Sun Belt housing markets are so weak that homebuilder Lennar’s average home price is down 22%

Core Insights - Lennar, the second-largest homebuilder in the U.S., has been focusing on increasing sales pace and market share, even at the expense of profit margins through price cuts and incentives in a challenging housing market [2][4] - The company reported its lowest gross margin since 2009, prompting a strategic shift to prioritize profitability over sales volume [2][5] Sales Strategy - Lennar's co-CEO announced a slight pullback on the aggressive sales-over-margin strategy due to further erosion of profitability in Q3 [3][5] - The average selling price of Lennar homes decreased to $383,000 in Q3 2025, a 9.2% drop from the previous year and 22% below the peak price of $491,000 in 2022 [4] Market Conditions - Despite a downward trend in mortgage rates towards the end of the quarter, stronger sales have not yet materialized, indicating a need for the company to pause and allow the market to stabilize [4] - The incentive-driven sales strategy, while effective in maintaining sales, has significantly impacted gross margins, which fell to 17.5% in Q3, the lowest level since 2009 [5]