“While we continue to have many strong markets in our more challenging areas, we’ve had to adjust base sales prices, increase incentives, and provide mortgage rate buydowns to maintain or regain sales momentum,” Beckwitt revealed. “Our sales strategy has been to find the market clearing price for each of our homes on a community-by-community basis as quickly as possible and price our homes accordingly.”
The strategy pivot required a more acute analysis of markets, he added: “This requires a detailed understanding of community- and product-specific pricing, financing programs, traffic trends, inventory levels, and buyer sentiments. During the fourth quarter, our new sales orders declined 15% from the prior year on a 4% lower year-over-year community count. Our year-end community count was lower than we projected at the beginning of the year as we walked away and renegotiated our many communities.”
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The strategy allowed the company to sell homes and avoid building up finished inventory, Beckwitt said, resulting in its ability to outsell the competition while increasing its market share. Yet he acknowledged challenges exacerbated in eight markets – those in the company’s so-called “category 3” markets – experiencing more significant softening and correction. Those markets were: Orlando and Pensacola, both cities in Florida; Northern Alabama; Austin, TX; Phoenix; Utah; Reno, Nev.; and Portland, Oregon.
“We had to offer mortgage buydown programs and normalized incentives,” he explained. “Our category 2 markets, which reflect markets where we’ve made more significant adjustments and have successfully regained sales momentum, include 23 markets. These include Jacksonville, Ocala, Atlanta, Coastal Carolinas, Raleigh, Virginia, Maryland, the Philadelphia metro area, Chicago, Minnesota, Nashville, Dallas, Houston, San Antonio, Colorado, Tucson, Las Vegas, California Coastal, the Inland Empire, the Bay Area, Central Valley, Sacramento, Seattle, and Boise. While inventory is limited in each of these markets, we had to offer more aggressive financing.”