Lennar Sells More Homes at Lower Prices Amid Soft Housing Market

Over the past four years, the U.S. housing industry faced challenges, such as high mortgage rates, limiting new home construction and sales.

A Lennar sign at the entrance to one of their housing developments in Miami, Florida, on Sept. 19, 2011. Joe Raedle/Getty Images

News Analysis

Lennar Corp. sold more homes in the second quarter of fiscal 2025 than in the same period a year earlier, but at lower prices amid a housing market that remains soft in the United States.

The Miami-based homebuilder said on June 16 that revenue from home sales totaled $7.8 billion for the quarter ended May 31, down 7 percent from the same period in fiscal 2024. The decline was due to a 9 percent decrease in the average sales price, partially offset by a 2 percent increase in the number of homes delivered.

Home prices fell amid the weakest housing market in 50 years—even as the U.S. economy showed resilience by growing 2.1 percent in the first quarter of 2025—according to a letter from RH Chairman and CEO Gary Friedman to stockholders last week.

Over the past four years, the U.S. housing industry has faced multiple challenges limiting the construction and sale of new homes, including elevated mortgage rates, reduced affordability, and rising costs for imported construction materials.

The 30-year mortgage rate, a key factor influencing homebuyer demand, currently stands near 7 percent, more than double the rate in 2021.

Investopedia’s home affordability index has remained well below 1 over the past two years, suggesting that homes are unaffordable for median-income buyers.

High mortgage rates and low home affordability have led to a glut of unsold homes on the market.

Real estate brokerage firm Redfin estimated that the total worth of homes for sale in April was $698 billion, up by 20.3 percent from a year ago, the highest dollar amount recorded for April since Redfin began tracking these figures in 2012.

The rising supply of homes has forced homebuilders to offer price discounts and squeeze profit margins while elevated building material costs continue to add pressure.

“Reflecting softer market conditions, our average sales price, net of incentives, declined to $389,000,” Stuart Miller, executive chairman and co-CEO of Lennar, said in a statement following the release of the financial results.

Gross margins on home sales were $1.4 billion, or 17.8 percent, in the second fiscal quarter, compared with $1.9 billion, or 22.6 percent, in the same period of 2024.

“Gross margins decreased due to an increase in land costs year over year, as well as a decrease in revenue per square foot, which was partially offset by a decrease in construction costs as the Company continues to focus on construction cost savings,” the company stated.

Lennar’s shrinking profit margins have led to inefficient capital allocation, with returns from homebuilding now falling short of the company’s cost of capital.

According to estimates from Gurufocus.com, the return on invested capital, a measure of the returns generated from the capital invested in its business, is currently 10.81 percent, which is below the weighted average cost of capital of 11.82 percent.

Lennar’s shares were little changed as of 11:30 a.m. ET on June 17. The stock has declined more than 27 percent over the past year, lagging behind the broader market, where the S&P 500 index has risen around 9.8 percent over the same period. Over the past five years, Lennar is up more than 77 percent but still trails the S&P 500, which has gained 93 percent.

The company has been working to improve the situation by streamlining its production model to build homes more efficiently.

“Our production-first focus led to a cycle time of 132 days this quarter, 12 percent lower than last year, which has a positive impact on our construction efficiency,” Lennar’s co-CEO and President Jon Jaffe said. “In addition, our inventory turn improved to 1.8 times, compared to 1.6 last year, in part reflecting these efficiencies and, in part, as a result of our asset-light land strategy.”

“We continue to focus on consistent volume and pace as we drive efficiencies through every part of our platform in order to realize improved margin even as market conditions soften,” Miller added. “We expect new orders between 22,000 and 23,000 homes, deliveries between 22,000 and 23,000 homes, and expect our gross margin to remain approximately 18 percent, all depending on market conditions.”