Lennar's Average Home Price Hits 9-Year Low, Boosting Outlook for Home Depot

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Summary · why it matters

Lennar reported its average home sales price fell to $371,000 in the fiscal second quarter, the lowest in nine years, as the builder offered nearly 13% in incentives and base-price adjustments to spur demand. The lower prices, combined with a recent dip in mortgage rates to 6.47%, are expected to improve housing affordability and eventually lift existing-home sales. That would benefit Home Depot, the largest home-improvement retailer with $165 billion in annual sales, because homebuyers typically undertake major renovations. Home Depot's same-store sales grew just 0.4% in its latest quarter, and management cited consumer uncertainty and affordability as headwinds. With Home Depot shares down 2.9% this year and trading at a price-to-earnings ratio of 24, the improving affordability picture could reward patient investors.

Impact on stocks 3

Consumer Discretionary± Mixed · 3 stocks
Lennar Corporation
LEN
▼ NegativePricingrelevance

Lennar's average home price fell to a 9-year low due to incentives and price adjustments to spur demand.

The Home Depot Inc
HD
▲ PositiveDemandrelevance

Lower home prices and mortgage rates improve housing affordability, which is expected to boost existing-home sales and renovation demand for Home Depot.

Lowe's Companies Inc
LOW
▲ PositiveDemandrelevance

Improved housing affordability from lower prices and mortgage rates is expected to lift home improvement demand, benefiting Lowe's as a competitor to Home Depot.

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