Lennar (NYSE:LEN) executives said the homebuilder delivered fourth-quarter and full-year fiscal 2025 results in what they described as a “stubbornly difficult” housing market, with affordability constraints and weak consumer confidence pressuring demand and margins.
Market conditions and demand backdrop
Executive Chairman and Co-CEO Stuart Miller said underlying housing demand remains “still strong while supply is short,” but affordability and consumer confidence have limited buyers’ ability to purchase. Miller noted mortgage rates moderated somewhat in the fall, but customer response was “fairly tepid,” and said the threat of a government shutdown in September and an “actual shutdown from October 1st through mid-November” further eroded confidence.
Miller also emphasized that federal officials have increased their focus on the national housing affordability crisis and have engaged builders and industry groups in discussions. While he said specifics remain uncertain, he told analysts he would be “surprised if something isn’t done” in 2026, calling affordability a prominent political issue.
Operational results: starts, deliveries, sales pace, and community count
In prepared remarks, Miller said Lennar started 18,443 homes, delivered 23,034 homes, and sold “just over 20,000” homes in the fourth quarter. The company grew community count to 1,708 communities, up 18% year-over-year, which management said positions it for the coming year.
Co-CEO and President Jon Jaffe, who is retiring and will step down on Jan. 1, said Lennar hit a fourth-quarter sales pace target of four homes per community per month. He highlighted operational metrics tied to the company’s sales funnel, including an average response time for customer requests for information (RFIs) of 42 seconds in the quarter, a 12.5% improvement over the third quarter. Jaffe said improvements in speed and quality of engagement contributed to a 15% year-over-year increase in appointments during the quarter.
On production, Jaffe said Lennar maintained a start pace of 3.7 homes per community per month. He also discussed plan and SKU optimization and a new national bidding software tool designed to streamline management of thousands of SKUs in real time.
Margins, incentives, and cost actions
Management said margins remained under pressure as the company used incentives to support affordability and maintain volume. Miller said sales incentives were “relatively flat at 14%,” and gross margin declined to 17% on an average sales price of $386,000. SG&A was 7.9%, and Lennar reported a net margin of 9.1%.
During the question-and-answer session, executives attributed margin pressure to changing market conditions, including the impact of the government shutdown on buyer psychology and pricing stability in certain markets. Jaffe said divisions had expected incentive structures to decline during the quarter as interest rates moved down, but the shutdown “had a material effect on the consumer psychology,” requiring Lennar to react in real time.
Even so, Jaffe said “new order incentives” decreased by 70 basis points quarter-over-quarter, and he pointed to continued progress on costs and cycle times. Miller said Lennar reduced vertical construction cost to build by about 10% from 2023 to 2025, while cycle time for detached single-family homes improved to 127 days from 138 days a year ago. Inventory turn improved to 2.2x from 1.6x last year.
Jaffe said direct construction costs in the fourth quarter decreased approximately 2% from the third quarter and more than 5% year-over-year, and he said the downward trend would continue into the first quarter of fiscal 2026. He also said the company achieved a 45% year-over-year reduction in warranty spend and reported a 2025 net promoter score (NPS) of 79.
Miller reiterated Lennar’s view that incentives represent a major lever to future margin recovery, noting that “in normalized market conditions” incentives typically run 4% to 6% versus about 14% currently.
Balance sheet, capital returns, and Millrose transaction
Chief Financial Officer Diane Bessette said Lennar ended the quarter with $3.4 billion of cash and total liquidity of $6.5 billion. She said the company’s “year’s supply of owned home sites” was 0.1 years and controlled home sites were 98%. Lennar ended the quarter owning just under 10,000 home sites and controlling 496,000, for a total of 506,000.
Bessette said Lennar ended the quarter with about 38,000 homes in inventory, including just under 5,000 completed unsold homes, or just under three per community. She also reported inventory churn of 2.2 times and return on inventory of about 20%.
On leverage, Bessette said the company had $1.7 billion outstanding under its term loan facility and no borrowings on its revolving credit facility. Homebuilding debt to total capital was 15.7%, and the next debt maturity is $400 million in June 2026.
Miller and Bessette also discussed completion of the Millrose transaction. Miller said Lennar launched and completed a split-off exchange offer to swap its remaining 20% stake in Millrose, about 33.3 million shares, for Lennar shares tendered by stockholders. Miller said the transaction resulted in a $156 million one-time “paper loss” tied to the book value versus stock price at the time of the trade, and produced an approximately 8 million share “cashless repurchase” of Lennar shares. Bessette added that Lennar repurchased 14 million shares for $1.7 billion in cash during fiscal 2025, bringing total repurchases to 22 million shares valued at $2.7 billion. The company also paid $521 million of dividends for the year, returning about $3.2 billion to shareholders in aggregate.
Outlook and leadership changes
For the first quarter of fiscal 2026, management guided to:
- New orders: 18,000 to 19,000 homes
- Deliveries: 17,000 to 18,000 homes
- Average sales price: $365,000 to $375,000
- Gross margin: 15% to 16%
- SG&A: around 9.5% (Bessette), with Miller citing approximately 9.1% overhead in prepared remarks tied to continued technology investment
- Financial services earnings: $105 million to $110 million
- Multi-family earnings: about $20 million
- EPS: approximately $0.80 to $1.10
For fiscal 2026, Miller said the company expects to deliver approximately 85,000 homes.
Executives also outlined management changes tied to Jaffe’s retirement. Miller said Lennar will not hire a replacement, and that regional presidents Jim Parker and David Grohn will each oversee roughly half the country’s operations. Greg McGuff is moving into a new role focused initially on refining execution around land banking programs.
In closing remarks, Miller said Lennar remains focused on “volume and even-flow production,” maintaining an affordable cost structure while it “find[s] our floor and rebuild[s] our margin” amid a market that management continues to describe as supply constrained.
About Lennar (NYSE:LEN)
Lennar Corporation (NYSE: LEN) is a U.S.-based homebuilder and real estate company that designs, constructs and sells residential housing. The company offers a range of product types including single-family detached homes, townhomes and condominiums, serving buyers from entry-level and first-time purchasers to move-up, active-adult and luxury segments. Lennar also develops master-planned communities and manages land acquisition and entitlement activities that support its homebuilding operations.
In addition to home construction and sales, Lennar provides a suite of ancillary services intended to streamline the purchase process and capture additional value.
