Finance News
Lennar describes affordability as ‘stretched’ amidst emerging issues in the US housing market.
Lennar describes affordability as being stretched as signs of weakness in the US housing market emerge,
On Thursday, Lennar’s CEO Stuart Miller expressed concern about the affordability of homes as mortgage rates are hovering around 7%. He mentioned that affordability is stretched for homebuyers, with more customers showing higher credit card and personal debt in their applications, leading to an increase in delinquencies. Lennar reported revenue that missed analyst estimates for the first quarter, causing its stock to drop by 6% and impacting D.R. Horton and Toll Brothers as well.
US household debt and delinquency rates have been on the rise, reaching $17.5 trillion in the fourth quarter of 2023 according to the Federal Reserve Bank of New York. The challenges of higher mortgage rates and home prices have been hindering buyers from entering the market, with mortgage rates peaking at around 7% in mid-February but have since slightly decreased.
Despite these challenges, Lennar Financial Services CEO Bruce Gross noted on the earnings call that customers are accumulating more debt relative to their total income. Investors are anticipating a potential interest rate cut from the Federal Reserve, although the central bank has emphasized caution and the timeline for any rate adjustments remains uncertain.
Builders have resorted to offering incentives such as mortgage rate buydowns and price reductions due to the high rates. Lennar reduced its average sales price by 8% to $413,000 in the recent quarter, leading to lower revenues than expected. However, Lennar remains optimistic about strong homebuyer demand fueled by a chronic inventory shortage.
New orders for Lennar saw a 28% increase in the quarter, exceeding the company’s estimates. The builder plans to close 80,000 homes for the year. For more detailed financial news and analysis, check out the latest updates on Yahoo Finance.
FAQ:
1. What is the impact of high mortgage rates on homebuyers?
High mortgage rates have made it challenging for buyers to afford homes, leading to more debt accumulation and delinquencies.
2. How are builders coping with the affordability issue?
Builders are offering incentives such as mortgage rate buydowns and price reductions to make homes more accessible to buyers.
3. What is the outlook for interest rates from the Federal Reserve?
While investors expect a potential interest rate cut, the Federal Reserve has signaled a cautious approach, with the timing of any rate adjustments remaining unclear.
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The housing inventory shortage that has been plaguing the U.S. for years appears to finally be easing, but a significant factor behind what is driving up supply provides little encouragement that the stagnant market will get moving again anytime soon.
A new report from Redfin says the number of homes for sale jumped to a four-year high in November, surging 12.1% year over year. But the major reason for the increase is that most homes on the market just aren’t selling.
Redfin data shows housing supply hit a four-year high in November, but mostly because a majority of houses for sale have sat on the market for more than two months. ( Liu Guanguan/China News Service/VCG via Getty Images / Getty Images)
More than half (54.5%) of homes on the market last month had been listed for more than 60 days, with many deemed too expensive by would-be buyers. According to Redfin data, that is up 49.9% from a year ago, and is the highest share of stale inventory for a November since 2019.
The report said that the typical home that went under contract last month did so in 43 days, which is also the slowest November pace since 2019.
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“A lot of listings on the market are either stale or uninhabitable. There’s a lot of inventory, but it doesn’t feel like enough,” said Meme Loggins, a Redfin Premier real estate agent in Portland, Oregon.
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“I explain to sellers that their house will sit on the market if it’s not fairly priced,” Loggins said. “Homes that are priced well and in good condition are flying off the market in three to five days, but homes that are overpriced can sit for over three months.”
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The data shows Texas and Florida have the highest rates of old listings on the market. Miami has the greatest share of homes on the market for longer than 60 days than any other major metro at 63.8%, followed by Austin, which has 62.4% of listings that have sat for more than two months without going under contract.
The affordability crisis has led to the majority of the homes on the market sitting unsold for more than 60 days. (Fox News)
The housing market saw a flurry of activity driven by high demand during the pandemic, but has become stagnant as soaring home prices and mortgage rates have led to an ongoing affordability crisis that has pushed homeownership out of reach for many Americans.
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Housing costs repeatedly broke records in 2024, and a report from the National Association of Realtors’ (NAR) annual survey of buyers and sellers found the share of first-time homebuyers dropped from 32% in 2023 to 24% in 2024, the lowest share since NAR began collecting data in 1981.
FOX Business’ Lindsay Kornick contributed to this report.
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