What changed in this filing

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Item 1A. Risk Factors

2025-01-23 compared with 2024-01-26 · 108 added, 84 removed, 247 unchanged (44% of the section changed)

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Demand for homes we build may be adversely affected by a variety of macroeconomic factors beyond our control.

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.

Demand for our homes is dependent on a variety of macroeconomic factors, such as employment levels, inflation, interest rates, changes in stock market valuations, consumer confidence, consumer income, 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.

These factors can be significantly adversely affected by a variety of factors beyond our control.

Currently, potential purchasers of our homes are being affected by inflation and increased interest rates, both of which increase what homebuyers have to pay for new homes.

Currently, potential purchasers of our homes are being affected by inflation and continued high interest rates, both of which increase what homebuyers have to pay for new homes.

Negative publicity could hurt our reputation, which could cause our revenues or results of operations to decline.

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Our strategies for our core homebuilding and mortgage finance businesses, and any related initiatives or actions, may not be successful.

Principal among our current strategies is continuing to reduce the inventory of land we own (i.e., to become a land lighter company), and to control a greater portion of the land we expect to use through options or other contractual arrangements.

We cannot provide assurance that this strategy, or other strategies we will follow, will increase our value.

possible that the land lighter or other strategies will reduce, rather than increase, the value and profitability of our core businesses.

It is 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.

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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.

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.

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.

During fiscal 2024 and 2023, a number of our markets experienced significant softening that required us to make substantial price reductions in order to maintain a steady sales pace.

It is possible that a continued market weakness could result in a further decline in demand for new homes with resulting price reductions which could require 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.

Weak demand may preclude us from raising home prices enough to keep up with the rate of inflation, which could reduce our profit margins.

Weaker demand has precluded us from raising home prices enough to keep up with the rate of inflation, which has reduced our profit margins.

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.

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.

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.

However, it is possible that those steps will not be successful, and that the combination of inflation and reduced demand for new homes will adversely affect our profitability.

Inflation may also accompany higher interest rates, which could adversely impact potential buyers’ ability to obtain financing on favorable terms, thereby decreasing demand for our homes.

We are taking steps that we hope will enable us to maintain acceptable operating margins in fiscal 2025.

However, it is possible that those steps will not be successful, and that a combination of inflation and reduced demand for new homes driven by an increase in mortgage interest rates will continue to adversely affect our profitability.

Further increase in mortgage interest rates could reduce potential buyers’ ability or desire to obtain financing with which to buy homes.

Housing has been considerably impacted by the more than doubling of mortgage interest rates in 2022, and continued increases in 2023.

Housing has been considerably impacted by the more than doubling of mortgage interest rates in 2022 and 2023, and small decreases in 2024.

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.

We are constantly purchasing land, or entering into arrangements to purchase land, for use in our homebuilding operations.

We are constantly purchasing land, or acquiring options 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.

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Although we have reduced our exposure to costs of that type, a certain amount of exposure is inherent in our homebuilding business.

If market conditions were to deteriorate significantly in the future, we could again be required to make significant write-downs of the carrying value of our land inventory and incur costs relating to decisions not to exercise land purchase options.

If market conditions were to deteriorate significantly in the future, we could again be required to make significant write-downs of the carrying value of our land inventory and write-offs costs relating to decisions not to exercise land purchase options.

Current and threatened international conflicts could affect demand for the homes we build.

There currently are ongoing conflicts involving Ukraine and Israel.

While we do not acquire essential components of the homes we build from either of those countries and while as of November 30, 2024, neither of these conflicts has had a material direct impact on our consolidated financial performance, those and other possible 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.

In addition, the closure of or limitation on the use of significant shipping routes as a result of these and related conflicts may result in interruptions to the supply of certain key raw materials that are used in products which we incorporate in the homes we build, increasing their cost.

International conflicts also may lead potential homebuyers to decide not to invest in new homes at this time, which could have a material impact on our business operations and financial performance.

Our results of operations and financial condition may be adversely affected by public health issues, and resulting governmental actions

The United States has experienced, and may experience in the future, outbreaks of contagious diseases that affect public health and public perception of health risk.

The COVID-19 pandemic caused the shutdown of large portions of our national economy.

With the exception of a period in March and April of 2020, the COVID-19 pandemic and its effects on the economy did not adversely affect our home sales.

However, this may not be the case with any future public health issues.

The extent to which public health issues impact our results will depend on future developments, which cannot be predicted.

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.

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.

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.

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,

increasing their cost.

If either or both conflicts escalate further or if additional countries join either conflict, that may lead potential homebuyers to decide not to invest in new homes at this time, which could have a material impact on our business operations and financial performance.

Operational Risks

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This increase in cost and limitation in coverage has also increased our self-insured retentions and decreased our total coverage.

It is possible in the future that insurance would not be available at commercially reasonable rates, which may cause us to reduce or eliminate general liability insurance.

It is possible in the future that insurance would not be available at commercially reasonable rates.

Even when insurance is available, the high cost of insurance has recently led us to self-insure against some risks .

Excessive health and safety incidents relating to our operations could be costly to us.

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While safety is a priority on our land development and construction sites, we cannot always control the way work is performed by subcontractors, including whether they comply with laws and regulations designed to maximize the safety of construction workers.

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.

Failures in health and safety performance on our

worksites may result in penalties for non-compliance with relevant regulatory requirements and in our subcontractors having difficulty attracting the workers they need as well as 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.

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.

Despite our detailed specifications and quality control procedures, in some cases, subcontractors may use improper construction processes or defective materials.

Defective products widely used by the homebuilding industry can result in the need to perform extensive repairs to large numbers of homes.

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We incur many costs even before we begin to build homes in a community.

Depending on the stage of development a land parcel is in when we acquire it, these may include costs of preparing land, finishing and entitling lots, installing roads, sewers, water systems and other utilities, and taxes and other costs related to ownership of the land on which we plan to build homes.

Depending on the stage of development a land parcel is in when we acquire it (or when it is acquired by Millrose or another land banking entity), these may include costs of preparing land, finishing and entitling lots, installing roads, sewers, water systems and other utilities, and taxes and other costs related to ownership of the land on which we plan to build homes.

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.

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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.

In 2022 and 2023, the Federal Reserve steadily raised benchmark interest rates and the Federal Reserve did not begin reducing benchmark interest rates until well into 2024.

At November 30, 2024, we had no borrowings under our Credit Facility.

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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.

If there is a weakening of the housing market, or if mortgage financing becomes less available or more expensive than it currently is or is expected to be more homebuyers may cancel their agreements of sale with us, which would have an adverse effect on our business and results of operations.

Our success to a substantial extent depends on our ability to acquire land that is suitable for residential homebuilding and meets our land investment criteria.

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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 if land banks are not able to raise necessary investor funds or if we are unable to create and maintain relationships with land banks.

As part of our land acquisition strategy, we have refined our relationships with strategic land banks with a view toward using land banks to gain future access to land without having to own it.

If we are unable to identify or to develop and maintain the necessary relationships with suitable land banks in the future, we will not be able to fully implement our strategy.

We could be hurt if land banks are not able to raise investor funds needed to enable them to supplement land acquisitions by Millrose.

We formed and intend to spin off Millrose to make it a recycling source of land acquisition funding.

However, Millrose will not have the capacity to provide all the land acquisition funding we require, and Millrose’s policies will limit its acquisitions to land we expect to use within five years.

We will look to traditional land banks to acquire at least some of the

land that Millrose will not or cannot acquire.

Most land banks are funds that use financial investor capital to finance land acquisitions.

If returns to investors in land banks are not sufficient to attract investor funds and land banks are not able to identify alternative sources of funding, we would no longer have access to land banks and instead might have to purchase our land directly from landowners.

This would significantly impair our ability to carry out our strategy of reducing our inventory of owned land.

This could significantly impair our ability to carry out our strategy of reducing our inventory of owned land.

We could be hurt by refusals of owners of land to honor options or contracts to sell land to us.

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Our insurance may not cover business interruptions or losses resulting from these events and our results of operations could be adversely affected by these events.

Additionally, natural disasters and severe weather conditions may increase the cost of homeowner's insurance or create difficulties in obtaining homeowners’ insurance at all, which could reduce the number of potential buyers who can afford, or are willing, to purchase homes we build in affected areas.

For example, the incidence of large wildfires in California has substantially increased in recent years and the risk of future wildfires is expected to increase.

The housing markets in areas affected by California’s recent wildfires have been adversely affected by increased insurance costs and difficulties in obtaining homeowners’ insurance, which we expect to be exacerbated by the recent wildfires in Los Angeles.

If our homebuyers are not able to obtain suitable financing, that would reduce demand for our homes and our home sales revenues.

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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.

Among other things, changes made by Fannie Mae, Freddie Mac, Ginnie Mae and FHA/VA to sponsored mortgage programs, as well as changes made in recent years by private mortgage insurance companies, have reduced the ability of a number of potential homebuyers to qualify for mortgages.

Among other things, changes made by Fannie Mae, Freddie Mac, Ginnie Mae and FHA/VA in recent years to sponsored mortgage programs, as well as changes made in recent years by private mortgage insurance companies, have reduced the ability of a number of potential homebuyers to qualify for mortgages.

Principal among these are higher income requirements, larger required down payments, increased reserves and higher required credit scores.

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Changes in tax laws could increase the cost of owning a home.

Currently, there are significant income tax benefits from owning a home, including deductibility of interest on mortgage loans incurred to finance home purchases.

If federal or state tax laws are changed to eliminate or reduce any of these income tax benefits or if personal income tax rates were to increase, the after-tax cost of homeownership could measurably increase and diminish consumer interest in buying a home, with a resulting adverse effect on our revenues.

Currently, there are significant income tax benefits from owning a home, including deductibility of all or some interest on mortgage loans incurred to finance home purchases and the deductibility of property taxes, subject to certain limits.

If federal or state tax laws are changed to eliminate or reduce any of these income tax benefits or if personal income or property tax rates were to increase, the after-tax cost of homeownership could measurably increase and diminish consumer interest in buying a home, with a resulting adverse effect on our revenues.

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 2024 were made to buyers of homes we built.

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.

If our ability to sell mortgages into the secondary market is impaired, that could significantly reduce our ability to sell homes unless we are willing to become a long-term investor in loans we originate.

Therefore, a decrease in the demand for our homes or an increase in the mortgage financing obtained by homebuyers from lenders other than our Financial Services segment would adversely affect the revenues of this aspect of our business.

If our ability to sell residential mortgages into the secondary market is impaired, that could significantly reduce our ability to sell homes unless we are willing to become a long-term investor in loans we originate.

Substantially all of the residential mortgage loans we originate are sold within a short period in the secondary mortgage market on a servicing-released, non-recourse basis.

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Financing Risks

Failure to comply with the covenants and conditions imposed by our borrowing facilities could restrict future borrowing or cause our debt to become immediately due and payable.

Failure to comply with the covenants and conditions imposed by our lenders could restrict future borrowing or cause our debt to become immediately due and payable.

The agreement governing our Credit Facility (the "Credit Agreement") makes it a default if we fail to pay principal or interest when it is due (subject, in some instances, to grace periods) or to comply with various covenants, including covenants regarding financial ratios.

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If we default under the Credit Agreement or our warehouse facilities, the lenders will have the right to terminate their commitments to lend and to require immediate repayment of all outstanding borrowings.

This could reduce our available funds at a time when we are having difficulty generating all the funds we need from our operations, in capital markets or otherwise, and restrict our ability to obtain financing in the future.

This could reduce our available funds at a time when we are having difficulty generating all the funds we need from our operations, in the capital markets or otherwise, and restrict our ability to obtain financing in the future.

In addition, if we default under the Credit Agreement or our warehouse facilities, it could cause the amounts outstanding under our senior notes to become immediately due and payable, which would seriously adversely impact our consolidated financial condition.

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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.

Sales of senior debt into the capital markets has, until recently, been a significant source of funding for our operations and acquisitions.

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 reduced our outstanding senior notes during fiscal 2024 by $554.0 million, but we still have a significant amount outstanding.

Sales of senior debt into the capital markets was historically a significant source of funding for our operations and acquisitions.

Our level of indebtedness exposes us to a number of risks, including:

• We may be more vulnerable to volatility within the capital market, 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;

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Our corporate credit rating and ratings of our senior notes affect, among other things, our ability to access new capital, especially debt, and the costs of that new capital.

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.

Among other things, we have often relied on proceeds of debt issuances to pay the principal of existing

senior notes when they mature.

Historically, a substantial portion of our access to capital has been through the issuance of senior notes, of which we have approximately $2.0 billion outstanding, net of debt issuance costs, as of November 30, 2024.

Among other things, we have often relied on proceeds of debt issuances to pay the principal of existing senior notes when they mature.

Negative changes in the ratings of our senior notes could make it difficult for us to sell senior notes in the future and could result in more stringent covenants and higher interest rates with regard to new senior notes we issue.

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We expect these facilities to be renewed or replaced with other facilities when they mature.

If we were unable to renew or replace these facilities on favorable terms or at all when they mature, that could seriously impede the activities of our Financial Services segment, which would have an impact on our financial results.

If we are unable to renew or replace these facilities on favorable terms or at all when they mature, that could seriously impede the activities of our Financial Services segment, which would have an impact on our financial results.

An inability to obtain performance bonds or post letters of credit could adversely affect our operations.

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Our ability to obtain surety bonds primarily depends upon our credit rating, financial condition, past performance and similar factors, the capacity of the surety market and the underwriting practices of surety bond issuers.

Our ability to obtain surety bonds also can be impacted by the willingness of insurance companies to issue performance bonds for construction and development activities.

Our ability to obtain surety bonds also can be impacted by unwillingness of insurance companies to issue performance bonds for construction and development activities.

If we were unable to obtain surety bonds when required, our operations could be adversely affected.

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government has imposed new, or increased existing, tariffs on an array of imported materials and products that are used in the homes we build, including lumber, steel, aluminum, solar panels and washing machines, which increases the costs of those items.

The tariffs that have been imposed or increased have impacted our construction costs and caused disruptions in our supply chains, and new or increased tariffs could result in further cost increases.

These cost increases will either require us to increase prices or negatively impact our profit margins.

The tariffs that have been imposed or increased have impacted our

construction costs and caused disruptions in our supply chains.

In addition, President Trump has expressed a desire to impose substantial new or increased tariffs.

Any widespread imposition of new or increased tariffs could increase the cost of, and reduce the demand for, homes we build and any cost increases will either require us to increase prices or negatively impact our profit margins.

New or increased tariffs could also negatively affect U.S.

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We can be injured by improper acts of persons over whom we do not have control.

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.

that do not comply with applicable laws, regulations or governmental guidelines.

When we learn of practices that do not comply with applicable laws or regulations, including practices relating to homes, buildings or multifamily rental properties we build or finance, we move actively to stop the non-complying practices as soon as possible and we have taken disciplinary action with regard to associates of ours who were aware of non-complying practices and did not take steps to address them, including in some instances terminating their employment.

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We do not have the ability to control what these contract parties pay their employees or the work rules they impose on their employees.

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 wage and hour laws, workers’ compensation and other work-related laws by firms whose employees are performing contracted for services.

While the future of joint employer liability remains uncertain, if we were deemed to be a joint employer of our subcontractors’ employees, we could become responsible for collective bargaining obligations of, and labor law violations by, our subcontractors.

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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 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.

However, the timing of this spin-off is currently uncertain and will depend upon general economic and market conditions over which we have no control.

As a result, we may not be able to consummate this transaction within any particular time period or at all.

The Millrose Spin-Off of much of our land assets may not occur on the timeline we expect or at all and we may not realize some or all of the expected benefits from this transaction even if completed.

We previously announced that we expect to spin off a significant portion of our land assets from our balance sheet through the spin-off of Millrose.

Millrose has filed a registration statement on Form S-11 with the Securities and Exchange Commission, which became effective on January 17, 2025, and our Board declared a special stock dividend to effect the Millrose Spin-Off to Lennar stockholders of record as of January 21, 2025, with a distribution date of February 7, 2025.

However, the completion of the Millrose Spin-Off remains subject to the satisfaction of a number of conditions, including the execution of certain agreements relating to the Millrose Spin-Off and other customary conditions, some of which will not occur until shortly prior to the distribution date.

The failure to satisfy all of the required conditions, as well as other factors outside of our control, including general economic and market conditions, could delay the completion of the Millrose Spin-Off relative to the anticipated timeline or prevent it from occurring.

Any delay in the completion of the Millrose Spin-Off or any change to the anticipated terms of the transaction could reduce the expected benefits of the transaction or delay the time at which such benefits are realized.

There can also be no assurance that the anticipated benefits of the transaction will be realized if the Millrose Spin-Off is completed, or that the costs will not exceed the anticipated benefits.

In addition, whether or not the Millrose Spin-Off is ultimately completed, we have incurred, and expect to continue to incur, costs associated with the planned transaction and the pendency of the planned transaction has imposed and may continue to impose challenges on us, including the diversion of management and employee time on matters relating to the proposed transaction while continuing to operate in the ordinary course of business.

If the planned Millrose Spin-Off is completed, Millrose may fail to perform under various transaction agreements that we expect to enter into in connection with the Millrose Spin-Off and our homebuilding operations could be seriously disrupted if Millrose refused to honor purchase options it is expected to grant us.

If completed, in connection with the Millrose Spin-Off, we expect to enter into a number of agreements with Millrose, pursuant to which Millrose will provide Lennar with land acquisition and horizontal development financing solutions.

We would rely on Millrose to satisfy its performance and payment obligations under these agreements.

If Millrose were unable or unwilling to satisfy its obligations under these agreements, including its indemnification obligations, we could incur operational difficulties and/or losses.

In particular, if the planned Millrose Spin-Off is completed, we expect to transfer a significant portion of our inventory of undeveloped and partially developed land, as well as some finished homesites, to Millrose, which would be an independent, externally managed, publicly traded company.

In addition, if the planned Millrose Spin-Off is completed, we expect that in the future we will do a number of our land acquisitions through arrangements under which Millrose will acquire land we specify and grant us options to purchase the land when it is developed into finished homesites.

That land is and would be essential to our homebuilding operations, and we expect to have options that would give us access to that land when it is developed into finished homesites.

We also expect that our options and other agreements with Millrose would contain provisions requiring Millrose to deliver homesites to us even if it is disputing our right to exercise options.

However, if Millrose were to refuse to honor option exercises despite requirements that it honor them, that could delay or prevent us from building and delivering homes, while we try to get courts to require Millrose to deliver homesites to us.

Even if we were to succeed in any legal proceedings against Millrose, there is no guarantee that a court would compel Millrose to deliver the homesites to us.

Monetary damages may not be sufficient for us to fully recoup our losses, particularly if we have contracts with homebuyers with respect

to the disputed homesites, and we would not be able to satisfy our obligations with respect to those contracts.

Any loss of access to our homesites could injure both our revenues and our reputation as a reliable homebuilder.

If the planned Millrose Spin-Off is completed, we may lose access to the land or homesites we would contribute to Millrose or that Millrose acquires in the future pursuant to our specifications in the event of lender foreclosures or bankruptcy proceedings.

If the planned Millrose Spin-Off is completed, Millrose will be an independent, publicly traded company, and in the future may enter into various “secured financing arrangements,” which may include but are not limited to secured or collateralized loans, or any other transactions where assets may be pledged or used as collateral to secure the financing instrument.

In connection with these arrangements, Millrose would have the right to pledge or use as collateral the inventory of land assets we would transfer to them in connection with the Millrose Spin-Off and the land assets that Millrose acquires in the future pursuant to our specifications.

If Millrose were to default under these arrangements, the lenders of these arrangements may foreclose on these assets.

Similarly, if Millrose were become subject to bankruptcy or insolvency proceedings, Millrose may forfeit its assets, including these assets, to any and all creditors or creditors may reject our purchase options in bankruptcy.

If we were unable to successful protect our purchase options, buy the applicable assets directly from the lenders or otherwise retain access to these assets, that could delay or prevent us from building and delivering homes and cause us significant harm.

Risks Related to Ownership of our Stock

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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.

The trading price for our Class A common stock and our Class B common stock may continue to be volatile.

The trading price of our stock has at times experienced significant volatility and may continue to be volatile.

In addition to the factors discussed in this report, the trading prices of our Class A common stock and our Class B common stock have fluctuated, and may continue to fluctuate widely, in response to various factors, many of which are beyond our control, including, among others, developments in our industry, the activities of our peers and changes in broader economic and political conditions and policies in the United States and around the world.

These broad market and industry factors could harm the market price of our Class A common stock and our Class B common stock, regardless of our actual operating performance .

We have substantial investments in real estate related funds and businesses in which we are a minority investor.

We have investments in funds and other investment vehicles managed by Rialto Capital Management, a company we sold in November 2018, investments in a number of companies that are applying technology to various aspects of building and marketing homes and real estate related aspects of the financial services industry, and investments in Five Point Holdings, LLC, a publicly traded company that has ownership interests in, and is managing the development of, three large multi-use master planned communities in California.

As a minority investor, we have little or no influence over decisions made with regard to these funds and businesses.

As a minority investor, we have little or no influence over decisions made with regard to

these funds and businesses.

However, we could suffer significant losses of our investments as a result of decisions that are made by the funds and businesses.

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We establish reserves against legal claims and we believe that, in general, the outcome of legal claims will not have a material adverse effect on our business or financial condition.

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.

We have provisions and reserves for taxes that we believe are sufficient to reflect our future tax obligations.

However, it is possible that a taxing authority will successfully assert that we owe taxes that we do not believe that we owe and for which

we do not have a provision or reserves.

If the additional taxes are material, they could adversely affect our income tax provision in the period in which such determination is made and, consequently, our operating results and financial condition.

However, it is possible that a taxing authority will successfully assert that we owe taxes that we do not believe that we owe and for which we do not have a provision or reserves.

If the additional taxes are material, they could adversely affect our income tax provision and, consequently, our operating results and financial condition, in the period in which we determine we need an additional provision or reserves.

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.

Our IT systems, like those of most companies, may be vulnerable to a variety of disruptions, including, but not limited to, those caused by natural disasters, telecommunications failures, hackers, and other security issues.

Moreover, our computer systems, like those of most companies, are subject to the possibility of computer viruses or other malicious codes, and to cyber or phishing-attacks.

We have installed and continually upgrade an array of protections against cyber-intrusions.

The risk of cyber-intrusion is one of the areas of risk as to which there are regular periodic presentations to our Board.

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.

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.

These IT systems, like those used by most companies, may be vulnerable to a variety of disruptions, including, but not limited to, those caused by natural disasters, telecommunications failures, hackers, and other security issues.

Moreover, these IT systems, like those of most companies, are subject to the possibility of computer viruses or other malicious codes, and to security breaches, cyber incidents, ransomware attacks or phishing-attacks.

Cyber intrusion efforts are becoming increasingly frequent and sophisticated, including as a result of the use of artificial intelligence, and it is possible that any controls we or third parties have installed could at some time be breached in a material respect.

While, to date, we have not had a cybersecurity disruption, failure, 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-incident, 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.

We may be required to incur significant costs to protect against damages caused by information technology failures or security breaches (including through the provision of insurance).

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.

In connection with our business we and the third parties we work with 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.

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.

A significant theft, loss or fraudulent use of the personally identifiable information we [or third parties] maintain, or of our data, by cyber-criminals or otherwise could adversely impact our reputation and could result in significant costs, fines and litigation.

We may be required to incur significant costs to protect against damages caused by the failure to satisfy privacy and data protection laws and regulations in the future as legal requirements continue to increase, including through the provision of insurance

International activities subject us to risks inherent in international operations.

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Dealings with people or institutions located outside the United States create risks related to currencies and to political affairs in various countries.

In some instances, the government may review the possible effects of investments by non-U.S.

In some instances, the U.S government may review the possible effects of investments by non-U.S.

entities on U.S.

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However, a variety of factors can change seasonal patterns.

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.

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.

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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.

As a result, the Company’s net earnings could be significantly affected by mark-to-market gains or losses on the Company’s investments.

As a result, our net earnings could be significantly affected by mark-to-market gains or losses on our 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.

There is growing concern from many members of the scientific community and the general public that an increase in global average temperatures due to emissions of greenhouse gases and other human activities have caused, or will cause, significant changes in weather patterns and increase the frequency and severity of natural disasters.

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.

We have tried to reduce the effect of the homes we build on the climate by installing solar power systems and other energy saving devices in many of those homes.

We have tried to reduce the effect of the homes we build on the climate by installing solar power systems and energy saving devices in many of those homes.

Nonetheless, governmental requirements directed at reducing effects on climate could cause us to incur expenses that we cannot recover or that will require us to increase the price of homes we sell to the point that it affects demand for those homes.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors