Berkshire Hathaway Is Buying Lennar Stock Near a 52-Week Low. Should You Follow?

Berkshire Hathaway has put another $192.6 million into Lennar, building a stake worth roughly $2.2 billion. Meanwhile, Lennar shares closed 6.7% lower at $74.44 on October 5 after touching a new 52-week low. 

A famous investor sees something worth backing. The market sees shrinking profits and uncomfortable questions about Lennar’s dealings with its former subsidiary, Millrose Properties. Which side has the stronger case?

Let’s break down what Lennar does, why Berkshire may see an opportunity and what the Millrose allegations change. Then we’ll test whether the stock’s lower price offers enough room for things to go wrong.

What Did Berkshire Actually Disclose About Lennar?

The latest SEC Form 4 covers purchases on October 1 and October 2. Adding its individual transactions together gives the following picture.

Purchases and holdings: SEC Form 4. Cost is calculated from disclosed weighted average prices. Ownership uses 237.9 million common shares outstanding on August 31; subsequent changes can alter the percentage. Stake value is rounded and is different from Berkshire’s acquisition cost.

There is a timing detail worth keeping straight. This filing does not establish that Berkshire purchased shares during the October 5 decline. Its disclosed transactions occurred earlier.

Nor does a 12.2% economic stake mean 12.2% voting control. Lennar has two share classes, and Class B carries ten votes per share, compared with one for Class A.

The distinction matters because an investment, a controlling position and a possible acquisition are three different stories. The filing establishes the first.

What Is Lennar and How Does It Make Money?

Lennar builds and sells homes across the United States. Founded in 1954, it serves first-time homeowners, families moving into larger homes and older buyers.

Its business extends beyond handing over the house keys.

Homebuilding generated approximately $7.76 billion of Lennar’s $8.05 billion quarterly revenue, or 96.4%. That makes housing demand the main engine of the company. Its smaller businesses can still meaningfully affect profit.

For investors, the core equation is straightforward: how many homes does Lennar deliver, what does each home sell for, and how much profit survives after costs?

The complication is that keeping the first number steady can require sacrificing the second and third.

Why Is Lennar Stock Falling?

The Millrose report landed on a company whose earnings were already under pressure.

Quarter ended August 31, 2026. Adjusted EPS excludes the items specified in Lennar’s earnings release.

Revenue fell 8.7%, but reported EPS fell 48%. Even after adjustments, EPS declined 38.5%.

That is the danger of a business with a narrow profit cushion. Lower selling prices reduce gross profit, while selling and administrative expenses consume a larger share of revenue. Investment gains and losses also affect reported earnings.

Lennar is trying to keep its building machine running by pricing homes at levels customers can afford. This can preserve scale and construction efficiency, but shareholders bear the cost through weaker margins.

The Buyer’s Monthly Payment Is the Real Battleground

Freddie Mac’s average 30-year mortgage rate reached 7.28% on October 1, compared with 6.34% a year earlier.

Consider a home priced at Lennar’s quarterly average of $372,000. With a 20% down payment, the mortgage would be $297,600.

Author calculations using a standard fixed-rate mortgage formula. Excludes taxes, insurance, fees and builder incentives. The lower rate is a scenario, not a forecast.

A one-percentage-point reduction would cut this payment by almost 10%. That could improve affordability and reduce the financial help builders must provide.

Lennar reported incentives averaging roughly 12% in Q3. These can include mortgage-rate subsidies and closing-cost assistance, rather than a simple reduction in the advertised price.

The constructive case is that easier financing eventually lets Lennar support customers with fewer concessions. The risk is that elevated rates, weak confidence or local oversupply keep those concessions in place.

A national need for housing does not automatically produce profitable sales in every neighbourhood.

What Is Millrose Properties and Why Does Lennar Use It?

A land bank finances and holds land until a builder is ready to use it.

Lennar spun off Millrose in February 2025, contributing approximately $5.6 billion of land assets and $1 billion of cash, including option deposits. It later disposed of its remaining substantial equity interest through an exchange offer in November 2025. Millrose is a separate listed company.

Under this arrangement, Lennar pays for the right to purchase homesites, or plots for houses, over time. Millrose earns recurring option fees while supplying land for future development.

An option gives Lennar a contractual right to purchase a homesite under agreed terms. Think of reserving ingredients for a restaurant without purchasing the entire farm. Less money sits in the farm upfront, but reservation fees keep running while you wait. That is the attraction of Lennar’s shift towards owning less land: release capital, increase flexibility and concentrate on constructing homes.

By Q3, Lennar owned only about 2% of its homesites and controlled approximately 98% through third parties. However, this model still needs money. Deposits, development costs and ongoing fees can tie up cash. Slower sales can stretch the time before land is purchased and homes are completed.

The crucial question is whether the capital released outweighs the costs and obligations created.

What Does the Millrose Report Actually Allege?

Hunterbrook’s October 2 investigation identified 700-plus Lennar home purchases by Millrose, worth about $200 million over roughly a month. It questioned their timing, pricing and rental economics. Hunterbrook Capital disclosed short positions in both companies, benefiting from declines in their shares.

These are allegations and estimates, not established findings of misconduct.

Why 356 Homes Matter More Than the 700-Home Headline

Hunterbrook identified at least 356 purchases during the final week of Lennar’s fiscal third quarter. Compare that with Lennar’s delivery guidance.

Guidance and reported deliveries: Lennar. Purchase count: Hunterbrook. Subtraction is illustrative and assumes all 356 purchases were included in reported Q3 deliveries.

Those 356 homes equal only 1.7% of quarterly deliveries. Yet they exceed the entire cushion above the guidance floor. That does not invalidate the other deliveries or prove improper accounting. It shows why a small customer group can have an outsized effect on whether a quarter appears to meet expectations.

The 700-plus purchases span a different period. They should not all be treated as Q3 deliveries.

The “Higher Prices” Claim Depends on Incentives

Hunterbrook’s recorded-price comparison was approximately $290,661 per Millrose home against $291,112 for individual buyers in the sampled communities. The estimated 13% premium emerged after applying Lennar’s companywide 12% incentive figure to individual purchasers, while assuming Millrose received no similar incentives.

That is a material qualification. The premium is an estimate of effective prices, rather than a directly observed 13% difference in recorded prices. Property differences and undisclosed incentives could change it.

The disclosure investors need is a comparison of equivalent homes, including all discounts, financing support and other concessions.

Can the Rental Programme Stand on Its Own?

Hunterbrook estimated net rental returns around 5%, using advertised rents and assumed expenses. Millrose priced a bond offering on September 22 with annual interest rates of 6.5% and 6.75%, scheduled to close on October 6. Its proceeds were intended for general corporate purposes, not specifically identified funding of these rental homes.

A property yielding 5% after operating expenses, but before financing, would face difficult economics if financed entirely at 6.5%. An illustrative $200 million portfolio would generate $10 million before financing against $13 million of annual interest.

This is a stress example, not Millrose’s disclosed financing structure. Equity funding, appreciation, eventual home sales and different actual expenses could change the outcome. Hunterbrook also relayed management’s description of the initiative as a rent-to-own pilot intended to earn returns through discounts and eventual sales.

The practical test is whether outside investors would find those terms attractive without also depending on Lennar’s land payments.

The Relationship Deserves Scrutiny, Without Jumping to a Verdict

Official disclosures establish that Lennar supplied 72% of Millrose’s Q2 revenue. Millrose’s proxy also showed Lennar CEO Stuart Miller controlled 43.2% of Millrose’s voting power as of March 23. An August 27 agreement amendment expressly added completed rental homes to the arrangements.

Lennar’s audited FY2025 filing says Millrose is excluded from its consolidated accounts because Lennar lacks the power to direct its most important activities. The auditor identified that assessment as a critical audit matter, reflecting the complexity of the judgement, rather than establishing an accounting error.

Consolidation means combining entities into one set of accounts. Transactions inside that combined group do not create external revenue. Economic dependence or overlapping shareholders alone cannot settle that accounting assessment. The new activity makes clearer disclosure of independence, pricing and risk transfer especially valuable.

Barron’s reported that both companies declined to comment on the points raised. That left the key questions unresolved.

Why Might Berkshire Be Increasing Its Lennar Stake?

The ownership filing does not explain Berkshire’s reasoning. The following is our interpretation of the investment case.

First, Berkshire can look beyond a difficult housing cycle. Mortgage affordability can change, while a large builder’s operating network and purchasing scale may remain valuable.

Second, Berkshire knows this industry. Its businesses include Clayton Homes, and its quarterly report confirms the July 2026 acquisition of Taylor Morrison. That provides relevant operating experience, although it does not prove Lennar is attractively priced.

Third, Lennar has genuine operating improvements. Construction cycle time fell to 116 days from 126 a year earlier, and management reported construction costs per square foot down 6% year over year. Faster construction reduces the time money remains tied up in a home.

Fourth, the apparent discount to net assets may offer recovery potential. If margins and cash generation improve, the market could reassess what those assets can earn.

There is also a portfolio perspective. Berkshire reported $323.8 billion of investments in equity securities at June 30. A $2.2 billion position is approximately 0.7% of that earlier balance.

Berkshire can own a large percentage of Lennar while committing a small percentage of its own investment assets. An individual investor concentrating a portfolio in Lennar would be taking a very different risk.

Our reading is that Berkshire may be basing its investment on a recovery over several years. The filing offers no assurance that earnings have stopped deteriorating.

Does Lennar’s Profit Turn Into Cash?

This is the harder test for the investment case.

Cash proxy calculated from the 10-Q; it excludes separate acquisition and joint-venture investment flows.

The cash deficit improved substantially. It still leaves a sizeable gap between reported profit and spendable cash.

Builders pay to construct homes before receiving final sale proceeds, so working capital and seasonality matter. A nine-month cash deficit does not by itself establish poor earnings quality. Full-year cash generation and the direction of inventory are better tests.

There is a further wrinkle: Lennar capitalizes option maintenance fees. It records them within asset costs, with the expense reaching the income statement as the relevant homes are sold. Cash can leave before the matching expense reduces profit. Think of paying for ingredients today and recording their cost when the meal is served. That can be normal accounting. But a restaurant with ingredients piling up still needs cash to pay its bills.

Management said the latest quarterly increase in pre-acquisition costs mainly reflected municipal reimbursements receivable, with a smaller increase in capitalized option fees. Treating the whole balance as accumulated fees would be misleading.

We would attach greater weight to rising cash generation than to another quarter of stable delivery counts. This does not amount to an immediate liquidity crisis. Management reported $1.2 billion of homebuilding cash, $3.6 billion of total liquidity including available credit, and homebuilding debt equal to 16.6% of total capital. That provides a buffer, although the quality of future cash generation still matters.

Is Lennar Stock Cheap Below Book Value?

Book value is the accounting value of assets left after liabilities. It is useful, but it is not a guaranteed resale price. Using Lennar’s August 31 balance sheet and outstanding shares produces a revealing comparison.

Author calculations. This is a simplified goodwill adjustment, before deducting any other intangibles. It is not Lennar’s reported tangible book value or an estimate of liquidation proceeds.

Goodwill represents the acquisition price paid above the value of identifiable net assets. Think of paying extra for a restaurant because its reputation and regular customers come with it. That premium can be valuable, but it cannot be treated like cash in the till.

Most of the apparent book-value cushion disappears after this one adjustment.

This does not mean Lennar’s goodwill has no value. Its franchise may justify it. It means investors need confidence in future earnings to justify the headline discount. The remaining assets also carry risk. Lennar disclosed $7.236 billion of non-refundable option deposits and pre-acquisition costs, separate from additional exposures.

An illustrative 10% write-off of that balance would equal $724 million, or about $3.04 per outstanding common share before possible tax benefits. That exceeds the $1.71 gap between the share price and our goodwill-adjusted book figure.

This is a stress test, not an expected impairment. It demonstrates why book value is a starting point for analysis rather than a reliable floor.

What Would a Lennar Earnings Recovery Look Like?

Morgan Stanley’s forecast, reported by Barron’s on October 1, was roughly $5 of EPS in both FY2026 and FY2027. At $74.44, that implies approximately 14.9 times annual earnings, or nearly $15 of share price for each $1 of annual profit.

That valuation becomes much more interesting if profits recover. It becomes demanding if $5 proves too optimistic.

We can estimate the importance of gross margin without guessing a future share price.

Delivery and price assumptions use midpoints of Lennar’s respective annual delivery and Q4 pricing guidance. Tax and share-count assumptions reference Q4 call guidance. The $5 starting point is an illustrative anchor, not a complete forecast.

At those assumptions, each one-percentage-point change in gross margin changes annual pretax profit by approximately $302 million.

After 25% tax, that works out to about $0.96 of EPS.

Author sensitivity model, holding volume, selling prices, overheads, other businesses, financing costs, tax and shares constant. Land-option costs are reflected through gross margin and should not be deducted again. These are scenarios, without assigned probabilities.

The table explains why reasonable investors can disagree about Lennar. They may be valuing different future earnings, despite looking at the same share price. A three-point margin improvement could transform the valuation. But our recovery case must earn its assumptions through lower incentives, better land economics and stronger demand. Lower mortgage rates would help. Falling rates caused by a weakening economy could also come with unemployment and more cautious homebuyers.

What Should Investors Watch in Lennar’s Next Results?

Management guided for Q4 deliveries of 22,000 to 23,000 homes and gross margins of 15.5% to 16%. That points to continued pressure rather than a declared recovery. The next earnings release should be assessed through these questions:

Further Berkshire purchases would be interesting, but they would not answer those operating questions.

For an existing investor, a weakening business should not be excused solely because Berkshire has increased its position. For someone evaluating Lennar for the first time, the most useful next milestone is better evidence on cash generation and Millrose’s economics.

Author’s View: Does Berkshire’s Lennar Bet Make Sense to Follow?

Lennar is a credible recovery candidate, but its current valuation offers less obvious protection than the “below book value” headline suggests.

The constructive case has substance: a large operating platform, faster construction and meaningful earnings sensitivity to even modest margin improvement.

Our reservation is equally specific. Lennar must demonstrate that owning less land produces more cash after fees, deposits and development commitments. The Millrose purchases introduce a separate question about customer independence that a housing rebound alone cannot resolve.

At roughly 15 times a $5 earnings anchor, investors are paying for some resilience or recovery. At roughly 2% below our simplified goodwill-adjusted book figure, they have limited comfort from that asset calculation.

We would want clearer transaction disclosures and improving cash conversion before treating the current price as a compelling bargain. Investors with a multi-year horizon and room for substantial volatility may interpret the recovery potential more favourably. That judgement needs an independent view of the business.

Berkshire’s position makes Lennar worth researching. The eventual investment case rests on Lennar’s margins, cash and disclosures.