Higher prices boost Lennar profit in tight U.S. housing market

Newly constructed houses built by Lennar Corp are pictured in Leucadia, California March 18, 2015. REUTERS/Mike Blake

June 16 (Reuters) – Lennar Corp (LEN.N) beat quarterly profit on Wednesday, helped by higher prices due to a tight supply of homes in the United States.

The COVID-19 pandemic fueled demand for spacious and more expensive homes as millions of Americans work from home and take classes remotely.

But the health crisis has hurt the homebuilders’ ability to ramp up construction due to labor supply disruptions as well as shortage of lumber and other raw materials. This has pushed up prices as buyers scramble to get hold of available inventory.

Lennar’s homebuilding gross margin rose by 450 basis points to 26.1% in the three months ended May 31, a record for the second quarter, helped by higher-than-expected sales price per home.

The No. 2 U.S. homebuilder also raised its average sales price forecast by 5% to $420,000, while reaffirming its outlook for annual deliveries of between 62,000 homes and 64,000 homes.

Shares of the company were, however, trading flat, as higher prices amid supply shortage stoked fears of home purchases becoming less affordable and hampering a recovery in sales.

U.S. new home sales dropped 5.9% to a seasonally adjusted annual rate of 863,000 units in April. read more

Analysts have said that some buyers are likely getting priced out of the market as prices continue to rise.

Lennar’s orders, an indicator of future revenue, rose 32% to 17,157 homes in the quarter, beating analysts’ average estimate of 16,715 homes, according to IBES data from Refinitiv.

The homebuilder said its quarterly home deliveries increased by about 14% to 14,493 homes, topping Wall Street’s estimate of 14,326. Average price for homes delivered rose by about 6% to $413,000.

Excluding items, Lennar earned $2.95 per share, above analysts’ average estimate of $2.36. Total revenue rose 21.6% to $6.43 billion and was ahead of expectation of $5.91 billion.Reporting by Ankit Ajmera in Bengaluru; Editing by Krishna Chandra Eluri

Our Standards: The Thomson Reuters Trust Principles.

Source: https://www.reuters.com/business/lennar-quarterly-profit-rises-607-robust-us-home-demand-2021-06-16/

World Economic Magazine