The housing market is being hurt by rising mortgage rates.
Jersey and Florida are both hot. The co-CEO of the second-largest home builder in the U.S. says that housing in Austin and Seattle is not.
Lennar
On its earnings call on Tuesday, (ticker: LEN, LEN. B) talked about how the housing market as a whole was slowing down and then went over some of the stronger and weaker markets around the country.
“So far in June, new orders, traffic, sales incentives, and cancellations have all gotten worse in many of our markets. This is due to a sudden rise in mortgage rates and bad news about the economy. Richard Beckwitt, co-CEO, said, “Many markets have also slowed as we’ve moved into a slower time of year.”
He made a list of 18 markets that are still doing well. Beckwitt said, “These include our six markets in Florida, New Jersey, Maryland, Charlotte, Indianapolis, Chicago, Dallas, Houston, San Antonio, Phoenix, San Diego, Orange County, and the Inland Empire.” “All of these markets are doing well because there aren’t many homes for sale, and many of them are also doing well because the local economy is strong and there is solid growth and migration.”
Beckwitt named seven markets that the company considers to be in “Category 3.” These are places that have seen “more significant market softening and correction.” Raleigh, Minnesota, Austin, Los Angeles, the Central Valley of California, Sacramento, and Seattle are some of the places on the list.
He said that Austin had been a very hot market for two years in a row, with prices going up by more than 40 percent each year. He also said that Seattle had been one of the best markets in the country over the past two years. Minnesota’s housing market has been hurt by the fact that not enough people have moved there.
Beckwitt said that the company’s 10 Category 2 markets are Atlanta, Colorado, Charleston, Myrtle Beach, Nashville, Philadelphia, Virginia, the Bay Area, Reno, and Salt Lake City. These markets have slowed down less dramatically and seen smaller price drops. “Traffic has slowed in each of these markets, and the number of cancellations has gone up,” the CEO said.
For the quarter ending in May, Lennar made more money than expected. The company made an adjusted $4.69 per share, which is more than the $3.95 that most people thought it would make.
The price of Lennar shares went up by 1.6% on Tuesday, closing at $65.65. So far this year, they have gone down by 43%. The stock has gone down, just like the shares of other home builders, as investors have gotten used to the idea that the housing market could slow down a lot in the second half of this year and in 2023.
The company trades for less than its book value, which is about $74 per share, and only four times what it is expected to earn per share in 2022.
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