Q2 2021 MDC Holdings Inc Earnings Call
[music].
Yes.
Thank you good day, ladies and gentlemen, and welcome to M. D. C Holdings 2021 second quarter.
Quarter earnings Conference call. If you require operator assistance. Please press Star then zero at this time for opening remarks, I would like to turn the call to their Kimberly director of SEC reporting.
Thank you good morning, ladies and gentlemen, and welcome to M. D. C Holdings 2021second.
Earnings Conference call.
On the call with me today I have Larry Mizel Executive Chairman, David <unk>, Chief Executive Officer, and Bob Martin Chief Financial Officer.
At this time all participants are in a listen only mode. After finishing our prepared remarks, we will conduct a question and answer session.
And at which time, we request that participants limit themselves to 1 question and 1 follow up question. Please.
Please note that this conference is being recorded and will be available for replay for.
For information on how to access the replay please visit our website at MDC Holdings Dot com.
Before turning the call over to Larry and David.
Quarter to be noted that certain statements made during this conference call, including those related to Mdc's business financial condition results of operation cash flow strategies and prospects and responses to questions may contain forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995.
These statements involve known and unknown risks uncertainties and other factors that may cause the company's actual results performance or achievements to be materially different from the results performance or achievements expressed or implied by the forward looking statements.
These and other factors.
And that could impact the company's actual performance are set forth and the Companys second quarter 2021 and form 10-Q, which is expected to be filed with the SEC today.
It should also be noted that SEC regulation G requires that certain information accompany the use of non-GAAP financial measures.
Any information required by.
And G is posted on our website with our webcast slides.
And now I will turn the call over to Mr. Michael for his opening remarks.
Thank you for joining us today.
As we go over our results for the second quarter of 2021.
Provide and update on current and Mark.
Conditions and share our thoughts and the outlook of our company and the industry as a whole.
M D. C Holdings reported net income of 154 million for the second quarter of 2021, representing an increase of 83 per cent.
Our regulators and the second quarter of last year.
Home sales revenues grew 54 per cent year over year, thanks to a 43 per cent increase and deliveries and an 8 per cent rise and our average closing price.
We posted another quarter of operating margin expansion.
Ranch and driven by further improvement to our homebuilding gross margin and our SG&A leverage.
These results are a testament to the continued strength of the housing market as well as to our ability to execute effectively and spy.
Despite the operating challenges facing our industry.
Net new orders for the quarter rose, 14% year over year.
And our sales pace of 4.8 homes per community per month.
Similar to last quarter, our sales efforts were tempered by our.
Objective to maximize pricing and maintain a manageable closing cadence for homes and backlog. We believe this strategy has been effective in generating higher profits for our company, allowing us to close homes at higher prices and.
And are they consistent pace, while staying ahead of cost increases.
Demand continues across all of our markets driven by the strong demographic forces, we have highlighted in the past and the lack of available supply and both the new and existing home markets.
And these 2 factors have created a supply demand imbalance that we believe will serve as tail winds for industry.
Equally important to our sales success has been our focus on affordability and I and our adherence.
Build to order operating model.
We are keenly aware of the home price appreciation that occurs across the country and strive to provide housing options that are attainable for the first time homebuyers by.
By value engineering, our homes.
Homes was smaller floor plans and the same high quality construction.
And we were able to offer our customers a compelling value along with an ability to personalize their home with options and upgrades at our home galleries, we believe this.
Operating philosophy has led to higher demand for our homes and improved our gross margin profile and.
I'll now turn the call over to our President and Chief Executive Officer, David Mandarin for additional comments on the current market conditions and our strategic.
Focus David.
Thank you Larry given our favorable outlook for the industry, we have been aggressively and and growing our presence and our existing markets as well as expanding and new ones.
We announced last quarter, we entered the Boise market and this quarter, we are pleased to announce.
Imagine and the Nashville.
Similar to Boise Nashville has been a popular destination for both companies and people around the country.
Given its relative affordability and overall quality of life, we believe nashville's growth and need for new housing and presents a great opportunity.
And so our company and we look forward to scaling our operations and this market for years to come.
While we remain committed to growing our homebuilding operations and new and existing markets. We are equally focused on improving our return profile.
This metric.
And before is a key factor and our decision making process when it comes to underwriting new land deals and allocating capital to our divisions and setting the appropriate balance between price and pace.
And the second quarter of 2021, our return on average equity on a trail.
Metric 12 month basis improved 1170 basis points as compared to the second quarter of last year.
Our recent expansion of our operating margins and our current backlog should help to drive further improvements to our return profile.
Now I'd like to.
Trailing back to Larry for some additional comments.
Thank you David and.
Another key focus for our company is returning capital to our shareholders.
Our annualized cash dividend of $1.60 per share equates to an.
<unk> yield of 3 per cent based and recent stock price.
This is far and away the highest dividend yield and our industry.
This payout is supported by our strong balance sheet with a debt to total capital ratio of 37 per cent and overseas.
And $100 million of cash on hand at the end of the quarter.
We believe and a consistent dividend payout is a prudent use of our capital and.
And rewards long term shareholders over time.
To that and I am proud of our accomplishments in this.
7 and our dividend program has been consistently and place for more than 25 years and our quarterly dividend has more than doubled over just the past 5 years.
In summary, the second quarter of 2021provided.
Are either evidence that the housing market remains on solid footing and that M. D. C holdings is well positioned to take advantage of the positive industry dynamics, we were able to sustain a strong order momentum and the quarter while successfully influence.
And for any price increases.
We were able to deliver more homes than we had anticipated.
Despite material shortages and supply chain issues facing our industry.
The number of homes and backlog at the end of the quarter was up significantly from the same period last.
Last year, putting us in a great position to post solid profitability and the second half of the year.
Given our strong results this quarter and record backlog and we're very confident about the future of homebuilding and especially the future of M.
M D C holdings.
With that I'd like to turn it over to Bob for more in depth review of this of the results of this quarter.
Thanks, Larry and good morning, everyone.
During the second quarter, we generated net income of $154.4.
$4 million or $2.11 per diluted share representing.
Representing an 83% increase from the second quarter of 2020.
Home sales revenues grew 54 per cent year over year to $1.37 billion.
Gross margin from home sales improved by 290 basis points from the prior year quarter.
Quarter.
The growth and home sale revenues and margin expansion resulted in a 121% increase and pre tax income from our homebuilding operations to $187.5 million.
Financial services pre tax income decreased to $18 million, primarily due to $5 million of <unk>.
Gains on equity securities recognized during the prior year quarter.
Our mortgage business also experienced a decrease and pretax income year over year due to increased competition in the primary mortgage market increased compensation related costs and a temporary decrease in our capture rate.
Our tax rate.
Increased from 24, 4% to 24, 9% for the 2021 second quarter.
The increase in rate was primarily due to an increase and pre tax income as well as a decrease in the amount of executive compensation that is deductible under the internal revenue code section 162 M.
For the remainder of the year.
We currently estimate and effective tax rate of approximately 24, 5%, excluding any discrete items and not accounting for any potential changes in tax rates or policy.
Homes delivered increased 43% year over year to 2007.
722 during the second quarter, driven by an increase and the number of homes, we had and backlog to start the quarter.
This exceeded our previously communicated range for the second quarter of 2500, 2700 closings, even a cycle time has moved up by more than 2 weeks from the first quarter.
While the second quarter.
We need to present, some operational challenges from a supply chain and labor perspective, we were successful and minimizing the impact of these disruptions on our home construction process.
During the second quarter, 25% of our home deliveries were in California market in the first quarter ever that home deliveries in Colorado, where surpassed.
And by another state each of our California markets had strong results for the quarter with our southern California market is showing the most substantial improvement year over year in terms of closings volume as well as margin expansion.
The average selling price of homes delivered during the quarter increased 8% to about $502000.
And can decrease was the result of price increases implemented across the majority of our communities over the past 12 months.
For the third quarter, we are anticipating home deliveries to reach between 2500.2700 units with an average selling price.
510005 hundred $20000.
Gross margin from home sales improved by 290 basis points year over year to 23, 1%.
We experienced improved gross margin from home sales across each of our divisions driven by price increases implemented across nearly all of our communities over the past 12 months as well as a decrease and the amount of capitalized interest per home.
<unk> included in cost of sales.
These improvements have been partially offset by increased building material and labor costs year over year.
Gross margin from home sales for the 2021 third quarter are expected to increase to approximately 23, 5%, assuming no impairments or warranty adjustments. Additionally.
Was that a sequential increase and gross margin from home sales is likely for the fourth quarter based on the gross margin of homes currently in backlog.
Our total dollar SG&A expense for the 2021 second quarter increased by $36.5 million.
From the 2020.
We've driven primarily by increased general and administrative and commission expenses.
Our SG&A expense as a percentage of home sale revenues decreased 100 basis points year over year to 9.4%.
General and administrative expenses totaled $62 million during the second quarter due to increases in compensation related.
Quarters, including.
Increased bonus and stock based compensation accruals due to our strong financial performance year to date.
We currently estimate our general and administrative expenses to remain above $60 million for the third quarter of 2021.
Marketing expenses increased $4.2 million as a result.
<unk> increased deferred selling amortization and master marketing fees, resulting from increased closings. However, marketing expenses as a percentage of home sales revenue was down 60 basis points year over year, as we were able to limit advertising expenses in this high demand environment.
Our commission expense as a percentage of home sale revenues.
<unk> decreased 40 basis points year over year as we took steps to control. These costs. During this period of strong demand for new housing.
As a result of our improved gross margin from home sales and increased operating leverage our homebuilding operating margin defined as gross margin from home sales minus.
<unk> revenue and a rate grew by 390 basis points year over year to 13, 7%. These.
And these improvements coupled with an increased number of home deliveries resulted in a 37% pre tax return on equity over the trailing 12 months. This represents a year over year increase of nearly 1200 based.
Our estimates.
The dollar value of our net orders increased 40% year over year to $1.46 billion.
Mostly due to a 24% year over year increase and the average selling price of our net orders that was driven by price increases across most of our communities.
The price increases we have taken to date.
At this point with an offset higher costs related to building materials and labor.
Additionally, we realized a 14% year over year increase in unit net orders are.
Our monthly absorption rate of 4.8 was 13% higher than a year ago.
And was our highest second quarter rates since 2005.
As Larry.
Have more earlier, we have worked to moderate sales activity through pricing and the second quarter alone we increased prices enacted <unk> by an average of 8%.
Also we have limited lot releases when home construction can't begin within 60 days of a potential sale.
We believe these actions are healthy for our business and that they help.
Our stressed supply chain and labor force keep pace with our construction needs.
As we enter the back half of 2021, we are mindful that normal seasonal factors have the potential to impact our absorption rates. Nonetheless, we remain confident and the overall strength of the market for new homes moving forward due to an ongoing combination.
<unk> of low supply and demographic changes that have resulted in an influx of homebuyers looking to purchase their first home.
As a result of strong sales over the past 12 months, we ended the quarter with an estimated sales value.
For our homes and backlog of 4.
For 1.1 billion, which was up 73% year over year, yes.
And the average selling price of homes and backlog increased 16% due to price increases implemented over that time.
Our backlog quality remains very high and provides us with the opportunity for significant year over year increases and both home sale revenues and pre tax income for the remainder of 2.
2021 and positions us for continued growth as we look forward to 2022.
We approved.
5000, and 739 lots for acquisition during the quarter.
And which is the second most and recent history nearly eclipsing the 5911.
And lots approved in the fourth quarter of last year.
We closed on 3686 lots during the second quarter across 66 subdivisions, which is a 282% increase from the prior year quarter and a 72% increase from the second quarter of 2019.
Land acquisition and development spend.
For the quarter totaled $438 million.
And comparing our current quarter land acquisition and approval activity to the second quarter of 2020. It should be noted that the pandemic resulted in a significant decrease in activity during the prior year quarter as we pause most land acquisition activity until we had more visibility.
As to the longer term impact.
Impact of the pandemic on our business.
As a result of our land acquisition and approval activity. Our total lot supply to end the quarter exceeded 34000 plots, representing a sequential increase of 7% from the first quarter and a 37% increase from the prior year quarter. We believed that this lot supply combined.
And with continued lot approval and acquisition activity provides us with a solid platform to meet our growth targets.
2021 is proving to be a challenging year for the startup of new communities.
As we are facing both delays and municipal approvals and a strain on the available resources to complete development work. Nonetheless, we are still.
Still pushing towards the goal of increasing our active subdivision count by about 10% year over year by December 31.2021.
In summary, we are pleased with the first half of 2021 and believe the housing backdrop remains favorable as we look forward to.
And our business plan for the remainder of the year.
We are well positioned to reach the high end of our closings range of between 10011 thousand units for 2021 with more than 11000 units already closed or started in backlog as of the end of the second quarter.
We are grateful to our employees subcontractors.
<unk> board of directors, and many others, who have helped us navigate successfully through a variety of challenges as we pursue our goals for 2021.
That concludes our prepared remarks before opening the line for questions. Please note that Larry Unfortunately will not be able to join us for the question and answer portion of the call this quarter.
<unk> with that in mind, I'll now turn the call back over to the operator.
We will now begin the question and answer session.
To ask a question you May press Star then 1 on your telephone keypad.
If you are using a speaker phone please pick up.
And your handset before pressing the keys.
If at any time. Your question has been addressed and you would like to withdraw your question. Please press Star then 2.
We ask that you limit yourself to 1 question and 1 follow up question.
At this time, we will pause momentarily to assemble our roster.
The first question comes from Michael Rehaut with Jpmorgan. Please go ahead.
Hi, This is Maggie on for Mike Congrats and Maggie.
Hey, congrats on the quarter and thanks for taking my question.
First just wanted.
To ask about what you've been seeing them into July.
And I think during the prepared remarks, you pointed to the potential to maybe see some seasonality and the back half of the year, but I am wondering if you've seen and E M.
Any seasonality kick in or any a slight moderation.
And or if it's remained strong.
And then obviously, it's remained strong but have you seen it start to slow at all.
Maggie.
I think we're pleased with the demand we've seen thus far and July especially after.
We're pushing through significant price increases and the first half of the year Tomorrow.
And to moderate sales.
I think it's difficult to predict given what we've done on pricing.
And the potential for a return to more seasonal patterns to really predict what's going to happen and the back half of the year right.
Now we're more focused on construction to meet the closing targets we have set.
And on maximizing our profitability per house.
Got it.
And second on gross margins.
And you guided to a sequential improvement and.
<unk> and <unk> as the prices are been able to.
More than offset increased costs and.
As you see it probably the highest the lumber costs flow through and the back half of this year and you're moving to 2022 and.
And you may be start to see.
Lumber costs kind of pull back and it and that flows through can you talk about the potential to see even maybe further improvement and your gross margins as you and you get any lift from that.
Yes, so we we commented on.
4 we thought that would be a sequential increase from Q3 and addition to the 23.5 per cent that we pointed to as our estimate for Q3.
And then beyond that I think you're right I think the the highest lumber costs come through and the back half of this year and then potentially through the P&L.
Q.
And they will.
And potentially start to come down and the first half of next year, So all else equal.
And that would be a true.
Aylwin from margins.
Got it thank you.
The next question comes from Truman Patterson.
<unk> with Wolfe Research. Please go ahead.
Hey, good afternoon, everyone. Thanks for taking my questions.
David I just wanted to start off with a big picture question, you know you've had a nice tenure and the industry and and you've seen a few cycles.
Demand clearly remains.
Remains healthy, but I'm just hoping you can help us gauge just how deep you think this buyer pool is versus some you know some of the prior periods and I'm just hoping you can balance this with our whether you think there are any you know real affordability issues and the market as we move through 2020.2.
Trim and that's that's a great question.
This is Larry and ice 45th year and.
And I think when we take a look and where we're at today I think this is clearly.
1 of the healthiest, if not the healthiest time, we've seen.
But 1 of the things we're seeing is really limited limited.
The inventories on resale houses across the country.
Ltd.
Limited new home inventory.
Still see and plenty of demand so so Germany.
Think this is probably 1 of our better years that we've seen and 45 years effective it could almost be the best 1 Bob do you have.
Anything to comment to that now.
Now David I think I think he said it well.
Good question Truman.
Thanks for that.
I appreciate it and then just another big picture question here I don't know if you can relate this to prior cycles or anything and.
And.
Ed.
And we're just clearly hearing and supply chain challenges across the board you all mentioned it with construction and we're hearing, especially materials. Some local muni approval land development and you know maybe a little bit of labor.
Do you think any of these bottlenecks.
And to improve.
And as we move through 'twenty, 1 and 2022 I'm just hoping you can help us think through some of the some of the items there.
Well, well trim and clearly it's been a challenge.
Depending on whether it's C and <unk>.
Lumber concrete or pipe or land development initiatives really across the country.
But I'll tell you what so fabulous about our industry is.
And as us and others and our industry and have done a great job problem solving.
Whether it's using alternative material or additional labor.
It's probably slightly more challenged with gene with the municipalities, but we're certainly seeing.
And some of the municipalities.
And I'll try and help us builders get some getting some houses and the ground for our consumers.
Another great question.
Perfect. Thank you guys. Good luck on the upcoming quarter.
Thank you.
The next question comes from deep.
Ragavan with Wells Fargo. Please go ahead.
Good afternoon, and David and Bob Thanks for taking my question.
Any thoughts on how long do you think you can go on with the sales allocation process here and given that.
The part that he currently.
And the industry assets yourself and sourcing and you guys too hot and know.
How do we think about sales pace and yet town Bush as the 4.8.
And kitchen.
Oh, yes.
Yes.
I think again, it's it's a tough.
And tough.
Tough question to predict what's going to happen.
And again, given what we've done on pricing to moderate sales and the potential for.
And I returned to more seasonal patterns I mean, that's typically what we see at this time of year, but we all know it.
It's been a pretty wild ride.
So right now we've got more than enough to work on.
Trying to meet our construction targets.
And maximizing profitability. So that's that's really our focus.
Okay.
Fair enough.
Yes, a question on pricing and and backlog.
This has increased 16% and auditors pricing up 23%.
Pretty healthy but.
What do you have any thoughts and what you're seeing in July. So far you said you were pleased with it.
You can see and as of July closings pretty pretty nice so far but.
Any thoughts on what Youre seeing in July so far is that pricing still.
And even at 20% plus and July and also and are you getting any pushback, even from the incremental or the marginal buyer out there and just curious any thoughts how long you know this healthy pace can continue.
And again I mean, you you characterized it correct where.
We're pleased with what we've.
M Arena and July.
And again.
It's not a market.
We're we're as much focused on sales so much as construction and the back half of the year.
Given that we've got.
Supply chain challenges and and we have a healthy goal.
Out before us so that's really where our focus is.
Got it thanks, so much I'll pass it on.
The next question comes from Ivy Zelman with Zelman and associates.
Please go ahead.
Hey, guys its actually Alan on for Ivy and nice.
Bob or David.
Obviously, it sounds like maybe your focus is shifting a little bit more to completing the backlog versus are you know growing at like you you were over the last several quarters, but we did hear from another management team. This morning, like they're starting to see anecdotally a little bit of.
Pushback from consumers on the pricing side, given the very strong price appreciation that that's obviously been underway.
And and <unk>.
And this the company expects there to be a little bit of an uptick and incentives later in the year as more supply comes across and the industry. So I'm curious if you guys are seeing that and your business at all and if there's any.
Expectation.
Nice quarter, and perhaps some of the debt and the tailwind that you've seen on margin obviously lower incentives.
And lower marketing expenses lower broker commissions, if any of that and you would expect to reverse course as more supply comes online later in the year.
Yeah. It's a great question, and then and I guess, just 2 to start maybe.
1 way of answering it is you know as we went through second quarter. We did see that June was lower than than April and may.
And that did have the full impact of price increases.
And that were designed to moderate orders, but that's that's kind of the key word is is having the design.
Of moderating orders.
And everything you've described some of the tailwind is going away I don't necessarily think that we're at at that point, yet I think.
We feel really good about where demand is right now.
So.
M. There really isn't a whole lot for us.
And then.
Based upon the information that's out there right now.
Got it that's that's helpful. Bob.
Second question you know you guys are back and expansion mode moving into a few new markets and we've also seen M. You know a big push towards the build to rent space amongst.
So a lot of your peers and I'm curious if and if that's an area you are interested in if you're currently selling any homes to a build to rent or single family rental operators and whether you know that could be and opportunity for you to kind of gain share pretty quickly and some of these newer markets. If you were to partner up with some of those operators to to start building up your scale.
This is this is.
David and I can answer that question.
Where we really are we're not selling to.
And to investors and we're not going to do a build to rent homes.
And right now we feel really good about what we're doing we're to stichter and netting.
And we love personalization and.
And so.
And.
So we're not going to go out and do that plus right now and you heard earlier.
All of the supply constrains or you know or everywhere. So we want to make sure we supply material and labor to our $4 billion worth of houses and backlog. So we get them closed.
It makes a lot of sense alright, guys.
What.
Okay.
The next question comes from Stephen Kim with Evercore ISI. Please go ahead.
Oh, Hey, guys. Congratulations on the good results and yeah I I just wanted to say that I don't think the key takeaway from the news. This morning was that.
Guys, thanks items arising and sales or our price is becoming a problem and I think the stocks are telling us something different.
But all that being said you mentioned that the issue really isn't orders or sales its production and you know I totally agree and in that regard. Your starts are pretty impressive and I think correct me, if I'm wrong, but I.
Thank you started and access is 3600 starts this quarter.
And <unk> over the last 12 months I think you know more than 12 and a half thousand.
And.
So first of all I just want to correct a check if those numbers are right.
I think that's correct Steve.
And so we had more than 3600 per Q2.
Yeah.
And so what's interesting is that you know this is a pretty solid pace. You know your starts over the last 12 months or basically and access of the orders that you've taken over the last 12 months. You start you know 30 over 3600 and the reason I'm, bringing this up it's because you face a really.
<unk> off order comp and percentages and percentage you know in the third quarter and I'm not asking you to predict your orders unnecessarily and 3 Q. However, I wanted to make sure that there wasn't a reason to think that your starts were going to decelerate markedly and 3 QR 4 Q and.
And if I and I wanted to also then just confirmed that it is reasonable to think that your <unk>.
Sales pace is going to be.
Aligned with your start pace generally with a little bit of.
Flex.
Yeah, I think being build to order, we really align.
And.
And our starts with sales generally speaking.
No.
So, yes, I think that.
That makes sense.
And any reason to think that the starts are going to slow in the back half of the year meaningfully.
Yeah, I mean, we're.
And line them up with with the sales so yeah.
And Steve I'll, just and I think 1 of the.
And things we want to make sure we communicated we're still seeing I mean, the demand is still there.
And.
I think you know for the last I mean, we're seeing demand and every 1 of our markets. So it really hasnt been wind at all.
Line.
But we're going to stick to our knitting and Bob you might go through what our policy is when we sell the house and.
Oh, how we started.
And we abide by a 60 day rule so if we.
We tell our division managers not to sell if they can't start the house within.
60 days and that's going to be our approach.
Into the foreseeable future.
And Steve.
And we build to order so great question Gray.
Firstly for you Bill.
So we got our numbers.
Well, yeah, well, you're your built to order for sure and I know Youre looking to grow your community count.
And so.
And kind of curious as to whether you start it's reasonable to think that your starts are.
And I.
We will generally grow with your community Count does your basically your production capacity increase.
As your community count grows maybe that's a better way of asking it.
Yeah.
Yes.
I guess I think it's fair to say that.
That.
That's the case when we open up a new.
Subdivision.
We were trying to have all the parts in place to make sure that we can support that growth.
The superintendents and the sales professionals.
And.
And the people on site, having built out the project.
April to get starts and the ground. So that same 60 day discipline applies for new subdivisions.
As well.
And Steve just that just add on its and its share.
And then you know and good communications and our relation.
And with our suppliers vendors and subcontractors, which you've done a really good job for us.
Great and then just lastly on your margin you mentioned that your peak lumber is probably going to be felt through your P&L and the back half of the year just as a as a as a benchmarking tool would you say that.
Lumber.
<unk> and what you're experiencing right now you know is roughly a 300 basis point headwind or more to your gross margin.
And I guess, it depends what you're talking about sales or closings.
Lumber or starts or what have you I think I'm, probably the sales that we just had in Q.
Q2 that definitely could be the case.
You mean revenues you mean closings right.
Sales and.
Orders also.
Orders Okay great.
Perfect that actually was what I was hoping from okay. Thanks, guys I appreciate it.
The next question comes from Alex Barron with housing Research Center. Please go ahead.
Yes, thanks, guys.
You know I was curious about.
Home price.
<unk> or have gone up quite a bit this year and Oh I was curious you know as far as your outlook for new communities that youll be opening up you know and the.
And the back half and next year is your outlook that prices are are sustainable or are you guys and some way.
And then do.
Price doesn't try to make the homes affordable again.
Well with <unk>.
Good demand is as we've described.
And low supply.
Thank you.
We do believe that pricing is.
Sustainable.
Something.
And I think on the same token we are trying to do what we can.
And to bring our price down overall for the company and whether that be.
And I'm talking about new innovations on on house plans that may be can bring and the price down a bit or.
It is a changing.
Changing up our footprint a little bit when we think about Boise and and Nashville, 1 of the <unk> of those markets as they've there a little bit more affordable than much of the rest of our our footprint.
I think we are.
Tackling affordability and a number of different ways.
But we really.
I think this is a great market to to support what we've already done and pricing.
And just to add onto that and it comes down to really mix and.
You can see and our numbers there we're doing more and more of what we call are affordable footprint, which is seasons.
Urban.
Duplexes, so we're adding more of those subdivisions across the country.
Got it.
And the other question I had was you know it seems like most of the.
Builders are shifting.
And towards doing more specs and selling those specs at a later stage.
And in the construction cycle and thank.
Thank you guys have.
You know have been fairly disciplined to stick to the built to order. So I'm curious how you guys are and how your thought process is changing given all the supply chain constraints of these things are going to be here a little bit longer.
Whether you guys and they're gonna.
And moving in that direction as well or what's the benefit of sticking with the with the build to order and your view.
Well I'll just.
And we're going to stick to the build to order model.
We start very few houses that are not sold.
When we start them, but.
Our whole personalization.
It's so important for our customers for them to pick out everything so.
So we feel really good about having a contract with the consumer that's got an earnest money deposit where it's their check and we're not building a bunch of inventory houses without customers.
Okay. That's fair thanks.
Again, if you have a question. Please press Star then 1 and.
The next question comes from Jay Mccanless with Wedbush. Please go ahead.
Hey, good morning, guys.
And David I appreciate the.
Clarity on an M D C 's intentions with the build for rent, but wanted to find out what type of impact has this the surge and demand for single family rentals had an M. D. C. 's business are you guys fighting for a lot of the same land parcels is it tightening up availability on subs, just just a little overview.
<unk> would be great.
He and I will tell you Jay that we're certainly seeing seeing some of the builders that are.
Looking for land.
And for build to rent to compete with us and.
And that's.
We've seen that business model.
And quite frankly, it has not.
Its not anything thats concerning to US also we have not had any issues with the with subcontractors and vendors.
And with compete.
With that business model.
Okay, that's great to hear.
That's.
All of that and thanks for taking my questions.
Yeah.
This concludes our question and answer session I would like to turn the conference back over to Bob Martin for any closing remarks.
Thanks to everyone for being on the call today and we look.
Look forward to speaking with you again following the reporting of our third quarter earnings.
This.
Our conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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