Homebuilder Lennar Corp posted a larger-than-expected quarterly profit as it used more land bought at a discount, and said it expects a profitable 2011.

The third-largest U.S. builder reported earnings of $13.8 million, or 7 cents a share, compared with earnings of $39.7 million, or 21 cents per share, a year ago.

Wall Street analysts on average had expected earnings of 4 cents per share.

Sales of previously owned U.S. homes hit a six-month low in May and supply rose, the National Association of Realtors said on Tuesday, an indication of ongoing weak demand for even pre-owned homes, which are generally more affordable than the new ones built by Lennar and rivals such as PulteGroup Inc
and KB Home .

This environment took a toll even on Lennar, whose revenue fell 6 percent to $649.8 million, the company said in a statement. Lennar offered incentives of $33,900 per home to buyers -- or 12.1 percent of home sales revenue -- slightly more than last year at this time.

Miami-based Lennar, which builds homes in 14 states including Florida and California, was still able to make a profit in part because it used the housing slump to buy land more cheaply. The houses built on that land have higher margins.

Also, the company is one of the few among its rivals to start a distressed land operation, Rialto Investments, whose operating earnings were $9.8 million, up from $5.1 million last year.

Lennar's shares were up 2.2 percent at $18.50 in thin premarket trading.

(Reporting by Helen Chernikoff and Nivedita Bhattacharjee; Editing by Maureen Bavdek)