D.R. Horton (DHI) 18 Apr 242024 Q2 Earnings call transcript

Good morning and welcome to the Second Quarter 2024 Earnings Conference Call for D.R. Horton, America's Builder, the largest builder in the United States. [Operator Instructions] I will now turn the call over to Jessica Hansen, Senior Vice President of Communications for D.R. Horton.

Thank you, Tom, and good morning. to fiscal financial XXXX. call second for our of quarter to discuss results our the Welcome

Reform Before forward-looking by Litigation statements get as of we started, defined the today's Private call includes Act XXXX. Securities

there not different. All of any D.R. believes does Horton available D.R. any outcomes are reasonable that Horton D.R. this are to and publicly is be based Horton such assurance materially Although no not to date conference statements obligation based call, on statements or statements. undertake on the assumptions, forward-looking any revise will information actual upon update forward-looking

investor.drhorton.com, Additional to its which Exchange with presentations the website is your report call, After performance plan information Form recent on section data supplementary that Commission. This about Horton's Form reference. post are filed at morning's on file found factors on and could of will site Relations most material under changes annual both week. we and and D.R. can in be lead next News XX-Q for Securities this the quarterly Events in on our release and to Investor we earnings Presentations XX-K our report contained and early investor XX-Q, our to updated

the turn Now I President Romanowski, Paul CEO. our over will call to and

President Thank on Operating Chief Officer; to pleased this Chief and our you, joined Officer. Vice Jessica, our Financial President and and Vice good also call Executive Murray, be and morning. I'm Wheat, Executive by Mike Bill

$X.XX delivered diluted results, For share. quarter, the highlighted by Horton second per earnings of D.R. solid the team

a XX.X%. revenues to increase pretax to with $X.X billion, Our billion consolidated on in XX% of pretax profit margin XX% income $X.X increased a

for and on the months March Our ended homebuilding was XX equity was period XX our XX.X%, trailing same XX.X%. on for return return the inventory

still good affordable share despite as in limited, are orders demand new is for cycle our selling supporting demographics at remained prior inventory during and existing market quarter and spring increased Although housing elevated, homes normal, housing mortgage first demand net improving. homes XX% and the challenges. rates favorable. Homebuyer remain the year price supply XX% well to from of the affordability the continue quarter interest sales and we our are points the inflation and continued far back been positioned consolidating our to average construction turns With has are times XX,XXX season thus inventory, both

continue to cash homebuilding consistent, flows produce capital returns. on to Mike? efficiency operating We focus and strong

$X.XX $X.X for share $X.X prior for $X.XX Earnings second XXXX billion per was quarter to the the increased to the consolidated share quarter in revenues on of income Net quarter. per compared fiscal of XX% diluted year billion.

Our second $X.X homes year. on compared revenues sales home to XX,XXX $X.X billion increased to on in closed the closed homes quarter XX,XXX prior XX% billion

closing from Bill? prior price for quarter. and flat average the year was Our the down X% $XXX,XXX, quarter sequentially

Our net XX% year $XX.X the sales and XX,XXX homes XX% orders billion. order to increased second value the increased prior to quarter in from

Our cancellation rate prior quarter the down in sequentially XX% and XX%, from the quarter. XX% for year was

our the second sizes mortgage the up price Based such and elevated year-over-year. in homebuyers, was near up and rate of and affordability address are these net reduced number up we quarter at active average up selling levels to mortgage current for buydowns prices X% the sequentially conditions was we homes as rates, incentives incentives market in have still Our using and XX% sales on necessary. expect remain where our prior communities term. sequentially The year we from X% $XXX,XXX, X% average of the and quarter. To orders of

and share. to and sales maintain sufficient primarily meet will continue homes start Jessica? demand to market aggregate sales Our homes, be under construction continue to and we from completed and inventory homes

per costs square from while the both X%. Our quarter essentially the was lot stick basis sequentially On home up in revenues were XX.X%, basis, points the second gross in quarter, foot XX a revenue flat increased sales costs sales profit margin and December on and home brick quarter.

Our strength spring for interest season changes home fiscal demand sales gross rest and margin the of rates dependent the to the selling market of the in during addition be full in conditions. XXXX year will mortgage other on

the to expect the our quarter, home quarter. slightly Bill? For better second third similar sales we or to margin gross be than

year. in basis homebuilding a last from by the SG&A revenues, percentage expansion year of to In primarily up the X.X%, as the of last down the SG&A of XX% growth. the XX second period points our quarter to revenues our same expense and homebuilding XX quarter, homebuilding operations increased X.X% Fiscal points was prior year, due from support was same SG&A basis year-to-date from expenses

while our SG&A our We adequately control Paul? to will business. that supports ensuring our platform continue

started completed up were X,XXX homes of unsold the quarter total XXX March had quarter than homes in unsold. our XX,XXX XX completed We of greater been a XX,XXX sequentially. ago homes and X% X% the of and Up year months. March with our for homes inventory. at were in from which ended X XX,XXX

cycle quarter, historical from closed X months of homes to to our the average For in the time are first complete. our slightly we back quarter improved construction second and from we start

and We space inventory sufficient will continue and a consolidating maintain homes Mike? to start market demand the meet share.

party. XX% approximately across build purchase others. our were relationships this on controlled homes We closed consisted lots at position lots, land to of country and Of maximize contracts. of allow through on homes the the more relationships March developed third owned focused remain XX% were us lot a we homebuilding lot Forestar which with Our XXX,XXX XX developers on by developed XX% to were a by quarter, returns. These or

is our key efficient capital a to portfolio strong lot flexible competitive and Our position.

lots, in and development totaled investments billion. homebuilding $X.X quarter land second Our

$X.X of for development for billion land consisted $XXX lots $XXX quarter Paul? this investments for acquisition. land Our million finished million and

multifamily $XXX second the revenues of and our units. from on quarter, operations sale single-family income rental of million $XX X,XXX pretax homes rental of In rental the generated million XXX

and multifamily rental XX $X.X was billion single-family March billion, at $X.X which rental $X.X of inventory of property rental billion consisted properties. Our properties of

Based rate not pipeline are separate capital volatility be guidance quarter rental timing uncertainty of third segment annual to second by the our projects, similar to closings due for market the the our to expect rental we our providing current on interest quarter. Jessica? in caused revenues regarding fluctuations. the of We

reported residential our revenues $XXX for million income development lot majority-owned of quarter sold Forestar, pretax company of with lots the X,XXX $XX second million. on

to purchased the owned block second offer of are of Forestar's position million controlled owned to right quarter or lots first we finished and D.R. from were a XX% of Horton. March XX,XXX in contract lots. was at XX under subject lots with $XXX Forestar's the Forestar.

ratio end net of debt-to-capital million had quarter of Forestar XX.X%. with approximately a $XXX at liquidity

with uniquely the in strong of lot to market remains on and positioned capitalize next relationship finished to aggregate the significant Forestar and supply lots with sheet, few industry Horton. years shortage the over Mike? D.R. balance its share homebuilding

million a second Financial in on resulting Services of earned $XXX profit pretax of $XX revenues, in the quarter XX.X%. income margin pretax million of

During and of buyers. homes mortgage ratio had Mortgage loans for of volume. and DHI score and the our to Borrowers VA homebuilding originating the with our company accounted XX% closed for originations our second the average financing XX% handled essentially mortgage average quarter, XXX all FHA operations, loan our by of mortgage company's an related of FICO loan-to-value quarter an of this company's XX%. loans

quarter. homebuyers Bill? company First-time closings handled the XX% by represented of a this mortgage

sustain growth focuses capital approach produces and opportunistic being returns, that cash platform consistent an flow. to disciplined, flexible and operating balanced on Our

We the maintain which changing leverage sheet continue with to balance a market to liquidity, low and to provides with strong significant adjust us ability conditions.

XX, $XXX operations liquidity, $X.X first year, the million consolidated was months of maturities billion million, and had of in cash credit we with of cash in used our consisting of At quarter of totaled XXXX. billion During $X.X operations $X.X March provided capacity billion our consolidated $XXX cash. $X.X the of no senior billion on Debt facilities. X fiscal our homebuilding the the and at end available note of

XX% consolidated was leverage year net at consolidated Our up March XX.X%. At from $XX.X $XX.XX, XX% March was was was per billion, stockholders' value book of cash share ago. XX, XX our and equity a leverage and

our our was For the ended consolidated XX, XX.X%. trailing was assets XX on return XX.X%, March return equity and on months

During paid We level the million. dividends for stock we repurchases totaling $X.XX during were our per declared quarter May. Board million, shares million has of repurchased quarter, be $XXX common X.X million Jessica? the same $XXX share a and year-to-date our and at the dividend of paid stock to in cash $XX quarterly fiscal

to For the and revenues billion third generate consolidated XX,XXX to closed homes operations XX,XXX we to currently quarter, homebuilding to billion the expect homes. of of range $X.X our be in by $X.X

third approximately gross financial XX.X% be quarterly margin to homebuilding and We as in quarter, margin to services income XX% approximately XX% approximately a of revenues of anticipate home profit tax quarter to X%. sales around expect in expect to XX% be the We and to third we XX%. percentage our SG&A a our pretax be the rate

XXXX Our affected full rates in meet market maximize pace conditions demand year efforts addition price by returns. revenue to our fiscal changes by be and sales will balancing pricing and and in margins to to mortgage

expect to of full to billion consolidated revenues $XX.X fiscal approximately the XX,XXX operations now XX,XXX in XXXX, of be homes. $XX.X our closed to we homes to generate the For range expect year billion of and by homebuilding

dividend continue in of full our expect for plan our around now from approximately our flow billion purchase $XXX stock to operations. of approximately of common year, payments cash to We million. homebuilding generate $X.X to We annual billion to $X the addition

for rate in tax fiscal XX%. XX.X% the range XXXX income to an expect now we Finally, of

are our liquidity consistently leverage. while grow We cash increased operations balancing Paul? maintaining dividend paying and repurchase and priorities conservative to shares flow our strong utilization

experienced and offerings. In product footprint position closing, teams, broad diverse our share, reflect and our industry-leading results geographic market

are and share. sustain produce while these ability returns, of key platform our our operating to growth flow, market continuing aggregate to consistent All components of cash that

and you Horton to disciplined Thank enhance D.R. trade dividends returning entire which consistent through investing of long-term will approach shareholders real agents hard a to capital of to remarks. and We estate basis. company, for and to our includes our your prepared share partners, focus developers, the repurchases capital on both concludes the value maintain the land vendors employees, our continued work. This family

will questions. We host now

Carl [Operator BTIG. is Instructions] And the coming first morning question from from this Reichardt

about to important and wanted higher experience that you in parts It's seen increase inventory a long some coming in of for insurance there. know obviously are talk market, an pretty bear we We've existing also market all, costs to I there. the Florida. home

performance your Florida in within So about to there, bit how detail maybe could some you a and markets various now? you the right it talk feels little

rates. been lot coast of still tied where the for Florida certainly feels good There the homes stability to a insurance of sell insurance off allows building Carl, and to our rise new construction us. has in those are some most rates. in And for news we

and a good reported high as you coastal increase sell, seen So we where wind growth see, communities in immigration and the job for seeing may zones, still the the significant haven't the throughout good homes market. Florida along

we to across pretty about market feel especially Florida good our about and the price Florida the points So affordable positioning more peninsula.

that a operation. you sized single-family more curious the then and markets got I'm for reasons some And The benefits fairly think, and for significantly multifamily in for multifamily and rental. there, in in that of portfolio lumpiness with is scale where single-family business sale good space, you've the about follow-up, homebuilding one the playing operations entering I overall

think maybe bit business. big markets margins? a sort about or you those the of little element homebuilding And vertical in costs overall if lower businesses, So you that X expand operation you're the are where to particular for of seeing on the better

buyer One there's to use. drive of to its is I factors of business. convert land, rental land big a that more of push into better we're and into better able that X think we're user the final a our land ultimate the

cost the over parts building a influence into structures on more we've traditional go the multifamily sellers So for operations some of lot bigger rent, to the purchase multifamily in of counterparty pieces land a developers. than we the multifamily ability structure, a component seen and our the better process. Certainly, from sale. build coming as deal we're of the because side probably efficiencies vertical residential much gives traditional and the in us can for as the with well a That as economies that to own buyers within cost entitlement we're

question John from next Your is Lovallo from coming UBS.

although first in CPI. since lot moved a The long-term of CPI mortgage XX rates market pre -- only given basis rates expected guess expect point any one, the given or by the there's basis your would is, about in you impact in demand concern change up the activity would be or have I this seen the obviously, points than there I stickier you mean, to any or move see question rates? XX incentive

move that activity to portion to continue We have to done. on incentives that the continue been we interest market. rate and to big what the has and tend market expect a stay We meet drive with focused we of buydowns

X.X we stickiness up up increase But the market the remain market. be their range seen near X and with you've to we about today. today, expect rate especially will rates, levels that buy-downs to as incentives in elevated in So rate X% stability that below to point move in do

Understood. was the there outlook some that quarter some about or should how midpoint second And expectation pull the -- by extent. but at about deliveries delivery here conservatism at the raised I versus the is this X,XXX units guys slightly can in maybe mean, outlook units that? pace there forward moderate we in Or quarter? maybe you midpoint. in some to think mean I outlook the your splitting here, by about X,XXX the beat

with a number of Great We quarter specs. did significant Yes. John. completed the into go question,

and XX% houses. actually of our closed we sold intra-quarter So

percentage And about within quarter. a to sold be typical our the range XX% be same so is us. that XX% very homes would and for of A would high closed

So X,XXX we over still completed have specs.

we're and our So allow think see the the historical at we I quarter. terms us higher forward did by little X,XXX. X.Xx our up a saw of be guiding that of probably that may do term. of gave and for units beat the range And the range high in by of roughly confidence our historical X,XXX not end demand It than that better to to intra-quarter we're norms. bit back this than our if what would end, we turns not activities the XX% high at now low pull it be you'll to the then of normal, But stay inventory a end full it just

scale good very opportunity but necessarily take feels same to next quarter. there's of for don't about the think beat So the an that ability range up,

Evercore question is coming next Kim from Your from ISI. Stephen

your far. appreciate bit more guidance. little guidance I the light curious cash you if all quarter. Strong was regarding thus a shed I could flow

$X about do but mentioned specifically, billion you from other homebuilding You segments. have

inventory XX with then call rental was Forestar I over rental you have in You right months relative $X to or from Where go And should to curious particular. have that's homebuilding. to specifically about we do now. have the you an rental from billion segment, expect in of And $X.X think it, billion you going value let's or kind this so? that as next, the offset year Forestar what

years. been On our us because ops. the guiding which generator flow portions cash couple over flow as well, the that consolidated have of cash invested Steve. we the to homebuilding the feeds has flow operation have Sure, guide, we primary that of rental been from for of And to cash cash last into

for years to do expect I of flow is in that on cash But around some there the we probably flow. guiding year $XXX would flow the building full So future this same in our the year. forward, platform our homebuilding consolidated. number narrowing much rental billion or $X fiscal offset moderate We're start expect 'XX. year be to as homebuilding cash cash would of consolidated going to versus home expect starts this to we billion million range, to and the $X flow to nearer the our gap beyond that growth cash ramp

further bit And to We [ the asset from platform. today. expect growth that primarily will grow see moderating, grow year, still multifamily and X.X this rental ] platform next do a slightly so at we're the with year

out 'XX platform years. will couple more elevated we're of start probably grow, continues well. over But as that level to and multifamily starts the of Our late to building moderate a last

cash into and we 'XX be 'XX. increasing on flow consistently for basis so here the consolidated a into And from to prospects see do

think you helpful. the to leaves And and then Appreciate across uses as -- your I growth of respect about for with That's that. Okay. you opportunity cash, country always, talked room there. some the still share market

ask so wanted to And community I your about count.

builders a for for of how lot into count generally You month-to-month, much next X bit little up in growth can community of further area you a have where X% I'm of in were provide terms and year growth. And you target year-over-year. there's That's curious expect count struggled. opportunity your the what if other community year granularity an up this or you XX%

Sure, several for year-over-year count for Steve. a on up percentage basis community We've been quarters. double-digit now a

have quarter So and we've continuing our we've until continue a probably to expect got that and drive growth, cycled community. of would each as than at least to position so drive at and lot or moderate rather another a more of lot shifted look that to we our coming to have every anniversaried and overall bit. just growth to community But absorption future from to the positioning count the out for we

see I double-digit percentage grow. year-over-year think do or So a our continue at It community you'll increase be just continue here probably in count to the to quarter won't two.

Okay. Got you.

kind of like talking right? rate of kind is So more like what a about, single-digit you're high

to mid high. Yes,

Your next coming Barclays. Bouley from from question is Matthew

production in which I forward. at pulling is wanted margin? back said -- the you little mortgage dial it start Perhaps would assuming way, we price at maybe to where mid- starts? there scenario we mortgage around another on all this bit a live back of Xs there pace Is supports going environment. high would to a extent consider Or you a rate rate or kind to ask

actually could responding I incentives environment to with of upon limiter based a seeing offering. Traditionally, for and several lot start. to in a supply on and start current had past rate the what think the that periods we're market we're going the in they're the of mix space what manage buyers interest we level we've at terms we're community-by-community how

lots we're the to and So starts able brought market. good bring production as into online, we're developed seeing get get our

quarter, the if into started continue absorptions probably we in expect quarter sales. we to and just that think June continued the homes under we see I and XX,XXX as

And always in like driven you the at so that market across sense returns pretty over disruption it's with to to maximize be for individual solid, XX% makes just the to, back basis take our level. lot alluded it very see it in and the is as a our going most have finished a starts, to gross community Mike a what currently and community-by-community on on broad-based margin big board position would pull based us

system think big of through year. any starts So see big move another remainder pretty our shocks in expect would we right as I significant to the we be the rates, without now, a sort to shock more or of the or consistent

Got it. Very helpful.

Secondly, and I around of wanted first-time in backdrop? your given particularly incremental your DTI affordability to metrics, credit sort for stress Are signs ask you of just seeing mortgage applications buyers. this any

No. We've buyer. solid of qualified seen level pretty a

and people's meaningful demographic consistent FICO this And been seen not store we Our fluctuation inventory remain and see and to X.XX%. still out ability at was to to We really of have and the demand, significant pretty average have strong with sale qualify. impact they've homes buyer level but available a our in on enough low backlog last we rates, purchase there. quarter any

is question Michael from coming next Your Rehaut from JPMorgan.

Good everyone. morning,

concerns rabbit January, Just know And have I'm example, love kind February, demand sales take come don't trends, months. demand type of wanted we But the with for go than market, that. bit door, typically little just some of any changed over March in March of far possible, change the hole progression. more the I'd maybe And all how incentives to the too in month-to-month. you around has the how I your the the maybe on of a last the down, trends drill with March, the your rates a if in are that, obviously, terms in pace in marketplace versus sorry, of down bit couple on in if April what February. at -- the and heard We've saw moderate through expectations? April little

and into December, buyers. say, times, seeing, better call still seasonality normal bit you the an many in when January. saw we first of Sure, were little demand into than see I'd we say, then normal period of on that for see at January, quarter January a did we Mike. in of talked in We rates, adjustment better a probably seasonality had in volatility we've our fiscal our And as sales terms continued I'd lot there's than anytime end always

volatility And so rates saw March. in in we more and February

intermittent and look where But periods were pace. And which the we at so X buyers weekly affect sales are the does very stabilize with us for then to our we saw positioned year. sales good or overall seeing that's seen in having we've to weeks very our adjust, some last guide like as over a increase so, pleased and plans line that that pace

with times another be and week, has Jessica said already, happens going rates we've to the it's couple a as in going the of rate seen forward, volatility. of to forward, Going what period subject in the last market

that to I continue we'll adjust So think see as it the rate the market adjusts to and we'll environment changes.

than all to at standpoint, from mortgage just third fiscal expensive gross If Bill. in maybe I go Great, terms And more else but maybe that an surprise incentives, delayed there bit those -- of little last impact little of all of was a more your like we points it higher equal, you more would buydowns. quarter, guess seems if warehouse on impact buydowns quarter, of guidance the back along of lines your rates a that. from impact Appreciate to quarter. Wondering, impact basically at of given incentives, fourth buying stay having incentive being and the rate if that be some some costly just obviously, guidance of of out on kind quarter quarter little I people you're fourth the were quarter? level in and and the delaying for you went the equal, looking margins of seen the perhaps the a And higher incentives calendar third haven't perhaps a else for. were front the higher the it to rates your than perhaps less back maybe for there's levels, know these

selling the quarter, number we're with a closing gross real-time margin. good intra of homes seeing Mike, pretty now, you're right average that and think I

between other real-time show our and a see faster. Hard rate and unlike lot in think actually with gross margin we're hairs in conditions And you'll I mortgage of of came And in results quarter. see utilize really we so of where pleased QX and But the gross split say, builders, we this a up market our QX. more to our number buydown increase slight in margin. an tick in spite sequentially we're did buyers that, that had the able to up

specific So dependent the for guidance because the pretty without remainder on feels year right the of good to giving it interest us is be now. going to it environment, rate

outside of have Our had still generally we've have brick pressure, out some lot expect up categories go we go some having side. the We're on cost to flattened getting inflation have able would We to but some incentives where down. to do continue cost to offset. need stick to and obviously we categories success still be

solely going wildcard, to we conditions. a going market it's it is really quarters, next be as in about dependent incentive when be the So X and predominantly on to think

to make cost in that extent XQ mortgage the already expensive feel buydowns like is Just have -- to and then, sure rates risen rates rate a that XQ? and you of the those lot become of have reflected more we understand

absorption keep quarter and pace. it along we'll I the and and we We're we we of that going in rates to question press more our more level that manage on the the getting And we'll pace to those really, mean incentives a And we of to and do at continue keep qualified. in would just consistent, the the they rates little look pace are buyers with the to doesn't third downs, that becomes seeing than X% more a market it it we're base. cost need up climb when goes that little I margin our X% increase quarter, then as again, plays our expect to to we'll fourth. if the along buy with see out high, so the want. think, really of fact if stress to returns we to we a our the the on buyer significant move next move they -- if the starts But how incentives homes in that so based XX% the to in see selling see it to so. But market, range, into necessarily our challenge go

Eric Your Bosshard from coming next from CRC. question is

things, I Two could. if

of the was margin a the better. quarter gross created different little was that? that in bit What First all,

I'm assuming you're on a talking sequential basis?

Correct.

Yes.

pieces of increase. up there on And points. XX less impact bit it then bit core So front was basis the just and biggest a when of the a a out litigation forward had about core modest kind terms sequential little just you'll buydown margin little why we because very is rate supplemental an this warranty of inclusive that are of a and on interest in see also of incentive of the we commitments pickup quarter. of Those was put our the kind guidance, X

to rates the Okay. And a incentives quarter the little of and out the the March the then and secondly, but as I you But talked figure effectiveness last comment trying bit, effectiveness you do to just with as through it I'm are just April, about curious different indeed in buydowns. suppose. to if and what moved to relative that just made different. I'm move you're was have to higher, that and relative do closing you anything having seeing you buydowns curious do customers conversion how incentives or behave

at time, in we various we're are rates us very to they front the for Currently, reacting the neighborhoods crafted positively We're doing to offerings have of different. the that significantly out and that the have the and there. incentive are not responding customers anything teams our

we've But in. pretty rates things the as steady. range, and of feel of range usual So no, We I where volatile like now. current good business now, it's right right there's Pretty sort we anything about we're not say to we're seeing want with world dealing been crazy with -- feel are.

is Your Wells question Fargo. next come from Reid Sam from

is a you're might said, the today back on your been to mean here value in pre-pandemic. one that historic a what perhaps engineered I cycle times. also thinking more case made levels than house progress of thing here You have lot That getting I'm building

there So trend? Or term? think of really is be -- state about should the question you that bring lower cycle is thinking really do to times kind we an versus opportunity historical longer is months the steady X

We're there's in Sam. maintain good for a an improvement focus man at home historical pull a and it's what our been and point, back our Yes, the labor house, norm. deem to and up business. we and of believe we And of out building us efficient affordability reach bring pleased you to to extreme upside try more are we're hours to going always be

strive We're and everything stay so doing focus reductions focused that. where for And we can. turns continue the to be We're We here. continue to from our inventory more to on we in down place, cycle process the continue construction reduce got on times going opportunity this counting on to can and efficient back and to significant not to further. we'll drive it to we

kind perhaps a back dynamics a was sequential driven like any on that there also like bit a a bit. in It sequential more or spring? Or touch have improvement? were then And just QX that a dial of of was between there geographic that looks mix on to in little incentives number, function might early bit hear of other and ASP I a little maybe you. bit maybe lift there a little would Got order to context of QX.

that It at sales couple X point of to you slightly The Central be a our markets of look primarily quarters for price and are our a now, which been price points. continued Southeast, South the of quarter. percentage and of lower average continues in this terms Yes. has mix price our when lower geographic

Your is next from Alan Zelman coming Associates. Ratner & question from

quarter. Nice

And just years. more the starting your in bit buyers last I'm the some markets of little are about to resale increased First, resell move-up the And how think have your thoughts right starting market, I'm you're your I entry-level markets on ticking over curious see maybe where of kind more benefited others. when contingent there, up curious, inventories see think market meaningfully any resale I from now? inventory the broadly, viewing type product? there from guys model, really than some uptick you're on And you we're competition to now few a resale, just spec of more in the

I -- especially impact our home point. a with home for it's sales marketplace, of that existing still affordable available the able coupled the But some part, pace price date. that, of the some a than a the at very in the of point incentives we're significant on price think we'd to solve able offer amount that's That, be at we're haven't rate our inventory offerings limited do. little we existing most to problem affordability able don't to sales better to seen provide interest

brokers. know that. heavier Appreciate NAR users still one with it's friends over the early, you And very the Great. have been years. settlement the if on that of community, were the I second, brokerage guys but you then to will,

to thought if And the I view an you them change you've be important given helpful. you any just our relationships buyers communities. think tool have would give as there, bring can Any settlement you commentary curious the might how with economics brokers? the I'm to to

to this going so will very the I We we think to community is with take some work regardless direction play do Yes. what this of brokerage time and mean continue takes. out. to closely

is digital still form terms will going it on also of you community, market. have with are the takes we believe, certainly sure couple commissions, stay continue impact, think But our to to I communicate some through are realtors to realtor of number to some emotional stay going active whatever I the to that restructuring the an close and customers them. ability see years. This in focused make and of we through are reaching the to going terms presence of next over ahead the for that of curve on in we're people stay and lie it

question Your Verron coming from from next Jefferies. is Collin

the seeing. to quarter? start most year? guess cost on it remainder tracking of in you think I the I you're off just recent thoughts lot that said in of the the was magnitude I in the single digits through want low Any inflation the on

Yes.

continue expectation we'll moderate I increases. think see our is to

continuing I what pipeline. current our in low think that is see we in can our current single-digit -- percentage

think then And you getting time or concentrate the that land controlled, moved land the lots as more owned. it's there? that you of That's helpful. again lots up years the runway is? on How on And do of just And model. thoughts much on right light line update of the just on number there any

of right think parties I developed portfolio. and lot So on our we by number more very continue efficient Forestar. XX% now, were our or for to ways a lots is at controlled be to in were look we're looking deliveries actually capital that of and more XX% position third efficient

to and of continuing made that not seek success incremental lot you've we've success, do third And but those every that's we're when more if lots lot a a put ceiling relationships to we on from opportunities parties. work, how can lot I'm progress. what of far a So got take we going a takes expand to day. buy more

coming from from Rahmani KBW. is question next Your Jade

multifamily, you of single-family is terms Wondering investors in for quite any rentals sell rates, aside investor changes a Blackstone, of make you we've leaving and interest example, acquisitions. large to? tone the from the for Are issue seeing of seen what couple appetite the

the those Yes. I being up tick they today. number in parties where in out across and would bit a in acting that and a of up out interested for that investors kind. have cautious of we of would I a sale are we've They're bit little rates there say interest cap the of market. a and are more and terms still in have just But we've board, say seen rates seen the tick assets

investors their are looking lot deployment. be, And capital in a for these a would scale of follow-up

increase? large the done deals. you at on of already some looking Are deals average size seeing you're You've

yes. Size are -- not communities, per place this appetites at into necessarily, to there the scale multiple community, dollars large space but

Your question Dahl next is Markets. coming from RBC Mike Capital from

on side. rental Revenue sequentially XQ. expected follow-up a flat Just in is on Jay's question the

that on, is it why at if to characterize is objectives price You you the it and projects? do meet completed and on having hesitancy more multifamilies. it's you're those not conversations -- have better, don't this Or your Is of single-family return point? think, for I a have function both margin around units more the investor

tied going size we're and selective It's where we of matter one shift projects in or as see relative, through we're timing time. significant selling have the that's going It's to the up into community at them going a would quarters are going time. but to to a and and no communities, rates. because not of and ahead we be monetize and at cap the process. that's closings, market, down, a be put really those of see and done, lumpy and through real look terms it's like that them, rates those go But a to margins interest that But we to we're not saying just communities we're to little the whole

Got it.

fiscal actually sequential gross costs benefit gross around role gears And period a down, last be margin is Okay. And ultimately, a think then XQ Can to And a forward homebuilding forward more having rate specific improvement, sequential rates Your what came or the and lower are in you quarter. margin? that a role margins a back the guide? in negative was fall played your there continued you hedges contracts played or lower both when mark-to-market on that shifting mentioned quantification? XQ of had impact you in significant I there volatility. mark-to-market. Jessica,

to somewhat unusual. We're it last No. but onetime. could not highly I again, mean it say was we really think of an about anomaly. was it, Mike, I happen going mean, quarter as

going in timing terms to and move that and and happened up so the a In which then end. quarter quickly the down move rate of close

gross I quarter, perspective. QX, this point talked of about basis it's no So mean, plus we been more when we've XX minimal or minus a a impact, margin see outside than move. From

that going what happened a see as won't repeat you and well, case will And be of hopefully, the forward QX. in so

Your next Goldman Sachs. from from Susan is coming question Maklari

My is the first material on question cost.

Jessica, those think, how within down? seeing mentioned that lower, that? inflation areas may thinking you more of any other is detail And coming some move on as through? I success of well that's about some be the And you're what where had some on lumber there some thoughts that can on coming give seeing to relative you you're

down which it leave I'll since then Mike, Lumber and has December, back better typical than of categories lumber, with they're March half that of be probably up on kind am. and fall than what was versed 'XX, it started would start to to but trend. in still less its at I'll other peak I is a in seasonal increase

but to in forward, talking our going year-over-year our of sequential and most to terms going lumber expect of of about we is in it modest. swings still closing, lumber, not moves relatively we're be terms from decline big brick in hopefully, stick So be

but and efficient do of I don't by the back it's a terms on others. other effort some in on some have category And that. give we fair. it's be to progress want Very an to market ongoing And market, then or categories, to make think might by can say some as category. I as categories, we struggle battle, we

some think, So now, very moderation constant seen And now. seeing has I in margin helpful we've season. right a right been it's battle in which increases,

be takes into Can about That's talk is helpful. making even looking just the low actually puts which SG&A X% right. to about just the All and think investments. we in about third you those even you thoughts your for third really Any quarter, out? still guided then as Okay. SG&A not the quarter, And there? the there, but

sure. Yes,

the we're as trying grow. to So scale involved certain across infrastructure share markets those to in as continually country position footprint market in applied position a markets larger individual be well. to up ourselves and in across our markets, a ourselves penetrate to in more our position to put realigning and gotten divisions to breaking that same deeply across have the more certain into divisions, multiple has we've has And

quick we pretty so see payback we're investments on now. And do some those right making that. And of

low and to developers remained and on third-party position tie teams, come bit do support to ahead be but have the develop has, sure sometimes and are in to little various And the trades as as continue personnel depth positions so markets SG&A primarily our our able a growth. But it making investments people that order percentage platform with those relationships and it's that's we've why in the we our up to making to we've land got those the got land of growth. to in

coming Zener next Kenneth Seaport Partners. Your Research from question is from

XX% ones that own inter-quarter then but stability higher coming of my spread I could orders. XX% And narrative, margin I those between were versus Why specifically. what was to up margin in to make of looks it the hear backlog. It All be it closings again, XQ the want naturally was out right, specifically?

that and looked XX%, the us driver get can that was to I was the the you. normal. are went think versus into times we to just and just the any cycle take X,XXX of don't clarify. back quarter completed It function And that with on to back the at look before we frankly XX% a call, but over specs our

Okay.

So you're correct? is up follow getting, intra-Q, that versus margin we'll backlog the on

Yes.

go not you dynamics. But are to up in and/or maybe Okay. in Central homes Paul, markets the in right issues. we know you rise Is are insurance. that had seeing And cost affordable about have your say. seeing I you're inventory don't of think per you to have you're markets we Texas, Central still and then, this Austin. seeing higher Austin Florida, coastal being in talked think comment same that Buda, inventory I demand, isolate in ownership Texas, that to building the affected so a Could coastal related we're by like place not

about excluding talked coastal kind we're there where conditions. of You

compete. maybe and of in has supply need to is coming back side the Months significant Well, had but either of on the points market resale on what relates of price tend and across still minimal overpriced increased and we past. the markets, we our the work has that. slowly where to Florida Inventories, certainly majority market comment costs and inventory in the crept in it more most as the we question was see mostly very see or the insurance up we around have than today to affordable

So we market expect our ability on to lot sell. in of going But it's a more come to we competed be we've that see forever. to homes on before take impact significantly to

good in against that We as available to closing to builder. resale We inventory basis a when do do we have against it some and about compete spec market when market. positioning compete will great cost our against the much incentives have package homes that and as warranty do. it We the resale the the to been market at come in feel come that we product and very new think we does a they point And as of on, home future.

that split you And Right. you it. guess, land X% said between on Appreciate Jessica, your land. I you buying and Could developed land finished?

we've in that, of front definitely don't think don't me. I and I that have quantified

Your of next question is coming from from America. Bank Rafe Jadrosich

gross third outlook margin first the quarter fiscal on slightly for flat Just to up.

do into and stick foot, seeing land are think land about specifically on you cost guidance? And the we is inflation that's how the assumptions brick that's in What flat Just that just then inflation contracted inflation, today? the pricing for land peaked of quarter-over-quarter. for terms per square net land lot and

in guide, now stability in labor. right and relative Yes, forward Rafe, materials our

but still some go up we components So slightly. are seeing

but think specific. more expectation a and range. land, than of to I in bit that digits, the very low lot our X% specific there probably cost And higher that, is single-digit single still deal-by-deal low little X% increase So in new that's a percentage market-by-market generally terms just

the But shortage up land seen as still long-term I we've while, time. out a inflation. of think industry not lot still here prices settle availability. general, in This over little has last the over much trend

continue be think a I to to that's going situation. constrained so And

so to see And land we prices not down. situation, come that in would expect

then commitments out have, this how or the forward you are long week. that on go buy-downs, those And months those [indiscernible] very all That's the do rate helpful.

forward So how the will you of that rates recent to offering move when be to the kind like are in the impacted yet have? you rates, commitment of start offered hasn't homebuyer, that it do long

volume the forward commitments go with. that go we terribly We out generally far in of don't too terms of

hedge vary to and within, of look market sales sort or demand from most incentives expiration community. builder We a going we're point XX that effective can upon that reprice to is Paul that of have I one before much out. buy we'll given XX of so incentive given X.X with returns when margin of as to pace we expectations existing we'll given our for are driving X the that But take at any continually to said at is the for not offering anticipated to levels forward days appropriate and given which X various we're the feel date, points based market how fulfill a all any

Research Alex Your Barron from next question is coming Housing from Center.

the options mean stuff, was mean, I you the Great for are curious that's around to lot land more development you? by you Or job land costs going Yes, feel term? land quarter. you development expected developing. to impact costs. absorbed using I guys the but whoever more developing in are for a just guys do I is land margin near and in be

infrastructure keeping haven't labor. those Alex, up seen what land or are much demand reduction we there We you other country have labor are builders ground that for development just from in materials that significant doing on and the improvements the putting lots in materials costs, but throughout we're labor. the and have still either demand not and are out for doing,

our that's in So what increase we over of time. price lot terms baked look in of at kind into

to near we the it don't we So term. to see see we'd expect -- but love some don't in reduction,

was but of bit curious future? quarter, going And like they're saw just more guess not I you margins in Or if it. we on to this touched what going be rental I to do expect a necessarily? sort Got the the you that's the look business, already

the in rate capital be execution dependent going largely on those. It's markets the to as to

with opportunity some are for delivering multifamily volatility is this and quarter at point, our within quarters to they're the yet our consistent some large think I platform communities the scale not multifamily there's be to today. expectation chunky But transactions these we are too, marketplace. number within where that, going X that around especially of the every individual somewhat because it's producing significant to a is transactions. There next are to quarter where

and a for volatility. small opportunity number. can So chunky relatively there's be They there's

in today. somewhere in is the we're range expectation Our

is McCanless this from Jay from question final coming Wedbush. The morning

already So projects might during is that place? think guidance guidance that for quarter? Or close you is that financing have you just talked the what on based schedule that XQ, on in about the rental of

It's a of mix both.

much to to far mean this more during I what make for Okay. larger other leadership starting it not COVID want I seem question think support you're up and to if ultimately along it's does do how aggressive if And then years you share going communities. a question gain but going pace are an SG&A And in too guess, like the to try you through bring maybe now staff think forward? is you organization. a market people to of are that I don't is to transition? kind big the of selling deal, the from that I also, more on Sue's going had

has Yes. tied to during to do more I all trying lot that position. anything push say, wouldn't It's Jay, it pace with us COVID. to our

of those but up, to position our ready building And not were all so lot go. we've lots been

our communities And And for so additional less were the don't affordability we knew the the available. We drive had to lots kind challenged a at that are time, And where coming. ready loss time, and market of communities extremely strong have getting same hot of obviously, demand, to the period were environment we go. we same so was the able today. finished absorption are

online, incremental communities absorption communities. drive to them ready existing we able it good time, to we're be in and mean that further to bringing happens when we're have So not our the go

do maybe a get guess community standpoint? from in you to I And think Okay. of trying how are along you far bigger the process count

And just be plan to the over lot and come an and online our and watch goal position. -- ongoing I'd to communities are say, going going That's positioning ultimately, time.

It's community is to growth that for exactly is us impossible what count going year-to-year, predict. from look like? Now to

I the remarks. you. turn closing would like Romanowski Thank Paul to floor now to back for

everyone's a We're results appreciate look We on and quarter. Tom. share Congratulations the second and call appreciate July. all time this today to to represent do. with quarter you producing entire to again I'm proud solid Horton speaking the in you family. that to on our D.R. you, call forward you third Thank

you. today's Thank does conference call. conclude This

time may a You wonderful phone day. your for at Thank lines have this participation. and your disconnect you