PulteGroup (PHM) 25 Oct 222022 Q3 Earnings call transcript

Good morning. My name is Chris, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the PulteGroup, Inc. Q3 2022 Earnings Conference Call. [Operator Instructions]

Vice Investor Zeumer, Communications. and Jim you, President Relations of Corporate Thank

may You begin.

Chris, I quarter good everyone Thank and Great. you, morning. XXXX. earnings for XX, to call want our September third ended PulteGroup's welcome to

Joining me results Marshall, Jim President and President Ossowski, Vice third Senior Bob Executive of CFO; are Finance. O’Shaughnessy, Ryan CEO; and discuss to PulteGroup's quarter and Vice President

corporate slides website of morning's pultegroup.com. posted earnings that webcast accompany this the been this copy A to and our at have call release

We will replay a of today's call also post later today.

risk results SEC of presentation always, key forward-looking future to As differ could annual including by within The want alert risk factors I are results release significant we and Actual about slides. everyone part our materially accompanying expected other and that that factors reports. and company's summarized in comments earnings today's filings, those suggested as today. the the detailed includes today's webcast the These from could our statements quarterly are make performance. affect information future most

the over me turn call let to Ryan? Ryan Now Marshall.

start is we're year market the periods have difference mortgage that primary between Jim, existed X%. favorable since versus of morning. and that delineating suspect X this demand conditions of encountering the call, third more rates Thanks, the the we which challenging ourselves find than environment I morning's that drove today. year Stating earlier the will the to between earnings obvious, this more throughout PulteGroup's good upwards the doubled quarter

with in of results homes even existed an time increase the third supply chain, labor Bob basis this earnings sales XX% almost are we average increase to expansion reflected and leverage price into we XXXX details provide in a quarter. of difficult The is will pricing which existed conditions important margin strong the the first favorable these demand in that reported demand few the at months Our $X.XX Further, closed our pricing XXXX. share. of tight the it on a pricing QX efforts a earnings of the benefits entire the to of the great few in XX% end were minutes, gain organization into reflect PulteGroup that for of in able third and at to dynamics, recognize and $XX,XXX and or XXX and results. the and delivering our quarter success more point gross acknowledge but per the

quarter and the If our operating income third order dynamics strength, show more cancellation challenging rates we statement are market demonstrates demand prior today. under

As the we quarter, flow demand could with move movement and of you throughout ebb see almost interest rates. the

surged fell July's Federal as homebuying demand to Chairman in rates August. Powell. mortgage positive actions Reserve short-lived, The as higher in in eased interest response was however, demand in Softness hawkish in September and trend rates from commentary

home. in a XX% widespread others to across dealing quarter. unsure consumer pullback longer the impact the home our no sidelines, in The was some cancellation issues also the they potential a now it's financing as fear consumers to because afford can demand home groups if buyers The to as and were move they because geographies and to increased buy of truly backlog best rates time with or of extended

most While rates significant mortgage influencing are likely on rise factors has there number in consumers. a the demand, today's housing of impact the had

and will commentary, hold remainder higher then to Reserve of expectations the are rates XXXX, rates at for their aggressively that continue on least Federal for likely raise longer. inflation Based control the to

conditions. today's Given we more challenging these we meaningfully market as continue operating dynamics, our to to practices market adjust adapt

first locks are closely our mortgage focused buy working begin willing find to are rate even on pricing When in or market-by-market were basis to community-by-community side, we our and buyers to of demand on most higher a sales rates, in and divisions incentives are slow the able downs. markets On with to response and transact.

aggressive As standing of and have other mortgage inventory reductions. price rates moved even more areas, have extended incentives discounting higher, to including

move be turn strategic we we to but rather, in but the inventory. and were our choppy that quarter share their as traction find trend we consumers. decision-making, the ongoing third paces but market although reality the sales gaining into of our are to our adjustments need need incentives the quarter, We've we on protect As absorption slowed to pricing can't intelligently to through and margin is October, The continued This within average, with progressed. told some markets. divisions be proud,

Housing this front against and inflation. center battle in the Federal Reserve's

the clearly second lower adjusting investment. At are adjusting we prices home interest home higher of in we the sales rates sales new in process the quarter, approach desires, slowing, Fed are land With As of options. and the to lots how controlled rates. under ongoing end XXX,XXX response selling we

pace face price, or using cost based we towards our current re-underwriting view we expected achieve whether conditions today, a Given still land more returns our rates. required demand hurdle on the are conditions and with market assessing exceed assumptions challenging deals

As the third a held quarter, lots option end the lots for consequence quarter. XX,XXX the of at XX% or these agreements second via accounting approximately we of we reviews, canceled of in the

acquisition importance $XXX exit $XX spend, spend. but strategic pre-acquisition write of from more actions, into we of the flexibility almost our transactions one million future of pipeline. off these walked No building and deposits wants optionality reaffirms to these taking land land the In million away to

lower being concern the progressed, quarter consumers. rates most Homebuyer third demand clearly the rise biggest dramatic ongoing moved but for likely and interest as the in

there recession loss. inflation, job of or at However, fear including about factors concerns play, certainly increasing are other

understand these have all why the consumers to considerations, sidelines. it moved easy Given of is to

inflation, rates, find defensive appreciate talking stability that, and off people maybe to the people mortgage move near again. are work buy a least appropriate approach compelling sidelines and said what for to is Having at prepared are desire homeownership to the term appropriately still as Operationally, today's today will offer. whether taking need or we more and posture conditions. We that about turbulent when a become homebuyers more navigate we they market stock believe this the

now a me and review to call operating results. financial turn Let Bob more detailed of our QX for the over

Thanks, up I'll quarter, which increase Home XX% active the all increase an good XX% for the dive right average pricing of buyer a morning. was and and driven last in average over our move-up this adult XX% gained were period Ryan, represents billion, price review revenues to so quarter across year-over-year in. $XXX,XXX. to $X.X by There's Higher increase for sale year. quarter was XX%. primarily first as up price sales lot revenues third totaled by improved a was of groups driven sales in The our $XX,XXX XX%, time same

quarter closings of fourth slated Hurricane the storm. to third X% operations -- by last the that our down for increased worth Ian delayed we noting Unit slowed closings due year homes. markets X,XXX in XXX Florida Carolina to and the over across as that a were quarter number were It's the approximately ahead or shut of

In X/X delivered buyers, buyer XX% XX% of changed basis, and the were having first-time were of as buyers with the alignment third move-up active mix quarter slightly our first-time, a On XX% homes our in adult approximately business delivered shift homes were and The XX% the XX% move-up were buyers. is first-time to mix strategy in active of were in year, prior in space. adult. more of time the were XX% first year-over-year

down decline as net slower of The quarter of interest new homes per new year. were year-over-year orders primarily pace from a our from rates fell reported is by significant per orders in the decrease X,XXX in X absorption same quarter month last XX% for cancellations. last in our month, the totaled period Net softer reflect to third in higher with Along impacted sales, a year. demand, X.X homes resulting a homes, increase pace which orders from the third

cancellation for XX% of last third third of which Our XX% in with in year. was quarter and the second quarter the this year the quarter rate XX%, compares

year as spec sales is our buyers among XX% orders by did X% not from and availability the majority the quarter, double-digit move-in our decreased increased the buyer Centex the impact order count materially in benefited a production than XX%. among accounts increase prior the year, these as in quick prior groups. of -- buyers active orders communities. homes in Orders adult community Changes of In while for over rates lower of community by were either not did first-time move-up materially impact

fourth of operated quarter we both count and an XXX the our slower to which X% from new community quarter, from communities, existing slightly consistent During in community Average for year. The is reflects XXX. and previous count the guidance closeout increase with of last communities. average should openings is increase store the up

is backlog quarter totaled XX% same last down from which At the our period end, homes, XX,XXX year.

and dollar X% up average year. prices. construction, our under over of prior year the sold in were of spec. unit which XX,XXX XX% rise to We due our While XX% to billion backlog XX% the a lower, the homes total backlog under ended value quarter Of sales were increased over is with third construction, $XX.X is the the last units

Consistent better made primarily our homes increase earnings serve to to our buyers. with of been Centex first-time working comments inventory prior communities on spec we've in calls,

XX we homes buyer have that close expects start see quarter XX continued to buyer We can for days across all third as in in groups. the continued preference to

end, per we one quarter commonly spec well used our metric were community. At of finished still below

balance we production starts meet targeted production to specs our lowered in production, adult to However, in now with move-up and with we X,XXX production our we effectively of emphasis the our manage to spec spec an we'll compete positioned demand on Having inventories spec consumers. well and within and our our of active achieved build-to-order have markets. dirt universe, level and are believe our for maintain

operations. in Ian getting homes restoration point, and homes. closings we of Florida environment, the rates faulty on power rates, expense appropriately services to be the municipal homes at are now of communities. X,XXX Hurricane new The in to higher to relative impact on repair to and fourth cancellation the communities the current resources last prior sales To and reflects and and the deliveries production quarter we in the while approximately sales of to our being Carolinas challenging expect Based expected damaged have ongoing the limited, guide Florida decrease was our diverted the in

this ASP, quarter, Based and rates price cancellation results. anticipate $XXX,XXX quarter our At the closings reflects through of pricing XX% that on sales the be this dynamics mix expect the the we on to note the call, range in over we be would last deliver of guidance estimate, the on our of all to of to range, we but the in impact we midpoint average homes fourth as best year. up move Please including our provide could current actual $XXX,XXX.

that For which pricing the costs, the into third of demand XXX quarter, the at third XX.X%, increase end Referring first benefited double-digit last increases labor Ryan's and quarter conditions our points to to the existed margins we These prices. higher and show and from represents XXXX homebuilding an our was lumber quarter supported us year. the of opening third comments, back half allowed price over margin and gross conditions gross including quarter elevated the the cover XXXX. strong material basis in of

quarter on in seen during The basis discounts call. discounts closed financing this X.X%. new strength increased is in discounts which only the also be taken to can period over XXX year the the in noting that higher in were homes sales our for QX orders third addition points increase of incentives discussed to in By our earnings quarter. that worth X% demand contrast, It's we've in last

the basis Financing new our historic third X.X%, average. approximately orders last on is were year which incentives points above in quarter and XX

be the are XX%. increase in points our is currently an XXX our lower we to quarter to This last guide. Given increase but to the expect year, in basis represent be addition attract market, demand incentives dynamics from previous pricing sequentially sales, homebuilding approximately would down we fourth in over would the and needed and currently of margin experiencing gross

market reduce suppliers teams trade and procurement partners changing the and opportunities land discussions Given to dynamics, are development already house in our an construction having effort our with identify costs. to

point, business XXXX. to at However, able benefit this our would we are savings in realize any

X.X%. of $XXX million the home revenues. with year X.X% track be $XXX was sale The of company This third or SG&A to our prior in X.X% for remains to In expense or on expense full revenues. range X.X% sale compares year of the SG&A SG&A quarter, of million home

will dynamics taking challenging expectations remain Given demand XXXX, actions summer in demand. to the align that are with of current better pullback we overheads and buyer market for all needed

For the an leverage margin an points prior helped over basis greater of which overhead of quarter, generate the margin and PulteGroup higher XXX third represents operating increase gross XX%, year.

Turning to Financial Services.

Our from capture $XX the lower part third face loan rate challenging to the market conditions. down driven reported which year. a lower operations pretax quarter, is origination continue In volumes totaled $XX by primary and decreased quarter, income rate business extremely competitive to chase profitability million were In our of in our Capture business. with was million, for not decline last unprofitable loan pretax the drivers as the but XX% the compared per quarter be mortgage year in XX% seeks to income. last

an Our tax third tax expense for which rate represents the effective XX.X%. was $XXX of million, quarter

August Act which enacted net income total, in prior credits Our Reduction as was company's taxes this quarter third per share. year. that reported increased $XXX quarter net the were part for third extended was $X.XX $XXX in the of to million law federal $X.XX million per or Inflation year of In The or the share. into PulteGroup's energy-efficient home include income

In for X.X in which shares of of have buying of X% activity, shares the million $XXX months and the per $X.X of the of we price third the quarter, million. or land million shares first an we XX% share the repurchased X quarter, in back our with billion $XX.XX development for at Along buying beginning $XXX approximately average continued X% common another stock, was outstanding of assets. outstanding Through year we year, repurchase share. the the for our we existing land development invested acquisition had the or of

are based on in re-underwriting cost discussed, we Ryan land pace As every response price, transaction and dynamics. changing current conditions, to market

third to to due terminate. down from and approximately was our getting the XX,XXX year lots in our At continue long-term XX% ended goal the second XXX,XXX quarter deals lots XX% end, to large part quarter control, this work pipeline option with which total land end under of to elected the We quarter via of toward of the of is XX%. to controlled we we

positions While we rates exceed have still we we control terminated achieve a or required to number return. of transactions, there have our project are that land that under of

be As $X.X close we investment transactions is result such in our land on which guide. with in year expect a line currently expect and full to prior to approximately result, our billion,

drop currently demand the and own impact on spend Given land the year. change buyer our our the in will inventory, turning land we resulting of materially that expect next

development Of land of for by drop expect While of assets. we land billion $X.X approximately in estimate we billion. to process, that this spend preliminary upwards development planning that spend, and be $X.X acquisition are still X/X the will our is in existing the will XXXX

acquisition We earnings planned next will provide on during year's our and development call. QX more details spend land

We ended facility. $XXX $XXX on cash million with in and quarter our the credit revolving million had drawn

as in inventories under production land Hurricane our drawings by closings development our the an facility driven and and spend, the we house increase in were to through Our homes acquisition revolving Ian. credit primarily delay move related

ratio quarter end debt-to-capital was Our at XX.X%.

orchestrated objective of the the rates price and Fed's market. negatively impacting the interest the in in are terms up Wrapping slowing Federal Reserve by higher being appreciation demand achieving

confident through phase tougher, this housing the ability our competitive While to in and cycle. PulteGroup's work position conditions gotten of successfully in am I have

turn Ryan. let back the call me Now to

country, in still better press Looking where in this at release, Southeast. that net and to orders the were see although lower the a affordability. tables markets you Florida, we outperformance relative can new are faring morning's see we basis, our in the continue buyers can on Texas Generally, find year-over-year across

markets pause price likely plans. continued we rates to in buyers appreciation, prices more even gotten in rates spike and conditions difficult conditions third have October more buying pushing mortgage western force their X%. mortgage with clearly experienced higher our the challenging softer contrast, the demand in are The now selling as that have quarter In generally and into

Running is part homebuilding an a cycle the economic complicated, how this of to company during leadership we are team fortunate business. but that an operate experienced knows have to

a finding areas including community at where We action impact are of critical can to level we price the taking sell business, homes. the

sit We but we can backlog, inventory. to will on do protect won't the we best

we the and With and are home demand with aligning of to effectively, to to the remain our sales right meet model. compete committed build-to-order of level pace inventory ongoing starts

We no to we acquisition. on that or will cancel the for away. then approach our deal even months walk longer years, It's remain disciplined hard but land worked land in if you've a to is pencil, return

with suppliers evaluate new dynamics. to our changes will We will and current partners construction work and to current and adjust adjust given costs expected continue in -- to pricing we and intelligently market trade volumes. And changes in overhead spending our the

For all on we the I constructive defensive demand. actions housing remain long-term implementing, are

or way housing industry, be consumers swing the positive. Federal X% remain that confidence the for back go market. or if doesn't a Reserve a if If long will the dynamics get in While giving for just stock we expect enough to market coming ease, pauses into the towards quarters the difficult inflation might to single long-term starts day

stabilize, homes, and intelligently to deliver our managing investment will high to we aggressive be in returns. sell efficiently conditions to run operations, for work land business wait manage we While our day-to-day

I work Ian. out in by tremendous our delivering Hurricane impacted want our want I recognize third their a quarter. call teams to to for also employees great

and each serve. the tremendous you You taking work have care communities done other of

retire company, to PulteGroup on Chadwick, questions, want and Board over wishing the the call years. has best to has Chief retirement. instrumental has with Before President Vice a in release I his and in After in career we I year press success career organization I our amazing all announced an the John a quick Executive to company provide speak the John opening plans been our our in XX-plus this second its issued entire and had comment with our know morning. XXXX. Officer, Operating for John

replace to XXXX, as to Director ago years X, increasing Vice been Jones, Operations series Field January including began Division President Chief country of effective our in President expect area. April President, so will career managing John seamless field the responsibility, the Senior his Brandon Operating has of Brandon Pulte Area construction the Vice his a new XX positions with into Arizona named named Brandon of role. has Operations, a Senior operations John of held Southeast next several Officer. and the XXXX, markets in Since as transition year President in of throughout has Operations remain assist company been being and changeover. our of through with I

have PulteGroup, over built and to partnership advancing within and I bench I deep years. have forward a Brandon fortunate the and talented look are to great the We

Now let the Jim. to me turn back call

We're questions Q&A. to if you again ask possible you you. We yourself this And so to explain that Thank time started once the questions, call. get limit one we we'll as questions for follow-up. as get now, Chris, will many Great. the during Thanks, open with one to ask remaining Ryan. call and to now question how prepared can of

is Carl first Reichardt BTIG. from Our Instructions] question with [Operator

starting it's you you incentives can at pricing be pricing seeing you bit markets little talk October, are you and and a a doing you're -- little where you stabilization some that, little what Ryan, certain where least saw on Can absorptions? of some might to mentioned expand traction. sort a in have in of bit bit October and that

this Yes, Carl. question the I morning. appreciate

were X things As buying through rate financing-related our I on, early were that mentioned worked the my at sub-X% felt that prepared provide to some locks, we've largely with market incentives nature. the traction rates over in to interest with We even in incentives, the when that sub-X%. could aimed rate incentives. changing remarks, conditions on last able things were were And especially of get is early X consumers, you we that down, extended the we months, cases, getting

pushed up rates be range, have less those X% the into things As to effective. finding we're

majority we what the so And our pricing to really are. energy market we've believe of focused on current conditions

drops. and rollbacks price So price

inventory We have to but those, worked best the strategic we really maintain protect we've market. about, move feel I've important talked share in market get worked can, in the as backlog we've to to it's and hard to so as but been that Carl, we continue to

seen to X that It's some get over weeks. really those rollbacks the X traction price we've last

that And it's while so we're with we are encouraged do the seeing. we feel activity tough,

little averages All compare segment what then and currently talk you can by to those can right. a And are? bit might rates your about how buyer long-term

have of that XX cans Yes. We versus months where seen detail, to we cancellation it's churn in were folks rapid been a bit little don't a and give longer, when we XX ago, of typically change little the have signed. that seeing days. backlog is What bit increase they Carl. substantial with a X for and rate bit have level that little a were we from What in we is seen more

but little think a bit have we're of bit of surprised we movement by in I a that at end longer. been don't think that, the seen So people little the that have I day, backlog from

buyer comment and one active to not have financing. trends continue that a seeing can the support would seen I been the over consumer, the offer on as to Carl, heavily today is that's lowest adult we our that's that. of historically dependent that, The consistent years, out we're That's rate

next is from Kim Evercore The ISI. with question Stephen

actually related your predict. you going tough your the I are, light of question in quarter volatility been Good might to just with tremendous at mortgage of in mortgage you drop point, it's upward there's the obviously, couple rate what But they strategy -- that a job mean, a last to months, seen. of the over strategy volatility in in treasury to the market. we've tough direction. the that the ask being some thought rates Wanted a a to see spreads lot XX-year in

to what that, that you're I ready but happen several months. next was for to degree don't assume You it if were in the want curious to

of So the have you plan you low say? do big buyers but qualify let's had Do see a the in And to event drop, sense how who be drop couldn't be? marketing a let's mortgage into you Xs, do say, a you proactive rates have back rates list if X% today could you lower list can give that might us rate? a for

Well, really -- Stephen, with we've or hasn't of working even focused marketing basics changed entire challenging market let me always times. a start that maybe sales and these outstanding just that saying on good got lead in team market And we've times more has got our funnel. the

our funnel, to out in I'm ability get ability sales and to our do confident messages that. to relevant timely very our So

with we So see maintain really drop. and local are banks out so messaging and emphasize I -- with to sales local buyers to to if well push at the we folks rates we're relationships professionals our and fortunate interested our let know the very lead can right know a level. as our that get personal with

I corporate got also sales the marketing So local big platform, of our there's ways the of relationships multiple kind but professionals. bullhorn you've the grassroots with think using

them. fortunate if back, were be any Maybe probably machine marketing to market we thing is the so of itself, we'll I see just of come think the think the rates last I greatest

ear people Great. Hopefully, ground. the Yes. have their to Yes.

your your you with? figure can give of I homes per And Secondly, start and production. level Could to spec your or you then community, us of the number bricks talk homes I'm sticks construction, under look sorry, community. have inventory specs -- total about at your we levels per when

I is pre-pandemic specs. -- math pretty higher that's running You you than at intentionally right, at my were X.X% also what more doing significantly you're if were if but

could community curious, total of way, we the what the specs this is per is expect by year? I'm that by -- of specs, the end level that the So

question. piece sticks second then of Stephen, Jim give the will I'll bricks, you the and take the and

$X.XXX and another and got in production, we've Under then models we million for have billion bricks. $XXX sticks

X desire our inventory, have of And our we're we've last the then, the spec to about your level on Stephen, to for in as talking the question been -- X quarters inventory better system. part spec more of to

last continues market a to next to XX the that seen in X this are very XX to able has deliver we've days, X months that as preference to slowed the real moment. for Over homes and the

inventory lip In of ] the to spec, system, be. [ and our XX% have that we where our in we terms of is right want is

So with respect to very we feel comfortable that.

to our historical benchmark. Looking at which inventory, community, have per been kind always finished we less home one than finished active has of the continue

feel So with under comfortable we also not that we're any pressure finished inventory.

term, We and positive are to near is that in of see delivering sales which good flow-through specs of rate a sold the our continue are being that real for us.

spec moved to percentage we've last inventory spec more where higher transition entry-level into just years, intentionally maybe that's entry-level inventory put then this business our the certainly, over product, first-time And seen couple the we've of the of last And more communities. thing, you've as our resides. and Stephen, those the first-time of

comfortable So we that. with feel

forward The as relates starts is. and that, of my significantly to that sales and highlighted matching last slowed we're in I we've to inventory, it prepared our remarks, rate new thing, what

we've think we do we exactly how we So to going done we made adjustments of the moment. conditions on what said see based market and were at additional we've kind

Rehaut with from Michael next question JPMorgan. is The

the Thanks. And apologize price incentives to during that start, as did this I a but price, earlier, if includes what were running you missed quarter? percent price of or I end? where sales wanted Great. if adjustments and just And what I as well?

Yes.

our X% on closing. load in incentive third today, the was recently particular So quarter, most

Closing. On

year, than XX quarter but in better the On ran last closings, so on last bit a sales about highlight And sales did closings, the that quarter, rate X.X%. that's What than closings we right. of points third to year. not during this that little up is was the better the basis

is So running versus quarter higher quarter. of second third of closings that that we of in and sales, we year the total up and points basis a this incentive last also in we're up so by had this sales hundred quarter, couple on current that in the over the financing the incentives, talked about load

So flows. quarters over of then that will that influence our as business those couple homes

only comments, price. highlight to addition Bob's I'd that make -- are in price just the adjustments to Mike, adjustments, made as those we base

are Bob those to it incentives And opening as show And normal so have going in We've market been described. necessarily of the load. you new current fair very incentive we've what quarters intentional about communities, just the last the to aren't a as which that for up that there number a we talked such more in is we're those. well several adjustments pricing believe

what Right. I -- that's today. terms was exactly where kind that. of trying appreciate you of in are at to get I I mean That's

the a You reductions kind adjustments. bit I you of to perhaps said, as meet quarter with mentioned more and of price that market and the as trying an little price posture took aggressive I'm progressed, sure

half gross might that, have this or at the in get of that that's something trying of terms amounted you've sense, we assume you see I what So to ASP, actions XX XX, as until of guess, just point? in I to the adjustments And margin year? sense first price percent give over any taken last a those if next the reductions maybe us would wouldn't those days, could

that, Yes, where Mike, detail price are. the behind there's -- so what much it's -- points

some though, pricing. current certainly our see, down for about reflects by average price sign-ups is X%. the can That You of sign-up --

our and were so sign-ups bit a You skewed a little careful towards that. little in matters have mix bit time, more first to because be

down because put varies want a I by on really So by number it market, community. wouldn't x to percent

that the will to in And can where again, you we we some see there come gave, consequence. likely can that ASP XX%. see and it margin at But be guide is you down

of those homes on closed the next for year protect that have question, be a And Mike, Bob to gave not kind then flown the and will adjustments spec than well. into backlog those up homes quarter. a certainly build-to-order made, are yes, for home, quarter, of nature we incorporated into lot on margin work show more also your to If incentives that of the that margin we've fourth likely fourth as in get also the guide will incorporated model. the the That's guide the for and backlog is into Depending was some of those fourth the that it then as a quarter.

quick able give One were if month, that Order by sometimes you trends out. I Great. last to one, could.

mentioned of little a during was kind the as that differences few a rates of kind bit you fluctuated Just there little bit quarter.

trying Just say as year-over-year remained sense of any that that you And kind get of October type a little number well? if of to of a sense soft, as trends.

the month I followed think rate demand heard Yes. the Without the equation prepared in it Ryan's month, movements. getting by comments, into detail you

after in saw you so higher saw bit relative off dip demand. August. in progressed that, we And fence as people a the around of a rates that, We came little rates activity saw decrease in some where a

Barclays. from Bouley is question with Matthew Next

then saw maybe owned spreading evolves you ask speak what's where wanted in write-down, larger that I how of land obviously, to million of about the you deposits of kind the sort market particular the itself. this here, bucket on ultimately, occurring And of $XX you small in the of or But of this risk portfolio? risk and as kind can it think of sort to from write-down bucket? write-downs in do

that. will want Yes. I risk obviously, interesting. We've million, market don't The total money option us call deals. $XXX got, to $XXX tell it, million of It's at predict. around

to as well et as going cetera, So legal, be spend, deposits. pre-acquisition that's

and heard transaction. You doing this say we've every reevaluating now, for a while land us been we're

been a to want on that transactions. quantify the will wouldn't some of will And point we try of it's year, and remarks, stuff from. away walk it. we balance And the made our we the closing there because is interesting in have be lot I expectation that prepared the we for

whether is of negotiated reason is projected answer it our part more next spend go that stuff meets down I table, right? So the year to to to think it's the still stuff land have as internally return harder work, our to that comes were requirements. to because especially in things as to But going questions getting recently, we're some make

to that time, tough news have land had in that XX,XXX through. had was land work markets bought that from had prepared spend have a been we again, we some is, walked point And it good at million. a away if all might in The the remarks, lots that act of and would Ryan's we $XXX

said So lot we million we to a Having having by that, feel development work -- said million the through spend a and oh, with, of $XX good it, that. about Ryan charge. don't way, of $XXX feel land of top on

we like feel So way it's actually operating are. the we

the to XX% or it for pushing XX%. more down. look of to targeted whether our optionality, that at we're teams get market, be We're take We've to look our in time we optionality trying As book. into

we is -- the We'll I bring as to to So each going through I market us. work don't transaction at to guess think want what go.

into Got very margin the I zooming That's then And guide. it. second one guess helpful. the

basis the XXXX. is know everything incentives QX the and is points perhaps margin change I around guide think sequentially. in XXX -- to price, mentioned impactful you down I for more

flow sort there I in given there's this QX sort points curious spec guide. basis just in changes of this happening why of is XXX and you I'm kind kind just a that of these the can bridge if Ryan, said through think, quickly? decline lot that of decline But some certainly won't just margin of QX you us impact to into XXXX,

that I was it the prior wrapped gave. think Matt, and really up I Yes, answer

that at looked pricing we'll specs the on that that in are QX adjustments to Those influencing fourth through active based been we it backlog some communities. big the the that drivers sold need specs flowed have we close are the some in that adjustments still be quarter, as well As incorporates made sold, as guide. what

heavy industry's specifically inventory little only machine, pretty bit is continued production back-end add trades, of only of but a is finished what that production pressure labor trades there's the still for I through with of The not moving load that's our other a the would piece kind machine.

better We that back front-end have it's dynamic as come started that to pull we that are of starts trades things and productive starting subside on front the as to costs work we're to seeing. have given some with ability conversations see end to us environment down, of the to are responsive

Anthony question is next Citi. from Pettinari The with

about you've pulled maybe see slowed think as it diseconomies as has volumes, demand start some level an price you a the base it's scale? a talk pace, see should As understanding to absorptions you lever what And about to market? is floor of maybe is being a we there absorption ideal of maintain before possible and to very dynamic

what going seen in not of created And responsive underpinned XX global we're really pandemic. of go tell last and Yes, view I'll to being we'd we've what market. to as never that positive be and our the as of both by very we're -- heels what we're trying focused in the certainly overreact. housing Anthony, the we're it's than see on return interest not long-term years. that's talked more about maximize and we're some dynamics question, in to, we've would pace rates But the think a a like that's back least see which at to I levers. of take years. remarks, months, We kind on fair for still XX price so country, doubling this unprecedented to coming an really you, Unfortunately, It's look volume had a I we highlighted seeing. to in we've a currently but and prepared I strategic

Okay.

helpful. more or maybe in all? next cycle trades times or some And the of you year? And and decreased, on in a discussions quantify cycle constructive. XQ then which becoming those of times to following your expect Can quarter would just comment on early That's Okay. increased shortening up you your at if the extent

Anthony, haven't we're progress then months, of unchanged with we're continuing bunch with is right some we a X from at running we're the finished see were environment, prior I current in which previous maybe as of highlighted quarter. the still trades. where in to -- back-end pressure times, kind around the And labor my question, seen we cycle

to XXXX. I wouldn't focused see the am production time back teams QX. improvement to There's any too I just in very on still cycle expect much production in claw with machine. our

improvement So more year, of my cycle hit kind time we hope would as get the meaningful times. typical quarter-over-quarter we we're to QX, see starting back some be of to next QX, by QX

the just but supply I'm a better the -- that volume, which in So and beyond. based better the drop become also of to and that, confident healing in XXXX continues on chain, reality can get

The is Zelman next with from question Associates. & Zelman Ivy

walking Is of versus monthly the of people in much in information. sort the an this I -- from to order just a of built in how appreciate getting being consumer back log the that all of away Maybe, broadly function Ryan, colds are and and many equity? payment that speak to how feet cancellations just afford seeing. -- not a function able could has you the you're put already

buyer probably most now do several buyers I we prospective what going get at if And then I of questions in where been look XX% from a has as general pool? see? Like where just Is it's that more you done decades. approaching more? stretch see rates you to lot affordability of it the broadly, are back can't clients, you afford today, prospective X%, mean

maybe So such and more buyers led elevated us that help you dynamics getting here. comfortable to the can us to understand given needs respect pricing with happen what

I the it. Yes, Ivy, appreciate for questions. thanks

deposits absolutely that In that seeing We're And cases, we're confident afford, also terms longer really can cancellations economically but afford. can't they're ton where gotten pretty make sense -- you reasons. for feet walking still no that of that the in seeing, They're don't away colds buyers of get making We're but from whatever the seeing a a of money in into they've sizable kind it's buyers not many earnest that's purchase. just both. psychology.

reasons the significant we the That's or over pretty at of quarters, last change I'd folks why as couple in canceling. noticeable seen mix consistent. a trends of we haven't the been are you, tell a look

on waiting. going to many harder that's with to pool because the engaging people how can I of adjustments, we terms the and that Those it's Ivy, The is industry on are pool. who some even focus think and through not pricing the working into I'm folks people as buyer In to guess sideline more to quantify, fear. less, pool, going just are of afford specifically I'll understandably get is aren't psychological us. attempt They're

way are the directly some that in that of buyer those prepared stability is highlighted I as things I unfortunately don't remarks, my we get we the And control. think through market into back only and

So they think -- we kind of and we've what highlighted are.

just that I taken And could that's land on and right No, you've some to up as second Ryan. on question appreciating now abandonments. if my follow helpful, it relates option just underwriting

because Given lower the we are new the gross forecasted have gross currently slotted is margins are normal have are forward could always whatever but more you're obviously give to you the communities to given a the that open? talking just open, Or would return that Or environment? margin could hit qualitatively with not be requirements underwriting point? on that be you yet currently be pricing much that returns been to pricing new on a achieving? So even us at there direction? margins with should moving communities you're normalized risk some expect than we below this been Maybe

Yes, Ivy. return, we've underwrite the never we What is margin. I'd highlight underwritten

are -- the we've compromised pace the to walk that margins screen. that over not kind elected return operated. terms that current so we're in don't and capital the against current deals historical we're and we've that move we've range large, that the by have ones using we've elected forward environment all to meet with, the to meet that on away and in And used. that. on so price of grid board we our includes typically invested screen screen The using continue And from the always is risk that simply historical of and return-based screen The that

question. you'd in Ivy, your Bob, anything of add helps underwriting? in And terms hopefully, of of So kind terms that

next Lovallo UBS. The John from question is with

I you capital? near-term is in I buybacks? one or where to be spend, cautious aggressive more prudent aggressive intend could land you is on on to which pulling clearly more do view. on the the allocate buybacks mean, be stance, first our mean continue just given back The

exercise interesting It's have. this go always We'll we exact same the highlighted in through call. we Yes.

We which we out a are We're and pay that first line today, our last on we'll quarter. is -- on the borrowing out bit started revolver, little foremost, off. actually

order. is that to that able short in do be expectation we'll Our

several next what look at what always Then we the do years. is

be in to is point down, and we'll a we not investment it's usages think and spend and in going So time, capital highlighted building land. backlog. be our monetizing We've that consider we'll generation

we're we positive. cash be going think to flow So

And at to capital the look base we'll got we've and what do. so that

choices. We our -- continue obviously We can we have dividend. we'll at can look will repurchases. share And

on also basis. leverage. Obviously, be little in more our attractive rates pricing will looking We makes a a the at run-up debt our

those at Not and cash going through us do time, market in the but things. equity, other -- to of to anything, same all But suggesting we're these and it's should and we'll consistently see -- things use you at for we'll look consider look I we expect any think can time. at

overall That's kind Okay. of the communities those just then openings -- given open? back on land and Are general, land And slated actually thinking demand back you your helpful. were community that are you spend about holding pulling environment? now strategy just to in

open Not We're brightest encouraging. the communities at in which is some forward we've and opened really of those that best fact, And communities. with of recently our performers, some and all. have it been to move continuing

the pricing We've interest referencing got making there's very great lists X long for asked working little time comment have to I sure good for good a that think John. we've ago. These been One. and communities bit we're also marketing been in market. was reasons a that locations that that are back that, the deliberate current

traction in time a opening, seen the we're that new do making there. all value, we've light we when especially when we're sure we're Now environment, we that current and but communities, open of the opening up at

So long They as well. pretty time. that attractive for They pipeline a were in our right. bought a at developed arguably been have today opening were are cost basis communities

And continue to can margins those and returns nice we good importantly, out communities. of deliver so more

Markets. The Dahl Capital from RBC is next Mike with question

you of terminology questions versus issue or terms qualification Ivy's My of can't inability first know talking "Hey, hearing could versus outright how around question, payments." x percentage I I you're maybe affordability Ryan a, cancellations field if but challenges, dollars your seeing it's don't from Bob, just maybe buyers, a the a -- the -- in what a but you're as around just follow-up in on outright cancellations address and prospective or kind maybe I can incremental afford of to month impact qualify, actually it's qualify

-- at What that. I Looking. to is percentage. to on have you you running consistent again, back it is could don't to that tell we're a get I going

We haven't up qualify run in or seen percentage just the who don't a rejections. outright of people

my the So percentage -- relative head. I is, of know top that off but what don't the of

whether contraction you've results exposures terms are in of then positions, land at you And your obviously you obviously, seen everything across some some periods. maybe hit, point than of cycles, some or look thinking the when not past at through in builders but others. you at Or harder it. your of pretty provide Are sense? certain of markets When that? markets there's these if color can where other getting evaluating is makes during regional any market Got Okay. things exiting like you're markets, around look diversified you something the as in relative

we've more They be along affordable the confident also good places are are Mike, X are into new Sunbelt. climates. those we feel nothing's last that recent we're there. over places as entered in really A were kind our that tend that have the to the places locations places are markets geographic go had in actually that years have into entered really as to really job in there today changed No, lines. attractive we we been growth and about There those made of attractive and when predominantly generally lot several of to years, and decision the We've footprint. X

a our new think strategy expansion market we sense. of ton So makes still

don't additional sure. other color add really our well are of remarks. in existing markets, are my that highlighted versus markets toughest I to terms the than In The not real wouldn't I I have we're any that I prepared for of geographies terms them. doing happy in the Western what -- with know

I for kind on -- relatively of the that some more seeing or as with markets. softness locales. that's by many of Texas, reasons think relative the in comments just expansion reported The my the been for I widely of on Florida, also touched sources. better lot performing We're a expensive Northeast, Southeast,

with today Wolfe Research. from Truman Patterson is question Final

you are especially a generally started quick had seeing sales, lever nice and if realtor commissions to and pull augment broker homes of just move-in realtors. I'm First, with we've run throughout lower to that first of the 'XX. 'XX help preferred by all part

seeing And SG&A? so, just impact if commissions of So that if to there? increasing you're be could sort what

the when commissions with certainly through be Truman, are kind had and the of appreciate is that same kind the broker think, that realtor to We've We time relators help in our we've view today. a competitive sales We're balanced of office procuring truly position with still into it. our I paid, or commission. market on cause bring a process. buyer --

got So incentive average there as broker unique average cases that's you you as above employ commission see and a there's property strategy but here move may broker have particular of where certainly an broadly, a an to circumstances, commissions. above us a set won't

you. Got

board or up ticked cetera? of generally Okay. et But kind across the bonuses, for industry, it specific the has

I depends it think and it depends on market on the builder. the

strategy certain toward I think above broker marketing average there their largely their builders strategy directed commissions. of part or that are -- is outsized

you're come maybe competitors that So as starting use their seeing to the tool, play. certain bigger you're marketing see market tougher, primary that gets numbers as those into

Okay.

-- you. could like the products. building or framers you negotiations trades any of you Got if -- price discuss lumber? getting any product you traction mentioned earlier -- really trades early discuss categories all could you're But negotiations Okay. Ryan, and with building of about specific And materials, on then outside

in foundation that trades, been trades frequent Yes, of the shell, helpful. impactful tell kind all I up we've our -- more with feeling you shell, industry the the so have been of Truman, are plumbing really and Those are those -- trades the underground and front-end would recent it's conversations been slowdown through conversations talking now. have the with exterior the but right

tell so doing evaluate be of kind would look I their like. productive what kind you, engaged that the conversations. like they And business and efficiencies volume of We're would in and are they what to situation as

out That's We pull our that's organization, need to generally. trades as our well. and of housing cost

are that I can all appreciate think materials inflation, labor. those seen and we real. in costs both unprecedented And we've

in out we're I a approach so take of try pull the but system. to And think pragmatic cost we how trying very to intentful

Okay. the quarter. Got luck upcoming in you. And good

remarks. That it any concludes our to turn I'll for session. over Zeumer closing question-and-answer Jim

everybody's appreciate today. I time

of over will through call. to So day. look with all questions, to not you e-mail. the be available our the we get the we could Outside on remainder we'll feel Thank next Certainly of free speaking or you. but forward that, call

Thank Ladies and today's participating. call. for gentlemen, you concludes this conference

may disconnect. You now