America's second largest homebuilder outlines why the housing crisis is good news

The housing supply crisis is not bad news for everyone.

Lennar Corporation, America’s second-largest homebuilder by construction, reported first-quarter earnings that were better than analysts expected on Tuesday morning.

Its profits increased 25% from a year earlier to $144 million, or $0.63 per share. Revenues rose 21% to $2 billion.

The company is benefiting from a healthy housing market in a recovering economy with a strong labour market.

Its homebuilding revenues jumped in the quarter, along with the average sale price of homes.

As we’ve outlined before, rising home prices are partly because there are not enough homes being built.

For the home buyer, tight inventories right now mean rising prices and higher chances of not being able to afford a home, even with such low mortgage rates.

But for the seller, higher prices can be a boost to the bottom line. And that’s partly what’s delivered a strong quarter for Lennar.

In the earnings release, CEO Stuart Miller said (emphasis ours), “Despite global economic concerns and volatility in the stock market, our net earnings increased 25% year-over-year and we had solid performances in most of our businesses. We continue to believe that the housing market is continuing its slow and steady recovery driven by years of under production, tight inventory levels, attractive interest rates and the lowest unemployment levels since 2008.

The company reported that its average sales price of homes rose 12% to a record $365,000 in the first quarter. It operates in 19 states, including California, New York and Florida.

Lennar’s shares rose as much as 3% in pre-market trading. Over the last year, they have fallen 7%.

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