M/I Homes, Inc.

Good morning, ladies and gentlemen, and welcome to the M.A. Holmes First Quarter Earnings Conference Call. At this time, all lines are in a listen-only mode. Following the presentation, we'll conduct a -and-answer session. If at any time during this call you need assistance, please press star zero for the operator. This call is being recorded on Wednesday, April 23rd, 2025. I would now like to turn the conference over to Mr. Phil Creek. Please go ahead.

Thank you for joining us. With me on the call is Bob Schottenstein, our CEO and President, and Derek Clutch, President of our mortgage company. First, to address regulation fair disclosure, we encourage you to ask any questions regarding issues that you consider material during this call because we are prohibited from discussing significant nonpublic items with you directly. And as to forward-looking statements, I want to remind everyone that the cautionary language about forward-looking statements contained in today's press release also applies to any comments made during this call. Also be advised that the company undertakes no obligation to update any forward-looking statements made during this call. With that, I'll turn the call over to Bob.

Thanks, Phil. Good morning, everyone, and thank you for joining us. In the first quarter, dominated by rapidly changing and mostly challenging macroeconomic conditions, MI homes posted very solid results. We appreciate the opportunity to share our results with you. Before we do, however, I want to address more specifically the macro environment and how it has impacted the housing industry and our business. When we last spoke sharing our 2024 year-end record-setting results, we commented then the changing economic conditions and demand challenges we faced, particularly during the third and fourth quarters of last year when mortgage rates began to rise. It was during that time last year that we first implemented mortgage rate buy-downs to drive traffic and incent sales. As demand for housing became more uneven during last year's fourth quarter, the need for such rate buy-downs became an even more important part of our sales strategy, carefully utilized by us on a -by-subdivision basis to try and maximize both volume and margins. As we began 2025, it was clear to us that rate buy-downs remain necessary for us to drive traffic and promote sales, and that such rate buy-downs would continue throughout the spring selling season unless and until it became clear that consistent and solid demand had returned. Clearly that has not happened. Instead, what we have seen is the continuation of choppy and challenging conditions. While there has been some uptick in demand during the first quarter, the spring selling season has been just okay. Frankly we'd grade it somewhere between a B- to C+. Clearly this has been a period marked by uncertainty, a volatile stock market, the back and forth with threatened tariffs, concerns with inflation, interest rate fluctuations mostly going up, talk of a recession, and not surprisingly a decline in consumer confidence. Despite all of this, we were able to post very solid first quarter results. While new contracts were down 10% compared to last year, we believe we were effective in balancing pace and price as our gross margins were strong 25.9%, a sequential improvement over 2024's fourth quarter, reflecting some pricing power in the first quarter as well as the positive impact of select new communities. But margins were down 120 basis points from last year's first quarter. Given the need to continue using rate buy downs for the foreseeable future, our gross margins will likely be under some pressure as we move through the year and continue to be below 2024's full year margins of 26.6%. 54% of our buyers are now using our rate buy downs compared to just under 50% during last year's fourth quarter. That said, the credit quality of our buyers continues to be strong, with average credit scores of 746 and average down payments of 17% or nearly $90,000. Homes delivered during the quarter decreased by 8% to 1,976 homes and revenues decreased by 7% to $976 million. Pre-tax income decreased by 19% to $146 million, though our pre-tax income margin was a very strong 15% and we generated a very solid 19% return on equity. We ended the quarter with a record 226 communities and remain on track to grow our community count in 2025 by an average of 5%. With regard to our markets, our division income contributions in the first quarter were led by Dallas, Chicago, Columbus, Charlotte, and Minneapolis. New contracts for the first quarter in our northern region decreased by 8%. New contracts in our southern region decreased by 11% compared to last year's first quarter. Our deliveries in the southern region decreased 13% and our deliveries in the northern region decreased by 2% from a year ago. 58% of our deliveries come out of the southern region, the other 42% out of the northern region. We have an excellent land position. Our owned and controlled lot position in the southern region increased by 11% compared to a year ago and was flat versus last year in the northern region. 32% of our owned and controlled lots are in our northern region, the other 60% in our southern region. Company-wide, we own approximately 25,000 lots, which is slightly less than a three-year supply. In addition, we control approximately 26,000 additional lots via option contracts, resulting in a total of 51,100 owned and controlled lots, equating to about a five-year supply. With respect to our balance sheet, we ended the first quarter of 2025 with the strongest balance sheet in company history, with all-time record $3 billion of equity, equating to a book value per share of $112. We also ended the quarter with zero borrowings under our $650 million unsecured revolving credit facility, and this resulted in a -to-capital ratio of 19%, down from 21% a year ago, and a net -to-capital ratio of negative 3%. As I conclude, we plan to continue to offer -buy-down incentives to meet demand, and as mentioned earlier, we'll likely continue to experience some compression in our gross margins throughout the year, compared to what our margins were in 2024. Despite the short-term volatility and many market uncertainties, we remain very optimistic about our business, and believe over the long term, the home-building industry will continue to benefit from an undersupply of homes, as well as growing household formations throughout our 17 markets. We are well positioned as we begin the second quarter of 2025 and expect to have a solid year in 2025. And with that, I'll turn it over to Phil.

Thanks, Bob. Our new contracts were down 10% when compared to last year. They were down 20% in January, down 10% in February, and down 2% in March, and our cancellation rate for the first quarter was 10%. 50% of our first quarter sales were to first-time buyers, and 65% were inventory homes. Our community count was 226 at the end of the first quarter compared to 219 a year ago. The breakdown by region is 98 in the northern region and 128 in the southern region. During the quarter, we opened 27 new communities while closing 21. We currently estimate that our average 2025 community count will be about 5% higher than last year. We delivered 1,976 homes in the first quarter, delivering 78% of our backlog, and about 35% of our first quarter deliveries came from inventory homes that were sold and delivered in the quarter. And in March 31st, we had 4,800 homes in the field versus 4,500 homes in the field a year ago. Our revenue decreased 7% in the first quarter, and our average closing price in the first quarter was 476,000, a 1% increase when compared to last year. Our first quarter gross margin was 25.9, down 120 basis points year over year, and up 130 basis points over last year's fourth quarter. Our first quarter SG&A expenses were 11.5 of revenue compared to 10.5 a year ago. Our first quarter expenses increased 2% versus a year ago. Our increased costs were primarily due to increased community count and additional headcount. Interest income, net of interest expense for the quarter was $5.2 million, and our interest incurred was $8.8 million. Our pre-tax income was 15%, and our return on equity was 19%. During the quarter, we generated $154 million of EBITDA compared to $187 million in last year's first quarter. And our effective tax rate was 24% in the first quarter compared to 23% in last year's first quarter. Our earnings per diluted share for the quarter decreased to $3.98 per share from $4.78 per share last year, and our book value per share is now $112, a $17 per share increase from a year ago. Now, Derek Sutch will address our mortgage company results.

Thanks, Phil. Our mortgage and title operations achieved pre-tax income of $16.1 million, an increase of 31% from $12.3 million in 2024's first quarter. Revenue increased 17% from last year to a first quarter record $31.5 million due to higher margins on loans sold and a higher average loan amount, partially offset by a slight decrease in loans originated. The average loan to value on our first mortgages for the quarter was 83% compared to 82% in 2024's first quarter. We continue to see an increase in the use of government financing as 57% of loans closed in the quarter were conventional and 43% FHA or VA, compared to 68% and 32% respectively for 2024's first quarter. Our average mortgage amount increased to $406,000 in 2025's first quarter compared to $386,000 last year. Loans originated decreased to $1,530, which was down 2% from last year, while the volume of loans sold increased by 26%. Our borrower profile remained solid with an average down payment of 17%, an average credit score of 746 compared to 747 in 2024's first quarter. Finally, our mortgage operation captured 92% of our business in the first quarter, up from 88% last year. Now I'll turn the call back over to Phil.

Thanks Derek. So the balance sheet, we ended the first quarter with a cash balance of ,000,00 and no borrowings under our unsecured revolving credit facility. We continue to have one of the lowest debt levels of the public home builders and are well positioned with our maturities. Our bank line matures in late 2026 and our public debt matures in 2028 and 2030. Our unsold land investment in March 31 is $1.7 billion compared to $1.4 billion a year ago. And in March 31st we had $866 million of raw land and land under development, and $803 million of finished unsold lots. During the first quarter we spent $146 million on land purchases and $102 million on land development for a total of $248 million. And in March 31 we owned 25,000 lots and controlled 51,000 lots. At the end of the quarter we had 700 completed inventory homes and 2,400 total inventory homes. And of the total inventory, 900 are in the northern region and 1,500 are in the southern region. In March 31, 2024, we had 400 completed inventory homes and 1,900 total inventory homes. We spent $50 million in the first quarter repurchasing our stock and have $200 million remaining under our current board authorization. Since 2022 we have repurchased 13% of our outstanding shares. This completes our presentation. We'll now open the call for any questions or comments.

Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star followed by the one on your touchtone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by the two. And if you are using a speakerphone, please lift the handset before pressing any keys. The first question comes from Alan Ratner at Zellman and Associates. Please go ahead.

Hey guys, good morning. Nice job. Nice job in a tricky environment out there. It seems like it's changing by the day, so I'm sure it's not easy. First question, I'd love to drill in a little bit in terms of what you're seeing both from a geography standpoint and a price point perspective. Just curious like with all of the moving pieces going on, have you seen any notable shifts in buyer demand either within price points, smart series versus say move up or geography, any kind of relative winners and losers given all of the noise today?

Well, great question. As it relates to price point, let me address that one first. Not much of a change in demand. We have a number of very high producing smart series communities throughout the company, which is our product line that primarily caters to the first time buyer. It's roughly 54% of our sales were smart series sales and that's been about what it has been. We also have a lot of really strong move up, second time, third time purchase communities. I don't think there's any real conclusion to be drawn on that. If there was, that would be something that we would be all over. We look at that constantly. It's a great question. Geographically, I think there have been some noticeable differences, particularly during the latter part of last year. The Florida markets, and I would signal out rather Tampa more so than Orlando or Sarasota, were sort of just getting started in Fort Myers and Naples so we don't have enough critical mass to really draw a conclusion. But Tampa was clearly struggling more than the other Florida markets. It has rebounded somewhat in the last number of weeks. Some of that is just more aggressive promotions by us with price. But some of it, I think, is a return of buyers, a little bit better traffic. As we look around, Indianapolis has been quite strong. So has Cincinnati. Chicago has been a real bright spot for us as well. Houston and Dallas continue to be good. Dallas is not quite as good as it was maybe three or four months ago, but we remain very bullish about both those Texas markets. I think that Austin has been in somewhat of a transition for all the builders there for about the last year and a half or so. But long term, I think the Austin market is a tremendous market to be in. And then Columbus, I think our business has been very, very solid. Charlotte and Raleigh have held up quite well comparatively speaking. So Detroit, a little bit softer. That's sort of the way I see it. I think that the situation within the overall economy, which as you said is changing daily if not hourly, has certainly presented its share of challenges. Our new communities are off to not all, but most are off to a very strong start. I think some of our margin lift, very frankly in the first quarter, sequential margin lift, which helped offset what otherwise would have been a little bit of a margin decline, more of a margin decline from a year ago. I think the margin lift was buoyed by the positive impact of a number of our new community openings. And we're excited about the new communities we're opening this year. I don't think the sky is falling. I don't think it's any time to panic, but it's just a little bit of a hold on time. The spring selling season I think has been just okay. March was better than January and February. I guess we're still in it. April's not as good as March. But look, it's no time to panic as I said. We're going to keep doing what we're doing. We think we can have a very solid year.

Appreciate the very detailed rundown there. Definitely encouraging to hear Tampa is showing some signs of life and the new community performance as well. Those are all good signs. I

don't think Tampa's going anywhere anytime soon. By that I mean it's a city that is still seen on average over the last four years. Very respectable population growth. It's likely to continue. In fact, if you look at population growth throughout most of our markets, many of them over the last four years have seen 4, 5, 6, 8, 10% population growth, which bodes well for household formations, which bodes really well for our industry. We'll get through this period of time, but I wouldn't want to be in any other business.

Gotcha. Appreciate that. Second question on the spec strategy. You and others obviously have pivoted pretty hard towards spec over the last several years. I think you said it was about 65% of your sales this quarter. We've heard from some other builders that you seem to be dialing back spec starts a bit here over the last few months, given the choppiness in activity. Others have signaled trying to bring down that spec share a little bit closer to longer term averages. I'm curious, A, what are you seeing in terms of the spec margin differential? I know you've actually seen some pretty healthy margins on your spec product, but have you also dialed back those starts more recently? Well,

first let's put it in perspective. This is an area where I think, and you know it probably better than me, but this is an area where there's a distinct difference in strategies across the various public builders, with some over the last few years going to a 100% spec approach towards the business. We increased significantly. Five years we were probably 20%, 30%, maybe 40% spec. Now we're somewhere between 50% and 65% spec. We sort of like the balance. In general, specs have sold at lower margins. During some periods it's been 100 basis points. During others it's been 200 basis points. I think that the average in our company is probably today around 150 to 200 basis points. Some markets may be a little higher than that, but we've been able to keep the gap between the two pretty close, not out of stubbornness. That's just where the buyers seem to be. But there is a slightly lower margin on specs in most of our markets.

You know, also, Alan, it's just kind of a subdivision by subdivision issue. Product matters quite a bit. You know, today we're doing 15%, 20% attached townhouses, and attached townhouses, you know, tends to happen when you sell a unit or two in the building, you start another building, etc. Also, our smart series, our more affordable product line, in general we have a few more specs. If you look right now with us having about three finished specs per community, we feel very good with that. Also, with the rate buy down, you know, it's pretty costly when you start getting outside a 45 to 60 day window to be buying down those rates. So again, we manage that on a subdivision by subdivision basis for sure.

Perfect. Thanks a lot for all the detail. Good luck. Thanks, Alan. Thanks, Alan.

Thank you, ladies and gentlemen. As a reminder, if you have any questions, please press star 1. The next question comes from Kenneth Center at Seaport. Please go ahead.

Good morning, everybody. Thank you. Morning. I am interested on how you're thinking about, you know,

your order pace, which, you know, it's a false seasonality. It suggests pace kind of, you know, maybe down a little bit if you look at the three and long-term averages. But more importantly, how are you thinking about your, you know, units under construction and how starts are going to be related to pace as you kind of map out, you know, where expectations might be for, you know, your units under construction by the end of the year? I'm just, you know, if you're building spec, you might want to build more spec, right, even if orders aren't there, because it will drive the closings. But can you talk a little bit about how you're thinking about that?

Well, if you look at us today, you know, we do have a few more communities than a year ago. And as we talked about, we planned this year on average about 5% more. We talked about, in my remarks, that houses in the field today are like 4,800 versus 4,500. So we are, you know, continuing to be careful with what we put in the field. However, you know, as Bob said, you know, we're trying to manage very carefully on a subdivision basis. It takes a long time to get a locations under control, developed and opened. So we're trying to, you know, balance that, you know, good margin, good return versus pace. So it's just something that we manage on a subdivision basis constantly. You know, we would like to do, you know, a little more volume than we're doing. You know, last year we did, you know, over 9,000 houses. Our volume in the first quarter was down a little bit. But again, we're being mindful not to get too far ahead of things in the market. But again, where we are now with having a few more communities and a few more houses in the field, we feel like we're in pretty

good shape. Right. And

I

wonder, you know,

buy downs, which had been done in the 60s and 70s by builders, went away. And I've always been kind of curious as to why that happened. It's, you know, you hear some builders talking more about price reduction versus mortgage buy downs. Can you comment on how those buy downs might directionally break apart or be different within your conventional loan structures, you know, where there's more down payment versus the FHA, VHA, which is a lower down payment. Are you seeing more of that efficacy in the lower down payment loans?

I guess the first thing I would say is that again, we manage that not only on a community basis, but a customer basis. Customers more in the entry level price point. A number of those customers may need more help in closing costs, being stressed a little bit for out of pocket, those type of things. Again, buyers are different. I don't know,

Derek, Bob, do you want to? Well, a couple things on it. First of all, mortgage rate buy downs today, I can't come up with a better or more effective tool given the rate environment and all the other issues and all the noise that we've been all talking about. I can't think of a better way to drive traffic and the the the the the the the the the the the the the the the the In terms of what we're offering, our government rate is, the buy-down rate is lower than the conventional rate. Today on our FHA and government packages, we're generally on a 30-year fixed rate basis around 4 and 7 eighths, whereas with conventional, we're right around 5 and 7 eighths. When and if this goes away is, I think, when mortgage rates, either the spread over the 10-year, which brings down rates, or rates themselves come down, notwithstanding the spread, somewhere in the 6 or so percent range, and then demand starts to come back. I don't think we have to get back to 3 and 4 percent 30-year fixed rate mortgages to get rid of rate buy-downs. That's something that no one knows for sure. As rates do drop, the cost of buy-downs drops as well. Right now, let's call it for what it is, Kenneth. It's propping up the home building industry. If you took away rate buy-downs from every major builder in the country, I'm not sure where we'd be, but we wouldn't be where we are. It's also a tremendous competitive advantage for the larger builders like us, who own their own mortgage company and are able to nimbly, almost on a daily basis, react to what's happening. We've tried to do that as best as we can. Primarily, we're

in the payment business. What's most important to the majority of the people is what's that monthly payment. Again, there's a different result based on a price reduction, which also can impact appraisal values of homes and those types of things, which Bob talked about. Again, the rate buy-down, it depends what the customer really needs. We try to be as efficient as possible. Our mortgage company helps us a lot deal with individual customers. Customers need different things. We try to make that available to them at the most efficient cost we can.

Thank you for your thoughtful answer. Appreciate it. Thank you.

Thank you. The next question comes from Buck Horn at Raymond James. Please go ahead.

Hey, thanks. Appreciate the time and the opportunity. Congrats on the results in a difficult environment. Thank you. Thanks, Buck. Yeah, you're very welcome. Thinking through the impacts potentially as the quarters progress for the remainder of the year and how you're thinking through things like lot cost inflation as it's going to roll through the income statement and also your stick and brick costs factoring in the potential tariff impact. I'm wondering if you guys have thought through that in terms of the supply chain and what kind of inflationary trends? Yeah.

I'll give a little initial answer and then I think Phil has a lot more detail than perhaps I do on that. Just on sticks and bricks, right now there's really been no impact. Our costs are essentially what they were a year ago. In some instances they're slightly lower, which has probably helped some of the sequential movement on the margins. Despite all the noise, which crescendos and then decrescendos, if I can use the music terms, on tariffs, we haven't seen any impact yet. Will there be impact? Probably, but right now I don't think that our industry has yet felt it other than it's having some effect on consumer confidence in some indirect way. My guess is if we do see an effect, it won't show until somewhere late in the year when those costs do go up by virtue of tariffs, they're reflected in our fourth quarter closings. Beyond that, Phil, if you want to add anything?

We think our national account people and our purchasing teams have done a really good job. We've been working on a number of programs the last couple of quarters. As Bob said, our sticks and bricks the first quarter were actually a little less, so we were pleased with that. We're obviously trying to make sure that we're not single sourced anywhere. We have seen a little more availability of substance suppliers, but really that's about it. We're just trying to stay on top of everything as we can, try to focus on affordability best we can with targeted product to make sure we have specifications right in our product line because lot costs are continuing to go up. Overall, we feel pretty

good about where we are. Just to talk about lot costs for a second, because that's an area that has a massive impact on affordability and the end price of a home. There's no component, as you know, that impacts the end price more than land and land development. I don't think anyone should count on much movement on land prices in any of the markets in which we do business. First of all, like many of our competitors, we're relentlessly focused on securing what we call premier locations. We're not the only one. There's a lot of competencies, even if we're more careful about what we buy because we want to make sure it pencils. We haven't really seen much movement on the price side, maybe better terms. By that I mean maybe able to push off closing or buy more time, buy more time given the fact that in some markets it's taking longer to get things zoned. It's taking longer to get approvals. A seller understands that. They know we're not going to close on unzoned ground. That's just not what we do and most of our competitors don't either. Other than the term side, we haven't seen much, nor do I think we will see much on the price side. I don't think there's the old line, they're not making any more of it. The land is what it is and the strong locations, I think, are going to continue to command top dollar prices. If you want to play the game, you're going to have to do that and we're prepared to. Our balance sheet has never been stronger. We've got a great land position. We own less than a three-year supply. We've always been very disciplined on that. Our strategy with respect to owned and controlled really hasn't changed. We're not big on using land bankers. We don't feel like we need to and we don't want to pay, I use the T word, we don't want to pay a tariff to land bankers when we don't have to. We feel really good about our land strategy but that part of the component of the end price, I don't see much change on that anytime in the foreseeable future.

Very

helpful. I appreciate all

those detailed thoughts. I just want to shift. You mentioned the balance sheet, of course, never being in a stronger position than it is right now. Your shares are now below book value. It sounds like you're potentially dialing back to start space for the remainder of the year. You have remained very consistent with the cadence of repurchase activity but just wondering if you would consider leaning in to current market conditions and accelerating the pace of repurchases.

It's something we always look at. We talk about it every quarter with our board. We've tried to maintain consistency. We're not trying to game the time in which we purchase. We think a consistent approach is the most sound one. In all likelihood, what we have been doing will continue to do. Phil, I don't know if you have anything to add.

Yeah, Buck, like Bob said, we've had a consistent strategy the last few quarters buying $50 million. We think now is a good time to have lower leverage and bank line availability and those types of things. Our interest and courage is one of the lowest in the business. We like that position. Something we'll continue to look at but, again, we're just trying to be very mindful to make sure we're positioned very good. We've always run a conservative company and that's kept us where we are and so forth. But something we'll continue to look at but we feel really good about where we are.

All right, very good. Thanks for the thoughts, guys. Appreciate it. Thanks.

Thank you. The next question comes from Jay McCandless at Wettbush. Please go ahead.

Hey, good morning, guys. First question I had, where do you think the gross margin backlog is right now relative to what you saw in the first quarter and maybe directly how that's been trending so far in the second quarter?

You know, Jay, that's a pretty flat number. But again, as I said, about 35% of our closings during the quarter came from spec sales that sold and closed in the quarter. So Bob talked about the continued pressure on margins. We're doing all we can to keep those margins as high as we can. But we were pleased with the .9% in the first quarter, but we think there will be continued

margin pressures as we go through the year.

And then, you know, the exit velocity from January to March, it looks like orders continue to, the order comp continue to get better. For all of 2Q, you guys have an easier comp to last year. I guess, you know, what are you seeing right now in the field, whether it's from resale competition or other headwinds that can make the rest of the quarter maybe trend a little bit lower than what you saw in March?

Boy, you know, if I knew what sales were going to be like next week, I would tell you. There's been so much, you know, we're all sick of the word uncertainty, but there has been so much uncertainty and so much volatility just within, you know, the economy in general. But that's translated itself to demand as well, week to week. You know, some weeks we see a big uptick in traffic, then the next week it comes down. There's been very little consistency. It's been highly unpredictable. I actually thought our margins would be lower than they are. They've held up better than expected. It's not because, you know, what's the term that I heard used the other day? We're not trying to be margin proud. I like that line. We think we're balancing our margins with what it takes to get our sales to where they need to be. We know nothing good happens unless you sell something, and we're pushing to sell as much as we can. But right now, you know, I think the second quarter's, you know, if I had to guess, I think it's going to be, you know, up and down, uneven and mostly on the challenging side. But I don't know. I'm hoping that we'll be pleasantly surprised. The sky is not falling, and I said that earlier. And, you know, I think the stocks are trading at ridiculously low values, suggesting almost that this is like trending towards some kind of, you know, recession or great recession, which I think is, I just don't subscribe to that at all. And, you know, bringing 15% to the bottom line and a near 20% return on equity, this is the first quarter was one of the best first quarters in company history. It wasn't as good as a year ago. I get that. But, you know, we're poised to have a very strong year and at least a very solid year compared to last year, likely down unless something significant were to change. But that's no surprise. But I think we're very well positioned. I think many of our peers are very well positioned. I don't think see anything crazy happening out there with builder behavior, including us. So I just think it's very, very hard to forecast and give that kind of guidance. If you do, you're going to end up, you know, we've never led the league in guidance anyway, as we're often reminded. And we're certainly not going to start now. So that's a hard one, Jay. I respect the question completely. I don't mean to be, you know, less than honest about it, but I just don't know.

You know, Jay, I mean, you're right. I mean, if you look at the second quarter of last year, you know, our sales were actually up 3 percent. But I mean, we were surprised January and February sales were weaker than we thought. March was better. And we're not sure exactly why. Again, it's just something we watch every week, community by community. We did open, you know, 27 stores the first quarter. And we're going to be opening a lot of stores as the year goes on. But it's still just very choppy out there.

Okay. And then, Phil, could you give me the total spec numbers at the end of the quarter and where they were last year? I didn't catch those numbers.

The spec quarter, the spec numbers? Yeah, compared to where you're going. Yeah, the spec numbers. Yeah. If you look at the end of the quarter, we had 700 completed specs a year ago. We had 400. And as far as total specs, now we have 2400. And a year ago, we had 1900. We feel really good where we are, you know, basically having about three completed specs per community. Our community counts up, too. Our community counts up. And then we talked about it being up, you know, on average about 5 percent, you know, and it should move up as the year goes on. So we feel good about where we are, you know, managing that very carefully. There is most of the time a little bit of margin leak between specs and to be built. But again, we try to be very careful, you know, how we price and sell those specs also.

Got it. And then the last question for me, just pricing power. What percentage of communities were able to raise prices

this quarter? That's a good question. That's just a really difficult question. You know,

we've been pleased with the ASP and the margin and the pace of the new communities. We've opened the last couple of quarters. You know, in general, they're performing a little better than we thought. I mean, we raised prices wherever we can, but, you know, and we feel really good, especially about our new communities. That's just a really tough question. But, you know, when you look at our margins at 25.9, you know, again, we're pretty pleased with that.

I know some builders report that information. Where that gets very confusing is when you open up new phases in an existing community and you always intended the new phase to be at a slightly higher price because the lot cost is slightly higher. Is that pricing power? Do you call that pricing power? You're trying to hold the margins the same? I'd say where there's true pricing power is probably less than 10% of our communities, if I had to put a number on it. Right now in this environment, there's very little pricing power.

Understood. Okay. Thanks, guys. Appreciate it. Thank you. Thanks, Jay.

Thank you. We have no further questions. I will turn the call back over to Mr. Phil Creek for closing comments.

Thank you for joining us. We look forward to talking to you next quarter.

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and we ask that you please disconnect your lines.