Two of the largest listed home builders announced their quarterly results today and exceeded expectations while remaining upbeat regarding the future.
Lennar and KB Home 3Q earnings
Today saw Lennar Corporation (NYSE:LEN) post Q3 earnings of $0.54, up from $0.40 the previous year and well in excess of the $0.45 that the consensus estimates had expected. Revenue was up 46 percent to $1.60 billion, exceeding a call for $1.54 billion in quarterly revenue. Lennar has now seen seven straight quarters of double-digits or better sales and earnings growth.
KB Home (NYSE:KBH) reported earnings of $0.30 up year-over-year from earnings of $0.40. Analysts had anticipated earnings of $0.21. That gain, however, was tempered by sales that fell short of estimates. Despite rising 29 percent to $549 million, the Street was looking for $567 in revenue for the quarter. The average selling price climbed 22 percent, but orders declined 9 percent.
Home prices rise
In addition to these earnings, today saw an industry report released that showed home prices were meeting expectations by rising 12.4 percent from the same time last July, according to the S&P/Case-Shiller composite index of 20 metro areas across the country. This rise is the biggest gain in over seven years.
The average rate for a fixed, 30-year mortgage was 3.3 percent in May, while the average presently sits at 4.5 percent. Consequently, this is the first quarter that home builders have reported a full quarter of sales above 4 percent.
Both companies seem to believe that any slowdown in home building due to higher interest rates will be short-lived.
Recovery caused by rising mortgage rates
“We believe that the recent slower pace of the recovery caused by an uptick in mortgage interest rates is a temporary effect, and we expect to see steady upward demand for housing as consumers adjust to both higher rates and pricing,” KB Chief Executive Jeffrey Mezger said in a statement.
Lennar Corporation (NYSE:LEN) CEO Stuart Miller towed the same line in his statement where he “continues to see long-term fundamental demand” in the market amid a shortfall of new single-family and multifamily homes built over the last five years.
Growth in home sales
Last week, the National Association of Realtors said existing-home sales rose 1.7 percent in August to a seasonally adjusted annual rate of 5.48 million, the highest level in more than six years. Estimates had expected a slow down of 2 percent.
Last week, the Commerce Department reported that August housing starts rose less than expected to a seasonally adjusted annual rate of 891,000 units. Tomorrow it will release its new home numbers at 10 AM EST.