Latest news with #StuartMiller
Forbes
7 days ago
- Business
- Forbes
Homebuilders Tackle Elevated New Home Inventories
New home inventory has reached 9.8 months of supply as of June 2025, marking the highest level since the 2009 financial crisis and creating significant pressure on homebuilders. With 511,000 new houses for sale at the end of June—an 8.5% increase from the same period last year—builders are grappling with the most challenging inventory situation in over a decade. New home inventory rose to 9.8 months in June 2025, the highest level since 2009 This inventory accumulation represents a 16.7% increase in months of supply compared to June 2024's 8.4 months, pushing the market well beyond the 6-month threshold typically considered balanced. That said, the current environment still offers strong opportunities for the homebuilding sector, as this article discusses. The most pressing concern for builders lies in completed, unsold homes, which reached 119,000 units in May 2025—the highest level since July 2009. This represents a dramatic increase from just 33,000 completed unsold homes in May 2021, illustrating how rapidly market conditions have Executives Respond: Strategic Adjustments Lennar co-CEO Stuart Miller addressed the inventory challenge during the company's Q2 2025 earnings call, explaining their volume-first strategy: "While our margin and earnings have been adjusting and of course, falling in order to accommodate the realities of the housing market conditions, we remain focused on volume and evenflow production to enable rationalized cost structure and overhead in order to find a floor and rebuild margin even as the overall housing market continues to soften". The company's incentive spending reached 13% of final sales price in Q2 2025, a significant increase from 1.5% during the pandemic housing boom in Q2 2022. Co-CEO Jon Jaffe emphasized their collaborative approach: "Our trade partners know that we are doing this to maintain production levels. Our trade partners work with us to reduce their operating costs and when needed to lower their margins". Some builder clients we have spoken with are gnashing their teeth over Lennar's aggressive pricing in the face of weak sales. Especially in Florida, builders fret that Lennar is sacrificing margin in order to maintain margin and market share.D.R. Horton: Managing Through Market Transition D.R. Horton CEO Paul Romanowski was transparent about their incentive-driven approach during their July 2025 earnings call: "We expect our sales incentives to remain elevated and increase further during the fourth quarter, the extent to which will depend on the strength of demand during the remainder of summer, changes in mortgage interest rates and other market conditions". Despite the poor results this selling season, Romanowski maintained confidence in their strategy: "The incentives have increased as we have discussed. That's why we anticipated a slightly lower gross margin for the fourth quarter, but it appears to be functioning effectively in terms of driving traffic and achieving the incremental sales we need". In our own work, performing market studies for the builders, the incentives (particularly mortgage-rate buydowns) worked very well at first, but are having less of a stimulative effect on sales Focus on Consumer Confidence PulteGroup CEO Ryan Marshall highlighted broader market psychology beyond pricing pressures: "Feedback from would-be homebuyers indicates a variety of concerns ranging from affordability and the inability to sell an existing home to a slowing economy and the fear of potentially losing their job. Consumer confidence is uncertain at best and confidence is something that's difficult to solve with a lower price or higher incentive". The 'house-to-sell' problem is a major one, and it vexes most builders around the Factors Drove the Inventory Build-Up Affordability Constraints With mortgage rates near 7%, monthly payments on typical homes have become prohibitive for many buyers. The 30-year fixed mortgage rate averaged 6.72% as of July 31, 2025, more than double the sub-3% rates during the pandemic boom. Many buyers were rendered unable to buy the home that they had signed an agreement to buy, because the mortgage payment was out of reach at the new level of interest rates. Cancellation rates rose, and homes that had been sold had to be re-marketed by the builder. Regional Concentration Patterns The inventory accumulation is particularly pronounced in SunBelt markets that experienced rapid construction growth during the pandemic. Markets like Denver (+100.0% vs. pre-pandemic), Austin (+69.0%), and Seattle (+60.9%) lead the nation in inventory recovery, while Northeast and Midwest markets remain more supply-constrained. Builder Response Through Pricing Strategies Builders are responding with unprecedented pricing flexibility. 38% of builders reported cutting prices in July 2025—the highest percentage since NAHB began tracking this metric. Additionally, 62% of builders are using sales incentives with the average price reduction at 5%. Market data shows 19.1% of listings featured reduced prices in May 2025, the highest share for any May since at least 2016, with metros like Phoenix (31.3%), Tampa (29.9%), and Denver (29.4%) leading in price reductions. Impact on Builder Sentiment and Operations The NAHB Housing Market Index reflects these inventory pressures, registering 33 in July 2025 and marking 15 consecutive months below the 50-point threshold. The buyer traffic component scored just 20—the lowest reading since late 2022—while current sales conditions registered 36 and future sales expectations reached 43. These readings demonstrate that builders' outlook remains cautious despite ongoing inventory management efforts, with traffic concerns being particularly Housing Supply Fundamentals Remain Strong While current inventory levels present near-term challenges, the underlying housing shortage that has developed over more than a decade remains a critical factor supporting long-term demand. According to recent analyses, the United States faces a housing deficit of at least one million homes. This shortage stems from more than a decade of underbuilding following the Great Recession, when construction activity remained well below historical norms relative to household formation. analysis found that at the current pace, closing the housing gap would take an estimated 7.5 years nationwide, highlighting the persistent supply-demand imbalance. The National Association of Home Builders estimates a continuing housing deficit of 1.5 million homes, with construction levels still below historical norms despite recent improvements. Harvard's Joint Center for Housing Studies reinforces this view, noting that while single-family construction saw a 7% increase in production in 2024, there remains a 1.5 million shortage of rental and owner homes. It may seem contradictory: we have a surplus of new home inventory yet a shortage of housing. The explanation is that the current oversupply of unsold inventory is temporary, and it is being 'fixed' by the builders as they market those homes as 'quick-move-in' homes with special incentives. Inventories will not remain this high for much longer, as the gap between aggregate home production and aggregate home demand Outlook: Recovery Potential with (Possible) Rate Relief The current inventory situation, while challenging in the near term, positions the homebuilding industry for potential recovery as inventory conditions normalize (new-home inventories and resale inventories). Mortgage rate forecasts suggest that some modest level of relief could lie ahead, with housing authorities projecting rates to decline to the 6.2% - 6.5% range by 2026. Fannie Mae's latest forecast anticipates mortgage rates ending 2025 at 6.4% and 2026 at 6.0%, while the National Association of Realtors notes that rates below 6% would bring approximately 5.5 million additional households within reach of homeownership. Such rate improvements would significantly enhance affordability and drive demand recovery, but the odds that mortgage rates will dip under 6% are slim, given the outlook for the federal deficit. While the current high inventory levels require careful navigation, the fundamental shortage of housing supply relative to long-term demographic demand will provide a strong foundation for future growth once affordability constraints ease and buyer confidence returns to the market. And, if things start to go better for the builders, they will be able to rein in the expensive incentives like mortgage rate buydowns, which will start to help their margins.
NBC News
25-06-2025
- Business
- NBC News
Sales of new homes tanked in May, pushing supply up to a 3-year high
Sales of new single-family homes dropped 13.7% in May compared with April to 623,000 units on a seasonally adjusted, annualized basis, according to the U.S. Census. That sales total was 6.3% lower than May 2024 and well below both the six-month average of 671,000 and the one-year average of 676,000. It also lags the pre-pandemic average in 2019 of 685,000 units sold. Wall Street analysts were expecting May new home sales of 695,000, according to estimates from Dow Jones. This count is based on signed contracts, so people out shopping in May, when mortgage rates remained stubbornly high. The average rate on the 30-year fixed mortgage started May at 6.83%, rose steadily to just over 7% and then settled back at 6.95% by the end of the month, according to Mortgage News Daily. 'The large fall in new home sales in May cancels out all of the positivity of the past couple of months and serves as a valuable reminder that buyer activity can only rise so far with mortgage rates hugging 7%,' wrote Bradley Saunders, an economist at Capital Economics. Homebuilders who reported quarterly earnings recently noted high rates cutting into affordability. 'The macro economy remains challenging, as mortgage interest rates have remained higher while consumer confidence has been challenged by a wide range of uncertainties, both domestic and global,' said Stuart Miller, co-CEO of Lennar, on a call with analysts following the company's fiscal second-quarter earnings release. 'Across the housing landscape, actionable demand has been diminished by both affordability and consumer confidence, and therefore has continued to soften.' Lennar reported lowering prices, but KB Home, which posted its quarterly earnings this week, raised prices. Nationally, the median price of a new home sold in May was $426,600, according to the Census report, 3% above the year-earlier price. Slower sales resulted in a significant bump higher in supply. There were 507,000 new homes for sales at the end of May. This represents a 9.8-month supply at the current sales rate, which is 15% higher than May 2024. The last time supply was that high was briefly in the summer of 2022, after the Federal Reserve first started raising interest rates post-pandemic. Before that, supply hadn't been this high since 2009, amid the subprime mortgage crisis and the Great Recession.
CNBC
25-06-2025
- Business
- CNBC
Sales of new homes tanked in May, pushing supply up to a 3-year high
Sales of new single-family homes dropped 13.7% in May compared with April to 623,000 units on a seasonally-adjusted, annualized basis, according to the U.S. Census. That sales total was 6.3% lower than May 2024 and well below both the 6-month average of 671,000 and the one-year average of 676,000. It also lags the pre-pandemic average in 2019 of 685,000 units sold. Wall Street analysts were expecting May new home sales of 695,000, according to estimates from Dow Jones. This count is based on signed contracts, so people out shopping in May, when mortgage rates remained stubbornly high. The average rate on the 30-year fixed mortgage started May at 6.83%, rose steadily to just over 7% and then settled back at 6.95% by the end of the month, according to Mortgage News Daily. "The large fall in new home sales in May cancels out all of the positivity of the past couple of months and serves as a valuable reminder that buyer activity can only rise so far with mortgage rates hugging 7%," wrote Bradley Saunders, an economist with Capital Economics. Home builders who reported quarterly earnings recently noted high rates cutting into affordability. "The macro economy remains challenging, as mortgage interest rates have remained higher while consumer confidence has been challenged by a wide range of uncertainties, both domestic and global," said Stuart Miller, co-CEO of Lennar, on a call with analysts following the company's second-quarter earnings release. "Across the housing landscape, actionable demand has been diminished by both affordability and consumer confidence, and therefore has continued to soften." Lennar reported lowering prices, but KB Home, which reported its quarterly earnings this week, raised prices. Nationally, the median price of a new home sold in May was $426,600, according to the Census report, 3% above the year-earlier price. Slower sales resulted in a significant bump higher in supply. There were 507,000 new homes for sales at the end of May. This represents a 9.8-month supply at the current sales rate, which is 15% higher than May 2024. The last time supply was that high was briefly in the summer of 2022, after the Federal Reserve first started raising interest rates post-pandemic. Before that, supply hadn't been this high since 2009, amid the subprime mortgage crisis and the great recession.
Yahoo
20-06-2025
- Business
- Yahoo
LEN Q2 Deep Dive: Margin Pressures Mount as Lennar Prioritizes Volume and Technology Investments
Homebuilder Lennar (NYSE:LEN) announced better-than-expected revenue in Q2 CY2025, but sales fell by 4.4% year on year to $8.38 billion. Is now the time to buy LEN? Find out in our full research report (it's free). Revenue: $8.38 billion vs analyst estimates of $8.29 billion (4.4% year-on-year decline, 1.1% beat) Backlog: $6.48 billion at quarter end, down 21.2% year on year Market Capitalization: $27.15 billion Lennar's second quarter results were met with a negative market reaction, as the company delivered revenue ahead of Wall Street expectations but saw adjusted earnings per share fall short. Management highlighted that persistent affordability challenges in the housing market, driven by higher interest rates and cautious consumer sentiment, led to increased use of sales incentives and reduced margins. Executive Chairman Stuart Miller noted, 'We remain focused on driving volume and growth, matching production and sales pace using margin reduction to enable affordability.' Despite a drop in profitability, Lennar continued to prioritize keeping production steady to preserve long-term relationships and operational efficiencies. Looking ahead, Lennar's strategy centers on leveraging technology to drive cost savings, maintain sales pace, and eventually rebuild margins even as market conditions remain soft. Management expressed confidence that ongoing investments in initiatives such as the Lennar Machine (a digital marketing and pricing platform) and a new land management system will help streamline operations over time. CFO Diane Bessette emphasized, 'These initiatives have been and will continue to add SG&A as well as corporate G&A for some time to come as they represent a significant investment in our differentiated future.' Management acknowledged that while near-term headwinds persist, they believe the company is approaching a turning point where technology-driven efficiencies can support margin recovery. Management attributed the quarter's margin pressures to increased incentives needed for affordability, while emphasizing progress on operational efficiencies and technology adoption. Increased sales incentives: Lennar raised sales incentives to 13.3% during the quarter, primarily in the form of mortgage rate buydowns, to address affordability challenges and support sales volumes. Technology-driven sales and pricing: The company's Lennar Machine platform is now central to marketing and dynamic pricing, utilizing real-time data to optimize incentives and maintain sales pace across diverse markets. Core product rollout: Approximately one-third of new home starts now use Lennar's core product design, which management claims is reducing construction cycle times by nearly 20 days and lowering costs relative to non-core offerings. Land-light strategy advances: Lennar further reduced its supply of owned home sites, increasing reliance on controlled (but not owned) land, and continues to develop a digital land management system in partnership with Palantir to increase efficiency. Ongoing SG&A investment: Elevated selling, general, and administrative expenses reflect both lower leverage on falling revenues and higher spending on technology and marketing, which management believes will yield long-term efficiency benefits. Lennar expects ongoing softness in demand to weigh on margins, but is betting that technology and cost discipline will position the company for improved profitability longer term. Persistent affordability headwinds: Management expects higher-for-longer interest rates and cautious consumer sentiment to continue driving the need for incentives, putting near-term pressure on margins and average sales prices. Technology-enabled cost savings: Initiatives like the Lennar Machine and digital land management systems are designed to streamline marketing, sales, and land acquisition processes, which management believes will lower costs and support future margin recovery as adoption scales. Operational focus on inventory turns: The rollout of standardized core product designs and tighter inventory controls are expected to boost inventory turns and cash generation, with a stated long-term goal of reaching 3x inventory turns, up from the current 1.8x. In the quarters ahead, StockStory analysts will monitor (1) the pace of adoption and impact of Lennar's technology initiatives on cost structure, (2) the effectiveness of incentives in sustaining sales volumes without further eroding margins, and (3) improvements in inventory turns and cash generation as more divisions implement standardized core products. Execution on these priorities will be key to tracking Lennar's progress toward its margin recovery targets. Lennar currently trades at $103.98, down from $109.41 just before the earnings. At this price, is it a buy or sell? Find out in our full research report (it's free). Market indices reached historic highs following Donald Trump's presidential victory in November 2024, but the outlook for 2025 is clouded by new trade policies that could impact business confidence and growth. While this has caused many investors to adopt a "fearful" wait-and-see approach, we're leaning into our best ideas that can grow regardless of the political or macroeconomic climate. Take advantage of Mr. Market by checking out our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025). Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
CNBC
17-06-2025
- Business
- CNBC
10 things to watch in the stock market Tuesday including Israel-Iran conflict and Nvidia
The Club's 10 things to watch Tuesday, June 17 1. Stocks are tracking for a lower open this morning after President Donald Trump left the G7 meeting early, suggesting the conflict between Israel and Iran was intensifying with a call to "immediately evacuate Tehran." 2. Oil prices rose around 1% this morning, in line with the intensification of the Israel-Iran war. Separately, OPEC yesterday trimmed its 2026 global supply growth forecast. The oil cartel revised down its estimate for U.S. supply growth, while keeping its demand outlook unchanged. 3. Barclays raised its price target on Club name Nvidia to $200 a share from $170 and reiterated its overweight buy rating. Analysts sees upside to July quarter revenue versus current estimates following supply chain checks. 4. Club holding Amazon announced that its annual Prime Day even starts on July 8 and will last for 96 hours, double its usual length. Elsewhere, the May retail sales came in weaker-than-expected this morning, but there's still some noise in those numbers after a tariff pull-forward effect in March. 5. Wells Fargo reiterated its overweight buy rating on Club name Meta Platforms , calling the WhatsApp monetization news a positive indicator for the company's next product cycle. As we wrote yesterday for Club members, we're big fans of this long-awaited move for WhatsApp. 6. Morgan Stanley trimmed its price target on Nike to $61 a share from $70 and it's become "slightly more negative" on its hold-equivalent equal weight rating. Analysts aren't seeing positive demand signals and believe innovation is lacking. The good news may simply be how bearish investors already are on the name. 6. Club holding Eli Lilly announced an agreement to acquire Verve Therapeutics , a clinical-stage company working on medicines for cardiovascular disease that use gene editing. The deal could be worth up to $1.3 billion if certain milestones are hit. Lilly and Verve had an existing partnership. 7. Shares of homebuilder Lennar climbed nearly 2% this morning after beating on second-quarter sales but missing on earnings. Co-CEO Stuart Miller said Lennar continues to "see softness in the housing market due to affordability challenges and a decline in consumer confidence" 8. A number of price-target hikes for Olive Garden owner Darden ahead of earnings later this week. Wells Fargo went to $225 a share, citing positive casual dining trends and share gains for the restaurant operator. Bank of America went to $252, and BTIG went to $235. We own Texas Roadhouse in casual dining. 9. Solar stocks are under pressure after the Senate's version of Trump's spending and tax bill included full cuts to solar and wind power tax incentives by 2028. The Invesco Solar ETF is down more than 10% this morning. However, the Senate's bill is more positive for nuclear, hydropower and geothermal energy than the House version. 10. Lenskart is working on filing for an initial public offering in the coming weeks, Bloomberg News reported . The Softbank-backed firm is the largest eyewear maker in India. While Club name Goldman Sachs isn't involved in the deal, per Bloomberg, it's nevertheless a good sign to see more IPO activity around the globe. Sign up for my Top 10 Morning Thoughts on the Market email newsletter for free (See here for a full list of the stocks at Jim Cramer's Charitable Trust.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
