Homebuilder KB Home late Wednesday reported second-quarter earnings and a full-year outlook that beat expectations, even as swelling home prices and rising mortgage rates cut into housing demand.
Shares of the company rose 3.7% ahead of Thursday's open.
KB Home earned $2.32 per share, above estimates for $2.04 per share. Sales rose 19% to $1.72 billion. That was also above estimates for $1.648 billion.
Homes delivered stood at 3,469, also above forecasts. The average selling price of one of the company's homes jumped 21% to $494,300.
"Sales rates are moderating from the exceptional levels the industry has experienced, as buyers process the impact of higher mortgage interest rates, as well as inflationary pressures," CEO Jeffrey Mezger said in a statement.
Still, KB Home forecast full-year revenue of $7.3 billion to $7.5 billion, with the midpoint above Wall Street estimates for $7.323 billion. And the company, at least for the rest of its fiscal year year, didn't expect home prices to get any cheaper: It forecast an average selling price of roughly $500,000.
Homebuilder Lennar's quarterly results, reported on Tuesday, also beat expectations. But its outlook for deliveries came up short. And it noted "slowing sales" and "stalling price increases," even as it forecast the average price of its homes to be "slightly higher" in its third quarter.
The results arrive as the Federal Reserve pushes up interest rates in an effort to curb rising prices. The central bank last week announced a three-quarter percentage-point hike on its key interest rate. That was the first such hike since 1994.
The Commerce Department issues new-home sales data for May on Friday.
Home Sales Figures
KB Home issued results a day after still more data indicated a cooldown in the U.S. housing market, which boomed during the pandemic. U.S. existing-home sales fell 3.4% in May, the National Association of Realtors said Tuesday.
That figure wasn't as bad as the 3.6% consensus expected by economists polled by the Wall Street Journal. But it marked the fourth straight month of declines.
The median price for an existing home rose past $400,000 for the first time in May, hitting $407,600, the NAR said. That marked a 14.8% jump from a year ago.
"Further sales declines should be expected in the upcoming months given housing affordability challenges from the sharp rise in mortgage rates this year," Lawrence Yun, the NAR's chief economist, said in a statement.
He said trends in home sales had largely returned to 2019 levels, after the pandemic sent people fleeing from cities and drove a home buying and home-renovation boom. Yun added that the inventory of homes for sale would need to almost double to cool down rising home prices and broaden options for homebuyers.
Existing-home sales fell from April to a seasonally adjusted annual rate of 5.41 million in May.
The inventory of unsold existing homes stood at 1.16 million units, the NAR said. That was up 12.6% from April, but still down 4.1% from the previous year.
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Other figures suggested the housing market still remains tight. Homes typically remained on the market for 16 days last month, the NAR said. That was shorter than the 17 days in both April and a year ago. Some 88% of homes sold last month were available for less than a month.
Freddie Mac last week said that the 30-year fixed-rate mortgage rose more than half a percentage point to 5.78%. That was the biggest weekly increase since 1987, it said. The rising rates, it said, were "the result of a shift in expectations about inflation and the course of monetary policy."
Lennar Earnings, Housing Stocks
Lennar on Tuesday said it earned $4.49 per share during its second quarter. That marked a 69% jump from a year ago. The result was above FactSet's consensus expectations for $3.95.
The company's home sales climbed 30% to around $8.4 billion. The top-line figure was above estimates for $8.1 billion, and helped by a 17% jump in its average home sales price.
That price for the quarter stood at $483,000. Deliveries of 16,549 homes during the quarter also beat expectations.
Lennar forecast deliveries of 17,000 to 18,500 units for the third quarter. But the company said that "current attempts at guidance are tantamount to 'guessing' and not 'guiding.' " Analysts had expected guidance of 18,123 units.
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The company said levels of unsold homes remained low. However, management also noted that rising rates had begun to spook some homebuyers in the current quarter.
"While our second quarter results demonstrate strength and excellent performance throughout the quarter, the weight of a rapid doubling of interest rates over six months, together with accelerated price appreciation, began to drive buyers in many markets to pause and reconsider," Lennar's Executive Chairman Stuart Miller said in a statement.
"We began to see these effects after quarter end," he continued.
Lennar stock added 1.2% in early trade. Toll Bros. dipped 1%. Both stocks finished higher on Wednesday, working top snap three week dives to their lowest levels since late 2020.
Jefferies analysts, in a note on Tuesday, said "the message from the housing market is bleak, with mortgage applications diving." They noted that the New York Fed's most recent consumer survey found that half of customers feel "worse off than one year ago in terms of credit access and expectations."
