Lennar’s incentives reach 12% as margins slide

Lennar said its average sales price last quarter reflected incentives of about 12%, as it cut prices and paid down buyers’ mortgage rates to keep homes moving.

In the fiscal third quarter ended August 31, new orders fell 9% to 20,879 and deliveries slipped 3% to 20,840. The average price of homes delivered fell to $372,000 from $383,000, and gross margin on home sales dropped to 15.8% from 17.5%.

Stuart Miller called affordability the defining constraint. On Thursday’s earnings call, management said nearly half of visitors in many markets can’t immediately qualify for a mortgage.

Lennar trimmed its full-year delivery target to 80,000–81,000 homes. Adjusted earnings of $1.23 a share missed the $1.30 expected, and the shares fell 2.6% before the open.

The results came a day after the National Association of Home Builders’ confidence index fell to 32, a one-year low, with 38% of builders cutting prices.