Financial Data and Key Metrics Changes - In 2025, the company delivered 8,921 homes and recorded revenue of $4.4 billion, with pre-tax income of nearly $590 million, down 20% from the previous year's record of $734 million [5][6] - The net income was $403 million, or $14.74 per share, with a return on equity of 13.1% and shareholders' equity increased by 8% year-over-year to $3.2 billion [6][10] - Gross margins for the full year were 24.4%, down 220 basis points from 2024, primarily due to higher incentives and lot costs [6][10] Business Line Data and Key Metrics Changes - The financial services segment achieved a record capture rate of 93% and pre-tax income of $56 million for the year [5][16] - The Smart Series product, which is the most affordably priced, accounted for 49% of total company sales in the fourth quarter, down from 52% a year ago [7] - The average mortgage amount increased to $414,000 in the fourth quarter of 2025, compared to $409,000 in the previous year [16][17] Market Data and Key Metrics Changes - New contracts in the Southern Region increased by 13% year-over-year, while the Northern Region saw a 4% increase [8] - Deliveries in the Southern Region increased by 1% over the previous year's fourth quarter, representing 57% of the company-wide total [8] - The company owns approximately 26,000 lots, with 30% in the Northern Region and 70% in the Southern Region, and controls an additional 24,000 lots via option contracts [9] Company Strategy and Development Direction - The company is focused on maintaining quality and customer service while navigating economic challenges, positioning itself well in 17 markets [3][10] - The strategy includes using mortgage rate buydowns as incentives to drive sales, particularly in the current market environment [6][34] - The company plans to open more communities in 2026, estimating a 5% increase in average community count compared to 2025 [12][18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term fundamentals of the industry despite current challenges, stating they are in the best financial condition in their history [10] - There is optimism regarding demand improvement as the selling season begins, with management noting increased traffic in many markets [45][90] - The company is cautious about pricing strategies and inventory management, focusing on maintaining margins while responding to market conditions [52][104] Other Important Information - The company ended the year with cash of $689 million and zero borrowings under its $900 million unsecured revolving credit facility, resulting in a strong debt-to-capital ratio of 18% [10][18] - The company spent $1.2 billion on land purchases and development in 2025, up from $1.1 billion in 2024 [18] Q&A Session Summary Question: Can you address the 13% growth in the South and bifurcate that into Texas and Florida? - Management noted solid sales across various markets, with Florida's Orlando market performing well and Texas showing mixed results, particularly with Dallas and Houston remaining strong while Austin and San Antonio lagged [24][25] Question: Can you comment on margin pressures and the differential between intra-quarter closings and backlog? - Management acknowledged that margins are under pressure but noted that a significant portion of sales now comes from spec homes, which has changed the sales dynamics [34][35] Question: What is the strategy regarding mortgage rate buy-downs? - The company has been successful with a 4.875% 30-year fixed mortgage rate and offers temporary buydowns to attract buyers [72][74] Question: Any guidance on margins for the next quarter? - Management does not provide specific guidance on margins but expressed satisfaction with current performance and ongoing efforts to manage costs [82] Question: How is the inventory situation and what are the broader industry trends? - Management feels confident about their inventory levels and noted that while some excess spec inventory exists, they are focused on careful management to avoid overexposure [104]

Core Insights - The current housing market presents an opportunity for affordable new home purchases due to builders having ample inventory and being motivated to negotiate prices and offer lower mortgage rates [1][3][5]. Group 1: New Construction Benefits - New construction homes are becoming more affordable, with the price difference between new and existing homes narrowing significantly [4]. - Builders are responding to market conditions by offering incentives such as lower mortgage rates and reduced down payments, making new homes more attractive to buyers [3][6][8]. - In November, 60% of new home communities provided incentives for homes to be built, and 78% offered incentives for quick move-in homes [6]. Group 2: Mortgage Rate Incentives - Builders commonly offer mortgage rate deals, which can include rate buydowns or below-market adjustable-rate mortgages [7][12]. - New home buyers received an average mortgage rate that was nearly one percentage point lower than that of existing home buyers [8]. - The average down payment for new construction homes was 15.7%, compared to 17.8% for existing homes, indicating a shift in buyer incentives [8][10]. Group 3: Considerations for Buyers - Buyers should carefully evaluate financing deals, as advertised low rates may come with higher APRs due to fees or future payment adjustments [11][12]. - It is advisable for buyers to compare loan offers from builders with those from outside lenders to ensure they are getting the best long-term value [13][14]. - While builder incentives can enhance affordability, they may also lead to thin equity if buyers finance a larger portion of the home purchase [15][17].

Core Insights - The 30-year mortgage rate has decreased by more than half a point since the end of May, currently at 6.28%, while the 15-year fixed rate is at 5.58% [1][16][17] - Adjustable-rate mortgages (ARMs) are also available, with the 5/1 ARM rate at 6.69% and the 7/1 ARM at 6.79% [3][16] - Mortgage refinance rates tend to be higher than purchase rates, but this is not always the case [2] Current Mortgage Rates - 30-year fixed: 6.28% [1][16] - 20-year fixed: 5.79% [3] - 15-year fixed: 5.58% [1][16] - 5/1 ARM: 6.69% [3] - 7/1 ARM: 6.79% [3] - 30-year VA: 5.67% [3] - 15-year VA: 5.20% [3] - 5/1 VA: 5.46% [3] Mortgage Payment Examples - A $300,000 mortgage at a 30-year term with a 6.28% rate results in a monthly payment of approximately $1,853, totaling $367,083 in interest over the loan's life [7] - For the same mortgage amount at a 15-year term with a 5.58% rate, the monthly payment would be $2,464, with total interest paid amounting to $143,521 [9] Adjustable Mortgage Rates - ARMs typically start with lower rates than fixed-rate mortgages but can increase after the initial fixed period [10][11] - The 5/1 ARM locks in the rate for the first five years, after which it adjusts annually [10] Strategies for Lower Mortgage Rates - Lenders offer the best rates to borrowers with higher down payments, excellent credit scores, and low debt-to-income ratios [13] - Options to lower rates include paying for discount points at closing or considering temporary interest rate buydowns [14][15] Market Outlook - Mortgage rates are not expected to drop significantly before the end of the year, with the 30-year fixed rate only eight basis points from the year's low [18]