One key strategy is a commitment to pre-starting 100% of the company’s entry-level homes, he noted: “This readily available home inventory puts us in a favorable position since buyers in the current market want homes that are ready to close within 45 to 60 days,” he said. “Eliminating uncertainty and reducing stress are a premium in today’s murky economic environment. Further, line building allows us to complete homes on a shorter cycle time than a build-to-order model despite supply chain issues.”
Hopeful signs on the horizon
In spite of current challenges, Lord noted, the company experienced industry-leading gross margin levels: “More importantly, we increased our market share. Consistent with our strategy, we continue to target three to four net sales per month. As we had a net order absorption pace of 2.2 per month in Q4, we have taken additional actions to get back on our target, including lowering prices and utilizing a full range of incentives such as mortgage rate locks, rate buydowns until we find the market clearing point to move our inventory and get back to our target sales pace.”
He read the tea leaves in approximating future scenarios: “While we certainly don’t have a crystal ball regarding what cancelations rates will do in 2023, we are comfortable that the buyers who purchased homes in earlier 2022 under a different market and economic environment represent a smaller portion of today’s backlog compared to a greater portion coming from buyers that have a more fulsome understanding of the current market conditions, their monthly payment expectations, and the relative advantage of their rates and pricing incentives.”
The Scottsdale, Ariz.-based homebuilder divides its operations into four regions: West, Central, East and South. In the latter region, Texas stood out: “With all four Texas markets holding a growth sales pace greater than 3.0 per month, we believe we are starting to find stability in Houston, Austin, and San Antonio, while in Dallas, we are experiencing a steadier environment and are gaining market share,” Lord said.
The East region showed promise: “The fourth-quarter regional absorption pace for the East region was 2.5 per month,” the CEO said. “We still have work to do here, but all of our Eastern markets actually had a gross sales pace in line with our three to four per month per target. And we are confident that we are well positioned in this part of the country. The East had the lowest region of decline in orders up 41% year over year and the lowest cancelation rate in the fourth quarter.”
Source: mpamag.com