Lennar’s Earnings Are a Read on Housing. Demand for New Homes Is Strong.

Investors are set to get a temperature check on the housing market when Lennar, one of the nation’s largest home builders, reports third-quarter earnings on Thursday.

During the typically busy spring and summer months this year, existing-home sales were well below year-ago levels as higher mortgage rates sent both buyers and sellers to the sidelines. Leading data suggests the broad pullback has continued into September: A Mortgage Bankers Association index tracking the volume of applications for home purchase loans was 27% lower than year-ago levels last week, the trade group said Wednesday.

Demand for new homes amid a scarce supply of previously owned houses boosted builder stocks in 2023. Two exchange-traded funds tracking home builders and related companies, the SPDR S&P Homebuilders ETF and the iShares U.S. Home Construction ETF , have returned about 34% and 38% year to date respectively, beating the broader S&P 500’s roughly 18% return. Lennar class-A shares are up 29% year to date.

Indeed, much of the 2023’s housing market story has concerned the shortage of previously owned homes for sale but early data show supply could be improving. New listings ticked up unexpectedly in August, Zillow said earlier this week. “August deposits are usually down 25% to 30% versus July based on long-term historical trends as summer winds down and kids returned to school,” Toll Brothers CEO Douglas Yearley said on an August conference call. “So far in August, deposits are only down 11% and both physical and web traffic is up slightly compared with July.”

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