Homebuilders Lennar Corporation (NYSE: LEN) and KB Home (NYSE: KBH) reported their earnings results for the first quarter of 2025 at the end of last month against a challenging housing backdrop. While KB Home’s quarterly performance was impacted by market headwinds, Lennar managed to deliver revenue growth despite the difficult environment.
Housing market headwinds
The housing market continues to be pressured by macroeconomic uncertainty as high interest rates and inflation continue to hinder affordability. Consumers are finding it difficult to afford down payments or qualify for mortgage and this has affected their ability to move forward with new home purchases, despite there being a strong demand for housing. In addition, job security concerns have also dampened the interest in buying new homes.
Both Lennar and KB Home have been offering various incentives to help with affordability. Although this strategy puts pressure on margins, it helps in driving sales as consumers are responding favorably to these adjustments.
Lennar has been focusing on matching production pace with sales pace, and delivering consistent volume irrespective of positive or negative changes in market conditions. This helps in maximizing efficiencies and avoiding build-up of inventory. In addition, its asset-light, land-light manufacturing model helps drive more predictable volume and growth. KBH continues to benefit from its built-to-order model, which offers flexibility in pricing.
Q1 performance
In Q1 2025, Lennar’s total revenue grew 4% year-over-year to $7.6 billion. New orders rose 1% and deliveries grew 6%. Average sales price dipped 1% to $408,000. Gross margins on home sales fell to 18.7% from 21.8% last year and adjusted earnings fell 17% to $2.14 per share.
On the other hand, KB Home’s revenues for Q1 2025 decreased 5% YoY to $1.39 billion. Homes delivered decreased 9% and net orders were down 17%. Average selling price rose 4% to $500,700. Housing gross profit margin dropped to 20.2% from 21.5% last year, while earnings per share decreased 15% to $1.49.
Outlook
For the second quarter of 2025, Lennar expects new orders of 22,500-23,500 and deliveries of 19,500-20,500. Average sales price is expected to range between $390,000-400,000. Gross margin on home sales is expected to be approx. 18%.
For Q2 2025, KB Home expects its housing revenues to range from $1.45-1.55 billion. Overall average selling price is expected to be approx. $488,000. Housing gross profit margin is expected to range between 19.1-19.5%.
Shares of both Lennar and KB Home were up slightly in mid-day trade on Wednesday.
