Lennar reports 13% uptick in Q3 profit amid sluggish housing market

The Miami-based homebuilder attributed much of its earnings growth to increased demand for lower-priced homes

National /
Oct.October 02, 2019 01:30 PM
Lennar’s Stuart Miller

Lennar’s Stuart Miller

Lennar Corp. reported an uptick in net income and home deliveries in its third quarter, but signs still point to a broader slowdown in the housing market.

The Miami-based homebuilder reported $513.4 million or $1.59 per share in third quarter net income, up 13.3 percent from $453.2 million or $1.37 per share in the third quarter of 2018. At the same time, revenue from home sales increased 2 percent, year-over-year, to $5.3 billion.

Lennar’s third-quarter report also showed possible indications that the housing market is slowing down. For example, sales incentives increased to $24,400 per home delivered in the third quarter, up from $22,900 per home delivered in the third quarter of 2018.

Sales incentives could be used to prop up home sales amid a cooling housing market and broader concerns about a recession. Due to such worries, homebuilders’ stocks have suffered, including Lennar’s, which is down more than 23 percent since January 2018.

Lennar Executive Chairman Stuart Miller told analysts during a conference call on Wednesday that the company is still seeing strong economic fundamentals and the housing market will grow after seeing a brief pause in 2019.

“The housing market seems solid and strong and continues to improve,” Miller said.

Lennar attributed much of its earnings growth to increased demand for lower-priced homes. The average sale price of homes delivered was $394,000 in the third quarter, compared to $415,000 in the third quarter of 2018.

In total, Lennar’s new orders increased 9 percent, year-over-year, in the third quarter, to 13,369 homes.

Lennar’s stock rose 2.6 percent to $57.16 at 1:15 pm on Wednesday.

Lennar’s third quarter performance follows a strong second quarter in which new home deliveries increased 5 percent, year-over-year, to 12,706 homes. The company’s stock dropped, however, following its second quarter conference call, after the company said tariffs on Chinese goods are costing Lennar an average of about $500 per home.

A number of indicators are signaling that home prices could soon come down after years of price appreciation.

Stephen Ross of Related Companies told Yahoo Finance in August that the housing market “is probably in the eighth inning.”

Nationwide, single-family housing authorizations declined for three straight quarters, according to a new report by BuildFax.


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