Q3 2022 Green Brick Partners Inc Earnings Call
Okay.
Good afternoon, and welcome to Green brick partners earnings call for the third quarter ended September 30 of 2022.
During today's remarks, we will hold a Q&A session.
As a reminder, this call is being recorded and will be available for playback and.
In addition, our presentation will accompany today's webcast and is also available on the company's website at investors thought green brick partners dotcom.
Joining us on the call today is Jim Brickman, co founder and Chief Executive Officer.
Rick Costello, Chief Financial Officer, and Jed Dolson, Chief operating officer.
Some of the information discussed on this call is forward looking including the company's financial and operational expectations for 2022 and beyond.
In yesterday's press release, and SEC filings the company detailed material risks that may cause future results to differ from its expectations.
The company's statements are as of today November three 2022, and the company has no obligation to update any forward looking statements. It may make.
The comments also include non-GAAP financial metrics, a reconciliation of these metrics and the other information required by regulation G can be found in the earnings release that the company issued yesterday and in the presentation are available on the company's website.
With that I'll turn the call over.
Jim Brickman.
Thank you Jerry our call today, we're going to discuss the current housing landscape.
Green bricks overall business strategy.
And our land and lot position in much more detail than in past calls.
Rick will discuss Q3 2022 financial results in depth, and then Jeff will discuss the market dynamics capital allocation strategy and our supply chain.
We are pleased to report another strong quarter, despite multiple challenges the homebuilding industry is facing.
Residential revenue for the third quarter of 2022 increased 17, 1% year over year to $397 million based on an increase in our average sales price of 33%.
This contributed to a record high homebuilding gross margin of 32, 4%.
As a result, the company generated $74 million of net income or $1 57 per diluted share representing a year over year increase of 65%.
Year to date annualized return on equity was 34, 9%.
1001 hundred basis points higher than last year. We believe this demonstrates our ability to consistently deliver superior returns to our shareholders.
Looking ahead the U S housing market has taken that dramatic shift as mortgage rates have more than doubled from a year ago and he had a 20 year high in October .
Distant inflationary pressure and higher mortgage rates have been keeping potential homebuyers on the sidelines.
By the strong labor market consumer confidence has been negatively impacted by geopolitical risks political uncertainty surrounding the upcoming elections supply chain disruptions and particularly how aggressively the bed is hitting the economic breaks to contain inflation.
While the dust settles, we expect housing in metairie.
Housing market to remain very choppy, while it is difficult to accurately predict what will happen in the short term or long term view on the immense imbalance of housing supply and demand remains intact.
A decade long underproduction of housing has resulted in a GAAP of approximately 4 million housing units that will take many years to adjust if not another decade.
Recent and expected future reductions in housing starts are likely to exaggerate the housing shortage.
Our markets have one of the best demographics and in migration trends. Many builders have already reported their results. Yes, you've heard on these calls Dallas and Atlanta, which produced over 90% of our revenues have fared much better than markets, such as California, Denver, Phoenix and Las Vegas.
For example, the DFW metroplex, our largest market at 70% of our year to date revenues has attracted over 140 companies for office relocations and expansions in 2021 and 2022.
The resulting in migration means more people and more housing we believe the job growth economic diversity, a younger population climate tax rates and relative affordability in our core markets vis vis the rest of the nation will result in our core markets continuing.
<unk> in the nation.
Let's take a quick look at slide four of our presentation.
Despite the slowdown in sales on a national scale as shown here inventory at both existing and new single family homes remains near historic lows.
We take a closer look at Dallas on slide five.
In DFW existing home listings represents a $2 two months supply on the left graph and finished new home inventory represents a one three months supply on the right graph.
Both measures are below pre pandemic levels, we expect the existing inventory to increase in Q4 and into 2023, but also see that builders are quickly responding to decreased demand by lowering starts.
The byproduct of lower starts is that we believe construction costs have peaked.
Furthermore, as the third largest builder in DFW, we believe that our scale and this slowdown will provide us leverage to produce our construction spend.
Yes.
We believe that existing home inventory growth will continue to be limited due to a homeowner's leasing rather than selling their homes based on the slide market.
Inventory will be further limited due to homeowners, who are purchased or refinanced over the past 10 years and particularly during the last three years, because they have very low mortgage rates, which disincentivize us selling the residences.
We believe that long term home demand will continue as millennials.
Now need their first home that are financially ready and we continue to see a record level of rents rising in our primary markets. We highlight the growth of millennial cohort on page six of our presentation.
Please turn to slide seven where we focus on green bricks strategic advantages.
First we have been disciplined and deliberate in maintaining a strong balance sheet.
Despite purchasing almost 10% of our stock year to date, our debt to total capital ratio fell to 28% and our net debt to total capital was 25, 5% at the end of the quarter.
How about 89% of our outstanding debt is long term fixed rate with an annual cost of about three 5%.
We issued $50 million of perpetual preferred stock in late 2021, and a 575% coupon that would be prohibitively expensive to issue today.
Goal is to always have a superior balance sheet.
And ample dry powder.
Second as Jen will discuss in more detail later, we have been consistently disciplined with our land investment and underwriting which lead to a superior land pipeline to support our business.
Unlike many of our peers, who operate under a land light playbook, we do not use land banking to secure lives.
We believe this puts us in a strong position relative to these peers for multiple reasons.
First cost of financing the land bankers, who provide financing for land light builder is typically charge a high cost of capital. The recent rise in interest rates had made previously expensive land bank capital much more expensive.
As noted in peers, earning calls because these increased costs in flooring demands. Some builders are walking away from lot option contract or land bank deals. These are typically and C locations.
We expect land banking capital will contract and become more expensive in the future and third party lot development will be more challenging.
Second take down costs builders must buy lots from lot developers or land bankers, yes, retail prices instead of wholesale prices green brick on the other hand is the developer of code developer on over 90% of our lots owned and controlled giving us a wholesale pricing advantage and the more surety of our lives.
Third price escalation.
Many large contracts and most on a location data.
Have a 6% price escalator, which means that builders must pay 6% more to purchase a lot. The following year, even if the housing market slows further.
While there is a lots of renegotiating taking place on option lots.
Very few re negotiations are taking place on lots in prime locations.
High quality lots in prime a locations are not easily replaceable and those neighborhoods are performing better than lots and C locations.
Lastly penalty most high quality option lots demand, 15% or more a retail lot price as a first loss earnest money deposit, making it a very expensive proposition for builders to walk away from their lives.
At the end of the quarter, we owned and controlled approximately 26000 lots, we have no need to buy land to grow our business and don't plan to buy much or any land in Q4 2022 are well into 2023.
Our third strategic advantage is location location location.
And I don't know lead you operate some of the best markets in the country, but you also primarily build in infill submarkets over 80% of our year to date revenues were generated from those infill markets, where supply is constrained accompanying significant demographic tailwind.
We believe our markets will outperform the rest of the country.
Jeff will expand this discussion on our land and lot position as well as our preferred locations later on.
Fourth operational efficiency, we have invested significant capital and resources to improve our technology and processes across green bricks brands.
These investments have provided us more transparency into our workflow and cost structure as a result, as the market slows. We believe that we will have the ability to react quickly to improve overhead efficiency and negotiate what we think will be better pricing with vendors and subcontractors.
Finally, and most significantly as shown on slide eight our industry, leading gross margins at 32, 4% gives us a tremendous amount of cushion to manage pace versus price with that I'll now turn it over to Rick Rick.
Thank you Jim Please turn to slide nine of the presentation. Our total revenues in Q3, 2022 increased 19% year over year to $408 million, primarily driven by a 33% increase in asps.
Most homes to $607000. This was partially offset by 12% decline in the number of closings to 650 homes.
The decline in the number of closings was due to lower start pace in prior quarters, and a smaller backlog entering the quarter because of weakened demand.
Higher residential units revenues led to a 550 basis point year over year improvement in homebuilding gross margin to 32, 4% in Q3 of 2020 to breaking the previous record of 32, 3% setting in Q2 of 'twenty two.
Although we are not likely to maintain this level of margin in this housing market our ability to outperform our peers has been consistently demonstrated quarter over quarter and we believe we will continue to generate superior margins and a more trying time.
SG&A leverage ratio increased slightly year over year to 10, 9% during the third quarter of 2022.
As a result of higher revenues and gross margins net income attributable to green brick grew 52% year over year for the quarter.
Additionally, our reduced tax rate, resulting from energy tax credits.
Either improve diluted EPS for Q3, 2022 to $1 57 for the quarter a year over year growth of 65%.
As mortgage rates rose to their highest level in 20 years housing demand Gould quickly.
Net new home orders during the third quarter of 2022 decreased 41% year over year to 404, while our quarterly absorption rate per average active selling communities decreased to five three hubs.
Despite the lower sales pace or decline in new order revenues during the third quarter was just 34% smaller than the decline in order count as our average sales price of new orders rose by 12, 5% from 553620 2000.
Our cancellation rate increased to $17 six for the third quarter 2022, compared to six 9% for the same period last year and was up from 11, 4% last quarter.
As you would expect our cancellation rate is the highest with trophies entry level buyer.
We do not see this improving Sen Judd will provide more commentary on sales and market dynamics.
On slide 10, we highlight our year to date results. Our total revenues were up 40% year over year on an ASP increase of 31%.
Our year to date gross margin was up 460 basis points to 31, 1% and our SG&A leverage improved 150 basis points to nine 4%.
Our net income attributable to green brick was up 86% with our diluted EPS up 94% year over year.
Our annualized year to date return on equity was up 1090 basis points to 34, 9% the highest among our peer group.
Backlog at the end of the third quarter of 2022 declined 45% year over year to $564 million. This was due to a 54% drop in backlog units, partially offset by a 20% increase in the average sales price of backlog units.
The drop in backlog units as a function of the lower levels of new home orders and the higher cancellation rate described above.
As a result of fewer sales increase of units closed and decrease in backlog units.
Spec units under construction as a percentage of total units under construction rose to 65% at the end of September 2022 from 31% a year ago.
We are assessing our inventory level on a daily basis to make sure. We are aligning our sales space starts in construction.
Consequently, we expect to start fewer homes in Q4, and this trend will likely continue into the first part of 2023.
As Jim mentioned earlier, we continue to deleverage our balance sheet with strong operating cash flow and one of the lowest debt to total capital ratios of 28%.
As of September 32022, our weighted average cost of debt was three 5% and 89% of the outstanding debt was fixed maintaining the strength of our balance sheet will remain as a top priority.
I will now turn it over to Chad for market commentary Jed.
Thank you Rick.
Please turn to slide 11, the impact of rising interest rates was felt in our markets as Rick mentioned earlier, our net sales orders during the quarter were down 41% year over year with revenues on sales orders down 34%.
Those are our continued increase in average sales price.
And as seen on the slide even though our cancellation rate has continued to go up since may of this year. It is still outperforming most of our peers cancellations were heavily weighted to buyers who signed contracts when interest rates were lower.
We also experienced higher cancellations among products with lower price points and lower deposits.
Paired with the rest of our portfolio.
People are still buying houses as there is still unmet demands.
We have non discretionary buyers who need to move out of rentals due to milestone changes in life, such as marriage, new child or new job.
During this price discovery phase.
We continue to be laser focused on several key priorities that were laid out last quarter, which are one preserving backlog and acting quickly to restore sales momentum too.
<unk> been stringent and nimble with capital allocation.
And lastly, managing bottlenecks in the supply chain to bring down production cost and cycle times.
We are carefully managing our sales pace and starts on a community by community basis.
Market as a whole experienced an abrupt slowdown in June since then we haven't adopted more aggressive incentives and underperforming communities.
Sales activity picked up in the second half of July while mortgage rates temporarily dropped before rising again in the second half of August .
With an increased level of incentives, we were able to entice a reticent market and maintain a constant sales pace from June through September .
Overall discounts and incentives for new orders were up from 2% the previous quarter to four 2% in Q3 2022.
During October traffic and sales pace have been slower with monthly sales down approximately 19% versus the prior four month average and then.
Incentives, increasing from four 2% to $6 30%.
Discounts and incentives include base price reductions rate buy downs and other closing credits.
We expect elevated incentives higher cancellations and lower sales volume to remain the biggest headwinds to our margin performance in the near term.
We will continue to monitor the market carefully to adjust our pricing and our balanced starts and inventory with sales.
Jim noted our industry, leading gross margins allow us to be very aggressive pricing in our homes.
Next we continue to focus on managing capital allocation prudently.
Considering current market developments.
Have significantly slowed down our land acquisitions and expect the trend to continue until the land markets adjust.
Additionally, we conducted a thorough review of our lots owned and control.
As a reminder, a vast majority of our lots for purchase before the upsurge of land prices.
On top of conservative underwriting.
Therefore, our underwriting for these laws still generate adequate returns in today's environment, and we do not see immediate impairment risk and have no communities on a watch list.
Given the recent volatility in the market and slower sales we are planning to postpone line development in certain communities that are entering the next phases of land development.
As shown on slide 12, and 13 communities that have been delayed in the DFW area.
Periphery locations, while the majority of our land book in DFW and Atlanta are in infill locations.
We project that our land and lot development spending will decline approximately 45% next year from full year 2022.
We're surveilling the market condition as to determine the best cadence and timing for the resumption of these development projects.
Please turn to slide 14.
The self developing nature of our land business gives us tremendous flexibility to control delivery schedule and cost.
And on an upper hand on achieving higher margins.
Despite a slowdown in development, we expect to complete almost 8800 finished lots between 2022 and 2023 and 73 community.
As shown on slides 15, and 16 or 2023 deliveries in DFW and Atlanta will be concentrated in infill in adjacent desirable areas.
And in our market conditions as many peers pull back where do you expect to have the opportunity to increase our count on Indian active selling communities by 20% to 30%.
The end of September over the next four to five quarters. We believe these new communities with our favorable land and lot basis provide optionality are aggressively pricing without the overhang of protecting backlog. We also believe this will generate favorable sales per community.
More traditional gross margins.
We expect this capability will be an opportunity to build market share and effectively manage price versus pace decisions.
In addition to the flexibility regarding timing of community openings are self development of lots is expected to generate higher margins and therefore are more pricing flexibility compared to builders, who have accumulated the higher priced lots from third party developers.
This also provides us with the capability to start more homes under construction without an outlay of cash to purchase these finished lots when demand returns.
Next I would also like to provide some update our expansion into Austin.
In August we fulfilled several key roles, including our New Division President Ryan Jerky to operate the trophy brand in Austin, Ron brings tremendous experience and knowledge in homebuilding and we're excited to have him join the team.
Austin is a tough market today, but we think we will be able to deliver homes from $275000, where there is a pent up demand we will keep everyone posted when we break ground on homes in early 2023.
The last focal point for us is to value engineer to bring down cycle times and costs our cycle time for homes closed during Q3 of 2020 to.
Very significantly from by brand and price point, but in aggregate shorten modestly by 21 days sequentially. Although we are not back to pre COVID-19 levels. We are pleased to see improvements in the supply chain across multiple categories, especially with front end construction.
The falloff in starts across the industry gives us more leverage in negotiations on new communities as we've become more selective with vendors as in regards to both pricing and quality.
To be clear were still experienced struggles on certain aspects of the supply chain.
We will continue to work with our trade partners to resolve bottlenecks in the supply chain and unlock additional savings.
With that I'll turn it over to Jim for closing remarks, Jim.
Thank you Chad I would like to thank our entire green brick team for their continued hard work in this more challenging environment.
We believe the green brick is entering this cycle in a strong position we have.
A significant footprint in some of the best markets in the country.
A broad spectrum of product types and customer basis a.
A strong balance sheet and ample dry powder to deploy.
A disciplined land pipeline to support growth and most importantly, an experienced team in place to navigate our business in this environment and achieve our long term goals.
As far as stock buybacks and capital allocation are concerned for the first time in many years, we think unique investment opportunities may arise in 2023.
Consequently, we expect to evaluate buying back stock versus these direct investment opportunities as the opportunities arise.
This concludes our prepared remarks, we will now open the line for questions.
Yeah.
Thank you if you would like to ask a question on the phone lines. Today. Please press star one on your telephone keypad to remove yourself from the queue. You can press star one again, please limit yourself to one question and one follow up and if you have additional questions. Please feel free to reenter the queue.
Everyone that is star one to ask a question we will take our first question from Carl Reichardt with BTG.
Thanks, Good morning, guys or afternoon.
I'm not sure what time it exactly.
Sure.
I wanted to ask about the SG&A, which was ahead of what we were expecting and there were some negative leverage despite the relatively good sized increase in revenue I know there was some unabsorbed overhead I think you said in the Q can you just expand.
On why that number increased year over year on a percentage basis, and then what kind of run rate should we be thinking for core G&A on a go forward basis.
Those are great questions. Carl This is this is Rick.
First.
Particularly if you look Q to Q.
We went from $512 million of homebuilding revenues in Q2 down to $397 million in Q3.
So.
Most of the SG&A I.
I shouldn't say that.
Commissions generally are going to be your most significant singular variable cost in.
In the short run a lot of your overhead are going to be fixed costs in the long run everything is variable variable rate, so about 60% of the quarter to quarter increase from eight 2% to 10, 9% was that function of math, just having a bigger denominator versus your cost.
Costs, excluding commissions were in about the same.
Other than the other 40% about a 1% delta related to a cumulative year to date incentive comp adjustment.
An increase for the coming year that we're having but if you normalize that that would have only been 3% sort of 1% in the quarter. So.
It would have been about 10, 2%.
A lot more interesting to talk about the long long term run rate.
Because we're going to be cutting costs.
Just to end this.
And his view of having fewer starts until demand comes back more robustly.
We're going to be looking to to chop that number down so lower is the answer but that alone.
It will add more Wagner will always lag.
We still have a bunch of homes to complete at this point.
Okay.
Okay, Alright, I think I've got that.
And then.
Jim.
A question here that you got to it at the very end of your prepared.
<unk>, which is obviously green brick was started at effectively the bottom then awful housing market.
Looking at least some struggles in the in the near to intermediate term. So when youre thinking about opportunities are those opportunities that you think you would see in your existing markets. So any opportunity to grow your share or is this the opportunity for green brick now to begin to spread its wings into new markets.
Just like your perspective on that thanks.
Okay parallel first of all.
We quit seeing much deal flow.
From brokers to sell builders, because they knew we wouldnt buy based on rosy going forward assumptions.
So.
I would like to say that we see a lot of deals that frankly, we didnt because they knew that we weren't going to be buyers.
Right now we are in a cyclical business I think this is my fourth real estate cycle.
I've never seen a real estate cycle, where optimism didnt revert to realism. So.
That's why I think that will maybe may is the operative word be opportunities in 2023 purchasing a private builder for the first time, because I think youre going to see optimism river through realism, and pricing will adjust accordingly, the perfect scenario would be to find a private builder.
That fits our culture and more importantly, fits our economic hurdle rates and a solid or southeastern market.
Okay I appreciate that color, thanks, very much I'll get back in queue.
We will take our next question from Michael Rehaut with Jpmorgan.
Hi, everyone. It's Andrew <unk> on for Mike I. Appreciate you taking my question Congrats.
Congrats on the results this quarter I wanted to ask if you can give us some of your thoughts around directionally, how gross margins might be shaping up over the next one or two quarters.
Sure I think I'll just start that Jed can chime in later.
Praxis almost on a daily basis neighborhood by neighborhood.
It's really interesting in the a class infill neighborhoods.
We're seeing margins maintain because it's so supply constrained from a competitive position in our builders.
Competitive situation.
I don't want to make to be overly optimistic, but we actually raised prices and a $1 million neighborhood. This week and are having really good demand, even though at a slower sales pace in a AAA location neighborhood.
The neighborhoods that are really hard to handicap right now are C location neighborhoods in jets going to chime in how most of our neighborhoods are not see location neighborhoods with trophy does have some.
We think it's going to be much more challenging because theres more builders down the street.
Housing is more commoditized and frankly.
What our gross margins are going to be are going to be dependent.
To a great degree on what our peers do down the street so.
Your guess is really as good as mine.
Okay.
Yes, I would just add that gross margin is also going to be.
Our gross margin and below the gross from our gross margin will be affected by a financing and increased rover commissions that would probably.
And these periphery markets, all having to add to incentivize sales.
Okay, great. Thank you for that color and then you mentioned raising prices. So in your AAA markets, how should we be thinking about closing asps that are next two three quarters ahead of you opening these.
New communities.
Jed why don't you take the product mix question because obviously.
We're not raising prices.
And many.
As many neighborhoods is either flat or decreasing.
I think it will be I think our ASP will continue to increase slightly because.
What we've seen is the periphery locations that they were selling 10 to 12, a month sales have really dropped to about four.
That's quite a dramatic decrease whereas the preponderance of our communities are in AAA locations and we have seen a slight decrease maybe we're selling three a month instead of four so that the percentage drop in the a locations, which again are the preponderance of our communities.
Is much smaller.
And the ASP in those communities.
Typically at very high.
Andrew I think that probably some of the best color. We gave was on just the.
The increase in October .
Of the average discount going from.
Just a six 3%.
So.
That's going to have an impact.
Certainly on the ASP and part in part if it's a price discount or on incentives. So it becomes a little bit of a combination between.
Gross margin hit.
Hit just right off the top for a discount.
Okay, Great, Yes Super helpful to get your thoughts on that and I'll get back in the queue. Thank you.
We will take our next question from Jay Mccanless with Wedbush.
Hey, good afternoon guys.
So I did not follow your answer to Carl on the SG&A question can you talk about why that was up year over year, what we should be forecasting going forward.
Well the bottom line is it's a function of lower revenues and there are of course cost structure is going to have to come down.
So it was probably up <unk>.
Seven two high this quarter for the.
Incentive comp adjustment and otherwise, it's going to be a function of us making adjustments to the.
The core cost.
Probably the beginning of 2023.
Sure.
Okay.
Then Jeff in your prepared comments and I don't Wouldnt expect a big decrease in SG&A. In 2004, we are going to start addressing the cost structure more into 2023, we don't want to have a knee jerk reaction to that.
Used upon three or four months sales, but we are watching very closely.
Okay. Thank you Jim.
And then John in your comments.
Im caught about half of it I think you said something about 20% to 25% community growth is that what you said for next year.
Yes, yes.
Okay.
<unk>.
Does that community growth include the potential purchase of a southern builder you were talking about June or is that not only in that you already have under contract no place card for a builder.
We have some maps in our slide deck, showing new community opening locations, Rick that I think investors really need to stay in tune with that.
Math in your presentation with slides.
There are a couple of slides in there 15 and 16, but 14 is probably really on point because it shows how we have.
Between this year and next year 73, total communities, where we're delivering lots.
So that's going to drive the opening of those communities.
We'll be driving that growth in 2023, and what's really interesting we don't get this granular in our presentations, but if you take a look at the slide deck.
15, and you take a look where those communities are open and you can see that they are in the areas that burns does that describes as most desirable and desirable areas and I don't think any CEO is jumping up and down excited about what's happening in the market, but we are relatively optimistic because that.
Communities that are opening in these new highly desirable neighborhoods, we have a very favorable lot cost we purchased.
The land was low some of them have.
Low cost mud debt on them.
We already have as our neighborhoods not far from that and our lot cost in these new neighborhoods is very favorable compared to our older neighborhoods that are already producing very nice margins. So.
We feel good about that Youll see two docks that are a few dots that are not in there.
The highly desirable locations and as we said in the call.
Those are in more Horton higher competitive neighborhoods, where theres more competition and we're going to see margin compression in those neighborhoods and we know what we just don't know what it's going to be because.
We know we can price a house more than Horton because frankly, it's up.
Pressure architecture, more windows better indoor out living space, but we can only go so this spread over our Horton probably can only be so much.
So to that end Jim if this is a longer term downturn in the shorter one what's the future for trophy signature and you just put a lot of that land and mothball and wait till <unk>.
GE Palestine jacking up rates or what's the what's the near to medium term outlook for trophy signature.
Well, it's obviously it can be harder to grow trophy signature unless you want to take lower margins are going to evaluate that we've already made the investment in land.
So in terms of return on capital and stuff, but we think it's going to be accretive, but how accretive we don't know.
In terms of Austin for example, Jim I think to tell them, what we're doing in Austin and we think we can still be very successful in Austin, because we can price, our homelink or $300000 and we think there's a huge amount of demand.
And this market is kind of a winner take all because the consumers so smart and if you open at $300000 and you can make decent margins and some other builders not far from me at $3 50, you don't get one incremental sale you get 10 a month.
Yes, I would just that.
Jay I would just add.
Our lot cost basis, and a lot of these periphery locations is around $50000.
Our vertical construction costs really.
Kind of run out of control.
Not just us, but the whole industry too.
Whereas cost staying close to 2000 $200000 of house to build that.
We think we can beat those down.
One 150 to 175 range and really deliver this.
Jim pointed out are much cheaper product.
Very industry standard historically.
Nice gross margin of.
25, 6%.
Okay.
And thank you for that Gen, Jim, but the last one I had.
Infill is still selling that well and on a company average you had a 41% order decline.
I guess, what was the level of declines in the softer areas versus the level of declines in the better areas for the quarter.
Yes.
This is Jed I'll take that.
Have the exact numbers, but it was like.
With the cancellations in the a locations was.
At least half of what it was in the periphery locations.
Sure.
Okay.
Right now the real problem in the periphery locations is not demand. It was the cancellation factor there was so much higher than the locations were taking 60 $70000 in some of the higher end price points and lot deposits and Thats. Obviously there is those people are more qualified and they are less likely to walk away from $65 at an entry level buyers.
That puts $5000 in the house or cancelled late it was really affecting.
The <unk>.
Sales pace. The demand was there are cancellations were too high I think they were running 29% 30% of trophy.
And sometimes some week, if they can even be higher than that and they are much lower than that.
For the aggregate over the rest of our builders.
Okay, great. Thanks for taking my questions.
Yeah.
As a reminder, everyone that is star one on your telephone to ask a question, we'll take Sir I'll take our next question from Alex Rygiel with B Riley Securities.
Yes, good afternoon first.
Clarification did you say that incentives in Cancelations increased in the month of October .
Yes, yes, yes incentives went from four 2% in Q3 to six 3% in October for instance.
Helpful and then.
How many finished spec homes did you have at the end of the quarter.
63.
And then lastly, what's your land spend likely to be for 2022.
We don't I don't think we provide that detail I think we were internally taking a look at land spend in 'twenty.
<unk> 22 in 2023, and I think it was going to be.
Within about $140 million Delta.
To be down 45% between Atlanta development spend from 'twenty two to 'twenty three.
And the Delta on that is.
$150 million.
Thank you very much that's somewhat fluid depending on costs and other.
Phasing issues that we're looking at right now.
Obviously with the with lower demand any anytime that we can reduce development spend that's a good idea and we're really evaluating that in our neighborhood by neighborhood basis.
All of our builders are coming to Dallas November 8th and ninth to discuss that issue with us.
Thank you.
We will take our next question from Alex Barron with housing Research Center.
Yes, thank you very much.
Wanted to see if you guys could provide the number of starts.
This quarter, and how that compared to last quarter and last year.
Yes, it's actually that you can do the math pretty easily every quarter. We tell you what the closings are obviously and we would tell you what the.
The ending units under construction.
But in Q3, we started 490 homes.
Okay.
And year ago.
A year ago was 801.
It's very difficult.
Caution anybody would take a look at.
Comparing.
Covid sales results required starts detour, resulting of this and matching that to other periods because it's it's going to skew the results because we just had a.
When we were starting 801.
We were selling homes really in hindsight that I wish we would have delayed selling some.