Lennar’s (LEN) CEO Stuart Miller said Thursday that affordability remains a headwind for would-be buyers as mortgage rates linger around the 7% mark.
Miller said on the company’s first quarter earnings call that affordability is “stretched,” noting that “we are definitely seeing a little bit more credit card debt and personal debt from the customer showing up in their applications.” He noted, “We have seen some delinquencies in some of that debt.”
His comments came after Lennar on Wednesday reported revenue that missed analyst estimates for its fiscal first quarter ended Feb. 29.
Lennar stock tumbled roughly 6% Thursday on the news, dragging down D.R. Horton (DHI) and Toll Brothers (TOL), which were both down 3%. The SPDR S&P Homebuilders ETF (XHB) slipped nearly 2%.
US household debt and delinquency rates have been rising. Total household debt rose by $212 billion to hit $17.5 trillion in the fourth quarter of 2023, according to data from the Federal Reserve Bank of New York.
The challenges of higher mortgage rates and home prices over the last year have plagued buyers trying to jump into the market. Mortgage rates have largely been on the rise this year, peaking around 7% in mid-February. The average rate on the 30-year fixed mortgage fell to 6.74% Thursday from 6.88% the week prior, according to Freddie Mac.
“What we’re seeing is when you look at [our customers] in particular, more of the [customers] are having a higher percentage relating to debt to total income,” Bruce Gross, chief executive officer of Lennar Financial Services, told analysts on the earnings call Thursday.
“There’s more debt to pay off, and that’s something new that we noticed this quarter. We often work with the buyers, and we’re able to work through a lot of the conditions. But that one point is something that we’ve seen [different from] last quarter,” Gross added.
