Lennar calls affordability 'stretched' as cracks in US housing market appear

Yahoo Finance03-15

Lennar’s (LEN) CEO Stuart Miller warned Thursday that affordability remains a concern for homebuyers as mortgage rates hover near 7%. Miller said on the company's first quarter earnings call that ...

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His comments came after Lennar on Wednesday reported revenue that missed analyst estimates for its fiscal first quarter ended Feb. 29. Lennar stock tumbled roughly 6% Thursday on the news, dragging down D.R. Horton  and Toll Brothers, which were  both down 3%. The SPDR S&P Homebuilders ETF  slipped nearly 2%.New orders increased 28% to 18,176 homes in the quarter, higher than the company's estimate of 17,500 to 18,000. 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Lennar stock tumbled roughly 6% Thursday on the news, dragging down D.R. Horton (DHI) and Toll Brothers, which were (TOL) both down 3%. The SPDR S&P Homebuilders ETF (XHB) slipped nearly 2%. \nUS household debt and delinquency rates have been rising. Total household debt rose by $212 billion to hit $17.5 trillion in the fourth quarter of 2023, according to data from the Federal Reserve Bank of New York.\nThe challenges of higher mortgage rates and home prices over the last year have plagued buyers trying to jump into the market. Mortgage rates have largely been on the rise this year, peaking around 7% in mid-February. The average rate on the 30-year fixed mortgage fell to 6.74% Thursday from 6.88% the week prior, according to Freddie Mac. \n“What we're seeing is when you look at [our customers] in particular, more of the [customers] are having a higher percentage relating to debt to total income,” Bruce Gross, chief executive officer of Lennar Financial Services, told analysts on the earnings call Thursday.\n“There's more debt to pay off, and that's something new that we noticed this quarter. We often work with the buyers, and we're able to work through a lot of the conditions. But that one point is something that we've seen [different from] last quarter,” Gross added.\nWhile investors expect the Federal Reserve to cut interest rates this year, the central bank has indicated it will move with caution, and the timeline still remains unclear.\nHigh rates have prompted builders to offer a variety of incentives from mortgage rate buydowns to price reductions. Lennar cut its average sales price to $413,000 during the quarter, an 8% drop from last year.\nWedbush analyst Jay McCanless said the lower average closing price contributed to total revenues falling below consensus expectations in the latest quarter. \n\n\n\n  NEWARK, CALIFORNIA - DECEMBER 15: Signs are posted in front of homes at the Lennar Bridgeway home development on December 15, 2021 in Newark, California. Homebuilder Lennar will report fourth quarter earnings today after the closing bell. (Photo by Justin Sullivan/Getty Images)\n \n\n  Justin Sullivan via Getty Images\n \n\nTo be sure, Lennar noted on its call that homebuyer demand remained strong thanks to a chronic inventory shortage. \nNew orders increased 28% to 18,176 homes in the quarter, higher than the company's estimate of 17,500 to 18,000. The builder reaffirmed its plans to close 80,000 homes for the year.\nDani Romero is a reporter for Yahoo Finance. Follow her on Twitter @daniromerotv.\nFor the latest earnings reports and analysis, earnings whispers and expectations, and company earnings news, click here\nRead the latest financial and business news from Yahoo Finance","kind":null,"is_publish_news":null,"is_publish_highlight":null,"is_publish_live":null,"is_publish_wemedia":null,"editions":null,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.22.4","shortVersion":"4.22.4","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2419939158"}