Lennar (Newhall Land) Sees Tough Going Ahead

What a difference perspective makes!

Our local paper, The Mighty Signal, had an article a couple of days ago that was the front page leader, announcing that Lennar and its partner LNR Property Corp. had sold a 62% stake in their LandSource joint venture, whose primary investment, Newhall Land and Farming, owns 15,000 acres in the Santa Clarita Valley. The article went on to imply that this was little more than an accounting move, and Lennar and Newhall Land is still firmly committed to developing the Newhall Ranch development west of the I-5.

The Wall Street Journal, in an article dated 1-3-2007, had an entirely different take on the story.

"Lennar Corp. Chief Executive Stuart Miller said he sees no signs the home building market has hit bottom, signaling the industry could continue to face pressure on its financial results," writes Janet Morrissey. "Lennar said it slashed its exposure in California, where market conditions have been deteriorating."

Morrissey goes on, "'It sends a signal that they don't want to have their capital at risk in Southern California for the next few years,' said Raymond James Financial Inc. analyst Rick Murray. He sees the sale as a sign the company doesn't believe a rebound in California will happen in the near future."

While Lennar has experienced a decline in sales that is much less than many of its competitors lately, between price slashing and incentives given for home purchases and the lower level of sales, Lennar has said its gross profit margins will continue a trend to be 'materially lower' according to the WSJ article.

This, combined with Lennar's removal of the Madison properties from sale indicates that NL&F sees a less than rosy picture for SCV housing, at least in the immediate future. The Madison is an apartment to condo conversion development in the Town Center area, across the street from the Westfield Mall area.

The WSJ article stands in stark contrast to the Signal's puff piece on what Lennar's sale of the majority of its holdings in Newhall Land. But what else can you expect from the Signal? It remains the mouthpiece of Santa Clarita's major land developer.

While this author remains generally upbeat about the stability of the housing market, at least locally, the difference in tone between the WSJ and the Signal articles shows that you the reader would be well advised to continue to read The Real Blog, where we are committed to giving you information about what is really happening in the housing market.