Lennar, the second biggest US housebuilder by units sold, on Thursday reported a record $1.25bn loss in the fourth quarter as the value of its land holdings plummeted.
The company took a $1.86bn impairment charge for land, inventory and goodwill in the quarter ending in November, which included a $740m loss on 11,000 lots the company sold to its joint venture with Morgan Stanley. Lennar said its land portfolio was worth $4.5bn at the beginning of its first quarter, down from $7.8bn the year before.
The impairment charge takes the total amount written off by the housebuilding industry to nearly $20bn since the beginning of 2006, according to calculations by Standard & Poor’s.
Lennar said it lost $7.92 a share, almost four times more than analysts had predicted. The impairment charge was equivalent to $7.50 a share. Revenue fell 49 per cent to $2.18bn.
Housebuilders, including DR Horton, the largest in the US, are expected to write off billions more this year as they shed inventory and generate cash to remain solvent, analysts say.
Five of the top 11 US builders to report this quarter have so far written off $3.2bn on land and other assets, and UBS estimated this month that the remaining six are expected to write off at least another $1.5bn.
“You’re going to see a lot more land sales,” said Stephen East, an analyst at Pali Capital. “That’s going to depress land and housing prices further.”
Stuart Miller, Lennar chief executive, called his group’s results “disappointing”. He said: “It is apparent that 2007 was a very tough year. At the back end of this year I do not expect to see sales or price acceleration.”
Lennar said new orders for the fourth quarter fell 50 per cent and the cancellation rate was 33 per cent.
Sales incentives rose 24 per cent to $58,800 a home against the fourth quarter last year. Average sales prices dropped 4 per cent to $291,000.
The company said it would record a cash benefit in the first quarter of $852m from taxes returned because of the losses it made in 2005-06.
Hopes for builders are pinned on an uptick after the US Federal Reserve cut rates by 75 basis points this week and government moves to assist the housing sector after the subprime debacle.
Shares in Lennar rose 8.5 per cent to close at $16.21. Its shares have risen about 25 per cent since the emergency Fed cut on Tuesday.
Get alerts on Property sector when a new story is published