(Reuters) -Homebuilder Lennar Corp on Wednesday reported a better-than-expected profit in the third quarter, benefiting from record-high property prices as demand far outpaced supply that was crippled by raw material and labor shortages.
While homebuilders have been enjoying steeper prices for a while, the U.S. Federal Reserve’s decision to continue raising interest rates to clamp down on inflation has made homes even less affordable for buyers, and is starting to affect sales.
For the reported third quarter, Florida-based Lennar said new orders fell about 12% to 14,366 homes.
“Sales have clearly been impacted by rising interest rates, but there remains a significant national shortage of housing, especially workforce housing, and demand remains strong as we navigate the rebalance between price and interest rates,” Lennar Executive Chairman Stuart Miller said.
Lennar, the second largest home construction company in the United States, said it expects deliveries between 20,000 and 21,000 homes for its fourth quarter with gross margins between 26% and 27%.
“Interest rates are moving and likely to continue to move, and the housing market will continue to rebalance pricing and interest rates in order to meet demand,” Miller said.
Smaller rival KB Home said on Wednesday “the long-term outlook for the housing market remains favorable,” after posting an about 26% rise in its quarterly revenue to $1.84 billion.
On an adjusted basis, Lennar earned $5.19 per share in the third quarter ended Aug. 31, beating analysts’ average estimate of $4.88, according to Refinitiv IBES data.
It posted an about 29% rise in quarterly revenue to $8.93 billion, but missed analysts’ average expectation of about $9 billion.
Net income rose 4.3% to $1.47 billion.
(Reporting by Nathan Gomes and Priyamvada C in Bengaluru; Editing by Shinjini Ganguli)