By Shaina Mishkin

In an expensive housing market, home buyers still need deals and discounts to get in the door, Lennar's first-quarter results show. It's a bad sign for other builders and housing demand heading into the spring -- even if the stocks are rising today.

Lennar, one of the nation's largest home builders, reported first quarter results that missed analyst expectations on Thursday night. The company reported earnings per diluted share of 93 cents, or 88 cents excluding mark-to-market gains on technology investments, on $6.6 billion in revenue. Analysts had expected 95 cents on $6.8 billion, according to FactSet.

The company's 16,863 deliveries, a measure of home closings, missed both guidance and consensus expectations, which called for 17,698. Its gross margin on home sales was 15.2%, missing estimates that called for 15.5%. And its 18,515 new orders, a measure of contract signings, came in below the 18,666 consensus had foreseen.

The company has been leaning into home-building in a notably pricey market for buyers, Lennar CEO Stuart Miller said in a statement. "Our strategy has been to actively design around the affordability challenge rather than waiting it out," he said. "We have focused on prioritizing volume to create durable scale advantages, delivering that volume at lower prices, and ultimately improving margins."

Builder margins have long been a focus for investors. When quickly-rising mortgage rates stalled the housing market, many builders cut prices or offered buyer incentives, such as free design upgrades or lower mortgage rate promotions. That kept new homes selling, even as existing-home sales stalled.

The sales skid continued for three years straight -- as has pressure on the margins of builders offering plentiful incentives to keep sales volume up. Lennar's first-quarter margins hit their lowest point since 2009 as the builder leaned on such incentives to get buyers in the door, Raymond James analyst Buck Horne noted in a reaction to the results.

The builder's new orders increased 1% from the year prior "despite persistent headwinds, including elevated mortgage rates, cautious consumer sentiment, and geopolitical uncertainty," he noted, adding that Lennar achieved that by keeping incentives elevated.

The results, which cover the quarter ended Feb. 28, offer little to look forward to in other builders' results covering a similar period. There was hope coming into 2026 that housing would improve, in part from government actions. Mortgage rates, notably, fell in January after President Donald Trump said he had instructed Fannie Mae and Freddie Mac to buy mortgage bonds.

But "the expected reduction in incentives from [...] US government efforts to improve affordability does not yet appear to have materialized," BTIG analyst Ryan Gilbert wrote in a reaction to the results.

The company's second quarter guidance, which calls for a margin between 15.5% and 16% in its second quarter, shows that margin pressures will persist, Evercore analyst Stephen Kim wrote in a note. "We regard this guide as somewhat soft, given that 2Q [gross margins] usually rise roughly 100bps from 1Q due to increased revenue leverage," he wrote.

Despite the miss, Lennar stock was on the rise on Friday morning, along with builders more broadly. Lennar shares were up 2.7% shortly after the open, while the iShares U.S. Home Construction exchange-traded fund was up 1.14%.

If the fund closes higher, it will snap its longest losing streak since Feb. 5, 2018, according to Dow Jones Market Data. The recent drop was driven by geopolitical uncertainty and higher mortgage rates at the start of the critical spring buying season.

It could be that the latest results have at least given investors a number upon which to hang their hats. Additional commentary from the builders' conference call, which will take place at 11 a.m. Eastern, could help.

"Given such a sudden and lopsided shift in sentiment against homebuilders as mortgage rates have surged again, we would not be surprised if any optimistic commentary [...] is met with a modest relief rally," Raymond James' Horne wrote in a note.

Write to Shaina Mishkin at shaina.mishkin@dowjones.com

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March 13, 2026 11:03 ET (15:03 GMT)

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