After a tough fourth quarter, Lennar's chairman, Stuart Miller, said December's interest rate drop spurred a surge in customer traffic through its model homes.
As one of the nation's largest homebuilders, with a national footprint, what's good for Lennar could bode well for the broader market for new homes in 2019.
"The very quick moves in interest rates that we saw from the Fed that translated into the mortgage rates, it really created an element of sticker shock," said Miller in an interview on CNBC's "The Exchange." "With interest rates tapering back, we think we're seeing an elevation in consumer confidence and we think we'll see the customer come back to the market."
Lennar reported disappointing sales in the company's fourth quarter, ended Nov. 30. Profits beat expectations but revenue, deliveries and new orders came in slightly lower.
The housing market in general has been hit hard by affordability issues. Home prices ran up sharply in the past three years, far faster than income growth. Then mortgage rates moved higher, exacerbating the problem. While rates have pulled back in the last month, they are still half a percentage point higher than they were a year ago.
Miller said he does not expect to see home prices drop for new construction, given strong fundamentals like low unemployment and wage growth. Higher costs for land and labor also make it difficult for builders to lower prices.
"I think that we're trying to find equilibrium right now. The customer is coming out to the market. With interest rates tapering back, I don't think you're going to see a big reduction in purchase price," said Miller. But builders are increasingly using incentives like granite countertops and higher-end finishing in new home sales, he added.