Lennar profit beats as tight home supply boosts construction demand

Reuters

Published Sep 14, 2023 04:48PM ET

Updated Sep 14, 2023 05:20PM ET

(Reuters) -Homebuilder Lennar (NYSE:LEN) on Thursday reported third-quarter profit above Wall Street targets as historically low home inventories in the market supported demand for new constructions while easing supply-chain snags helped improve delivery times.

Housing supply remains tight despite current mortgage rates hitting a two-decade high, as a majority of homeowners are locked into a fixed rate below 5%, making them unlikely to resell.

The "rate-lock in" effect has been a tailwind for homebuilders this year, even as rising home prices constrain affordability for many buyers.

"Market conditions remained constructive for new homebuilders during our third quarter," said Lennar co-CEO Stuart Miller, adding that tight housing supply, absorbed by strong current and pent-up demand, continued to help sales.

The second-largest U.S. homebuilder delivered 18,559 homes in the quarter ended Aug. 31, 8% higher than last year.

"Our cycle time during the quarter was down 32 days sequentially as the improving supply chain and labor market positively impacted our production times," said co-CEO Jon Jaffe.

Bolstered by higher deliveries, Lennar's profit margins saw sequential improvement to 24.4% from 22.5% last quarter.

However, the company, which tends to be conservative on pricing and aggressive on sales, said it expected flat average selling prices per home for the fourth quarter.