Lennar CEO Stuart Miller sees solid signs of stabilization in the home building market. Though he's not sure what form a recovery will take, only that it's not likely to be swift.

"This recovery is not presenting itself as a V-[shaped one]," he told investors during the company's year-end conference call, but rather a "rocky stabilizing bottom" with "visibility obscured with more questions than clear answers."

Miller said he had just finished market reviews that left him confident that "prices are no longer freefalling downward, and, in many instances, they are starting to stabilize and recover," adding that the company has been able to reduce the value of the incentives it offers to buyers to $36,300, down from $42,200 in its third quarter and $51,400 in 2008.

Margins, too, were up in the company's fourth quarter, which ended Nov. 30, to 17.8% from 15.6% in its third quarter and 17% in 2008.

New orders increased as well, for the first time since the first quarter of 2006.

"I feel comfortable today saying this is a trend and not an anomaly," Miller said of the improvements.

Lennar, too, was able to turn a slight profit, of $35.6 million or $0.19 a share, but only because it was able to collect a $320 million tax refund thanks to a change in the tax law that allows builders to collect refunds from taxes paid on profits made up to five years ago against losses in recent years. The tax rule had allowed only a two-year carryback on tax refunds.

Companies have a choice about what year to claim the five-year loss, and Lennar chose '09, exhausting the refunds available to it, executives said.

Lennar was both a seller and buyer of land in the quarter, selling about 2,000 of its mothballed lots that it had no intention of building on in the near future and buying roughly 3,500 ready-to-build lots at extreme discounts with low risk.

Since August, the company has put under contract 5,000 finished home sites in 50 communiites across the country where the company can start building homes immediately. The company was able to secure the options with small or no deposits on the land, sometimes not requiring payment until the homes are closed on.

Rick Beckwitt, an executive vice president, offered some details on the deals and their expected return rates.

The company bought 50 lots in McKinney, Texas, with a $100 deposit and the ability to buy any lot between now and 2012. The internal rate of return on the lots is "north of 50% with gross margins in the mid-20% range," he said.

In North Carolina's Mecklenburg County, Lennar agreed to buy 50 lots with a 5,000 deposit and take-down requirements of five home sites every 90 days. The internal rate of return is expected to be greater than 100% with gross margins in the high 20% range.

In Fresno, Calif., Lennar bought 33 home sites foreclosed on by three banks that are expected to return 30% gross margins and pre-tax margins in the high teens.

In what was termed a "funky" deal in South Florida, Lennar bought 500 home sites from an investor group in need of cash, assuming bond debt and purchasing community development bond debt at a steep discount. Gross margins on that deal are expected to approach 40%.

Lennar is working on nailing down larger land deals as well "under the banner" of a separate company called Rialto, a partnership Miller has said in the past was formed with equity investors.

"The team has been formed, and we have begun the process of looking at investments," Miller said.

"We are going to do what we have done in past real estate cycles," he continued, "make the cycle our ally, not our adversary. We are beginning to see opportunities that make sense."

The company has also made operational improvements that have already begun to boost margins, said executives. The company has decreased the number of plans it offers in each region and value-engineered them to cut construction costs. In its Phoenix, Las Vegas, and Tucson markets, for instance, the company offers 15 rather than 40 plans and has been able to cut costs by 12%.