The pandemic did not prevent Americans from buying new homes because Lennar Corp. reported revenue, orders and deliveries rising in the third quarter after two previous periods of growth.
Record low interest rates, buyers’ interest in houses with new technology and better internet connection plus a general shortage of housing for rent and sale are stimulates demand for new houses, management told analysts during Tuesday’s conference call.
“We expect home sales to remain strong for the foreseeable future,” said CEO Lennar Stuart Miller he said at the challenge.
Although millennials continue to value home ownership, Covid-19 could “disperse” the transition from cities to suburbs and from apartments to houses, said Lennar, CEO Rick Beckwitt.
Lennar reported 15,564 new home orders during the last quarter, which ended on August 31. This represents an increase of 16 percent over the same period last year and exceeded the expectations of a Miami home builder. New orders also increased by 20 percent second quarter. Lennar’s total value of new orders rose to $ 6.3 billion, up 20 percent year over year and up about 30 percent from the previous quarter.
The company delivered 13,842 homes during the third quarter, a year-over-year increase of 2 percent and a 10 percent increase over the previous quarter. However, average sales prices remained largely the same year-on-year, at $ 396,000.
Lennar’s backlog also increased, reaching 19,697 homes in the quarter, up 4 percent year over year and up 10 percent from the previous quarter. The value of this outstanding state, $ 7.9 billion, increased at about the same rate.
Lennar is known for simple houses without trimmings at an affordable price. The company has reported strong profits in the last few years as a lack of housing led to strong demand for new single-family homes.
For the third quarter, Lennar reported net income of $ 666.4 million, or $ 2.12 per share, up 30 percent from $ 513.4 million, or $ 1.59 per share, in the same period last year.
However, the company’s shares fell about 3 percent on Tuesday and at 14:53 reached $ 76.46 per share. In his order, Lennar said he expects the average home sales price to fall to $ 390,000 in the fourth quarter and new orders to be lower – between 13,800 and 14,300 – with deliveries between 15,500 and 16,000.
Lennar reported gross home sales margins of 23.1 percent in the third quarter, up from 20.4 percent in the third quarter of last year and up 21.6 percent in the previous quarter.
“Simply put, sales could have been stronger with a unique focus on volume,” said Miller. “But instead, we managed margin growth and cash flow while allowing prices to appreciate to cover cost escalations in the future.”
The launch of Lennar’s new home increased 17 percent year-over-year, reflecting a slowdown in the manufacturing slowdown in earlier Covid-19 days. “As the market recovers, we have increased numbers and production so that production and deliveries return to normal by 2021,” said Miller.
Despite this, construction costs rose Lennar managers are careful about over-building in the short term. Labor and material costs remained at the same level quarter-on-quarter and year-on-year, which management attributed to cost management.
However, timber prices almost doubled between the beginning of the quarter and August. Lennar’s president, Jon Jaffe, said future lumber prices have fallen by about 19 percent and expects to fall by about 40 percent over the next three months.