Warren Buffett's Berkshire Hathaway increased its stake in Lennar to 12% as mortgage rates hit a three-year high and the homebuilder's profits fell sharply.
A Contrarian Move in a Bleeding Market
On October 1 and 2, Berkshire Hathaway bought roughly 2.42 million additional shares of Lennar for about $193 million. This move pushed their total stake to approximately 12%, a position now valued at around $2.2 billion. The timing is stark because mortgage rates had just climbed toward a three-year high, making the housing environment look increasingly hostile to new buyers.
Lennar is not a company currently flying high. Its stock closed at $76.68, a drop of 33.23% over the past year. Barron's noted its worst drop since 2024, and short-seller Hunterbrook published a critical report on its dealings with Millrose Properties. Yet Buffett is buying more, not less, as the pain intensifies for the company and its customers.
The Numbers Behind the Pain
Lennar's third-quarter results were rough. Revenue fell by 8.5% to $8.05 billion, and adjusted earnings per share of $1.23 missed expectations. Net income plunged by 52%, a massive hit to the bottom line. Stuart Miller, the company's chairman, warned that conditions have deteriorated significantly, with nearly half of visitors unable to qualify for mortgages.
Freddie Mac data showed the average 30-year fixed mortgage rate hit 7.40%, the highest since November 2023. This marks the seventh straight weekly increase in rates. The financial pressure is real, and it is squeezing both the builder and the families trying to buy a home.
Why Buffett Is Buying
Berkshire has not issued a formal explanation for the purchase. My read is that this is a calculated bet on a company engineered to survive a long slump. The price of the stock already assumes a difficult market, which creates an opportunity for a value investor with a long-term horizon. Buffett is likely seeing a chance to buy a major player at a discount while the rest of the market panics.
The strategy relies on Lennar's volume approach. Even with falling prices and lower margins, the company is building and selling homes at a scale that keeps it afloat. This is a classic Buffett play: buy a business that can endure the winter, knowing the spring will eventually come.
The Broader Market Context
This move happens against a backdrop of rising US Treasury yields. The 10-year yield fell slightly to 5.243% for the week, but it had been near 24-year highs. Investors are watching the September CPI report scheduled for October 14, which could influence the Federal Reserve's next interest rate decision.
Tech shares recovered on Friday, helping the Nasdaq gain 0.64% and the S&P 500 rise 0.59%. The Dow Jones Industrial Average climbed 423.31 points to 51,654.95. The market is volatile, and investors are dealing with high oil prices and concerns about the outlook for AI companies.
What Comes Next
The next Lennar earnings report will test whether its volume strategy can hold under pressure. Q4 guidance was built on 6.8% mortgage rates, a level that has already been surpassed. If rates stay high, the company will face even tougher headwinds, and Buffett's bet will be tested further.
For now, the market is watching. The stock is down, the rates are up, and the profits are down. But Buffett is buying. That is a signal worth paying attention to, even if the short-term picture looks grim.
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