M/I Homes Q4 2025 M/I Homes Inc Earnings Call | AllMind AI Earnings | AllMind AI
Q4 2025 M/I Homes Inc Earnings Call
Speaker #1: Good morning, ladies and gentlemen, and welcome to the M/I HOMES fourth quarter and year-end earnings conference call. At this time, our lines are now listen-only mode.
Operator: Good morning, ladies and gentlemen, and welcome to the M/I Homes Q4 and year-end earnings conference call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you need assistance, please press star zero for the operator. This call is being recorded on Wednesday, January 28, 2026. I would now like to turn the conference over to Phillip Creek. Please go ahead.
Operator: Good morning, ladies and gentlemen, and welcome to the M/I Homes Q4 and year-end earnings conference call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you need assistance, please press star zero for the operator. This call is being recorded on Wednesday, January 28, 2026. I would now like to turn the conference over to Phillip Creek. Please go ahead.
Speaker #1: Following the presentation, we will conduct a question-and-answer session. If at any time during this call you need assistance, please press star zero for the operator.
Speaker #1: This call is being recorded on Wednesday, January 28, 2026. I would now like to turn the conference over to Phil Creek. Please go ahead.
Speaker #2: Thank you. And thank you for joining us today. On the call with me is Bob Schottenstein, our CEO and president, and Derek Klutch, president of our mortgage company.
Phillip Creek: Thank you, and thank you for joining us today. On the call with me is Bob Schottenstein, our CEO and President, and Derek Kluch, President of our mortgage company. First, to address Regulation Fair Disclosure, we encourage you to ask any questions regarding issues that you consider material during this call, because we are prohibited from discussing significant non-public items with you directly. And as to forward-looking statements, I want to remind everyone that the cautionary language about forward-looking statements contained in today's press release also applies to any comments made during this call. Also, be advised that the company undertakes no obligation to update any forward-looking statements made during this call. With that, I'll turn it over to Bob.
Phillip Creek: Thank you, and thank you for joining us today. On the call with me is Bob Schottenstein, our CEO and President, and Derek Kluch, President of our mortgage company. First, to address Regulation Fair Disclosure, we encourage you to ask any questions regarding issues that you consider material during this call, because we are prohibited from discussing significant non-public items with you directly. And as to forward-looking statements, I want to remind everyone that the cautionary language about forward-looking statements contained in today's press release also applies to any comments made during this call. Also, be advised that the company undertakes no obligation to update any forward-looking statements made during this call. With that, I'll turn it over to Bob.
Speaker #2: First to address regulation fair disclosure, we encourage you to ask any questions regarding issues that you consider material during this call because we are prohibited from discussing significant non-public items with you directly.
Speaker #2: forward-looking statements, I want to remind And as to everyone that the cautionary language about forward-looking statements contained in today's press release also applies to any comments made during this call.
Speaker #2: Also, be advised that the company undertakes no obligation to update any forward-looking statements made during this call. With that, I'll turn it over to Bob.
Speaker #3: Thanks, Phil. And good morning. Thank you for joining us today. As I begin, I'd like to take a brief moment to acknowledge an important milestone for M/I Homes.
Bob Schottenstein: Thanks, Phil, and good morning, and thank you for joining us today. As I begin, I'd like to take a brief moment to acknowledge an important milestone for M/I Homes. 2026 marks our fiftieth year in business. Over the past five decades, our company has grown to become one of the nation's largest and most respected home builders. Looking back, we've been through a lot, but we've experienced disciplined growth and certainly our fair share of successes navigating through multiple housing cycles. Through it all, we have maintained an unwavering focus on quality, customer service, and operating at a high standard. As we look ahead to celebrating this milestone, we're proud to report that we are in the best financial condition in our history, have a group of leadership teams that are as strong as we've ever had, and that we are well-positioned in our 17 markets.
Robert Schottenstein: Thanks, Phil, and good morning, and thank you for joining us today. As I begin, I'd like to take a brief moment to acknowledge an important milestone for M/I Homes. 2026 marks our fiftieth year in business. Over the past five decades, our company has grown to become one of the nation's largest and most respected home builders. Looking back, we've been through a lot, but we've experienced disciplined growth and certainly our fair share of successes navigating through multiple housing cycles. Through it all, we have maintained an unwavering focus on quality, customer service, and operating at a high standard. As we look ahead to celebrating this milestone, we're proud to report that we are in the best financial condition in our history, have a group of leadership teams that are as strong as we've ever had, and that we are well-positioned in our 17 markets.
Speaker #3: 2026 marks our 50th year in business. Over the past five decades, our company has grown to become one of the nation's largest and most respected homebuilders.
Speaker #3: Looking back, we've been through a lot. We've experienced discipline, growth, and certainly our fair share of successes navigating through multiple housing cycles. Through it all, we have maintained an unwavering focus on quality, customer service, and operating at a high standard.
Speaker #3: As we look ahead to celebrating this milestone, we're proud to report that we are in the best financial condition in our history, have a group of leadership teams that are as strong as we've ever had, and that we are well positioned in our 17 markets.
Speaker #3: With that, we'll turn to our 2025 performance. Our full year 2025 results reflect the economic conditions that we and, frankly, our entire industry experienced throughout the year.
Bob Schottenstein: With that, we'll turn to our 2025 performance. Our full year 2025 results reflect the economic conditions that we, and frankly, our entire industry, experienced throughout the year. Despite choppy demand, affordability challenges, economic uncertainty, and other macroeconomic pressures, our performance remained very solid. Though new contracts were down slightly for the full year, we were pleased that our monthly new contracts during the fourth quarter showed a 9% year-over-year increase, and that we successfully increased our 2025 average community count by 6% versus our guide of about 5%. In 2025, we delivered 8,921 homes, recorded revenue of $4.4 billion, and excluding charges of $59 million related to inventory and warranty items, we generated pre-tax income of nearly $590 million, which was down 20% compared to last year's record, $734 million.
With that, we'll turn to our 2025 performance. Our full year 2025 results reflect the economic conditions that we, and frankly, our entire industry, experienced throughout the year. Despite choppy demand, affordability challenges, economic uncertainty, and other macroeconomic pressures, our performance remained very solid. Though new contracts were down slightly for the full year, we were pleased that our monthly new contracts during the fourth quarter showed a 9% year-over-year increase, and that we successfully increased our 2025 average community count by 6% versus our guide of about 5%. In 2025, we delivered 8,921 homes, recorded revenue of $4.4 billion, and excluding charges of $59 million related to inventory and warranty items, we generated pre-tax income of nearly $590 million, which was down 20% compared to last year's record, $734 million.
Speaker #3: Despite choppy demand, affordability challenges, economic uncertainty, and other macroeconomic pressures, our performance remained very solid. Though new contracts were down slightly for the full year, we were pleased that our monthly new contracts during the fourth quarter showed a 9% year-over-year increase and that we successfully increased our 2025 average community count by 6% versus our guide of about 5%.
Speaker #3: In 2025, we delivered 8,921 homes, recorded revenue of $4.4 billion, and, excluding charges of $59 million related to inventory and warranty items, we generated pre-tax income of nearly $590 million, which was down 20% compared to last year's record of $734 million.
Speaker #3: Our pre-tax income percentage was a very solid 13% before the charges, and 12% after all charges. Our financial services segment had a record capture rate of 93%, record volume levels, and that's a very strong year, achieving pre-tax income for the year of $56 million.
Bob Schottenstein: Our pre-tax income percentage was a very solid 13% before the charges and 12% after all charges. Our financial services segment had a record capture rate of 93%, record volume levels, and a very strong year, achieving pre-tax income for the year of $56 million. Our full-year gross margins, excluding the above-mentioned inventory and warranty charges, were 24.4%, 220 basis points lower than 2024, and down primarily due to higher incentives and higher lot costs versus the same period a year ago. As you all know, our primary incentives were and continue to be mortgage rate buydowns, and we will continue to use these incentives as necessary on a community-by-community basis.
Our pre-tax income percentage was a very solid 13% before the charges and 12% after all charges. Our financial services segment had a record capture rate of 93%, record volume levels, and a very strong year, achieving pre-tax income for the year of $56 million. Our full-year gross margins, excluding the above-mentioned inventory and warranty charges, were 24.4%, 220 basis points lower than 2024, and down primarily due to higher incentives and higher lot costs versus the same period a year ago. As you all know, our primary incentives were and continue to be mortgage rate buydowns, and we will continue to use these incentives as necessary on a community-by-community basis.
Speaker #3: Our full-year gross margins, excluding the above-mentioned inventory and warranty charges, were 24.4%, or 220 basis points lower than 2024, and down primarily due to higher incentives and higher lock costs versus the same period a year ago.
Speaker #3: As you all know, our primary incentives were and continue to be mortgage rate buy-downs, and we will continue to use these incentives as necessary on a community-by-community basis.
Speaker #3: Our net income was $403 million, or $14.74 per share, at a very strong return on equity of 13.1%. Our shareholders' equity increased 8% year-over-year and reached an all-time record of $3.2 billion, with a record book value per share of $123.
Bob Schottenstein: Our net income was $403 million, or $14.74 per share, with a very strong return on equity of 13.1%. Our shareholders' equity increased 8% year-over-year and reached an all-time record of $3.2 billion, with a record book value per share of $123.... The quality of our buyers, in terms of creditworthiness, continues to be strong, with average credit scores of 747, and average down payments of almost 17% or just over $90,000 per home. Our Smart Series, which is our most affordably priced product, continues to have a very positive and meaningful impact, not just on our sales, but our overall performance. Smart Series sales comprised 49% of total company sales in Q4, compared to 52% a year ago.
Our net income was $403 million, or $14.74 per share, with a very strong return on equity of 13.1%. Our shareholders' equity increased 8% year-over-year and reached an all-time record of $3.2 billion, with a record book value per share of $123.... The quality of our buyers, in terms of creditworthiness, continues to be strong, with average credit scores of 747, and average down payments of almost 17% or just over $90,000 per home. Our Smart Series, which is our most affordably priced product, continues to have a very positive and meaningful impact, not just on our sales, but our overall performance. Smart Series sales comprised 49% of total company sales in Q4, compared to 52% a year ago.
Speaker #3: The quality of our buyers in terms of creditworthiness continues to be strong, with average credit scores of 747 and average down payments of almost 17% or just over $90,000 per home.
Speaker #3: Our smart series which is our most affordably priced product continues to have a very positive and meaningful impact, not just on our sales but our overall performance.
Speaker #3: Smart series sales comprised 49% of total company sales in the fourth quarter, compared to 52% a year ago. And as I previously noted, we ended the year with community count growth with 232 active communities which was an increase of 5% compared to the end of '24 and on average an increase of 6%.
Bob Schottenstein: As I previously noted, we ended the year with community count growth with 232 active communities, which was an increase of 5% compared to the end of 2024, and on average, an increase of 6%. In terms of our various markets, our division income contributions in 2025 were led by Columbus, Dallas, Chicago, Orlando, and Minneapolis. Our new contracts for Q4 in our southern region increased by 13% year-over-year and by 4% in the northern region. For the year, new contracts decreased 1% in the southern region and 9% in our northern region. Deliveries increased 1% over last year's Q4 in the southern region and represented 57% of the company-wide total.
As I previously noted, we ended the year with community count growth with 232 active communities, which was an increase of 5% compared to the end of 2024, and on average, an increase of 6%. In terms of our various markets, our division income contributions in 2025 were led by Columbus, Dallas, Chicago, Orlando, and Minneapolis. Our new contracts for Q4 in our southern region increased by 13% year-over-year and by 4% in the northern region. For the year, new contracts decreased 1% in the southern region and 9% in our northern region. Deliveries increased 1% over last year's Q4 in the southern region and represented 57% of the company-wide total.
Speaker #3: In terms of our various markets, our division income contributions in 2025 were led by Columbus, Dallas, Chicago, Orlando, and Minneapolis. Our new contracts for the fourth quarter and our southern region increased by 13% year-over-year.
Speaker #3: And by 4% in the northern region. For the year, new contracts decreased 1% in the southern region and 9% in our northern region. Deliveries increased 1% over last year's fourth quarter in the southern region and represented 57% of the company-wide total.
Speaker #3: The northern region contributed 981 deliveries, which was a decrease of 8% over last year's fourth quarter. For the year, HOMES deliveries slightly increased in the southern region but decreased slightly in the northern region.
Bob Schottenstein: The northern region contributed 981 deliveries, which was a decrease of 8% over last year's fourth quarter. For the year, homes delivered slightly increased in the southern region, but decreased slightly in the northern region. Our owned and controlled lot position in the southern region decreased by 11% compared to a year ago, increased by 9% compared to a year ago in the northern region. We have a tremendous land position. Company-wide, we own approximately 26,000 lots, which is slightly less than a 3-year supply. Of this total, 30% of our own lots are in the northern region, with a balance of 70% in the southern region. On top of the lots that we own, we control via option contracts an additional 24,000 lots.
The northern region contributed 981 deliveries, which was a decrease of 8% over last year's fourth quarter. For the year, homes delivered slightly increased in the southern region, but decreased slightly in the northern region. Our owned and controlled lot position in the southern region decreased by 11% compared to a year ago, increased by 9% compared to a year ago in the northern region. We have a tremendous land position. Company-wide, we own approximately 26,000 lots, which is slightly less than a 3-year supply. Of this total, 30% of our own lots are in the northern region, with a balance of 70% in the southern region. On top of the lots that we own, we control via option contracts an additional 24,000 lots.
Speaker #3: Our owned and controlled lot position in the southern region decreased by 11% compared to a year ago. Increased by 9% compared to a year ago in the northern region.
Speaker #3: We have a tremendous land position. Company-wide, we own approximately 26,000 lots, which is slightly less than a three-year supply. Of this total, 30% of our owned lots are in the Northern region, with the balance of 70% in the Southern region.
Speaker #3: On top of the lots that we own, we control via option contracts an additional 24,000 lots so in total, we own and control approximately 50,000 single-family lots which is down 2,000 lots from a year ago and this equates to roughly a 5 to 6-year supply.
Bob Schottenstein: So in total, we own and control approximately 50,000 single-family lots, which is down 2,000 lots from a year ago, and this equates to roughly a 5- to 6-year supply. Most importantly, 49% of our lots are controlled pursuant to option contracts, which gives us continued flexibility and important flexibility to react to changes in demand or individual market conditions. With respect to our balance sheet, we ended the year in excellent condition, with cash of $689 million and 0 borrowings under our $900 million unsecured revolving credit facility. This resulted in a very strong debt-to-capital ratio of 18% and a net debt-to-cap ratio of 0. Before I conclude, let me again state that we are in the best financial condition in our 50-year history.
So in total, we own and control approximately 50,000 single-family lots, which is down 2,000 lots from a year ago, and this equates to roughly a 5- to 6-year supply. Most importantly, 49% of our lots are controlled pursuant to option contracts, which gives us continued flexibility and important flexibility to react to changes in demand or individual market conditions. With respect to our balance sheet, we ended the year in excellent condition, with cash of $689 million and 0 borrowings under our $900 million unsecured revolving credit facility. This resulted in a very strong debt-to-capital ratio of 18% and a net debt-to-cap ratio of 0. Before I conclude, let me again state that we are in the best financial condition in our 50-year history.
Speaker #3: Most importantly, 49% of our lots are controlled pursuant to option contracts. Which gives us continued flexibility and important flexibility to react to changes in demand or individual market conditions.
Speaker #3: With respect to our balance sheet, we ended the year in excellent condition, with cash of $689 million and zero borrowings under our $900 million unsecured revolving credit facility.
Speaker #3: This resulted in a very strong debt-to-capital ratio of 18% and a net debt-to-cap ratio of zero. Before I conclude, let me again state that we are in the best financial condition in our 50-year history.
Speaker #3: Despite the current challenging conditions, we feel very good about our business, remain very confident in the long-term fundamentals of our industry, and are well-positioned as we begin 2026.
Bob Schottenstein: Despite the current challenging conditions, we feel very good about our business, remain very confident in the long-term fundamentals of our industry, and are well-positioned as we begin 2026. I'll now turn it over to Phil to provide more specifics on our results.
Despite the current challenging conditions, we feel very good about our business, remain very confident in the long-term fundamentals of our industry, and are well-positioned as we begin 2026. I'll now turn it over to Phil to provide more specifics on our results.
Speaker #3: I'll now turn it over to Phil to provide more specifics on our results.
Speaker #2: Thanks, Bob. Our new contracts were up 18% in October, up 9%, excuse me, up 6% in November, and up 4% in December for a 9% improvement in the quarter compared to last year's fourth quarter.
Phillip Creek: Thanks, Bob. Our new contracts were up 18% in October, up 9%, excuse me, up 6% in November, and up 4% in December for a 9% improvement in the quarter compared to last year's fourth quarter. Our sales pace was 2.8 in the fourth quarter, compared to 2.7 in 2024's fourth quarter, and our cancellation rate for the fourth quarter was 10%. As to our buyer profile, 48% of our fourth quarter sales were to first-time buyers, compared to 50% a year ago. In addition, 79% of our fourth quarter sales were inventory homes, compared to 67% in last year's fourth quarter. Our community count was 232 at the end of 2025, compared to 220 at the end of last year.
Phillip Creek: Thanks, Bob. Our new contracts were up 18% in October, up 9%, excuse me, up 6% in November, and up 4% in December for a 9% improvement in the quarter compared to last year's fourth quarter. Our sales pace was 2.8 in the fourth quarter, compared to 2.7 in 2024's fourth quarter, and our cancellation rate for the fourth quarter was 10%. As to our buyer profile, 48% of our fourth quarter sales were to first-time buyers, compared to 50% a year ago. In addition, 79% of our fourth quarter sales were inventory homes, compared to 67% in last year's fourth quarter. Our community count was 232 at the end of 2025, compared to 220 at the end of last year.
Speaker #2: Our sales pace was 2.8 in the fourth quarter, compared to 2.7 in 2024's fourth quarter. And our cancellation rate for the fourth quarter was 10%.
Speaker #2: As to our buyer profile, 48% of our fourth-quarter sales were to first-time buyers, compared to 50% a year ago. In addition, 79% of our fourth-quarter sales were inventory homes, compared to 67% in last year's fourth quarter.
Speaker #2: Our community count was 232 at the end of 2025, compared to 220 at the end of last year. During the quarter, we opened 17 new communities, while closing 18.
Phillip Creek: During the quarter, we opened 17 new communities while closing 18, and for the year, we opened 81 new communities. We currently estimate that our average 2026 community count will be about 5% higher than 2025. We delivered 2,301 homes in Q4, and about 40% of our quarter deliveries came from inventory homes that were both sold and delivered within the quarter. As of 31 December, we had 4,500 homes in the field versus 4,700 homes in the field a year ago.
During the quarter, we opened 17 new communities while closing 18, and for the year, we opened 81 new communities. We currently estimate that our average 2026 community count will be about 5% higher than 2025. We delivered 2,301 homes in Q4, and about 40% of our quarter deliveries came from inventory homes that were both sold and delivered within the quarter. As of 31 December, we had 4,500 homes in the field versus 4,700 homes in the field a year ago.
Speaker #2: And for the year, we opened 81 new communities. We currently estimate that our average 2026 community count will be about 5% higher than 2025.
Speaker #2: We delivered 2,301 homes in the fourth quarter, and about 40% of our quarter deliveries came from inventory homes that were both sold and delivered within the quarter.
Speaker #2: As of December 31st, we had 4,500 homes in the field versus 4,700 homes in the field a year ago. Revenue decreased 5% in the fourth quarter of 2025 to $1.1 billion, and our average closing price for the fourth quarter was $484,000, a 1% decrease when compared to last year's fourth quarter average closing price of $490,000.
Phillip Creek: Revenue decreased 5% in Q4 2025 to $1.1 billion, and our average closing price for Q4 was $484,000, a 1% decrease when compared to last year's Q4 average closing price of $490,000. Our gross margin was 18.1% for the quarter, including $51 million of charges, which consisted of $40 million of inventory charges and $11 million of warranty charges. Excluding these charges, our gross margin was 22.6%. The breakdown of the inventory charges is $30 million of impairments and $10 million of lot deposit due diligence costs written off. The majority of our impairments in the quarter were in entry-level communities with average selling prices below $375,000....
Revenue decreased 5% in Q4 2025 to $1.1 billion, and our average closing price for Q4 was $484,000, a 1% decrease when compared to last year's Q4 average closing price of $490,000. Our gross margin was 18.1% for the quarter, including $51 million of charges, which consisted of $40 million of inventory charges and $11 million of warranty charges. Excluding these charges, our gross margin was 22.6%. The breakdown of the inventory charges is $30 million of impairments and $10 million of lot deposit due diligence costs written off. The majority of our impairments in the quarter were in entry-level communities with average selling prices below $375,000....
Speaker #2: Our gross margin was 18.1% for the quarter, including 51 million of charges which consisted of 40 million of inventory charges and 11 million of warranty charges.
Speaker #2: Excluding these charges, our gross margin was 22.6%. The breakdown of the inventory charges is $30 million of impairments and $10 million of lot deposit due diligence costs written off.
Speaker #2: The majority of our impairments in the quarter were in entry-level communities with average selling prices below $375,000. And the warranty charges were due to two communities in our Florida market.
Phillip Creek: and the warranty charges were due to 2 communities in our Florida market. For the full year, our gross margins were 23.0. Excluding our $59 million of charges, our full year gross margin was 24.4. Our fourth quarter SG&A expenses were flat compared to a year ago, and were 11.6% of revenue compared to 11.0% last year. Interest income, net of interest expense for the quarter was $6 million. Our interest incurred was $9.5 million. We had solid returns given the challenges facing our industry. Our pre-tax income was 12% for the year, and our return on equity was 13%. During the fourth quarter, we generated $129 billion of EBITDA, and for the full year, we generated $608 million of EBITDA.
and the warranty charges were due to 2 communities in our Florida market. For the full year, our gross margins were 23.0. Excluding our $59 million of charges, our full year gross margin was 24.4. Our fourth quarter SG&A expenses were flat compared to a year ago, and were 11.6% of revenue compared to 11.0% last year. Interest income, net of interest expense for the quarter was $6 million. Our interest incurred was $9.5 million. We had solid returns given the challenges facing our industry. Our pre-tax income was 12% for the year, and our return on equity was 13%. During the fourth quarter, we generated $129 billion of EBITDA, and for the full year, we generated $608 million of EBITDA.
Speaker #2: For the full year, our gross margins were 23.0%. Excluding our $59 million of charges, our full-year gross margin was 24.4%. And our fourth-quarter SG&A expenses were flat compared to a year ago, and were 11.6% of revenue compared to 11.0% last year.
Speaker #2: Interest income, net of interest expense for the quarter, was $6 million. Our interest incurred was $9.5 million. We had solid returns given the challenges facing our industry.
Speaker #2: Our pre-tax income was 12% for the year, and our return on equity was 13%. During the fourth quarter, we generated $129 million of EBITDA, and for the full year, we generated $608 million of EBITDA.
Speaker #2: Our effective tax rate was 21% in the fourth quarter, compared to 22% in last year's fourth quarter, and our annual effective rate for this year was 23.5%.
Phillip Creek: Our effective tax rate was 21% in Q4, compared to 22% in last year's Q4, and our annual effective rate for this year was 23.5%. We expect 2026 effective tax rate to be around 23.5%. Our earnings per diluted share for the quarter decreased to $2.39 per share from $4.71 per share in last year's Q4, and decreased 25% for the year to $14.74 per share from $19.71 per share last year. During Q4, we spent $50 million repurchasing our shares, and for the year we spent $200 million. We currently have $220 million available under our repurchase authority, and in the last three years, we have purchased 13% of our outstanding shares. Now, Derek Kluch will address our mortgage company results.
Our effective tax rate was 21% in Q4, compared to 22% in last year's Q4, and our annual effective rate for this year was 23.5%. We expect 2026 effective tax rate to be around 23.5%. Our earnings per diluted share for the quarter decreased to $2.39 per share from $4.71 per share in last year's Q4, and decreased 25% for the year to $14.74 per share from $19.71 per share last year. During Q4, we spent $50 million repurchasing our shares, and for the year we spent $200 million. We currently have $220 million available under our repurchase authority, and in the last three years, we have purchased 13% of our outstanding shares. Now, Derek Kluch will address our mortgage company results.
Speaker #2: We expect the 2026 effective tax rate to be around 23.5%. Our earnings per diluted share for the quarter decreased to $2.39 per share, from $4.71 per share in last year's fourth quarter.
Speaker #2: And decreased 25% for the year, to $1,474 per share, from $1,971 per share last year. During the fourth quarter, we spent $50 million repurchasing our shares, and for the year, we spent $200 million.
Speaker #2: We currently have $220 million available under our repurchase authority, and in the last three years, we have purchased $13% of our outstanding shares. Now, Derek Klutch will address our mortgage company results.
Speaker #2: Thanks, Phil. In the fourth quarter, our mortgage and title operations achieved pre-tax income of 8.5 million dollars. Down 1.6 million dollars from 2024. And revenue of $27.8 million down 2% from last year.
Derek Klutch: Thanks, Bill. In the fourth quarter, our mortgage and title operations achieved pre-tax income of $8.5 million, down $1.6 million from 2024, and revenue of $27.8 million, down 2% from last year, primarily as a result of lower margins on loans closed and sold, and partially offset by higher average loan amounts and more loans closed. For the year, pre-tax income was $56 million and revenue was $126 million. The loan to value on our first mortgages for the quarter was 83% in 2025, compared to 82% in 2024's fourth quarter. Sixty-five percent of the loans closed in the quarter were conventional and 35% were FHA or VA, compared to 59% and 41%, respectively, for 2024's same period.
Derek Kluch: Thanks, Bill. In the fourth quarter, our mortgage and title operations achieved pre-tax income of $8.5 million, down $1.6 million from 2024, and revenue of $27.8 million, down 2% from last year, primarily as a result of lower margins on loans closed and sold, and partially offset by higher average loan amounts and more loans closed. For the year, pre-tax income was $56 million and revenue was $126 million. The loan to value on our first mortgages for the quarter was 83% in 2025, compared to 82% in 2024's fourth quarter. Sixty-five percent of the loans closed in the quarter were conventional and 35% were FHA or VA, compared to 59% and 41%, respectively, for 2024's same period.
Speaker #2: Primarily as a result of lower margins on loans closed and sold, and partially offset by higher average loan amounts and more loans closed. For the year, pre-tax income was $56 million, and revenue was $126 million.
Speaker #2: The loan-to-value on our first mortgages for the quarter was 83% in 2025, compared to 82% in 2024's fourth quarter. 65% of the loans closed in the quarter were conventional, and 35% were FHA or VA.
Speaker #2: Compared to 59% and 41%, respectively, for 2024's same period. Our average mortgage amount increased to $414,000 in 2025's fourth quarter, compared to $409,000 in 2024.
Derek Klutch: Our average mortgage amount increased to $414,000 in 2025's Q4, compared to $409,000 in 2024. Loans originated in the quarter increased 1% from 1,862 to 1,874, and the volume of loans sold decreased by 1%. Our mortgage operation captured 94% of our business in the quarter, an increase from 91% in 2024's Q4. Now I'll turn the call back over to Phil.
Our average mortgage amount increased to $414,000 in 2025's Q4, compared to $409,000 in 2024. Loans originated in the quarter increased 1% from 1,862 to 1,874, and the volume of loans sold decreased by 1%. Our mortgage operation captured 94% of our business in the quarter, an increase from 91% in 2024's Q4. Now I'll turn the call back over to Phil.
Speaker #2: Loans originated in the quarter increased 1% from $1,862 to $1,874, and the volume of loans sold decreased by 1%. Our mortgage operation captured $94% of our business in the quarter, and increased from $91% in 2024's fourth quarter.
Speaker #2: Now, I'll turn the call back over to Phil.
Speaker #1: Thanks, Derek. As far as the balance sheet, we ended the fourth quarter with a cash balance of $689 million, and no borrowings under our unsecured credit facility.
Phillip Creek: Thanks, Derek. As far as the balance sheet, we ended Q4 with a cash balance of $689 million and no borrowings under our unsecured credit facility. We continue to have one of the lowest debt levels of the public home builders and are well positioned with our maturities. Our bank line matures in 2030, and our public debt matures in 2028 and 2030. Total home building inventory at year-end was $3.4 billion, an increase of 9% from prior year levels. During 2025, we spent $524 million on land purchases and $646 million on land development, for a total spend of $1.2 billion. This was up from $1.1 billion in 2024.
Phillip Creek: Thanks, Derek. As far as the balance sheet, we ended Q4 with a cash balance of $689 million and no borrowings under our unsecured credit facility. We continue to have one of the lowest debt levels of the public home builders and are well positioned with our maturities. Our bank line matures in 2030, and our public debt matures in 2028 and 2030. Total home building inventory at year-end was $3.4 billion, an increase of 9% from prior year levels. During 2025, we spent $524 million on land purchases and $646 million on land development, for a total spend of $1.2 billion. This was up from $1.1 billion in 2024.
Speaker #1: We continue to have one of the lowest debt levels of the public home builders, and our well-positioned with our maturities. Our bank line matures in 2030, and our public debt matures in 2028 and 2030.
Speaker #1: Total home building inventory at year-end was $3.4 billion, an increase of 9% from prior year levels. And during 2025, we spent $524 million on land purchases and $646 million on land development, for a total spend of $1.2 billion.
Speaker #1: This was up from $1.1 billion in 2024. And at December 31, 2025, we had $900 million of raw land and land under development, and $1.1 billion of finished unsold lots.
Phillip Creek: And at 31 December 2025, we had $900 million of raw land and land under development and $1.1 billion of finished unsold lots. We own 10,500 unsold finished lots, and at the end of the year, we had 1,030 completed inventory homes, about 4 per community, and 2,779 total inventory homes. And of the total inventory, 1,116 are in the northern region and 1,663 in the southern region. And at 31 December 2024, we had 706 completed inventory homes and 2,502 total inventory homes. This completes our presentation. We'll now open the call for any questions or comments.
And at 31 December 2025, we had $900 million of raw land and land under development and $1.1 billion of finished unsold lots. We own 10,500 unsold finished lots, and at the end of the year, we had 1,030 completed inventory homes, about 4 per community, and 2,779 total inventory homes. And of the total inventory, 1,116 are in the northern region and 1,663 in the southern region. And at 31 December 2024, we had 706 completed inventory homes and 2,502 total inventory homes. This completes our presentation. We'll now open the call for any questions or comments.
Speaker #1: We own 10,500 unsold finished lots. And at the end of the year, we had 1,030 completed inventory homes, about four per community, and 2,779 total inventory homes.
Speaker #1: And of the total inventory, 1,116 are in the northern region, and 1,663 in the southern region. And at December 31, 2024, we had 706 completed inventory homes, and 2,502 total inventory homes.
Speaker #1: This completes our presentation. We'll now open the call for any questions or
Speaker #1: comments. Thank you.
Operator: Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Should you have a question, please press the star followed by the one on your touchtone phone. You will hear a prompt that your hand has been raised. If you wish to decline from the polling process, please press star followed by two. And if you are using a speakerphone, please lift the handset before pressing any keys. The first question comes from Ken Zener at Seaport Research Partners. Please go ahead.
Operator: Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Should you have a question, please press the star followed by the one on your touchtone phone. You will hear a prompt that your hand has been raised. If you wish to decline from the polling process, please press star followed by two. And if you are using a speakerphone, please lift the handset before pressing any keys. The first question comes from Ken Zener at Seaport Research Partners. Please go ahead.
Speaker #2: Ladies and gentlemen, we will now begin the question-and-answer session. Should you have a question, please press the star followed by the 1 on your touch-tone phone.
Speaker #2: You will hear a prompt that your hand has been raised. If you wish to decline from the polling process, please press star followed by 2.
Speaker #2: And if you are using a speakerphone, please lift the handset before pressing any keys. The first question comes from Ken Zenner at Seaport Research Partners.
Speaker #2: Please go
Speaker #2: ahead. Good morning,
Kenneth Zener: Good morning, everybody.
Kenneth Zener: Good morning, everybody.
Speaker #4: Good everybody.
Speaker #4: morning.
Phillip Creek: Good morning.
Phillip Creek: Good morning.
Kenneth Zener: Positive order growth, pretty impressive. Can you address the 13% growth you had in the South? Can you bifurcate that into Texas and Florida? Because I think that last time, you found that Texas is a little bit more of the volume, and we've been seeing that Florida is actually doing a little better than Texas. Could you address the split in that, those mar- that region?
Speaker #3: Positive order
Kenneth Zener: Positive order growth, pretty impressive. Can you address the 13% growth you had in the South? Can you bifurcate that into Texas and Florida? Because I think that last time, you found that Texas is a little bit more of the volume, and we've been seeing that Florida is actually doing a little better than Texas. Could you address the split in that, those mar- that region?
Speaker #3: growth. Pretty impressive. And can you address the 13% growth you had in the South? Can you bifurcate that into Texas and Florida? Because I think last time you found my Texas is a little bit more of the volume and we've been seeing that Florida is actually doing a little better than Texas.
Speaker #3: Could you address the split in those regions?
Phillip Creek: ... You know, in general, we had pretty solid sales everywhere. Our Carolina markets, Charlotte and Raleigh, have done very well. You know, in Florida, our Orlando market has actually held up pretty well, and Tampa also has improved as we've gone through the quarter. When you look at Texas, you know, Dallas has stayed pretty solid for us, along with Houston. Weaker markets have been Austin and San Antonio, so it's been spread around a little bit. But like you say, we were very pleased that our southern region was up 13% and our northern region was also up 4%.
Phillip Creek: ... You know, in general, we had pretty solid sales everywhere. Our Carolina markets, Charlotte and Raleigh, have done very well. You know, in Florida, our Orlando market has actually held up pretty well, and Tampa also has improved as we've gone through the quarter. When you look at Texas, you know, Dallas has stayed pretty solid for us, along with Houston. Weaker markets have been Austin and San Antonio, so it's been spread around a little bit. But like you say, we were very pleased that our southern region was up 13% and our northern region was also up 4%.
Speaker #4: In general, we had pretty solid sales everywhere. Our Carolina markets—Charlotte and Raleigh—have done very well. In Florida, the Orlando market has actually held up pretty well.
Speaker #4: In Tampa also has improved as we've gone through the quarter. When you look at Texas, Dallas has stayed pretty solid for us along with Houston.
Speaker #4: Weaker markets have been Austin and San Antonio. So it's been spread around a little bit. But like you say, we were very pleased that our southern region was up 13% and our northern region was also up
Speaker #4: 4%.
Bob Schottenstein: You know, the only other thing I'll mention, Ken, it's a good call-out. Just to build on what Phil said, as we're getting now some traction in our newer markets in the southern region, specifically Nashville, Fort Myers, and Naples, that will slightly skew upwards some of the percentages. But we felt very good about our Q4 sales. And I would simply add that as we begin 2026, you know, we certainly have seen, and I think some of it's clearly seasonal, we're beginning the selling season right now as opposed to leaving the slowest time of the year in Q4, but we've certainly seen an important improvement in traffic.
Robert Schottenstein: You know, the only other thing I'll mention, Ken, it's a good call-out. Just to build on what Phil said, as we're getting now some traction in our newer markets in the southern region, specifically Nashville, Fort Myers, and Naples, that will slightly skew upwards some of the percentages. But we felt very good about our Q4 sales. And I would simply add that as we begin 2026, you know, we certainly have seen, and I think some of it's clearly seasonal, we're beginning the selling season right now as opposed to leaving the slowest time of the year in Q4, but we've certainly seen an important improvement in traffic.
Speaker #3: The only other thing I'll
Speaker #3: mention, Ken, and it's a good call out, just to build on what Phil said, is as we're getting now some traction in our newer markets in the southern region, specifically Nashville and Fort Myers Naples, that will slightly skew upward some of the percentages.
Speaker #3: But we felt very good about our fourth quarter sales. And I would simply add that as we begin 2026, we certainly have seen—and I think some of it's clearly seasonal—we're beginning the selling season right now as opposed to leaving the slowest time of the year in the fourth quarter.
Speaker #3: But we certainly have seen an important improvement in traffic. I appreciate those comments. And they are reported too, today, and our margins are under pressure.
Kenneth Zener: I appreciate those comments. It's, you know, and they are reported too today, and it's... Our margins are under pressure, you know, the demand seems to be there. Could you comment-
Kenneth Zener: I appreciate those comments. It's, you know, and they are reported too today, and it's... Our margins are under pressure, you know, the demand seems to be there. Could you comment-
Speaker #3: If the demand seems to be there. Could you comment, given the intra-quarter orders and closing, could you comment on the margin differential between your intra-quarter closings and your backlog or spread, if you will, as well as are the majority of those intra-quarter closings—I assume they're coming from the lower-priced smart series—if you could address those two questions?
Bob Schottenstein: Yeah.
Robert Schottenstein: Yeah.
Kenneth Zener: Given the intra-quarter orders and closing, could you comment on the margin differential between your intra-quarter closings and your backlog or spread, if you will? As well as, are the majority of those intra-quarter closings, I assume they're coming from the lower-priced Smart Series. If you could address those two questions. Thank you very much.
Kenneth Zener: Given the intra-quarter orders and closing, could you comment on the margin differential between your intra-quarter closings and your backlog or spread, if you will? As well as, are the majority of those intra-quarter closings, I assume they're coming from the lower-priced Smart Series. If you could address those two questions. Thank you very much.
Speaker #3: Thank you very much.
Speaker #4: Well, I'm not sure I completely understood the question. And you may have to ask it
Bob Schottenstein: Well, I'm not sure I completely understood the question, and you may have to ask it again.
Robert Schottenstein: Well, I'm not sure I completely understood the question, and you may have to ask it again.
Speaker #4: again.
Speaker #3: Okay. That's all right. I'll make it
Kenneth Zener: Okay, that's all right. I'll make it clear.
Kenneth Zener: Okay, that's all right. I'll make it clear.
Speaker #3: clear. Orders and
Bob Schottenstein: W- okay.
Robert Schottenstein: W- okay.
Speaker #4: Okay.
Kenneth Zener: Orders and closings for a unit that were intra-quarter, so what I call spec, how were those margins compared to the homes that came out of backlog? And I'm assuming most of those intra-quarter orders, which were closings, were the Smart Series.
Kenneth Zener: Orders and closings for a unit that were intra-quarter, so what I call spec, how were those margins compared to the homes that came out of backlog? And I'm assuming most of those intra-quarter orders, which were closings, were the Smart Series.
Speaker #3: Closings for a unit that were intra-quarter—so, what I call SPAC—how were those margins compared to the homes that came out of backlog? And I’m assuming most of those intra-quarter orders, which were closings, were the smart—
Speaker #3: series.
Bob Schottenstein: Well, yes and no, on the Smart Series point. The one thing I'll say is, over the last 12 to 24 months, our business has changed quite noticeably in terms of the significant contribution of spec sales month in, month out. About, you know, 2/3 to 3/4 of our sales are now coming from specs. And if you go back five years ago, that would have been less than 50%, some cases less than 40%. So that's been a pretty significant change, and is likely here to stay as long as, you know, we're in this situation where we're needing to use rate buydowns to promote sales.
Robert Schottenstein: Well, yes and no, on the Smart Series point. The one thing I'll say is, over the last 12 to 24 months, our business has changed quite noticeably in terms of the significant contribution of spec sales month in, month out. About, you know, 2/3 to 3/4 of our sales are now coming from specs. And if you go back five years ago, that would have been less than 50%, some cases less than 40%. So that's been a pretty significant change, and is likely here to stay as long as, you know, we're in this situation where we're needing to use rate buydowns to promote sales.
Speaker #4: Yes and no. On the Smart Series point, the one thing I'll say is, over the last 12 to 24 months, our business has changed quite noticeably in terms of the significant contribution of SPAC sales, month in, month out.
Speaker #4: About two-thirds to three-fourths of our sales are now coming from SPACs. And if you go back five years ago, that would have been less than 50%.
Speaker #4: In some cases, less than 40. So that's been a pretty significant change, and as likely here to stay as long as we're in this situation where we're needing to use rate buy-downs to promote sales. Because, as you well know, the ability to provide a favorable rate buy-down at any kind of a reasonable or at least acceptable cost is one of the conditions— that you can get the home closed within 60 to 90 days of the purchase of the buy-down money. Which means it's only going to really work for SPACs.
Bob Schottenstein: Because, as you well know, the ability to provide a favorable rate buydown at any kind of a reasonable or at least acceptable cost is one of the conditions is that you can get the home closed, you know, within 60 to 90 days of the purchase of the buydown money, which means it's only going to really work for specs. So having said all that, the majority of, you know, 60 to 75% of the closings, quarter to quarter to quarter, are all coming from spec sales. Phil, I don't know if you want to add anything to that.
Because, as you well know, the ability to provide a favorable rate buydown at any kind of a reasonable or at least acceptable cost is one of the conditions is that you can get the home closed, you know, within 60 to 90 days of the purchase of the buydown money, which means it's only going to really work for specs. So having said all that, the majority of, you know, 60 to 75% of the closings, quarter to quarter to quarter, are all coming from spec sales. Phil, I don't know if you want to add anything to that.
Speaker #4: So having said all that, the majority of 60 to 75 percent of the closings quarter to quarter to quarter are all coming from SPAC sales.
Speaker #4: Phil, I don't know if you want to add anything to that.
Speaker #4: anything to that. Yeah.
Phillip Creek: Yeah, I mean, you know, our closing GPs in the fourth quarter, you know, were 22.6, you know, forgetting the charges. We were, you know, pretty pleased with that. Are there continued pressures? Yes, we do feel good that our construction cost last year came down about 2%. We were also pleased last year that our cycle time improved by about 5%. So we're making some progress on some of those key areas. Spec margins, in general, are lower than to-be-built homes. But the last couple of months, we have seen a slight pickup in our to-be-built business. But, you know, we just continue focusing, you know, every day on everything we can do to hold those sales prices stable or increase them, and also keep margins as high as we can.
Phillip Creek: Yeah, I mean, you know, our closing GPs in the fourth quarter, you know, were 22.6, you know, forgetting the charges. We were, you know, pretty pleased with that. Are there continued pressures? Yes, we do feel good that our construction cost last year came down about 2%. We were also pleased last year that our cycle time improved by about 5%. So we're making some progress on some of those key areas. Spec margins, in general, are lower than to-be-built homes. But the last couple of months, we have seen a slight pickup in our to-be-built business. But, you know, we just continue focusing, you know, every day on everything we can do to hold those sales prices stable or increase them, and also keep margins as high as we can.
Speaker #3: I mean, our closing GPs in the fourth quarter were 22.6% for getting the charges. We were pretty pleased with that. Are there continued pressures?
Speaker #3: Yes, we do feel good that our construction cost last year came down about 2%. We were also pleased last year that our cycle time improved by about 5%.
Speaker #3: So, we're making some progress on some of those key areas. SPAC margins in general are lower than to-be-built homes, but the last couple of months, we have seen a slight pickup in our to-be-built business.
Speaker #3: But we just everything we can do to continue focusing every day on hold those sales prices stable or increase them, and also keep margins as high as we
Speaker #3: But we just everything we can do to continue focusing every day on hold those sales prices stable or increase them, and also keep margins as high as we can.
Speaker #5: Thank you very much.
Kenneth Zener: Thank you very much.
Kenneth Zener: Thank you very much.
Speaker #3: Thanks, Ken.
Bob Schottenstein: Thanks, Ken.
Robert Schottenstein: Thanks, Ken.
Speaker #1: Thank you. The next question comes from Alan Ratner at Zelman. Please go ahead.
Operator: Thank you. The next question comes from Alan Ratner at Zelman. Please go ahead.
Operator: Thank you. The next question comes from Alan Ratner at Zelman. Please go ahead.
Speaker #6: Hey, Bob. Hey, Phil. Good morning. Nice quarter and.
Alan Ratner: Hey, Bob. Hey, Phil. Good morning. Nice quarter-
Alan Ratner: Hey, Bob. Hey, Phil. Good morning. Nice quarter-
Bob Schottenstein: Morning, Alan.
Robert Schottenstein: Morning, Alan.
Alan Ratner: Happy 50th anniversary. Good morning, and happy New Year.
Alan Ratner: Happy 50th anniversary. Good morning, and happy New Year.
Speaker #6: Happy 50th, good morning, Alan. Anniversary.
Speaker #6: Very good. Happy New Good morning.
Speaker #6: Year. We don't
Bob Schottenstein: We don't feel that old.
Robert Schottenstein: We don't feel that old.
Speaker #3: feel that
Speaker #3: old.
Alan Ratner: I hear you. Well, it's very impressive, and I'm sure we've got 50 more out ahead of us, so looking forward to it. My first question is on the order strength in the quarter. You know, I was looking, and, you know, your Q4, obviously up year-over-year, but your Q4 orders were actually fractionally higher on a sequential basis as well, which as far as I can tell, that's the first time that's happened since 2001. So I was hoping you could just talk a little bit about, you know, kind of your incentive and pricing strategy through the quarter.
Alan Ratner: I hear you. Well, it's very impressive, and I'm sure we've got 50 more out ahead of us, so looking forward to it. My first question is on the order strength in the quarter. You know, I was looking, and, you know, your Q4, obviously up year-over-year, but your Q4 orders were actually fractionally higher on a sequential basis as well, which as far as I can tell, that's the first time that's happened since 2001. So I was hoping you could just talk a little bit about, you know, kind of your incentive and pricing strategy through the quarter.
Speaker #6: Well, it's very impressive—impressive, and I'm sure we've got 50 more out ahead of us, so looking forward to it. My first question is on the order strength in the quarter.
Speaker #6: I was looking and your fourth quarter, obviously, up year over year, but your fourth quarter orders were actually fractionally higher on a sequential basis as well, which as far as I can tell, that's the first time that's happened since 2001.
Speaker #6: So I was hoping you could just talk a little bit about kind of your incentive and pricing strategy through the quarter. Would you say that order strength, at least kind of seasonally, is a reflection of improving demand, or was it more of a concerted effort by you guys to kind of clear through some inventory ahead of year-end, maybe with some higher
Speaker #6: So I was hoping you could just talk a little bit about kind of your incentive and pricing strategy through the quarter. Would you say that order strength, at least kind of seasonally, is a reflection of improving demand, or was it more of a concerted effort by you guys to kind of clear through some inventory ahead of year-end, maybe with some higher incentives?
Alan Ratner: Would you say that order strength, at least kind of seasonally, is a reflection of improving demand, or was it more of a concerted effort by you guys to kind of clear through some inventory ahead of year-end, maybe with some higher incentives?
Alan Ratner: Would you say that order strength, at least kind of seasonally, is a reflection of improving demand, or was it more of a concerted effort by you guys to kind of clear through some inventory ahead of year-end, maybe with some higher incentives?
Speaker #4: Well, that's a great question. It's actually probably one of the most important questions, as we look week to week and in terms of our sales activity.
Bob Schottenstein: ... Well, that's a great question. It's actually probably one of the most important questions that, you know, as we look week to week and look at in terms of our sales activity. I feel like it's a little bit of both. I think we, you know, we wanted to push to get as many completed specs, you know, off the, you know, out to the buyers as we could. I feel like demand is slightly picking up, and, you know, I felt like, you know, not every market, but in many of our markets, we were, you know, we were somewhat pleased with the level of traffic through the fourth quarter. And that is continuing.
Robert Schottenstein: ... Well, that's a great question. It's actually probably one of the most important questions that, you know, as we look week to week and look at in terms of our sales activity. I feel like it's a little bit of both. I think we, you know, we wanted to push to get as many completed specs, you know, off the, you know, out to the buyers as we could. I feel like demand is slightly picking up, and, you know, I felt like, you know, not every market, but in many of our markets, we were, you know, we were somewhat pleased with the level of traffic through the fourth quarter. And that is continuing.
Speaker #4: I feel like it's a little bit of both. I think we wanted to push to get as many completed SPACs out to the buyers as we could.
Speaker #4: I feel like demand is slightly picking up. And I felt like, not every market, but in many of our markets, we were somewhat pleased with the level of traffic through the fourth quarter.
Speaker #4: And that has continuing. I think it's too early to make a call, but look, we've all been whining for the last number of years about all the pent-up demand and housing is underperforming, and on and on and on and on. More articles have been written about that almost than anything—other than affordability.
Bob Schottenstein: You know, it's -- I think it's too early to make a call, but look, we've, you know, we've all been whining for the last number of years about all the pent-up demand and under- and, and you know, housing is underperforming and on and on and on and on, and more articles have been written about that almost than anything other than affordability. But but it, it's- it feels like, you know, we may be starting to see a slight improvement in demand. And I also think, and you know, we'll know when we know. We expected our margins to drop at least 200 basis points last year, and of course, they did that and then some.
You know, it's -- I think it's too early to make a call, but look, we've, you know, we've all been whining for the last number of years about all the pent-up demand and under- and, and you know, housing is underperforming and on and on and on and on, and more articles have been written about that almost than anything other than affordability. But but it, it's- it feels like, you know, we may be starting to see a slight improvement in demand. And I also think, and you know, we'll know when we know. We expected our margins to drop at least 200 basis points last year, and of course, they did that and then some.
Speaker #4: But it feels like we may be starting to see a slight improvement in demand. And I also think, and we'll know when we know, we expect that our margins to drop at least 200 basis points last year.
Speaker #4: And of course, they did that and then some. And the margins are likely to remain under pressure, but it's not clear to me at this point that the pressure in '26 will be as much as it was in '25.
Bob Schottenstein: The margins are likely to remain under pressure, but it's not clear to me at this point that the pressure in 2026 will be as much as it was in 2025. So hopefully, those things are starting to level off a bit. Again, we'll know when we know. You know, all things considered, you know, pre-charges, we made almost $590 million last year, brought 13% to the bottom line. By historical standards, that's pretty good performance. You know, I think that you know, I'm optimistic about you know, the first 4 or 5 months of this year in terms of demand and the selling season, so we'll see.
The margins are likely to remain under pressure, but it's not clear to me at this point that the pressure in 2026 will be as much as it was in 2025. So hopefully, those things are starting to level off a bit. Again, we'll know when we know. You know, all things considered, you know, pre-charges, we made almost $590 million last year, brought 13% to the bottom line. By historical standards, that's pretty good performance. You know, I think that you know, I'm optimistic about you know, the first 4 or 5 months of this year in terms of demand and the selling season, so we'll see.
Speaker #4: So hopefully, those things are starting to level off a bit. Again, we'll know when we know, but all things considered, pre-charges, we made almost $590 million last year and brought 13% to the bottom line.
Speaker #4: By historical standards, that's a pretty good performance. And just putting things in context, we've all seen a whole lot worse and I think that I'm optimistic about the first four or five months of this year in terms of demand and the selling season.
Speaker #4: So we'll see.
Phillip Creek: You know, Alan, one thing I'll add is that, we talked about, you know, the impairments came primarily from entry-level communities with an ASP under $375,000. You know, it was led by, you know, our more challenging markets in Austin and San Antonio. So in general, we've seen a little more pressure on prices and margins on the real entry-level, lower price for us. Hopefully, that is gonna get a little bit better. You know, we tend to play at a little higher price point, but, that's kind of where things are.
Phillip Creek: You know, Alan, one thing I'll add is that, we talked about, you know, the impairments came primarily from entry-level communities with an ASP under $375,000. You know, it was led by, you know, our more challenging markets in Austin and San Antonio. So in general, we've seen a little more pressure on prices and margins on the real entry-level, lower price for us. Hopefully, that is gonna get a little bit better. You know, we tend to play at a little higher price point, but, that's kind of where things are.
Speaker #5: Alan, one thing I add is that we talked about the impairments came primarily from entry-level communities with an ASP under 375. It was led by our more challenging markets in Austin and San Antonio, so in general, we've seen a little more pressure on prices and margins on the real entry-level, lower-priced for us.
Speaker #5: Hopefully, that is going to get a little bit better. We tend to play it a little higher price point, but that's kind of where things
Speaker #5: are. Got it.
Alan Ratner: Got it. No, I appreciate all that detail. And Phil, you kind of touched on the second question I had, which was on those impairments. You know, I guess the first one is a little bit of an accounting nuance, but I'm just curious. If I look at you historically, when you've taken charges, they're almost entirely in your Q4s. I mean, you maybe have some minimal charges through the year, but it looks like Q4 is kind of where you generally take larger charges. So I'm curious, you know, if there's any accounting reason why that is, at least compared to other builders.
Alan Ratner: Got it. No, I appreciate all that detail. And Phil, you kind of touched on the second question I had, which was on those impairments. You know, I guess the first one is a little bit of an accounting nuance, but I'm just curious. If I look at you historically, when you've taken charges, they're almost entirely in your Q4s. I mean, you maybe have some minimal charges through the year, but it looks like Q4 is kind of where you generally take larger charges. So I'm curious, you know, if there's any accounting reason why that is, at least compared to other builders.
Speaker #6: No, I appreciate all that detail. And Phil, you kind of touched on the second question I had, which was on those impairments. I guess the first one is a little bit of an accounting nuance, but I'm just curious, if I look at historically when you've taken charges, they're almost entirely in your fourth quarters.
Speaker #6: I mean, you maybe have some minimal charges through the year, but it looks like fourth quarter is kind of where you generally take larger charges.
Speaker #6: So I'm curious if there's any accounting reason why that is, at least compared to other builders. And B, I don't know if you disclose a watch list of communities that have maybe potential indicators of impairments, but is there any indication that impairments should continue here over the next handful of quarters, just based on where some of your margins are trending in your lower price point communities?
Alan Ratner: And B, I don't know if you disclose, like, a watch list of communities that have maybe potential indicators of impairments, but is there any indication that, you know, impairments should continue here over the next handful of quarters, just based on, you know, where some of your margins are trending in your lower price point communities?
And B, I don't know if you disclose, like, a watch list of communities that have maybe potential indicators of impairments, but is there any indication that, you know, impairments should continue here over the next handful of quarters, just based on, you know, where some of your margins are trending in your lower price point communities?
Speaker #4: Yeah, Alan, I appreciate that. I'll try to get all those points. To us, it's a business issue. I mean, if you look at our business goals, we're in the subdivision business.
Phillip Creek: Yeah. Alan, I appreciate that, and I'll try to get all those points. You know, to us, it's a business issue. I mean, if you look at our business goals, you know, we're in the subdivision business. That's what really matters to us. That's how we operate the business. And if we're not getting... You know, we try to get a pace of 3+, we try to get margins at 22+, and we try to make sure we're focused on all the items, product, presentation, salespeople, make sure all those levers are working at all times. But when we're not getting acceptable pace over a certain period of time, you know, we make the business decision oftentimes to go to price.
Phillip Creek: Yeah. Alan, I appreciate that, and I'll try to get all those points. You know, to us, it's a business issue. I mean, if you look at our business goals, you know, we're in the subdivision business. That's what really matters to us. That's how we operate the business. And if we're not getting... You know, we try to get a pace of 3+, we try to get margins at 22+, and we try to make sure we're focused on all the items, product, presentation, salespeople, make sure all those levers are working at all times. But when we're not getting acceptable pace over a certain period of time, you know, we make the business decision oftentimes to go to price.
Speaker #4: That's what really matters to us. That's how we operate the business. And if we're not getting it, we try to get a pace of three-plus; we try to get margins at 22-plus.
Speaker #4: And we try to make sure we're focused on all the items, product, presentation, salespeople, make sure all those levers are working at all times.
Speaker #4: But when we're not getting acceptable pace over a certain period of time, we make the business decision oftentimes to go to price. And of course, the way the accounting rules are basically is that once you get down to about a 10% GP you kind of get to the point where carry costs, disposal costs exceed that, so the accounting rules kind of force you to do an impairment.
Phillip Creek: Of course, the way the accounting rules are, basically, is that once you get down to about a 10% GP, you know, you kind of get to the point where, you know, carry costs, disposal costs exceed that. So the accounting rules, you know, kind of force you to do an impairment. But again, to us, it's a business decision. You know, we do look harder at things toward the end of the year, for sure. So that's why the majority of those charges in the past have been that way. Although this year, we did, you know, a small impairment also, I think it was in Q3. But, you know, if you look at us today, you know, we own about 25,000 or so lots. We always have a couple of problem subdivisions.
Of course, the way the accounting rules are, basically, is that once you get down to about a 10% GP, you know, you kind of get to the point where, you know, carry costs, disposal costs exceed that. So the accounting rules, you know, kind of force you to do an impairment. But again, to us, it's a business decision. You know, we do look harder at things toward the end of the year, for sure. So that's why the majority of those charges in the past have been that way. Although this year, we did, you know, a small impairment also, I think it was in Q3. But, you know, if you look at us today, you know, we own about 25,000 or so lots. We always have a couple of problem subdivisions.
Speaker #4: But again, to us, it's a business decision. We do look harder at things toward the end of the year, for sure, so that's why the majority of those charges in the past have been that way.
Speaker #4: Although this year we did a small impairment also, I think it was in the third quarter. But if you look at us today, we own about 25,000 unsold old lots.
Speaker #4: We always have a couple of problems subdivisions. Our impairment covered about 1,000 lots. So about 1,000 of the 25 lots. And again, it was in the most affordable stuff.
Phillip Creek: Our impairment covered about 1,000 lots, so about 1,000 of the 25,000 lots, and again, it was in the most affordable stuff. You know, we could have continued grinding through these communities. It may be 1, 1.5, 2 or a month, you know, maybe at 10% to 12% margins. But, you know, our view is when you look at the landscape of the business and the difficulty, especially at those lower price points, you know, we decided to go to that last lever of dropping price, and that's what, you know, triggered those impairments. But again, we think that's a really good business decision. We expect that pace to pick up. We expect the margin to get back to closer to normal levels, and, and that's why we did it.
Our impairment covered about 1,000 lots, so about 1,000 of the 25,000 lots, and again, it was in the most affordable stuff. You know, we could have continued grinding through these communities. It may be 1, 1.5, 2 or a month, you know, maybe at 10% to 12% margins. But, you know, our view is when you look at the landscape of the business and the difficulty, especially at those lower price points, you know, we decided to go to that last lever of dropping price, and that's what, you know, triggered those impairments. But again, we think that's a really good business decision. We expect that pace to pick up. We expect the margin to get back to closer to normal levels, and, and that's why we did it.
Speaker #4: We could have continued grinding through these communities. It may be one and a half, two a month—maybe at 10%, 12% margins. But our view is, when you look at the landscape of the business and the difficulty, especially at those lower price points, we decided to go to that last lever of dropping price.
Speaker #4: And that's what triggered those impairments. But again, we think that's a really good business decision. We expect that pace to pick up. We expect the margin to get back to closer to normal levels.
Speaker #4: And that's why we did it. The other thing I'll say, because I've been to the movie, it was a long time ago, but back during the Great Recession, when every quarter you were sort of holding your breath as the builders reported because how many more impairments are coming?
Bob Schottenstein: The other thing I'll say, because I've been to the movie, it was a long time ago, but back during the Great Recession, when every quarter, you know, you were sort of holding your breath as the builders reported, because how many more impairments are coming? And we all sort of felt like there was more coming. This is very different. I'm not going to say there's no more coming because no one knows that. But what I will say is that as we got towards the end of last year, it was sort of let's start 2026, you know, with all cylinders, you know, as strong as they can possibly be.
Robert Schottenstein: The other thing I'll say, because I've been to the movie, it was a long time ago, but back during the Great Recession, when every quarter, you know, you were sort of holding your breath as the builders reported, because how many more impairments are coming? And we all sort of felt like there was more coming. This is very different. I'm not going to say there's no more coming because no one knows that. But what I will say is that as we got towards the end of last year, it was sort of let's start 2026, you know, with all cylinders, you know, as strong as they can possibly be.
Speaker #4: There was more coming. This is very—And we all sort of felt like—different. I'm not going to say there's no more coming because no one knows that.
Speaker #4: But what I will say is that as we got towards the end of last year, it was sort of, 'Let's start 2026 with all cylinders as strong as they can possibly be.'
Speaker #4: Whatever thing we think might be a problem, let's deal with it now and let's end of 2026 with as many items controlled and behind us as possible.
Bob Schottenstein: Whatever thing we think might be a problem, let's deal with it now and let's end in 2026, you know, with as many items controlled and behind us as possible.
Whatever thing we think might be a problem, let's deal with it now and let's end in 2026, you know, with as many items controlled and behind us as possible.
Speaker #5: And Alan, I appreciate that detail. Thank you.
Phillip Creek: Alan, also, I mean-
Phillip Creek: Alan, also, I mean-
Operator: Really appreciate that detail. Thank you.
Operator: Really appreciate that detail. Thank you.
Phillip Creek: 10 million was a combination of lot deposit write-offs, prepaid, like, due diligence write-offs on deals we're not pursuing anymore because we think to do those deals, it would take, you know, a pretty significant cost reduction or other changes in terms. So we walked away from those deals. But again, you know, on average, when you take a $30 million charge on 1,000 lots, you're looking at $30,000 per lot, which is pretty significant. Hopefully, that's going to increase our pace and margins as we go into this year.
Speaker #4: Yeah. 10 million was a combination of lot deposit write-offs, prepaid due diligence write-offs, on deals we're not pursuing. Any more because we think to do those deals, it would take a pretty significant cost reduction or other changes in terms.
Phillip Creek: 10 million was a combination of lot deposit write-offs, prepaid, like, due diligence write-offs on deals we're not pursuing anymore because we think to do those deals, it would take, you know, a pretty significant cost reduction or other changes in terms. So we walked away from those deals. But again, you know, on average, when you take a $30 million charge on 1,000 lots, you're looking at $30,000 per lot, which is pretty significant. Hopefully, that's going to increase our pace and margins as we go into this year.
Speaker #4: So we walked away from those deals. But again, on average, when you take a $30 million charge on 1,000 lots, you're looking at 30,000 per lot, which is pretty significant.
Speaker #4: And hopefully, that's going to increase our pace and margins as we go into this year.
Speaker #6: Makes sense. Thanks a
Operator: Makes sense. Thanks a lot, guys.
Alan Ratner: Makes sense. Thanks a lot, guys.
Speaker #6: lot.
Speaker #4: Thanks,
Bob Schottenstein: Thanks, Alan.
Robert Schottenstein: Thanks, Alan.
Speaker #4: Alan. Thank you.
Operator: Thank you. The next question comes from Buck Horne at Raymond James. Please go ahead.
Operator: Thank you. The next question comes from Buck Horne at Raymond James. Please go ahead.
Speaker #7: The next question comes from Buckhorn at Raymond Games. Please go ahead.
Speaker #8: Hey, thanks. Good morning, guys. Congrats on navigating a challenging environment, and appreciate the color on all the charges as well.
Buck Horne: Hey, thanks. Good morning, guys. Congrats on navigating a challenging environment and appreciate those, the color on all the charges as well.
Buck Horne: Hey, thanks. Good morning, guys. Congrats on navigating a challenging environment and appreciate those, the color on all the charges as well.
Bob Schottenstein: Thanks, Buck.
Robert Schottenstein: Thanks, Buck.
Operator: Thanks, Buck.
Operator: Thanks, Buck.
Buck Horne: I was also... Yeah, very welcome. I was kind of curious about the acceleration in land purchase activity and some of the lot development spend in the fourth quarter. It was up both sequentially and year-over-year. I guess first, kind of wondering if any particular markets or regions are getting the bulk of that new spend that you're targeting? And, you know, should we read into that acceleration? Is that an indication of your confidence levels of kind of the demand that's out there and your growth trajectory? Or, you know, how should we interpret that pickup in the land spend?
Speaker #8: Thanks, bud. Yeah, you're very welcome. I was kind of curious about the acceleration in land purchase activity and some of the lot development spend in the fourth quarter.
Buck Horne: I was also... Yeah, very welcome. I was kind of curious about the acceleration in land purchase activity and some of the lot development spend in the fourth quarter. It was up both sequentially and year-over-year. I guess first, kind of wondering if any particular markets or regions are getting the bulk of that new spend that you're targeting? And, you know, should we read into that acceleration? Is that an indication of your confidence levels of kind of the demand that's out there and your growth trajectory? Or, you know, how should we interpret that pickup in the land spend?
Speaker #8: It was up both sequentially and year over year. I guess, first, kind of wondering if any particular markets or regions are getting the bulk of that new spend that you're targeting, and should we read into that acceleration—if there is one—as an indication of your confidence levels in the demand that's out there and your growth trajectory, or how should we interpret that pickup in the land?
Speaker #8: spend? No, nothing really
Phillip Creek: No, nothing really special. You know, again, some of our markets are impacted by, you know, weather, when we can get blacktopping done and those type of things. I mean, we owned about 25,000 lots, as Bob said. We try to have about a 1-year supply of finished lots, and that way, we don't go dark, et cetera. And we ended the year with a little over 10,000 finished lots. And again, with our current run rate at 9,000, we feel good about that. So no, nothing really special. You know, we're continuing to do a lot of land development. You know, we self-develop about 80% of our own land. But as far as any strategy or direction, that just kind of was the way the dollars were.
Phillip Creek: No, nothing really special. You know, again, some of our markets are impacted by, you know, weather, when we can get blacktopping done and those type of things. I mean, we owned about 25,000 lots, as Bob said. We try to have about a 1-year supply of finished lots, and that way, we don't go dark, et cetera. And we ended the year with a little over 10,000 finished lots. And again, with our current run rate at 9,000, we feel good about that. So no, nothing really special. You know, we're continuing to do a lot of land development. You know, we self-develop about 80% of our own land. But as far as any strategy or direction, that just kind of was the way the dollars were.
Speaker #4: special. Again, some of our markets are impacted by weather. When we get blacktopping done and those types of things, I mean, we own about 25,000 lots as Bob said.
Speaker #4: We try to have about a one-year supply of finished lots and that way we don't go dark, etc. And we ended the year with a little over 10,000 finished lots.
Speaker #4: And again, with our current run rate at 9,000, we feel good about that. So no, nothing really special. We're continuing to do a lot of land development.
Speaker #4: We self-develop about 80% of our own land. But as far as any strategy or direction, that just kind of was the way the dollars were.
Speaker #4: We did spend a little bit more money last year toward the end, but that's just the way it kind of fell.
Phillip Creek: We did spend a little bit more money, you know, last year toward the end, but, you know, just the way it kind of fell.
We did spend a little bit more money, you know, last year toward the end, but, you know, just the way it kind of fell.
Speaker #8: Okay. That's helpful. I'm always curious about your Florida trends in particular. I was just wondering because we've seen some signs that resale inventory to start the year in Florida here seems to have flipped negative year over year I think you mentioned that Tampa started to improve a little bit or Orlando seems to be steady.
Buck Horne: Okay. That's helpful. Always curious about your Florida trends in particular. I was just wondering, because we've seen some signs that resale inventory to start the year in Florida here seems to have flipped negative year-over-year. I think you mentioned that Tampa started to improve a little bit. Orlando seems to be steady. Are you sensing that we may have, I don't know, you know, is there any signs of improving traffic, demand, any signs that the stabilization of the resale inventory is helping?
Buck Horne: Okay. That's helpful. Always curious about your Florida trends in particular. I was just wondering, because we've seen some signs that resale inventory to start the year in Florida here seems to have flipped negative year-over-year. I think you mentioned that Tampa started to improve a little bit. Orlando seems to be steady. Are you sensing that we may have, I don't know, you know, is there any signs of improving traffic, demand, any signs that the stabilization of the resale inventory is helping?
Speaker #8: Are you sensing that we may have I don't know. Is there any signs of improving traffic demand, any signs that the stabilization of the resale inventory is helping?
Speaker #8: Are you sensing that we may have, I don't know... Is there any sign of improving traffic demand, any signs that the stabilization of the resale inventory is—
Speaker #4: When we look at the four Florida markets that we operate in, Orlando, Tampa, Sarasota, Fort Myers, Naples, Fort Myers, Naples is really new for us.
Bob Schottenstein: When we look at the four Florida markets that we operate in, Orlando, Tampa, Sarasota, Fort Myers, Naples. Fort Myers, Naples is really new for us. We're very bullish about it, and, you know, there we had significant growth because we went from almost zero to, you know, over 100 and some units, you know, last year. But, and we're expecting pretty meaningful growth there over the next several years. As far as the other three, where we've been a while, Orlando's clearly held up the best. And over the last, I would say, you know, 30 to 120, 150 days, demand in Orlando has been stronger than Tampa and Sarasota. Tampa was the toughest market for a while.
Robert Schottenstein: When we look at the four Florida markets that we operate in, Orlando, Tampa, Sarasota, Fort Myers, Naples. Fort Myers, Naples is really new for us. We're very bullish about it, and, you know, there we had significant growth because we went from almost zero to, you know, over 100 and some units, you know, last year. But, and we're expecting pretty meaningful growth there over the next several years. As far as the other three, where we've been a while, Orlando's clearly held up the best. And over the last, I would say, you know, 30 to 120, 150 days, demand in Orlando has been stronger than Tampa and Sarasota. Tampa was the toughest market for a while.
Speaker #4: We're very bullish about it. And there, we had significant growth because we went from almost zero to over 100-and-some units last year.
Speaker #4: But we're expecting pretty meaningful growth there over the next several years. As far as the other three where we've been a while, Orlando has clearly held up the best.
Speaker #4: And over the last, I would say, 30 to 120, 150 days, demand in Orlando has been stronger than Tampa and Sarasota. Tampa was the toughest market for a while.
Bob Schottenstein: Had probably, for whatever reason, the hardest hit for us in Florida, clearly. Tampa business has picked up, very importantly. It's not as strong as Orlando at this point, but we're encouraged by what we're seeing, that's for sure. And Sarasota is just sort of, you know, so-so. You know, I think that market is, it's a very good market, but it's, you know, it's sort of trending along and, you know, maybe C plus, B minus, that kind of thing. So, look, we're very invested in Florida, very committed to Florida. It's a huge part of our business. Candidly, we have some of the best leadership teams in our company in Florida.
Speaker #4: Had probably, for whatever reasons, the hardest hit for us in Florida, clearly. Tampa business has picked up very importantly. It's not as strong as Orlando at this point, but we're encouraged by what we're seeing, that's for sure.
Had probably, for whatever reason, the hardest hit for us in Florida, clearly. Tampa business has picked up, very importantly. It's not as strong as Orlando at this point, but we're encouraged by what we're seeing, that's for sure. And Sarasota is just sort of, you know, so-so. You know, I think that market is, it's a very good market, but it's, you know, it's sort of trending along and, you know, maybe C plus, B minus, that kind of thing. So, look, we're very invested in Florida, very committed to Florida. It's a huge part of our business. Candidly, we have some of the best leadership teams in our company in Florida.
Speaker #4: And Sarasota is just sort of so-so. I think that market is a very good market, but it's sort of trending along and maybe C plus B minus, that kind of thing.
Speaker #4: So, look, we're very invested in Florida. Very committed to Florida. It's a huge part of our business. Candidly, we have some of the best leadership teams in our company in Florida.
Bob Schottenstein: And, it's, you know, so, you know, we, we've been there a long time, and I mean, this, as was noted, we've been in business 50 years. The first market outside of Columbus, Ohio, that we expanded to was Tampa. And, the second one after that was Orlando. So, we've been in Florida for a long time, since 1981 in Tampa and 1985 in Orlando, and we're not, you know, we're, you know, we've had a very strong leadership position in those markets. We'll continue to, as well as, the operation in Sarasota, Fort Myers, and Naples.
Speaker #4: And it's so we've been there a long time and I mean, as was noted, we've been in business 50 years. The first market outside of Columbus, Ohio, that we expanded to was Tampa.
And, it's, you know, so, you know, we, we've been there a long time, and I mean, this, as was noted, we've been in business 50 years. The first market outside of Columbus, Ohio, that we expanded to was Tampa. And, the second one after that was Orlando. So, we've been in Florida for a long time, since 1981 in Tampa and 1985 in Orlando, and we're not, you know, we're, you know, we've had a very strong leadership position in those markets. We'll continue to, as well as, the operation in Sarasota, Fort Myers, and Naples.
Speaker #4: And the second one after that was Orlando. So we've been in Florida for a long time—since 1981 in Tampa, and 1985 in Orlando.
Speaker #4: And we're not—we've had a very strong leadership position in those markets. We'll continue to, as well as the operation in Sarasota and Fort Myers.
Speaker #4: Naples. Outstanding.
Buck Horne: ... Outstanding. That's great to hear. One last one, if I can sneak one in. I was curious about just how you're structuring the mortgage rate buydowns right now in terms of, you know, what type of program or structure seems to be resonating in getting consumers, you know, over the hump? You know, is there kind of a sweet spot target mortgage rate that seems to work best with those buydowns?
Buck Horne: ... Outstanding. That's great to hear. One last one, if I can sneak one in. I was curious about just how you're structuring the mortgage rate buydowns right now in terms of, you know, what type of program or structure seems to be resonating in getting consumers, you know, over the hump? You know, is there kind of a sweet spot target mortgage rate that seems to work best with those buydowns?
Speaker #8: It's great to hear. One last one, if I can sneak one in. I was curious about just how your structuring the mortgage rate buy downs right now in terms of what type of program or structure seems to be resonating in getting consumers over the hump.
Speaker #8: Is there kind of a sweet spot target mortgage rate that seems to work best with those buy
Speaker #8: downs? I guess this is Derek.
Derek Klutch: Yeah, I guess this is Derek. We've been going with a 4 7/8, 30-year fixed, and we think getting a sub-5 is the key, and that's what really seems to attract the buyers. And then on top of that, in some divisions, we offer a temporary buydown, so we can get buyers with a first-year payment in the 2.875 range. We've run that for quite a while, and that seems to be successful for us, just that sub-5% note rate.
Derek Kluch: Yeah, I guess this is Derek. We've been going with a 4 7/8, 30-year fixed, and we think getting a sub-5 is the key, and that's what really seems to attract the buyers. And then on top of that, in some divisions, we offer a temporary buydown, so we can get buyers with a first-year payment in the 2.875 range. We've run that for quite a while, and that seems to be successful for us, just that sub-5% note rate.
Speaker #4: We've been going with a 4 and 7/8 30-year fixed, and we think getting a sub-5 is the key. And that's what really seems to attract the buyers.
Speaker #4: And then, on top of that, in some divisions, we offer a temporary buy down so we can get buyers with a first-year payment in the 2.875% range.
Speaker #4: We've run that for quite a while, and that seems to be successful for us—just that sub-5% No rate.
Speaker #3: That's clearly been our most successful recently. We've been tinkering with the 7/1 arm, that other builders have been using a lot. It's everybody has their own experiences.
Bob Schottenstein: That's clearly been our most successful. Recently, we've been tinkering with the 7/1 ARM that other builders have been using a lot. You know, it's everybody has their own experiences. To Derek's point, what seems to work best for us is the very straightforward 30-year fixed, 4 7/8%, FHA, VA, or conventional. You know, that's, and in many instances, it's supplemented with the 2-1 buydown that Derek mentioned.
Robert Schottenstein: That's clearly been our most successful. Recently, we've been tinkering with the 7/1 ARM that other builders have been using a lot. You know, it's everybody has their own experiences. To Derek's point, what seems to work best for us is the very straightforward 30-year fixed, 4 7/8%, FHA, VA, or conventional. You know, that's, and in many instances, it's supplemented with the 2-1 buydown that Derek mentioned.
Speaker #3: To Derek's point, what seems to work best for us is the very straightforward 30-year fixed, 4 and 7/8 percent FHA, VA, or conventional. And that's, in many instances, supplemented with the 2/1 buy down that Derek mentioned.
Speaker #5: And one thing I'll stress also is that our mortgage and title operations are very important to us. They only serve M/I Home customers.
Phillip Creek: One thing I'll stress also is that, you know, our mortgage and title operations is very important to us. They only serve our M/I Home customers. We're able to deal individually with customers, and depending on if it's a first-time buyer, there may be a real big need for closing cost assistance. There are some people out there that do want to do to-build home - to-be-built homes, that do want a longer-term rate program. So we're able to customize whatever we need to do with an individual customer, as opposed to throwing all kind of money to every customer that may or may not need that. So being able to individually deal with customers, we think is very important to our business.
Phillip Creek: One thing I'll stress also is that, you know, our mortgage and title operations is very important to us. They only serve our M/I Home customers. We're able to deal individually with customers, and depending on if it's a first-time buyer, there may be a real big need for closing cost assistance. There are some people out there that do want to do to-build home - to-be-built homes, that do want a longer-term rate program. So we're able to customize whatever we need to do with an individual customer, as opposed to throwing all kind of money to every customer that may or may not need that. So being able to individually deal with customers, we think is very important to our business.
Speaker #5: We're able to deal individually with customers. And depending on if it's a first-time buyer, there may be a real big need for closing cost assistance.
Speaker #5: There are some people out there that do want to do two-build homes. They do want a longer-term rate program. So we're able to customize whatever we need to do with an individual customer as opposed to throwing all kinds of money to every customer that may or may not need that.
Speaker #5: So being able to individually deal with customers, we think it's very important to our business.
Speaker #8: Awesome. Very helpful, Color. Appreciate it, guys. Good luck.
Buck Horne: Awesome. Very helpful color. Appreciate it, guys. Good luck.
Buck Horne: Awesome. Very helpful color. Appreciate it, guys. Good luck.
Speaker #3: Thanks.
Bob Schottenstein: Thanks.
Robert Schottenstein: Thanks.
Speaker #5: Thanks. Thank you.
Phillip Creek: Thanks.
Phillip Creek: Thanks.
Operator: Thank you. The next question comes from Alex Barron at Housing Research Center. Please go ahead.
Operator: Thank you. The next question comes from Alex Barron at Housing Research Center. Please go ahead.
Speaker #1: The next question comes from Alex Barron at Housing Research Center. Please go ahead.
Alex Barron: Hey, good morning, guys.
Alex Barron: Hey, good morning, guys.
Speaker #4: Good Hey, good morning, guys. morning.
Bob Schottenstein: Good morning.
Robert Schottenstein: Good morning.
Speaker #6: I wanted to—I wasn't sure if I missed it, but did you guys give any guidance or outlook for margins for next quarter? Do you feel like they're going to go down sequentially, or are these impairments you took this quarter going to help stabilize margins?
Alex Barron: I wanted to... I wasn't sure if I missed it, but did you guys give any guidance or outlook for margins for next quarter? Do you feel like they're gonna go down sequentially, or is these impairments you took this quarter gonna help stabilize margins?
Alex Barron: I wanted to... I wasn't sure if I missed it, but did you guys give any guidance or outlook for margins for next quarter? Do you feel like they're gonna go down sequentially, or is these impairments you took this quarter gonna help stabilize margins?
Phillip Creek: Alex, you know us, we don't, we don't give guidance on things like that. We were, you know, pretty pleased with our margins in Q4. We did deal with problem communities, that we thought we needed to with the impairments. Don't give any guidance. You know, we are working hard on construction costs and cycle time and all those things. We are opening a number of new stores again this year. We did give guidance. We expect average community count to be up 5% this year, but, no, we did not give any guidance as far as margins.
Speaker #5: Alex, you know us. We don't give guidance on things like that. We were pretty pleased with our margins in the fourth quarter. We did deal with problem communities that we thought we needed to with the impairments.
Phillip Creek: Alex, you know us, we don't, we don't give guidance on things like that. We were, you know, pretty pleased with our margins in Q4. We did deal with problem communities, that we thought we needed to with the impairments. Don't give any guidance. You know, we are working hard on construction costs and cycle time and all those things. We are opening a number of new stores again this year. We did give guidance. We expect average community count to be up 5% this year, but, no, we did not give any guidance as far as margins.
Speaker #5: Don't give any guidance. We are working hard on construction costs and cycle time and all those things. We are opening a number of new stores again this year.
Speaker #5: We did give guidance. We expect average community count to be at 5% this year. But no, we did not give any guidance as far as margins.
Speaker #6: Okay. Did your incentive levels go up in the quarter versus the previous quarter, or can you comment on orders?
Alex Barron: Okay. Did your incentive levels or go up in the quarter versus the previous quarter for new orders?
Alex Barron: Okay. Did your incentive levels or go up in the quarter versus the previous quarter for new orders?
Speaker #5: I mean, our margins were down a little bit. So are we doing a little bit more on closings in the fourth quarter? Yes, we did.
Phillip Creek: I mean, our margins were down a little bit. So, you know, are we doing a little bit more on closings in the fourth quarter? Yes, we did. Again, that's reflected in our margins. Trying to do the best job we can, opening all these new stores. We opened 80 stores last year and anticipate to open more than that this year, so that's a big opportunity for us. But, hopefully, spring selling season will be a little better than it has been.
Phillip Creek: I mean, our margins were down a little bit. So, you know, are we doing a little bit more on closings in the fourth quarter? Yes, we did. Again, that's reflected in our margins. Trying to do the best job we can, opening all these new stores. We opened 80 stores last year and anticipate to open more than that this year, so that's a big opportunity for us. But, hopefully, spring selling season will be a little better than it has been.
Speaker #5: Again, that's reflected in our margins. Trying to do the best job we can opening all these new stores. We opened 80 stores last year.
Speaker #5: And anticipate opening more than that this year. So that's a big opportunity for us. But hopefully, spring-selling season will be a little better than it has been.
Speaker #6: Okay. And also, any shift in your strategy as far as what percentage of spec homes you guys are starting versus going back towards build-to-order?
Alex Barron: Okay. And also, any shift in your strategy as far as what percentage of spec homes you guys are starting versus, you know, going back towards build to order?
Alex Barron: Okay. And also, any shift in your strategy as far as what percentage of spec homes you guys are starting versus, you know, going back towards build to order?
Speaker #3: No, it'll likely spot-shot and stain, Alex. It'll likely remain about what it's been, which is about, like I said earlier, two-thirds to three-fourths of our business are spec sales.
Bob Schottenstein: No. It'll likely... It's Bob Schottenstein, Alex. It'll likely remain about what it's been, which is about, like I said earlier, 2/3 to 3/4 of our business, our spec sales. And I don't see things changing there or on the rate buydown side to incent sales. I don't see any of that changing anytime soon. You know, obviously, you know, we're all reacting to, you know, almost on a daily basis, to what's happening in the market. As we did mention, we've been encouraged by early traffic improvements here that we've seen through the latter part of Q4 and certainly as we begin 2026.
Robert Schottenstein: No. It'll likely... It's Bob Schottenstein, Alex. It'll likely remain about what it's been, which is about, like I said earlier, 2/3 to 3/4 of our business, our spec sales. And I don't see things changing there or on the rate buydown side to incent sales. I don't see any of that changing anytime soon. You know, obviously, you know, we're all reacting to, you know, almost on a daily basis, to what's happening in the market. As we did mention, we've been encouraged by early traffic improvements here that we've seen through the latter part of Q4 and certainly as we begin 2026.
Speaker #3: And I don't see things changing there or on the rate buy down side to incent sales. I don't see any of that changing anytime soon.
Speaker #3: Obviously, we're all reacting to, almost on a daily basis, what's happening in the market. As we did mention, we've been encouraged by early traffic improvements here that we've seen through the latter part of the fourth quarter and certainly as we begin 2026.
Speaker #6: All right, guys. Well, best of luck. Thank
Alex Barron: All right, guys. Well, best of luck. Thank you.
Alex Barron: All right, guys. Well, best of luck. Thank you.
Speaker #6: you.
Bob Schottenstein: Thanks a lot.
Robert Schottenstein: Thanks a lot.
Phillip Creek: Thanks, Alex.
Phillip Creek: Thanks, Alex.
Speaker #5: Thanks, Thanks a lot. Alex.
Speaker #1: Thank you. And the next question comes from Jay McAnlis at Citizens. Please go ahead.
Operator: Thank you. The next question comes from Jay McCanless at Citizens JMP. Please go ahead.
Operator: Thank you. The next question comes from Jay McCanless at Citizens JMP. Please go ahead.
Speaker #1: ahead. Hey, good morning,
Derek Klutch: Hey, good morning, everyone. Just to kind of follow on that point, Bob-
Jay McCanless: Hey, good morning, everyone. Just to kind of follow on that point, Bob-
Speaker #7: everyone. Just to kind of follow on that point, Bob,
Speaker #3: Jay, congratulations on your new position.
Bob Schottenstein: Jay, congratulations on your new position.
Robert Schottenstein: Jay, congratulations on your new position.
Speaker #7: Thank you, sir. I really appreciate it. Appreciate y'all's time this morning as well. Just to kind of follow on what you were saying there, Bob, are you all north and the south, or is it a little seeing similar traffic pickup in both the stronger in one region versus the other?
Derek Klutch: Thank you, sir. I really appreciate it. Appreciate y'all's time this morning as well. Just to kind of follow on what you were saying there, Bob, are you all seeing similar traffic pickup in both the North and the South, or is it a little stronger in one region versus the other?
Jay McCanless: Thank you, sir. I really appreciate it. Appreciate y'all's time this morning as well. Just to kind of follow on what you were saying there, Bob, are you all seeing similar traffic pickup in both the North and the South, or is it a little stronger in one region versus the other?
Bob Schottenstein: You know, I think that it's not every single one of our 17 markets, but certainly most, and I would not say it's particularly regional. Now, the last 5 days, things aren't very good anywhere because, you know, most people are frozen solid or they're snowed in, including, you know, here in Columbus, it's been pretty rough. But in general, we've seen traffic, you know, start to pick up. It always does this time of year. Just feels a little better than even a year ago, though, to me.
Robert Schottenstein: You know, I think that it's not every single one of our 17 markets, but certainly most, and I would not say it's particularly regional. Now, the last 5 days, things aren't very good anywhere because, you know, most people are frozen solid or they're snowed in, including, you know, here in Columbus, it's been pretty rough. But in general, we've seen traffic, you know, start to pick up. It always does this time of year. Just feels a little better than even a year ago, though, to me.
Speaker #3: I think that it's not every single one of our 17 markets. But certainly most. And I would not say it's particularly regional. Now, the last five days, things aren't very good anywhere because most people are frozen solid.
Speaker #3: Or they're snowed in, including here in Columbus. It's been pretty rough. But in general, we've seen traffic start to pick up. It always does this time of year.
Speaker #3: It feels a little better than even a year ago, though, to me.
Speaker #7: Okay. That's great. And then Phil, could you talk about in the fourth quarter, your ending gross margin in the backlog, how that compares to what you reported for closings in 4Q?
Jay McCanless: Okay, that's great. And then, Phil, could you talk about, in the fourth quarter, you know, the your ending gross margin in the backlog, how that compares to what you reported for closings in Q4?
Jay McCanless: Okay, that's great. And then, Phil, could you talk about, in the fourth quarter, you know, the your ending gross margin in the backlog, how that compares to what you reported for closings in Q4?
Phillip Creek: You know, right now, what we're doing, as Bob said, 75 to 80 percent specs. You know, in general, the margins in the backlog are higher, you know, than specs. Are the margins that you're in a little higher than you were in a year ago? The answer is yes. You know, that's about 100 basis points difference, but hopefully, we're getting a little better. We continue to focus on how we can improve the margins on these specs. So again, we're doing all we can. You know, we did have 22.6% margins in Q4, so we're hoping margins hold up pretty good.
Phillip Creek: You know, right now, what we're doing, as Bob said, 75 to 80 percent specs. You know, in general, the margins in the backlog are higher, you know, than specs. Are the margins that you're in a little higher than you were in a year ago? The answer is yes. You know, that's about 100 basis points difference, but hopefully, we're getting a little better. We continue to focus on how we can improve the margins on these specs. So again, we're doing all we can. You know, we did have 22.6% margins in Q4, so we're hoping margins hold up pretty good.
Speaker #5: Right now, we're doing, as Bob said, 75–80 percent specs. In general, the margins in the backlog are higher than specs. Are the margins that you're in a little higher than you were in a year ago?
Speaker #5: The answer is yes. That's about 100 basis points difference. But hopefully, we're getting a little better. We continue to focus on how we can improve the margins on these specs.
Speaker #5: So again, we're doing all we can. We did a 22.6% margin in the fourth quarter. So we're hoping margins hold up pretty good.
Speaker #7: Okay. That's great. And then the next question I had, just thinking about the sales pace for these newer communities you're opening, are you all trying to push a similar sales pace as what you got in '25, or are you trying to be a little more cautious and not wanting to give away too much margin at the beginning of these
Jay McCanless: Good. That's great. And then the next question I had, just thinking about the sales pace for these newer communities you're opening, are you all trying to push a similar sales pace as what you got in 25, or are you trying to be a little more cautious, not wanting to give away too much margin at the beginning of these communities?
Jay McCanless: Good. That's great. And then the next question I had, just thinking about the sales pace for these newer communities you're opening, are you all trying to push a similar sales pace as what you got in 25, or are you trying to be a little more cautious, not wanting to give away too much margin at the beginning of these communities?
Speaker #7: communities? Well,
Speaker #5: we always try to focus on getting that pace. It's three-plus. Our store count is up about 5%, but again, you got to be a little more careful opening new stores.
Phillip Creek: Well, we always try to focus on getting that pace, you know, at 3+. You know, our store count is up about 5%, but, you know, again, you got to be a little more careful opening new stores, you know, as far as if you're super aggressive on price and margin, again, you can feel that benefit for a while. So, there is a lot of opportunity with these new stores. Hopefully, we've got the, the right product and the right price to move through there. But, you know, we are focusing on trying to keep this pace, you know, at hopefully around 3 or a little better.
Phillip Creek: Well, we always try to focus on getting that pace, you know, at 3+. You know, our store count is up about 5%, but, you know, again, you got to be a little more careful opening new stores, you know, as far as if you're super aggressive on price and margin, again, you can feel that benefit for a while. So, there is a lot of opportunity with these new stores. Hopefully, we've got the, the right product and the right price to move through there. But, you know, we are focusing on trying to keep this pace, you know, at hopefully around 3 or a little better.
Speaker #5: As far as if you're super aggressive on price and margin, again, you can feel that benefit for a while. So, there is a lot of opportunity with these new stores.
Speaker #5: Hopefully, we've got the right product and the right price to move through there. But we are focusing on trying to keep this pace, and hopefully around three or a little better.
Speaker #7: Okay. That's great. Thanks. And then the last one for me, and thank you for the detail on the specs, I guess, how are you feeling about MHO's inventory right now and maybe some broader commentary on what you're seeing in the industry?
Jay McCanless: Okay, that's great. Thanks. And then the last one for me, and thank you for the detail on the specs. I guess, how are you feeling about MHO's inventory right now, and maybe some broader commentary on what you're seeing in the industry? Does it feel like some of the excess spec inventory is being drawn down, or how—what are you hearing from the divisions on that?
Jay McCanless: Okay, that's great. Thanks. And then the last one for me, and thank you for the detail on the specs. I guess, how are you feeling about MHO's inventory right now, and maybe some broader commentary on what you're seeing in the industry? Does it feel like some of the excess spec inventory is being drawn down, or how—what are you hearing from the divisions on that?
Speaker #7: Does it feel like some of the excess spec inventory is being drawn down, or what are you hearing from the divisions on that?
Speaker #3: I think we feel really good about where we are. Not to be silly, I mean, if we didn't, we'd change. But we going into this year, again, a lot of it's community-specific, but we want to be very aggressive in making certain that we have the product standing product in the field, the inventory, if you will, so that we can take advantage of what should be hopefully a decent selling environment here over the next three to four or five months.
Bob Schottenstein: I think we feel really good about where we are. Not, not to be, you know, silly. I mean, if we didn't, we'd change. But, you know, we, going into this year, again, a lot of it's community specific, but we want to be very aggressive in making certain that we have the product, standing product in the field, the inventory, if you will, you know, so that we can, you know, take advantage of what should be a, you know, a, hopefully, a decent selling environment here over the next, you know, three to four or five months. And, and, so I, I think we feel, we feel our strategy is the right strategy. We don't feel we need to do any significant shifts.
Robert Schottenstein: I think we feel really good about where we are. Not, not to be, you know, silly. I mean, if we didn't, we'd change. But, you know, we, going into this year, again, a lot of it's community specific, but we want to be very aggressive in making certain that we have the product, standing product in the field, the inventory, if you will, you know, so that we can, you know, take advantage of what should be a, you know, a, hopefully, a decent selling environment here over the next, you know, three to four or five months. And, and, so I, I think we feel, we feel our strategy is the right strategy. We don't feel we need to do any significant shifts.
Speaker #3: And so I think we feel our strategy is the right strategy. We don't feel we need to do any significant shifts. And other than community-by-community specific things, in general, I think we're very well positioned.
Bob Schottenstein: You know, other than community-by-community-specific things, in general, I think we're very well positioned.
You know, other than community-by-community-specific things, in general, I think we're very well positioned.
Speaker #3: positioned. Okay.
Jay McCanless: Good. That's great. And just any industry commentary you've been hearing from the field?
Jay McCanless: Good. That's great. And just any industry commentary you've been hearing from the field?
Speaker #7: That's been hearing from the great. And just any industry commentary, you've field?
Bob Schottenstein: Relating to what issue?
Speaker #3: Relating to what
Robert Schottenstein: Relating to what issue?
Speaker #3: issue? Relating to
Jay McCanless: Relating to inventory. Spec inventory, specifically.
Jay McCanless: Relating to inventory. Spec inventory, specifically.
Speaker #7: inventory. Spec inventory
Speaker #7: specifically. You mean
Bob Schottenstein: You mean, are people like, you know, deep discounting just to move specs, or have the discounts slowed down, or are more incentives being paid to third-party realtors, or, I mean, things like that?
Robert Schottenstein: You mean, are people like, you know, deep discounting just to move specs, or have the discounts slowed down, or are more incentives being paid to third-party realtors, or, I mean, things like that?
Speaker #3: are people deep discounting just to move specs, or have discounts slowed down, or are more incentives being paid to third-party realtors, or I mean, things like that?
Speaker #7: Yeah. Things like that. That'd be
Jay McCanless: Yeah, things like that. That'd be great.
Jay McCanless: Yeah, things like that. That'd be great.
Speaker #7: great. Yeah.
Bob Schottenstein: Yeah, you know, you hear a crazy story now and then, about once every two days. So it, you know, I don't think that's anything new.
Robert Schottenstein: Yeah, you know, you hear a crazy story now and then, about once every two days. So it, you know, I don't think that's anything new.
Speaker #3: I mean, you hear a crazy story now and then about once every two days. So I don't think that's anything new. I mean, people do what they think they need to do.
Jay McCanless: Okay.
Jay McCanless: Okay.
Bob Schottenstein: I mean, people do what they think they need to do. Look, you know, I think that knowing... On a look back, knowing what 2025 was, if you just said to me, we're going to bring 12 to 13% to the bottom line for the full year, I'd say, "I'll take it." Well, that's what we did.
Robert Schottenstein: I mean, people do what they think they need to do. Look, you know, I think that knowing... On a look back, knowing what 2025 was, if you just said to me, we're going to bring 12 to 13% to the bottom line for the full year, I'd say, "I'll take it." Well, that's what we did.
Speaker #3: Look, I think that knowing on a look back, knowing what 2025 was, if you just said to me, "We're going to bring 12 to 13 percent to the bottom line for the full year," I'd say I'll take it.
Speaker #3: Well, that's what we did.
Speaker #7: Understood. Jay, we pay a lot of attention
Jay McCanless: Understood.
Jay McCanless: Understood.
Phillip Creek: You know, Jay, we pay a lot of attention to our inventory levels. We do have about 1,000 finished specs, which is a little higher than last year's 800. We do have 5% more starts. You know, we have a few less houses in the field today than we did a year ago, but again, we benefit by better cycle time. We're just trying to be very focused. A lot, you know, a lot of times execution doesn't get discussed, but, you know, now execution really matters. We're trying to be careful not to put too much inventory in the field, too many finished specs. You know, again, it depends on, is it an attached townhouse community? Is it a higher-priced community? Every community is a little bit different.
Phillip Creek: You know, Jay, we pay a lot of attention to our inventory levels. We do have about 1,000 finished specs, which is a little higher than last year's 800. We do have 5% more starts. You know, we have a few less houses in the field today than we did a year ago, but again, we benefit by better cycle time. We're just trying to be very focused. A lot, you know, a lot of times execution doesn't get discussed, but, you know, now execution really matters. We're trying to be careful not to put too much inventory in the field, too many finished specs. You know, again, it depends on, is it an attached townhouse community? Is it a higher-priced community? Every community is a little bit different.
Speaker #5: To our inventory levels, we do have about 1,000 finished specs, which is a little higher than last year's 800. We do have 5% more stores.
Speaker #5: We have a few less houses in the field today than we did a year ago. But again, we've benefited by better cycle time. We're just trying to be very focused. A lot of times, execution doesn't get discussed, but now execution really matters.
Speaker #5: We're trying to be careful not to put too much inventory in the field, too many finished specs, again, it depends on is it an attached townhouse community, is it a higher-priced community, every community is a little bit different.
Speaker #5: But again, I mean, doing 70, 75 percent specs I mean, we're relying on sales every week, every month, and that's what we have to stay focused on.
Phillip Creek: But, you know, again, I mean, doing 70-75% specs, I mean, we're relying on sales every week, every month, and that's what we have to stay focused on. We were very pleased. If you look at it last year, we closed almost the same number of houses we did the year before, which was our record, 9,000 homes. Obviously, our, our hopes and plans are, you know, we hope to close a few more houses this year than last year. We have more stores. Again, we're staying focused. You know, we try to run a conservative business. We're not trying to put inventory out there too far ahead of ourselves. But, you know, again, we feel pretty good about our results.
But, you know, again, I mean, doing 70-75% specs, I mean, we're relying on sales every week, every month, and that's what we have to stay focused on. We were very pleased. If you look at it last year, we closed almost the same number of houses we did the year before, which was our record, 9,000 homes. Obviously, our, our hopes and plans are, you know, we hope to close a few more houses this year than last year. We have more stores. Again, we're staying focused. You know, we try to run a conservative business. We're not trying to put inventory out there too far ahead of ourselves. But, you know, again, we feel pretty good about our results.
Speaker #5: We were very pleased if you look at it last year, we closed almost the same number of houses as we did the year before, which was our record, 9,000 homes.
Speaker #5: And obviously, our hopes and plans are we hope to close a few more houses this year than last year. We have more stores. But again, we're staying focused.
Speaker #5: We try to run a conservative business. We're not trying to put inventory out there too far ahead of ourselves. But again, we feel pretty good about our results.
Speaker #5: We try to run a conservative business. We're not trying to put inventory out there too far ahead of ourselves. But again, we feel pretty good about our results.
Speaker #7: Absolutely. And one question I forgot. Could you talk or can you, if you talked about it, maybe repeat the commentary on what the margins on new community profit margins on new communities look like?
Jay McCanless: Absolutely. And one question I forgot: Could you talk, can you, if you talked about it, maybe repeat the commentary on what the margins on new community profit margins on new communities look like?
Jay McCanless: Absolutely. And one question I forgot: Could you talk, can you, if you talked about it, maybe repeat the commentary on what the margins on new community profit margins on new communities look like?
Speaker #5: As far as what margins are on new communities we're opening versus older,
Phillip Creek: ... As far as what the margins are on new communities we're opening versus older communities, is that your question?
Phillip Creek: ... As far as what the margins are on new communities we're opening versus older communities, is that your question?
Speaker #5: communities, is that your question?
Speaker #7: Correct.
Jay McCanless: Correct. Yep, that's it.
Jay McCanless: Correct. Yep, that's it.
Speaker #7: Yeah. That's
Speaker #7: it.
Phillip Creek: You know, again, that's, that's really a hard question. You know, last year we opened, you know, 80 stores. I would say in general, they're, they're pretty close. You know, we have some new stores that are doing really well, and, you know, some that aren't doing so hot. It's a pace. It's an individual situation. But, overall, we feel pretty good about, you know, the new stores we're opening. We're trying to make sure we have the, the right product and the right price and all those things open the right way. But, you know, that's just a really hard question, Jay.
Phillip Creek: You know, again, that's, that's really a hard question. You know, last year we opened, you know, 80 stores. I would say in general, they're, they're pretty close. You know, we have some new stores that are doing really well, and, you know, some that aren't doing so hot. It's a pace. It's an individual situation. But, overall, we feel pretty good about, you know, the new stores we're opening. We're trying to make sure we have the, the right product and the right price and all those things open the right way. But, you know, that's just a really hard question, Jay.
Speaker #5: Last year, we opened 80 stores. I would say, in general, they're pretty close. We have some new stores that are doing really well, and some that aren't doing so hot.
Speaker #5: It's an individual situation. But overall, we feel pretty good about the new stores we're opening. We're trying to make sure we have the right product and the right price, and all those things, open the right way.
Speaker #5: But that's just a really hard question, Jay.
Speaker #7: Understood. Well, thank you, guys, for all the time. And that's all the questions I have. Thank you.
Jay McCanless: Understood. Well, thank you guys for all the time. And that's all the questions I have. Thank you.
Jay McCanless: Understood. Well, thank you guys for all the time. And that's all the questions I have. Thank you.
Speaker #7: you. Thanks,
Phillip Creek: Thanks, Jay.
Phillip Creek: Thanks, Jay.
Speaker #3: Jay. Thank you.
Operator: Thank you. The next question is a follow-up from Ken Zener at Seaport Research Partners. Please go ahead.
Operator: Thank you. The next question is a follow-up from Ken Zener at Seaport Research Partners. Please go ahead.
Speaker #1: The next question is a follow-up from Ken Zenner at Seaport Research Partners. Please go ahead.
Speaker #8: Hello again. Thank you. I wonder if you could comment on the flexibility of the business. So obviously, mortgage buyouts for, let's say, two-thirds of the communities that you have product, you're trying to protect the community.
Kenneth Zener: Hello again. Thank you. I wonder if you could comment on, you know, the flexibility of the business. So obviously, mortgage buydowns for, let's say, two-thirds of the communities that, you know, you have product, you're trying to protect the community, price points, et cetera. But for new communities, given that, you know, the communities that opened last year and conversely are opening this year, how much of a change to the product type or, you know, how you open it up at what price points? Can you talk to the dynamics that you employ when making those choices on new communities in terms of resetting the, let's say, home size or, you know, the specs that you're building are, I don't want to use the word de-spec, but, you know, they're more simpler in terms of price points?
Kenneth Zener: Hello again. Thank you. I wonder if you could comment on, you know, the flexibility of the business. So obviously, mortgage buydowns for, let's say, two-thirds of the communities that, you know, you have product, you're trying to protect the community, price points, et cetera. But for new communities, given that, you know, the communities that opened last year and conversely are opening this year, how much of a change to the product type or, you know, how you open it up at what price points? Can you talk to the dynamics that you employ when making those choices on new communities in terms of resetting the, let's say, home size or, you know, the specs that you're building are, I don't want to use the word de-spec, but, you know, they're more simpler in terms of price points?
Speaker #8: Price points, TS, etc. But for new communities, given the communities that opened last year and conversely are opening this year, how much of a change to the product type or how you open it up, at what price points?
Speaker #8: Can you talk to the dynamics that you employ when making those choices on new communities in terms of resetting the, let's say, home size or the specs that you're building are—I don't want to use the word de-spec—but they're more simpler in terms of price points.
Speaker #8: How much flexibility do you really have there when you're coming into opening a community six to nine months out vis-à-vis the product construction?
Kenneth Zener: How much flexibility do you really have there when you're coming into opening a community 6 to 9 months out vis-à-vis the product construction, cost, type?
Kenneth Zener: How much flexibility do you really have there when you're coming into opening a community 6 to 9 months out vis-à-vis the product construction, cost, type?
Bob Schottenstein: Probably, yeah. I think a lot more flexibility, I think, than most people might realize. Look, so much of it's determined by zoning, and so, you know, you have to stay within the confines of the permissible zoning parameters. Having said that, usually those parameters give you a fair amount of flexibility. The amount of internal debate, discussion, analysis, and strategy, if you will, that goes into each community planning from the very earliest stages when we think there's a site, and I'll use this as an example, in Charlotte, that we're looking to tie up. From the moment that we think that site might be available, the debate occurs within the division.
Robert Schottenstein: Probably, yeah. I think a lot more flexibility, I think, than most people might realize. Look, so much of it's determined by zoning, and so, you know, you have to stay within the confines of the permissible zoning parameters. Having said that, usually those parameters give you a fair amount of flexibility. The amount of internal debate, discussion, analysis, and strategy, if you will, that goes into each community planning from the very earliest stages when we think there's a site, and I'll use this as an example, in Charlotte, that we're looking to tie up. From the moment that we think that site might be available, the debate occurs within the division.
Speaker #8: cost type? I think a lot
Speaker #3: more flexibility. I think that most people might realize. Look, so much of it's determined by zoning. And so you have to stay within the confines of the permissible zoning parameters.
Speaker #3: Having said that, usually, those parameters give you a fair amount of flexibility. The amount of internal debate discussion analysis strategy, if you will, that goes into each community planning from the very earliest stages when we think there's a site in—I'll use this as an example—in Charlotte that we're looking to tie up from the moment that we think that site might be available, the debate occurs within the division, sometime it springs all the way up to corporate conversations, about what are we going to do with that if we get that deal done and that becomes a new store for us?
Bob Schottenstein: Sometimes it springs all the way up to corporate conversations about what, what are we gonna do with that if we get that deal done and that becomes a new store for us? What is that store gonna look like? What are we gonna merchandise in that store? What is – who is the buyer? And, you know, there's – that's a lot more art than science. I'm not saying it's rocket, you know, like building a rocket ship to the moon, but it is a lot more art than science, and you do have some flexibility. And we're, you know, there is a fair amount of tinkering that takes place.
Robert Schottenstein: Sometimes it springs all the way up to corporate conversations about what, what are we gonna do with that if we get that deal done and that becomes a new store for us? What is that store gonna look like? What are we gonna merchandise in that store? What is – who is the buyer? And, you know, there's – that's a lot more art than science. I'm not saying it's rocket, you know, like building a rocket ship to the moon, but it is a lot more art than science, and you do have some flexibility. And we're, you know, there is a fair amount of tinkering that takes place.
Speaker #3: What does that store going to look like? What are we going to merchandise in that store? What is the buyer? And that's a lot more art than science.
Speaker #3: I'm not saying it's rocket like building a rocket ship to the moon, but it is a lot more art than science. And you do have some flexibility and there is a fair amount of tinkering that takes place.
Speaker #3: We have projects, many of them, that will be coming on this year that when we first started planning them, we might have planned to do larger homes.
Bob Schottenstein: We have projects, many of them, that will be coming on this year, that when we first started planning them, we might have planned to do, you know, larger homes, and now we're looking to do smaller homes. That's a very simple example. But or we may be replanning in a way that the density stays neutral, but we're now gonna develop it with smaller sized lots, or perhaps the opposite, larger sized lots to take advantage of maybe lot premiums.
We have projects, many of them, that will be coming on this year, that when we first started planning them, we might have planned to do, you know, larger homes, and now we're looking to do smaller homes. That's a very simple example. But or we may be replanning in a way that the density stays neutral, but we're now gonna develop it with smaller sized lots, or perhaps the opposite, larger sized lots to take advantage of maybe lot premiums.
Speaker #3: And now we're looking to do smaller homes. That's a very simple example. But or we may be replanning in a way that the density stays neutral, but we've now we're now going to develop it with smaller size lots.
Speaker #3: Or perhaps the opposite—larger size lots to take advantage of, maybe, lot premiums. So that's a huge part of what goes on in the course. Every new land deal in this company, before we are in a position where we've made a firm commitment, must get approved at the corporate level through our land committee process and evaluation process, which is a discussion involving the specific division and, of course, a few of us here at corporate.
Bob Schottenstein: So, that's a huge part of what goes on, and of course, every new land deal in this company before we are in a position where we've made a firm commitment, must get approved at the corporate level through, you know, our land committee process and evaluation process, which is a discussion involving the specific division and of course, a few of us here at corporate. And even in that, after this thing, this thing has been batted back and forth at the division level, we'll quite often have questions about the product and the product line and what are we really trying to do here? And, and, you know, should we, should we, should we adjust this or that?
So, that's a huge part of what goes on, and of course, every new land deal in this company before we are in a position where we've made a firm commitment, must get approved at the corporate level through, you know, our land committee process and evaluation process, which is a discussion involving the specific division and of course, a few of us here at corporate. And even in that, after this thing, this thing has been batted back and forth at the division level, we'll quite often have questions about the product and the product line and what are we really trying to do here? And, and, you know, should we, should we, should we adjust this or that?
Speaker #3: And even in that, after there's this thing has been batted back and forth at the division level, we'll quite often have questions about the product and the product line and what are we really trying to do here.
Speaker #3: And should we adjust this or that? And certainly, on larger deals where there's multiple product lines or they have a long tail, we may have two or three land committee calls along the way: what are we thinking?
Bob Schottenstein: And certainly on larger deals where there's multiple product lines or they have a long tail, we may have 2 or 3 land committee calls along the way. What are we thinking? How does it look now? Let's reconvene in 90 days. So, there's a whole lot that goes into that. You know, we're as good as our stores. We're a retailer. You know, we're a very unusual retailer because we reinvent ourself about every 3 years. The stores that we have out there today, 3 years from now, 90% of them will be completely different, and because we'll sell through and replace with new. As Phil mentioned, you know, we're poised to open a whole lot of new stores this year, and we'll be closing out of a number of them, too.
And certainly on larger deals where there's multiple product lines or they have a long tail, we may have 2 or 3 land committee calls along the way. What are we thinking? How does it look now? Let's reconvene in 90 days. So, there's a whole lot that goes into that. You know, we're as good as our stores. We're a retailer. You know, we're a very unusual retailer because we reinvent ourself about every 3 years. The stores that we have out there today, 3 years from now, 90% of them will be completely different, and because we'll sell through and replace with new. As Phil mentioned, you know, we're poised to open a whole lot of new stores this year, and we'll be closing out of a number of them, too.
Speaker #3: How's it look now? Let's reconvene in 90 days. So there's a whole lot that goes into that. We're as good as our stores. We're a retailer.
Speaker #3: We're a very unusual retailer because we reinvent ourselves about every three years. The stores that we have out there today three years from now, 90% of them will be completely different.
Speaker #3: And because we'll sell through and replace with new. And as Phil mentioned, we're poised to open a whole lot of new stores this year.
Speaker #3: And we'll be closing out of a number of them too. So what those stores look like and what we choose to sell hopefully meeting the market where it is, who is the buyer?
Bob Schottenstein: So what those stores look like and what we choose to sell, hopefully meeting the market where it is, who is the buyer, what are we targeting? That's a huge part of the business. Huge part of the business. And, you know, we've made our fair share of mistakes, so hopefully, we've learned from some of them. And, and there's times when we've absolutely, you know, shifted to a strategy that has turned something that might have just been average into something really good. And, you know, so when we see something that works in one market, you know, we, that maybe is a little bit, you know, off-the-wall thinking, you know, we'll also try to apply to that, you know, in other markets if it makes sense to do so. So, it's a very, very big part of the business.
So what those stores look like and what we choose to sell, hopefully meeting the market where it is, who is the buyer, what are we targeting? That's a huge part of the business. Huge part of the business. And, you know, we've made our fair share of mistakes, so hopefully, we've learned from some of them. And, and there's times when we've absolutely, you know, shifted to a strategy that has turned something that might have just been average into something really good. And, you know, so when we see something that works in one market, you know, we, that maybe is a little bit, you know, off-the-wall thinking, you know, we'll also try to apply to that, you know, in other markets if it makes sense to do so. So, it's a very, very big part of the business.
Speaker #3: What are we targeting? That's a huge part of the business. Huge part of the business. And we've made our fair share of mistakes. So hopefully, we've learned from some of them.
Speaker #3: And there's times when we've absolutely shifted to a strategy that has turned something that might have just been average into something really good. And so when we see something that works in one market, we that maybe it's a little bit off-the-wall thinking, we'll also try to apply to that in other markets if it makes sense to do so.
Speaker #3: So it's a very, very big part of the business. Doesn't often get a lot of conversation. But it's a terrific question.
Bob Schottenstein: Doesn't often get a lot of conversation, but, you know, it's a terrific question.
Doesn't often get a lot of conversation, but, you know, it's a terrific question.
Speaker #2: Thank
Kenneth Zener: Thank you.
Kenneth Zener: Thank you.
Speaker #2: you.
Speaker #1: Thank you. There are no further questions at this time.
Operator: Thank you. There are no further questions at this time. I will turn the call back over to Phil Creek for closing comments.
Operator: Thank you. There are no further questions at this time. I will turn the call back over to Phil Creek for closing comments.
Speaker #1: questions at this time. I will turn the call back over to Phil Creek for closing
Speaker #1: comments.
Speaker #2: Thank you for
Phillip Creek: Thank you for joining us. Look forward to talking to you next quarter.
Phillip Creek: Thank you for joining us. Look forward to talking to you next quarter.
Speaker #2: joining us. Look forward to talking to you next
Speaker #2: quarter. Ladies and
Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating, and we ask that you please disconnect your lines.
Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating, and we ask that you please disconnect your lines.
