Lennar executive chairman expects housing will be a ‘primary driver of the overall economy’
Lennar Executive Chairman Stuart Miller told CNBC Tuesday that he expects housing will be one of the main forces powering the U.S. economy, given the strength in the housing market.
“Housing, and especially affordable housing, is going to be a primary driver of the overall economy,” he said in a “Mad Money” interview with Jim Cramer, one day after releasing an earnings report that showed the company beat estimates in its latest quarter report and raised guidance.
“We can bring a lot of new people to work and absorb a lot of unemployment, and that’s what you’re going to see happen over the next year or two with the housing market expansion.”
Lennar, the second-largest homebuilder by market value, reported more than 15,500 in new home orders, up 16% from the same quarter a year ago, and upped its new orders forecast in the current quarter to 14,300 on the high end compared to an initial projection of as much as 12,500. The company is benefiting from a surge in home sales amid the coronavirus pandemic.
New single-family home sales in July surged 36% from the same month in 2019, and the median sales price was up 7% to $330,600. The output was driven by pent-up demand from the spring, which was limited by the economic lockdown, flight from the cities to the suburbs and the need for more home offices.
Housing data from the U.S. Census Bureau for the month of August is set to release Thursday morning. Housing starts is expected to climb 0.45% month-over-month in August, according to FactSet.
The growth in housing comes against the backdrop of a U.S. economy that is toiling through a recession and an unemployment rate above 8%. The Midwest, South and West have been the hottest regions in the housing market, while sales have slid in the Northeast.
“With the housing expansion, you see job opportunities open up,” he said. “Now, it takes some time for people to go from unskilled to skilled [labor] within our industry, but we are not an industry that requires a tremendous amount of education.”
Lennar reported revenue of $5.87 billion and profits of $666.4 billion, which translates to $2.12 per share. That topped FactSet estimates of $5.35 billion and $1.55 EPS, respectively, in the fiscal 2020 third-quarter. The stock sold off almost 4% on Tuesday, however, as the company projected the average sales price to slip year over year to $390,000.
“It’s the best of the best times. This is a robust housing market,” Miller said. “Covid brought us in to a downturn [and] Covid has ignited an expansion and a recalibration for the industry. The market is strong and we just had a terrific quarter.”
Lennar reported a backlog of 19,697 homes as of Aug. 31.
While analysts would have liked to see a stronger backlog, “we didn’t want to get out over our skis,” Miller said.
