These are the 7 worst home purchases, according to Lennar

These are the 7 worst home purchases, according to Lennar

Higher mortgage rates have dampened home sales nationwide — but, as the saying goes, all real estate is local.


The nation’s second-largest builder by market capitalization on Thursday charted the best- and worst-holding housing markets.

The builder was one of two to report earnings this week for the quarter ended Aug. 31.


(ticker: LEN) and the smallest builder

KB Home

( KBH ) beat estimates for earnings per share but said orders fell as higher mortgage rates dampened buyer results.

“Construction is once again at the forefront of everything happening in the economy, and the Fed’s use of the interest rate tool to curb inflation is certainly having the desired effect on the home for sale market,” said Stuart Miller, Lennar’s Executive Chairman. on the company’s third-quarter earnings call.

Lennar is adjusting prices and offering incentives to drive traffic, executives said. The company’s new net sales order price was 9% lower than in the second quarter, but 1% higher than a year earlier, co-CEO Richard Beckwitt said on the call. In the third quarter, incentives for new orders rose to 6 percent in August from 2.3 percent in June, he added.

“As we lower prices and increase incentives, the demand is still there,” Miller said. “These fundamentals give us reassurance that, while there is some short- and medium-term consolidation, the long-term outlook for housing remains strong.”

Not every home purchase needed the same tough love. Beckwitt classified housing markets into three categories: those that continued to perform well, those where sales momentum picked up after the company adjusted prices or incentives, and those that may require further price adjustments to drive sales .

Sales remained strong in nine areas, Beckwitt said. They include New Jersey. Maryland? Virginia; Charlotte, NC; Indianapolis; San Diego, California; and three Florida markets: Southwest, Southeast and the Palm Beach area.

“These markets are benefiting from extremely low inventory and many are benefiting from a strong local economy, job growth and immigration,” Beckwitt said, adding that Lennar offered mortgage buyback programs and some incentives to keep sales going. “Some communities in these markets have demanded targeted price adjustments on a limited basis,” he added.

The bulk of local areas belonged to the second category. The company said it “made more significant adjustments to regain sales momentum” in more than 20 markets. Among them were some of the hottest markets of the housing boom pandemic, including Phoenix, Dallas and Tampa, Florida.

Other areas in this category included Orlando, Florida. Jacksonville, Fla.; the coastal carolinas; Atlanta? Chicago; Nashville? Raleigh, NC; Houston? San Antonio? Tucson, Ariz.; Las Vegas; Colorado? Seattle? and many parts of California, including the Coast, Inland Empire, Bay Area, Central Valley, and Sacramento.

Traffic has slowed in each of those markets and cancellations have increased, Beckwitt said, adding that the company offered perks to buyers such as “aggressive” financing programs, price reductions and increased incentives to drive sales.

The company says the buyer pullback was strongest in seven markets, including Boise, Idaho, where prices soared earlier in the pandemic amid lower interest rates and a housing boom. “While the drivers and individual dynamics of these markets vary somewhat, movement has slowed significantly,” Beckwitt said. Other markets in this category include Philadelphia. Pensacola, Fla.; Austin? Reno, Nev.; Minnesota? and Utah.

Many buyers in these markets “need to be convinced that now is the time to buy,” Beckwitt said. “There is a fear that sales prices have not bottomed out, which has led to an increased level of cancellations.”

Lennar isn’t alone in sweetening deals for prospective buyers. More than half of builders surveyed by the National Association of Home Builders in September said they offered incentives, such as mortgage rate buybacks and price reductions, to help boost sales, the trade group said earlier this week.

While builders struggle with buyers, sellers of existing homes have pulled back. The inventory of existing homes for sale at the end of August fell for the first time since January, according to data from the National Association of Realtors released Wednesday. Sellers “don’t want to give up that 3% mortgage rate,” the association’s chief economist Lawrence Yun said at the time.

Write to Shaina Mishkin at

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