Episode summary
Lennar Forecast Disappoints in Challenging Market for Builders | Bloomberg Intelligence
Bloomberg Intelligence
· · Hosts: Paul Sweeney, Norah Mulinda · Guests: Drew Reading, Matthew Schettenhelm, James Walker
Summary
Lennar’s latest quarter showed the strain builders are still under, even as orders rose 12% from a year ago. A guest said the company had to rely on heavier sales incentives to move homes, with incentives equal to 13% of average selling price last quarter versus a normal 5% to 6%, and as high as 17% to 18% in Florida and Texas. That helped offset weaker pricing: average order price fell about 12%, and the guest said Lennar’s fourth-quarter guidance on orders, deliveries and margins was softer than expected.
The broader housing backdrop remains difficult. The guest argued that affordability is still near historic lows, existing-home sales are frozen, and rates falling a bit will not by itself restore normal demand. He noted that builder stocks have already rallied on expectations for lower rates, while the existing-home market remains constrained by homeowners locked into mortgages below 4.5% and much higher home prices since 2019.
The program also covered broadcast regulation and the Jimmy Kimmel dispute, with a guest saying Nexstar and Sinclair’s response to FCC Chair Brendan Carr likely reflects their need to stay in the agency’s good graces as it weighs deregulation and major deals. In a separate segment, James Walker of Nano Nuclear Energy said microreactors could help meet rising power demand from data centers and AI, and argued nuclear is becoming a central long-term solution.
Key takeaways
- Lennar’s orders rose 12% year over year, but a guest said incentives had to reach 13% of average selling price to keep traffic moving.
- The guest said Lennar’s average order price fell about 12% and its fourth-quarter margin guide was weaker than expected.
- Homebuilder stocks have rallied more than 30% since mid-June on rate-cut hopes, even though mortgage rates were up 25 basis points after the Fed cut, the guest said.
- The existing-home market remains “pretty much frozen,” with volumes 20% to 25% below normal and many owners locked into sub-4.5% mortgages, according to the guest.
- A guest said Nexstar’s and Sinclair’s reaction to Brendan Carr reflects their dependence on FCC approvals for deregulation and large transactions.
- James Walker said Nano Nuclear Energy is targeting microreactors for data centers and off-grid power as part of a broader nuclear renaissance.
Notable quotes
“Orders were actually pretty solid. They're up 12% from last year, but what management said is that they can see continued pressure in the housing market”
“incentives represented 13% of the average selling price of a home”
“the existing home market is still pretty much frozen. Volumes are 20 to 25% below what would be considered normal”
“you could be off-rid and you could just um build a reactor wherever you want and use a micro grid”
How the episode opens
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Let's switch gears to the housing market. Lenar, one of the big uh home builders out there, reported some numbers. We want to break that down and get a better sense of what's happening out there in the US housing market.
To do that, we check in with Drew Reading. He covers all the housing stuff for Bloomberg Intelligence. He's safely sconed down there in Princeton, New Jersey.
He forgot that there's a train into New York City from Princeton, but we'll we'll get to that later. Drew, talk to us about LAR. What did you hear from uh our folks there?
Yeah, it it was a pretty tough quarter for LAR. Orders were actually pretty solid. They're up 12% from last year, but what management said is that they can see continued pressure in the housing market and that they had increased their use of sales incentives to drive traffic and demand.
Now, for a little bit of context, last quarter, and we'll wait to see how 3Q ultimately shapes out, but last quarter incentives represented 13% of the average selling price of a home.
By comparison, in a normal market, that's about 5 to 6%. Um, in some of the most important markets, Florida, Texas, it's as high as 17 to 18%. So, you could see to, uh, you know, just the extent of how much they're having to incentivize to drive traffic through the doors. And we saw that ultimately play out in the results, their average order price is down about 12%.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- homebuilding forecasts
- affordability concerns
- nuclear reactors uk
- fcc deregulation
- media regulation
Companies and tickers mentioned
- LEN
- NXST
- SBGI
- Lennar
- Nexstar
- Sinclair
- Nano Nuclear Energy
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Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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