Meritage Homes' First-Time Buyer Model Meets Higher Rates as Dendur Capital Exits

Core Viewpoint - Meritage Homes is highly sensitive to mortgage rate fluctuations, and the recent exit of Dendur Capital raises questions about the sustainability of first-time buyer demand in the current mortgage environment [1][7]. Company Overview - Meritage Homes Corporation is a prominent U.S. residential homebuilder that focuses on single-family homes for entry-level and move-up buyers, operating primarily in high-growth markets such as Texas, Arizona, California, and several southeastern states [5]. - The company generates revenue mainly through homebuilding operations, land acquisition and development, home construction, and related financial services [6]. Financial Performance - For the trailing twelve months (TTM), Meritage Homes reported revenue of $5.86 billion and a net income of $453.01 million, with a dividend yield of 2.47% [4]. - As of February 20, 2026, the share price was $77.83, reflecting a 12.4% increase over the past year, outperforming the S&P 500 by 0.59 percentage points [3][4]. Market Dynamics - High mortgage rates have created affordability challenges for entry-level buyers, which directly impacts Meritage Homes' primary market [7]. - The company has implemented incentives such as rate buydowns and closing cost support to maintain buyer interest and convert backlog into closings, despite rising borrowing costs [8][9]. Strategic Positioning - Management has been disciplined in land spending and community expansion, avoiding aggressive strategies that could pressure returns [9]. - Limited resale inventory in core markets has driven buyers towards new construction, which supports revenue and cash flow [9]. Future Outlook - The ability of Meritage Homes to sustain demand without significantly reducing prices will be crucial for profitability [10]. - The growth in the number of communities and land acquisition strategies will indicate management's confidence in future demand [10]. - The focus on the Sunbelt region and a strong balance sheet will be essential for navigating the current economic cycle without compromising long-term returns [10].