Lennar's (LEN, LEN.B) shares declined early Thursday after the homebuilder reported weaker-than-expected fiscal third-quarter results as affordability challenges slowed home-buying activity.
The company's adjusted earnings fell to $1.23 a share for the August quarter from $2 the year before, it said late Wednesday. The print trailed the FactSet-polled consensus of $1.29. Revenue declined to $8.05 billion from $8.81 billion, below Wall Street's $8.32 billion view.
Lennar's class A stock decreased 2.6% in most recent premarket activity, having lost 24% this year through Wednesday close.
"Mortgage rates increased through the quarter, with the 30-year rate at approximately 6.8% at quarter end and even higher since," Chief Executive Stuart Miller said in a statement. "Rates are responding as inflation remains above the (Federal Reserve's) target, driven by geopolitical tension and higher oil prices. Additionally, consumer confidence has declined as rates and affordability have driven more consumers to slow their purchase decision."
The Fed on Wednesday raised its benchmark lending rate by 25 basis points to combat sticky inflation and signaled another hike later this year. The Mortgage Bankers Association said the same day that mortgage applications declined last week as the rate for 30-year fixed mortgages with conforming loan balances jumped to its highest since May 2025.
Crude oil has rallied past $100 a barrel this month amid intensifying hostilities in the Middle East, while diesel prices in the US has hit record highs.
Lennar's homebuilding revenue retreated 6% year on year to $7.76 billion in the fiscal third quarter, driven by declines in the average sales price and the number of home deliveries, the company said. Homes delivered declined 3% to 20,840 units, missing the average analyst estimate that called for 20,960.
The company offered incentives to homebuyers and adjusted the base price to "sustain volume in a market where affordability remains the defining constraint," Miller said.
Ahead of Lennar's results, Truist Securities said that homebuilders will likely have to increase buyer incentives due to elevated mortgage rates and weak demand.
Lennar's new orders fell 9% on a yearly basis to 20,879 homes, with an average sales price of $359,000 versus $367,000 in the 2025 quarter.
"This does not read well to the rest of the entry level market given that it is the worst new order ASP since 2015, albeit product mix has shifted since then," Truist said in a separate note released after Lennar had published its results.
The National Association of Home Builders and Wells Fargo said Wednesday that homebuilder confidence reached a 12-month low in September amid high mortgage rates and increasing material costs.
Lennar lowered its 2026 delivery target to about 80,000 to 81,000 homes from the prior 82,000 to 83,000 range, Miller said.
Still, the overall housing environment "remains constructive" as home shortages drive demand from primary buyers and investors looking to generate rental income, Miller said.
For the ongoing quarter, Lennar expects to deliver between 22,000 and 23,000 homes, while the Street is looking for 24,011. New orders are pegged at 19,500 to 20,500 homes and the average sales price is forecast between $370,000 and $380,000.
In July, D.R. Horton (DHI) lowered its full-year revenue outlook despite reporting fiscal third-quarter sales above market estimates. KB Home (KBH) is slated to release its quarterly results next week.
