Lennar stock falls on weak Q3 gross margin forecast

Lennar (LEN) shares are falling on weaker-than-expected estimates for its gross margin in the third quarter. The Morning Brief Co-Hosts Seana Smith and Brad Smith break down the company's fiscal second-quarter earnings and how housing demand is being affected by high interest rates.

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This post was written by Melanie Riehl

Video transcript

Lenar share is following this morning after giving weaker than expected estimates for home deliveries in its third quarter.

The company's executive chairman noting that it's been quote tested by interest rate movements.

They're taking a look at shares of Lenar down by about 2.8% here pre market.

Uh the company in terms of some of the figures that they were able to report, uh net earnings per share ultimately did move higher by about 50 percent that not enough to impress the street though new orders that increased by about 19% to 21,293 homes in the most recent quarter.

And they have a backlog of about 17,873 homes dollar value for that backlog of about $8.2 billion.

Yeah.

And I think a lot of this just ties to where exactly mortgage rates are right now.

The fact that consumers are under a tremendous amount of pressure now, you still have mortgage rates higher when you compare to.

Obviously, historically speaking, they're not much higher than where they had been when you go back decades, but where they compared to what what levels that they have been over the last 10 to 15 years, we are substantially higher here.

So I think many, we talk about this lock in effect, then you also have the the problem that people simply cannot afford homes.

So when you stack that up against each other, clearly, we are seeing a bit of a slow down here.

So it could be a sign that some of that demand for new homes here is expected to remain a bit sluggish as mortgage rates do hover around those higher levels.

And we also talk about the average price here of homes.

It's still significantly higher here.

We are seeing some relief.

Leonard.

The price per home is 426,000 in the quarter that's commit to 449,000 a year ago.

But again, at extremely elevated level.

So again, there is this pent up demand because there simply is not that much inventory out there.

People are still looking to buy the homes, those that kind of right now.

And you're also paying higher prices if you are in the market for a home.

So that combined with the higher mortgage rates making it very difficult here for many home buyers in particular, first time home buyers to afford that home and that of course, has been weighing on the entire sector.

Yeah, one of the first time home buyer core kind of new home companies that we've heard from here in Lenar.

Another one that we're gonna hear from after the bell today with KB Homes.

So we're gonna be watching that ticker, uh, especially after the close.