KB Home and Lennar gave some greater insight into the declining housing market with their mixed earnings reports Wednesday afternoon. KB Home noted softening homebuyer demand in its results, while Lennar has already seen new orders decline.
The KB Home and Lennar earnings reports come as mortgage rates have surged above 6%, putting further pressure on housing. New- and existing-home sales have trended significantly lower in 2022. There are growing indications that home prices are starting to top out. While lumber and other material costs are starting to fall, land costs remain high while skilled labor remains scarce and expensive.
KB Home Earnings
Expectations: Analysts saw KB Home earnings leaping 67% to $2.67 per share and revenue growing 27% to $1.87 billion.
Results: KB Home earnings catapulted 79% to $2.86 per share. Revenue climbed 25% to $1.84 billion.
Home deliveries increased 6% to 3,615 for the period, with the average selling price up 19% to $508,700.
KB Home's quarter-ending backlog value increased 9% to $5.26 billion, while the number of backlog units was up slightly to 10,756. And inventories grew 19% over the year to $5.74 billion.
Citing softening homebuyer demand, KB Home decreased its investments in land acquisition and development by 29% to $556 million.
For the fourth quarter, KB Home predicts housing revenue to range from $1.95 billion to $2.05 billion with an average selling price falling to around $503,000.
KBH stock fell more than 4% in the first hours of trading on Thursday.
Lennar Earnings Results
Expectations: Wall Street expected adjusted earnings to jump 50% to $4.91 per share. Sales were predicted to increase to $8.93 billion.
Results: Lennar earnings comfortably beat expectations, coming in at $5.18 per share. Revenue swelled 29% to $8.93 billion.
Deliveries increased 13% to 17,248 homes during the quarter. And the average sale price increased 15% to range between $428,000 and $491,000. However, new orders decreased 12% to 14,336 units.
"Sales have clearly been impacted by rising interest rates," Lennar CEO Stuart Miller said. "But there remains a significant shortage of housing, especially workforce housing, and demand remains strong as we navigate the rebalance between prices and interest rates."
For the fourth quarter, Lennar forecasts 20,000 to 21,000 home deliveries, with an average sales price between $475,000 and $480,000. The deliveries target was solid, while the expected sales price was a little below forecasts.
LEN stock climbed more than 1.5% on Thursday morning.
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