Berkshire Nearly Doubles Lennar Stake as Abel Bets on Housing

Berkshire Hathaway grew its stake in Lennar by 94% in the third quarter, and the conglomerate built under Greg Abel now owns roughly 11% of America's second-largest homebuilder, according to SEC filings. The move is Abel's third major housing play since he succeeded Warren Buffett as CEO on Jan. 1, and it doubles down on a sector most of Wall Street still avoids.

Since Abel took the top job, Berkshire has made three decisive moves in homebuilding:

• Taylor Morrison acquisition. In late May, Berkshire agreed to buy the nation's sixth-largest homebuilder in a cash deal worth $6.8 billion in equity, or about $8.5 billion including debt. The deal closed in July.
• Mungo Homes deal. In early July, Mungo Homes, part of Berkshire's Clayton Properties Group, acquired South Carolina builder McGuinn Homes, expanding its Southeast footprint.
• The Lennar build-up. Berkshire raised its Lennar holdings by 94% in the third quarter, per calculations by housing research firm ResiClub, on top of a stake that had already grown nearly 30% in the second quarter.

Abel told CNBC's Squawk Box on Sept. 2 that the Taylor Morrison deal reflected a long-term view of U.S. housing. "When we looked at housing and housing specifically in North America, we were taking a very long-term view, that American dream will continue to exist," he said, according to a CNBC transcript. "And five years and 10 years from now, this will be a very strong asset for Berkshire."

Why the short term looks ugly

The timing looks uncomfortable. Lennar's shares ended the third quarter 49.7% below their October 2024 high, according to ResiClub. Since the end of 2019, the stock is up just 44.2% — while the S&P 500 gained 138.6% and D.R. Horton, PulteGroup, and Toll Brothers each returned more than 150% over the same stretch.

Lennar has been this cycle's most aggressive builder in cutting net effective prices. Its average sales price is down 24.2% from its 2022 peak, and ResiClub estimates that incentives and price cuts account for about two-thirds of that decline. A shift toward smaller, lower-priced homes explains the rest.

That math has hit profits. Lennar's 15.8% gross margin in its fiscal third quarter, which ended Aug. 31, marked its weakest third quarter since 2009, per ResiClub. Net earnings fell to $284 million from $591 million a year earlier — a drop of more than half — the company reported.

The whole sector faces the same pressure. The average 30-year fixed mortgage rate climbed above 7% in late September for the first time since January 2025 and reached 7.28% as of Oct. 1, according to Freddie Mac data.

Abel isn't glossing over it. "We did see it from Berkshire's perspective that it was going to be a bumpy road for a while," he told CNBC. "We don't envision a quick recovery there, but we do see it as an industry that we definitely want to be invested in, and we're invested in for the long term."

What does this change for Berkshire and the housing trade?

The combination of Taylor Morrison and Clayton Properties has already made Berkshire America's fourth-largest site-built homebuilder, behind only D.R. Horton, Lennar, and PulteGroup, according to ResiClub. Berkshire is no longer a passive homebuilder investor — it's now one of the industry's biggest operators, with its returns tied directly to construction margins, not just share prices.

Wall Street isn't following Abel in. The consensus analyst rating on Lennar is underweight, according to ResiClub, and several major quant funds cut their positions in the same quarter Berkshire was buying. On Lennar's latest earnings call, CEO Stuart Miller said that "if anything, [housing has] gotten more difficult since we last spoke in June," ResiClub reported.

Lennar's heavy exposure to entry-level homes in the Sun Belt was once a winning bet on where Americans were moving. Since the boom ended in mid-2022, that segment has been among the market's weakest, and nobody knows yet whether the region's pull on first-time buyers returns.

For practitioners, the signal is straightforward: Berkshire has stopped waiting for a housing bottom and started buying the builders themselves. Whether that conviction pays off depends on a recovery timeline that, by Abel's own admission, nobody at Berkshire expects to be quick.

Berkshire and Abel's office did not respond to Fortune's request for comment.