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What changed in Lennar's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Lennar's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+340 added−328 removedSource: 10-K (2024-01-26) vs 10-K (2023-01-26)

Top changes in Lennar's 2023 10-K

340 paragraphs added · 328 removed · 263 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

73 edited+11 added−9 removed53 unchanged
Biggest changeThey are: • Blend, a company that is a digital lending platform developer simplifying and fast tracking the consumer finance process; • Doma, a company that built a predictive analytics platform for title insurers; • Hippo, a company that provides an efficient means of obtaining home insurance; • Opendoor, a company that uses technology to significantly streamline the homebuying and selling process; • Sonder, a company that manages short-term rentals, such as rental hotels; • SmartRent, an enterprise smart home automation company; and • Sunnova, a leading national residential solar company, to which during 2021, we sold our solar power business in return for equity.
Biggest change("Blend"), a digital lending platform developer simplifying and fast tracking the consumer finance process; • Doma Holdings, Inc. ("Doma"), a company that built a predictive analytics platform for title insurers; • Hippo Holdings, Inc. ("Hippo"), a company that provides an efficient means of obtaining home insurance; • Opendoor Technologies, Inc.
We employ new home consultants who are paid salaries, commissions or both to conduct on-site sales of our homes. We also sell homes through independent realtors. We have also made it possible for potential homebuyers to take virtual tours of model homes.
We employ new home consultants who are paid salaries, commissions or both to conduct on-site sales of our homes. We also sell homes through independent realtors. We have made it possible for potential homebuyers to take virtual tours of model homes.
Five Point Holdings, LLC We own an indirect approximately 40% interest in Five Point Holdings, LLC, which is a publicly traded developer of three large master planned mixed-use developments in California (Newhall Ranch, Great Park Neighborhoods, and San Francisco Shipyard/Candlestick Point). We sometimes purchase properties from FivePoint for use in our homebuilding operations.
Five Point Holdings, LLC We own an indirect approximately 40% interest in FivePoint, which is a publicly traded developer of three large master planned mixed-use developments in California (Newhall Ranch, Great Park Neighborhoods, and San Francisco Shipyard/Candlestick Point). We sometimes purchase properties from FivePoint for use in our homebuilding operations.
We understand the importance of balance, and offer associates a competitive and comprehensive benefits package, including paid parental leave and resources for whole-self well-being (physical, social, and financial). We are committed to the health and safety of our associates and trade partners.
We understand the importance of balance, and offer associates a competitive and comprehensive benefits package, including paid parental leave and resources for whole-self well-being (physical, social, and financial). Health and Safety We are committed to the health and safety of our associates and trade partners.
We centralize at the corporate level decisions related to our overall strategy, acquisitions of land and businesses, risk management, financing, cash management and information systems. Backlog Backlog represents the number of homes under sales contracts. Homes are sold using sales contracts, which are generally accompanied by deposits.
We centralize at the corporate level decisions related to our overall strategy, acquisitions and disposition of land and businesses, risk management, financing, cash management and information systems. Backlog Backlog represents the number of homes under sales contracts. Homes are sold using sales contracts, which are generally accompanied by deposits.
The Limited Partnership Agreement of Upward America gives Upward America the right to purchase from Lennar for their appraised value all homes or communities that are purpose built for single family home rental. Upward America also is free to purchase homes from homebuilders other than Lennar or to purchase previously occupied homes.
The Limited Partnership Agreement of Upward America gives Upward America the right to purchase from Lennar for their appraised value all homes or communities that are purpose built by Lennar for single-family home rental. Upward America also is free to purchase homes from homebuilders other than Lennar or to purchase previously occupied homes.
We believe we are competitive in the market regions where we operate primarily due to our: • Everything’s Included ® marketing program, which simplifies the homebuying experience by including the most desirable features as standard items; • Innovative home designs, such as our Next Gen ® homes that provide both privacy and togetherness for multi-generational families or a home office to accommodate working from home; • Inclusion of built-in Wi-Fi, solar power systems and advanced technology in many of our homes; • Consumer insight capabilities, which allow us to continually stay tapped into consumer preferences and feedback so we can continuously evolve and fine-tune our offerings, processes and communications for our customers; • Financial position as a result of our ability to finance land purchases and development activities with operating revenues and corporate level unsecured borrowing; • Access to land, particularly in land-constrained markets; • Pricing to current market conditions; • Cost efficiencies realized through our national purchasing programs and production of value-engineered homes; • Quality construction and home warranty programs, which are supported by a responsive customer care team; • Our builder of choice program through which we maximize the efficiency of our suppliers' dealing with us; • Size and scale in leading markets; and • Strategic investments in technology initiatives through our LEN X investments in companies that help us enhance the homebuying and home ownership experience, and help us stay at the forefront of homebuilding innovation.
We believe we are competitive in the market regions where we operate primarily due to our: • Everything’s Included ® marketing program, which simplifies the homebuying experience by including the most desirable features as standard items; • Innovative home designs, such as our Next Gen ® homes that provide both privacy and togetherness for multi-generational families or a home office to accommodate working from home; • Inclusion of built-in Wi-Fi, solar power systems and advanced technology in many of our homes; • Consumer insight capabilities, which allow us to continually stay tapped into consumer preferences and feedback so we can continuously evolve and fine-tune our offerings, processes and communications for our customers; • Financial position as a result of our ability to finance land purchases and development activities with operating revenues and corporate level unsecured borrowing; • Access to land, particularly in land-constrained markets; • Pricing to current market conditions; • Cost efficiencies realized through our national purchasing programs and production of value-engineered homes; • Quality construction and home warranty programs, which are supported by a responsive customer care team; • Our builder of choice program through which we maximize the efficiency of our suppliers' dealing with us; • Size and scale in leading markets; • Use of digital channels to advertise homes; and • Strategic investments in technology initiatives through our LEN X investments in companies that help us enhance the homebuying and home ownership experience, and help us stay at the forefront of homebuilding innovation.
Key elements of our strategy include: • Strong Operating Margins - Our purchasing leverage combined with our focus on reducing selling, general and administrative costs by using technology and innovative strategies and reducing interest expense through paydowns of debt has enabled us to achieve historically high gross profit and operating margins. • Everything’s Included ® Approach - We are focused on distinguishing our products, including through our Everything’s Included ® approach, which maximizes our purchasing power, enables us to include luxury features as standard items in our homes and simplifies our homebuilding operations. • Innovative Homebuilding - We are constantly innovating the homes we build to create products that better meet our customers' needs and desires.
Key elements of our strategy include: • Strong Operating Margins - Our purchasing leverage combined with our focus on reducing selling, general and administrative costs by using technology and innovative strategies and reducing interest expense through paydowns of debt has enabled us to achieve strong gross profit and operating margins. • Everything’s Included ® Approach - We are focused on distinguishing our products, including through our Everything’s Included ® approach, which maximizes our purchasing power, enables us to include luxury features as standard items in our homes and simplifies our homebuilding operations. • Innovative Homebuilding - We are constantly innovating the homes we build to create products that better meet our customers' needs and desires.
Financial information about our Homebuilding, Financial Services, Multifamily and Lennar Other operations is contained in Management's Discussion and Analysis of Financial Condition and Results of Operations, which is Item 7 of this Report. About Our Company Our company was founded as a local Miami homebuilder in 1954.
Financial information about our Homebuilding, Financial Services, Multifamily and Lennar Other operations is contained in Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations of this Report. About Our Company Our company was founded as a local Miami homebuilder in 1954.
In addition, we include built in wireless capability, home automation and solar power in many of the homes we sell, which enhances our brand and improves our ability to generate traffic and sales. We sell our homes primarily from models that we have designed and constructed.
In addition, we include built in wireless capability, home automation and solar power in many of the homes we sell, which enhances our brand and improves our ability to generate traffic and sales. We sell our homes from models that we have designed and constructed.
Land purchases are subject to specified underwriting criteria and are made through our diversified program of property acquisition, which may consist of: • Acquiring land through option contracts, which generally enables us to control portions of properties owned by third parties (including strategic land funds) or entities in which we have investments until we have determined whether to exercise the options; • Acquiring land directly from individual land owners/developers, or other homebuilders; • Acquiring local or regional homebuilders that own, or have options to purchase, land in strategic markets; • Acquiring access to land through joint ventures or partnerships, which among other benefits, limits the amount of our capital invested in land while helping to ensure our access to potential future homesites and allowing us to participate in strategic ventures; • Investing in regional developers in exchange for preferential land purchase opportunities; and • Acquiring land in conjunction with our Multifamily business.
Land purchases are subject to specified underwriting criteria and are made through our diversified program of property acquisition, which may consist of: • Acquiring land through option contracts, which generally enables us to control portions of properties owned by land banks and other third parties or entities in which we have investments until we have determined whether to exercise the options; • Acquiring land directly from individual land owners/developers, or other homebuilders; • Acquiring local or regional homebuilders that own, or have options to purchase, land in strategic markets; • Acquiring access to land through joint ventures or partnerships, which among other benefits, limits the amount of our capital invested in land while helping to ensure our access to potential future homesites and allowing us to participate in strategic ventures; • Investing in regional developers in exchange for preferential land purchase opportunities; and • Acquiring land in conjunction with our Multifamily business.
In 2017, we acquired WCI Communities, Inc., a homebuilder of luxury single and multifamily homes, including a small number of luxury high-rise tower units, in Florida. In 2018, we acquired CalAtlantic Group, Inc.
In 2017, we acquired WCI Communities, Inc., a homebuilder of luxury single-family and multifamily homes, including a small number of luxury high-rise tower units, in Florida. In 2018, we acquired CalAtlantic Group, Inc.
As owner of the general partner of Upward America, Lennar has the right to receive, in addition to distributions regarding its own commitments, distributions based on the amounts by which returns to limited partners exceed specified amounts (i.e., carried interests). As the manager of Upward America, we receive management and acquisition fees.
As owner of the general partner of Upward America, Lennar has the right to receive, in addition to distributions regarding its own commitments, distributions based on the amounts by which returns to limited partners exceed specified amounts (i.e., carried interests). As the manager of Upward America, Lennar receives management and acquisition fees.
As of November 30, 2022, our reportable Homebuilding segments and all Other Homebuilding operations not required to be reported separately have divisions located in: East: Alabama, Florida, New Jersey, Pennsylvania and South Carolina Central: Georgia, Illinois, Indiana, Maryland, Minnesota, North Carolina, Tennessee and Virginia Texas: Texas West: Arizona, California, Colorado, Idaho, Nevada, Oregon, Utah and Washington Other: Urban divisions and other homebuilding related investments primarily in California, including Five Point Holdings, LLC ("FivePoint") Our other reportable segments are Financial Services, Multifamily and Lennar Other.
As of November 30, 2023, our reportable Homebuilding segments and all Other Homebuilding operations not required to be reported separately have divisions located in: East: Alabama, Florida, New Jersey, Pennsylvania and South Carolina Central: Georgia, Illinois, Indiana, Maryland, Minnesota, North Carolina, Tennessee and Virginia Texas: Texas West: Arizona, California, Colorado, Idaho, Nevada, Oregon, Utah and Washington Other: Urban divisions and other homebuilding related investments primarily in California, including FivePoint Holdings, LLC ("FivePoint") Our other reportable segments are Financial Services, Multifamily and Lennar Other.
Although we, like homebuilders throughout the country, have encountered shortages of materials and skilled labor during 2022, we believe that because of our size and our builder of choice program, where we work with our trade partners to drive efficiencies for them, we have been less affected by these shortages than many of our competitors.
Although we, like homebuilders throughout the country, encountered shortages of materials and skilled labor during 2022, we believe that because of our size and our builder of choice program, where we work with our trade partners to drive efficiencies for them, we were less affected by these shortages than many of our competitors.
In addition, many new development projects are subject to assessments for schools, parks, streets and highways and other public improvements, the costs of which can be substantial. Also, some states are attempting to make homebuilders responsible for violations of wage and other labor laws by their subcontractors.
In addition, many new development projects are subject to assessments for schools, parks, streets and highways and other public improvements, the costs of which can be substantial. Also, some governmental agencies are attempting to make homebuilders responsible for violations of wage and other labor laws by their subcontractors.
The most important factors that could cause actual results to differ materially from those anticipated by our forward-looking statements include, but are not limited to: slowdowns in real estate markets in regions where we have significant Homebuilding or Multifamily development activities; decreased demand for our homes, either for sale or for rent, or Multifamily rental apartments; the potential impact of inflation; the impact of increased cost of mortgage financing for homebuyers, increased 9 Table of Contents interest rates or increased competition in the mortgage industry; supply shortages and increased costs related to construction materials and labor; cost increases related to real estate taxes and insurance; the effect of increased interest rates with regard to our funds' borrowings on the willingness of the funds to invest in new projects; reductions in the market value of the Company's investments in public companies; natural disasters or catastrophic events for which our insurance may not provide adequate coverage; our inability to successfully execute our strategies, including our land lighter strategy and our planned spin-off of certain businesses; a decline in the value of the land and home inventories we maintain and resulting possible future writedowns of the carrying value of our real estate assets; the forfeiture of deposits related to land purchase options we decide not to exercise; the potential negative impact to our business of the coronavirus (COVID-19) pandemic; possible unfavorable losses in legal proceedings; changes in general economic and financial conditions that reduce demand for our products and services, lower our profit margins or reduce our access to credit; our inability to acquire land at anticipated prices; the possibility that we will incur nonrecurring costs that affect earnings in one or more reporting periods; the possibility that the benefit from our increasing use of technology will not justify its cost; increased competition for home sales from other sellers of new and resale homes; becoming unable to pay down debt; government actions or other factors that might force us to terminate our program of repurchasing our stock; the failure of the participants in various joint ventures to honor their commitments; difficulty obtaining land-use entitlements or construction financing; new laws or regulatory changes that adversely affect the profitability of our businesses; our inability to refinance our debt on terms that are as favorable as our current arrangements; and changes in accounting conventions that adversely affect our reported earnings.
The most important factors that could cause actual results to differ materially from those anticipated by our forward-looking statements include, but are not limited to: slowdowns in real estate markets in regions where we have significant Homebuilding or Multifamily development activities or own a substantial number of single-family homes for rent; decreased demand for our homes, either for sale or for rent, or Multifamily rental apartments; the potential impact of inflation; the impact of increased cost of mortgage financing for homebuyers, increased interest rates or increased competition in the mortgage industry; supply shortages and increased costs related to construction materials and labor; cost increases related to real estate taxes and insurance; the effect of increased interest rates with regard to our funds' borrowings on the willingness of the funds to invest in new projects; reductions in the market value of the Company's investments in public companies; natural disasters or catastrophic events for which our insurance may not provide adequate coverage; our inability to successfully execute our strategies, including our land lighter strategy and our planned spin-off of certain businesses; a decline in the value of the land and home inventories we maintain and resulting possible future write downs of the carrying value of our real estate assets; the forfeiture of deposits related to land purchase options we decide not to exercise; the potential negative impact to our business of public health issues, including the coronavirus (COVID-19) pandemic; possible unfavorable outcomes in legal proceedings; changes in general economic and financial conditions that reduce demand for our products and services, lower our profit margins or reduce our access to credit; our inability to acquire land at anticipated prices; the possibility that we will incur nonrecurring costs that affect earnings in one or more reporting periods; the possibility that the benefit from our increasing use of technology will not justify its cost; increased competition for home sales from other sellers of new and resale homes; becoming unable to pay down debt; government actions or other factors that might force us to terminate our program of repurchasing our stock; the failure of the participants in various joint ventures to honor their commitments; difficulty obtaining land-use entitlements or construction financing; new laws or regulatory changes that adversely affect the profitability of our businesses (including changes in tax laws or liabilities); our inability to refinance our debt on terms that are as favorable as our current arrangements; and changes in accounting conventions that adversely affect our reported earnings.
We have a corporate risk management policy under which we hedge our interest rate risk on rate-locked loan commitments and loans held-for-sale to mitigate exposure to interest rate fluctuations. We have been using new technology to automate portions of our mortgage loan origination process.
We have a corporate risk management policy under which we hedge our interest rate risk on rate-locked loan commitments and loans held-for-sale to mitigate exposure to interest rate fluctuations. 4 Table of Contents We have been using new technology to automate portions of our mortgage loan origination process.
In addition, our home design and engineering work optimizes efficiency of building materials and reduces construction waste. We also believe in the value of clean energy from solar power, which is why we formed our own captive solar power company in 2013.
In addition, our home design and engineering work optimizes efficient use of building materials and reduces construction waste. We also believe in the value of clean energy from solar power, which is why we formed our own captive solar power company in 2013.
For fiscal 2022, the average sales price, excluding deliveries from unconsolidated entities, was $480,000, compared to $424,000 in fiscal 2021 and $395,000 in fiscal 2020. 1 Table of Contents We operate primarily under the Lennar brand name. Our homebuilding mission is focused on the profitable development of residential communities.
For fiscal 2023, the average sales price, excluding deliveries from unconsolidated entities, was $446,000, compared to $480,000 in fiscal 2022 and $424,000 in fiscal 2021. 1 Table of Contents We operate primarily under the Lennar brand name. Our homebuilding mission is focused on the profitable development of residential communities.
Lennar Other Strategic Technology Investments We strategically invest in companies involved in technology initiatives that, among other things, help us enhance the homebuying or home ownership experience, reduce our SG&A expenses and help us stay at the forefront of homebuilding innovation. Seven of the companies in which we have strategic investments are publicly traded.
Lennar Other Strategic Technology Investments We strategically invest in companies involved in technology initiatives that, among other things, help us enhance the homebuying or home ownership experience, reduce our SG&A expenses and help us stay at the forefront of homebuilding innovation. Seven of the companies in which we have strategic investments are publicly traded. They are: • Blend Labs, Inc.
We also have investments in companies that are engaged in applying technology to improve the homebuilding industry and real estate related aspects of the financial services industry. Our homebuilding operations are the most substantial part of our business, generating $32 billion in revenues, or approximately 95% of consolidated revenues, in fiscal 2022.
We also have investments in companies that are engaged in applying technology to improve the homebuilding industry and real estate related aspects of the financial services industry. Our homebuilding operations are the most substantial part of our business, generating $33 billion in revenues, or approximately 95% of consolidated revenues, in fiscal 2023.
In fiscal year 2022, our financial services subsidiaries provided loans to 72% of our homebuyers who obtained mortgage financing in areas where we offered services. Because of the availability of mortgage loans from our financial services subsidiaries, as well as from independent mortgage lenders, we believe almost all creditworthy potential purchasers of our homes have access to financing.
In fiscal year 2023, our financial services subsidiaries provided loans to 81% of our homebuyers who obtained mortgage financing in areas where we offered services. Because of the availability of mortgage loans from our financial services subsidiaries, as well as from independent mortgage lenders, we believe almost all creditworthy potential purchasers of our homes have access to financing.
Item 1. Business Overview of Lennar Corporation We are the second largest homebuilder in the United States by deliveries, revenues and net earnings, an originator of residential and commercial mortgage loans, a provider of title insurance and closing services and a developer of multifamily rental properties.
Item 1. Business. Overview of Lennar Corporation We are one of the largest homebuilders in the United States by deliveries, revenues and net earnings, an originator of residential and commercial mortgage loans, a provider of title insurance and closing services and a developer of multifamily rental properties.
In each region where our funds offer single family homes for rent, there will be competition for residents with other owners of residential real estate (whether for-rent or for-sale).
In each region where our funds offer single-family homes for rent, there is competition for residents with other owners of residential real estate (whether for-rent or for-sale).
New home deliveries, including deliveries from unconsolidated entities, were 66,399 in fiscal 2022, compared to 59,825 in fiscal 2021 and 52,925 in fiscal 2020. We primarily sell homes in communities targeted to first-time, move-up, active adult, and luxury homebuyers. The average sales price of a Lennar home varies depending on product and geographic location.
New home deliveries, including deliveries from unconsolidated entities, were 73,087 in fiscal 2023, compared to 66,399 in fiscal 2022 and 59,825 in fiscal 2021. We primarily sell homes in communities targeted to first-time, move-up, active adult, and luxury homebuyers. The average sales price of a Lennar home varies depending on product and geographic location.
During the second half of fiscal 2022, significant increases in interest rates made our homes less affordable to many prospective buyers and led us to reduce prices or increase sales incentives in a number of our communities. Quality Service We continually strive to improve homeowner customer satisfaction throughout the pre-sale, sale, construction, closing and post-closing periods.
During fiscal 2023, significant increases in interest rates made our homes less affordable to many prospective buyers and led us to reduce prices or increase sales incentives in a number of our communities to maintain sales pace. Quality Service We continually strive to improve homeowner customer satisfaction throughout the pre-sale, sale, construction, closing and post-closing periods.
We do not recognize revenue on homes that are the subject of sales contracts until the sales are closed and title passes to the new homeowners. The backlog dollar value including unconsolidated entities at November 30, 2022 was $8.7 billion, compared to $11.4 billion at November 30, 2021.
We do not recognize revenue on homes that are the subject of sales contracts until the sales are closed and title passes to the new homeowners. The backlog dollar value including unconsolidated entities at November 30, 2023 was $6.6 billion, compared to $8.7 billion at November 30, 2022.
However, we retained the right to share in carried interest distributions from some of the funds and other investment vehicles Rialto manages. We also retained limited partner investments in several Rialto funds and investment vehicles that totaled $185.1 million as of November 30, 2022. Seasonality We historically have experienced, and expect to continue to experience, variability in quarterly results.
However, we retained the right to share in carried interest distributions from some of the funds and other investment vehicles Rialto manages. We also retained limited partner investments in several Rialto funds and investment vehicles that totaled $148.7 million as of November 30, 2023. Seasonality We historically have experienced, and expect to continue to experience, variability in quarterly results.
In 2021, we sold our SunStreet solar operations to Sunnova Energy International, a leading national residential solar company, in exchange for stock in the company. We believe Sunnova will be better able than us at maximizing 8 Table of Contents the potential of the SunStreet solar operations.
In 2021, we sold our SunStreet solar operations to Sunnova, a leading national residential solar company, in exchange for stock in the company. We believe Sunnova will be better able than us at maximizing the potential of the SunStreet solar operations.
However, the Multifamily business now manages, and owns interests in, longer-duration funds that build multifamily communities with the intention of retaining them as rental income-generating assets. At November 30, 2022, Multifamily had interests in, and was managing, four funds and 19 joint ventures.
However, the Multifamily business now manages, and owns interests in, longer-duration funds that build multifamily communities with the intention of retaining them as rental income-generating assets. At November 30, 2023, Multifamily had interests in, and was managing, three funds and 22 joint ventures.
In order to finance LMF Commercial lending activities, as of November 30, 2022, LMF Commercial had four warehouse repurchase financing agreements maturing at various dates through fiscal 2023 with commitments totaling $550 million. This is discussed in greater detail in Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7 of this Report.
In order to finance LMF Commercial lending activities, as of November 30, 2023, LMF Commercial had three warehouse repurchase financing agreements maturing at various dates from December 2023 through fiscal 2024 with commitments totaling $500 million. This is discussed in greater detail in Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7 of this Report.
We do not have collective bargaining agreements relating to any of our associates. However, we subcontract many phases of our homebuilding operations and some of the subcontractors we use have employees who are represented by labor unions.
We do not have collective bargaining agreements relating to any of our associates. However, we subcontract many phases of our homebuilding operations and some of the subcontractors we use have employees who are represented by labor unions. We believe our overall relations with our workforce are healthy.
At November 30, 2022, Upward America had purchased 4,129 homes in 103 communities across 19 metropolitan statistical areas for a total purchase price of $1.1 billion (an average price of $259,000 per home), of which 2,352 of the homes owned by Upward America had been leased to occupants.
At November 30, 2023, Upward America had purchased 4,697 homes in 103 communities across 19 metropolitan statistical areas for a total purchase price of $1.2 billion (an average price of $258,000 per home), of which 4,420 of the homes owned by Upward America had been leased to occupants.
As of November 30, 2022 and 2021, we had equity investments in 48 and 41 active homebuilding and land unconsolidated entities, respectively, in which we were participating, and our maximum recourse debt exposure related to Homebuilding unconsolidated joint ventures was $9.1 million and $5.3 million, respectively.
As of both November 30, 2023 and 2022, we had equity investments in 48 active homebuilding and land unconsolidated entities, in which we were participating, and our maximum recourse debt exposure related to Homebuilding unconsolidated joint ventures was $42.1 million and $9.1 million, respectively.
And it includes the many people who are involved in design, construction oversight, marketing and other aspects of our homebuilding business and in carrying out our other activities.
It also includes the people who head our homebuilding divisions and non-homebuilding segments. And it includes the many people who are involved in design, construction oversight, marketing and other aspects of our homebuilding business and in carrying out our other activities.
We have no active role in the management of FivePoint, except that since August 2021 our Executive Chairman has been the non-employee Executive Chairman of the Board of Directors (but not the chief executive officer) of FivePoint. As of November 30, 2022, the carrying amount of our investment in FivePoint was $382.9 million.
We have no active role in the management of FivePoint, except that since August 2021 our Executive Chairman and Co-Chief Executive Officer has been the non-employee Executive Chairman of the Board of Directors (but not the chief executive officer) of FivePoint. As of November 30, 2023, the carrying amount of our investment in FivePoint was $422.2 million.
During fiscal year 2022, we originated approximately 37,700 residential mortgage loans totaling $14.4 billion, compared to 38,100 residential mortgage loans totaling $13.2 billion during fiscal year 2021. Substantially all of the residential mortgage loans we originate are sold within a short period in the secondary mortgage market, a majority of them on a servicing released, non-recourse basis.
During fiscal year 2023, we originated approximately 47,000 residential mortgage loans totaling $17.4 billion, compared to 37,700 residential mortgage loans totaling $14.4 billion during fiscal year 2022. Substantially all of the residential mortgage loans we originate are sold within a short period in the secondary mortgage market, a majority of them on a servicing-released, non-recourse basis.
We do not believe that the ultimate resolution of these claims will have a material adverse effect on our business or financial position. During fiscal year 2022, we also locked interest rates on approximately 41,100 residential mortgage loans totaling $15.7 billion, compared to 37,900 residential mortgage loans totaling $13.3 billion during fiscal year 2021.
We do not believe that the ultimate resolution of these claims will have a material adverse effect on our business or financial position. During fiscal year 2023, we also locked interest rates on approximately 46,600 residential mortgage loans totaling $17.2 billion, compared to 41,100 residential mortgage loans totaling $15.7 billion during fiscal year 2022.
Our marketing strategy has increasingly involved advertising through digital channels including real estate listing sites, paid search, display advertising, social media and e-mail marketing, all of which drive traffic to our website, www.lennar.com.
Our marketing strategy has increasingly involved advertising through digital channels including real estate listing sites, paid search, display advertising, social media and e-mail marketing, all of which drive traffic to our website, www.lennar.com. This has allowed us to attract more qualified and knowledgeable homebuyers.
We finance our mortgage loan activities with borrowings under our financial services warehouse facilities or funds from our operating activities. At November 30, 2022, Financial Services had four warehouse residential facilities maturing at 4 Table of Contents various dates through fiscal 2023 with a total maximum borrowing capacity of $2.3 billion including an uncommitted amount of $600 million.
We finance our mortgage loan activities with borrowings under our financial services warehouse facilities or funds from our operating activities. At November 30, 2023, Financial Services had five warehouse residential facilities maturing at various dates through fiscal 2024 with a total maximum borrowing capacity of $2.5 billion including an uncommitted amount of $750 million.
Multifamily Operations Our Multifamily business has been engaged in the development of multifamily communities since 2011. Initially, the Multifamily business almost exclusively participated in shorter-duration joint ventures that built multifamily communities with the intention of selling them soon after they were built, and in most cases after they were substantially occupied.
Initially, the Multifamily business almost exclusively participated in shorter-duration joint ventures that built multifamily communities with the intention of selling them soon after they were built, and in most cases after they were substantially occupied.
Regulation The residential communities and multifamily apartment developments that we build are subject to a large variety of local, state and federal statutes, ordinances, rules and regulations relating to, among other things, zoning, construction permits or entitlements, construction materials, density, building design and property elevation, building codes and handling of waste. 7 Table of Contents These include laws requiring the use of construction materials that reduce the need for energy-consuming heating and cooling systems.
Regulation The residential communities and multifamily apartment developments that we build are subject to a large variety of local, state and federal statutes, ordinances, rules and regulations relating to, among other things, zoning, construction permits 7 Table of Contents or entitlements, construction materials, density, building design and property elevation, building codes and handling of waste.
Please see "Item 1A-Risk Factors" of this Annual Report for a further discussion of these and other risks and uncertainties which could affect our future results.
Please see Item 1A-Risk Factors and Item 7. Management's Discussion and Analysis of Financial Condition and results of Operations of this Report for a further discussion of these and other risks and uncertainties which could affect our future results.
We are also partnering with Sunnova for it to be our exclusive solar and battery storage provider, and we are working with Sunnova on the development of community solar microgrids. Human Capital Our associates are our most valuable asset, and we are committed to supporting each associate’s (i.e., employee's) unique career journey.
We are also partnering with Sunnova for it to be our exclusive residential home solar and battery storage provider, and we are working with Sunnova on the development of community solar microgrids. 8 Table of Contents Human Capital Management Diversity, Equity and Inclusion; Talent and Development Our associates (i.e., employees) are our most valuable asset, and we are committed to supporting each associate’s unique career journey.
Our Next Gen ® home provides what can be a home within a home to accommodate children or parents or can be an office from which to work remotely. • Flexible Operating Structure - Our local operating structure gives us the flexibility to make operating decisions based on local homebuilding conditions and customer preferences, while our centralized management structure provides strategic oversight for our homebuilding operations. • Digital Marketing - We are increasingly advertising homes through digital channels, which is significantly increasing the cost effectiveness of our marketing efforts. • Technology Focused - We partner with and/or invest in technology companies that are looking to improve the homebuilding and financial services industries to increase efficiencies, reduce customer acquisition costs and create a better customer experience. • Land light strategy - We are focused on reducing our years' supply of owned homesites and increasing the percentage of land we control through options or agreements, including agreements with strategic land funds and joint ventures, rather than ownership.
Our Next Gen ® home provides what can be a home within a home to accommodate children or parents or can be an office from which to work remotely. • Flexible Operating Structure - Our local operating structure gives us the flexibility to make operating decisions based on local homebuilding conditions and customer preferences, while our centralized management structure provides strategic oversight for our homebuilding operations. • Digital Marketing - We are increasingly advertising homes through digital channels, which is significantly increasing the cost effectiveness of our marketing efforts. • Dynamic pricing model - We match up unsold production as homes progress toward completion, with pricing information from our dynamic pricing model on a community-by-community and home-by-home basis. • Technology Focused - We partner with and/or invest in technology companies that are looking to improve the homebuilding and financial services industries to increase efficiencies, reduce customer acquisition costs and create a better customer experience. • Land light strategy - We are focused on reducing our years' supply of owned homesites and increasing the percentage of land we control through options or agreements, including agreements with strategic land banks and joint ventures, rather than ownership. • Even flow production - We are focused on maintaining consistent starts and sales paces in order to generate increased market share in all the markets we build in.
These laws and regulations are subject to frequent change and often increase construction costs. For example, the California Energy Commission has adopted a requirement that most newly built homes in California must have rooftop solar panels.
These include laws requiring the use of construction materials that reduce the need for energy-consuming heating and cooling systems. These laws and regulations are subject to frequent change and often increase construction costs. For example, the California Energy Commission has adopted a requirement that most newly built homes in California must have rooftop solar panels.
We use independent subcontractors for most aspects of home construction. At November 30, 2022, we were actively building and marketing homes in 1,208 c ommunities, including eight communities being constructed by unconsolidated entities.
We use independent subcontractors for most aspects of land development and home construction. At November 30, 2023, we were actively building and marketing homes in 1,260 communities, including five communities being constructed by unconsolidated entities.
At November 30, 2022, we employed 12,012 individuals of whom 9,357 were involved in the Homebuilding operations, 1,748 were involved in the Financial Services operations and 907 were involved in the Multifamily operations, compared to November 30, 2021, when we employed 10,753 individuals of whom 8,323 were involved in the Homebuilding operations, 1,688 were involved in the Financial Services operations and 742 were involved in the Multifamily operations.
At November 30, 2023, we employed 12,284 individuals of whom 9,622 were involved in the Homebuilding operations, 1,792 were involved in the Financial Services operations and 870 were involved in the Multifamily operations, compared to November 30, 2022, when we employed 12,012 individuals of whom 9,357 were involved in the Homebuilding operations, 1,748 were involved in the Financial Services operations and 907 were involved in the Multifamily operations.
Title, Insurance and Closing Services We are licensed to provide title insurance, and closing services for residential and/or commercial transactions in 40 states to our homebuyers and others. During fiscal 2022 and 2021, we closed approximately 68,800 and 67,500 real estate transactions, respectively, in 20 states.
Title, Insurance and Closing Services We are licensed to provide title insurance, and closing services for residential and/or commercial transactions in 41 states to our homebuyers and others. During fiscal 2023 and 2022, we provided closing services with regard to approximately 74,900 and 68,800 real estate transactions, respectively, in 25 and 20 states, respectively.
Marketing We offer a diversified line of homes for first-time, move-up, active adult, luxury and multi-generational homebuyers in a variety of locations ranging from urban infill communities to suburban golf course communities.
We finance construction and land development activities primarily with cash generated from operations and historically from proceeds of unsecured corporate debt. Marketing We offer a diversified line of homes for first-time, move-up, active adult, luxury and multi-generational homebuyers in a variety of locations ranging from urban infill communities to suburban golf course communities.
We wish to caution readers that certain important factors may have affected and could in the future affect our actual results and could cause actual results to differ significantly from what is anticipated by our forward-looking statements.
These forward-looking statements reflect our current views about future events and are subject to risks, uncertainties and assumptions. We wish to caution readers that certain important factors may have affected and could in the future affect our 9 Table of Contents actual results and could cause actual results to differ significantly from what is anticipated by our forward-looking statements.
In some instances, purchasers are permitted to cancel sales contracts if they fail to qualify for financing or under certain other circumstances. We experienced a cancellation rate of 17% in 2022 and 10% in 2021, but in the third and fourth quarters of fiscal 2022, our cancellation rate increased to 21% and 26% respectively.
In some instances, purchasers are permitted to cancel sales contracts if they fail to qualify for financing or under certain other circumstances. We experienced a cancellation rate of 16% in 2023 and 17% in 2022.
Each of the investments listed above, except Doma, is reflected in our financial statements at market value, with changes to the fair values of those investments generating gains or losses on our quarterly financial statements. Doma is accounted for using the equity method.
("Sunnova"), a leading national residential solar company, to which during 2021, we sold our solar power business in return for equity. Each of the investments listed above, except Doma, is reflected in our financial statements at market value, with changes to the fair values of those investments generating gains or losses on our quarterly financial statements.
Initially all the homes purchased by Upward America were purchased from Lennar, but subsequently, Upward America began purchasing homes from multiple homebuilders. At November 30, 2022, approximately 6% of the homes owned by Upward America were built by homebuilders other than Lennar. The single family rental business is expected to be one of the businesses included in our proposed spin-off.
Initially all the homes purchased by Upward America were purchased from Lennar, but subsequently, Upward America began purchasing homes from multiple homebuilders. At both November 30, 2023 and 2022, approximately 6% of the homes owned by Upward America were built by homebuilders other than Lennar.
We have policies that prohibit us from discriminating in employment opportunities on the basis of race or gender, and we take active steps to offer employment opportunities to under-represented ethnic groups. NYSE Certification On April 26, 2022, we submitted our Annual CEO Certification to the New York Stock Exchange ("NYSE") in accordance with NYSE's listing standards.
We have policies that prohibit us from discriminating in employment opportunities on the basis of race or gender, and we take active steps to offer employment opportunities to members of under-represented ethnic groups.
As of November 30, 2022, institutional investors had committed $1.6 billion to Upward America, part of which was used to reduce an initial commitment Lennar had made from $225 million to $125 million. Proceeds of commitments by other investors may be used to redeem more of Lennar’s ownership, but Lennar has agreed not to reduce its ownership below $50 million.
As of November 30, 2023, institutional investors and Lennar had committed $1.6 billion to Upward America, part of which was used to reduce an initial commitment Lennar had made from $225 million to $125 million.
These environmental laws include such subjects as storm water and surface water management, soil, groundwater and wetlands protection, subsurface conditions and air quality protection and enhancement. Environmental laws may result in delays, may cause us to incur substantial compliance and other costs and may prohibit or severely restrict homebuilding activity in environmentally sensitive regions or areas.
Environmental laws may result in delays in developing properties, may cause us to incur substantial compliance and other costs and may prohibit or severely restrict homebuilding activity in environmentally sensitive regions or areas.
We believe having an inclusive work environment, where everyone has a sense of belonging, not only drives engagement but fosters innovation, which is critical to driving growth. Our “Everyone’s Included” mantra anchors our unique culture. Our success starts and ends with having the best talent, and, as a result, we are focused on attracting, developing, engaging and retaining our associates.
We were built on a culture of inclusivity and a conscious focus on the associate experience, bringing together the best talent to drive success as part of our “Lennar family.” We believe having an inclusive work environment, where everyone has a sense of belonging, not only drives engagement but fosters innovation, which is critical to driving growth.
This has allowed us to attract more qualified and knowledgeable homebuyers and has helped us reduce our selling, general and administrative expenses as a percentage of home sales revenues. However, we also continue to advertise through more traditional media on a limited basis, including newspapers, other local and regional publications, radio and on billboards where appropriate.
However, we also continue to advertise through more traditional media on a limited basis, including newspapers, other local and regional publications, radio and on billboards where appropriate.
This had the effect of reducing the number of homes subject to sales contracts at any particular time. Homebuilding Investments in Unconsolidated Entities We create and participate in joint ventures that acquire and develop land for our homebuilding operations, for sale to third parties or for use in the ventures' own homebuilding operations.
We expect that a significant portion of all homes currently in backlog will be delivered in fiscal year 2024. Homebuilding Investments in Unconsolidated Entities We create and participate in joint ventures that acquire and develop land for our homebuilding operations, for sale to third parties or for use in the ventures' own homebuilding operations.
At November 30, 2022, the book value (including those recorded at fair value) of our investment in strategic technology investments was $522.5 million and is included in our Lennar Other segment. For additional information about our investments in strategic technology investments, see Management's Discussion and Analysis of Financial Condition and Results of Operations in Item 7 of this Report.
Doma is accounted for using the equity method. At November 30, 2023, the book value of our investment in strategic technology investments (including those recorded at fair value) was $424.7 million and is included in our Lennar Other segment.
In addition, it has carried interests in the funds or ventures it manages, and receives distributions with regard to those carried interests. Multifamily is expected to be one of the businesses included in our proposed spin-off.
Multifamily has co-investments in all the funds and ventures it manages, and receives returns on these investments. In addition, it has carried interests in the funds or ventures it manages, and receives distributions with regard to those carried interests.
As of November 30, 2022, funds and ventures managed by Multifamily had a pipeline of 64 potential future developments, which were owned, under contract or subject to letters of intent, totaling approximately $9.1 billion in anticipated development costs across several states. Multifamily has co-investments in all the funds and ventures it manages, and receives returns on these investments.
Most communities offer residents a mix of studio, one, two, and three-bedroom homes. 5 Table of Contents As of November 30, 2023, funds and ventures managed by Multifamily had a pipeline of 48 potential future developments, which were owned, under contract or subject to letters of intent, totaling approximately $6.2 billion in anticipated development costs across several states.
For the last several years, we have been reducing our reliance on land we own and increasing our access to land through options and joint ventures. At November 30, 2022, 63% of our total homesites were controlled through options and joint ventures compared to 59% at November 30, 2021.
For the last several years, we have been reducing our reliance on land we own and increasing our access to land through options and joint ventures, most significantly through our use of land banks which is a critical part of our operating strategy.
We caution you that the information on our website is not part of this or any other report we file with, or furnish to, the SEC. Special Note Regarding Forward-Looking Statements This annual report on Form 10-K contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995.
We caution you that the information on our website is not incorporated herein and is not a part of this or any other report we file with, or furnish to, the SEC.
These statements concern expectations, beliefs, projections, plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. These forward-looking statements typically include the words “anticipate,” “believe,” “consider,” “estimate,” “expect,” “forecast,” “intend,” “objective,” “plan,” “predict,” “projection,” “seek,” “strategy,” “target,” “will” or other words of similar meaning.
These forward-looking statements typically include the words “anticipate,” “believe,” “consider,” “estimate,” “expect,” “forecast,” “intend,” “objective,” “plan,” “predict,” “projection,” “seek,” “strategy,” “target,” “will”, "may" or other words of similar meaning. Some of them are opinions formed based upon general observations, anecdotal evidence and industry experience, but that are not supported by specific investigation or analysis.
That includes senior executives who are responsible for our operational strategies and for approving significant land acquisitions and other major investments we make. It also includes the people who head our homebuilding divisions and non-homebuilding segments.
Employees and Labor Relations Although we subcontract the land development and construction aspects of our homebuilding activities, we are highly dependent on our skilled employees for critical aspects of what we do. That includes senior executives who are responsible for our operational strategies and for approving significant land acquisitions and other major investments we make.
This was a decrease from the 1,263 communities, including four communities being constructed by unconsolidated entities, in which we were actively building and marketing homes at November 30, 2021. The number of homes we built in 2022 was limited by shortages of both construction materials and skilled labor.
This was an increase from the 1,208 communities, including eight communities being constructed by unconsolidated entities, in which we were actively building and marketing homes at November 30, 2022. At November 30, 2023 and 2022, we had about 1,200 and 900 completed unsold homes, respectively.
From inception through November 30, 2022, the Multifamily business has capitalized and developed 116 multifamily residential communities with approximately 34,900 rental units across 20 states throughout the United States.
From inception through November 30, 2023, the Multifamily business has capitalized and developed 119 multifamily residential communities with approximately 35,900 rental units across 20 states throughout the United States. The communities developed by the Multifamily business include a diversified mix of conventional garden, mid-rise and high-rise multifamily properties in urban and suburban locations near major employment centers.
During fiscal 2020 and continuing through fiscal 2021, as a result of the COVID-19 pandemic, we implemented additional safety protocols to protect our associates, trade partners and homebuyers, including protocols regarding social distancing, daily health checks and working remotely. Our experienced teams adapted quickly to the changes and have managed our business successfully during this challenging time.
We hired a full-time Chief Medical Officer in early 2020 at the beginning of the COVID-19 pandemic. Our experienced teams adapted quickly to changes in safety protocols to protect our associates, trade partners and homebuyers, and we have continued these protocols even after the COVID-19 pandemic receded.
We are also committed to worker safety and regulatory compliance. Our Board of Directors and its Audit Committee reviews the results of OSHA visits and other safety related information. Although we subcontract the land development and construction aspects of our homebuilding activities, we are highly dependent on our skilled employees for critical aspects of what we do.
Our Board of Directors and its Audit Committee regularly review the results of OSHA visits and other safety-related information to ensure that we are successfully managing and improving our safety program.
In 2020 and 2021, the COVID-19 pandemic slowed down the approval process in many government offices, which in many instances delayed our being able to begin constructing homes in particular communities. Residential homebuilding and apartment development are also subject to a variety of local, state and federal statutes, ordinances, rules and regulations concerning the protection of health and the environment.
Residential homebuilding and apartment development are also subject to a variety of local, state and federal statutes, ordinances, rules and regulations concerning the protection of health and the environment. These environmental laws include such subjects as storm water and surface water management, soil, groundwater and wetlands protection, subsurface conditions and air quality protection and enhancement.
Removed
Subject to market conditions, we intend to spin off our Multifamily and single family home for rent asset management businesses, together with some investment assets, by transferring them to a newly formed subsidiary, Quarterra Group, Inc. ("Quarterra"), and distributing the stock of that subsidiary to our stockholders. That will make us more of a pure homebuilding and financial services company.
Added
At November 30, 2023, 76% of our total homesites were controlled through options with land banks, land sellers and joint ventures compared to 69% at November 30, 2022.
Removed
Also, weaknesses in some markets in the second half of 2022 led us to decrease starts to match sales pace so that we would not have a build up of inventory. We ended the year with about 900 completed unsold homes.
Added
Most shortages were eliminated due to the supply chain environment catching up to homebuilder demand as well as Lennar’s continued effort to work with our suppliers and manufacturers on the volume and specific products needed to build homes. We generally do not own heavy construction equipment.
Removed
We generally do not own heavy construction equipment. We finance construction and land development activities primarily with cash generated from operations and historically from proceeds of unsecured corporate debt.
Added
During fiscal 2023, even with shifts in macroeconomic factors and adjusting to the recent inflationary environment, we were able to develop, enhance, use, and improve the Lennar machine. Our sales, marketing, and dynamic pricing machine is quickly becoming an advanced digital engine that has materially benefited from aggressive, focused use and engagement while the market was most difficult.
Removed
We expect that a significant portion of all homes currently in backlog will be delivered in fiscal year 2023.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

66 edited+20 added−9 removed101 unchanged
Biggest changeOur success depends to a significant extent upon the performance and active participation of our senior management, many of whom have been with us for 20 or more years. If we were to lose members of our senior management, we might not be able to find appropriate replacements on a timely basis and our operations could be negatively affected.
Biggest changeThe loss of the services of members of our senior management or a significant number of our operating employees could negatively affect our business. Our success depends to a significant extent upon the performance and active participation of our senior management, many of whom have been with us for 20 or more years.
In some cases, however, a homebuyer may cancel the agreement of sale and receive a complete or partial refund of the deposit for reasons such as state and local laws, the homebuyer’s inability to obtain mortgage financing, their inability to sell their current home or our inability to complete and deliver the home within the specified time.
In some cases, however, a homebuyer may cancel the agreement of sale and receive a complete or partial refund of the deposit for reasons such as state and local laws, the homebuyer’s inability to obtain mortgage financing, the homebuyer's inability to sell their current home or our inability to complete and deliver the home within the specified time.
While, to date, we have not had a significant cybersecurity breach or attack that had a material impact on our business or results of operations, if we were to be subject to a material successful cyber intrusion, that could result in remediation or service restoration costs, increased cyber protection costs, lost revenues or loss of customers, litigation or regulatory actions by governmental authorities, increased insurance premiums, reputational damage and damage to our competitiveness, our stock price and our long-term stockholder value.
While, to date, we have not had a cybersecurity breach or attack that had a material impact on our business or results of operations, if we were to be subject to a material successful cyber-intrusion, that could result in remediation or service restoration costs, increased cyber protection costs, lost revenues or loss of customers, litigation or regulatory actions by governmental authorities, increased insurance premiums, reputational damage and damage to our competitiveness, our stock price and our long-term stockholder value.
Our use of capital markets debt to help support our operations exposes us to a number of risks, including: • We may be more vulnerable to general adverse economic and homebuilding industry conditions; • We may have to pay higher interest rates upon refinancing indebtedness as a result of the increase in interest rates, thereby reducing our earnings and cash flows; • We may find it difficult, or may be unable, to obtain additional financing to fund future working capital, capital expenditures and other general corporate requirements that would be in our best long-term interests; 14 Table of Contents • We may be required to dedicate a substantial portion of our cash flow from operations to the payment of principal and interest on our debt, reducing the cash flow available to fund operations and investments and reducing the amount we can return to our stockholders; • We may have reduced flexibility in planning for, or reacting to, changes in our businesses or the industries in which they are conducted; • We may have a competitive disadvantage relative to other companies in our industry, if any, that are less leveraged; and • We may be required to sell debt or equity securities or sell some of our core assets, possibly on unfavorable terms, in order to meet payment obligations.
Our use of capital markets debt to help support our operations exposes us to a number of risks, including: • We may be more vulnerable to general adverse economic and homebuilding industry conditions; • We may have to pay higher interest rates upon refinancing indebtedness as a result of the increase in market interest rates, thereby reducing our earnings and cash flows; • We may find it difficult, or may be unable, to obtain additional financing to fund future working capital, capital expenditures and other general corporate requirements that would be in our best long-term interests; • We may be required to dedicate a substantial portion of our cash flow from operations to the payment of principal and interest on our debt, reducing the cash flow available to fund operations and investments and reducing the amount we can return to our stockholders; • We may have reduced flexibility in planning for, or reacting to, changes in our businesses or the industries in which they are conducted; • We may have a competitive disadvantage relative to other companies in our industry, if any, that are less leveraged; and • We may be required to sell debt or equity securities or sell some of our core assets, possibly on unfavorable terms, in order to meet debt payment obligations.
We usually have received a deposit from our home buyer for each home reflected in our backlog, and generally we have the right to retain the deposit if the homebuyer does not complete the purchase.
We usually have received a deposit from our homebuyer for each home reflected in our backlog, and generally we have the right to retain the deposit if the homebuyer does not complete the purchase.
Our business requires us to finance much of the cost of developing our residential communities. One of the ways we do this is with bank borrowings. At November 30, 2022, we had a $2.6 billion revolving credit facility with a group of banks (the "Credit Facility"), which had an accordion feature that could increase it to $3 billion.
Our business requires us to finance much of the cost of developing our residential communities. One of the ways we do this is with bank borrowings. At November 30, 2023, we had a $2.6 billion revolving credit facility with a group of banks (the "Credit Facility"), which had an accordion feature that could increase it to $3 billion.
Our quarterly results of operations may continue to fluctuate in the future as a result of a variety of factors, including, among others, seasonal homebuying patterns, the timing of home closings and land sales and weather-related problems. 18 Table of Contents We could suffer significant losses if there are reductions in the market value of our investments in publicly traded companies.
Our quarterly results of operations may continue to fluctuate in the future as a result of a variety of factors, including, among others, seasonal homebuying patterns, the timing of home closings and land sales and weather-related problems. We could suffer significant losses if there are reductions in the market value of our investments in publicly traded companies.
Disruptions in the mortgage markets and increased government regulation could adversely affect the ability of potential homebuyers to obtain financing for home purchases, making it difficult for them to purchase our homes.
Disruptions in the mortgage markets or increased government regulation could adversely affect the ability of potential homebuyers to obtain financing for home purchases, making it difficult for them to purchase our homes.
If any of those joint ventures are unable to do this, we could be required to provide at 15 Table of Contents least a portion of the funds the joint ventures need to be able to repay the borrowings and to finance the activities for which they were incurred, which could adversely impact our financial position.
If any of those joint ventures are unable to do this, we could be required to provide at least a portion of the funds the joint ventures need to be able to repay the borrowings and to finance the activities for which they were incurred, which could adversely impact our financial position.
Although we expect all of our associates (i.e., employees), officers and directors to comply at all times with all applicable laws, rules and regulations, there may be instances in which subcontractors or others through whom we do business engage in practices that do not comply with applicable laws, regulations or governmental guidelines.
Although we expect all of our associates, officers and directors to comply at all times with all applicable laws, rules and regulations, there may be instances in which subcontractors or others through whom we do business engage in practices that do not comply with applicable laws, regulations or governmental guidelines.
However, various governmental agencies have sought, and in the future may seek, to hold contract parties like us responsible for violations of wage and hour laws, workers’ compensation and other work-related laws by firms whose employees are performing contracted for services.
However, various governmental agencies have sought, and in the future may seek, to hold contract parties like us responsible for violations of 17 Table of Contents wage and hour laws, workers’ compensation and other work-related laws by firms whose employees are performing contracted for services.
If the rate at which we sell and deliver homes slows, or if we delay the opening of new home communities, we may incur increased pre-construction costs and it may take longer for us to recover our costs. Increased interest rates could increase the cost of the homes we build.
If the rate at which we sell and deliver homes slows, or if we delay the opening of new home communities, we may incur increased pre-construction costs and it may take longer for us to recover those costs. Increased interest rates could increase our cost of building homes.
Stuart Miller, our Executive Chairman, through family and personal holdings of Class B, and to a lesser extent Class A, common stock, has the power to cast approximately 36% of the votes that can be cast by the holders of all our outstanding Class A and Class B common stock combined. This gives Mr.
Stuart Miller, our Executive Chairman and Co-Chief Executive Officer, through family and personal holdings of Class B, and to a lesser extent Class A, common stock, has the power to cast approximately 36% of the votes that can be cast by the holders of all our outstanding Class A and Class B common stock combined. This gives Mr.
With the weakening of the housing market, we have experienced an increase in cancellation rates. If there is a further downturn in the housing market, or if mortgage financing becomes less available than it currently is, more homebuyers may cancel their agreements of sale with us, which would have an adverse effect on our business and results of operations.
With the increase in interest rates, we have experienced an increase in cancellation rates. If there is a weakening of the housing market, or if mortgage financing becomes less available or more expensive than it currently is, more homebuyers may cancel their agreements of sale with us, which would have an adverse effect on our business and results of operations.
These competitive conditions could negatively impact the ability of the funds and ventures we manage to find renters for the apartments they are building or the prices for which those apartments can be rented. 11 Table of Contents Single Family Home Rentals .
These competitive conditions could negatively impact the ability of the funds and ventures we manage to find renters for the apartments they are building or the prices for which those apartments can be rented. Single-Family Home Rentals .
We rely on subcontractors to perform the actual construction of our homes, and in many cases, to select and obtain building materials. Despite our detailed specifications and quality control procedures, in some cases, subcontractors may use improper construction processes or defective materials.
We rely on subcontractors to perform the actual construction of our homes, and in many cases, to select and obtain building materials. Despite our detailed specifications and quality control procedures, in some cases, subcontractors may use 12 Table of Contents improper construction processes or defective materials.
Our obligation to comply with the laws and regulations under which we operate, and our need to ensure that our associates, subcontractors and other agents comply with these laws and regulations, could result in delays in construction and land development, cause us to incur substantial costs and prohibit or restrict land development and homebuilding activity in 16 Table of Contents certain areas in which we operate.
Our obligation to comply with the laws and regulations under which we operate, and our need to ensure that our associates, subcontractors and other agents comply with these laws and regulations, could result in delays in construction and land development, cause us to incur substantial costs and prohibit or restrict land development and homebuilding activity in certain areas in which we operate.
We often are required to provide surety bonds to secure our performance of obligations under construction contracts, development agreements and other arrangements. At November 30, 2022, we had outstanding surety bonds of $4.1 billion including performance surety bonds related to site improvements at various projects (including certain projects of our joint ventures) and financial surety bonds.
We often are required to provide surety bonds to secure our performance of obligations under construction contracts, development agreements and other arrangements. At November 30, 2023, we had outstanding surety bonds of $4.5 billion including performance surety bonds related to site improvements at various projects (including certain projects of our joint ventures) and financial surety bonds.
However, regardless of the steps we take after we learn of practices that do not comply with applicable laws or regulations, we can in some instances be subject to fines or other governmental penalties, and our reputation can be injured, due to the practices having taken place.
However, regardless of the steps we take after we learn of practices that do not comply with applicable laws or regulations, we can in certain cases be subject to fines or other governmental penalties, and our reputation can be injured, due to the practices having taken place.
However, if in the future we have a need for significant borrowings under the Credit Facility and 12 Table of Contents interest rates continue to increase, that would increase the cost of the homes we build, which either would make those homes more expensive for homebuyers, which is likely to reduce demand, or would lower our operating margins, or both.
However, if in the future we have a need for significant borrowings under our Credit Facility and interest rates continue be high, that would increase the cost of the homes we build, which either would make those homes more expensive for homebuyers, which is likely to reduce demand, or would lower our operating margins, or both.
Government mandates, standards or regulations intended to reduce greenhouse gas emissions or projected climate change impacts have resulted, and are likely to continue to result, in restrictions on land development in certain areas and increased energy, transportation and raw material costs.
Government mandates, standards or regulations intended to reduce greenhouse gas emissions or projected climate change impacts have resulted, and are likely to continue to result, in restrictions on land development in certain areas and increased energy, transportation and raw 19 Table of Contents material costs.
Any failure in health and safety performance may result in penalties for non-compliance with relevant regulatory requirements, may result in our subcontractors having difficulty attracting the workers they need and may result in a negative impact to our reputation. Products supplied to us and work done by subcontractors can expose us to risks that could adversely affect our business.
Failures in health and safety performance on our worksites may result in penalties for non-compliance with relevant regulatory requirements in our subcontractors having difficulty attracting the workers they need and in a negative impact to our reputation. Products supplied to us and work done by subcontractors can expose us to risks that could adversely affect our business.
It is possible that a continued downturn could result in a further decline in demand for new homes with resulting write downs in the carrying value of our land inventory and write offs of costs of land purchase options we decide not to exercise. 10 Table of Contents Supply shortages and inflation could adversely affect our profitability.
It is possible that a continued downturn could result in a further decline in demand for new homes with resulting write downs in the carrying value of our land inventory and write offs of costs of land purchase options we decide not to exercise. Inflation could adversely affect our profitability.
Therefore, a decrease in the demand for our homes or an increase in cash used by home buyers would adversely affect the revenues of this aspect of our business.
Therefore, a decrease in the demand for our homes or an increase in cash used by homebuyers would adversely affect the revenues of this aspect of our business.
However, if the amounts we are required to pay as a result of claims against us substantially exceed the sums anticipated by our reserves, the need to pay those amounts could have an adverse effect on our results of operations for the periods when we are required to make the payments.
However, if the amounts we are required to pay as a result of claims against us substantially exceed the sums anticipated by our reserves, the need to pay those amounts could have an adverse effect on our results of operations for the periods when we are required to make the payments. We could be subject to unexpected tax liabilities.
Among other things, we have often relied on proceeds of debt issuances to pay the principal of existing senior notes when they mature.
Among other things, we have often relied on proceeds of debt issuances to pay the principal of existing 15 Table of Contents senior notes when they mature.
We have a substantial level of indebtedness, which may have an adverse effect on our business or limit our ability to take advantage of business, strategic or financing opportunities. As of November 30, 2022, we had outstanding senior notes which we had sold into the capital markets over a number of years totaling $3.6 billion.
We have a substantial level of indebtedness, which may have an adverse effect on our business or limit our ability to take advantage of business, strategic or financing opportunities. As of November 30, 2023, we had outstanding senior notes which we had sold into the capital markets over a number of years totaling $2.5 billion.
The indentures governing our senior notes do not restrict our incurrence of future secured or unsecured debt, and the agreement governing our Credit Facility allows us to incur a substantial amount of future unsecured debt. We reduced our outstanding senior notes during fiscal 2022 by $575 million, but we still have a significant amount outstanding.
The indentures governing our senior notes do not restrict our incurrence of future secured or unsecured debt, and the agreement governing our Credit Facility allows us to incur a substantial amount of future unsecured debt. We reduced our outstanding senior notes during fiscal 2023 by $1.1 billion, but we still have a significant amount outstanding.
During 2023, we will have to replace or renew a total of $2.85 billion of warehouse lines used by Financial Services, including LMF Commercial, as they mature. We expect these facilities to be renewed or replaced with other facilities when they mature.
During 2024, we will have to replace or renew a total of $3.7 billion of warehouse lines used by Financial Services, including LMF Commercial, as they mature. We expect these facilities to be renewed or replaced with other facilities when they mature.
Information technology failures and data security breaches could harm our business. We rely extensively on information technology ("IT") systems, including Internet sites, data hosting facilities and other hardware and software platforms, some of which are hosted by third parties, to assist in conducting our businesses.
We rely extensively on information technology ("IT") systems, including Internet sites, data hosting facilities and other hardware and software platforms, some of which are hosted by third parties, to assist in conducting our businesses.
Our Financial Services segment can be adversely affected by reduced demand for our homes. Approximately 99% of the residential mortgage loans made by our Financial Services segment in 2022 were made to buyers of homes we built.
Our Financial Services segment can be adversely affected by reduced demand for our homes. 100% of the residential mortgage loans made by our Financial Services segment in 2023 were made to buyers of homes we built.
For a number of years, a substantial portion of our access to capital has been through the issuance of senior notes, of which we have approximately $3.6 billion outstanding, net of debt issuance costs, as of November 30, 2022.
For a number of years, a substantial portion of our access to capital has been through the issuance of senior notes, of which we have approximately $2.5 billion outstanding, net of debt issuance costs, as of November 30, 2023.
Adverse publicity or negative commentary from media outlets could damage our reputation and reduce the demand for our homes, which would adversely affect our business. Our business strategies for our homebuilding and mortgage finance businesses may not increase our value.
Adverse publicity or negative commentary from media outlets could damage our reputation and reduce the demand for our homes, which would adversely affect our business. Our business strategies for our homebuilding and mortgage finance businesses may not increase our value. Our strategies for our core homebuilding and mortgage finance businesses, and any related initiatives or actions, may not be successful.
We also had warehouse borrowing facilities totaling$2.85 billion to support our residential and commercial mortgage lending activities. The interest on borrowings under the Credit Facility is at rates based on prevailing short term rates from time to time. In 2022, the Federal Reserve steadily raised benchmark interest rates and said it intends to continue doing so in 2023.
We also had warehouse borrowing facilities totaling $3.7 billion to support our residential and commercial mortgage lending activities. The interest on borrowings under the Credit Facility is at rates based on prevailing short-term rates from time to time. In 2022 and 2023, the Federal Reserve steadily raised benchmark interest rates.
If we became unable to sell residential mortgage loans into the secondary mortgage market or directly to Fannie Mae, Freddie Mac and Ginnie Mae, we would have to either curtail our origination of residential mortgage loans, which among other things, could significantly reduce our ability to sell homes, or commit our own funds to long term investments in mortgage loans, which, in addition to requiring us to deploy substantial amounts of our own funds, could delay the time when we recognize revenues from home sales on our statements of operations.
If we became unable to sell residential mortgage loans into the secondary mortgage market or directly to Fannie Mae, Freddie Mac and Ginnie Mae, we would have to either curtail our origination of residential mortgage loans, which among other things, could significantly reduce our ability to sell homes, or commit our own funds to long-term investments in mortgage loans, which, in addition to requiring us to deploy substantial amounts of our own funds, could delay the time when we recognize revenues from home sales on our statements of operations. 14 Table of Contents We may be liable for certain limited representations and warranties we make in connection with the sale of loans.
Our homebuilding business is seasonal in nature and generally reflects higher levels of new home order activity in our second fiscal quarter and increased deliveries in the second half of our fiscal year. However, a variety of factors can change seasonal patterns.
We experience variability in our operating results on a quarterly basis. Our homebuilding business is seasonal in nature and generally reflects higher levels of new home order activity in our second fiscal quarter and increased deliveries in the second half of our fiscal year. However, a variety of factors can change seasonal patterns.
Demand for our homes is dependent on a variety of macroeconomic factors, such as employment levels, interest rates, changes in stock market valuations, consumer confidence, housing demand, availability of financing for home buyers, availability and prices of new homes compared to existing inventory, and demographic trends.
Demand for our homes is dependent on a variety of macroeconomic factors, such as employment levels, interest rates, changes in stock market valuations, consumer confidence, housing demand, availability and cost of financing for homebuyers, availability and prices of new homes compared to those of previously occupied homes, and demographic trends.
A significant theft, loss or fraudulent use of the personally identifiable information we maintain, or of our data, by cyber-criminals or otherwise could adversely impact our reputation and could result in significant costs, fines and litigation. International activities subject us to risks inherent in international operations.
The U.S. regulatory environment surrounding information security and privacy is increasingly demanding. A significant theft, loss or fraudulent use of the personally identifiable information we maintain, or of our data, by cyber-criminals or otherwise could adversely impact our reputation and could result in significant costs, fines and litigation. International activities subject us to risks inherent in international operations.
There is a substantial possibility that substituting an alternate source of liquidity would 13 Table of Contents increase mortgage interest rates, which would increase the buyers' effective costs of paying for the homes we sell, and therefore could reduce demand for our homes and adversely affect our results of operations.
There is a substantial possibility that substituting an alternate source of liquidity would increase mortgage interest rates, which would increase the buyers' effective costs of paying for the homes we sell, and therefore could reduce demand for our homes and adversely affect our results of operations. Changes in tax laws could increase the cost of owning a home.
Should suitable lots or land become less available, the number of homes we could build and sell could be reduced, and the cost of land could be increased, perhaps substantially, which could adversely impact our results of operations. We could be hurt by refusals of owners of land to honor options or contracts to sell the land to us.
Should suitable lots or land become less available, the number of homes we could build and sell could be reduced, and the cost of land could be increased, perhaps substantially, which could adversely impact our results of operations.
Miller may be able to cause our stockholders to approve actions that are contrary to many of our other stockholders' desires. The trading price of our Class B common stock has been substantially lower than that of our Class A common stock.
Miller may be able to cause our stockholders to approve actions that are contrary to many of our other stockholders' desires. Our Class B common stock is less liquid than and has traded at a price substantially lower than that of our Class A common stock.
Failure to maintain the security of personally identifiable information could adversely affect us . In connection with our business we collect and retain personally identifiable information (e.g., information regarding our customers, suppliers and employees), and there is an expectation that we will adequately protect that information. The U.S. regulatory environment surrounding information security and privacy is increasingly demanding.
Failure to maintain the security of personally identifiable information could adversely affect us . In connection with our business we collect and retain personally identifiable information (e.g., information regarding our customers, suppliers and employees), and our customers, suppliers and employees have an expectation that we will adequately protect that information.
Also, we have to be aware of tax issues involved in doing business outside the United States or with people who are not residents of the United States, both under U.S. tax laws and under the tax laws of the countries in which we do business. We experience variability in our operating results on a quarterly basis.
Also, we have to be aware of tax issues involved in doing business outside the United States or with people who are not residents of the United States, both under U.S. tax laws and under the tax laws of the countries in which we do business or in which the non-residents reside.
Moreover, in an inflationary environment, our cost of capital, labor and materials can increase and the purchasing power of our cash resources can decline, which can have an adverse impact on our business or financial results. During fiscal 2022, we experienced increased costs of materials and labor caused both by supply shortages and inflation.
In addition, in an inflationary environment, our cost of capital, labor and materials can increase and the purchasing power of our cash resources can decline, which can have an adverse impact on our business or financial results. During fiscal 2023, we experienced an increase in the inflation rate.
At November 30, 2022, we had no borrowings under the Credit Facility.
At November 30, 2023, we had no borrowings under our Credit Facility.
Governmental rulings that make us responsible for labor practices by our subcontractors could create substantial exposures for us in situations that are not within our control. Risk Related to Planned Spin-Off Our planned spin-off of some of our businesses may not achieve its goals.
Governmental rulings that make us responsible for labor practices by our subcontractors could create substantial exposures for us in situations that are not within our control. Risk Related to Planned Spin-Off Our previously announced spin-off of some of our businesses may not occur within any particular time period or at all.
We have made investments in companies that are engaged in applying technology to improve the homebuilding industry and real estate related aspects of the financial services industry. Our investments in Opendoor Technologies, Inc. ("Opendoor"), Sonder Holdings Inc., Sunnova, Hippo Holdings, Inc. ("Hippo"), SmartRent, Inc. ("SmartRent") and Blend Labs, Inc.
We have made investments in companies that are engaged in applying technology to improve the homebuilding industry and real estate related aspects of the financial services industry.
In an inflationary environment, we may be precluded from raising home prices enough to keep up with the rate of inflation, which could reduce our profit margins.
Weak demand may preclude us from raising home prices enough to keep up with the rate of inflation, which could reduce our profit margins.
Many of our homebuilding operations are conducted in areas that are subject to natural disasters, including hurricanes, earthquakes, droughts, floods, wildfires and severe weather.
Natural disasters and severe weather conditions could delay deliveries and increase costs of new homes in affected areas, which could harm our sales and results of operations. Many of our homebuilding operations are conducted in areas that are subject to natural disasters, including hurricanes, earthquakes, droughts, floods, wildfires and severe weather.
However, cyber intrusion efforts are becoming increasingly sophisticated, and it is possible that the controls we have installed could at some time be breached in a material respect. Further, there has been a significant increase in work from remote locations since the start of the COVID-19 pandemic.
However, cyber intrusion efforts are becoming increasingly sophisticated, and it is possible that the controls we have installed could at some time be breached in a material respect.
Changes in global or regional environmental conditions and governmental actions in response to such changes may adversely affect us by increasing the costs of or restricting our planned or future growth activities.
As a result, the Company’s net earnings could be significantly affected by mark-to-market gains or losses on the Company’s investments. Changes in global or regional environmental conditions and governmental actions in response to such changes may adversely affect us by increasing the costs of or restricting our planned or future growth activities.
However, if landowners who are parties to the options or contracts were to refuse to honor them, we could lose access to land at the time we want to use it in our homebuilding activities. The loss of the services of members of our senior management or a significant number of our operating employees could negatively affect our business.
However, if landowners who are parties to the options or contracts, possibly including land banks, were to refuse to honor them, we could lose access to land at the time we want to use it in our homebuilding activities.
Homebuilders compete not only for homebuyers, but also for desirable land, financing, raw materials, skilled management and labor resources. We compete in each of our markets with numerous national, regional and local homebuilders. We also compete with sellers of existing homes, including foreclosed homes, and with rental housing.
We compete in each of our markets with numerous national, regional and local homebuilders. We also compete with sellers of existing homes, including foreclosed homes, and with rental housing.
We are constantly purchasing land, or entering into arrangements to purchase land, for use in our homebuilding operations. The value of land suitable for residential development fluctuates depending on local and national market conditions and other factors that affect demand for new homes.
The value of land suitable for residential development fluctuates depending on local and national market conditions and other factors that affect demand for new homes.
The limited liquidity could make it difficult for a holder of even a relatively small number of shares of our Class B common stock to dispose of the stock without materially reducing the trading price of the Class B common stock. 17 Table of Contents Other Risks We have substantial investments in real estate related funds and businesses in which we are a minority investor.
The limited liquidity could make it difficult for a holder of even a relatively small number of shares of our Class B common stock to dispose of the stock without materially reducing the trading price of the Class B common stock.
It is possible that the land lighter or other strategies will reduce, rather than increase, the value and profitability of our core businesses. A continuing downturn in the homebuilding market could adversely affect our operations. During fiscal 2022, the housing market weakened in response to the Federal Reserve’s aggressive increase in interest rates in an effort to curtail inflation.
It is 10 Table of Contents possible that the land lighter or other strategies will reduce, rather than increase, the value and profitability of our core businesses. The market for new homes is cyclical, and a continuing downturn in the homebuilding market could adversely affect our operations.
Governmental regulations regarding land use and environmental matters could increase the cost and limit the availability of our development and homebuilding projects and adversely affect our business or financial results.
Our businesses could be adversely affected by changes in laws, regulations, policies or interpretations or by our inability to comply with them without making significant changes in our businesses. 16 Table of Contents Governmental regulations regarding land use and environmental matters could increase the cost and limit the availability of our development and homebuilding projects and adversely affect our business or financial results.
We were able to maintain satisfactory margins by applying stringent cost controls and by raising prices. However, declining demand for new homes as the year progressed is requiring us to reduce, rather than increase, prices. On the other hand, it is beginning to relieve supply shortages.
However, declining demand for new homes as the year progressed often required us to reduce, rather than increase, prices. On the other hand, it is beginning to relieve supply shortages. We are taking steps that we expect will enable us to maintain acceptable operating margins despite the inability to raise prices.
When interest rates increase, the cost of owning a new home increases, which usually reduces the number of potential buyers who can afford, or are willing, to purchase homes we build. A decline in prices of new homes could require us to write down the carrying value of land we own and to write off option costs.
Housing has been considerably impacted by the more than doubling of mortgage interest rates in 2022, and continued increases in 2023. When interest rates increase, the cost of owning a new home increases, which usually reduces the number of potential buyers who can afford, or are willing, to purchase homes we build.
If a contagious disease causes significant negative impacts to economic conditions or consumer confidence, our results of operations, financial condition and cash flows could be materially adversely impacted. Operational Risks Homebuilding, mortgage lending and home rentals are very competitive industries, and competitive conditions could adversely affect our business or financial results. Homebuilding . The homebuilding industry is highly competitive.
If a contagious disease causes significant negative impacts to economic conditions or consumer confidence, our results of operations, financial condition and cash flows could be materially adversely impacted. Current and threatened conflicts could affect demand for the homes we build. There currently are ongoing conflicts in Ukraine and Israel.
Item 1A. Risk Factors. The following are what we believe to be the principal risks that could materially affect us and our businesses. Market and Economic Risks Demand for homes we build may be adversely affected by a variety of macroeconomic factors beyond our control.
Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or results of operations. Market and Economic Risks Demand for homes we build may be adversely affected by a variety of macroeconomic factors beyond our control.
We are in the process of transferring some of our non-homebuilding businesses into a newly formed company, Quarterra Group, Inc., and, subject to market conditions, we intend to distribute the stock of Quarterra to our stockholders.
We previously announced that we planned to transfer some of our non-homebuilding businesses to a subsidiary, Quarterra Group, Inc. (“Quarterra”), which had been formed for that purpose, and, subject to market conditions, to distribute the stock of Quarterra to our stockholders.
Also, the loss of a significant number of key operating employees and our inability to hire qualified replacements could have a material adverse effect on our business. Natural disasters and severe weather conditions could delay deliveries and increase costs of new homes in affected areas, which could harm our sales and results of operations.
If we were to lose members of our senior management, we might not be able to find appropriate replacements on a timely basis and our operations could be negatively affected. Also, the loss of a significant number of key operating employees and our inability to hire qualified replacements could have a material adverse effect on our business.
A number of our markets experienced significant market softening that required us to make substantial price reductions.
During fiscal 2022 and 2023, the housing market weakened throughout the country in response to the Federal Reserve’s aggressive increase in interest rates in an effort to curtail inflation. A number of our markets experienced significant market softening that required us to make substantial price reductions.
("Blend") are carried on our books at their fair values, which will change depending on the value of the Company’s share holdings on the last day of each quarter. As a result, the Company’s net earnings could be significantly affected by mark-to-market gains or losses on the Company’s investments.
Our investments in Blend, Hippo, Opendoor, SmartRent, Sonder, and Sunnova, all of which have publicly traded shares of common stock are carried on our books at their fair values, which will change depending on the value of the Company’s shareholdings on the last day of each quarter.
Laws and regulations, and policies under or interpretations of existing laws and regulations, change frequently. Our businesses could be adversely affected by changes in laws, regulations, policies or interpretations or by our inability to comply with them without making significant changes in our businesses.
Laws and regulations, and policies under or interpretations of existing laws and regulations, change frequently.
Removed
We cannot assure you that our strategies for our core homebuilding and mortgage finance businesses, and any related initiatives or actions, will be successful.
Added
Item 1A. Risk Factors. The following risks, which should be considered carefully with the information provided elsewhere in this Report, could materially adversely affect our business, financial condition or results of operations.
Removed
We are taking steps that we expect will enable us to maintain acceptable operating margins despite the inability to raise prices.
Added
The residential homebuilding industry is sensitive to changes in economic conditions and other factors, such as the level of employment, consumer confidence, consumer income, product affordability, availability of financing, inflation, and interest rate levels. As a result, over the years, demand for new homes has been cyclical, with multi-year periods of high demand followed by multi-year periods of low demand.
Removed
Housing has been considerably impacted by the more than doubling of mortgage interest rates in 2022, and the Federal Reserve Board has said it intends to continue to increase its benchmark interest rate in 2023.
Added
Even with shifts in macroeconomic factors in the current fiscal year and adjusting to the recent inflationary environment, as a result of our production volume, an increase in deliveries, and by applying stringent cost controls, we were able to achieve satisfactory margins.
Removed
We may be liable for certain limited representations and warranties we make in connection with the sale of loans.
Added
A decline in prices of new homes could require us to write down the carrying value of land we own and to write off option costs. We are constantly purchasing land, or entering into arrangements to purchase land, for use in our homebuilding operations.
Removed
Our Financial Services segment, including LMF Commercial, has warehouse facilities that mature in fiscal year 2023, and if we could not renew or replace these facilities, we probably would have to reduce our mortgage lending and origination activities.
Added
While we do not acquire essential components of the homes we build from either of those countries and while as of November 30, 2023, neither of these conflicts has had a material direct impact on our consolidated financial performance, the conflicts are still ongoing, and there are many risks and uncertainties in relation to those conflicts that are outside of our control.
Removed
Our hope is that doing that will result in the combined market value of our stock and Quarterra's stock exceeding what the market value of our stock would be if we continued to conduct the businesses that we will transfer to Quarterra. However, there is no assurance that that will occur.
Added
For example, these conflicts have already led and could lead to further market disruptions, including significant volatility in commodity prices, credit and capital markets, as well as supply chain interruptions.
Removed
Among other things, making Quarterra a self-standing entity will lose some synergies from which the businesses it will own currently benefit.
Added
In addition, the closure of or limitation on the use of significant shipping routes as a result of these conflicts may result in interruptions to the supply of certain key raw materials worldwide, thereby, among other things, 11 Table of Contents increasing their cost.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties. We lease and maintain our executive offices in an office building in Miami, Florida. Our homebuilding, financial services and multifamily offices are located in the markets where we conduct business, primarily in leased space. We believe that our existing facilities are adequate for our current and planned levels of operation.
Biggest changeOur homebuilding, financial services and multifamily offices are located in the markets where we conduct 20 Table of Contents business, primarily in leased spaces. We believe that our existing facilities are adequate for our current and planned levels of operation.
Added
Item 2. Properties. We maintain our corporate headquarters in an office building in Miami, Florida. In December 2023, we purchased this office building, in which we had previously leased office space for our corporate headquarters. This building contains approximately 213,200 square feet of office space, of which we lease approximately 53,000 square feet of unused office space to other tenants.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings. We are party to various claims and lawsuits which arise in the ordinary course of business, but we do not consider the volume of our claims and lawsuits unusual given the number of homes we deliver and the fact that the lawsuits often relate to homes delivered several years before the lawsuits are commenced.
Biggest changeWe are party to various claims and lawsuits relating to homes we sold which arise in the ordinary course of business, but we do not consider the volume of our claims and lawsuits unusual given the number of homes we deliver and the fact that the lawsuits often relate to homes delivered several years before the lawsuits are commenced.
From time-to-time, we also receive notices from environmental agencies or other regulators regarding alleged violations of environmental or other laws. We typically settle these matters before they reach litigation for amounts that are not material to us.
From time-to-time, we also receive notices from environmental agencies or other regulators regarding alleged violations of environmental or other laws. We typically settle all of the foregoing matters before they reach litigation for amounts that are not material to us.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe information required by Item 201(d) of Regulation S-K relating to equity compensation plans is provided in Item 12 of this Report. Performance Graph The following graph compares the five-year cumulative total return of our Class A common stock with the Dow Jones U.S. Home Construction Index and the Dow Jones U.S. Total Market Index.
Biggest changeRepurchases are authorized to be made in open-market or private transactions. The repurchase authorization has no expiration date. 21 Table of Contents The information required by Item 201(d) of Regulation S-K relating to equity compensation plans is provided in Item 12 of this Report.
As a result of prior authorizations being almost exhausted, in March 2022, our Board of Directors approved an additional authorization for us to repurchase up to the lesser of $2.0 billion in value, or 30 million in shares, of our outstanding Class A or Class B common stock. The repurchase authorization has no expiration date.
(2) In March 2022, our Board of Directors approved an authorization for us to repurchase up to the lesser of $2.0 billion in value, or 30 million in shares, of our outstanding Class A or Class B common stock. The repurchase authorization has no expiration date.
The following table provides information about our repurchases of common stock during the three months ended November 30, 2022: 20 Table of Contents Period: Total Number of Shares Purchased (1) Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2) Maximum Number of Shares that may yet be Purchased under the Plans or Programs (2) September 1 to September 30, 2022 205,107 $ 75.06 205,000 26,999,347 October 1 to October 31, 2022 1,295,000 $ 75.94 1,295,000 25,704,347 November 1 to November 30, 2022 100,748 $ 67.97 100,000 25,604,347 (1) Includes shares of Class A and Class B common stock withheld by us to cover withholding taxes due with market value approximating the amount of withholding taxes due.
The following table provides information about our repurchases of common stock during the three months ended November 30, 2023: Period: Total Number of Shares Purchased (1) Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2) Maximum Number of Shares that may yet be Purchased under the Plans or Programs (2) September 1 to September 30, 2023 1,020,797 $ 112.26 1,020,000 17,584,347 October 1 to October 31, 2023 980,000 $ 108.38 980,000 16,604,347 November 1 to November 30, 2023 1,000,468 $ 116.76 1,000,000 15,604,347 (1) Includes shares of Class A and Class B common stock withheld by us to cover withholding taxes due with market value approximating the amount of withholding taxes due.
As of December 31, 2022, the last reported sale price of our Class A and Class B common stock on the NYSE was $90.50 and $74.78, respectively. As of December 31, 2022, there were approximately 1,567 and 828 holders of record of our Class A and Class B common stock, respectively.
As of December 31, 2023, the last reported sale price of our Class A and Class B common stock on the NYSE was $149.04 and $134.05, respectively. As of December 31, 2023, there were approximately 1,518 and 803 holders of record of our Class A and Class B common stock, respectively.
(2) In October 2021, the Board of Directors authorized an increase to our stock repurchase program to enable us to repurchase up to the lesser of an additional $1.0 billion in value, excluding commission, or 25 million in shares, of our outstanding Class A or Class B common stock.
This authorization was in addition to what was remaining of our October 2021 stock repurchase program. Subsequent to November 30, 2023, our Board of Directors authorized an increase to our stock repurchase program to enable us to repurchase up to an additional $5 billion in value of our outstanding Class A or Class B common stock.
The graph assumes $100 invested on November 30, 2017 in our Class A common stock, the Dow Jones U.S. Home Construction Index and the Dow Jones U.S. Total Market Index, and the reinvestment of all dividends. 2017 2018 2019 2020 2021 2022 Lennar Corporation $ 100 70 98 126 175 149 Dow Jones U.S.
Performance Graph The following graph compares the five-year cumulative total return of our Class A common stock with the Dow Jones U.S. Home Construction Index and the Dow Jones U.S. Total Market Index. The graph assumes $100 invested on November 30, 2018 in our Class A common stock, the Dow Jones U.S. Home Construction Index and the Dow Jones U.S.
On January 12, 2023, our Board of Directors declared a quarterly cash dividend of $0.375 per share on both our Class A and Class B common stock. The dividend is payable on February 10, 2023 to holders of record at the close of business on January 27, 2023.
On January 9, 2024, our Board of Directors increased our annual dividend to $2.00 per share from $1.50 per share, resulting in a quarterly cash dividend of $0.50 per share on both our Class A and Class B common stock.
Removed
Home Construction Index $ 100 71 104 127 178 144 Dow Jones U.S. Total Market Index $ 100 102 117 139 176 156 21 Table of Contents Item 6. Reserved.
Added
The dividend is payable on February 7, 2024 to holders of record at the close of business on January 24, 2024.
Added
Total Market Index, and the reinvestment of all dividends. 2018 2019 2020 2021 2022 2023 Lennar Corporation $ 100 140 179 251 213 314 Dow Jones U.S. Home Construction Index $ 100 146 178 250 203 315 Dow Jones U.S. Total Market Index $ 100 102 120 153 135 153 Item 6. Reserved.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeResults of Operations Overview Our net earnings attributable to Lennar were $4.6 billion, or $15.72 per diluted share ($15.74 per basic share) in 2022 and $4.4 billion, or $14.27 per diluted share ($14.28 per basic share) in 2021. 23 Table of Contents Financial information relating to our operations was as follows: Year ended November 30, 2022 (In thousands) Homebuilding Financial Services Multifamily Lennar Other Corporate Total Revenues: Sales of homes $ 31,778,885 — — — — 31,778,885 Sales of land 143,041 — — — — 143,041 Other revenues 29,409 809,680 865,603 44,392 — 1,749,084 Total revenues 31,951,335 809,680 865,603 44,392 — 33,671,010 Costs and expenses: Costs of homes sold 23,025,467 — — — — 23,025,467 Costs of land sold 171,589 — — — — 171,589 Selling, general and administrative 1,964,243 — — — — 1,964,243 Other costs and expenses — 426,378 848,931 32,258 — 1,307,567 Total costs and expenses 25,161,299 426,378 848,931 32,258 — 26,468,866 Equity in earnings (loss) from unconsolidated entities, Multifamily other gain and Lennar Other other income (expense), net, and other gain (loss) (17,235) — 52,821 (91,689) — (56,103) Homebuilding other income, net 4,516 — — — — 4,516 Lennar Other unrealized loss from technology investments — — — (655,094) — (655,094) Operating earnings (loss) 6,777,317 383,302 69,493 (734,649) — 6,495,463 Corporate general and administrative expenses — — — — 414,498 414,498 Charitable foundation contribution — — — — 66,399 66,399 Earnings (loss) before income taxes $ 6,777,317 383,302 69,493 (734,649) (480,897) 6,014,566 Year ended November 30, 2021 (In thousands) Homebuilding Financial Services Multifamily Lennar Other Corporate Total Revenues: Sales of homes $ 25,348,105 — — — — 25,348,105 Sales of land 167,913 — — — — 167,913 Other revenues 29,224 898,745 665,232 21,457 — 1,614,658 Total revenues 25,545,242 898,745 665,232 21,457 — 27,130,676 Costs and expenses: Costs of homes sold 18,562,213 — — — — 18,562,213 Costs of land sold 143,631 — — — — 143,631 Selling, general and administrative 1,796,697 — — — — 1,796,697 Other costs and expenses — 407,731 652,810 30,955 — 1,091,496 Total costs and expenses 20,502,541 407,731 652,810 30,955 — 21,594,037 Equity in earnings (loss) from unconsolidated entities, Multifamily other gain and Lennar Other other income (expense), net, and other gain (loss) (1) (14,205) — 9,031 231,731 — 226,557 Homebuilding other income, net 3,266 — — — — 3,266 Lennar Other unrealized gain from technology investments — — — 510,802 — 510,802 Operating earnings 5,031,762 491,014 21,453 733,035 — 6,277,264 Corporate general and administrative expenses — — — — 398,381 398,381 Charitable foundation contribution — — — — 59,825 59,825 Earnings before income taxes $ 5,031,762 491,014 21,453 733,035 (458,206) 5,819,058 (1) During the year ended November 30, 2021, the Company realized a gain of $158.1 million on the sale of its residential solar business 24 Table of Contents 2022 versus 2021 Revenues from home sales increased 25% in the year ended November 30, 2022 to $31.8 billion from $25.3 billion in the year ended November 30, 2021.
Biggest changeFinancial information relating to our operations was as follows: Year ended November 30, 2023 (In thousands) Homebuilding Financial Services Multifamily Lennar Other Corporate Total Revenues: Sales of homes $ 32,459,129 — — — — 32,459,129 Sales of land 109,963 — — — — 109,963 Other revenues 91,895 976,859 573,485 22,035 — 1,664,274 Total revenues 32,660,987 976,859 573,485 22,035 — 34,233,366 Costs and expenses: Costs of homes sold 24,900,470 — — — — 24,900,470 Costs of land sold 92,142 — — — — 92,142 Selling, general and administrative 2,231,033 — — — — 2,231,033 Other costs and expenses — 467,398 573,658 27,681 — 1,068,737 Total costs and expenses 27,223,645 467,398 573,658 27,681 — 28,292,382 Equity in losses from unconsolidated entities (3,886) — (52,073) (88,651) — (144,610) Other income (expense), net and other gains (losses) 94,251 — 1,595 (65,329) — 30,517 Lennar Other unrealized losses from technology investments — — — (50,162) — (50,162) Operating earnings (loss) 5,527,707 509,461 (50,651) (209,788) — 5,776,729 Corporate general and administrative expenses — — — — 501,338 501,338 Charitable foundation contribution — — — — 73,087 73,087 Earnings (loss) before income taxes $ 5,527,707 509,461 (50,651) (209,788) (574,425) 5,202,304 24 Table of Contents Year ended November 30, 2022 (In thousands) Homebuilding Financial Services Multifamily Lennar Other Corporate Total Revenues: Sales of homes $ 31,778,885 — — — — 31,778,885 Sales of land 143,041 — — — — 143,041 Other revenues (1) 29,409 809,680 865,603 44,392 — 1,749,084 Total revenues 31,951,335 809,680 865,603 44,392 — 33,671,010 Costs and expenses: Costs of homes sold 23,025,467 — — — — 23,025,467 Costs of land sold 171,589 — — — — 171,589 Selling, general and administrative 1,964,243 — — — — 1,964,243 Other costs and expenses — 426,378 848,931 32,258 — 1,307,567 Total costs and expenses 25,161,299 426,378 848,931 32,258 — 26,468,866 Equity in earnings (loss) from unconsolidated entities (17,235) — 52,603 (71,669) — (36,301) Other income (expense), net and other gains (losses) 4,516 — 218 (20,020) — (15,286) Lennar Other unrealized losses from technology investments — — — (655,094) — (655,094) Operating earnings (loss) 6,777,317 383,302 69,493 (734,649) — 6,495,463 Corporate general and administrative expenses — — — — 414,498 414,498 Charitable foundation contribution — — — — 66,399 66,399 Earnings (loss) before income taxes $ 6,777,317 383,302 69,493 (734,649) (480,897) 6,014,566 (1) During the year ended November 30, 2022 , other revenues in our Multifamily segment included land sales to unconsolidated entities of $237.5 million . 2023 versus 2022 Revenues from home sales increased 2% in the year ended November 30, 2023 to $32.5 billion from $31.8 billion in the year ended November 30, 2022.
During 2022, our cash used in financing activities was primarily due to (1) early redemption of $575 million aggregate principal amount of our 4.75% senior notes due November 2022, (2) $48 million principal payments on notes payable and other borrowings, (3) repurchase of our common stock for $1.0 billion, which included $968 million of repurchases of our stock under our repurchase program and $72 million of repurchases related to our equity compensation plan, and (4) $438 million of dividend payments.
During 2022, our cash used in financing activities was primarily due to (1) early redemption of $575 million aggregate principal amount of our 4.75% senior notes due November 2022, (2) $48 million principal payment on notes payable and other borrowings, (3) repurchase of our common stock for $1.0 billion, which included $968 million of repurchase of our stock under our repurchase program and $72 million of repurchases related to our equity compensation plan, and (4) $438 million of dividend payments.
The Financial Services segment uses the residential warehouse facilities to finance its residential lending activities until the mortgage loans are sold to investors and the proceeds are collected. The facilities are non-recourse to us and are expected to be renewed or replaced with other facilities when they mature.
The Financial Services segment uses residential mortgage loan warehouse facilities to finance its residential lending activities until the mortgage loans are sold to investors and the proceeds are collected. The facilities are non-recourse to us and are expected to be renewed or replaced with other facilities when they mature.
Included in the following tables as part of “Obligors” together with Lennar Corporation are subsidiary entities that are not finance company subsidiaries or foreign subsidiaries and were guaranteeing the senior notes because at November 30, 2022 they were guaranteeing Lennar Corporation's letter of credit facilities and its Credit Facility, disclosed in Note 4 of the Notes to Consolidated Financial Statements.
Included in the following tables as part of “Obligors” together with Lennar Corporation are subsidiary entities that are not finance company subsidiaries or foreign subsidiaries and were guaranteeing the senior notes because at November 30, 2023 they were guaranteeing Lennar Corporation's letter of credit facilities and its Credit Facility, disclosed in Note 4 of the Notes to Consolidated Financial Statements.
We review changes in estimated cash flows periodically to determine if an other-than-temporary impairment has occurred on our CMBS. Based on management’s assessment, no impairment charges were recorded during the years ended November 30, 2022 and 2021. We classify these securities as held-for-sale at November 30, 2022 and 2021.
We review changes in estimated cash flows periodically to determine if an other-than-temporary impairment has occurred on our CMBS. Based on management’s assessment, no impairment charges were recorded during the years ended November 30, 2023 and 2022. We classify these securities as held-for-sale at November 30, 2023 and 2022.
The credit agreement also provides that up to $500 million in commitments may be used for letters of credit. As of both November 30, 2022 and 2021, we had no outstanding borrowings under the Credit Facility. In addition to the Credit Facility, we have other letter of credit facilities with different financial institutions.
The credit agreement also provides that up to $500 million in commitments may be used for letters of credit. As of both November 30, 2023 and 2022, we had no outstanding borrowings under the Credit Facility. In addition to the Credit Facility, we have other letter of credit facilities with different financial institutions.
The following table summarizes the principal maturities of our Homebuilding unconsolidated entities ("JVs") debt as per current debt arrangements as of November 30, 2022. It does not represent estimates of future cash payments that will be made to reduce debt balances.
The following table summarizes the principal maturities of our Homebuilding unconsolidated entities ("JVs") debt as per current debt arrangements as of November 30, 2023. It does not represent estimates of future cash payments that will be made to reduce debt balances.
We are subject to the usual obligations associated with entering into contracts (including option contracts) for the purchase, development and sale of real estate in the routine conduct of our business. Option contracts for the purchase of land generally reduces our financial risk and costs of capital associated with land holdings.
We are subject to the usual obligations associated with entering into contracts (including option contracts) for the purchase, development and sale of real estate in the routine conduct of our business. Option contracts for the purchase of land generally reduce our financial risk and costs of capital associated with land holdings.
Option Contracts We often obtain access to land through option contracts, which generally enable us to control portions of properties owned by third parties (including land funds) and unconsolidated entities until we have determined whether to exercise the options.
Option Contracts We often obtain access to land through option contracts, which generally enable us to control portions of properties owned by third parties (including land banks) and unconsolidated entities until we have determined whether to exercise the options.
As of the end of each fiscal quarter, we are also required to maintain either (1) liquidity in an amount equal to or greater than 1.00x consolidated interest incurred for the last twelve months then ended or (2) an interest coverage ratio equal to or greater than 1.50:1.00 for the last twelve months then ended.
As of the end of each fiscal quarter, we are also required to maintain either (1) liquidity in an amount equal 33 Table of Contents to or greater than 1.00x consolidated interest incurred for the last twelve months then ended or (2) an interest coverage ratio equal to or greater than 1.50:1.00 for the last twelve months then ended.
The accounting policy relating to the use of the equity method of accounting is a critical accounting policy due to the judgment required in determining whether the entity is a VIE or a voting interest entity and then whether we are the primary beneficiary or have control or significant 40 Table of Contents influence.
The accounting policy relating to the use of the equity method of accounting is a critical accounting policy due to the judgment required in determining whether the entity is a VIE or a voting interest entity and then whether we are the primary beneficiary or have control or significant influence.
Details of these securities and related debt are within Note 2 of the Notes to Consolidated Financial Statements. 28 Table of Contents LMF Commercial LMF Commercial originates and sells into securitizations first mortgage loans, which are secured by income producing commercial properties.
Details of these securities and related debt are within Note 2 of the Notes to Consolidated Financial Statements. LMF Commercial LMF Commercial originates and sells into securitizations first mortgage loans, which are secured by income producing commercial properties.
These transactions may include the issuance of additional indebtedness, the repurchase of our outstanding indebtedness, the repurchase of our common stock, the acquisition of homebuilders and other companies, the purchase or sale of assets or lines of business, the issuance of common stock or securities convertible into shares of common stock, and/or the pursuit of other financing alternatives.
These transactions may include the issuance of 32 Table of Contents additional indebtedness, the repurchase of our outstanding indebtedness, the repurchase of our common stock, the acquisition of homebuilders and other companies, the purchase or sale of assets or lines of business, the issuance of common stock or securities convertible into shares of common stock, and/or the pursuit of other financing alternatives.
At November 30, 2022, we had open commitments amounting to $3.5 billion to sell MBS with varying settlement dates through February 2023 and open future contracts in the amount of $9.5 million with the settlement dates through March 2023.
At November 30, 2023, we had open commitments amounting to $3.2 billion to sell MBS with varying settlement dates through February 2024 and open future contracts in the amount of $5.9 million with the settlement dates through March 2024.
("Sonder") and Sunnova Energy International, Inc. ("Sunnova"), which are held at market and will therefore change depending on the fair value of our share holdings in those entities on the last day of each quarter.
("Sonder") and Sunnova Energy International, Inc. ("Sunnova"), which are held at market and will therefore change depending on the fair value of our shareholdings in those entities on the last day of each quarter.
Joint ventures with financial partners have allowed us to combine our development and construction expertise with access to our partners’ capital. Each joint venture is governed by an operating agreement that provides significant substantive 35 Table of Contents participating voting rights on major decisions to our partners.
Joint ventures with financial partners have allowed us to combine our development and construction expertise with access to our partners’ capital. Each joint venture is governed by an operating agreement that provides significant substantive participating voting rights on major decisions to our partners.
If the proposed spin-off of our multifamily and single family rental asset management businesses takes place, the subsidiaries involved in those businesses will no longer guarantee our senior notes. Supplemental information for the Obligors, which excludes non-guarantor subsidiaries and intercompany transactions, at November 30, 2022 is included in the following tables.
If the proposed spin-off of our multifamily and single-family rental asset management businesses or any other of our businesses takes place, the subsidiaries involved in those businesses will no longer guarantee our senior notes. Supplemental information for the Obligors, which excludes non-guarantor subsidiaries and intercompany transactions, at November 30, 2023 is included in the following tables.
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. Inventory costs include land, land development and home construction costs, real estate taxes, deposits on land purchase contracts and interest related to development and construction.
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. Inventory costs include land, land development and home construction costs, real estate taxes and interest related to development and construction.
The dividend is payable on February 10, 2023 to holders of record at the close of business on January 27, 2023. Based on our current financial condition and credit relationships, we believe that our operations and borrowing resources will provide for our current and long-term capital requirements at our anticipated levels of activity.
The dividend is payable on February 7, 2024 to holders of record at the close of business on January 24, 2024. Based on our current financial condition and credit relationships, we believe that our operations and borrowing resources will provide for our current and long-term capital requirements at our anticipated levels of activity.
Financial Condition and Capital Resources At November 30, 2022, we had cash and cash equivalents and restricted cash related to our homebuilding, financial services, multifamily and other operations of $4.8 billion, compared to $3.0 billion at November 30, 2021.
Financial Condition and Capital Resources At November 30, 2023, we had cash and cash equivalents and restricted cash related to our homebuilding, financial services, multifamily and other operations of $6.6 billion, compared to $4.8 billion at November 30, 2022.
Financing Cash Flow Activities During 2022 and 2021, our cash used in financing activities totaled $1.3 billion and $2.4 billion, respectively.
Financing Cash Flow Activities During 2023 and 2022, our cash used in financing activities totaled $3.2 billion and $1.3 billion, respectively.
A series of operating losses of an investee or other factors may indicate that a decrease in the fair value of our investment in the unconsolidated entity below its carrying amount has occurred which is other-than-temporary. The amount of impairment recognized is the excess of the investment’s carrying amount over its estimated fair value.
A series of operating losses of an investee or other factors may indicate that a decrease in the fair value of our investment in the unconsolidated entity below its carrying amount has occurred which is other-than-temporary.
As of November 30, 2022 and 2021, we had strategic technology investments in unconsolidated entities of $131.5 million and $145.6 million, respectively, accounted for under the equity method of accounting.
As of November 30, 2023 and 2022, we had strategic technology investments in unconsolidated entities of $127.5 million and $131.5 million respectively, accounted for under the equity method of accounting.
However, because net homebuilding debt to total capital is not calculated in accordance with GAAP, this financial measure should not be considered in isolation or as an alternative to financial measures prescribed by GAAP.
However, because net homebuilding debt to total capital is not calculated in accordance with GAAP, this financial measure should not be considered in isolation or as an alternative to financial measures prescribed by GAAP. Rather, this non-GAAP financial measure should be used to supplement our GAAP results.
Selling, general and administrative expenses were $2.0 billion in the year ended November 30, 2022, compared to $1.8 billion in the year ended November 30, 2021.
Selling, general and administrative expenses were $2.2 billion in the year ended November 30, 2023, compared to $2.0 billion in the year ended November 30, 2022.
At November 30, 2022, we had $4.6 billion of Homebuilding cash and cash equivalents and no outstanding borrowings under our $2.6 billion revolving credit facility, thereby providing $7.2 billion of available capacity. Operating Cash Flow Activities During 2022 and 2021, cash provided by operating activities totaled $3.3 billion and $2.5 billion, respectively.
At November 30, 2023, we had $6.3 billion of Homebuilding cash and cash equivalents and no outstanding borrowings under our $2.6 billion revolving credit facility, thereby approximately $8.9 billion of available capacity. Operating Cash Flow Activities During 2023 and 2022, cash provided by operating activities totaled $5.2 billion and $3.3 billion, respectively.
In conducting our review for indicators of impairment on a community level, we evaluate, among other things, the margins on homes that have been delivered, margins on homes under sales contracts in backlog, projected margins with regard to future home sales over the life of the community, projected margins with regard to future land sales, and the estimated fair value of the land itself. 39 Table of Contents We estimate the fair value of our communities using a discounted cash flow model.
In conducting our review for indicators of impairment on a community level, we evaluate, among other things, the margins on homes that have been delivered, margins on homes under sales contracts in backlog, projected margins with regard to future home sales over the life of the community, projected margins with regard to future land sales, and the estimated fair value of the land itself.
As discussed in Note 1, the preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions about future events that affect the amounts reported in our consolidated financial statements and accompanying 38 Table of Contents notes.
As discussed in Note 1, the preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions about future events that affect the amounts reported in our consolidated financial statements and accompanying notes. Future events and their effects cannot be determined with absolute certainty.
At November 30, 2022, we had access to 281,409 homesites through option contracts with third parties and unconsolidated entities in which we have investments.
At November 30, 2023, we had access to 309,700 homesites through option contracts with third parties and unconsolidated entities in which we have investments.
The segment also originates and sells into securitizations commercial mortgage loans through its LMF Commercial business. Our Financial Services segment sells substantially all of the residential loans it originates within a short period in the secondary mortgage market, the majority of which are sold on a servicing released, non-recourse basis.
Our Financial Services segment sells substantially all of the residential loans it originates within a short period in the secondary mortgage market, the majority of which are sold on a servicing-released, non-recourse basis.
As of November 30, 2022 and 2021, our balance sheet had $788.5 million and $1.5 billion, respectively, of assets in the Lennar Other segment, which included investments in unconsolidated entities of $316.5 million and $346.3 million, respectively. We have investments in Blend Labs, Inc. ("Blend Labs"), Hippo Holdings, Inc. ("Hippo"), Opendoor, Inc. ("Opendoor"), SmartRent, Inc. ("SmartRent"), Sonder Holdings, Inc.
As of November 30, 2023 and 2022, our balance sheet had $657.9 million and $788.5 million, respectively, of assets in the Lennar Other segment, which included investments in unconsolidated entities of $276.2 million and $316.5 million, respectively. We have investments in Blend Labs, Inc. ("Blend Labs"), Hippo Holdings, Inc. ("Hippo"), Opendoor Technologies, Inc. ("Opendoor"), SmartRent, Inc. ("SmartRent"), Sonder Holdings, Inc.
LMF Commercial originated commercial loans as follows: November 30, (Dollars in thousands) 2022 2021 Originations $ 740,345 770,107 Sold $ 715,933 931,023 Securitizations 6 6 Multifamily Segment We have been actively involved, primarily through unconsolidated entities, in the development, construction and property management of multifamily rental properties.
LMF Commercial originated commercial loans as follows: Years Ended November 30, (Dollars in thousands) 2023 2022 Originations $ 466,043 740,345 Sold $ 430,707 715,933 Securitizations 10 6 Multifamily Segment We have been actively involved, primarily through unconsolidated entities, in the development, construction and property management of multifamily rental properties.
The following table sets forth selected financial and operational information related to the residential mortgage and title activities of our Financial Services: Years Ended November 30, (Dollars in thousands) 2022 2021 Dollar value of mortgages originated $ 14,432,200 13,247,100 Number of mortgages originated 37,700 38,100 Mortgage capture rate of Lennar homebuyers 72% 75% Number of title and closing service transactions 68,800 67,500 At November 30, 2022 and 2021, the carrying value of Financial Services' commercial mortgage-backed securities ("CMBS") was $143.3 million and $157.8 million, respectively.
The following table sets forth selected financial and operational information related to the residential mortgage and title activities of our Financial Services: Years Ended November 30, (Dollars in thousands) 2023 2022 Dollar value of mortgages originated $ 17,395,000 14,432,200 Number of mortgages originated 47,000 37,700 Mortgage capture rate of Lennar homebuyers 81% 72% Number of title and closing service transactions 74,900 68,800 At November 30, 2023 and 2022, the carrying value of Financial Services' commercial mortgage-backed securities ("CMBS") was $140.7 million and $143.3 million, respectively.
Borrowings and collateral under the facilities and their prior year predecessors were as follows: November 30, (In thousands) 2022 2021 Borrowings under the residential facilities $ 1,877,411 1,482,258 Collateral under the residential facilities 1,950,155 1,539,641 Borrowings under the LMF Commercial facilities 124,399 96,294 If the facilities are not renewed or replaced, the borrowings under the lines of credit will be repaid by selling the mortgage loans held-for-sale to investors and by collecting receivables on loans sold but not yet paid for.
Borrowings and collateral under the facilities were as follows: November 30, (In thousands) 2023 2022 Borrowings under the residential facilities $ 2,020,187 1,877,411 Collateral under the residential facilities 2,097,020 1,950,155 Borrowings under the LMF Commercial facilities 12,525 124,399 If the facilities are not renewed or replaced, the borrowings under the lines of credit will be repaid by selling the mortgage loans held-for-sale to investors and by collecting receivables on loans sold but not yet paid for.
Our outstanding letters of credit and surety bonds are described below: November 30, (In thousands) 2022 2021 Performance letters of credit $ 1,259,033 924,584 Financial letters of credit 503,659 425,843 Surety bonds 4,136,715 3,553,047 Anticipated future costs primarily for site improvements related to performance surety bonds 2,273,694 1,690,861 Our Homebuilding average debt outstanding and the average rates of interest were as follows: November 30, (Dollars in thousands) 2022 2021 Homebuilding average debt outstanding $ 4,705,892 5,711,100 Average interest rate 4.7% 4.9% Interest incurred $ 230,839 275,091 Under the Credit Facility agreement (the "Credit Agreement"), we are required to maintain a minimum consolidated tangible net worth, a maximum leverage ratio and either a liquidity or an interest coverage ratio.
Our outstanding letters of credit and surety bonds are described below: November 30, (In thousands) 2023 2022 Performance letters of credit $ 1,404,541 1,259,033 Financial letters of credit 417,976 503,659 Surety bonds 4,508,428 4,136,715 Anticipated future costs primarily for site improvements related to performance surety bonds 2,499,680 2,273,694 Our Homebuilding average debt outstanding and the average rates of interest were as follows: November 30, (Dollars in thousands) 2023 2022 Homebuilding average debt outstanding $ 3,688,363 4,705,892 Average interest rate 4.9% 4.7% Interest incurred $ 187,640 230,839 Under the Credit Facility agreement (the "Credit Agreement"), we are required to maintain a minimum consolidated tangible net worth, a maximum leverage ratio and either a liquidity or an interest coverage ratio.
For the year ended November 30, 2022, an increase in revenues per square foot was partially offset by an increase in costs per square foot primarily due to higher materials and labor costs. Overall, gross margins remained flat year over year as land costs remained relatively flat while interest expense decreased as a result of our focus on reducing debt.
For the year ended November 30, 2023, a decrease in revenues per square foot was partially offset by a decrease in costs per square foot. Overall, gross margins remained flat year over year as land costs remained flat while interest expense decreased as a result of our focus on reducing debt.
We believe that we were in compliance with our debt covenants at November 30, 2022. 32 Table of Contents The following summarizes our required debt covenants and our actual levels or ratios with respect to those covenants as calculated per the Credit Agreement as of November 30, 2022: (Dollars in thousands) Covenant Level Level Achieved as of November 30, 2022 Minimum net worth test $ 12,196,941 17,779,830 Maximum leverage ratio 65.0% (0.2)% Liquidity test (1) 1.00 32.08 (1) We are only required to maintain either (1) liquidity in an amount equal to or greater than 1.00x consolidated interest incurred for the last twelve months then ended or (2) an interest coverage ratio of equal to or greater than 1.50:1.00 for the last twelve months then ended.
The following summarizes our required debt covenants and our actual levels or ratios with respect to those covenants as calculated per the Credit Agreement as of November 30, 2023: (Dollars in thousands) Covenant Level Level Achieved as of November 30, 2023 Minimum net worth test $ 13,499,906 20,145,031 Maximum leverage ratio 65.0% (13.0)% Liquidity test (1) 1.00 207.15 (1) We are only required to maintain either (1) liquidity in an amount equal to or greater than 1.00x consolidated interest incurred for the last twelve months then ended or (2) an interest coverage ratio of equal to or greater than 1.50:1.00 for the last twelve months then ended.
Since the estimates and assumptions included in our cash flow models are based upon historical results and projected trends, they do not anticipate unexpected changes in market conditions or strategies that may lead to us incurring additional impairment charges in the future. Using all the available information, we calculate our best estimate of projected cash flows for each community.
These trends are analyzed for each of the estimates listed above. 40 Table of Contents Since the estimates and assumptions included in our cash flow models are based upon historical results and projected trends, they do not anticipate unexpected changes in market conditions or strategies that may lead to us incurring additional impairment charges in the future.
The following table summarizes the principal maturities of our Multifamily unconsolidated entities debt as per current debt arrangements as of November 30, 2022. It does not represent estimates of future cash payments that will be made to reduce debt balances.
We believe all of the joint ventures were in compliance with their debt covenants at November 30, 2023. The following table summarizes the principal maturities of our Multifamily unconsolidated entities debt as per current debt arrangements as of November 30, 2023. It does not represent estimates of future cash payments that will be made to reduce debt balances.
At November 30, 2022, the Financial Services segment had warehouse facilities, all of which were 364-day repurchase facilities and were used to fund residential mortgages or commercial mortgages for LMF Commercial as follows: (In thousands) Maximum Aggregate Commitment Residential facilities maturing: December 2022 (1) $ 800,000 May 2023 500,000 August 2023 1,000,000 Total - Residential facilities $ 2,300,000 LMF Commercial facilities maturing: December 2022 (1) $ 400,000 July 2023 50,000 November 2023 100,000 Total - LMF Commercial facilities $ 550,000 Total $ 2,850,000 (1) Subsequent to November 30, 2022, the maturity date was extended to December 2023.
At November 30, 2023, the Financial Services segment had warehouse facilities, all of which were 364-day repurchase facilities and were used to fund residential mortgages or commercial mortgages for LMF Commercial as follows: Maximum Aggregate Commitment (In thousands) Committed Amount Uncommitted Amount Total Residential facilities maturing: December 2023 (1) $ 500,000 — 500,000 April 2024 250,000 250,000 500,000 May 2024 (2) 1,500,000 — 1,500,000 June 2024 100,000 400,000 500,000 September 2024 100,000 100,000 200,000 Total residential facilities $ 2,450,000 750,000 3,200,000 LMF commercial facilities maturing: November 2023 (1) 100,000 — 100,000 December 2023 (3) 400,000 — 400,000 Total LMF commercial facilities $ 500,000 — 500,000 Total $ 3,700,000 (1) Subsequent to November 30, 2023, the maturity date of December 2023 was extended to March 2024 and the maturity date of November 2023 was extended to January 2024.
Loans in process for which interest rates were committed to the borrowers totaled approximately $2.2 billion as of November 30, 2022. A significant portion of these commitments had a remaining period of 60 days or less.
Our Financial Services segment had a pipeline of loan applications in process of $3.3 billion at November 30, 2023. Loans in process for which interest rates were committed to the borrowers totaled approximately $2.1 billion as of 38 Table of Contents November 30, 2023. A significant portion of these commitments had a remaining period of 60 days or less.
The following is a detail of Lennar Other unrealized gains (losses) from our technology investments: Years Ended November 30, (In thousands) 2022 2021 Blend Labs (BLND) mark-to-market $ (25,630) (6,744) Hippo (HIPO) mark-to-market (222,447) 207,634 Opendoor (OPEN) mark-to-market (265,276) 239,312 SmartRent (SMRT) mark-to-market (78,177) 79,483 Sonder (SOND) mark-to-market (2,339) — Sunnova (NOVA) mark-to-market (61,225) (8,883) Lennar Other unrealized gains (losses) from technology investments $ (655,094) 510,802 At November 30, 2022 and 2021, Lennar Other owned commercial mortgage-backed securities ("CMBS") with carrying values of $35.5 million and $41.7 million, respectively.
The following is a detail of Lennar Other unrealized losses from mark-to-market adjustments on our technology investments: Years Ended November 30, (In thousands) 2023 2022 Blend Labs (BLND) $ (130) (25,630) Hippo (HIPO) (19,210) (222,447) Opendoor (OPEN) 21,762 (265,276) SmartRent (SMRT) 5,914 (78,177) Sonder (SOND) (700) (2,339) Sunnova (NOVA) (57,798) (61,225) Lennar Other unrealized losses from technology investments $ (50,162) (655,094) At November 30, 2023 and 2022, Lennar Other owned commercial mortgage-backed securities ("CMBS") with carrying values of $38.0 million and $35.5 million, respectively.
(2) Gross loss on sales of land includes $47.9 million of deposit write-offs as we walked away from 42,000 controlled homesites. (3) Negative gross and net margins were due to period costs in Urban divisions that impact costs of homes sold without sufficient sales of homes revenues to offset those costs.
(2) For the years ended November 30, 2023 and 2022, gross margins (loss) on sales of land included $19.9 million and $47.9 million of deposit write-offs as we walked away from 10,600 and 42,000 controlled homesites, respectively. 26 Table of Contents (3) Negative gross and net margins were due to period costs and/or impairments in Urban divisions that impact costs of homes sold without sufficient sales of homes revenue to offset those costs.
The increase in the average sales price of homes delivered was primarily due to price appreciation year over year. For the year ended November 30, 2022, an increase in revenues per square foot was partially offset by an increase in costs per square foot primarily due to higher materials and labor costs.
The decrease in the average sales price of homes delivered in Alabama, Florida and South Carolina was primarily due to pricing to market and product mix. For the year ended November 30, 2023, an increase in revenues per square foot was partially offset by an increase in costs per square foot primarily due to higher material and labor costs.
The decrease in the number of home deliveries in Georgia and Virginia was primarily due to a decrease in the number of deliveries per active community due to the timing of opening and closing of communities as a result of supply chain disruptions.
The decrease in the number of home deliveries in other states in the segment was primarily due to a decrease in the number of deliveries per active community due to the timing of opening and closing of communities.
Rather, this non-GAAP financial measure should be used to supplement our GAAP results. 31 Table of Contents At November 30, 2022, Homebuilding debt to total capital was lower compared to November 30, 2021 primarily as a result of an increase in stockholders' equity due to net earnings and a decrease in homebuilding debt due to debt paydowns, partially offset by share repurchases.
At November 30, 2023, Homebuilding debt to total capital was lower compared to November 30, 2022, primarily as a result of an increase in stockholders' equity due to net earnings and a decrease in homebuilding debt due to debt paydowns and debt repurchases, partially offset by share repurchases.
While many of the estimates are calculated based on historical and projected trends, all estimates are subjective and change from market to market and community to community as market and economic conditions change.
Using all the available information, we calculate our best estimate of projected cash flows for each community. While many of the estimates are calculated based on historical and projected trends, all estimates are subjective and change from market to market and community to community as market and economic conditions change.
At November 30, 2022, we had $2.0 billion of non-refundable option deposits and pre-acquisition costs related to certain of these homesites and had posted $163.9 million of letters of credit in lieu of cash deposits under certain land and option contracts. 37 Table of Contents At November 30, 2022, we had letters of credit outstanding in the amount of $1.8 billion (which included the $163.9 million of letters of credit discussed above).
At November 30, 2023, we had $1.9 billion of non-refundable option deposits and pre-acquisition costs related to certain of these homesites and had posted $198.9 million of letters of credit in lieu of cash deposits under certain land and option contracts.
We have the option to perform a qualitative or quantitative assessment to determine whether the fair value of a reporting unit exceeds its carrying value. Qualitative factors may include, but are not limited to, economic conditions, industry and market considerations, cost factors, overall financial performance of the reporting units and other entity and reporting unit specific events.
Qualitative factors may include, but are not limited to, economic conditions, industry and market considerations, cost factors, overall financial performance of the reporting units and other entity and reporting unit specific events.
During the years ended November 30, 2022 and 2021, our Class A and Class B common stockholders received an aggregate per share annual dividend of $1.50 and $1.00, respectively. On January 12, 2023, our Board of Directors declared a quarterly cash dividend of $0.375 per share on both our Class A and Class B common stock.
During both the years ended November 30, 2023 and 2022, our Class A and Class B common stockholders received an aggregate per share annual dividend of $1.50.
Principal Maturities of Multifamily Unconsolidated JVs Debt by Period (In thousands) Total JV Debt 2023 2024 2025 Thereafter Other Debt without recourse to Lennar $ 4,345,145 1,286,563 1,022,248 1,052,564 983,770 — Debt issuance costs (26,371) — — — — (26,371) Total $ 4,318,774 1,286,563 1,022,248 1,052,564 983,770 (26,371) Lennar Other - Investments in Unconsolidated Entities As part of the sale of the Rialto investment and asset management platform, we retained the right to receive a portion of payments with regard to carried interests if funds meet specified performance thresholds.
Principal Maturities of Multifamily Unconsolidated JVs Debt by Period (In thousands) Total JV Debt 2024 2025 2026 Thereafter Other Debt without recourse to Lennar $ 4,909,744 2,052,566 1,409,911 882,136 565,131 — Debt issuance costs (19,477) — — — — (19,477) Total $ 4,890,267 2,052,566 1,409,911 882,136 565,131 (19,477) Lennar Other - Investments in Unconsolidated Entities As part of the sale of the Rialto investment and asset management platform, we retained the right to receive a portion of payments with regard to carried interests if certain funds meet specified performance thresholds.
Homebuilding Central: Revenues from home sales increased in 2022 compared to 2021, primarily due to an increase in the number of home deliveries in all the states of the segment except for Georgia and Virginia and an increase in the average sales price in all the states of the segment.
In addition, land costs increased year over year. Thus gross margin percentage of home deliveries decreased year over year. Homebuilding Central: Revenues from home sales increased in 2023 compared to 2022, primarily due to an increase in the number of home deliveries in all the states in the segment except in Georgia and Virginia.
The decrease in the number of home deliveries in Arizona, California, Nevada and Utah was primarily due to a decrease in the number of deliveries per active community due to the timing of opening and closing of communities as a result of supply chain disruptions.
The decrease in the number of home deliveries in other states in the segment was primarily due to a decrease in the number of deliveries per active community due to the timing of opening and closing of communities.
Homebuilding debt to total capital and net Homebuilding debt to total capital were calculated as follows: November 30, (Dollars in thousands) 2022 2021 Homebuilding debt $ 4,047,294 4,652,338 Stockholders’ equity 24,100,500 20,816,425 Total capital $ 28,147,794 25,468,763 Homebuilding debt to total capital 14.4% 18.3% Homebuilding debt $ 4,047,294 4,652,338 Less: Homebuilding cash and cash equivalents 4,616,124 2,735,213 Net Homebuilding debt $ (568,830) 1,917,125 Net Homebuilding debt to total capital (1) (2.4)% 8.4% (1) Net homebuilding debt to total capital is a non-GAAP financial measure defined as net homebuilding debt (homebuilding debt less homebuilding cash and cash equivalents) divided by total capital (net homebuilding debt plus stockholders' equity).
Homebuilding debt to total capital and net Homebuilding debt to total capital were calculated as follows: November 30, (Dollars in thousands) 2023 2022 Homebuilding debt $ 2,816,482 4,047,294 Stockholders’ equity 26,580,664 24,100,500 Total capital $ 29,397,146 28,147,794 Homebuilding debt to total capital 9.6% 14.4% Homebuilding debt $ 2,816,482 4,047,294 Less: Homebuilding cash and cash equivalents 6,273,724 4,616,124 Net Homebuilding debt $ (3,457,242) (568,830) Net Homebuilding debt to total capital (1) (15.0)% (2.4)% (1) Net homebuilding debt to total capital is a non-GAAP financial measure defined as net homebuilding debt (homebuilding debt less homebuilding cash and cash equivalents) divided by total capital (net homebuilding debt plus stockholders' equity).
Revenues were higher primarily due to an 11% increase in the number of home deliveries and a 13% increase in the average sales price. New home deliveries increased to 66,399 homes in the year ended November 30, 2022 from 59,825 homes in the year ended November 30, 2021.
Revenues were higher primarily due to a 10% increase in the number of home deliveries, partially offset by a 7% decrease in the average sales price of homes delivered. New home deliveries increased to 73,087 homes in the year ended November 30, 2023 from 66,399 homes in the year ended November 30, 2022.
We believe our assumptions on discount rates are critical accounting policies because the selection of the discount rates affects the estimated fair value of our investments in unconsolidated entities. A higher discount rate reduces the estimated fair value of our investments in unconsolidated entities, while a lower discount rate increases the estimated fair value of our investments in unconsolidated entities.
Our assumptions on the projected future distributions from unconsolidated entities are dependent on market conditions. We believe our assumptions on discount rates are critical accounting policies because the selection of the discount rates affects the estimated fair value of our investments in unconsolidated entities.
We have announced an intention to spin off, subject to market conditions, our multifamily and single family rental asset management businesses and some of our investment assets. Our Homebuilding senior notes and other debts payable are summarized within Note 4 of the Notes to Consolidated Financial Statements.
We have announced an intention to spin off, subject to market conditions, our multifamily and single-family rental asset management businesses and some of our investment assets.
Homebuilding West: Revenues from home sales increased in 2022 compared to 2021, primarily due to an increase in the number of home deliveries in all states of the segment except for Arizona, Nevada and Utah and an increase in the average sales price in all the states of the segment.
Homebuilding West: Revenues from home sales decreased in 2023 compared to 2022, primarily due to a decrease in the average sales price of homes delivered in all the states in the segment which was partially offset by an increase in the number of home deliveries in all the states in the segment except in Colorado, Nevada, Utah and Washington.
Every division evaluates the historical performance of each of its communities as well as current trends in the market and economy impacting the community and its surrounding areas. These trends are analyzed for each of the estimates listed above.
We evaluate the historical performance of each of our communities as well as current trends in the market and economy impacting the community and its surrounding areas.
During 2021, our cash used in investing activities was primarily due to cash contributions of $408 million to unconsolidated entities, which primarily included (1) $251 million to Homebuilding unconsolidated entities (2) $72 million to Multifamily unconsolidated entities, and (3) $83 million to strategic technology investments included in the Lennar Other segment.
During 2023, our cash used in investing activities was primarily due to cash contributions of $201 million to unconsolidated entities, 31 Table of Contents which primarily included (1) $94 million to Homebuilding unconsolidated entities, (2) $81 million to Lennar Other unconsolidated entities, and (3) $27 million to Multifamily unconsolidated entities.
We regularly monitor the results of our Homebuilding unconsolidated joint ventures and any trends that may affect their future liquidity or results of operations. We also monitor the performance of Homebuilding joint ventures in which we have investments on a regular basis to assess compliance with debt covenants.
We also monitor the performance of Homebuilding joint ventures in which we have investments on a regular basis to assess compliance with debt covenants. For those joint ventures not in compliance with their debt covenants, we evaluate and assess possible impairment of our investments.
Operating earnings for the Multifamily segment were $66.8 million in the year ended November 30, 2022, compared to $21.5 million in the year ended November 30, 2021. Operating loss for the Lennar Other segment was $735.6 million in the year ended November 30, 2022, compared to operating earnings of $733.0 million in the year ended November 30, 2021.
Operating loss for the Lennar Other segment was $211.2 million in the year ended November 30, 2023, compared to an operating loss of $735.6 million in the year ended November 30, 2022.
Details on our letters of credit outstanding and outstanding surety bonds are included in Note 4 of the Notes to Consolidated Financial Statements. Our Financial Services segment had a pipeline of loan applications in process of $3.8 billion at November 30, 2022.
At November 30, 2023, we had letters of credit outstanding in the amount of $1.8 billion (which included the $198.9 million of letters of credit discussed above). Details on our letters of credit outstanding and outstanding surety bonds are included in Note 4 of the Notes to Consolidated Financial Statements.
The following tables provide information related to our investment in the Multifamily segment: Balance Sheet November 30, (In thousands) 2022 2021 Multifamily investments in unconsolidated entities $ 648,126 654,029 Lennar's net investment in Multifamily 935,961 976,676 Statement of Operations Years Ended November 30, (Dollars in thousands) 2022 2021 Number of operating properties/investments sold through joint ventures 2 1 Lennar's share of gains on the sale of operating properties/investments $ 43,308 14,784 The Multifamily segment manages and has investments in Multifamily Venture Fund I (the "LMV I") and Multifamily Venture Fund II LP (the "LMV II"), which are long-term multifamily development investment vehicles involved in the development, construction and ownership of class-A multifamily rental properties.
However, more recently we have focused on creating and participating in funds that build multifamily properties with the intention of retaining them after they are completed. 29 Table of Contents The following table provides information related to our investment in the Multifamily segment: At November 30, (Dollars in thousands) 2023 2022 Multifamily investments in unconsolidated entities $ 599,852 648,126 Lennar's net investment in Multifamily 1,095,218 935,961 Number of operating properties/investments sold through joint ventures — 2 Lennar's share of gains on the sale of operating properties/investments — 43,308 The Multifamily segment manages and has investments in Multifamily Venture Fund I (the "LMV I") and Multifamily Venture Fund II LP (the "LMV II"), which are long-term multifamily development investment vehicles involved in the development, construction and ownership of class-A multifamily rental properties.
Homebuilding Segments At November 30, 2022, our Homebuilding operating segments and Homebuilding Other consisted of homebuilding divisions located in: East: Alabama, Florida, New Jersey, Pennsylvania and South Carolina Central: Georgia, Illinois, Indiana, Maryland, Minnesota, North Carolina, Tennessee and Virginia Texas: Texas West: Arizona, California, Colorado, Idaho, Nevada, Oregon, Utah and Washington Other: Urban divisions and other homebuilding related investments primarily in California, including FivePoint 25 Table of Contents The following tables set forth selected financial and operational information related to our homebuilding operations for the years indicated: Selected Financial and Operational Data Year Ended November 30, 2022 Gross Margins Operating Earnings (Loss) (Dollars in thousands) Sales of Homes Revenues Costs of Sales of Homes Gross Margin % Net Margins on Sales of Homes (1) Gross Loss on Sales of Land (2) Other Revenues Equity in Earnings (Loss) from Unconsolidated Entities Other Income (Expense), net Operating Earnings (Loss) East $ 9,201,412 6,341,272 31.1 % $ 2,222,835 (10,701) 3,991 1,300 22,831 2,240,256 Central 5,830,587 4,532,474 22.3 % 889,359 (171) 1,496 691 (2,144) 889,231 Texas 4,212,223 2,992,532 29.0 % 941,899 (9,387) 1,250 — (4,525) 929,237 West 12,513,277 9,114,818 27.2 % 2,775,430 (4,398) 3,916 4,412 (5,763) 2,773,597 Other (3) 21,386 44,371 (107.5) % (40,348) (3,891) 18,756 (23,638) (5,883) (55,004) Totals $ 31,778,885 23,025,467 27.5 % $ 6,789,175 (28,548) 29,409 (17,235) 4,516 6,777,317 Year Ended November 30, 2021 Gross Margins Operating Earnings (Loss) (Dollars in thousands) Sales of Homes Revenues Costs of Sales of Homes Gross Margin % Net Margins on Sales of Homes (1) Gross Margins on Sales of Land Other Revenues Equity in Earnings (Loss) from Unconsolidated Entities Other Income (Expense), net Operating Earnings (Loss) East $ 6,814,578 4,858,456 28.7 % $ 1,432,242 10,835 7,161 308 4,886 1,455,432 Central 4,807,194 3,731,567 22.4 % 713,229 4,271 1,977 1,088 (146) 720,419 Texas 3,204,609 2,238,204 30.2 % 725,065 6,347 1,630 498 (3,075) 730,465 West 10,503,305 7,694,870 26.7 % 2,179,980 1,394 4,778 5,388 906 2,192,446 Other (3) 18,419 39,116 (112.4) % (61,321) 1,435 13,678 (21,487) 695 (67,000) $ 25,348,105 18,562,213 26.8 % $ 4,989,195 24,282 29,224 (14,205) 3,266 5,031,762 (1) Net margins on sales of homes include selling, general and administrative expenses.
Homebuilding Segments At November 30, 2023, our Homebuilding operating segments and Homebuilding Other consisted of homebuilding divisions located in: East: Alabama, Florida, New Jersey, Pennsylvania and South Carolina Central: Georgia, Illinois, Indiana, Maryland, Minnesota, North Carolina, Tennessee and Virginia Texas: Texas West: Arizona, California, Colorado, Idaho, Nevada, Oregon, Utah and Washington Other: Urban divisions and other homebuilding related investments primarily in California, including FivePoint The following tables set forth selected financial and operational information related to our homebuilding operations for the years indicated: Selected Financial and Operational Data Year Ended November 30, 2023 Gross Margins Operating Earnings (Loss) (Dollars in thousands) Sales of Homes Revenues Costs of Sales of Homes Gross Margin % Net Margins on Sales of Homes (1) Gross Margins (Loss) on Sales of Land (2) Other Revenues Equity in Earnings (Loss) from Unconsolidated Entities Other Income (Expense), net Operating Earnings (Loss) East $ 9,563,108 6,776,991 29.1 % $ 2,030,953 17,266 30,702 20,165 48,244 2,147,330 Central 6,127,748 4,770,383 22.2 % 889,479 10,369 24,187 807 24,700 949,542 Texas 4,692,906 3,593,759 23.4 % 770,817 474 6,739 — 10,518 788,548 West 12,052,131 9,722,912 19.3 % 1,670,953 (10,288) 14,688 1,453 36,160 1,712,966 Other (3) 23,236 36,425 (56.8) % (34,576) — 15,579 (26,311) (25,371) (70,679) Totals $ 32,459,129 24,900,470 23.3 % $ 5,327,626 17,821 91,895 (3,886) 94,251 5,527,707 Year Ended November 30, 2022 Gross Margins Operating Earnings (Loss) (Dollars in thousands) Sales of Homes Revenues Costs of Sales of Homes Gross Margin % Net Margins on Sales of Homes (1) Gross Loss on Sales of Land (2) Other Revenues Equity in Earnings (Loss) from Unconsolidated Entities Other Income (Expense), net Operating Earnings (Loss) East $ 9,201,412 6,341,272 31.1 % $ 2,222,835 (10,701) 3,991 1,300 22,831 2,240,256 Central 5,830,587 4,532,474 22.3 % 889,359 (171) 1,496 691 (2,144) 889,231 Texas 4,212,223 2,992,532 29.0 % 941,899 (9,387) 1,250 — (4,525) 929,237 West 12,513,277 9,114,818 27.2 % 2,775,430 (4,398) 3,916 4,412 (5,763) 2,773,597 Other (3) 21,386 44,371 (107.5) % (40,348) (3,891) 18,756 (23,638) (5,883) (55,004) $ 31,778,885 23,025,467 27.5 % $ 6,789,175 (28,548) 29,409 (17,235) 4,516 6,777,317 (1) Net margins on sales of homes include selling, general and administrative expenses.
The average sales price of homes delivered was $480,000 in the year ended November 30, 2022, compared to $424,000 in the year ended November 30, 2021. Gross margins on home sales were $8.8 billion, or 27.5% (27.7% pre-impairment), in the year ended November 30, 2022, compared to $6.8 billion, or 26.8%, in the year ended November 30, 2021.
Gross margins on home sales were $7.6 billion, or 23.3%, in the year ended November 30, 2023, compared to $8.8 billion, or 27.5%, in the year ended November 30, 2022.
This was partially offset by distributions of capital from unconsolidated entities of $362 million, which primarily included (1) $177 million from Homebuilding unconsolidated entities (2) $128 million from Multifamily unconsolidated entities, and (3) $57 million from our Lennar Other segment, which included our unconsolidated Rialto real estate funds and distributions from strategic investments.
This was partially offset by distributions of capital from unconsolidated entities of $100 million, which primarily included (1) $70 million from Homebuilding unconsolidated entities, and (2) $29 million from our Lennar Other unconsolidated entities.
Homebuilding Texas: Revenues from home sales increased in 2022 compared to 2021, primarily due to an increase in the number of home deliveries and the average sales price. The increase in the number of home deliveries was primarily due to higher demand as the number of deliveries per active community increased.
Homebuilding Texas: Revenues from home sales increased in 2023 compared to 2022, primarily due to an increase in the number of home deliveries, which was partially offset by a decrease in the average sales price of homes delivered. The increase in the number of home deliveries was primarily due to an increase in the number of active communities.
These were partially offset by (1) $344 million of reductions in liabilities related to consolidated inventory not owned due to land sales to land banks, (2) $262 million of net borrowings under our Financial Services warehouse facilities, and (3) receipts related to noncontrolling interests of $70 million.
These were partially offset by (1) $29 million of net borrowings under our Financial Services warehouse facilities, and (2) receipts related to noncontrolling interests of $21 million.
This was partially offset by a $2.4 billion increase in inventories due to strategic land purchases, land development and construction costs and an increase in receivables of $422 million.
This was partially offset by a $1.7 billion increase in inventories due to strategic land purchases, land development and construction costs, $672 million increase in deposits and pre-acquisition costs on real estate as we increased the percentage of controlled homesites, and an increase in receivables of $422 million.
The breakout of the Multifamily segment's equity investments in unconsolidated entities and the development activities by stage were as follows: (Dollars in thousands) November 30, 2022 Under construction/owned 25 Partially completed and leasing 9 Completed and operating 49 Total unconsolidated joint ventures 83 Total development costs $ 10,043,000 29 Table of Contents As of November 30, 2022, our Multifamily segment also had a pipeline of potential future projects, which were under contract or had letters of intent, totaling approximately $8.7 billion in anticipated development costs across a number of states that will be developed primarily by unconsolidated entities.
The breakout of the Multifamily segment's equity investments in unconsolidated entities and the development activities by stage were as follows: (Dollars in thousands) November 30, 2023 Under construction/owned 16 Partially completed and leasing 8 Completed and operating 58 Total unconsolidated joint ventures 82 Total development costs $ 9,883,073 As of November 30, 2023, our Multifamily segment also had a pipeline of potential future projects, which were under contract or had letters of intent, totaling approximately $6.2 billion in anticipated development costs across a number of states that will be developed primarily by unconsolidated entities. 30 Table of Contents Lennar Other Segment Our Lennar Other segment includes fund investments we retained subsequent to our sale of the Rialto investment and asset management platform as well as strategic investments in technology companies that are looking to improve the homebuilding and financial services industries to better serve homebuyers and homeowners and increase efficiencies.
New Orders (2): At November 30, For the Years Ended November 30, Active Communities Homes Dollar Value (In thousands) Average Sales Price 2022 2021 2022 2021 2022 2021 2022 2021 East 316 345 21,649 20,566 $ 9,516,178 7,908,164 $ 440,000 385,000 Central 313 302 12,020 12,871 5,351,534 5,366,197 445,000 417,000 Texas 235 241 11,424 12,382 3,596,037 3,833,294 315,000 310,000 West 341 372 15,990 18,703 10,604,593 11,725,035 663,000 627,000 Other 3 3 22 21 18,608 20,513 846,000 977,000 Total 1,208 1,263 61,105 64,543 $ 29,086,950 28,853,203 $ 476,000 447,000 Of the total new orders listed above, 261 homes with a dollar value of $116.7 million and an average sales price of $447,000 represent new orders from unconsolidated entities for the year ended November 30, 2022, compared to 136 new orders with a dollar value of $48.8 million and an average sales price of $359,000 for the year ended November 30, 2021.
New Orders (2): At November 30, For the Years Ended November 30, Active Communities Homes Dollar Value (In thousands) Average Sales Price 2023 2022 2023 2022 2023 2022 2023 2022 East 337 316 20,884 21,649 $ 8,760,877 9,516,178 $ 420,000 440,000 Central 291 313 13,204 12,020 5,494,319 5,351,534 416,000 445,000 Texas 246 235 15,789 11,424 4,331,763 3,596,037 274,000 315,000 West 384 341 19,199 15,990 11,897,996 10,604,593 620,000 663,000 Other 2 3 35 22 23,600 18,608 674,000 846,000 Total 1,260 1,208 69,111 61,105 $ 30,508,555 29,086,950 $ 441,000 476,000 Of the total new orders listed above, 321 homes with a dollar value of $152.9 million and an average sales price of $476,000 represent new orders from unconsolidated entities for the year ended November 30, 2023, compared to 261 new orders with a dollar value of $116.7 million and an average sales price of $447,000 for the year ended November 30, 2022.
We have appealed this judgment since we believe there were clear errors of law made by the trial court. Excluding this one-time charge, operating earnings were $417.4 million, compared to operating earnings of $490.4 million in the year ended November 30, 2021.
The operating earnings in the year ended November 30, 2022 included a $35.5 million one-time charge due to an increase in a litigation accrual in the third quarter of fiscal 2022 related to a court judgment. We have appealed this judgment since we believe there were clear errors of 25 Table of Contents law made by the trial court.
We regularly monitor the results of our Multifamily unconsolidated joint ventures and any trends that may affect their future liquidity or results of operations. We also monitor the performance of Multifamily joint ventures in which we have investments on a regular basis to assess compliance with debt covenants.
We also monitor the performance of Multifamily joint ventures in which we have investments on a regular basis to assess compliance with debt covenants. For those joint ventures not in compliance with the debt covenants, we evaluate and assess possible impairment of our investment.
As a percentage of revenues from home sales, selling, general and administrative expenses improved to 6.2% in the year ended November 30, 2022, from 7.1% in the year ended November 30, 2021, due to a decrease in broker commissions, an increase in leverage, and benefits of our technology efforts.
As a percentage of revenues from home sales, selling, general and administrative expenses increased to 6.9% in the year ended November 30, 2023, from 6.2% in the year ended November 30, 2022, primarily due to an increase in the use of brokers due to current market conditions.
Lennar Other operating loss for the year ended November 30, 2022 was primarily due to negative mark-to-market adjustments on our publicly traded technology investments. The operating earnings for the year ended November 30, 2021 were primarily due to positive mark-to-market adjustments on our publicly traded technology investments and the gain on the sale of the our solar business.
Lennar Other operating loss for the year ended November 30, 2023 was primarily due to negative mark-to-market adjustments of $50.2 million on our publicly traded technology investments and a $65.0 million write-off of one of our non-public technology investments.
The Multifamily segment manages and has investments in LMV I and LMV II, which are long-term multifamily development investment vehicles involved in the development, construction and ownership of class-A multifamily rental properties. Details of each as of and during the year ended November 30, 2022 are included in Note 3 of the Notes to Consolidated Financial Statements.
The Multifamily segment manages and has investments in LMV I, LMV II and Canada Pension Plan Investments Fund, which are long-term multifamily development investment vehicles involved in the development, construction and ownership of class-A multifamily rental properties.
Future events and their effects cannot be determined with absolute certainty. Therefore, the determination of estimates requires the exercise of judgment. Actual results could differ from those estimates, and such differences may be material to our consolidated financial statements.
Therefore, the determination of estimates requires the exercise of judgment. Actual results could differ from those estimates, and such differences may be material to our consolidated financial statements. Listed below are those policies and estimates that we believe are critical and require the use of significant judgment in their application.
We experienced cancellation rates in our Homebuilding segments and Homebuilding other as follows: Years Ended November 30, 2022 2021 East 11 % 8 % Central 12 % 7 % Texas 27 % 18 % West 21 % 10 % Other 49 % — % Total 17 % 10 % Backlog: At November 30, Homes Dollar Value (In thousands) Average Sales Price 2022 2021 2022 2021 2022 2021 East 8,706 7,932 $ 3,820,714 3,448,719 $ 439,000 435,000 Central 4,025 5,104 1,855,430 2,321,174 461,000 455,000 Texas 2,697 4,266 837,083 1,453,270 310,000 341,000 West 3,440 6,465 2,226,477 4,135,162 647,000 640,000 Other 1 4 1,164 3,942 1,164,000 986,000 Total 18,869 23,771 $ 8,740,868 11,362,266 $ 463,000 478,000 Of the total homes in backlog listed above, 166 homes with a backlog dollar value of $77.8 million and an average sales price of $469,000 represent the backlog from unconsolidated entities at November 30, 2022, compared to 79 homes with a backlog dollar value of $28.6 million and an average sales price of $363,000 at November 30, 2021.
(2) New orders represent the number of new sales contracts executed with homebuyers, net of cancellations, during the years ended November 30, 2023 and 2022. 27 Table of Contents We experienced cancellation rates in our Homebuilding segments and Homebuilding other as follows: Years Ended November 30, 2023 2022 East 17 % 11 % Central 15 % 12 % Texas 20 % 27 % West 13 % 21 % Other 8 % 49 % Total 16 % 17 % Backlog: At November 30, Homes Dollar Value (In thousands) Average Sales Price 2023 2022 2023 2022 2023 2022 East 6,975 8,706 $ 2,861,937 3,820,714 $ 410,000 439,000 Central 2,768 4,025 1,222,002 1,855,430 441,000 461,000 Texas 1,895 2,697 475,941 837,083 251,000 310,000 West 3,251 3,440 2,072,342 2,226,477 637,000 647,000 Other 3 1 1,528 1,164 509,000 1,164,000 Total 14,892 18,869 $ 6,633,750 8,740,868 $ 445,000 463,000 Of the total homes in backlog listed above, 147 homes with a backlog dollar value of $74.5 million and an average sales price of $507,000 represent the backlog from unconsolidated entities at November 30, 2023, compared to 166 homes with a backlog dollar value of $77.8 million and an average sales price of $469,000 at November 30, 2022.
Our overall effective income tax rate was lower in 2022 primarily due to the resolution of an uncertain state tax position and the retroactive reinstatement of the energy efficient home credits for 2022, resulting from the passage of the Inflation Reduction Act by Congress.
Our overall effective income tax rate was higher than last year, primarily due to the resolution of an uncertain state tax position and the retroactive reinstatement of the new energy efficient home credit, both during 2022.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeInformation Regarding Interest Rate Sensitivity Principal (Notional) Amount by Expected Maturity and Average Interest Rate November 30, 2022 Years Ending November 30, Fair Value at November 30, (Dollars in millions) 2023 2024 2025 2026 2027 Thereafter Total 2022 ASSETS Financial Services: Loans held-for-investment, net: Fixed rate $ 1.0 1.0 1.0 1.1 1.1 32.7 37.9 37.9 Average interest rate 3.6 % 3.6 % 3.6 % 3.6 % 3.6 % 3.6 % 3.6 % — Variable rate $ 7.3 — — — — 0.5 7.8 7.8 Average interest rate 8.6 % — — — — 2.8 % 8.3 % — LIABILITIES Homebuilding: Senior notes and other debts payable: Fixed rate $ 223.1 1,537.4 566.1 404.5 1,265.3 42.4 4,038.8 3,993.2 Average interest rate 3.9 % 5.0 % 4.7 % 5.2 % 4.8 % 6.2 % 4.9 % — Financial Services: Notes and other debts payable: Fixed rate $ — — — — — 133.3 133.3 134.0 Average interest rate — — — — — 3.4 % 3.4 % — Variable rate $ 2,001.8 — — — — — 2,001.8 2,001.8 Average interest rate 5.8 % — — — — — 5.8 % — Multifamily: Notes and other debts payable: Fixed rate $ 13.5 — — — — — 13.5 13.5 Average interest rate 0.0 % — — — — — 0.0 % — Variable rate $ — 3.2 — — — — 3.2 3.2 Average interest rate — 3.6 % — — — — 3.6 % — 42 Table of Contents
Biggest changeInformation Regarding Interest Rate Sensitivity Principal (Notional) Amount by Expected Maturity and Average Interest Rate November 30, 2023 Years Ending November 30, Fair Value at November 30, (Dollars in millions) 2024 2025 2026 2027 2028 Thereafter Total 2023 ASSETS Financial Services: Investments held-to-maturity: Fixed rate $ — — — — — 140.7 140.7 139.4 Average interest rate — — — — — 3.6 % 3.6 % — Loans held-for-investment, net: Fixed rate $ 1.2 1.3 1.3 1.4 1.4 46.1 52.7 52.7 Average interest rate 4.0 % 4.0 % 4.0 % 4.0 % 4.0 % 4.0 % 4.0 % — Variable rate $ — — — 0.1 0.1 2.5 2.7 2.7 Average interest rate — — — 4.9 % 4.9 % 4.9 % 4.9 % — LIABILITIES Homebuilding: Senior notes and other debts payable: Fixed rate $ 483.4 673.9 455.9 1,165.0 4.0 33.4 2,815.6 2,785.7 Average interest rate 4.5 % 4.7 % 5.1 % 4.8 % 3.0 % 5.9 % 4.8 % — Financial Services: Notes and other debts payable: Fixed rate $ — — — — — 131.1 131.1 131.7 Average interest rate — — — — — 3.4 % 3.4 % — Variable rate $ 2,032.7 — — — — — 2,032.7 2,032.7 Average interest rate 7.1 % — — — — — 7.1 % — Multifamily: Notes and other debts payable: Fixed rate $ 0.2 — — — — — 0.2 0.2 Average interest rate 0.0 % — — — — — 0.0 % — Variable rate $ 3.5 — — — — — 3.5 3.5 Average interest rate 3.6 % — — — — — 3.6 % — 43 Table of Contents
For loans held-for-investment, net and investments held-to-maturity, senior notes and other debts payable and notes and other debts payable, the table presents principal cash flows and related weighted average effective interest rates by expected maturity dates and estimated fair values at November 30, 2022. Weighted average variable interest rates are based on the variable interest rates at November 30, 2022.
For loans held-for-investment, net and investments held-to-maturity, senior notes and other debts payable and notes and other debts payable, the table presents principal cash flows and related weighted average effective interest rates by expected maturity dates and estimated fair values at November 30, 2023. Weighted average variable interest rates are based on the variable interest rates at November 30, 2023.
In our Financial Services operations, we utilize mortgage backed securities forward commitments, option contracts and investor commitments to protect the value of rate-locked commitments and loans held-for-sale from fluctuations in mortgage-related interest rates. 41 Table of Contents To mitigate interest risk associated with LMF Commercial's loans held-for-sale, we use derivative financial instruments to hedge our exposure to risk from the time a borrower locks a loan until the time the loan is securitized.
In our Financial Services operations, we utilize mortgage backed securities forward commitments, option contracts and investor commitments to protect the value of rate-locked commitments and loans held-for-sale from fluctuations in mortgage-related interest rates.
We hedge our interest rate exposure through entering into interest rate swap futures. We also manage a portion of our credit exposure by buying protection within the CMBX and CDX markets. We do not enter into or hold derivatives for trading or speculative purposes.
We also manage a portion of our credit exposure by buying protection within the CMBX and CDX markets. We do not enter into or hold derivatives for trading or speculative purposes. 42 Table of Contents The table below provides information at November 30, 2023 about our significant instruments that are sensitive to changes in interest rates.
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The table below provides information at November 30, 2022 about our significant instruments that are sensitive to changes in interest rates.
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To mitigate interest risk associated with LMF Commercial's loans held-for-sale, we use derivative financial instruments to hedge our exposure to risk from the time a borrower locks a loan until the time the loan is securitized. We hedge our interest rate exposure through entering into interest rate swap futures.

Other LEN 10-K year-over-year comparisons