Lennar’s sturdy earnings are a window into the housing market ahead of a key spring season
Blooming estates… Lennar, the US’s second-largest homebuilder, posted expectation-beating quarterly growth this week, even as debt-fatigued Americans cool on home buying. Lennar’s revenue and profit both grew, while home deliveries rose 9%. Lennar’s CEO said the beat was partly thanks to buyers accepting higher mortgage rates as “the new normal.” Still…
- Small nails: Lennar’s new-home orders dipped 10% from last year, and the average price of its new-home sales dropped to $452K from $495K.
- Big hammer: Mortgage rates fell this week after the bank collapses, but are still 2X higher than in 2020. And in February, US home sales fell for the 12th straight month.
- Hard wall: Still, lofty house prices have stuck as supply remains low. Case in point: housing costs drove 70%+ of consumer inflation last month.
3BDRs + patio… break out the bidding paddles. Mid-pandemic, houses were built at the fastest pace in a decade as more Americans took advantage of low interest rates and fled to the ’burbs. But rates have surged, making homeownership unaffordable for even high earners. Meanwhile, current homeowners locked into lower rates are staying put and listing less, exacerbating the supply problem.
The housing bud may start blooming… Homebuilder confidence rose for the third straight month in March as rates started to cool. That could set up the housing market for a warm spring (the season when most US home sales happen). Next week is crucial: if the Fed cools or pauses rate hikes, it could be a green light for more buyers to hit the market.