Homebuilders face 'muted' spring selling season amid high mortgage rates, tariff uncertainty

Sat, Mar 29, 2025, 6:00 AM 4 min read

Homebuilders are having a rough start to the spring selling season amid high mortgage rates and tariff uncertainty.

On Monday, KB Home (KBH) reported a 17% drop in net orders from the year-earlier period for its fiscal first quarter ending Feb. 28. The company also dialed down its average selling price range for 2025 to $480,000 to $495,000. In January, it expected a range of $488,000 to $498,000.

Shares of KBH fell 4% in after-hours trading following the earnings report.

"While longer-term housing market conditions remain favorable, driven by demographics and an undersupply of homes, demand at the start of the spring selling season has been more muted than we have seen over the past few years," KB Home CEO Jeffrey Mezger told analysts and investors on the earnings call.

Many real estate agents and builders consider Super Bowl weekend, which landed on Feb. 8-9 of this year, to be the unofficial kickoff for the peak homebuying and selling season, which lasts through early June.

Read more: 2025 housing market — is this a good time to buy a house?

Mezger noted that the company typically sees a pickup in net orders in late January and early February. This season, that did not materialize, reflecting the hesitancy among buyers to purchase a home.

As a result, KBH lowered its guidance for 2025 housing sales to $6.60 billion to $7 billion from its previous forecast of $7 billion to $7.5 billion.

Overall, sales of new single-family homes rebounded slightly in February amid warmer weather and falling mortgage rates. But it's unclear if the momentum will last.

"If the builders can figure out what leverage to pull from an affordability standpoint, the buyers and the demand are out there, but it's not going to be as easy as it was," Wedbush Securities senior vice president of equity research Jay McCanless told Yahoo Finance in an interview.

This challenge is not unique to KB Home. The second-largest homebuilder, Lennar, reported a slight 1% increase in net new orders from the year-earlier period, totaling 18,355. However, the company projected lower-than-expected quarterly orders due to the tough housing market.

When it reported Q1 results last week, Lennar (LEN) forecast new orders between 22,500 and 23,500 for its second fiscal quarter, lower than analysts' estimate of 23,800 homes. While mortgage rates have decreased slightly, they are still hovering around 6.7%, prompting the builder to reduce its average sales price, after incentives, to $408,000 in the quarter, marking a 1% decline from last year.