3. Lennar Corporation (NYSE:LEN)
Number of Hedge Fund Holders: 68
Cramer pointed out that Lennar Corporation (NYSE:LEN) could face challenges and highlighted housing stocks declining after Toll Brothers reported disappointing earnings.
“We have some big earnings reports on Wednesday… After the close, we hear from two bellwethers, there’s Micron, the semiconductor company, which you know I like very much, and Lennar, the huge home builder, which I also share affection for… Lennar, okay, that’s trickier. This week saw the housing stocks just get clubbed after Toll Brothers reported a less than perfect quarter before getting downgraded by JP Morgan. One two punches Friday morning. That sent the group cascading. It’s a casualty of the frail bond market, which is not cooperating with the Fed’s rate cut agenda. Mortgage rates are stubbornly high and we just aren’t getting the turnover we would’ve expected by now.”
Lennar (NYSE:LEN) is a U.S.-based homebuilder involved in the construction and sale of single-family homes, residential land development, and multifamily rental property management. On December 13, JPMorgan analyst Michael Rehaut reduced the price target on the stock to $173 from $192 and maintained a Neutral rating on the stock.
After holding a positive outlook on the homebuilder sector for the past two years, the firm is adopting a “more cautious, less constructive approach” for 2025. JPMorgan forecasts a “significantly” less favorable demand/supply environment, predicting margin and return on equity contraction for builders in the coming year. Additionally, the analyst points out that stock valuations remain high, according to a research note. This shift in ratings reflects the firm’s 2025 outlook, as key demand drivers for housing, such as interest rates, employment growth, and affordability, are not expected to improve substantially in 2025.
On December 12, Freddie Mac published the results of its Primary Mortgage Market Survey, revealing that the average 30-year fixed-rate mortgage stood at 6.60 percent. Freddie Mac (the Federal Home Loan Mortgage Corporation) is a government-backed entity that buys, guarantees, and securitizes home loans. Sam Khater, Freddie Mac’s Chief Economist, noted that the 30-year fixed-rate mortgage decreased for the third consecutive week. He explained that the drop in mortgage rates, strong consumer income growth, and a positive stock market have led to increased homebuyer demand in recent weeks. However, he also pointed out that while the housing market outlook is improving, the progress is limited due to ongoing affordability challenges faced by homebuyers.
For the fourth quarter, the company expects new orders in the range of 19,000 to 19,300. Deliveries are projected to be between 22,500 and 23,000, with an average sales price of approximately $425,000. The gross margin percentage on home sales is anticipated to remain flat compared to the third quarter.
