“Mortgage interest rates have remained higher-for-longer, which has left the overall housing market weaker-for-longer,” Stuart Miller said in an earnings call on Friday. “Across the housing landscape, actionable demand has slowed materially.”

It spooked investors; Lennar shares are down 4% on the news. But as Miller mentions, underlying demand is there. People still need homes, but not a lot of people can afford them at the moment. Since February 2020, home prices have increased 45%, according to Zillow; and the average 30-year fixed mortgage rate is 6.67%, per the latest weekly reading, which is an improvement but higher than what more people became accustomed to during the pandemic. Not to mention, people are feeling less certain about their employment prospects lately, which Miller alluded to without naming a suspected cause. Meanwhile, mass layoffs in the federal government could be taking a toll on consumer confidence.

“Consumers have been generally confident that they will remain employed and that their compensation is safe—but more recently, even that safety has been called into question,” Miller said. Because consumer confidence is tanking, there is less urgency to pull the home-buying trigger. 

You can see it in home sales data. Existing home sales slipped 1.2% in February compared to a year earlier. New home sales dropped 1.1% in January compared to a year earlier and that’s despite homebuilders’ ability to offer mortgage rate buydowns and other incentives intended to bring back demand. But “while the short-term road ahead might still seem a little choppy,” Miller said, Lennar is optimistic in the longer term. Still, a recovery in demand correlates with mortgage rates normalizing and there is no way to know when that might be. 

There are other unknowns, too: tariff and immigration policies. To date, there has been no effect on Lennar’s costs due to tariffs, said co-CEO Jon Jaffe, during the earnings call. However, it is something they are monitoring and discussing with their trade partners. The same goes for anticipated labor shortages because of mass deportations—Jaffe said there has been no impact on Lennar thus far. 

For the first quarter of the year, Lennar reported $7.6 billion in revenues, and $809 million in earnings from homebuilding operations. Lennar delivered almost 18,000 homes, an increase from a year earlier. But its average sales price after incentives fell to $408,000, a 1% drop from a year ago. 
In the last twelve months, Lennar shares are down 28%. Lennar declined to comment further.