Lennar sees most home orders in a decade in Q2
Miami-based builder Lennar had its best quarter for new-home orders in a decade during Q2 2017, increasing 12% year-over-year and driven by growth in community count and activity within, according to the company.
Home-sales revenues rose 18% from a year ago to $2.9 billion in Q2. Deliveries were up 15% for the period to 7,710 homes. Overall, the company reported net earnings of $213.6 million, or $0.91 per diluted share, compared to $218.5 million in Q2 2016, impacted by costs associated with the recent acquisition of WCI.
Its strongest markets — Portland, OR, Seattle, the Inland Empire, coastal California, the San Francisco Bay Area, Tampa, FL, and southeast Florida — paced at five homes sales per community each month, compared to 3.9 sales nationally.
Lennar’s strong quarter bucked an industry trend. While the homebuilder saw its deliveries and orders increase, tight inventory has activity across the industry trending downward. The most recent data from the Department of Housing and Urban Development and the Census Bureau revealed housing starts hit lows in May while new home sales dropped 11.4% in April, HousingWire reported.
In a call with analysts Tuesday, company executives said they plan to focus on shorter-term land acquisitions and maintain a 7% to 10% growth rate for the company while reducing selling general and administrative expenses. Activity generated from the acquisition of Florida builder WCI, which was finalized earlier this year, should help attain that growth, officials said.
The company is also focused on expanding its offerings to first-time buyers, which make up 40% of its product mix currently. “The general trajectory is positive, even at the first-time buyer level, as the millennials start to unwind their doubling up and come to the market realizing that rental rates have gone up, and there is a real reason to go ahead and purchase,” Lennar CEO Stuart Miller told analysts, adding that first-timers are proving “flexible” as prices increase.
The company saw a 3.3% increase in its average selling price to $374,000 during the quarter from a year ago. Meanwhile, a 7% year-over-year increase in labor costs and a lumber-driven 4% rise in material prices for the period pushed direct construction costs up 5% from Q1 2016 to Q2 2017 to roughly $55 per square foot.
Lennar has embraced trends that could make its homes more attractive to prospective buyers. In March, the company announced plans to build 180 homes in a solar-powered community, Babcock Ranch, in southwest Florida. Lennar is also one of a several homebuilders to offer smart home automation products.
- Lennar Form 8-K
- HousingWire Lennar bullish after new home demand reaches 10-year high