Am I wrong, or has the concept of a "bottom" for the housing market become seemingly passe over the past month? There's a key reason for this redirection: The emergence of severe difficulties among subprime (and potentially Alt-A) mortgage holders has hammered home the notion that housing's softness may last longer than we originally thought. As such, the idea of a housing bottom has become far less immediate and less meaningful than it used to be.
Lennar
But looking quickly at the numbers, the company reported earnings for the quarter of $68.6 million, or $0.43 a share. That's a 73% reduction from the $258.1 million, or $1.58 a share, in the same quarter a year earlier. The quarter included a $175.9 million pre-tax gain from a transaction related to Lennar's LandSource joint venture, along with a $91.6 million pre-tax charge stemming from valuation adjustments and write-offs of option deposits and pre-acquisition costs.
When the company released its results for the final quarter of 2006, Stuart Miller, its president and CEO, said -- and I'm paraphrasing -- that as long as the economy remained solid, 2007 results generally would match or exceed those of 2006, when Lennar earned $3.69 per share. On Tuesday, Miller was far more measured in his assessment of his company's likely performance and the broader housing market:
The housing market continues to demonstrate overall weakness.... While some markets are performing better than others, the typically stronger spring selling season has not yet materialized. These soft market conditions have been exacerbated by the well-publicized problems in the subprime lending market.... Given the state of the market, we do not expect to achieve our previously stated 2007 earnings goal, and we are not comfortable providing a new earnings goal at this time.
Lennar follows KB Home
So it appears that we're in for a long slog before housing regains its health. On Monday, it was reported that sales of new homes hit a seven-year low in February, and that the total inventory of unsold homes reached a 16-year high. And while I continue to believe that there will be money to be made from the better homebuilders (especially at today's prices), it's becoming progressively more apparent that Fools should only take positions in the group if they are able to justify an extended investment time horizon.
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Fool contributor David Lee Smith does not own shares in any of the companies mentioned. He welcomes your questions or comments. The Fool has a disclosure policy.