Homebuilder Lennar Corp. Says 20% Growth in Orders Due to High Rents
The third-largest U.S. homebuilder, Lennar Corp., announced today their third straight quarter of increased orders, and said the housing market is “bottoming out.” For the September to December period, Lennar saw a 20% increase to 3,027 new home orders.The news sent the Miami-based company’s shares up, along with other homebuilders, such as KB Homes PulteGroup and DR Horton.
Interestingly, a spokesperson said that high rental rates are to blame—or to thank, as the case may be—for the jump. Low prices and historically low mortgage rates were also helping consumers choose buying over renting, he indicated.
Lennar also reported:
- Net income of $30.3 million for the quarter, the company’s seventh straight quarterly profit.
- The average home’s sales rice rose to $243,000, up from $238,000 in the same period of 2010.
- The company’s backlog increased 35% to 2,171 homes.
Meanwhile, KB Homes, the country’s fifth-largest homebuilder, said their orders in December increased by 38%. Securities analysts were impressed with both companies’ performances, as they expected Lennar’s growth to top out at about 6%.
Other signs that the housing market is stabilizing:
- Pending home sales are at their highest level since April 2010.
- Homebuilder optimism has risen for three straight months.
- Housing prices could now be at or near the bottom, according to JPMorgan Chase CEO Jamie Dimon.
- Employment numbers are starting to increase, with an additional 200,000 jobs in December.
Homebuilders are an economic bellwether. While new homes represent only one-fifth of the market, each new home generates about $90,000 in taxes and creates an average of three jobs, according to the National Association of Home Builders.
And if homebuyers are starting to become active again, landlords should plan accordingly. Later in 2012, it may be time to maintain rents and offer good tenants incentives to renew leases.