Lennar stock logged its largest decline since 2024 after a report from the media outlet and investment firm Hunterbrook called its relationship with the land banking company Millrose into question.

The report says that Lennar sold over 700 homes to Millrose, a land-banking company that spun off from Lennar in early 2025, and that Millrose, in turn, rents them out, appearing to pay more for the homes than individual buyers, according to the report.

Lennar stock closed 6.7% lower on Monday at $74.44, its lowest close since Oct. 24, 2022 and sharpest one-day decline since March 2024, according to Dow Jones Market Data. Millrose was down 8.5%, to $22.51, its lowest close since April 2025.

Spokespeople for both Lennar and Millrose declined to comment on the points raised in the report.

Hunterbrook Capital is short on shares of Millrose and Lennar, the authors disclose at the top of the report. Like other short sellers, Hunterbrook benefits as the stocks decline.

The team at Hunterbrook wrote that it identified at least 356 purchases by Millrose in the final week of Lennar's most recent fiscal quarter. The report says that Millrose paid more than individual buyers in the same communities, and that, by renting out the homes, Millrose would earn less than its bonds yield, according to Hunterbrook's analysis of Zillow rents.

Millrose's purchase of Lennar homes "represents an expansion of its relationship with [Lennar]," KBW analyst Jade Rahmani wrote Monday. "The report raises questions regarding the composition of 3Q deliveries."

The volume of purchases outlined in the report -- estimated by Hunterbrook at about $200 million -- would represent about 2% of Millrose's second quarter invested capital, BTIG analyst Ryan Gilbert wrote in a Sunday note.

"Our sense is that the company does not view the scale of the purchases to-date to be material," he wrote. "If the investment stays at this level, from a size and impact to earnings perspective, we lean toward MRP's view on materiality."

Millrose's primary business is land banking -- but in August, Millrose updated its founders' rights agreement to allow for the funding of purchases of single-family homes built to rent, according to a financial filing.

It's not unusual for Lennar to sell single-family homes for rent, noted KBW's Rahmani: "[Single-family rental]/[Build-to-rent] transactions have historically represented a mid-single-digit share of quarterly deliveries, and we believe margins on such sales have generally been consistent with LEN's home sales activity."

Lennar in a June investor presentation highlighted the benefits of such an arrangement: controlling land through agreements with third parties reduces the risk of impairment from holding land on the balance sheet.

"Optioning land is a superior risk management strategy compared to owning land outright, as the maximum potential loss in a worst-case scenario is lower and predefined," the company wrote in the report. Moving that land off its balance sheet allowed Lennar to repurchase $9.6 billion of stock and retire $6.9 billion in senior notes, it wrote in the presentation.

The report follows Lennar's weaker-than-expected earnings, which were affected by its land costs. One of the nation's largest builders by market capitalization, Lennar utilizes a land-banking model, through which it pays third parties such as Millrose a fee to hold land, instead of holding it on its balance sheet.

The report added to Lennar's pain at a time when rising mortgage rates are weighing more broadly on housing-related stocks.

The iShares U.S. Home Construction exchange-traded fund was down 0.8% on Monday after the 10-year Treasury yield rose to 5.310%, its highest level since April 2002. Treasury yields are linked to mortgage rates, with higher financing costs dulling demand for purchases when mortgage rates rise.

Hunterbrook was founded in 2023. Its investment affiliate, Hunterbrook Capital, sometimes takes positions on the companies Hunterbrook Media covers.