Company: LEN
Filing Date: 2025-01-23
Form Type: 10-K
Source: 0001628280-25-002404
Chunk: 92

Company: LENNAR CORP /NEW/
Filing Date: 2025-01-23
Form: 10-K
Item: Item 1A
Chunk 92
---
 greater portion of the land we expect to use through options or other contractual arrangements, including through the proposed Millrose Spin-Off. We cannot provide assurance that this strategy, or other strategies we will follow, will increase our value. It is possible that the land lighter or other strategies will reduce, rather than increase, the value and profitability of our core businesses.

The market for new homes is cyclical, and a continuing downturn in the homebuilding market could adversely affect our operations.

The residential homebuilding industry is sensitive to changes in economic conditions and other factors, such as the level of employment, consumer confidence, consumer income, product affordability, availability of financing, inflation, and interest rate levels. As a result, over the years, demand for new homes has been cyclical, with multi-year periods of high demand followed by multi-year periods of low demand. During fiscal 2024 and 2023, a number of our markets experienced significant softening that required us to make substantial price reductions in order to maintain a steady sales pace. It is possible that a continued market weakness could result in a further decline in demand for new homes with resulting price reductions which could require write downs in the carrying value of our land inventory and write offs of costs of land purchase options we decide not to exercise.

Inflation could adversely affect our profitability.

Weaker demand has precluded us from raising home prices enough to keep up with the rate of inflation, which has reduced our profit margins. In addition, in an inflationary environment, our cost of capital, labor and materials can increase and the purchasing power of our cash resources can decline, which can have an adverse impact on our business or financial results. Inflation may also accompany higher interest rates, which could adversely impact potential buyers’ ability to obtain financing on favorable terms, thereby decreasing demand for our homes. We are taking steps that we hope will enable us to maintain acceptable operating margins in fiscal 2025. However, it is possible that those steps will not be successful, and that a combination of inflation and reduced demand for new homes driven by an increase in mortgage interest rates will continue to adversely affect our profitability.

Further increase in mortgage interest rates could reduce potential buyers’ ability or desire to obtain financing with which to buy homes. 

Housing has been considerably impacted by the more than doubling of mortgage interest rates in 2022 and 2023, and small decreases in 2024. When interest rates increase, the cost of owning a new home increases, which usually reduces the number of potential buyers who can afford