Leonards (LEN) CEO Stuart Miller said on Thursday that affordability remained a headwind for potential buyers, with mortgage rates hovering around 7%.
Miller said on the company's first-quarter earnings call that affordability is “at its limits,” adding: “We're certainly seeing a little bit more credit card debt and personal debt from our customers.” “There were delinquencies on some of those debts,” he said.
His comments came after Lennar reported Wednesday that its fiscal first quarter sales, which ended Feb. 29, were lower than analysts expected.
Lennar shares fell about 6% Thursday on the news, pushing down DR Horton (DHI) and Toll Brothers (TOL), which both fell 3%. The SPDR S&P Home Builders ETF (XHB) fell nearly 2%.
U.S. household debt and delinquency rates are rising. Total household debt increased by $212 billion, reaching $17.5 trillion in the fourth quarter of 2023, according to data from the New York Fed.
The challenges of rising mortgage rates and home prices over the past year have been troubling for buyers looking to enter the market. Mortgage interest rates have been on an upward trend for most of this year, reaching about 7% in mid-February. The average interest rate on a 30-year fixed mortgage fell to 6.74% Thursday from 6.88% the previous week, according to Freddie Mac.
“What we see is what you see. [our customers] In particular, more [customers] Lennar Financial Services CEO Bruce Gross told analysts on an earnings call Thursday that the company is seeing a higher proportion of total revenue related to debt.
“That we have more debt to pay off is something we realized anew this quarter. We often work with buyers and we can work through a lot of conditions. But That's one thing we've seen [different from] This is the last quarter,” Gross added.
