This Fortune 500 homebuilder has yet to see the 'pickup typically associated with the beginning of the spring selling season'

Lennar—a giant publicly traded homebuilder ranked No. 126 on the Fortune 500—told investors on Friday that their spring selling season is off to a soft start.

“We do not see the seasonal pickup typically associated with the beginning of the spring selling season. So we continue to lean into our machine focusing on converting leads and appointments and adjusting incentives as needed to maintain sales pace. These adjustments came in the form of mortgage rate buydowns, price reductions, and closing cost assistance,” Jon Jaffe, co-CEO of Lennar, said on their Friday earnings call.

In addition to Lennar acknowledging a soft start to the spring season, here are six other key takeaways from its Q1 2025 earnings report, covering the period from December 1 to February 28.

1. Lennar continues to see weakness in Florida and Texas

It shouldn’t surprise ResiClub readers—especially ResiClub PRO members—that Lennar is seeing greater softness in its Texas and Florida markets. Many markets in those states, particularly San Antonio in Texas and Cape Coral and Punta Gorda in Southwest Florida, have seen active inventory rise well above pre-pandemic levels and home prices decline amid weakened housing demand.

“In general, homebuyers in Florida and Texas, our two highest volume states, needed more help than most other markets around the country. We needed more incentives in Florida and Texas markets to assist buyers achieve mortgage payments they can afford as well as to offset both a slowing in migration environment and increased inventory. All markets around the country require incentives to assist buyers in the current home buying environment,” Jon Jaffe, co-CEO of Lennar, said on their Friday earnings call.

2. Lennar is deploying bigger sales incentives—especially in Florida and Texas

Lennar's average sales price, net of incentives, declined 1% from $413,000 in Q1 2024 to $408,00 in Q1 2025.

Last quarter, Lennar spent the equivalent of 13% of the final sales price on sales incentives, such as rate buydowns. For a $400,000 home, that translates to $52,000 in incentives.

According to John Burns Research and Consulting [see their historical chart here], that’s the highest incentive level Lennar has offered since 2009—and it’s significantly higher than Lennar’s cycle low in Q2 2022, when it spent 1.5% of the final sales price on sales incentives.

Lennar co-CEO Stuart Miller said on Friday that: "These are outsized [incentives] for the moment and normalized incentives should be around 5% to 6%.”

In other words, where and when needed—like pockets of Florida and Texas where active inventory has bounced back and buyers have gained leverage—Lennar is cutting net effective prices through larger incentives to find the market and keep sales rolling.

Note: Keep in mind that a homebuilder's average sales price can be skewed by mix shift. To at least some degree, this is the case for Lennar, which has introduced more smaller home offerings over the past few years.

3. More margin compression

During the Pandemic Housing Boom, publicly traded homebuilders achieved record profit margins as home prices soared and buyer demand ran red hot. Once the national housing demand boom fizzled out in the summer of 2022, many large homebuilders made affordability adjustments where and when needed to maintain their sales pace. Despite some profit margin compression, almost every major homebuilder entered 2024 with gross margins still above pre-pandemic 2019 levels.

However, in recent quarters, margin compression has returned.

During their December 2024 earnings call, Lennar CFO Diane Bessette stated that they anticipate further margin compression, with gross margins expected to range between 19.0% and 19.25% for Q1 2025.

Lennar’s Q1 2025 gross margin ended up being 18.7%—its lowest in over a decade.

On their March 2025 earnings call, Lennar co-CEO Stuart Miller said he expects their Q2 2025 gross margin to be 18% and that they “expect to continue to see margin pressure on deliveries that will be sold during the quarter.”

4. Lennar chooses volume over margins

Last year, when it became clear that Lennar would have to choose between offering greater incentives in 2025 (i.e., smaller margins) or lower volume, they made it clear they’d choose the former.

“We're going to adjust to market. We're going to maintain [sales] volume,” Lennar co-CEO Stuart Miller said in December.

That’s exactly what they did. It’s also why net new orders in Q1 2025 (18,355) were essentially flat compared to Q1 2024 (18,130) despite the choppier sales environment.

5. No impact from tariffs—yet

Given that Lennar is America’s second-largest homebuilder, it serves as a good proxy for us to figure out how Trump administration policy could be impacting homebuilders.

On Friday, Lennar executives stated that tariff policy has not yet impacted their business.

“We've been in discussions regarding the potential impacts of tariffs with our supply chain. These discussions all start with a review of margin reductions Lennar has already taken. This leads to a constructive effort to identify alternative sourcing and material strategies. Additionally, we prepare our trade partners to absorb potential increases to their supply chain costs in the event of tariffs… To date, we have had no impact to our cost from tariffs and we will work closely with all our trade partners that further tariffs present themselves to mitigate offset cost impacts,” Lennar co-CEO Jon Jaffe told investors on Friday.

6. No impact from immigration policy—yet

While we don’t exactly know how many undocumented immigrants work in construction, we know it’s a chunk. In 2016, Pew Research Center estimated that 13% of the U.S. construction workforce is undocumented. In 2021, the Center for American Progress estimated that 23% of construction laborers are undocumented (see their full breakdown above).

While undocumented workers are more likely to be employed by subcontractors rather than the builder, business disruptions due to deportations, if they are to occur, would still be noticed by general contractors and homebuilders.

So far, Lennar hasn’t seen disruptions caused by changes in immigration policy.

“With respect to potential labor disruptions that could derive from immigration policy enforcement, our consistent high volume makes our construction a priority for our trade partners. To date, there has been no shortage of labor or impact to cycle time. Again, our strategic trade partners appreciate the financial impact to our margins of maintaining our consistent high volume and we expect to be as well-positioned as possible should any disruptions present themselves,” Lennar co-CEO Jon Jaffe told investors on Friday.

Over the past week, ResiClub PRO members (paid tier) got these 3 additional housing research articles:

Net domestic migration in 800+ metros and 3,000+ counties

Monthly home price analysis spanning over 800 metros and 3,000 counties

Home price analysis: +25,000 ZIP codes