Homebuilding giant Lennar reported a sharp decline in profits in its latest quarterly earnings report on March 12, underscoring that elevated mortgage rates and economic uncertainty continue to weigh on the housing market.
The Miami-based homebuilder said first-quarter profits fell 56 percent year over year, to $229 million, for the quarter ending Feb. 28. A year earlier, the company reported $520 million in profit.
“Our first quarter of fiscal year 2026 was defined by the same persistent headwinds that have challenged the housing market for over three years — high mortgage rates, constrained affordability, cautious consumer sentiment, and geopolitical uncertainty, especially now including the recent conflict in Iran,” Stuart Miller, Executive Chairman and CEO of Lennar, said in a statement.
Housing shortage still driving long-term demand
Miller acknowledged that the market remains under pressure, with uncertainty and affordability constraints continuing to weigh on homebuyers. Still, he said the company is operating with “conviction and clarity” as it navigates the current environment.
Miller pointed to a structural issue that has defined the U.S. housing market for years: the persistent shortage of homes. That gap between supply and demand, he said, has not gone away. “The fundamental shortage of housing in America has not been solved,” Miller said. “Demand is real, deferred, and building.”
While higher mortgage rates have slowed sales activity in recent quarters, Miller expressed confidence that conditions will eventually improve. As borrowing costs stabilize and policymakers begin addressing regulatory and entitlement barriers that limit new housing supply, he said the market could gradually regain momentum.
In the meantime, Lennar is focused on adjusting its strategy to match the realities of today’s buyers. The company has leaned heavily on incentives and price adjustments to keep homes within reach for consumers facing elevated financing costs.
“We are building the homes America needs, at the prices the market can absorb,” Miller said, adding that the company continues to refine its operating platform to improve efficiency each quarter. Even amid a difficult market environment, Miller argued that Lennar’s operational discipline and focus on affordability position the company to benefit when housing demand eventually rebounds.
Lower prices and fewer deliveries weigh on revenue
Lennar reported a notable decline in homebuilding revenue during the first quarter of 2026 as lower home prices and fewer deliveries weighed on results. Revenue from home sales fell 13 percent year over year to $6.3 billion, down from $7.2 billion in the first quarter of 2025. The decline was driven by both softer pricing and reduced sales volume as the housing market continues to grapple with affordability challenges.
The company delivered 16,863 homes during the quarter, a 5 percent decrease from the 17,834 homes delivered during the same period last year. At the same time, the average sales price dropped 8 percent to $374,000, compared with $408,000 a year earlier. Lennar attributed the lower pricing largely to ongoing market weakness and the increased use of buyer incentives designed to keep homes affordable for consumers facing elevated mortgage rates.
The softer pricing environment also pressured profitability. Gross margins on home sales totaled $951 million, or 15.2 percent, compared with $1.4 billion, or 18.7 percent, in the first quarter of 2025. According to the company, margins were squeezed primarily by lower revenue per square foot and higher land costs compared with last year.
Some of that pressure was offset by declining construction costs, reflecting the builder’s ongoing efforts to improve efficiency and reduce expenses across its operations.
Operating costs remained largely unchanged. Selling, general and administrative (SG&A) expenses came in at $617 million for the quarter, nearly flat compared with $616 million during the same period last year.
However, because overall revenue declined, those expenses represented a larger share of sales. SG&A rose to 9.8 percent of home sale revenues in the first quarter, up from 8.5 percent a year earlier, reflecting reduced operating leverage as the company navigates a slower housing market.
