Lennar Jumps After Chairman Says December Demand Improved
(Bloomberg) -- Lennar Corp., the first big U.S. homebuilder to report in this earnings cycle, surged after its chairman said buyer traffic improved in December as mortgage rates declined.
Chairman Stuart Miller said on a call with analysts that more buyers came into sales offices, even in the rapidly-cooling California market. The company earlier in the day reported that orders for the quarter ending in November were only 10,611, compared with its own guidance of 11,400.
“With recent pressure on both volume and margin, many have become concerned that the housing market has completely stalled," Miller said during the call. “We still do not agree. As rates have started to ease we have seen traffic pick up. Therefore we continue to believe the market has taken a natural pause. It will adjust and recalibrate and demand driven by fundamental economic strength will resume.”
Mortgage rates for 30-year loans reached 4.94 percent in November, almost a percentage point higher than at the start of 2018. That has been a drag on the hottest markets, such as Seattle, Dallas and Los Angeles, where price growth is now slowing.
In the past month, mortgage rates have dropped to 4.51 percent, according to data from Freddie Mac, and analysts and investors are watching to see if the lower rates reinvigorate demand, or if the market has simply lost its momentum.
The moment Miller started talking about a pickup in home shoppers in December, the company’s shares jumped.
The company’s shares were up 7.3 percent at 2:38 p.m. in New York trading, the most since June. It was the best-performing stock in the Standard & Poor’s homebuilding index, which was up 1.3 percent.
If higher traffic at model homes translates to higher sales, that could be meaningful, though December is just one month -- typically a slow one -- and the company provided few details, saying only that it saw more qualified buyers and that they seemed more willing to buy.
After accounting for last year’s purchase of another big builder, CalAtlantic Group Inc., orders fell 2 percent in the fourth quarter. And despite the company’s statements about improving buyer traffic in December, the company said orders will be 9,700-10,000 in the first quarter, which suggests a year-over-year drop of about 10 percent at the midpoint of that forecast, according to Bloomberg Intelligence analyst Drew Reading.
“Over the past quarter, market data has clearly indicated that the housing market and recovery has decelerated and seems to indicate a continued slower market ahead," Miller said.
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