Lennar Reports Mixed Q2 Results as Housing Affordability Pressures Weigh on Margins

Lennar (LEN) reported fiscal second-quarter results that reflected the challenges facing homebuilders amid high mortgage rates and fading consumer confidence. The company missed on earnings but managed to exceed revenue expectations, posting solid delivery growth while leaning on incentives to maintain buyer interest. As affordability headwinds persist, Lennar’s gross margin performance—falling just below expectations—served as a key focus for investors ahead of the company’s earnings call Tuesday at 11 a.m. ET.

For the quarter ended May 31, 2025, Lennar posted adjusted earnings of $1.90 per share, slightly below the consensus estimate of $1.94 and sharply lower than the $3.38 earned in the same period last year. On the top line, revenue came in at $8.38 billion, topping expectations of $8.19 billion but declining 4.4% year-over-year. The slight revenue beat came on the back of better-than-expected performance in several business lines, most notably multifamily and land sales, which helped offset a softer showing in homebuilding revenue.

A standout figure was Lennar’s gross margin on home sales, which came in at 17.8%—just shy of the 18% forecast and down significantly from 22.6% a year ago. The decline reflects the company’s strategic use of sales incentives to help offset affordability challenges in the market. Co-CEO Stuart Miller acknowledged that while higher mortgage rates and waning consumer confidence created a more difficult backdrop, Lennar “drove volume with starts while incentivizing sales to enable affordability and help consumers to purchase homes.” In other words, Lennar prioritized sales velocity over margin preservation to maintain scale and efficiency through its platform.

Indeed, the company delivered 20,131 homes during the quarter, slightly above analyst estimates and up 2% year-over-year. The average sales price declined to $389,000, compared to $408,000 in Q1 and $426,000 in the prior-year quarter. While the decline was expected due to ongoing incentives, it does highlight the pressure on pricing power. Lennar’s Q2 new orders totaled 22,601, a 6% increase from last year, though slightly below consensus. The company's backlog came in lighter than expected at 15,538 homes.

On the forward outlook, Lennar guided for Q3 deliveries of 22,000 to 23,000 homes and new orders in the same range—both slightly shy of Street estimates. The company expects average selling prices to fall further to between $380,000 and $385,000, reinforcing the message that incentives and price flexibility will remain central to its strategy. Importantly, management sees gross margins holding near 18%, dependent on market conditions, which signals continued pricing pressure into the second half of the year.

Segment performance showed some diversification. Lennar’s Financial Services unit delivered $298 million in revenue, a 5.8% year-over-year gain and ahead of estimates. Its multifamily segment more than doubled revenue to $230 million, up 131% and far exceeding analyst forecasts, while land sales revenue surged over 200% to $43.2 million. These pockets of strength offered a buffer against softness in core home sales and underscore management’s effort to broaden the company’s revenue base.

In terms of cost discipline, Lennar held the line on corporate expenses, with general and administrative costs falling slightly to $155.9 million from $157 million a year ago. This helped cushion some of the margin compression in homebuilding operations.

The stock responded positively in after-hours trading, rising more than 2% and building on modest gains during the regular session. The market appeared to take a “better-than-feared” view of the report, particularly with gross margins staying near management's target and deliveries holding firm. However, attention will turn to the 11 a.m. conference call for deeper commentary on pricing trends, buyer behavior, and Lennar’s outlook on tariffs and potential supply chain disruptions.

Macro conditions remain difficult to read. According to recent Bank of America data, nearly 60% of prospective buyers are unsure whether it's a good time to buy, up from 57% last year. While rising inventories and flattening home prices could eventually stabilize the market, homebuilders like Lennar may need to continue offering price cuts and incentives to remain competitive with resales, especially as mortgage rates remain above 6%.

Overall, Lennar’s Q2 results highlight a company navigating headwinds with scale and strategic flexibility. Despite earnings coming in a touch light and margins under pressure, the company’s operational efficiency, steady deliveries, and diversified revenue streams are helping offset broader softness in the housing market. The tone on the upcoming call will likely determine whether investors view this as a transitory margin dip—or the start of a tougher stretch for homebuilders.