U.S. homebuilder Lennar Corp. posted a sharp decline in profit for its fiscal third quarter, reflecting ongoing affordability challenges that continue to weigh on the housing market.
The company reported earnings of $2.29 per share, down from $4.26 per share in the same period last year — a 46% drop. Revenue for the quarter ended August 31 slipped 8.7% to $8.25 billion, falling short of Wall Street’s expectations of $9 billion. Shares fell 4.4% in after-hours trading following the results.
Lennar, the second-largest U.S. homebuilder by sales, also projected fourth-quarter home deliveries between 22,000 and 23,000 units, below analysts’ forecasts of more than 25,000.
Elevated interest rates, sticky inflation, and rising Treasury yields have reduced affordability for many potential buyers, creating headwinds for builders. While the Federal Reserve recently implemented a rate cut, analysts caution that the effect may not immediately filter down to homebuyers.
Analysts at BofA Securities said Thursday that the Fed’s rate cut is unlikely to significantly impact the housing market in the near term, noting that “homebuilder stocks and mortgage rates had already priced in the move following June's announcement.”
To counter slowing demand, Lennar has leaned on sales incentives, including mortgage rate buydowns, which are pressuring profit margins.
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“The company does not expect to be impacted by tariffs and will focus on improving margins,” Lennar Co-CEO and Chairman Stuart Miller told CNBC.
Despite cost adjustments, the company acknowledged that affordability challenges are dampening sales momentum.
The broader homebuilding sector has been grappling with a mismatch between supply and demand. While there is still an undersupply of homes in many markets, high mortgage rates — hovering near 7% — have sidelined many first-time and middle-income buyers.
Treasury yields ticked higher this week despite the Fed’s move, reversing the declines seen in June and keeping pressure on mortgage rates. Economists suggest that sustained lower yields would be required to meaningfully improve affordability.
Lennar’s results reflect the broader struggles in the sector, where builders must balance construction costs, affordability concerns, and incentive programs that cut into margins but are necessary to sustain sales.
Originally reported by Reuters.
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