Key facts
- Lennar's third-quarter profit fell to $283.9 million, or $1.19 per share, from $591 million, or $2.29 per share, a year ago.
- Total revenue for the quarter ended August 31 decreased by over 8% year-over-year to $8.05 billion.
- CEO Stuart Miller cited a challenging economic environment and deteriorating conditions since the previous quarter.
- High mortgage rates, nearing 7% during the quarter, and weakening consumer confidence impacted demand for new homes.
- Lennar expects the average sales price per unit in the next quarter to be between $370,000 and $380,000.
Lennar's third-quarter profit plummeted by more than half, with earnings falling to $283.9 million, or $1.19 per share, compared to nearly $591 million, or $2.29 per share, in the same period last year. The homebuilder's shares dropped 3% in after-hours trading following the announcement.
CEO Stuart Miller attributed the weaker-than-expected results to a challenging economic environment, which he stated has deteriorated since the prior quarter. Lennar, like its competitors, is contending with a prolonged affordability crisis driven by mortgage rates that approached 7% during the quarter. This, coupled with declining consumer confidence, has prompted potential buyers to delay home purchases, leading to slower demand in the new-home market.
Homebuilder sentiment in the U.S. experienced a dip in June and July before a slight increase in August, amidst economic uncertainty and elevated construction costs exacerbated by geopolitical tensions. Miller noted that interest rates are reacting to inflation remaining above the Federal Reserve's target, influenced by geopolitical factors and higher oil prices.
A Reuters poll of property experts indicated that U.S. mortgage rates are expected to remain higher than previously forecast, with only modest declines anticipated in the coming quarters, which will likely keep home price growth subdued through next year. For the upcoming quarter, Lennar anticipates an average sales price per unit ranging between $370,000 and $380,000, falling short of analysts' consensus estimate of $383,610.