House prices have finished falling – but no rebound yet
They are down around 10%.
Lennar Corp., the second-largest US homebuilder, is calling an end to falling housing prices — but doesn’t yet see a recovery in sight.
“Home prices have come down about 10%,” executive chairman Stuart Miller said Thursday in a Bloomberg Television interview. “They’re probably going to remain right there at least for the foreseeable future.”
He qualified that assessment by saying his outlook was subject to change in the event of interest rates moving higher, a day after Miami-based Lennar reported quarterly earnings and the Federal Reserve announced a pause in its hiking cycle. A chronic shortage of affordable housing units in the US will keep the market tight, Miller said.
Investors may be signaling that their concerns about homebuilding are easing. Lennar is heading for its highest close on record, eclipsing the $116.91 mark set in December 2021.
The shares rose 3.7% to $119 at 2:23 p.m. in New York, buoyed by Lennar’s boost in its forecast for full-year new-home deliveries and quarterly beats against estimates for gross margins and new orders.
Miller said on an earnings call that the average sales price of a new Lennar home was now $450,000, down from a peak of $500,000 last year.
The exuberant demand that marked the COVID-19 pandemic has withered under the pressure of the fastest rate-hiking cycles in Fed history, crimping prices. Inventory of existing houses has evaporated as owners choose to stay put rather than move and borrow at higher rates, and builders have benefited as new buyers enter the market. Still, lower prices have dented Lennar’s profitability, a metric Miller said is likely to remain lower than it once was.
New homeowners, including young people who have lived at home with their parents, have become the principal drivers of demand for Lennar homes, Miller said, while “those that have that 3%, 4% mortgage are going to be very reluctant to give up that interest rate.”
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