Lennar Stock Regains Momentum

MIAMI-Publicly traded shares in Lennar Corp. resurged last week since hitting a recent low of $38.51 on Aug. 15.

Common shares in the Miami-based builder of single-family and multifamily homes pretty much started a freefall from the 52-week high of $49.88 recorded on July 19. The issue had traded as low as $25.37 over the same time period.

Since the recent low of $38.51, however, the issue regained momentum, closing up $2.20 on Friday at $42.60. That is a gain of $4.09 over seven days of trading.

It appears the stock is reacting to fluctuating market concerns about the economic health of the U.S. homebuilding industry. Lennar is widely considered the industry’s second largest homebuilder behind Centex Homes.

In late July, for instance, Goldman Sachs issued a client advisory warning investors that homebuilders like Lennar finally may be facing the overall effects of a weakened U.S. economy.

On the other hand, shares in Lennar regained momentum over the three days following a decision on Aug. 21 by the Federal Open Market Committee to reduce the federal funds rate by 25 basis points to 3½%.

In response to a sluggish U.S. economy, the FOMC has decreased the target federal funds rate–the rate banks charge other banks on overnight lending and an indicator of overall market interest rates–by 300 basis points since the beginning of the year.

Although unlikely to have an immediate impact on homebuilding operations, most market analysts perceive the reduction in the federal funds rate as a having positive influence on mortgage interest rates, which is good news for homebuilders.