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Rising mortgage rates are holding back the housing market.
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Jersey and Florida are hot. Housing in Austin and Seattle is not, according to the co-executive director of the second largest builder in the United States.
Lenar
(tickers: LEN, LEN. B) noted a slowdown in national housing during its conference on earnings on Tuesday, then went through some of the country’s stronger and weaker markets.
“So in June, new orders, traffic, sales incentives and cancellations deteriorated in many of our markets due to the rapid jump in mortgage rates and headwinds from negative economic headlines. Many markets have also slowed as we enter a seasonally slower part of the year, “said co-CEO Richard Beckwith.
He listed 18 markets that continue to perform well. “These include our six markets in Florida, New Jersey, Maryland, Charlotte, Indianapolis, Chicago, Dallas, Houston, San Antonio, Phoenix, San Diego, Orange County and the Inner Empire,” Beckwith said. “All of these markets benefit from extremely low stocks, and many of them benefit from a strong local economy and stable growth and migration.”
Beckwith identified seven markets that the company considers “Category 3” – places that have experienced “significant mitigation and adjustment of the market.” The list includes Raleigh, Minnesota, Austin, Los Angeles, Central California, Sacramento and Seattle.
Austin was a particularly hot market with 40% plus appreciation for two consecutive years, while Seattle was one of the strongest markets in the country in the last two years, he said. Minnesota is hampered by a lack of immigration, limiting the group of home buyers.
Beckwith said the company’s 10 Category 2 markets, which have slowed less drastically, with modest price declines, include Atlanta, Colorado, Charleston, Myrtle Beach, Nashville, Philadelphia, Virginia, the Bay Area, Reno and Salt Lake City. “In each of these markets, traffic has slowed and we are witnessing an increase in the cancellation rate,” said the CEO.
Lenar
C ‘
profits for the quarter ended in May were better than expected. The company realized an adjusted $ 4.69 per share, compared to $ 2.65 a year earlier and before the consensus consensus of $ 3.95.
Shares of Lennar closed 1.6% higher on Tuesday at $ 65.65, down 43% so far this year. Like the shares of other home builders, the shares fell as investors adjusted to the potential for a major housing slowdown later this year and in 2023.
The company trades below its book value of about $ 74 per share and only four times the projected earnings per share for 2022.
Write to Andrew Barry at andrew.bary@barrons.com
