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Fitch: Lennar Earnings Underscore Improving U.S. Housing Sector

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NEW YORK & CHICAGO, Jan 15, 2013 (BUSINESS WIRE) -- Lennar Corporation (NYSE:LEN) Tuesday reported better than expected fourth-quarter earnings, reflecting the company's strong liquidity position and continuing growth prospects for the U.S. housing sector, according to Fitch Ratings. The company is the third largest homebuilder in the U.S. and has an issuer default rating (IDR) of 'BB+'. Rating Outlooks for both Lennar and the U.S. housing and homebuilding sectors are Stable.

Lennar's fourth-quarter revenue jumped 42% to $1.35 billion and gross margins expanded to 23.5% from 19.4%. The company's CEO noted that low mortgage rates, affordable home prices, reduced foreclosures, and an extremely favorable "rent versus own" comparison continued to drive the U.S. housing recovery, as reflected in Lennar's earnings. Fitch sees attractive home prices, persistently low mortgage rates, and a rise in nominal incomes resulting in superior affordability and valuations. Mortgage rates remain near their all-time recorded lows, and housing appears more undervalued versus incomes than at any time in the past 35 years. Rising home prices and the potential for interest rates to increase could create a sense of urgency and encourage fence-sitters to pull the trigger and purchase a home.

Lennar maintains solid liquidity, with unrestricted homebuilding cash of $1.15 billion as of Nov. 30, 2012. The company also has an unsecured revolving credit facility of $500 million that expires in May 2015. Its debt maturities are well-laddered, with roughly 20% of its total homebuilding debt maturing through 2015.

We raised our housing forecast for 2012 a number of times during the course of the year. Nevertheless, the current forecast still reflects a below-trend line cyclical rise off a very low bottom. In a slowly growing economy with somewhat diminished distressed home sales competition, less competitive rental cost alternatives, and new home inventories at historically low levels, 2013 single-family housing starts should improve about 18%, while new home sales increase approximately 22% and existing home sales grow 7%. However, as we have noted in the past, recovery will likely occur in fits and starts.

We also adjusted expectations for home prices due to overt price increases and mix issues. Average single-family new home prices (as measured by the Census Bureau) improved an estimated 3.5% in 2012 and should rise about 3.8% in 2013.

Although home prices have stabilized and started to improve, we believe that home price appreciation will tend to be relatively narrowly focused and very sensitive to local economic, employment, and supply issues. Demand will likely continue to be affected by widespread negative equity, challenging mortgage qualification standards, and excess supply due to foreclosures. Foreclosure activity could also accelerate somewhat this year as a result of agreements between banks and the federal government.

Additional information is available on www.fitchratings.com.

The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article, which may include hyperlinks to companies and current ratings, can be accessed at www.fitchratings.com. All opinions expressed are those of Fitch Ratings.

Applicable Criteria and Related Research:

2013 Outlook: U.S. Housing and Homebuilders

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=696947

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE.

http://cts.businesswire.com/ct/CT?id=bwnews&sty=20130115006575r1&sid=cmtx4&distro=nx

SOURCE: Fitch Ratings

Fitch Ratings 
Robert Rulla, +1 312-606-2311 
Director 
Corporates, Homebuilding 
70 West Madison Street 
Chicago, IL 
or 
Robert P. Curran, +1 212-908-1515 
Managing Director 
Corporates, Homebuilding 
33 Whitehall Street 
New York, NY 
or 
Fitch Wire 
Kellie Geressy-Nilsen, +1 212-908-9123 
Senior Director 
One State Street Plaza 
New York, NY 
or 
Media Relations 
Sandro Scenga, +1-212-908-0278 (New York) 
sandro.scenga@fitchratings.com

Copyright Business Wire 2013

**********************************************************************

As of Friday, 01-11-2013 23:59, the latest Comtex SmarTrendA? Alert,
an automated pattern recognition system, indicated a DOWNTREND on
06-01-2012 for LEN @ $25.48.

For more information on SmarTrend, contact your market data
provider or go to www.mysmartrend.com

SmarTrend is a registered trademark of Comtex News Network, Inc.
Copyright A? 2004-2013 Comtex News Network, Inc. All rights reserved.

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