Homebuilder Lennar Cuts Prices by 10 percent as Affordability Has Declined

Homebuilder Lennar says it cut the average price of its homes 10% last quarter amid weak demand from homebuyers struggling with affordability and worried about the economy.

Lennar revealed its average sales price was $386,000 for homes delivered in the three months that ended in November. That is down from $430,000 in the same period last year, a price cut of $44,000.

The company’s CEO, Stuart Miller, says they have focused on adapting to a new normal as they are thinking of ways to boost sales despite an ongoing weakness in the housing market.

"To address continued market declines, we maintained approximately 14% in incentives and price adjustments, while continuing to focus on volume," said CEO Stuart Miller. "

As buyer demand is down nationally, CEO of 3D Technologies, Lance Thrailkill says, sales are down due to appreciate home values and high interest rates causing people to stay put. “I could buy the same house, and my mortgage payment’s going to be more; that’s the conundrum that most people are in.” He said.

Before tariffs, materials were up 30 percent. In addition, there is a spike in demand for skilled laborers. “So, this has driven costs up, they can increase their prices and the demand for them is higher, so they can charge more.” Thrailkill said.

The housing expert says the reality is that we need 7.4 million affordable homes. “We’re only building one 1.4 million homes per year, and the construction industry’s solution to the problem has been- just throw more people at it, but there’s not more people to throw at it.” He explained.

Thrailkill says the housing industry needs to take a holistic approach, exploring different methods and materials to close the gap. He cites that we have been building homes the same way for one hundred years and what other industry hasn’t changed in that span of time? Thrailkill said the nail gun was revolutionary but still a heavy demand is placed on labor with the same materials needing paint, wood, and masonry. He says, to compensate for the sales gap, homebuilders have cut costs on materials and labor- so you end up with a cheaper product. An example of another method is 3D Printing which are concrete homes and that alone eliminates 5 trades and can build the whole wall system up in 2 weeks.

It may be time to think beyond financial incentives and holiday specials. When you travel to other countries such as Italy, you will find castles and concrete homes that withstand the test of time. Mexico has long time built concrete homes too. Sometimes, to get the results you want we have to put the pencil down and stop crunching numbers and pick up the paintbrush and be creative and take a different look at what has not worked for a very long time. Thrailkill says lower mortgage rates, ends up spiking the prices of home sales- and once again, that is not what we want, nor does it support the American dream of home ownership.