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Homebuilders unload solid earnings as spring arrives – but prices are muddling the forecast

  • reitokensdmn
  • March 25, 2024
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Cul-de-sac mania… America’s largest homebuilders nailed earnings beats this month as they cranked out new builds to ease low inventory. Last week, KB Home said its quarterly revenue grew 6% and net new-home orders surged 55%. Rival Lennar’s home deliveries jumped 23% while revenue grew 13%. But with spring here, the housing market isn’t all sunshine and roses.

  • Closed house: New-home sales dipped slightly in February as mortgage rates ticked up, though the median sale price for a new home fell to $400K from $415K in January.
  • Open hand: Homebuilders are dishing out more perks to lock in cash-strapped buyers (think: covering $500 inspection fees). KB Home said that last quarter over half its deals came with concessions.

Escrow anxiety… Last year, low housing inventory and 23-year-high interest rates contributed to the lowest existing-home sales in nearly three decades. But even as builders like Lennar and KB ramp up production, the US market is still short up to 7.2M homes. Most first-time homebuyers now spend over 40% of their monthly income on home payments. Would-be buyers need to earn nearly $50K more than they did prepandemic to afford a new pad. Even those who earn enough may have a hard time finding their dream home.

  • Golden cuffs: A lot of homeowners are unwilling to give up the low mortgage rates they locked in during the pandemic. Recently, nearly 70% said they didn’t plan on moving anytime soon.

There’s less spring in housing’s step… Spring is historically the housing market’s sweetest szn thanks to higher inventory and better weather (picture: sun-soaked gardens in full bloom). But Americans are facing the least affordable housing market since 1984, and while rate cuts could spark a home-buying spree later this year, they may also drive up prices by boosting demand.

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