Coming Home To Roost

The housing market is already in rough shape, and the Fed reiterated its determination to bring prices down further. Given this is such an essential part of the economy, let’s look at earnings from homebuilders KB Home and Lennar. ๐Ÿ‘€

ย First, let’s start with KB Home. Its earnings per share beat estimates of $2.67, coming in at $2.86. Meanwhile, its revenues of $1.84 billion were slightly below expectations.ย 

Home deliveries were up 6% YoY, but its third-quarter net orders fell by 50% due to higher mortgage rates, inflation, and macro pressures. In addition to demand waning, the company expects extended build times and supply constraints to continue into the fourth quarter. โŒ

Meanwhile, Lennar earned $5.03 per share compared to $4.52 last year. Revenues were up 29% YoY to $8.9 billion, with deliveries rising 13% YoY and an average sales price of $491,000. ๐Ÿ”บ

Like KB Home, a drop in new home orders shows slipping demand as a weaker macro environment, and higher rates push buyers out of the market. On the supply side, it noted an increase in materials and labor costs and that overall supply chain constraints (although improving) continue to limit its deliveries.

While these companies aren’t entirely sounding the alarms yet, the housing market is clearly amid a slowdown. And with the Federal Reserve focused on bringing down inflation by any means, monetary policy will likely remain a headwind for these companies well into next year.

After-hours volume is typically light for these companies, so we’ll have to see what tomorrow brings. Though the initial reaction from both stocks looks like their reports…not great. ๐Ÿ‘Ž

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