Lennar’s results highlighted continued stress in the housing market, with profits falling 56% due to high mortgage rates and weak home prices.
Homebuilder Lennar reported a sharp drop in profits in its latest quarterly results released on March 12, highlighting how rising mortgage rates and economic uncertainty continue to weigh on the housing market.
The Miami-based homebuilder announced first-quarter profit for the quarter that ended Feb. 28 fell 56% from a year earlier to $229 million. A year ago, the company reported a profit of $520 million.
“Our first quarter of fiscal 2026 was defined by the same persistent headwinds that have challenged the housing market for more than three years: high mortgage rates, constrained affordability, cautious consumer sentiment and geopolitical uncertainty, including in particular the recent conflict in Iran,” Stuart Miller, Lennar’s executive chairman and CEO, said in a statement.
Housing shortage continues to drive long-term demand
Mr Miller acknowledged the market remained under pressure, with uncertainty and affordability constraints continuing to weigh on homebuyers. Still, he said the company is operating with “belief and clarity” as it navigates the current environment.
Miller pointed to a structural problem that has characterized the U.S. housing market for years: a persistent housing shortage. The gap between demand and supply has not yet been closed, he said. “America’s fundamental housing shortage is still unresolved,” Miller said. “The demand is real, deferred and building.”
Rising mortgage rates have slowed sales activity in recent quarters, but Miller expressed confidence that the situation will eventually improve. He said the market could gradually regain momentum as borrowing costs stabilize and policymakers begin to address regulatory and entitlement barriers that limit the supply of new housing.
In the meantime, Lennar is focused on adjusting its strategy to the realities of today’s buyers. The company focuses on incentives and price adjustments to keep housing within reach for consumers facing rising financing costs.
“We’re building the homes America needs at prices the market can absorb,” Miller said, adding that the company continues to improve its operating platform to increase efficiency every quarter. Mr. Miller argued that despite difficult market conditions, Lennar’s management discipline and focus on affordability will position it to benefit when housing demand eventually recovers.
Lower prices and fewer deliveries weigh on profits
Lennar reported a significant decline in home construction revenue in the first quarter of 2026, with lower home prices and fewer deliveries weighing on results. Revenue from home sales decreased 13% year over year to $6.3 billion from $7.2 billion in the first quarter of 2025. This decline is due to both relaxed pricing and lower sales volumes as the housing market continues to grapple with affordability challenges.
The company delivered 16,863 homes in the quarter, a 5% decrease compared to 17,834 homes delivered in the same period last year. At the same time, the average sales price fell 8% to $374,000 from $408,000 a year ago. Renner said the main reasons for the price reductions are the continued market downturn and the increased availability of buyer incentives designed to help consumers keep their homes affordable in the face of rising mortgage rates.
A softening price environment also put pressure on profitability. Gross margins on home sales totaled $951 million (15.2%), compared to first quarter 2025 gross margins of $1.4 billion (18.7%). According to the company, the main reasons for the pressure on profits were lower revenue per square foot and higher land costs compared to the previous year.
Some of that pressure was offset by lower construction costs, reflecting the contractor’s continued efforts to improve efficiency and reduce expenses across its operations.
Operating costs remained largely unchanged. Selling, general and administrative (SG&A) expenses for the quarter were $617 million, essentially unchanged from $616 million in the same period last year.
However, as overall revenue decreased, these expenses became a larger percentage of sales. SG&A expenses as a percentage of home sales revenue in the first quarter was 9.8%, up from 8.5% in the same period last year, reflecting lower operating leverage as the company weathered the downturn in the housing market.
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