Homebuilders KB Home, Lennar Cut Prices As Buyer Demand Has 'Slowed Materially'

Homebuilders are sounding the alarm on the state of American consumers, as sales depend on increased incentives and lower home prices.

What To Know: Lennar Corp. LEN and KB Home KBH each reported disappointing first-quarter financial results in the past week. Both companies pointed to slowing "actionable demand" from homebuyers on earnings calls with analysts.

Lennar Co-CEO Stuart A. Miller listed several factors contributing to the decrease in homebuyers' demand, including limited funds for down payments, high levels of personal debt, and hard-to-achieve income qualifications for mortgages.

"A somewhat confused consumer and wavering consumer confidence have challenged the consumer’s desire and ability to transact. While there continues to be considerable traffic and customers looking for homes, the urgency to actually transact remains tepid," Miller said on the earnings call.

Miller also raised concerns about new immigration policies and tariffs that could affect the housing industry.

"The housing market has softened as affordability and consumer confidence have limited actionable demand. Incentives have been increasing, and net housing prices seem to be moderating," Miller said, adding that at least housing will not be contributing to current inflationary pressures.

Executives at KB Home gave similar comments on Monday's earnings call after the company lowered its revenue guidance for fiscal 2025 due to softer demand at the start of the spring selling season.

"Consumers are working through affordability concerns and uncertainties related to macroeconomic and geopolitical issues, which are causing them to move slowly in their homebuying decisions," said Jeffrey Mezger, CEO of KB Home.

The company lowered its base prices to align with market conditions and stimulate demand, he explained.

"In mid-February, we took steps to reposition our communities to offer the most compelling value, and buyers responded favorably to these adjustments," Mezger added.

Robert McGibney, COO, added that about half of their communities saw price reductions ranging from $5,000 to $30,000, averaging around $15,000 to $16,000. McGibney noted that Florida was the softest state in terms of sales demand and required more significant pricing adjustments, while less adjustments were needed in the West and Southwest regions.

KBH, LEN Price Action: According to data from Benzinga Pro, both KB Home and Lennar shares are down approximately 30% over the past six months as high home prices and interest rates continue to negatively affect the homebuilders.

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