In a fiscal quarter that remained “constructive” for home builders, Lennar reported “solid third quarter” results that reflect the home builder’s strategic focus and execution, according to Stuart Miller, executive chairman and co-CEO.

During the company’s earnings call, Miller said strategic initiatives included balancing and maintaining production and sales pace, reducing cycle times, increasing cash flow, improving inventory turns, and driving a strong company bottom line.

Miller said despite an uptick in interest rates in August, Lennar was able to continue to drive sales pace through the conclusion of the fiscal third quarter.

“The Fed continued to use tighter money supply and higher interest rates as tools to battle inflation, while enabling continued economic growth. At the same time, short housing supply, absorbed by strong primary and pent-up demand, continued to define a strong sales environment,” said Miller. “Home builders continued to use incentives, including buydowns, to offset rising interest rates and tighter capital, which limit affordability.”

Lennar’s strong quarter again included an outperformance of analyst expectations on its profits per share figure, the fourth consecutive occurrence dating back to the fourth quarter of 2022. Lennar reported profits per share of $3.87 and total revenue of $8.7 billion, also above analyst expectations.

“Overall, we believe that the housing market has leveled, and, while net average sales prices are lower, cancellations have been normalizing and margins have stabilized as cost reductions and value engineering provide an offset to the price reductions,” Miller said. “Additionally, we believe that the new supply of homes will be limited as developed land is scarce and increasingly more expensive to develop. This will continue to limit available inventory and maintain supply demand imbalance.”

Revenues from home sales decreased 2% in the third quarter to $8.3 billion from $8.4 billion in the prior-year period. Lennar attributed the lower revenues partially to a 9% decrease in the average sales price of home deliveries ($448,000 in the third quarter compared with $491,000 in the same quarter of 2022). The builder said the decrease in sales price was primarily due to pricing to market and product mix differences compared with last year’s third quarter.

Lennar’s home deliveries increased 8% year over year in the third quarter to 18,559 homes, and new orders increased 37% to 19,666 homes. Lennar ended the quarter with a backlog of 21,321 homes with a dollar value of $9.9 billion. The home builder started 18,675 homes during the third quarter while reporting a cancellation rate of 3.3%.

“As the Fed continues to focus on its goal of reducing inflation, we have remained vigilant and focused on our operating strategies,” said Miller. “We will continue to fortify our balance sheet with significant liquidity and operate from a position of strength, repurchasing stock and reducing debt, thus enabling us to continue to execute on our core strategies and outperform in periods of growth as well as uncertainty.”

Land and Cycle Time Updates

Jon Jaffe, co-CEO and president of Lennar, said the company continued to execute its land-light strategy in the third quarter. The builder’s supply of owned homesites improved to 1.5 years from 2.2 years, and Lennar’s controlled homesite percentage increased to 73% in the third quarter from 69% a year ago.

Jaffe said the builder’s cycle time in the third quarter was down 32 days sequentially, with improving supply chain and labor market conditions positively impacting production times.

“Concurrently, the ‘Lennar Machine’ continued to drive sales pace in concert with production,” Jaffe said. “Accordingly, quarterly starts and sales pace were 4.9 homes and 5.2 homes per community, respectively, and we ended the third quarter with approximately 1,400 completed, unsold homes, about one home per community."