D.R. Horton Q2 2023 Earnings Call Transcript

Presentation

[Operator]

Good morning, and welcome to the Second Quarter 2023 Earnings Conference Call for D.R. Horton, America's Builder, the largest builder in the United States. [Operator Instructions] Please note this conference is being recorded.

I will now turn the call over to Jessica Hansen, Vice President of Investor Relations for D.R. Horton.

[Jessica Hansen, Vice President, Investor Relations and Communications at D.R. Horton]

Thank you, Holly, and good morning. Welcome to our call to discuss our results for the second quarter of fiscal 2023.

Before we get started, today's call includes forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Although D.R. Horton believes any such statements are based on reasonable assumptions, there is no assurance that actual outcomes will not be materially different. All forward-looking statements are based upon information available to D.R. Horton on the date of this conference call, and D.R. Horton does not undertake any obligation to publicly update or revise any forward-looking statements. Additional information about factors that could lead to material changes in performance is contained in D.R' Horton's Annual Report on Form 10-K and its most recent quarterly report on Form 10-Q, both of which are filed with the Securities and Exchange Commission.

This morning's earnings release can be found on our website at investor.drhorton.com, and we plan to file our 10-Q early next week. After this call, we will post updated investor and supplementary data presentations to our Investor Relations site on the Presentations section under News & Events for your reference.

Now, I will turn the call over to David Auld, our President and CEO.

[David V. Auld, President and Chief Executive Officer at D.R. Horton]

Thank you, Jessica, and good morning. I am pleased to also be joined on this call, like Mike Murray and Paul Romanowski, our Executive Vice Presidents and Co-Chief Operating Officers; and Bill Wheat, our Executive Vice President and Chief Financial Officer.

We are excited to announce that we recently closed our one millionth home, a first for any homebuilder. We are both humble and proud to have been a part of a million families achieving their dream of home ownership over the past 45 years.

For the second quarter, the D.R. Horton team delivered solid results, highlighted by earnings of $2.73 per diluted share. Our consolidated pre-tax income was $1.2 billion on $8 billion in revenues with a pre-tax profit margin of 15.6%. Our homebuilding return on inventory for the trailing 12 months ended March 31 was 35.1%, and our consolidated return-on-equity for the same period was 27.2%.

Spring selling season is off to an encouraging start with our net sales orders increasing 73% sequentially from the first quarter. Despite higher mortgage rates and inflationary pressures, demand improved during the quarter due to normal seasonal factors, coupled with our use of incentives and pricing adjustments to adapt to changing market conditions. Although higher interest rates and economic uncertainty may persist for some time, the supply of both new and existing homes at affordable price points remains limited, and demographics supporting housing demand remain favorable.

We are well-positioned to navigate changing market conditions with our experienced operators, affordable product offerings, flexible lot supply and great trade and supplier relationships. Our strong balance sheet, liquidity and low leverage provide us with significant financial flexibility. We will continue to focus on managing our product offerings, incentives, home prices, sales pace and inventory levels to meet the market, consolidate market share, optimize returns and generate increased operating cash flow.

Mike?

[Michael J. Murray, Executive Vice President and Co-Chief Operating Officer at D.R. Horton]

Earnings for the second quarter of fiscal 2023 decreased 32% to $2.73 per diluted share compared to $4.03 per share in the prior year quarter. Net income for the quarter decreased 34% to $942 million on consolidated revenues of $8 billion. Our second quarter home sales revenues were $7.4 billion on 19,664 homes closed compared to $7.5 billion on 19,828 homes closed in the prior year. Our average closing price for the quarter was $378,800, down 2% sequentially and essentially flat with the prior year quarter.

Paul?

[Paul J. Romanowski, Executive Vice President and Co-Chief Operating Officer at D.R. Horton]

Our net sales orders in the second quarter decreased 5% to 23,142 homes, and order value decreased 11% from the prior year to $8.6 billion. Our cancellation rate for the quarter was 18%, up from 16% in the prior year quarter, but down 27% sequentially. Our average number of active selling communities was up 3%, both sequentially and year-over-year. The average sales price of net sales orders in the second quarter was $372,900, down 7% from the prior year quarter and up 1% sequentially.

To adjust to changing market conditions and higher mortgage rates, we have continued offering incentives and reducing the prices and sizes of our homes where necessary to provide better affordability to homebuyers and to optimize the returns on our inventory investments. We expect to continue offering similar level incentives throughout 2023, and we are seeing indications that our average sales price and incentive levels are beginning to stabilize.

Our sales volume in the third quarter and for the rest of the year will depend on the continued strength of the spring selling season and general market conditions, which can be significantly affected by changes in mortgage rates and other economic factors. We will continue to start homes and maintain sufficient inventory to meet sales demand and aggregate market share.

Bill?

[Bill W. Wheat, Executive Vice President and Chief Financial Officer at D.R. Horton]

Our gross profit margin on home sales revenues in the second quarter was 21.6%, down 230 basis points sequentially from the December quarter. The decrease in our gross margin from December to March reflects the impact of higher sales incentives and home price reductions. On a per square foot basis, home sales revenues were down 1% sequentially, stick and brick cost per square foot increased 1% and lot costs were up 5%.

We are continuing to work with our trade partners and suppliers to reduce our construction costs on new home starts. We are making some limited progress in these efforts, but are also still experiencing some cost increases due to the overall inflationary environment. However, with the benefits of lower lumber costs, the average cost of our homes closed is beginning to stabilize, and we see indications that our home sales gross margin is also starting to stabilize around current levels.

Jessica?

[Jessica Hansen, Vice President, Investor Relations and Communications at D.R. Horton]

In the second quarter, our homebuilding SG&A expenses increased by 8% from last year, and homebuilding SG&A expense as a percentage of revenues was 7.3%, up 50 basis points from the same quarter in the prior year. We are controlling our SG&A, while ensuring our platform adequately supports our business.

Paul?

[Paul J. Romanowski, Executive Vice President and Co-Chief Operating Officer at D.R. Horton]

We started 19,900 homes this quarter and ended the quarter with 43,600 homes in inventory, down 27% from a year-ago and up 1% sequentially. 24,800 of our homes at March 31 were unsold, of which 6,400 were completed. For homes we closed this quarter, our construction cycle time decreased 12 days from the first quarter, reflecting our efforts to improve our cycle times and improvements in the supply chain. We will continue to evaluate demand and adjust our homes and inventory and start pace based on current market conditions.

Mike?

[Michael J. Murray, Executive Vice President and Co-Chief Operating Officer at D.R. Horton]

Our homebuilding lot position at March 31 consisted of approximately 547,000 lots, of which 25% were owned and 75% were controlled through purchase contracts. 32% of our total owned lots are finished and 53% of our controlled lots are or will be finished when we purchase them. Our capital-efficient and flexible lot portfolio is a key to our strong competitive position. We are actively managing our investments in lots, land and development based on current market conditions.

During the quarter, our Homebuilding segment incurred $900,000 of inventory impairments and wrote-off $13 million of option deposits and due diligence costs related to land and lot purchase contracts. We expect our level of option cost write-offs to remain somewhat elevated in fiscal 2023 as we continue to manage our lot portfolio through changing market conditions. Our second quarter homebuilding investments in lots, land and development totaled $1.7 billion, down 19% from the prior year quarter and flat sequentially. Our current quarter investments consisted of $980 million for finished lots, $590 million for land development and $150 million for land acquisition.

Bill?

[Bill W. Wheat, Executive Vice President and Chief Financial Officer at D.R. Horton]

Financial services pre-tax income in the second quarter was $86 million on $216 million of revenues with a pre-tax profit margin of 39.6%. During the second quarter, 99% of our mortgage company's loan originations related to homes closed by our homebuilding operations, and our mortgage company handled the financing for 76% of our buyers.

FHA and VA loans accounted for 46% of the mortgage company's volume. Borrowers' originating loans with DHI Mortgage this quarter had an average FICO score of 723 and an average loan-to-value ratio of 88%. First-time homebuyers represented 55% of the closings handled by our mortgage company this quarter.

Mike?

[Michael J. Murray, Executive Vice President and Co-Chief Operating Officer at D.R. Horton]

Our rental operations generated $224 million of revenues during the second quarter from the sale of 721 single-family rental homes, earning pre-tax income of $35 million. Our rental property inventory at March 31 was $3.3 billion, which included approximately $2.1 billion of single-family rental properties and $1.2 billion of multi-family rental properties. We expect our rental operations to generate significant increases in both revenues and profits in fiscal 2023 as our platform matures and expands across more markets. For the third quarter, we expect our rental revenues to be similar to our first and second quarters.

Paul?

[Paul J. Romanowski, Executive Vice President and Co-Chief Operating Officer at D.R. Horton]

Forestar, a majority-owned residential lot development company, reported total revenues of $302 million on 2,979 lots sold and pre-tax income of $36 million for the second quarter. Forestar's owned and controlled lot position at March 31 was 76,400 lots, 54% of Forestar's owned lots are under contract with or subject to a right of first offer to D.R Horton. $220 million of our finished lots purchased in the second quarter were from Forestar.

Forestar is separately capitalized from D.R. Horton and had more than $650 million of liquidity at quarter end with a net debt-to-capital ratio of 25.2%. Forestar is well positioned to meet changing market conditions with its strong capitalization, lot supply and relationship with D.R. Horton.

Bill?

[Bill W. Wheat, Executive Vice President and Chief Financial Officer at D.R. Horton]

Our balanced capital approach focuses on being disciplined, flexible and opportunistic. We are committed to maintaining a strong balance sheet with low leverage and significant liquidity, which provides us with flexibility to adjust to changing market conditions. During the first six months of the year, our cash provided by both our consolidated and homebuilding operations was $1.5 billion.

At March 31, we had $4.4 billion of homebuilding liquidity, consisting of $2.4 billion of unrestricted homebuilding cash and $2 billion of available capacity on our homebuilding revolving credit facility. We repaid $300 million of 4.75% senior notes in February at maturity, and we have $400 million of senior notes that will mature in August. Our homebuilding leverage was 11.5% at the end of March and homebuilding leverage net of cash was 1.5%. Our consolidated leverage at March 31 was 22.4% and consolidated leverage net of cash was 12.3%.

At March 31, our stockholders' equity was $20.7 billion, and book value per share was $60.73, up 27% from a year ago. For the trailing 12 months ended March, our return-on-equity was 27.2%. During the quarter, we paid cash dividends of $85.6 million and our Board has declared a quarterly dividend at the same level as last quarter to be paid in May. We repurchased 3.2 million shares of common stock for $303 million during the quarter for a total of 4.5 million shares repurchased fiscal year-to-date for $421 million. Subsequent to quarter-end, our Board authorized the repurchase of up to $1 billion of our common stock, replacing our prior authorization. The new authorization has no expiration date.

Jessica?

[Jessica Hansen, Vice President, Investor Relations and Communications at D.R. Horton]

As we look forward, we expect current market conditions to continue with uncertainty regarding mortgage rate, the capital markets and general economic conditions that may significantly impact our business. We are providing detailed guidance for the third quarter, as is our standard practice. We are also providing incremental guidance for the full year now that we've seen the beginning of the spring selling season with good homebuyer demand and signs of stabilization in pricing, incentives and cost trends.

We currently expect to generate consolidated revenues in our June quarter of $8 billion to $8.5 billion, and homes closed by our homebuilding operations to be in the range of 20,000 to 21,000 homes. We expect our home sales gross margin in the second quarter to be approximately 21% to 22% and homebuilding SG&A as a percentage of revenues in the third quarter to be in the range of 7.2% to 7.5%. We anticipate a financial services pre-tax profit margin of around 30% and we expect our income tax rates to be approximately 24% to 24.5% in the third quarter.

We are well-positioned to continue aggregating market share in both our homebuilding and rental operations. For the full year, we currently expect to close between 77,000 and 80,000 homes in our homebuilding operations and between 4,000 and 5,000 homes in units and our rental operations. We expect our consolidated revenues for fiscal 2023 to be in the range of $31.5 billion to $33 billion. We forecast an income tax rate for the year of approximately 24%.

We expect to generate increased cash flow from our homebuilding operations and on a consolidated basis in fiscal 2023 compared to fiscal 2022. We also plan to repurchase shares and at a similar dollar amount as last year to reduce our share count with the volume of our repurchases dependent on cash flow, liquidity, market conditions and our investment opportunities. We have $400 million of senior notes that mature during the remainder of the year, which we are positioned to repay from cash.

We will continue to balance our cash flow utilization priorities among our core homebuilding operations, our rental operations, maintaining conservative homebuilding leverage and strong liquidity, paying an increased dividend and consistently repurchasing shares.

David?

[David V. Auld, President and Chief Executive Officer at D.R. Horton]

In closing, our results and positions reflect our experienced teams' industry-leading market share, broad geographic footprint and diverse product offerings. Our strong balance sheet, liquidity and low leverage provide us with significant financial flexibility to effectively operate in changing economic conditions and continue aggregating market share. We plan to maintain our disciplined approach to invest in capital to enhance the long-term value of the company, which includes returning capital to our shareholders through both dividends and share repurchases on a consistent basis.

Thank you to the entire D.R. Horton team for your continued focus and hard work, and a special thank you from Don Horton, our Founder and Executive Chairman, to the catalyst D.R. Horton employees and trade partners over the past 45 years. We participate in the catalyst D.R. Horton -- we participated and contributed to our journey to build, sell and close 1 million homes.

This concludes our prepared remarks. We will now host questions.

Questions and Answers

[Operator]

[Operator Instructions] Your first question for today is coming from John Lovallo at UBS.

[John Lovallo, Analyst at UBS Group]

Good morning, guys, and thank you for taking my questions. The first one is, to the extent you can comment on April trends, I mean, it sounds like from what we can gather from our checks at April has trended along pretty nicely. And along those same lines, if we think about the third quarter, typical absorption declining, call it, 10% sequentially. Is that a reasonable way to -- as a starting point as we move into the third quarter here or how are you thinking about that?

[Jessica Hansen, Vice President, Investor Relations and Communications at D.R. Horton]

Sure. We continue to be pleased with our sales pace in April. And you heard us say stabilize a lot on the call, and we really feel like we've seen signs of that and everything has continued into April as we would like to see. In terms of what our Q3 sales look like versus our Q2 sales, typically it can go either way. A lot of times it's dead on within a few houses, so we could be slightly up, we could be slightly down. Sales-wise sequentially, it's going to be dependent though on the continued strength of the spring, what happens with mortgage rates and anything else, obviously economic that could drive that. But right now, it feels pretty good.

[John Lovallo, Analyst at UBS Group]

Makes sense. And then, just given the demand is holding up reasonably well, do you think there could be somewhat of an industry. I don't want to say land grab, but more of a push towards companies going out and trying to buy more land as maybe expectations reset a bit more positively looking into 2024?

[Michael J. Murray, Executive Vice President and Co-Chief Operating Officer at D.R. Horton]

I think you can look across the board and see that most builders have a pretty good lot portfolio out in front of them. I know, we're over roughly 550,000 lots controlled that were owned. So we feel really good about the positioning we have for handling increased demand as well as if we needed -- if demand moderates, we've got flexibility in that portfolio. We will look to continue to add on to our portfolio where it makes sense on a deal-by-deal market-by-market basis. Haven't seen evidence of a big land grab yet.

[John Lovallo, Analyst at UBS Group]

Got it. Thanks very much, guys.

[Operator]

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

[Stephen Kim, Analyst at Evercore ISI]

Thanks very much, guys. I got to start off with a comment, which is that if you do the high end of your guide for closings this year, effectively you'll have had pretty stable closings in '21, '22 and '23, which is a pretty remarkable achievement, given the volatility in the adverse environment we saw late last year. So, congrats to you guys on that.

Now, regarding -- I wanted to talk about market share. One of the things that we've seen -- I see as an emerging trend is that builders such as yourselves are going to be able to gain share, particularly from some of your private guys who are more dependent upon regional and local banks. So, I wanted to ask you whether you think that a lot of the strength that you've been seeing recently can be attributed to market share gains. And if so, does that mean that you can continue to see your volumes to rebound without seeing a commensurate rise in overall costs, which was a theme that people were wrestling with over the last few months?

[David V. Auld, President and Chief Executive Officer at D.R. Horton]

Stephen, in markets where we have our largest market share -- control the largest market share, we see much more stability in both cost and demand and deliveries and margin. So, it's our expectation as we continue to consolidate markets, there's going to be kind of a new norm and stability of margin and cost structure, to be honest with you. As we get more efficient and more efficient in delivering houses, we can hit the affordability requirements and still maintain margin. So, why we focus on it, it's not just about the number of houses, but controlling the percentage of the market that gives us more access to trades, materials and a stronger relationship with developers and third-party realtors, which all drive our business.

[Stephen Kim, Analyst at Evercore ISI]

Great. That's encouraging. Appreciate that. Second question relates to, to what degree you're able to ratchet back incentives looking ahead? I know you sort of talked about a stable environment, and I get that. But I also know that you are probably going to be adjusting what sort of product you put out to market, I would guess that probably has a little bit more of a value orientation. And I'm curious as to whether you anticipate over the medium term that you will be able to ratchet back your incentives as you roll out some more inherently affordable product by design?

[Paul J. Romanowski, Executive Vice President and Co-Chief Operating Officer at D.R. Horton]

Stephen, as we see stability in the market, it certainly allows us to pull back on incentives and where we have the opportunity, and we have some pricing power, we're taking advantage of that. We aren't seeing a significant change in what we offer in the market. We have some smaller homes that we've been able to put out and, where it makes sense, we're taking advantage of that. So, we do see an opportunity to continue to peel back on incentives and take advantage of pricing power on a go-forward basis.

[Jessica Hansen, Vice President, Investor Relations and Communications at D.R. Horton]

And as with everything, we're not directing anything globally nationwide, community by community, market by market, our local operators are making those decisions to maximize returns at the local level.

[Stephen Kim, Analyst at Evercore ISI]

Great. Thanks a lot, guys.

[Operator]

Your next question for today is coming from Carl Reichardt at BTIG.

[Carl Reichardt, Analyst at BTIG Research]

Hi, everybody. Good morning. Thanks for the time. Last couple of quarters, there has been sort of a mixed bag in terms of geographic performance for builders with the Southeast Texas pretty good and the West weak. I'm curious in one quarter, and I know we're going to see some of this information when you guys put the stuff up on the site. But was there any sort of significant recovery in some of the markets that have been weaker, David, in the first quarter, especially in the West in terms of orders?

[David V. Auld, President and Chief Executive Officer at D.R. Horton]

Carl, it's less, it's about positioning. We like the way we're positioned out there and then driving stability. So, consistency, stability, flag count, I'm not sure that we saw significant improvement. But again, it's a part of the overall contributor [Phonetic].

[Jessica Hansen, Vice President, Investor Relations and Communications at D.R. Horton]

Yeah. Most of our pickup really was absorption versus community count. Our overall community count was only up 3% sequentially. We saw three of our regions up better than normal seasonality but, call it, still less than 60%. And then we have the Southeast, East and North that were much higher. The North is a lot of new communities, new markets, but the Southeast and the East are just showing the continued strength, particularly in Florida and the Carolinas.

[Carl Reichardt, Analyst at BTIG Research]

Okay. Thanks, Jess. And then, on supply chain, you mentioned -- or sorry, on the cycle times, you mentioned down 12 days. And I'm curious, if that was just really all supply chain improvement or, to some extent, sort of mix and moving down to quicker homes to turn? And then, are you expecting additional improvement in the back half of the year in that metric?

[Michael J. Murray, Executive Vice President and Co-Chief Operating Officer at D.R. Horton]

Yeah. Carl, that was primarily supply chain improvements, finally getting houses through various stages of construction, being better organized and prepared with the labor. And we saw improvement sequentially throughout the quarter, and we're continuing to see improvement in early construction stage movements of homes more recently started. So, yes, we expect to see better cycle times as we progress through the year.

[Carl Reichardt, Analyst at BTIG Research]

I appreciate it. Thanks so much.

[Operator]

Your next question is coming from Mike Rehaut at JPMorgan.

[Mike Rehaut, Analyst at JPMorgan Chase & Co.]

Thanks. Good morning, everyone. First question, I wanted to get a sense. You mentioned that incentives have stabilized or recently stabilized. And based on our conversations with certain privates, there has been somewhat of an improvement in net pricing throughout the March quarter. I'm curious if you saw that as well. In other words, that net pricing by March end was better than the beginning of the year. And if so, all else equal, with that point, your 3Q gross margin towards the higher end of the range or even a little bit above, if you're expecting stabilization from here on in, particularly in this metric?

[Bill W. Wheat, Executive Vice President and Chief Financial Officer at D.R. Horton]

Yeah, Mike, I think the key word we keep using here is stabilization. We've started to see pricing and incentive levels stabilize during the quarter. Naturally, as that stabilization remains in place a bit longer, you are able to tighten things up a bit. And as we've been able to move through the spring selling season community by community, we see strength, we see good turns. We're able to tighten those things up. So that's certainly overall an expectation, but it's community by community. So, there are still places where we are seeing pricing still slightly decline, some places where we're seeing it stabilize, some places where we're able to start pushing it up a little bit. So, on a net basis, as we look forward, we expect our margins to stabilize around current levels. So that's why our guidance range anticipates perhaps slightly below this quarter, perhaps a little above this quarter. And it's too early to know for sure how that will play out over the remainder of the coming quarter.

[Mike Rehaut, Analyst at JPMorgan Chase & Co.]

Okay. I appreciate that, Bill. I guess, secondly, maybe building on another question around ASP, how should we think about directionally ASPs, not just for the back half of this year, but into fiscal '24. Is it something where you feel like at current levels, there has been -- most of the adjustment has been made or, I guess, more specifically, I'm even thinking about potential product mix changes to continue to address affordability if you wouldn't want to try and drive ASP may be a little bit lower in fiscal '24, just to more fully address perhaps the market or affordability challenges, etc?

[Bill W. Wheat, Executive Vice President and Chief Financial Officer at D.R. Horton]

Yeah, Mike, I think that's just all part of the mix here, slightly reductions in the size of our homes trying to address the affordability equation. That's an ongoing effort for us. And that's why we leave a little room around current levels there because we were always going to try to be as affordable as we can. But at the same time, if we have a good market and we're able to take advantage of some pricing power, we will do that also community by community. So, stabilization is the word for the day and, obviously, we don't guide sales prices very far out. And it's largely going to be dependent ultimately on market conditions over the remainder of the year and what happens in the rate environment.

[Mike Rehaut, Analyst at JPMorgan Chase & Co.]

Great. Thank you.

[Operator]

Your next question for today is coming from Matthew Bouley at Barclays.

[Matthew Bouley, Analyst at Barclays]

Hey. Good morning, everyone. Thanks for taking the questions. I wanted to follow up on Steve's question from earlier around sort of what's happening with credit tightening from regional banks and, of course, the smaller private builders generally leveraging the regional banking system. Are you actually seeing any changes competitively yet from those smaller builders in terms of land acquisition starts? How are you guys sort of reacting to any changing conditions from those builders? Thank you.

[Michael J. Murray, Executive Vice President and Co-Chief Operating Officer at D.R. Horton]

We haven't really seen any significant shift in how they're operating in the market. A lot of builders certainly have come out of the end of this calendar year and had inventory that they may have gone through cancellations. They've been working through that product, not seeing significant starts on a go-forward basis for most of the smaller privates or regional, and we certainly have picked up a few land positions, lot positions here and there, but no significant shift in how they're addressing the market.

[Matthew Bouley, Analyst at Barclays]

Got it. Okay. Thank you for that. And then, secondly, it looks like you started less homes than you sold during the quarter. I think you guys have previously spoken about sort of aligning starts and sales pace. How are you guys thinking about that going forward? Is there any room to kind of push a little harder on starts here going forward given some of these improving demand trends?

[Jessica Hansen, Vice President, Investor Relations and Communications at D.R. Horton]

Yeah. We were in a transition in the last couple of quarters, it was more closely to sales. But really, our focus is tied to closings in our search space. And if you look at that, we were kind of neck and neck this quarter. And so, with our guide for next quarter and what we're trying to do market by market, community by community to build back our production capabilities, we would expect our starts to increase. The extent to which will be dependent on a lot of different factors, but we do expect our starts to increase next quarter.

[Matthew Bouley, Analyst at Barclays]

All right. Thanks, Jessica. Thanks, everyone. Good luck.

[Jessica Hansen, Vice President, Investor Relations and Communications at D.R. Horton]

Thanks, Matt.

[Operator]

Your next question is coming from Truman Patterson at Wolfe Research.

[Truman Patterson, Analyst at Wolfe Research]

Hey. Good morning, everyone. Thanks for taking my questions. First, hoping to get an update on your mortgage business and the overall environment. Are you seeing any distress in the market from mid-tier banks, tightening of mortgage warehouse financing or tightening in consumer credit or lending standards for agency, non-agency loans? We've heard that it's been kind of business as usual, but wanted to get your thoughts.

[Bill W. Wheat, Executive Vice President and Chief Financial Officer at D.R. Horton]

Yeah, obviously, with all the headlines that we've had this quarter, we have been watching that market very closely, having a lot of conversation with our banking relationships, but I would echo what you heard. At the moment, it's still business as usual, but obviously that's something we'll continue to monitor. We just renewed our mortgage warehouse facility this quarter, and we kept basically the same bank group in place. And so, that market is still functioning and working as normal. But obviously, if we see further distress in that market, that's something we'll need to be prepared to adjust to.

[Truman Patterson, Analyst at Wolfe Research]

Bill, that relates to both D.R. Horton and kind of the broader market, those comments?

[Bill W. Wheat, Executive Vice President and Chief Financial Officer at D.R. Horton]

Yes, absolutely. Yeahs, we all see the same headlines there. And depending on what happens in the rate environment and across the spectrum of banks, so there could be further headlines obviously. But today, no, we have not seen a significant impact.

[Truman Patterson, Analyst at Wolfe Research]

Okay. Perfect. And then, just an update on construction costs outside of lumber. It seems like they've been relatively sticky. Bill, I think you even mentioned some costs might be increasing a little bit. But could you just give us an update on how you're viewing the magnitude of potential cost savings moving through the year really into 2024? Should we really see an improvement outside of lumber or are things just pretty stable at this point?

[Michael J. Murray, Executive Vice President and Co-Chief Operating Officer at D.R. Horton]

I think we're seeing a lot of stability. A lot of the increases that we were taking over the past year have stopped. But we're seeing the effects of those increases coming through more recent starts would be at the more stable cost benefiting from the lumber commodity price declines. But we're getting to the point we're starting to anniversary well into some normalized lumber market pricing. So, I'm not expecting to see huge changes in our cost inputs, but they certainly have been -- increases have been a little bit sticky.

[Truman Patterson, Analyst at Wolfe Research]

All right. Thank you all, and good luck on the upcoming quarter.

[Michael J. Murray, Executive Vice President and Co-Chief Operating Officer at D.R. Horton]

Thanks, Truman.

[Operator]

Your next question is coming from Anthony Pettinari at Citi.

[Anthony Pettinari, Analyst at Smith Barney Citigroup]

Good morning. Your net order ASP was up, I think, 1% quarter-over-quarter, which is a little bit better than we were expecting. Just wondering if there is any kind of mix effects that you'd call out there, whether regionally or product type kind of given the commentary around incentive stabilizing?

[Michael J. Murray, Executive Vice President and Co-Chief Operating Officer at D.R. Horton]

I think it's pretty much like-for-like. We saw a stabilizing market through the quarter. And in fact, about half of the homes we delivered this quarter were sold in the quarter. And so, we feel pretty good about market conditions right now. We've seen good stabilization in pricing and incentive levels. And when we see that, and we're hitting absorptions in the communities at a community-by-community level, we're looking to adjust incentive levels and pricing.

[Anthony Pettinari, Analyst at Smith Barney Citigroup]

Okay. That's helpful. And then, just on the full year outlook, does that assume kind of mortgage rates around current levels? And if rates were to moderate a bit, do you have maybe some room to flex up production or should we think about that 80,000 to sort of an upper limit of where you could go for the year?

[Bill W. Wheat, Executive Vice President and Chief Financial Officer at D.R. Horton]

I think, the range we provided for the year is a realistic range given current conditions. And our homes that we currently have an inventory and in production, as we've already stated, we do expect to incrementally increase our starts in the coming quarters. We saw a nice step-up in our starts this quarter and would expect that to incrementally improve from here. But in terms of significant upside to the delivery this year, I think we would say that our current range is a realistic one under all circumstances.

[Anthony Pettinari, Analyst at Smith Barney Citigroup]

Okay. And the mortgage rate assumptions around the full year guidance or just kind of around where we are or anything you'd call out there?

[Bill W. Wheat, Executive Vice President and Chief Financial Officer at D.R. Horton]

Yeah, current conditions. We guide based on current conditions. If things change, that obviously could affect our outlook.

[Anthony Pettinari, Analyst at Smith Barney Citigroup]

Okay. That's helpful. I'll turn it over.

[Operator]

Your next question for today is coming from Susan Maklari at Goldman Sachs.

[Susan Maklari, Analyst at The Goldman Sachs Group]

Thank you. Good morning.

[David V. Auld, President and Chief Executive Officer at D.R. Horton]

Good morning, Susan.

[Susan Maklari, Analyst at The Goldman Sachs Group]

My first question is, can you talk a little bit about what you're seeing on the rental side of the business? As we've seen the for sale side, get a little better in the quarter, are you seeing any shift there? And how are you thinking about the outlook the rentals?

[Paul J. Romanowski, Executive Vice President and Co-Chief Operating Officer at D.R. Horton]

We have seen good pace on our ability to rent up both our apartments and single-family for rent. We have seen stability in rent rates. They've been increasing quite a bit over the prior 12 months, and we've seen stability there. On the purchase side, we still see activity in the market. We have certainly some units that we pushed out and sold consistent this quarter really with last in terms of number of units. And although we have seen the number of buyers back off some and a little bit of tightening in credit in terms of their ability to get to these financed, but we still see pretty solid demand for the communities that we have out to market.

[Susan Maklari, Analyst at The Goldman Sachs Group]

Okay. That's helpful. And then, given the outlook and the trajectory demand, the way it seems to be coming together, can you talk a bit about your appetite for land acquisitions? Land spend, I believe, you said was about flat sequentially. How are you thinking about that as we go through the next couple of quarters?

[Bill W. Wheat, Executive Vice President and Chief Financial Officer at D.R. Horton]

We're really just continuing to look at replenishing the supply market by market. We've got a good lot position, a good flexible lot position, so we'll continue to incrementally just replenish it. I don't necessarily expect significant moves one way or the other. But as our volume of sales and closings increase, then we'll be replenishing a little bit more to match that.

[Susan Maklari, Analyst at The Goldman Sachs Group]

Okay. Thank you, and good luck.

[Operator]

Your next question for today is coming from Eric Bosshard at Cleveland Research.

[Eric Bosshard, Analyst at Cleveland Research]

Good morning. Two things. First of all, I think, the gross margin in the quarter was a bit better than you had targeted. What was different that drove the relative better gross margin performance?

[Bill W. Wheat, Executive Vice President and Chief Financial Officer at D.R. Horton]

I think, the main difference was our pricing stabilized at a slightly higher level than we were projecting. We were not seeing signs of stabilization at the end of Q1. But once we've gotten into the spring, we've been able to see that really start to stabilize. So, I think that -- I think we're seeing that stabilization a little sooner or a little earlier than we would have projected a quarter ago.

[Michael J. Murray, Executive Vice President and Co-Chief Operating Officer at D.R. Horton]

We definitely saw a strong start to the spring selling season in the March quarter. And as I mentioned before, half the homes we closed were sold in the quarter, so they benefited from some of the stabilizing and improving price environment. We carried a fair number of completed specs into the quarter.

[Eric Bosshard, Analyst at Cleveland Research]

Okay. And then, secondly, in regards to incentives or pricing, I'm curious if you can help with what the average rate on closings is? I'm just trying to get a sense of where rate buydowns are part of the effort, the magnitude of what that looks like, what the -- I guess, in other words, what the magic number of rates or the bull side that you need to get rates to get consumers comfortable closing on homes?

[Jessica Hansen, Vice President, Investor Relations and Communications at D.R. Horton]

Yes. So, our average general buydown is typically a point on the loan value. So, I would say, there's been a lot of headlines out there talking about 5.5%. It fluctuates probably a little bit, but 5.5% is relatively reasonable in terms of what a consumer is okay with at this point.

[Bill W. Wheat, Executive Vice President and Chief Financial Officer at D.R. Horton]

Yeah. And roughly 60%, 65% of our buyers are utilizing that buy down through our mortgage company. And so, they're getting that benefit of that point buy down.

[Eric Bosshard, Analyst at Cleveland Research]

And then, regarding the trend within that, has there been any change within that or is that kind of the bulls out that works? And obviously, the mortgage market moves around, but is that 5.5% -- the 60% to 65%, has there been any variability in the trend around either of those?

[Bill W. Wheat, Executive Vice President and Chief Financial Officer at D.R. Horton]

It's been pretty consistent certainly throughout the quarter, and rates have stayed relatively consistent. And we will fluctuate our rate to the market based on what we see in the overall market rates. So, for the last quarter, it's hovered right around that 5.5% and seems to be accepted by our homebuyers.

[Eric Bosshard, Analyst at Cleveland Research]

Great. Thank you.

[Operator]

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

[Alan Ratner, Analyst at Zelman & Associates]

Hey, guys. Good morning. Thanks for taking my question. Nice quarter. First question, obviously you guys are an entry-level builder, but you do have exposure at different price points in segments as well. So I'm curious if you're seeing any notable differences in terms of demand trends across your price points. And similar to that effect, we have heard in recent quarters that -- and I think you guys mentioned this as well that there was a reluctance of buyers to kind of sit in backlog for a long period of time given the volatility in rates and you guys were holding specs off until they were further along in the construction process. Has that changed at all? Are you seeing -- with the stability now, are you seeing more willingness to maybe sit in backlog for a longer period of time?

[Michael J. Murray, Executive Vice President and Co-Chief Operating Officer at D.R. Horton]

I think, we are seeing some buyers willing to buy earlier in the production process. There has been a little bit of stability in market rates and they feel good about that. But the better thing for us is, we're seeing our cycle times improve. So we're still able to give them sort of a shorter period of time in backlog than they would have had six months or certainly a year ago. And so there is a confidence level that we're able to sell from that helps that buyer quite a bit.

[Alan Ratner, Analyst at Zelman & Associates]

Got it. And on the price point question, any notable differences that move up and active adult recognizing it's a smaller part of your business?

[Paul J. Romanowski, Executive Vice President and Co-Chief Operating Officer at D.R. Horton]

No, Alan. We really haven't seen market to market a significant difference in terms of levels of demand as we go up and down the price curve. Even where we are at the higher end of the price market in any given market, we're still at the value price point for that price. So, we're still seeing that demand. And for us, if they've come off of a $700,000 price, that means they may be looking for $600,000 or $500,000. And so, we are catching those people, I think, as they move down the curve.

[Jessica Hansen, Vice President, Investor Relations and Communications at D.R. Horton]

And what still hasn't changed is the amount of existing home inventory out there and available, that remains very limited. And so, if somebody does want to home at a higher price point or a lower price point, new construction is where they can find it right now.

[David V. Auld, President and Chief Executive Officer at D.R. Horton]

And you also have the trend of migration from high cost states to lower cost states, what seems like a high price point in Florida to our Florida operators is a relatively low price for somebody coming from New York or California.

[Alan Ratner, Analyst at Zelman & Associates]

Understood. If I can squeeze in a follow-up on the rental segment. If I look at the average order price of your SFR homes, it's come down quite significantly. And I'm sure there might be some mix involved there since we're talking about a relatively small number of homes, but is that 25%, 30% decline in per unit price. I think this quarter's average was in the low-300s. Is that representative of what's going on in the market today or have the trends mirrored the for-sale market?

[Michael J. Murray, Executive Vice President and Co-Chief Operating Officer at D.R. Horton]

I think, we've seen certainly through the fall with the disruption in the capital markets, increases in cap rates for disposition of those properties. But largely what we saw this quarter was a change in mix of geographies of where those homes were being delivered and related rental rates and NOIs on those projects. So, still feel good about the overall platform for sure, very excited about the opportunities that are in front of us with that and excited that the capital markets have been stabilizing a little bit, which is going to help execution for sure, on the disposition of those properties.

[Paul J. Romanowski, Executive Vice President and Co-Chief Operating Officer at D.R. Horton]

And also expect, on a go-forward basis, to see a little more variability in our rental platform just because we're selling whole communities at a time, and they could be townhomes or smaller homes or geographic location can cause that to move around a little more than our for-sale business.

[Bill W. Wheat, Executive Vice President and Chief Financial Officer at D.R. Horton]

Until the volume and the number of projects closing in the quarter gets up to a larger level in a steady state, you're going to see a little bit more lumpiness in the quarter-to-quarter stats there.

[David V. Auld, President and Chief Executive Officer at D.R. Horton]

And I will say, it's very difficult to put a lot on the ground to get a house built, very little inventory out there and a lot of money chasing investment properties. So, we think we have high hopes for this product segment.

[Alan Ratner, Analyst at Zelman & Associates]

Appreciate the color. Thanks, guys.

[Operator]

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

[Rafe Jadrosich, Analyst at Bank of America]

Hi. Good morning. Thanks for taking my question. I wanted to ask, how do you think about how your ability to offer rate buy-downs impacts demand and sort of a volatile mortgage rate environment? Do you see volatility in weekly traffic and demand as mortgage rates move around or is your ability to offer rate buy-down to prevent that?

[Michael J. Murray, Executive Vice President and Co-Chief Operating Officer at D.R. Horton]

I think, you could certainly see, as rates shift in traffic, you're going to see that change either up or down, but the sales cycle time isn't immediate. And so, our agents and our realtor partners do a good job of maintaining those buyer relationships and our ability to offer some stability in and that rate helps us really at the close.

[David V. Auld, President and Chief Executive Officer at D.R. Horton]

And just certainty of payment gives confidence to the buyer and, at a 5.5% rate, we have more qualified buyers than we do at a 6.5% rate. So, it opens up ownership to more people if you're able to present that.

[Jessica Hansen, Vice President, Investor Relations and Communications at D.R. Horton]

Much easier to manage to the interest rate environment when now you're talking about 20 to 50 basis point moves in rates versus what we were experiencing in the back half of last year. I mean, it's just not as impactful as what we had to manage through last year.

[Rafe Jadrosich, Analyst at Bank of America]

Thank you. And then, just following up on an earlier question on how the gross margin came in versus your initial guidance for the quarter. It sounded like the pricing stability was higher than projected. Is it -- did you start to raise prices at all during the quarter and then the gross margin improved throughout the quarter? Or was there a better elasticity where you didn't have to lower prices as much as you anticipated to sell homes that had the current rate?

[Bill W. Wheat, Executive Vice President and Chief Financial Officer at D.R. Horton]

Versus the guidance we gave, it was the latter. We did not have to lower as much as we had been projecting necessarily. But in terms of how we're actually managing community by community, that's a mix bag. As we got into the spring, we did, as Mike said, we sold about half our homes that we closed this quarter in the quarter. So as we started hitting our pace, seeing solid demand into the spring, definitely in certain communities, we are starting to push pricing up carefully, but are pushing it up.

[Rafe Jadrosich, Analyst at Bank of America]

Thank you. Very helpful.

[Operator]

Your next question is coming from Buck Horne at Raymond James.

[Buck Horne, Analyst at Raymond James]

Hey, thanks. Good morning. Before we leave the rental segment altogether, I wanted to just maybe drill down a little bit further in terms of breaking apart your expectations for single-family rental versus multifamily for the remainder of the year. You mentioned that there has been some backing up of cap rate expectations, I guess, with higher cost of capital and disruptions in the capital markets. Is that more pronounced on multifamily versus SFR or vice versa or kind of what are you seeing in terms of buyer expectations for stabilized cap rates in either segment?

[Michael J. Murray, Executive Vice President and Co-Chief Operating Officer at D.R. Horton]

Other than saying higher than they were a year ago, on a go-forward basis, it does seem to have stabilized. I don't think it has been changing between the multifamily and the single family rental. The relative gap that's there has not changed. Generally, the multifamily projects underwrite at a slightly lower cap rate. Like-for-like, it's a more established market, it's a more known market, but still very pleased with the performance we're getting from that segment and the disposition opportunities ahead of us over the next several quarters.

[Buck Horne, Analyst at Raymond James]

Okay. That's helpful. Appreciate that. And maybe just kind of hypothetically just thinking ahead here with challenges in the regional banking environment and maybe more capital constraints for -- particularly for smaller and your regional private competition -- homebuilding competition that is -- would you think that it's possible that more M&A opportunities might open up either later this year or in the next year if there's just more capital constraints on some of your small private competition out there?

[David V. Auld, President and Chief Executive Officer at D.R. Horton]

Well, we do believe that capital constraints for the privates and smaller builders is going to be impactful. We see opportunities. We evaluate the opportunities and based upon positioning people in market that they have, we'll pursue them or not. But irregardless, it's going to help us aggregate markets, whether it's via acquisition or picking up lots or just providing more inventory availability than can be done by a private or a smaller region. So, it's an opportunity for us.

[Operator]

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

[Alex Barron, Analyst at Housing Research Center]

Yes. Thank you. I was hoping we could think big -- talk big picture. At the end of 2020, there was a lot of demand, and everybody just took a lot of orders and then suddenly ran into supply chain issues the following year, as demand is pretty good here at 6%, 6.5% rates. If rates were to go down, say, below 6% or towards 5% in the next year or something, what do you guys think you could do differently this time around to be able to capture and deliver on those homes? Meaning, have you guys thought of doing warehousing of materials or hiring crews to some level of the deliveries or some type of vertical integration? Any thoughts around anything you do different to be able to grow and not just kind of keep your deliveries limited?

[David V. Auld, President and Chief Executive Officer at D.R. Horton]

I think, there is just a built-in capacity issue in the industry. And even when you think you've got everything solved, then something else happens. I mean, the transformers that bring [Technical Issues] provide could be a huge issue in getting lots delivered within the next 12 to 15 months. And so, you're constantly looking at how are you positioned, where can we pick up incremental capacity both in trade and in lines. And from a division level push, that is really kind of what we've been focused on, simplifying our operations, consolidating markets, consolidating trade capacity, and how do we improve our logistics of getting materials to communities. But it's just within the entire industry. If we had 100% of the trade material capacity, it would still be constructed. It's very difficult for lots on the ground, very difficult to get house built. And I do think that's why we're gaining market share because we are 100% focused on controlling capacity throughout the supply chain.

[Alex Barron, Analyst at Housing Research Center]

Okay. And in terms of the land supply, I mean, you guys have shifted materially in the last few years. What percentage of your lots you own versus how many you option? And you obviously acquired Forestar to kind of help in that process, but is there anything else that you could do to, I guess, grow Forestar or do something to shift your ability to increase that ratio of going to option even more?

[David V. Auld, President and Chief Executive Officer at D.R. Horton]

Let's just continue to work. I mean, it's day in, day out, developing great -- our development partners and then building a trust relationship with them. They know when we bring up a deal or they bring us a deal that there's going to be the highest level of execution from a housing standpoint of anybody in the industry. And it is hard work, it's to build relationships over time and maintain trust through any kind of market. So -- but we're just going to continue to work on it, try to get a little better next year. There's no magic wand to make all that happen. It's hard work, it's trust, it's transparency, it's building relationships.

[Alex Barron, Analyst at Housing Research Center]

All right. Well, best of luck on your road back to 100,000.

[Jessica Hansen, Vice President, Investor Relations and Communications at D.R. Horton]

Thanks, Alex.

[Operator]

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

[Mike Dahl, Analyst at RBC Capital Markets]

Good morning. Thanks for taking my question. Just a follow-up on the lot side. A couple of comments already on the call, but you note the flexibility in your current portfolio, not necessarily getting too aggressive on offense. Yet I'm still expecting somewhat elevated option write-offs. I guess, I'm wondering, clearly as the markets improved, probably some deals that you have in your existing book, maybe you didn't think they would pencil a quarter or two ago and now they might be. Any way that you could kind of ballpark quantify what deals you think have kind of come back into the underwriting box on what makes sense today versus things you might have thought you would walk from prior?

[Michael J. Murray, Executive Vice President and Co-Chief Operating Officer at D.R. Horton]

We have so many deals under contract and evaluation at any point in time. It would be really hard for us to have any sense of what fell out or was falling out and leading our global operations teams to think this deal doesn't work anymore, and now it might. I can tell you, as David said, anytime we have an opportunity to get finished lots that are increasingly difficult to get produced these days, we are aggressively looking for ways to work with our development partners, landowners to make the deals work and to find ways to bring those lots to market. So, it's a constant evaluation process and the transparency and the relationships we've built over 45 years of doing this really help us achieve that.

[Mike Dahl, Analyst at RBC Capital Markets]

Got it. Okay. And then, second question, just on capital allocation. With the buyback based on dollar figure in terms of the guide, obviously you're moving the stock that doesn't necessarily buy as much as it would have a quarter or two ago. So, when we're thinking about incremental capital allocation and the balance sheet and the cash flow expectations, I guess, do you think you'll keep targeting more of that dollar figure or should we expect as the year goes on that you move back to more targeting a certain level of either dilution offset or net share count reduction?

[Bill W. Wheat, Executive Vice President and Chief Financial Officer at D.R. Horton]

Yeah. It's always -- obviously we're looking at both the dollars invested as well as the impact on the share count, and you will never hear me complain about a higher stock price for sure with respect to our repurchase activity. So -- but end of the day, it's dollars that we're investing. And so, we look at our cash flow, we look at our earnings, we look at our liquidity levels, we look at our projections going forward to the extent that our projections are improving and our cash flow prospects are improving versus what we have previously thought, then that increases the chance of increasing share repurchase levels. But as of right now, and as we're looking at the rest of the year and our positioning there and our needs for our capital to invest in the business, guiding to around the same level of dollar investment as last year is still where we expect to be, but that's something we'll be constantly reevaluating.

[Mike Dahl, Analyst at RBC Capital Markets]

Okay. Thank you.

[Operator]

Your next question is coming from Jay McCanless at Wedbush.

[Jay McCanless, Analyst at Wedbush]

Hey. Good morning. Thanks for taking my questions. So, if my math is right, I think this is the fifth quarter in a row where average selling communities have been up year-over-year. I guess, and I think you talked a little bit about this earlier, David, what headwinds are remaining to continuing that kind of growth streak? And I'm presuming that the lot count you have right now could support further growth, but maybe just talk about that trajectory.

[David V. Auld, President and Chief Executive Officer at D.R. Horton]

It's going to be market to market, I can tell you, kind of what Mike said earlier, where we have an opportunity to pick up finished lots on some kind of role or take. We're going to pursue that aggressively. It's consolidating, it's like controlling the lumber yard. If you control the lots, you control the capacity -- the ability to meet capacity. So, I would anticipate the committed count continue to decline. When it was declining, because every time we open community, it sold out immediately, which is a good thing. But the market is normalizing. There is much more stability from the -- or much better ability to kind of look at the market, understand the absorption, set a start pace and kind of drive an efficient production operation. So, I guess, that's a long way to say, yes, I do think you're going to see our community count continue to move forward.

[Jay McCanless, Analyst at Wedbush]

Okay. Great. It's a high-class problem to have. And I guess, the question I have, pre-COVID, could you remind us for the fiscal second, fiscal third quarter, historically what was the percentage of homes that you would sell and close intra-quarter?

[Jessica Hansen, Vice President, Investor Relations and Communications at D.R. Horton]

That really bounces around quite a bit, and it doesn't really have a whole lot of seasonality. It's just kind of dependent on our inventory position at the time, which is why we were able to sell and close 50% of our homes this quarter, intra-quarter sold and closed at the same quarter, which is very high. A more normalized range would be somewhere between 30% and 40%. So when we think about Q3, it could still be elevated, but we don't necessarily expect to replicate the 50%.

[David V. Auld, President and Chief Executive Officer at D.R. Horton]

Well, our backlog going into this quarter is much better [Technical Issues] -- much better positioned.

[Jessica Hansen, Vice President, Investor Relations and Communications at D.R. Horton]

Yes.

[Jay McCanless, Analyst at Wedbush]

Okay. Great. Appreciate it. Thank you.

[David V. Auld, President and Chief Executive Officer at D.R. Horton]

Things just feel to be normalizing.

[Operator]

We have reached the end of the question-and-answer session, and I will now turn the call over to David Auld for closing remarks.

[David V. Auld, President and Chief Executive Officer at D.R. Horton]

Thank you, Holly. We appreciate everyone's time on the call today and look forward to speaking with you again to share our third quarter results in July. And finally, congratulations to the entire D.R. Horton team in producing a solid second quarter, continue to compete and continue to win every day.

[Operator]

[Operator Closing Remarks]

Participants

Corporate Executives

• Jessica Hansen, Vice President, Investor Relations and Communications
• David V. Auld, President and Chief Executive Officer
• Michael J. Murray, Executive Vice President and Co-Chief Operating Officer
• Paul J. Romanowski, Executive Vice President and Co-Chief Operating Officer
• Bill W. Wheat, Executive Vice President and Chief Financial Officer

Analysts

• John Lovallo, UBS Group AG
• Stephen Kim, Evercore ISI
• Carl Reichardt, BTIG Research
• Mike Rehaut, JPMorgan Chase & Co.
• Matthew Bouley, Barclays PLC
• Truman Patterson, Wolfe Research
• Anthony Pettinari, Smith Barney Citigroup
• Susan Maklari, The Goldman Sachs Group, Inc.
• Eric Bosshard, Cleveland Research
• Alan Ratner, Zelman & Associates
• Rafe Jadrosich, Bank of America Co.
• Buck Horne, Raymond James
• Alex Barron, Housing Research Center
• Mike Dahl, RBC Capital Markets
• Jay McCanless, Wedbush