The following discussion and analysis of our financial condition and results of operations should be read in conjunction with "Selected Financial Data" and our audited consolidated financial statements and accompanying notes included elsewhere in this Report.

Special Note Regarding Forward-Looking Statements

Some of the statements in this Management's Discussion and Analysis of Financial Condition and Results of Operations, and elsewhere in this Annual Report on Form 10-K, are "forward-looking statements," as that term is defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements regarding our business, financial condition, results of operations, cash flows, strategies and prospects. You can identify forward-looking statements by the fact that these statements do not relate strictly to historical or current matters. Rather, forward-looking statements relate to anticipated or expected events, activities, trends or results. Because forward-looking statements relate to matters that have not yet occurred, these statements are inherently subject to risks and uncertainties. Many factors could cause our actual activities or results to differ materially from the activities and results anticipated in forward-looking statements. These factors include those described under the caption "Risk Factors" in Item 1A of this Report. We do not undertake any obligation to update forward-looking statements, except as required by Federal securities laws.

Outlook

The housing market continues to be compromised by the most significant domestic economic downturn in recent history. General economic pressures continue to drive down the volume and prices of homes being sold, as rising levels of foreclosures add inventory to an already saturated marketplace. Overall consumer sentiment has continued to deteriorate, resulting in fewer potential home purchasers willing to enter the market. These conditions have fostered a competitive need amongst homebuilders to drive pricing downward through the use of incentives, price reductions and incentivized brokerage fees. Although there is optimism that the new administration taking federal office will offer stimulus to fix the sliding housing environment, we currently do not have visibility as to when these deteriorating market conditions will subside. Whether or not there is additional federal stimulus, there could be further deterioration in market conditions, which may lead to additional valuation adjustments in the future.

In midst of this environment, we remained balance sheet focused with great emphasis on liquidity and positioning ourselves for future opportunities. We continued to reduce overhead in an effort to be "right-sized" for anticipated lower volume levels in fiscal 2009. In addition, we continued to carefully manage our inventory levels through curtailing land purchases, reducing home starts and adjusting prices to deliver completed homes.

We also have diligently worked on restructuring, repositioning and reducing our joint ventures. We have reduced the number of joint ventures in which we participate to 116 unconsolidated joint ventures at November 30, 2008, compared to 270 unconsolidated joint ventures at the peak in 2006. We have also reduced our net recourse indebtedness exposure with regard to joint ventures to $392.5 million at November 30, 2008, compared to $1.1 billion at the peak in 2006.

In 2009, cash generation will continue to be our top priority. We will convert inventory to cash and reduce both our land purchases and homebuilding starts. In addition, we will reduce our cash outflows by continuing to right-size our overhead to improve our selling, general and administrative expenses as a percentage of revenues.

Results of Operations

Overview

Our net loss in 2008 was $1.1 billion, or $7.00 per basic and diluted share, compared to a net loss of $1.9 billion, or $12.31 per basic and diluted share, in 2007. The current year net loss was attributable to weakness in the housing market that has persisted during 2008 and has impacted all of our operations. Our gross margin percentage increased due to our lower inventory basis and continued focus on repositioning our product and reducing construction costs, despite Statement of Financial Accounting Standards ("SFAS") No. 144, Accounting for the Impairment of Long-lived Assets, ("SFAS 144") valuation adjustments and a decrease in the average sales price of homes delivered during 2008, compared to 2007. Our 2008 results were also impacted by a non-cash SFAS 109, Accounting for Income Taxes, ("SFAS 109") valuation allowance of $730.8 million, or $4.61 per basic and diluted share, recorded against our deferred tax assets.

The following table sets forth financial and operational information for the years indicated related to our operations. The results of operations of the homebuilders we acquired during 2006 were not material to our consolidated financial statements and are included in the tables since the respective dates of the acquisitions.

                                                             Years Ended November 30,
                                                 2008                     2007                   2006
                                                (Dollars in thousands, except average sales price)
Homebuilding revenues:
Sales of homes                             $      4,150,717                 9,462,940         14,854,874
Sales of land                                       112,321                   267,312            768,166

Total homebuilding revenues                       4,263,038                 9,730,252         15,623,040

Homebuilding costs and expenses:
Cost of homes sold                                3,641,090                 8,892,268         12,114,433
Cost of land sold                                   245,536                 1,928,451            798,165
Selling, general and administrative                 655,255                 1,368,358          1,764,967

Total homebuilding costs and expenses             4,541,881                12,189,077         14,677,565

Gain on recapitalization of
unconsolidated entity                               133,097                   175,879                 -
Goodwill impairments                                     -                   (190,198 )               -
Equity in loss from unconsolidated
entities                                            (59,156 )                (362,899 )          (12,536 )
Management fees and other income
(expense), net                                     (199,981 )                 (76,029 )           66,629
Minority interest income (expense),
net                                                   4,097                    (1,927 )          (13,415 )

Homebuilding operating earnings (loss)             (400,786 )              (2,913,999 )          986,153

Financial services revenues                         312,379                   456,529            643,622
Financial services costs and expenses
(1)                                                 343,369                   450,409            493,819

Financial services operating earnings
(loss)                                              (30,990 )                   6,120            149,803

Total operating earnings (loss)                    (431,776 )              (2,907,879 )        1,135,956
Corporate general and administrative
expenses                                           (129,752 )                (173,202 )         (193,307 )

Earnings (loss) before (provision)
benefit for income taxes                   $       (561,528 )              (3,081,081 )          942,649

Gross margin on home sales                             12.3 %                     6.0 %             18.4 %

SG&A expenses as a % of revenues from
home sales                                             15.8 %                    14.5 %             11.9 %

Operating margin as a % of revenues
from home sales                                        (3.5 )%                   (8.4 )%             6.6 %

Gross margin on home sales excluding
valuation adjustments (2)                              17.0 %                    13.9 %             20.3 %

Operating margin as a % of revenues
from home sales excluding valuation
adjustments (2)                                         1.2 %                    (0.5 )%             8.5 %

Average sales price                        $        270,000         $         297,000            315,000

(1) Financial Services costs and expenses for the year ended November 30, 2008 include a $27.2 million impairment of goodwill.

(2) Gross margins on home sales excluding valuation adjustments and operating margin as a percentage of revenues from home sales excluding valuation adjustments are non-GAAP financial measures disclosed by certain of our competitors and have been presented because we find it useful in evaluating our performance and believe that it helps readers of our financial statements compare our operations with those of our competitors.

2008 versus 2007

Revenues from home sales decreased 56% in the year ended November 30, 2008 to $4.2 billion from $9.5 billion in 2007. Revenues were lower primarily due to a 51% decrease in the number of home deliveries and a 9% decrease in the average sales price of homes delivered in 2008. New home deliveries, excluding unconsolidated entities, decreased to 15,344 homes in the year ended November 30, 2008 from 31,582 homes last year. In the year ended November 30, 2008, new home deliveries were lower in each of our homebuilding segments and Homebuilding Other, compared to 2007. The average sales price of homes delivered decreased to $270,000 in the year ended November 30, 2008 from $297,000 in 2007, due to reduced pricing. Sales incentives offered to homebuyers were $48,700 and $48,000 per home delivered, respectively, in the years ended November 30, 2008 and 2007.

Gross margins on home sales excluding SFAS 144 valuation adjustments were $705.1 million, or 17.0%, in the year ended November 30, 2008, compared to $1.3 billion, or 13.9%, in 2007. Gross margin percentage on home sales, excluding SFAS 144 valuation adjustments, improved compared to last year primarily due to our lower inventory basis and continued focus on repositioning our product and reducing construction costs. Gross margins on home sales were $509.6 million, or 12.3%, in the year ended November 30, 2008, which included $195.5 million of SFAS 144 valuation adjustments, compared to gross margins on home sales of $570.7 million, or 6.0%, in the year ended November 30, 2007, which included $747.8 million of SFAS 144 valuation adjustments. Gross margins on home sales excluding SFAS 144 valuation adjustments is a non-GAAP financial measure disclosed by certain of our competitors and has been presented because we find it useful in evaluating our performance and believe that it helps readers of our financial statements compare our operations with those of our competitors.

Homebuilding interest expense (primarily included in cost of homes sold and cost of land sold) was $130.4 million in 2008, compared to $203.7 million in 2007. The decrease in interest expense was due to lower interest costs resulting from lower average debt during 2008, as well as decreased deliveries during 2008, compared to 2007. Our homebuilding debt to total capital ratio as of November 30, 2008 was 49.2%, compared to 37.5% as of November 30, 2007. Our net homebuilding debt to total capital ratio as of November 30, 2008 was 35.7% compared to 30.2% as of November 30, 2007. The net homebuilding debt to total capital ratio consists of net homebuilding debt (homebuilding debt less homebuilding cash) divided by total capital (net homebuilding debt plus stockholders' equity).

Selling, general and administrative expenses were reduced by $713.1 million, or 52%, in the year ended November 30, 2008, compared to last year, primarily due to the consolidation of divisions, which resulted in reductions in associate headcount, variable selling expense and fixed costs. As a percentage of revenues from home sales, selling, general and administrative expenses increased to 15.8% in the year ended November 30, 2008, from 14.5% in 2007, due to lower revenues.

Losses on land sales totaled $133.2 million in the year ended November 30, 2008, which included $47.8 million of SFAS 144 valuation adjustments and $97.2 million of write-offs of deposits and pre-acquisition costs related to approximately 8,200 homesites under option that we do not intend to purchase. In the year ended November 30, 2007, losses on land sales totaled $1,661.1 million, which included $1,167.3 million of SFAS 144 valuation adjustments and $530.0 million of write-offs of deposits and pre-acquisition costs related to approximately 36,900 homesites that were under option.

Equity in loss from unconsolidated entities was $59.2 million in the year ended November 30, 2008, which included $32.2 million of our share of SFAS 144 valuation adjustments related to assets of unconsolidated entities in which we have investments, compared to equity in loss from unconsolidated entities of $362.9 million in the year ended November 30, 2007, which included $364.2 million of our share of SFAS 144 valuation adjustments related to assets of unconsolidated entities in which we have investments.

Management fees and other income (expense), net totaled ($200.0) million in the year ended November 30, 2008, which included $172.8 million of APB 18 valuation adjustments to our investments in unconsolidated entities and $25.0 million of write-offs of notes receivable, compared to management fees and other income (expense), net of ($76.0) million in the year ended November 30, 2007, which included $132.2 million of APB 18 valuation adjustments to our investments in unconsolidated entities.

Minority interest income (expense), net was $4.1 million in the year ended November 30, 2008, compared to minority interest income (expense), net of ($1.9) million in the year ended November 30, 2007.

Due to the termination of our rights to purchase certain assets from our LandSource unconsolidated joint venture, we recognized deferred profit of $101.3 million in the year ended November 30, 2008 (net of $31.8 million of write-offs of option deposits and pre-acquisition costs and other write-offs) related to the 2007 recapitalization of LandSource.

Sales of land, equity in loss from unconsolidated entities, management fees and other income (expense), net and minority interest income (expense), net may vary significantly from period to period depending on the timing of land sales and other transactions entered into by us and unconsolidated entities in which we have investments.

Operating loss for the Financial Services segment was $31.0 million in the year ended November 30, 2008, compared to operating earnings of $6.1 million in the same period last year. The decline in profitability was

primarily due to a goodwill impairment of $27.2 million related to the segment's mortgage operations and fewer transactions in the segment's title and mortgage operations.

Corporate general and administrative expenses were reduced by $43.5 million, or 25%, for the year ended November 30, 2008, compared to 2007. As a percentage of total revenues, corporate general and administrative expenses increased to 2.8% in the year ended November 30, 2008, from 1.7% in the same period last year, due to lower revenues.

SFAS 109 requires a reduction of the carrying amounts of deferred tax assets by a valuation allowance, if based on available evidence, it is more likely than not that such assets will not be realized. As a result of our operational results for the year ended November 30, 2008, we have now incurred cumulative losses over the evaluation period we established in accordance with SFAS 109. Accordingly, based on our evaluation of available evidence including our cumulative losses in the evaluation period, our current level of profits and losses and current market conditions, we have recorded a $730.8 million non-cash valuation allowance against our deferred tax assets during the year ended November 30, 2008. In future periods, this valuation allowance could be reduced based on sufficient evidence indicating that it is more likely than not that a portion of the our deferred tax assets will be realized.

At November 30, 2008, we owned 74,681 homesites and had access to an additional 38,589 homesites through either option contracts with third parties or agreements with unconsolidated entities in which we have investments. At November 30, 2008, 2% of the homesites we owned were subject to home purchase contracts. Our backlog of sales contracts was 1,599 homes ($456.3 million) at November 30, 2008, compared to 4,009 homes ($1,384.1 million) at November 30, 2007. The lower backlog was attributable to challenged market conditions that persisted throughout 2008, which resulted in lower new orders in 2008, compared to 2007.

2007 versus 2006

Revenues from home sales decreased 36% in the year ended November 30, 2007 to $9.5 billion from $14.9 billion in 2006. Revenues were lower primarily due to a 33% decrease in the number of home deliveries and a 6% decrease in the average sales price of homes delivered in 2007. New home deliveries, excluding unconsolidated entities, decreased to 31,582 homes in the year ended November 30, 2007 from 47,032 homes in 2006. In the year ended November 30, 2007, new home deliveries were lower in each of our homebuilding segments and Homebuilding Other, compared to 2006. The average sales price of homes delivered decreased to $297,000 in the year ended November 30, 2007 from $315,000 in 2006, primarily due to higher sales incentives offered to homebuyers ($48,000 per home delivered in 2007, compared to $32,000 per home delivered in 2006).

Gross margins on home sales excluding SFAS 144 valuation adjustments were $1.3 billion, or 13.9%, in the year ended November 30, 2007, compared to $3.0 billion, or 20.3%, in 2006. Gross margin percentage on home sales decreased compared to 2006 in all of our homebuilding segments primarily due to higher sales incentives offered to homebuyers. Gross margins on home sales were $570.7 million, or 6.0%, in the year ended November 30, 2007, which included $747.8 million of SFAS 144 valuation adjustments, compared to gross margins on home sales of $2,740.4 million, or 18.4%, in the year ended November 30, 2006, which included $280.5 million of SFAS 144 inventory valuation adjustments. Gross margins on home sales excluding SFAS 144 valuation adjustments is a non-GAAP financial measure disclosed by certain of our competitors and has been presented because we find it useful in evaluating its performance and believe that it helps readers of our financial statements compare our operations with those of our competitors.

Homebuilding interest expense (primarily included in cost of homes sold and cost of land sold) was $203.7 million in 2007, compared to $241.1 million in 2006. The decrease in interest expense was due to lower interest costs resulting from lower average debt during 2007, as well as decreased deliveries during 2007, compared to 2006. Our homebuilding debt to total capital ratio as of November 30, 2007 was 37.5%, compared to 31.4% as of November 30, 2006. Our net homebuilding debt to total capital ratio as of November 30, 2007 was 30.2% compared to 25.5% as of November 30, 2006. The net homebuilding debt to total capital ratio consists of net homebuilding debt (homebuilding debt less homebuilding cash) divided by total capital (net homebuilding debt plus stockholders' equity).

Selling, general and administrative expenses were reduced by $396.6 million, or 22%, in the year ended November 30, 2007, compared to 2006, primarily due to reductions in associate headcount and variable selling expenses. As a percentage of revenues from home sales, selling, general and administrative expenses increased to 14.5% in the year ended November 30, 2007, from 11.9% in 2006. The 260 basis point increase was primarily due to lower revenues.

Loss on land sales totaled $1,661.1 million in the year ended November 30, 2007, which included $740.4 million of SFAS 144 valuation adjustments on the inventory acquired by the Morgan Stanley land investment venture discussed below, $426.9 million of SFAS 144 valuation adjustments and $530.0 million of write-offs of deposits and pre-acquisition costs related to 36,900 homesites under option that we do not intend to purchase. In the year ended November 30, 2006, loss on land sales totaled $30.0 million, which included $69.1 million of SFAS 144 valuation adjustments and $152.2 million of write-offs of deposits and pre-acquisition costs related to 24,200 homesites that were under option.

In November 2007, we and Morgan Stanley Real Estate Fund II, L.P., an affiliate of Morgan Stanley & Co., Inc., formed a strategic land investment venture to acquire, develop, manage and sell residential real estate. We acquired a 20% ownership interest and 50% voting rights in the land investment venture. Concurrent with the formation of the land investment venture, we sold a diversified portfolio of our land to the venture for $525 million. The properties acquired by the new entity consist of approximately 11,000 homesites in 32 communities located throughout the country. The properties sold by us had a net book value of approximately $1.3 billion. As part of the transaction, we entered into option agreements and obtained rights of first offer providing us the opportunity to purchase certain finished homesites. The exercise price of the options is based on a fixed percentage of the future home price. We have no obligation to exercise these options and cannot acquire a majority of the entity's assets. We are managing the land investment venture's operations and receive fees for our services. We will also receive disproportionate distributions if the investment venture exceeds certain financial targets.

Due to our continuing involvement, the transaction did not qualify as a sale under GAAP; thus, the inventory remained on our balance sheet in consolidated inventory not owned as of November 30, 2007. Additionally, the $445 million of net cash received from the transaction was recorded in liabilities related to consolidated inventory not owned in the consolidated balance sheet and classified as cash flows from financing activities in the consolidated statement of cash flows. In connection with the transaction, we recorded a SFAS 144 valuation adjustment of $740.4 million on the inventory sold to the land investment venture.

Equity in loss from unconsolidated entities was $362.9 million in the year ended November 30, 2007, which included $364.2 million of our share of SFAS 144 valuation adjustments related to the assets of our investments in unconsolidated entities, compared to equity in loss from unconsolidated entities of $12.5 million in the year ended November 30, 2006, which included $126.4 million of our share of SFAS 144 valuation adjustments related to the assets of our investments in unconsolidated entities.

During the year ended November 30, 2007, we recorded goodwill impairments of $190.2 million related to our homebuilding operations.

Management fees and other income (expense), net, totaled ($76.0) million in the year ended November 30, 2007, which included $132.2 million of APB 18 valuation adjustments to our investments in unconsolidated entities, compared to management fees and other income (expense), net, of $66.6 million in the year ended November 30, 2006, net of $14.5 million of APB 18 valuation adjustments to our investments in unconsolidated entities.

Minority interest income (expense), net was ($1.9) million and ($13.4) million, respectively, in the years ended November 30, 2007 and 2006.

Sales of land, equity in loss from unconsolidated entities, management fees and other income (expense), net and minority interest income (expense), net may vary significantly from period to period depending on the timing of land sales and other transactions entered into by us and unconsolidated entities in which we have investments.

In February 2007, our LandSource joint venture admitted MW Housing Partners as a new strategic partner. As part of the transaction, the joint venture obtained $1.6 billion of non-recourse financing, which consisted of a $200 million five-year Revolving Credit Facility, a $1.1 billion six-year Term Loan B Facility and a $244 million seven-year Second Lien Term Facility. The transaction resulted in a cash distribution to us of $707.6 million, but reduced our resulting ownership of LandSource to 16%. As a result of the recapitalization, we recognized a pretax gain of $175.9 million in 2007.

Operating earnings for the Financial Services segment were $6.1 million in the year ended November 30, 2007, compared to $149.8 million in 2006. The decrease was primarily due to a decline in profitability from both the segment's mortgage and title operations and $28.4 million of partial write-offs of land seller notes receivable.

The decline in profitability was due to the overall weakness in the housing market, which led to a decrease in volume and transactions for the mortgage and title operations compared to 2006.

Corporate general and administrative expenses were reduced by $20.1 million, or 10%, in the year ended November 30, 2007, compared to 2006. As a percentage of total revenues, corporate general and administrative expenses increased to 1.7% in the year ended November 30, 2007, compared to 1.2% in 2006, primarily due to lower revenues.

At November 30, 2007, we owned 62,801 homesites and had access to an additional 85,870 homesites through either option contracts with third parties or agreements with unconsolidated entities in which we have investments. At November 30, 2007, 5% of the homesites we owned were subject to home purchase contracts. Our backlog of sales contracts was 4,009 homes ($1.4 billion) at November 30, 2007, compared to 11,608 homes ($4.0 billion) at November 30, 2006. The lower backlog was attributable to weak market conditions that persisted during 2007, which resulted in lower new orders in 2007, compared to 2006.

Homebuilding Segments

Our Homebuilding operations construct and sell homes primarily for first-time, move-up and active adult homebuyers primarily under the Lennar brand name. In addition, our homebuilding operations also purchase, develop and sell land to third parties. In certain circumstances, we diversify our operations through strategic alliances and minimize our risks by investing with third parties in joint ventures.

We have disaggregated our Houston homebuilding division from our Homebuilding Central reportable segment and have presented Houston as a separate reportable segment due to the division achieving a quantitative threshold set forth in SFAS No. 131, Disclosures About Segments of an Enterprise and Related Information ("SFAS 131") as of and for the year ended November 30, 2008. All segment information related to prior years has been restated to conform to the fiscal 2008 presentation. The change in reportable segments has no effect on our consolidated financial position, results of operations or cash flows.

Information about homebuilding activities in states in which our homebuilding activities are not economically similar to those in other states in the same geographic area is grouped under "Homebuilding Other." References in this Management's Discussion and Analysis of Financial Condition and Results of Operations to homebuilding segments are to those reportable segments.

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