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Financial Instruments and Fair Value Disclosures
 9 Months Ended
Aug. 31, 2024
Fair Value Disclosures [Abstract]  
Financial Instruments and Fair Value Disclosures Financial Instruments and Fair Value Disclosures
The following table presents the carrying amounts and estimated fair values of financial instruments held or issued by the Company at August 31, 2024 and November 30, 2023, using available market information and what the Company believes to be appropriate valuation methodologies. Considerable judgment is required in interpreting market data to develop the estimates of fair value. The use of different market assumptions and/or estimation methodologies might have a material effect on the estimated fair value amounts. The table excludes cash and cash equivalents, restricted cash, receivables, net and accounts payable, all of which had fair values approximating their carrying amounts due to the short maturities and liquidity of these instruments.
August 31, 2024November 30, 2023
(In thousands)Fair Value HierarchyCarrying AmountFair ValueCarrying AmountFair Value
ASSETS
Financial Services:
Loans held-for-investment, netLevel 3$63,995 64,172 55,463 55,463 
Investments held-to-maturityLevel 3138,045 141,500 140,676 139,396 
LIABILITIES
Homebuilding senior notes and other debt payable, netLevel 2$2,263,256 2,272,515 2,816,482 2,785,712 
Financial Services notes and other debt payable, netLevel 21,545,416 1,545,806 2,163,805 2,164,441 
Multifamily notes payable, netLevel 2— — 3,741 3,741 
The following methods and assumptions are used by the Company in estimating fair values:
Financial Services - The fair values above are based on quoted market prices, if available. The fair values for instruments that do not have quoted market prices are estimated by the Company on the basis of discounted cash flows or other
financial information. For notes and other debt payable, the fair values approximate their carrying value due to variable interest pricing terms and the short-term nature of the majority of the borrowings.
Homebuilding - For senior notes and other debts payable, the fair value of fixed-rate borrowings is primarily based on quoted market prices and the fair value of variable-rate borrowings is based on expected future cash flows calculated using current market forward rates.
Multifamily - For notes payable, the fair values approximate their carrying value due to variable interest pricing terms and the short-term nature of the borrowings.
Fair Value Measurements:
GAAP provides a framework for measuring fair value, expands disclosures about fair value measurements and establishes a fair value hierarchy which prioritizes the inputs used in measuring fair value summarized as follows:
Level 1: Fair value determined based on quoted prices in active markets for identical assets.
Level 2: Fair value determined using significant other observable inputs.
Level 3: Fair value determined using significant unobservable inputs.
The Company’s financial instruments measured at fair value on a recurring basis are summarized below:
Fair Value HierarchyFair Value at
(In thousands)August 31, 2024November 30, 2023
Financial Services Assets:
Residential loans held-for-saleLevel 2$1,690,344 2,073,350 
LMF Commercial loans held-for-saleLevel 3150,867 13,459 
Mortgage servicing rightsLevel 33,366 3,440 
Forward optionsLevel 16,058 5,937 
Lennar Other Assets:
Investments in equity securitiesLevel 1$192,069 176,198 
Investments available-for-saleLevel 340,090 37,953 
Residential and LMF Commercial loans held-for-sale in the table above include:
August 31, 2024November 30, 2023
(In thousands)Aggregate Principal BalanceChange in Fair ValueAggregate Principal BalanceChange in Fair Value
Residential loans held-for-sale$1,699,152 (8,808)2,083,776 (10,426)
LMF Commercial loans held-for-sale
151,540 (673)13,650 (191)
Financial Services residential loans held-for-sale - Fair value is based on independent quoted market prices, where available, or the prices for other mortgage whole loans with similar characteristics. The Company recognizes the fair value of its rights to service a mortgage loan as revenue upon entering into an interest rate lock loan commitment with a borrower. The fair value of these are included in Financial Services’ loans held-for-sale as of August 31, 2024 and November 30, 2023. Fair value of servicing rights is determined based on actual sales of servicing rights on loans with similar characteristics.
LMF Commercial loans held-for-sale - The fair value of commercial loans held-for-sale is calculated from model-based techniques that use discounted cash flow assumptions and the Company’s own estimates of CMBS spreads, market interest rate movements and the underlying loan credit quality. The details and methods of the calculation are unchanged from the fair value disclosure in the Company's Notes to the Financial Statements section in its Annual Report on Form 10-K for the year ended November 30, 2023. These methods use unobservable inputs in estimating a discount rate that is used to assign a value to each loan. While the cash payments on the loans are contractual, the discount rate used and assumptions regarding the relative size of each class in the CMBS capital structure can significantly impact the valuation. Therefore, the estimates used could differ materially from the fair value determined when the loans are sold to a securitization trust.
Mortgage servicing rights - Financial Services records mortgage servicing rights when it sells loans on a servicing-retained basis or through the acquisition or assumption of the right to service a financial asset. The fair value of the mortgage servicing rights is calculated using third-party valuations. The key assumptions, which are generally unobservable inputs, used in the valuation of the mortgage servicing rights include mortgage prepayment rates, discount rates and delinquency rates and are noted below:
As of August 31, 2024As of November 30, 2023
Unobservable inputs:
Mortgage prepayment rate9%8%
Discount rate13%13%
Delinquency rate 11%9%
Forward options - Fair value of forward options is based on independent quoted market prices for similar financial instruments. The fair value of these are included in Financial Services' other assets and the Company recognizes the changes in the fair value of the premium paid as Financial Services' Revenue.
Lennar Other investments in equity securities - The fair value of investments in equity securities was calculated based on independent quoted market prices. The Company’s investments in equity securities were recorded at fair value with all changes in fair value recorded to Lennar Other unrealized gains (losses) from technology investments on the Company’s condensed consolidated statements of operations and comprehensive income.
Lennar Other investments available-for-sale - The fair value of investments available-for-sale is calculated from model-based techniques that use discounted cash flow assumptions and the Company’s own estimates of CMBS spreads, market interest rate movements and the underlying loan credit quality. Loan values are calculated by allocating the change in value of an assumed CMBS capital structure to each loan. The value of an assumed CMBS capital structure is calculated, generally, by discounting the cash flows associated with each CMBS class at market interest rates and at the Company’s own estimate of CMBS spreads.
The changes in fair values for Level 1 and Level 2 financial instruments measured on a recurring basis are shown below by financial instrument and financial statement line item:
Three Months EndedNine Months Ended
August 31,August 31,
(In thousands)2024202320242023
Changes in fair value included in Financial Services revenues:
Loans held-for-sale$30,482 (9,795)1,617 (33,358)
Mortgage loan commitments22,400 18,139 (9,702)(16,922)
Forward contracts(31,664)(9,379)41,209 63,323 
Forward options2,687 (485)1,633 (1,437)
Changes in fair value included in Lennar Other unrealized gains (losses) from technology investments:
Investments in equity securities$39,123 (15,713)12,472 (14,170)
Changes in fair value included in other comprehensive income, net of tax:
Lennar Other investments available-for-sale$444 208 2,161 1,632 
Interest on Financial Services loans held-for-sale and LMF Commercial loans held-for-sale measured at fair value is calculated based on the interest rate of the loans and recorded as revenues in the Financial Services’ statement of operations.
The following table sets forth the reconciliation of the beginning and ending balance for the Level 3 recurring fair value measurements in the Company's Financial Services segment:
Three Months Ended August 31,
20242023
(In thousands)Mortgage servicing rightsLMF Commercial loans held-for-saleMortgage servicing rightsLMF Commercial loans held-for-sale
Beginning balance$3,652 66,715 3,398 22,754 
Purchases/loan originations174 236,665 34 161,308 
Sales/loan originations sold, including those not settled— (145,325)— (100,562)
Disposals/settlements(122)(9,500)(94)(45,667)
Changes in fair value (1)(338)2,312 78 (535)
Interest and principal paydowns— — — (3)
Ending balance$3,366 150,867 3,416 37,295 
Nine Months Ended August 31,
20242023
(In thousands)Mortgage servicing rightsLMF Commercial loans held-for-saleMortgage servicing rightsLMF Commercial loans held-for-sale
Beginning balance$3,440 13,459 3,463 25,599 
Purchases/loan originations406 449,000 155 325,378 
Sales/loan originations sold, including those not settled— (301,610)— (265,864)
Disposals/settlements(193)(9,500)(237)(45,667)
Changes in fair value (1)(287)(673)35 (547)
Interest and principal paydowns— 191 — (1,604)
Ending balance$3,366 150,867 3,416 37,295 
(1)Changes in fair value for LMF Commercial loans held-for-sale and Financial Services mortgage servicing rights are included in Financial Services' revenues.
The Company’s assets measured at fair value on a nonrecurring basis are those assets for which the Company has recorded valuation adjustments and write-offs. The fair values included in the table below represent only those assets whose carrying values were adjusted to fair value during the respective periods disclosed. The assets measured at fair value on a nonrecurring basis are summarized below:
Three Months Ended August 31,
20242023
(In thousands)Fair Value
Hierarchy		Carrying ValueFair ValueTotal Losses, Net (1)Carrying ValueFair ValueTotal Losses, Net (1)
Non-financial assets - Homebuilding:
Finished homes and construction in progress (2)Level 3$120,811 111,776 (9,035)67,006 57,801 (9,205)
Land and land under development (2)Level 3— — — 25,160 24,612 (548)
Deposits and pre-acquisition costs on real estate (3)Level 3206 — (206)1,580 — (1,580)
Non-financial assets - Multifamily:
Land and land under development (4)Level 3$139,980 49,970 (90,010)— — — 
Nine Months Ended August 31,
20242023
(In thousands)Fair Value
Hierarchy		Carrying ValueFair ValueTotal Losses, Net (1)Carrying ValueFair ValueTotal Losses, Net (1)
Non-financial assets - Homebuilding:
Finished homes and construction in progress (2)Level 3$313,120 280,761 (32,359)250,822 216,703 (34,119)
Land and land under development (2)Level 3— — — 50,895 48,315 (2,580)
Deposits and pre-acquisition costs on real estate (3)Level 33,408 — (3,408)18,710 — (18,710)
Investments in unconsolidated entities (5)Level 3— — — 78,834 37,792 (41,042)
Non-financial assets - Multifamily:
Land and land under development (4)Level 3$139,980 49,970 (90,010)— — — 
(1)Represents losses due to valuation adjustments and deposit and pre-acquisition write-offs recorded during the respective periods.
(2)Valuation adjustments for finished homes and construction in progress, and land and land under development were included in Homebuilding costs and expenses.
(3)Forfeited deposits and write-off of pre-acquisition costs on real estate were included in Homebuilding costs and expenses in the Company's condensed consolidated statements of operations and comprehensive income.
(4)Valuation adjustments for land and land under development were included in Multifamily costs and expenses.
(5)Valuation adjustments related to investments in unconsolidated entities were primarily included in Homebuilding other income (expense), net in the Company's condensed consolidated statements of operations and comprehensive income.
Finished homes and construction in progress are included within inventories. Inventories are stated at cost unless the inventory within a community is determined to be impaired, in which case the impaired inventory is written down to fair value. The Company disclosed its accounting policy related to inventories and its review for indicators of impairment in the Summary of Significant Accounting Policies in its Annual Report on Form 10-K for the year ended November 30, 2023.
The Company estimates the fair value of inventory evaluated for impairment based on market conditions and assumptions made by management at the time the inventory is evaluated, which may differ materially from actual results if market conditions or assumptions change. For example, changes in market conditions and other specific developments or changes in assumptions may cause the Company to re-evaluate its strategy regarding previously impaired inventory, as well as inventory not currently impaired but for which indicators of impairment may arise if market deterioration occurs, and certain other assets that could result in further valuation adjustments and/or additional write-offs of option deposits and pre-acquisition costs due to abandonment of those options contracts.
On a quarterly basis, the Company reviews its active communities for indicators of potential impairments. The table below summarizes communities reviewed for indicators of impairment and communities with valuation adjustments recorded:
Communities with valuation adjustments
At or for the Nine Months Ended# of active communities# of communities with potential indicator of impairment# of communities
Fair Value
(in thousands)
Valuation Adjustments
(in thousands)
August 31, 20241,283244$25,769 $15,263 
August 31, 20231,24721653,211 18,844 
The table below summarizes the most significant unobservable inputs used in the Company's discounted cash flow model to determine the fair value of its communities for which the Company recorded valuation adjustments:
Nine Months Ended August 31,
20242023
Unobservable inputsRangeRange
Average selling price (1)$178,000—282,000371,000—850,000
Absorption rate per quarter (homes)10—153—26
Discount rate20%20%
(1)Represents the projected average selling price on future deliveries for communities in which the Company recorded valuation adjustments during both the nine months ended August 31, 2024 and 2023.
The Company disclosed its accounting policy related to investments in unconsolidated entities and its review for indicators of impairment for the long-lived assets of an unconsolidated entity and the decline in the fair value of an investment below the carrying value in the Summary of Significant Accounting Policies in its Annual Report on Form 10-K for the year ended November 30, 2023.
The Company evaluates if a decrease in the fair value of an investment below the carrying value is other-than-temporary. This evaluation includes certain critical assumptions made by management: (1) projected future distributions from the unconsolidated entities, (2) discount rates applied to the future distributions, (3) the length of the time and the extent to which the market value has been less than cost and (4) various other factors, which include age of the venture, relationships with the other partners and banks, general economic market conditions, land status, length of the time and the extent to which the market value has been below the carrying value, and liquidity needs of the unconsolidated entity. The Company generally estimates the fair value of an investment in an unconsolidated entity by using a cash flow analysis for estimated future net distributions from an unconsolidated entity, subject to the perceived risks associated with the unconsolidated entity’s cash flow streams. During the three and nine months ended August 31, 2024, the Company evaluated the fair value of its investments in unconsolidated entities using a cash flow analysis and concluded that the investments had an immaterial amount of other-than-temporary impairment. During the nine months ended August 31, 2023, the Company estimated the fair value of an investment in an unconsolidated entity using a cash flow analysis with a 15% discount rate and concluded that the investment had an other-than-temporary impairment of $36.8 million included in Homebuilding other income (expense), net in the Company's condensed consolidated statements of operation and comprehensive income.
The Company estimates the fair value of investments in unconsolidated entities evaluated for impairment based on market conditions and assumptions made by management at the time the investment is evaluated, which may differ materially from actual results if market conditions or assumptions change.