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Lennar builds big profits, but still has complaints

Homebuilding titan is weary of a supply chain backlog that prevents meeting consumer demand

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National homebuilding titan Lennar is comfortably profitable, but company executives lament that a struggle to procure construction materials keeps them from doing more.

“The supply chain for construction is significantly stressed and that will continue for the 4th quarter and beyond,” said Stuart Miller, chairman of Lennar during a company earning’s call Tuesday.

The call reported on Lennar’s earnings for the months of June, July, and August. The Miami-based company tallied $6.9 billion in total revenue with 94% of that total coming from its home-building arm.

Lennar delivered 15,200 homes onto market in those three months, with the average sale priced at $428,000.

The company reported $1.4 billion in net earnings for the quarter, a figure that compares favorably to $666 million the company made in the same quarter last year.

Lennar is also building and selling more homes compared to 2020, when it delivered 13,842 abodes in June, July, and August of that year.

But instead of using the earnings call to trot a victory lap, executives voiced frustration with how a supply bottleneck has slowed down building and made it more expensive.

“New home construction cannot ramp up quickly enough and short supply is likely to remain for some time to come,” Miller groused.

Lennar co-president and CEO Jon Jaffe compared construction delays to both a “game of whack-a-mole” and a “traffic jam,” predicting, “We will feel the effects of this back-up for the next few quarters.”

The lack of readily available material plus a dearth of labor to move the material has ratcheted up the price in engineered wood, windows, garage doors, paint, and vinyl siding, Jaffe specified.

Because of those supply constraints, Lennar is failing to meet demand, specifically in southwest cities like Phoenix and Las Vegas.

“The casinos are full in Las Vegas, and there’s real demand there,” Jaffe said.

Lennar is the second most prolific homebuilder in the country, according to Builder magazine’s annual survey, behind D.R. Horton. Though the company’s revenue and expenses are almost entirely from building and then selling single-family homes, Lennar also is invested in companies that are publicly traded through a special purpose acquisition company merger.

Lennar reported $324 million in mark to market revenue from its investment in Hippo, which sells homeowner’s insurance. The homebuilder reported $100 million in mark to market revenue from SmartRent, which sells technology to landlords enabling them to operate and monitor items like thermostats and even plumbing remotely.

Lennar reported $37 million in mark to market revenue from growing instant homebuyer Opendoor.

In addition to referencing these investments, Lennar executives used the call to tout the value of company-owned homes. Professional ownership of homes, Jaffe said, helps families as they rent and save money for a purchase.

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