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Lennar Corp Class A - Stock Quote LEN

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Morningstar's Lennar Corp Class A Stock Analysis

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Higher Rates Likely to Cool Housing Market but Our Residential Construction Outlook Is Constructive

Analyst Note

| Brian Bernard, CFA, CPA |

Inflation-adjusted home prices eclipsed mid-2000's levels in 2021 as housing demand surged amid a tight supply of homes for sale. Still, homeownership affordability (measured by the median mortgage/income ratio) remained favorable, in our view, due to record low mortgage rates (the 30-year fixed rate mortgage averaged about 3% in 2021). However, affordability has since eroded due to the 30-year rate increasing 200 basis points since end-2021 (to over 5% in late April) and a continued uptick in home prices. We had been expecting a more gradual increase in mortgage rates. There's a recent precedent of slowing housing demand amid sharply increasing mortgage rates. In late 2018, home sales slowed considerably as the average 30-year fixed rate rose about 100 basis points to 5% in less than a year. However, the slowdown was short-lived as mortgage rates quickly moderated. We don't expect mortgage rates to quickly reverse course this time though.

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Lennar Corp Class A's Company Profile

Business Description

Lennar is the largest public homebuilder (by revenue) in the United States. The company’s homebuilding operations target first-time, move-up, and active adult homebuyers mainly under the Lennar brand name. Lennar’s financial-services segment provides mortgage financing and related services to its homebuyers. Miami-based Lennar is also involved in multifamily construction and has invested in numerous housing-related technology startups.

700 Northwest 107th Avenue
Miami, FL, 33172
T +1 305 559-4000
Sector Consumer Cyclical
Industry Residential Construction
Most Recent Earnings Feb 28, 2022
Fiscal Year End Nov 30, 2021
Stock Type Cyclical
Employees 10,753

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