Financial Services

UPDATE 4-Lennar says home sales improving as mortgage rates ease


(Reuters) – Lennar Corp (LEN.N) said on Wednesday it was seeing an improvement in home sales in its new fiscal year as mortgage rates start to ease, allaying concerns of a slowdown in the broader U.S. housing market.

FILE PHOTO: Newly constructed houses built by Lennar Corp are pictured in Leucadia, California March 18, 2015. REUTERS/Mike Blake/File Photo

The company’s shares reversed course to trade up as much as 7 percent following the comments. They were earlier marginally down after the company reported lower-than-expected home sales and orders for the fourth quarter.

The second largest U.S. homebuilder said the moderation in buyer traffic in the past quarter was temporary and expects strong employment, wage growth and consumer confidence to encourage buyers.

At the same time, the U.S. central bank has indicated fewer interest rate hikes this year, which would possibly stabilize mortgage rates.

“The demand is out there. Need for dwellings is out there and we think that the market is going to continue to be relatively strong as we get into the (spring) selling season,” Executive Chairman Stuart Miller said on a conference call.

Lennar, which put off giving its financial outlook for fiscal year ending November, said it expects to achieve its goal of selling more than 50,000 homes in the year, slightly below its previous forecast of 53,000 units.

Analysts said Lennar numbers were not as bad as feared in a market that continues to show stable demand.

“Sentiment on the (homebuilding) stocks has shifted more positively to start the year on hopes that the recent pullback in rates will re-energize growth,” RBC Capital Markets analyst Michael Dahl said.

Rising labor and raw material costs have led builders to increase home prices. This, combined with higher interest rates, has prompted some homebuyers to defer their purchases.

Lennar hinted that it might increase incentives to boost sales if buyers continue to wait out.

“Our intent is to build and deliver more than 50,000 homes this year, even if it’s at the expense of some margin,” Chief Executive Richard Beckwitt said.

The company’s sales rose 64 percent to 14,154 homes, helped by the purchase of smaller rival CalAtlantic last year, but missed analysts’ expectation of 14,485 units, according to IBES data from Refinitiv.

Orders soared 44.2 percent to 10,611 homes, but missed estimate of 11,174 units.

Excluding items, Lennar earned $1.96 per share.

The company’s shares, which had plunged 36.2 percent in the past 12 months compared with a 27.6 percent fall in the PHLX Housing Index .HGX, were last up 6.9 percent.

Reporting by Ankit Ajmera in Bengaluru; Editing by James Emmanuel and Sweta Singh



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