Stocks decline after hot inflation print

Affordability remains a barrier for potential buyers as mortgage rates remain around the 7% mark, Lennar ( LEN ) CEO Stuart Miller said Thursday.

Affordability is “extended,” Miller said on the company's first-quarter earnings call, noting that “we're definitely seeing more credit card debt and personal debt coming up from the customer on their orders.” He pointed out, “We have witnessed some delinquencies in some of these debts.”

His comments came after Lennar on Wednesday reported revenue that beat analysts' estimates for its fiscal first quarter ended February 29.

Lennar stock fell nearly 6% Thursday on the news, dragging down DR Horton (DHI) and Toll Brothers (TOL), which were down 3%. The SPDR S&P Homebuilders ETF (XHB) is down nearly 2%.

US household debt rates and delinquency rates have been rising. Total household debt rose by $212 billion to reach $17.5 trillion in the fourth quarter of 2023, according to European Central Bank data. Federal Reserve Bank of New York.

The challenges of rising mortgage rates and home prices over the past year have affected buyers trying to jump into the market. Mortgage rates have risen considerably this year, peaking at about 7% in mid-February. The average interest rate on a 30-year fixed mortgage fell to 6.74% on Thursday from 6.88% the week before, according to Freddie Mac.

“What we see is when you look at it [our customers] In particular, more than [customers] “They have a higher ratio in terms of debt to total income,” Bruce Gross, CEO of Lennar Financial Services, told analysts on Thursday's earnings call.

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“There's more debt to be paid down, and that's something new that we've noticed in this quarter. We're working more often with buyers, and we're able to work through a lot of terms. But that point is something that we've seen [different from] Gross added in the fourth quarter.

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