(Reuters) -Lennar Corp forecast its third-quarter home deliveries below analysts’ estimates on Monday, a sign that demand for new homes is expected to remain sluggish as mortgage rates hover at a two-decade high.
Shares of the U.S. homebuilder fell as much as 1.9% after the bell.
With the current 30-year fixed mortgage rate nearly at 7%, many homebuyers are being priced out of the market, prompting homebuilders to cut base home prices and dish out incentives such as mortgage rate buydowns, or reductions on home loan rates, to maintain sales pace.
“Although affordability continued to be tested by interest rate movements and simultaneously challenged consumer sentiment, purchasers remained responsive to increased sales incentives,” said Executive Chairman Stuart Miller.
Lennar (NYSE:) cut average price per home to $426,000 in the quarter ended May 31, from $449,000 a year ago. It delivered 19,690 homes during the period, versus 17,885 units a year earlier.
Existing housing supply also remains tight as a majority of homeowners are unwilling to resell their homes, having locked down home loan rates below 5% during an era of cheap debt.
The company forecast its third-quarter home deliveries to be between 20,500 and 21,000, the midpoint of which is marginally below analysts’ estimate of 20,917 units, according to LSEG data.
But earnings of $3.45 per share for the second quarter beat analysts’ average estimate of $3.24 per share.
Its overall quarterly revenue was at $8.77 billion, compared with the estimates of $8.52 billion.