Q2 2025 Tri Pointe Homes Inc Earnings Call
Greetings and welcome to second quarter 2025 earnings conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation.
Speaker Change: If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host. David Lee, general counsel, thank you, sir. You may begin good morning and welcome to Tri Pointe Homes earnings conference call earlier this morning, the company released its Financial results for the second quarter of 2025.
Speaker Change: Documents detailing these results, including a slide deck are available at www.trip.com.
Speaker Change: Through the investors Link in under the events and presentations table.
Speaker Change: Before the call begins, I would like to remind everyone that certain statements made on this call, which are not historical facts.
Speaker Change: including statements concerning future, financial and operating performance are forward-looking statements that involve risks and uncertainties
Speaker Change: The discussion of risks and uncertainties and other factors that could cause actual results to differ materially or detailed into companies SEC filing.
Speaker Change: Except as required, by law, the company undertakes, no Duty up to update these 4 looking statements.
Speaker Change: Additionally, reconciliations of non-gaap financial measures discussed on this call to the most comparable gaap measures can be accessed through. Try points website and in its SEC filings.
Speaker Change: Hosting the call today are Doug Bower, the company's chief executive officer.
Speaker Change: Glenn. Keeler, the company's Chief Financial Officer.
Speaker Change: Tom Mitchell, the company's president and Chief Operating Officer.
Doug Bower: And Linda made a company's Executive Vice President and chief marketing officer with that. I will now turn the call over to Doug.
Doug Bower: Good morning and thank you for joining us as we report our results for the second quarter of 2025.
Doug Bower: Our teams deliver, good quarterly, results, while executing a challenging environment.
Doug Bower: We met both our top and bottom line guidance. While continue to build a scalable foundation for long-term growth.
Doug Bower: In the second quarter, we delivered 1,326 homes and the average sales price of 664,000.
Doug Bower: Dinner 800880 million. In home sales revenue.
Doug Bower: Home Building gross margin adjusted to exclude an inventory related charge.
Doug Bower: Was 22.1% supported by discipline pricing.
Doug Bower: Strong product positioning and continued cost control.
Doug Bower: Adjusted debt income was 69 million or 77 cents per diluted share
Doug Bower: but the long-term outlook for housing remains favorable due to strong demographics and the continuing under supply of homes,
Doug Bower: The near-term Remains choppy.
Doug Bower: Continued policy uncertainty.
Doug Bower: Housing inventory levels and a softer pricing environment.
Doug Bower: We generated 1,131 net, new home orders in the quarter.
Doug Bower: With a monthly absorption rate of 2.5 per average, selling community.
Doug Bower: We continue to focus on balancing pace and price on a community by Community basis and have moderated. Our start Pace in an effort to normalize our level of spec inventory.
Doug Bower: By leveraging targeted incentives for design studio options and mortgage rate by Downs.
Doug Bower: We are addressing monthly payment, sensitivity and buyer, preferences for home, personalization with the goal of optimizing margins.
Doug Bower: Our innovatively designed and well-located communities close to job centers.
Doug Bower: And lifestyle amenities continue to attract a well-qualified buyer.
Doug Bower: Home buyers and backlog financing through our mortgage company. Tri Pointe connect.
Doug Bower: Have an average annual household income of 220,000.
Doug Bower: Average, FICO score 753.
Doug Bower: 79% loan to value.
Doug Bower: And average at the income ratio of 40% consistent with the last several quarters.
Doug Bower: We ended the quarter with 1.4 billion in total liquidity, including 623 million in cash.
Doug Bower: Our home building debt to Capital ratio was 21.7%.
Doug Bower: And net debt to net capital, stood at 8%.
Doug Bower: During the quarter. We further strengthened our financial position by extending and upsizing our revolving credit facility.
Doug Bower: Expanding liquidity through 2030.
Backed by a strong balance sheet, our land investment strategy remains disciplined with the selected. Focus on opportunities.
Doug Bower: That produces the strongest returns in our core markets.
Doug Bower: In the near term, we have an excellent land position that enables us to grow. Our Ending Community account in 2026, and the low double digits.
Doug Bower: During the quarter, we return an additional 100 million to shareholders through share repurchases.
Doug Bower: With our stock trading below Book value, we accelerated repurchases reducing our share, count by 3 and a half percent in the second quarter alone.
Doug Bower: For the year to date period. End of June 30th. We have repurchased 175 million
Doug Bower: reducing our shares outstanding by 5.5 million.
Doug Bower: Or 5.3%.
Doug Bower: since initiating the program in 2016, our share count has decreased by 46%
Doug Bower: This reflects our confidence in the long-term value of the business.
Doug Bower: And our commitment to enhance enhancing per share returns for our shareholders.
Doug Bower: in the last 12 months, our book value per share has grown 12.4%
Doug Bower: Our New Market expansion is in Utah, Florida and the coastal Carolinas, remain on track and are expected to contribute to meaningful, top and bottom line growth over time.
Doug Bower: Broad while broadening our Geographic footprint.
Development activity in these markets is progressing as planned.
Doug Bower: Supported by strong local, execution, and scalable operating models.
Doug Bower: We expect a notable inflection in the performance. From our new divisions beginning in 2027,
Doug Bower: As volumes increase in operating leverage improves, the porting our long-term growth strategy.
Doug Bower: While near-term conditions remain challenging. We are executing through a differentiated.
Doug Bower: Premium product offering targeted incentives.
Doug Bower: And continue to focus on, cost discipline and cycle time improvements.
Doug Bower: We remain confident in the long-term. Fundamentals, underpinning housing demand.
Doug Bower: Including favorable, buyer demographics and the undersupply of housing over the last decade.
Doug Bower: The current market market dynamics present, not only challenges but also meaningful opportunities.
Doug Bower: Through discipline and capital allocation including strategic land Investments.
Doug Bower: Prudent, Inventory management and opportunistic. Share repurchases.
Doug Bower: We are positioning TriPoint for continued, strong returns and long-term shareholder value creation.
Doug Bower: With a healthy balance sheet, a seasoned team and a differentiated brand. We are well positioned to navigate evolving market conditions and deliver, sustained growth and performance.
Over to Glenn Glenn.
Glenn Keeler: Thanks Doug and good morning. I'd like to highlight some of our results for the second quarter and then finish my remarks with our expectations and outlook for the third quarter and full year for 2025, the second quarter produced strong financial results. For the company, we delivered 1,326 homes, which beat the high end of our guidance range. Home. Sales revenue was 880 million for the quarter with an average sales price of 664,000.
Glenn Keeler: Our average sales price was lower than our previous guidance due to the mix of deliveries that were sold and closed in the quarter.
Glenn Keeler: Gross margin adjusted to a exclude, an 11 million inventory. Impairment charge was 22.1% for the quarter in line with our guidance.
Glenn Keeler: Sgna expense as a percentage of home sales, revenue was 12.6% and at the lower end of our guidance benefiting from Savings in GNA and better Topline Revenue, leverage as a result of exceeding. Our delivery guidance, finally, net income for the year was 69 million or 700 cents, 77 cents per diluted. Share also adjusted for the same inventory related charge,
Glenn Keeler: Net new home orders in the second quarter were 1,131 with an option pace of 2.5 homes per Community per month.
Glenn Keeler: For some Market color, our absorption Pace in the West Was 2.5 for the quarter with the Inland Empire, San Diego and Seattle Market showing stronger demand.
Software markets in the West for the quarter were Sacramento and Arizona.
Glenn Keeler: In the central region, the overall absorption Pace was 2.3 for the quarter.
Glenn Keeler: With increased supply of both new and resale Homes, Austin, Dallas, and Denver showed softer demand during the quarter. While Houston continue experienced steady demand,
Glenn Keeler: Finally, in the East absorption Pace was 3.1 for the quarter with our DC Metro, and rolly division showing strong demand while Charlotte was consistent with the company average.
Glenn Keeler: During the second quarter, we invested approximately 20050 million in land and Land Development. We ended the quarter with over 34, total to 34,000 total, Lots 51% of which are controlled via option.
Glenn Keeler: During the second quarter, we opened 11, new communities and closed out of 13 and in the quarter with 151, active, selling communities. And we continue to anticipate ending 25 somewhere in the range of 150 to 160 active communities.
Glenn Keeler: Looking at the balance sheet and capital spend. We ended the quarter with approximately 1.4 billion of liquidity. Consisting of 623 million of cash and 786 million available under our unsecured revolving credit facility, as Doug mentioned during the quarter. We extended our revolving credit facility out to 2030 and increase the revolver size by 100 million, to a total barring capacity of 850 million.
Glenn Keeler: At the end of the quarter, our home building debt to Capital ratio was 21.7% and our home building net debt to net. Capital ratio was 8%
Now, I'd like to summarize our outlook for the third quarter and full year of 2025 for the third quarter. We anticipate delivering between 1,000 and 1100 Homes at an average sales price between 675,000 and 685,000.
Glenn Keeler: We expect Home Building gross margin percentage to be in the range of 20% to 21%.
We expect our sgna expense ratio to be in the range of 13% to 14% And we estimate our effective tax rate for the third quarter to be approximately 27%.
Glenn Keeler: For the full year. We are updating our guidance to a lower range of deliveries. Based on the slower market conditions. We have experienced in the spring. We now anticipate delivering between 4,800 and 5,200 homes for the full year with an average sales price between 665,000 and 675,000.
Glenn Keeler: We continue to expect our full year home bid, and gross margin to be in the range of 20.5% to 22%.
Glenn Keeler: Which excludes the inventory related charge? We recorded this quarter.
Glenn Keeler: Finally, we anticipate our sg&a expense ratio to be in the range of 12% to 13% and we estimate our effective tax rate for the full year to be approximately 27%.
Doug Bower: With that, I will now turn the call back over to Doug for closing remarks.
Doug Bower: Thanks Glenn as we close. I want to express my sincere appreciation to the entire Tri. Pointe team for your continued dedication.
Doug Bower: Focus and alignment with our mission and values.
Doug Bower: Your commitment is the Cornerstone of our success and play a vital role in delivering, another solid quarter.
I'm also proud to note. That Tri Pointe was once again named to the Fortune 100 best companies to work for in 2025.
Doug Bower: A reflection of the culture of excellence and collaboration. We built together.
Doug Bower: Looking ahead. We remain confident in the long-term, fundamentals of the Housing Industry.
Underpinned by favorable demographics in a persistent Supply demand and balance.
Doug Bower: With a clear strategy at discipline operating model.
Doug Bower: And an exceptional team. We believe we are well positioned to navigate short-term headwinds and seize the opportunities. That lie ahead.
Doug Bower: Thank you again to our team members, customers trade partners, and shareholders for your continued, trust and support.
Doug Bower: I'll turn the call over to the operator. For any questions, operator.
Speaker Change: Thank you. We will now be conducting a question and answer session. If you would like to ask a question,
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Speaker Change: 1 moment, please while we pull for questions.
Trevor Alanson: Our first question comes from Trevor alanson with wolf research, please proceed with your question.
Trevor Alanson: Hi, good morning, thank you for taking my questions. Uh, I want to first ask about the implied 4q volume guide based on your foyer numbers.
Trevor Alanson: I think if I'm doing the math correctly, it implies, you're going to do 1500 or 1600 deliveries in the fourth quarter. It's in line with where your backlog sits currently. Can you talk about your confidence and hitting that number? And did you increase your starts in the quarter to make sure that you had inventory in place to hit that number?
Trevor Alanson: Hey Trevor, it's Glenn. Good question. Uh we're going into the third quarter with plenty of moving ready and Speck homes to be able to hit that number. And like you said that, the implied guidance is kind of consistent with the absorption that we're having actually adjusted down a little bit for seasonality. Um, so we definitely have the starts to, to hit that guide.
Trevor Alanson: Okay, gotcha makes sense. And then second 1 just on in incentives and your expectations for the rest of the year. I think. Previously, you talked about expecting roughly 7% incentives, hold the the remainder of the year, you've maintained, your gross margin guidance here. Uh, are you still thinking that roughly 7% incentives? Uh, is where you're going to be able? We just heard a couple other builders talk about expectations for incentives to move higher. So, hoping to get some color on, on your thoughts on that here. Moving forward.
Trevor Alanson: Yeah, Trevor it's Doug um incentives on revenues were 7.1%.
In in the second quarter. Uh they'll Trend up slightly as we factored, those into the seasonality of the back, half of the year.
Trevor Alanson: Uh, which is implied in our gross margin guide.
Okay, thanks for all the color. I appreciate it. Good luck, moving forward.
Trevor Alanson: Thank you.
Speaker Change: Our next question comes from Stephen Kim with evercore. Isi, please proceed with your question.
Stephen Kim: Yeah. Thanks a lot, guys. Appreciate the uh, the color. Uh, I was curious if you could give a little bit of detail on the impairment charge a 13 million in the quarter, kind of, where was that? Um, and also uh, I know that you guys uh in addition to communities that you actually do impaired, there's also communities that use subject to the impairment analysis if they're perhaps somewhat closed. So I was wondering if you give us some insight into what sort of that watch list if you want.
Speaker Change: Well, uh what that looks like.
Sure. Stephen. This is Glenn uh the 11 million impairment in the quarter was a bay area project.
Speaker Change: That's um, you know, been a been, a challenging project for some time. So, you know, based on the current market conditions, it just when you do that test, it failed the test. And so we booked the impairment this quarter, so, uh, nothing surprising there. It's just kind of a 1-off project that that was challenged on the impairment process for us. So what we do is you know, any Mar any project that has a margin starting to get around at 10% range, kind of comes onto a watch list for us.
Speaker Change: And we watch those projects and then we run impairment analysis. If there's indicators of impairment, which is required, um, from the accounting standards. So that's how we do it. Once it gets to that 10% range.
Speaker Change: Uh, we start watching it from an accounting perspective. Now, we're always watching every project and and the margin and trying to
Speaker Change: You know do the the best we can to improve uh margins in our projects but from uh pure impairment accounting perspective, that's our process.
Yeah, I guess my question. Yeah, go ahead. Sorry. I was just going to tag on to maybe hit the
Speaker Change: Question. Uh the the list is not significant um and so we do have projects that are on that list and they have been on that list but we seem to continue to implement strategies to have those projects have consistent absorption and and work through that without getting into that impairment Zone.
Speaker Change: Would it be fair to say Tom that we have not seen uh in the last few months? A significant uh increase in the number of communities that have made that watch list
No, I think you know obviously as absorption has slowed throughout uh, the industry. Um, it does put pressure on margins because of increased incentives, but again it's not to anywhere near an alarming uh rate
Speaker Change: And then I was wondering if you could talk a little bit about absorption. Um, maybe as a trended through the quarter, you know, on a monthly basis, I think you would said, 3 months ago that April had kind of gotten off to a little bit of a tougher start. I was curious how in the end uh that all wound up uh sort of average out your 2 5 for the for the quarter.
Speaker Change: Yes Stephen it's Doug um the quarter absorption started, you know, decent in April, uh, peaked in May and and then trended down in the back half of June which kind of follows from seasonal patterns. Um,
Speaker Change: The early part of July is also very seasonal with the, the holidays and so forth. Um, it's, it's a choppy Market to be honest with you. I've seen a lot worse conditions and these are all short-term conditions that shell change and shell move on when you look at the fundamentals of of the business. But uh, um, it's not uh it's not uh, Earth's shattering at all.
Speaker Change: Yeah.
Speaker Change: Um, yeah, I appreciate that. Uh, 1 last 1. If I could um, uh, Glenn you gave a range of for gross margin, which I think is pretty consistent with what you've done before, it's pretty wide range. Um, and you know, you haven't narrowed it here as you've progressed through the year, I was kind of curious. Um, it seems, you know, if my math is right, it it could potentially imply a gross margin in 4 q as low as 17%
I know you're not guiding to that. Um, but uh, I was curious. Why why didn't you tighten the range as you've made progress through the year and what kind of environment could actually drive a gross margin as low as 17% in the fourth quarter?
Speaker Change: Well, like Doug said, it's you know, it still is a choppy environment. There's a lot of moving pieces, still to go the rest of the year. Um there's not a lot of backlog going into the fourth quarter and so there's still a lot of sales to make. And so that's why we kept that wider range.
Speaker Change: I appreciate it. Thanks.
Speaker Change: Thanks. Yep.
Speaker Change: Our next question comes from Alan Ratner with dellman and Associates. Please proceed with your question.
Alan Ratner: Hey guys, good morning. Thanks uh, as always, for all the details so far. Um, my question is more kind of strategic, uh, in terms of how you're thinking about pace and price now, um, if if I look at your orders last 4 quarters, they're down 25% year-over-year and and the group is down low, single digits for comparison. And I know, you know, initially you kind of flagged the the price over Pace strategy and and certainly your margins reflected that. But if I look at your guidance, for the next couple of quarters, you know, margins coming down quite a bit and reverting closer to where where the peer group averages. So I'm curious that you know, how you're thinking about that interplay today. And what do you attribute? The, you know, the the relative order weakness versus peers too because, um, you know, it would seem like from a price point perspective. You guys are in in the right part of the market, uh,
Geographically speaking. You know, you're not big in Florida which is a big um pain point for a lot of Builders. So I'm just curious how you're you're thinking about that right now.
Yeah, and it's Doug, um, you know, we're we're going to continue to favor price over pace.
Alan Ratner: Demand is is to in in my mind is fairly inelastic. Um, and in the consumer,
Alan Ratner: Confidence is, is really the driving force. Uh, as you know, you see it all the time as all the sea, you know, all these headlines that that the consumer continues to see including uh, just the the the uh, kind of disruption that we've seen de, you know, just with the administration with tariffs and everything, just creates a lot of uncertainty. So uh we're going to continue to favor price over Pace. Uh, when you run sensitivities, it's pretty clear that uh uh you you you run your business that way to increase uh and maintain margins and profitability and earnings per share.
Alan Ratner: Allan. I think also the, uh, the difference in in margin as you've highlighted really relates to, uh, you know, some of those orders that were driven in 3 and 4 q last year, that have closed early this year versus orders that were generated this year, that just had higher incentive levels. So it's not necessarily a huge Trend towards an increase as we go through the back app.
Speaker Change: Got it. Okay, appreciate that. Tom. And then um,
Speaker Change: A willingness to accept contingent self.
Speaker Change: Ellen, this is Linda, good question. Uh, we do use contingencies as a strategic part of our sales program. We are very disciplined with our home to sell contingencies. Currently approximately 5% of our backlog is a home to sell contingency. We do set limits at each Community as appropriate on how many home to sell contingencies. We would carry it any 1 time.
Speaker Change: And, uh, because we do a lot of due diligence on each of the contingencies, before we write the contract, our success rate is, is very strong, so we continue to see that as an important part of our sales program, but we're not overly reliant on it.
Speaker Change: And we do certainly in the move up space. Um, see customers, who would like to sell their current home.
Speaker Change: Before buying ours, but they don't always have to sell their existing home. Um, so, you know, sometimes that will get worked through in the process where they may end up carrying both homes to some period of time and still closed on ours.
Speaker Change: s*** that Linda. Thanks a lot.
Speaker Change: Thanks Alan.
Our next question comes from Jay Michaelis with wedbush Securities, please proceed with your question.
Jay Michaelis: Hey, good morning everyone. Um, first question for me, I guess what, what got you over, the, the hump on closings, for the quarter, to beat the guidance, was it 1 market in particular just a couple extra closings and they were division.
Jay Michaelis: It it was more broad-based J. Like I said I think the team did a good job of focusing on um homes that were completed or soon to be completed and was able to concentrate their sales efforts on those homes, to generate more volume in the quarter.
Jay Michaelis: Um,
Speaker Change: and then we've heard from some of your competitors and I know you guys don't have a lot in the specific Bay Area but um some concern around demand in Northern California. Um, Tech job concerns Etc. Have you guys been hearing that from the field and and maybe dive down a little bit, also in Sacramento and and fill us in on what's going on. What's happening there?
Speaker Change: Hey Jay, this is Tom. I'll take that 1. Uh yeah Northern California has continued to soften, you know, throughout the the second quarter. But we have not heard of uh job loss being a factor in in that softness as Doug mentioned, you know, the underlying confidence and Chaos uh that the consumer is feeling is is really what we think is the obstacle.
Speaker Change: ICal to uh, to absorption pays.
Speaker Change: um,
We are down in community count in in Northern California as well. So, I think that accounts for some of the year-over-year variance and orders
Speaker Change: but as you look at it, um,
We're well positioned in the in core markets and uh, we still think there's underlying demand in those markets for our product. And it's just a matter of that confidence Factor coming back and and we think we'll be in good shape.
Speaker Change: Great j. J, j, j. Add, uh, Southern California as long as we're talking about California. Actually, the IE San Diego is well, above the company average. So, you know, every market across the country, we've got several, uh,
Speaker Change: 5 or 6 markets that are well absorbing well above company average. So it's a it's a very choppy Market. It's nothing to
Speaker Change: To to, you know, get all lathered up on it. It says, is actually, as, as I mentioned to to, I think it was Alan. I've seen a lot worse in my 35 years. So, you know, we're we're still seeing demand, uh, and uh, in Southern California. It's been, uh, actually pretty good uh, out in the Inland Empire in San Diego.
Speaker Change: Sounds good. Doug, thank you. Um, that's all the questions I have. Thanks.
Jay Michaelis: Thanks Jay. Thanks. Yeah.
Speaker Change: Our next question comes from Mike doll with RBC Capital markets. Please proceed with your question.
Mike Doll: Hey, good morning. Thanks for taking my questions.
Mike Doll: Um, as I, I just wanted to follow up on some of the questions around from a pace. And, and how you're thinking about the backcast with the
Down to 2 and a half months. I think this historically has been or, or at least in recent years, kind of the lower bound that where you want to operate. So when you think about the back half of the Year, obviously, normally
Mike Doll: We'd get.
Mike Doll: About that price versus Pace balance. What that threshold is for you.
Mike Doll: Yeah, I mean, we, we factored in the fact that the, the back half of the year is definitely more seasonal. You'll have, you know, some, uh, divisions or projects moving below 2 and a half. Um, but again, we're going to continue to focus on price over Pace. Um, overall, you know, I still think 2 and a half is, is, is probably a good number for the back. Half of the Year could Trend down a little bit. It could Trend up, um, it's as I mentioned earlier, it might, it's, it's very inelastic. Um, so there's not, you know, just throwing more money at things doesn't really do anything. Um, and so we, we, you know, our projects are well-located, uh, Main and Main, uh, there's no reason, uh, to, uh, give away the store, so to speak. Uh, we were just actually up in the state of Washington, uh, we have
Mike Doll: A a project up there. Uh, that's selling for over 3 million dollars and it's, uh, it's, you know, it's like taking orders. So every Market, every Project's, different
Speaker Change: Yeah, I hear that makes sense. Um, and then just shifting gears back to the margin. Question around the wide range and the implied outcomes for 42. I know you have the range out there but, um, Glenn, I, I mean, you know, midpoint of that range is kind of 19 is on 42. Is that really like based on what you're seeing today and the mix, you can see. And, and the specs that you can see it is that kind of should we be thinking about the midpoint or, um, or do you really want kind of the whole range on on the table? Uh, at this point?
Speaker Change: No, I think the midpoint makes sense, that's kind of how we base. Our guidance is, is that midpoint and that's what we see. You know, with the level incentives that is currently flowing through. Um, you know, if we had to pick, you know, still like I said there's a lot of orders still to make to get there. But um you know we're we're driving that guidance towards the midpoint
Stephen Kim: Okay. All right. Thanks Steve.
Our next question comes from Ken zenner with Seaport research. Please proceed with your question.
Ken Zenner: Good morning, everybody.
Speaker Change: You can thank you.
Speaker Change: Um I have a flu of questions here so I appreciate your patience. Um first can you address the rising variable sgna costs and is that kind of the new Baseline and what's driving that?
Speaker Change: It's really the percent of sales.
Speaker Change: Yeah, it's really just a function of lower volume, right? So it's just less leverage on our fixed costs.
Speaker Change: It's not like worse. I'm referring to the variable.
Speaker Change: Piece.
Well, there's still some fixed cost even in the S component, right? Because you're, you're spending advertising dollars on new communities and and their salaries in the S component. So it's not all variable in the S got it. Okay. And then I guess this and the same question goes for the fixed piece. Um, it's down obviously year over year, but how should we think about
Speaker Change: that um you know, corporate versus, you know, the number of communities you have
Speaker Change: Um, you know we're we're obviously watching spending, right? I mean obviously the Market's a little bit more challenged than it was last year. So,
Speaker Change: Spending is, uh, something that we're challenging and being really smart about. And so, that's why you're seeing GNA down a little bit year-over-year. But, you know, it's something we're going to continue to, to Monitor and make sure as we're as efficient as possible.
Speaker Change: And then as it relates to, right, there's starts, closing inventory. Do you guys expect inventory levels?
Speaker Change: to basically be down year-over-year, similar to where we are in 2q,
Speaker Change: Um, yes, yeah I I think you're you're seeing a little bit slower in The Land Act.
Speaker Change: Um then you know we were last year and so that that plays a part in it and we're also working down, you know, our spec levels and so we're we're hoping to end the year with less specs than we do now. Um, and so
Speaker Change: That'll be a factor as well.
Speaker Change: And then Doug.
Speaker Change: Um, this is more for you or for Tom, I guess but it's a big picture question. It's the main question I get from investors. So like your book values have 12%, you guys are still executing. Well you do your rest as a company. In general. The industry is that way as well.
Speaker Change: you know, when could attribute that to
consumer uncertainty, but
there's also the fact that the home price to income, it's very unaffordable.
Given a lot of historical metrics. So if how how is the industry going to kind of solve that if you know if the companies are good but the demand is just
Speaker Change: structurally lower because of affordability. Therefore, the cyclicality of the industry is diminished, how, how do you think that's going to kind of what are the puts and takes there for you? Um, because we could just say it is an elastic because, right? It's so unaffordable to people
Speaker Change: How do you kind of see this playing out?
Well, I think the inelastic Demand right now is due to buyer confidence can. Um, and and when you look at our
Uh, buyer profiles, uh, uh, having average household income of 220,000 dollars. Um, you know, they can afford, uh, all the house price that we provide in, in many cases. Uh, so, um, but on a, on a kind of a national basis,
As I read the earnings calls and and script and and reports that are coming out, uh, you know, there's the entry-level side of the business and and they're having to give more and more incentives to move that product. So net, net pricing is coming down and I think even John Burns indicated that in some of his analysis, so long term.
so, we think
Speaker Change: Uh, you know, the, the fundamentals of the market, uh, are going to work quite well in the favor of the, of the new home. Builders and, uh, our current expansion strategies are are well, timed, instead of making some sort of m&a, announcement, we are expanding organically. So we're still and
Speaker Change: Tom and I are very bullish about the Future. These
Speaker Change: short term conditions, uh, and you can analyze it. And look at all the headlines. Uh, and get all wrapped up in the short term. We look long term, we have a great land, uh, inventory, great Community count, that'll grow, uh, low, double digits next year. So we're well positioned for for, uh, Housing Industry that will continue to thrive as we look at it over the next 3 to 5 years,
Speaker Change: And if I could get 1 more in, I realize it's yeah, that's that's I 1 more question Ken. And then we got a wrap it up. That's right. I'll catch you. I'll do it later. Thank you.
Speaker Change: Thanks.
Speaker Change: Our next question comes from Alex Barron with housing Research Center, please proceed with your questions.
Speaker Change: Good morning, everybody. Um, just wanted to ask. What, what's your current? What's your current build time on average? And, you know, is there any opportunity to to keep improving it? And was there any Improvement versus a quarter ago or a year ago?
Tom Mitchell: By Alex. This is Tom uh good question. It's certainly a focus area for us as we're looking at uh all
Areas to reduce costs and improve on cycle times. But our current, uh, average build time is 115 working days. So, just, uh, about 5 and a half months, almost 6 months on that. Um, we're meeting our schedules, we're maybe a little bit ahead of schedule, so we're in process of.
uh,
doing some new initiatives around, uh, reducing cycle times. It's uh, it's time to do that. We're implementing some, some new templates, and schedules, and we'll be looking to improve on those numbers.
Tom Mitchell: All right, guys, best of luck for this year. Thank you.
Tom Mitchell: Thanks Alex.
Tom Mitchell: There are no further questions at this time. I would now like to turn the floor back over to Doug buyer for closing comments.
Tom Mitchell: Well, thank you everybody for, uh, joining us in today's call. And, uh, we look forward to chatting with you all and uh, October uh, have a great uh summer. Thank you.
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