Fitch Ratings has revised the outlook on Lennar Corporation to stable from positive but left the company's long-term issuer default rating and senior unsecured debt ratings unchanged at BBB+. The move reflects ongoing pressure on margins amid weak demand and persistently high sales incentives, according to the rating agency.
Fitch projects a marked decline in Lennar's profitability over the next two fiscal years. The agency expects EBITDA margins to fall to 6%-7% in fiscal 2026 and to 7%-8% in fiscal 2027. Those forecasts represent a step down from 8.4% in fiscal 2025 and the considerably higher margins recorded in previous years - 14.2% in fiscal 2024 and 16.5% in fiscal 2023.
Sales incentives are a central factor in Fitch's outlook. The rating agency anticipates incentives to remain around 14% of Lennar's revenues in fiscal 2026, contributing to the compressed margin profile. As a result of the lower expected EBITDA, Fitch sees Lennar's EBITDA leverage rising to about 2.2x at fiscal year-end 2026, a level modestly above the 2.0x sensitivity threshold for a BBB+ rating in Fitch's framework.
On macro conditions, Fitch expects the U.S. housing market to stay subdued with sustained affordability challenges and weak consumer confidence. The agency forecasts new home sales to decline by 2%-3% in 2026, while existing home sales are expected to remain essentially flat. Against that backdrop, Fitch projects Lennar's homebuilding revenues will decrease 2%-3% in 2026, driven by lower home prices and fewer deliveries.
Despite the more constrained outlook, Fitch reaffirmed the BBB+ rating, noting factors that support the rating. These include Lennar's substantial scale and leading positions in its local markets, broad geographic diversification, a consumer and product focus, modest leverage, and ongoing execution of a land-light strategy. The agency highlighted Lennar's standing as the nation's second-largest homebuilder.
At the end of the first quarter of fiscal 2026, Lennar controlled 536,000 lots, of which 9% were owned and 91% were held under options, a land position the rating agency factored into its assessment. Liquidity metrics cited by Fitch showed Lennar finished first quarter 2026 with $2.1 billion of homebuilding cash and no borrowings under its $3.125 billion revolver.
Share repurchases remain a component of Fitch's rating case. Lennar bought back $269.7 million of its stock in the first quarter of fiscal 2026, following repurchases of $1.8 billion in fiscal 2025 and $2.3 billion in fiscal 2024. Fitch's base rating case assumes the company will repurchase at least $700 million of shares annually in fiscal 2026 and 2027.
In summary, Fitch has tempered its view of Lennar's near-term prospects by moving the outlook to stable as the company faces narrowing margins, elevated incentives and slightly higher leverage, while keeping the BBB+ rating based on scale, market positions and liquidity.