Homebuilders Revise Earnings Down as Mortgage Rates Stall Sales
KB Home cut its annual gross profit margin guidance to 16.0% to 16.2% from a prior range of 16.1% to 16.5%, citing deteriorating market conditions across its footprint. The company also lowered its housing revenue outlook to $4.9 billion to $5.1 billion from $4.9 billion to $5.3 billion, while maintaining its delivery target of 10,500 to 11,000 homes. Third-quarter revenue fell 20% to $1.3 billion, with deliveries down 19% to 2,732 homes and net orders down 12% to 2,604. Profit dropped to $65.3 million, or $1.05 per share, from $109.8 million a year earlier.
Sales weakened sequentially in July and August after a resilient June, according to executives. Southern California, a key market for higher-margin properties, saw slower-than-expected sales in the third quarter, reducing the number of higher-priced homes expected to close in the current quarter. KB Home also cut prices in response to market conditions and mortgage rates that climbed above 7% for 30-year fixed loans following the Federal Reserve’s latest rate increase. Average selling prices dipped to $473,000 from $475,700 in the prior-year quarter.
Lennar cut its full-year home delivery target earlier this month, pointing to the same pressures—high mortgage rates, elevated home prices, and weak consumer confidence. Economists expect the 7% mortgage rate threshold to further slow buyer activity in an already stagnant market. KB Home projects fourth-quarter housing revenue of $1.45 billion to $1.65 billion and deliveries of 3,000 to 3,500 homes, both below analyst expectations.
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