Lennar offers 5,000 homes to investors with buyer demand sliding

Lennar Corp., one of the biggest U.S. homebuilders, is offering to sell thousands of homes to rental landlords at a time when sales to everyday buyers have slumped. 

Lennar is circulating lists of properties to potential acquirers, according to people familiar with the matter, who asked not to be named because the process is private. Many of the properties are located in the Southwest and Southeast, the people said, with the builder giving landlords the chance to acquire entire subdivisions in some cases. 

A representative for Lennar said the company offers single-family landlords the chance to buy unsold completed homes, as well as homes that are nearing completion, as part of its normal marketing efforts. The most recent inventory list had about 5,000 homes, the representative said, though the number changes monthly.

The average price of home Lennar sold in its fiscal third quarter was $491,000. That gives the properties currently on offer to landlords a potential value of roughly $2.5 billion, though buyers generally demand significant discounts from retail prices for making bulk purchases.

It has been a turbulent year for builders, who saw frenzied demand for suburban homes slow sharply when mortgage rates soared. Higher borrowing costs pushed homebuyers to cancel contracts, leading builders to abandon deals to acquire land. 

Lennar isn’t alone. In recent months, builders have sought bids from rental operators on at least 40,000 homes, said Jeff Cline, executive director of the single-family rental advisory arm of SVN. Many of those properties had been under contract with individual buyers who walked away from purchase agreements. Increasingly, builders are looking to sell one or more subdivisions at a time, Cline said. 

Single-family landlords have been eyeing builder inventories for months, with some, like industry giant Invitation Homes Inc. seeking to raise new funds to pounce on opportunities. Transactions have been muted as investors wait for greater clarity on interest rates and for pricing to come down.

Lennar has also raised money to acquire rental houses, tapping Allianz Real Estate and Centerbridge Partners for $1.25 billion in equity commitments in 2021. But Lennar, which plans to spin off a subsidiary that owns and operates single-family rentals and apartment buildings, has been a cautious buyer.

The company sold about 1,000 rental homes in its fiscal third quarter, with most of those properties going to outside investors, rather than Lennar’s single-family rental operation. 

“Our program has taken a very disciplined approach to stepping back and waiting for the market to kind of reconcile itself,” Lennar Chairman Stuart Miller said on a September call with investors.  “Contrary to what you might have thought, we’re probably selling less to our own program and more to other SFR programs outside of Lennar.”