(Reuters) - Lennar Corp (LEN.N) cut average prices by 6% for its homes in western United States, including California, during the fourth quarter as affluent Chinese buyers have been spooked by the Sino-U.S. trade war and the state’s ever increasing home prices.
The company said on Wednesday it plans to further lower average prices in 2020 to boost sales.
Last month luxury homebuilder Toll Brothers Inc’s (TOL.N) Chief Executive Officer Douglas Yearley told Reuters it expects to lower prices this year in California, a market where homes can cost upward of $2 million.
Chinese buyers form a significant portion of international home sales in California, where prices have increased steadily over the last few years and that has acted as a deterrent for home purchases due to a weaker yuan.
U.S. home sales to Chinese buyers are likely to drop to an eight-year low to between $10 billion and $12 billion for the year ending March 2020.
That compares to $13.4 billion for the year ended March 2019, and more than $30 billion in 2017 and 2018 each, according to a Reuters report.
“California has really fallen off ... perhaps more than any other part of the country,” Lennar President Jonathan Jaffe said.
Jaffe said the company’s strategy to lower average prices across the U.S., including California, partly helped a recovery back to normal sales levels, which was also aided by lower mortgage rates.
Lennar, which gets more than 30% of its sales from the western part of the country, on Wednesday forecast 2020 average sales price (ASP) for home deliveries to fall by 4%, adding to a 3% fall in 2019.
The company’s ASP rose between 4% and 10% in 2017 and 2018.
“The higher price point is where we have seen weaker demand throughout the United States ... worse in some of the less affordable markets such as California,” Morningstar analyst Brian Bernard said.
Toll, which gets 15% of its sales from California, last month forecast that its first-quarter ASP would fall as much as 7%. Toll’s ASP rose between 1% and 6% between 2018 and 2019.
Bernard expects home builders will try to make California more affordable in 2020.
Lennar’s deliveries in western U.S., including California, rose nearly 4% to 4,511 homes in the fourth quarter, growing at the slowest pace among all its markets.
Toll’s fourth-quarter deliveries in California fell by nearly 15% to 427 homes.
Reporting by Dominic Roshan K. L. and Sanjana Shivdas in Bengaluru; Additional reporting by Ankit Ajmera; Editing by Shounak Dasgupta