Green Brick Partners, Inc. (NASDAQ: NYSE:GRBK) reported a successful third quarter on October 31, 2024, with significant financial achievements including record revenues and a 23.5% increase in net income year-over-year. The homebuilder and land development company announced net income of $89 million and earnings per share (EPS) of $1.98 for Q3, marking the highest EPS for any third quarter in its history. The company, celebrating its tenth anniversary as a public company, is on track to surpass $2 billion in revenues for fiscal 2024, doubling its revenue since 2021.
Key Takeaways
- Green Brick Partners celebrated a decade as a public company with expectations to exceed $2 billion in revenues for fiscal 2024.
- The company reported a net income of $89 million for Q3, a 23.5% increase from the previous year, with a record EPS of $1.98.
- Home closings grew to 956 homes in Q3, with revenue up 26% to $523 million, despite a slight dip in average selling price to $547,000.
- The company's homebuilding gross margin reached 32.7%, leading among peers.
- Net new home orders rose 11.3% year-over-year to 877, with a shift in community mix lowering the ASP for new orders to $518,000.
- Green Brick maintains a strong balance sheet, with a low total debt to total capital ratio of 16.4%.
- The company is optimistic about future growth, leveraging strategic land positions amidst a significant housing shortage.
Company Outlook
- Green Brick plans to launch Green Brick Mortgage in Q1 2025.
- The company aims to spend $700 million on land acquisition and development in 2024.
- Expansion into northern Austin, Texas, aligns with the company's infill strategy, including a significant acquisition in Georgetown.
Bearish Highlights
- Average selling price for new orders decreased due to a shift in community mix.
- The backlog value decreased by 6.5% year-over-year to $582 million.
Bullish Highlights
- Home starts increased by 28% year-to-date, with 1,057 homes started in Q3 alone.
- Trophy homes comprised 52% of new orders, indicating strong demand for high-end properties.
- The company repurchased approximately 97,700 shares at an average price of $55.19.
Misses
- Despite overall growth, the company experienced a decrease in the average selling price for new orders and a decline in backlog value.
Q&A Highlights
- Green Brick prefers not to provide month-to-month comparisons, focusing on steady growth rather than short-term metrics.
- Cash flow has remained neutral throughout the year, with expected fluctuations in Q4 due to land deals and tax payments.
- Pricing adjustments are primarily incentive-driven, with a consistent incentive level of around 6% over recent months.
Green Brick Partners, Inc. continues to strengthen its position in the homebuilding industry with a robust financial performance and strategic land acquisitions. The company's focus on maintaining a strong balance sheet and leveraging favorable market conditions positions it well for future growth. With plans to expand its mortgage services and a significant investment in land acquisition and development, Green Brick looks to capitalize on the ongoing housing shortage and demographic trends. The company's strategic moves, such as entering the northern part of Austin, Texas, and maintaining a consistent incentive level to drive sales, demonstrate its commitment to sustainable growth and market adaptation.
InvestingPro Insights
Green Brick Partners' (NASDAQ: GRBK) strong financial performance in Q3 2024 is further supported by data from InvestingPro. The company's market capitalization stands at $3.39 billion, reflecting its significant presence in the homebuilding sector. With a P/E ratio of 9.26, Green Brick appears to be trading at an attractive valuation relative to its earnings, which aligns with the company's reported record revenues and net income growth.
InvestingPro data shows that Green Brick's revenue for the last twelve months as of Q2 2024 was $1.88 billion, with a robust revenue growth of 7.44%. This growth trajectory supports the company's expectation to exceed $2 billion in revenues for fiscal 2024. The company's profitability is underscored by its impressive gross profit margin of 32.95% and operating income margin of 21.98% for the same period, which corroborates the reported leading homebuilding gross margin of 32.7% mentioned in the earnings report.
An InvestingPro Tip highlights that Green Brick is trading at a low P/E ratio relative to its near-term earnings growth, with a PEG ratio of 0.39. This suggests that the stock may be undervalued considering its growth prospects. Additionally, another InvestingPro Tip indicates that the company operates with a moderate level of debt, which is consistent with the reported low total debt to total capital ratio of 16.4%.
Investors should note that Green Brick's stock has shown a strong performance, with a 78.32% price total return over the past year and a 27.49% return over the last six months. This aligns with the company's positive financial results and optimistic outlook.
For those interested in a more comprehensive analysis, InvestingPro offers 11 additional tips for Green Brick Partners, providing deeper insights into the company's financial health and market position.
Full transcript - Green Brick Partners Inc (GRBK) Q3 2024:
Operator: Hello, everyone. My name is Jessica, and I will be your conference operator today. At this time, I would like to welcome everyone to the Green Brick Partners, Inc. Third Quarter 2024 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. I would now like to turn the call over to Rick Costello, Chief Financial Officer. Please go ahead.
Rick Costello: Good afternoon, and welcome to Green Brick Partners earnings call for the third quarter ended September 30, 2024. Following today’s remarks, we will hold a Q&A session. As a reminder, this call is being recorded and will be available for playback. In addition, a presentation will accompany today’s webcast and is also available on the company’s website at investors.greenbrickpartners.com. On the call today is Jim Brickman, Co-Founder and Chief Executive Officer; Jed Dolson, President and Chief Operating Officer; and myself, Rick Costello, Chief Financial Officer. Some of the information discussed on this call is forward-looking, including the company’s financial and operational expectations for 2024 and beyond. In yesterday’s press release and SEC filings, the company detailed material risks that may cause its future results to differ from its expectations. The company’s statements are as of today, October 31, 2024, and the company has no obligation to update any forward-looking statement it may make. Our comments also include non-GAAP financial metrics. The reconciliation of these metrics and the other information required by Regulation G can be found in the earnings release that the company issued yesterday and the presentation available on the company’s website. With that, I’ll turn the call over to Jim. Jim?
Jim Brickman: Thank you, Rick. Before we dive into the financial results today, I would like to take a moment to acknowledge a significant milestone for Green Brick. This week marks the tenth anniversary since Green Brick became a public company. Over the past decade, we have prided ourselves on our ability to navigate turbulent environments while maintaining a focus on our long-term growth objectives. 10 years ago, in 2014, we had fewer than 600 closings and $246 million in total revenues. In 2021, we achieved total revenues above $1 billion for the first time, and now we expect to surpass the $2 billion mark in revenue in fiscal 2024. Our compounded annual growth rate in pretax income from fiscal year 2015 to the last 12 months ending 9/30/2024 is an amazing 34%. We also believe that our ability to grow with one of the least leveraged balance sheets and one of the lowest cost of debt among our small and mid-cap peers demonstrates our team’s operational excellence and positions us well for future growth. At the end of the third quarter, our net debt to total capital ratio was only 12.5%, and our total debt to total capital ratio was 16.4% with a weighted average interest rate of 3.4%. Finally, of the 16 public homebuilding peers that we track, Green Brick was the top performer since we went public based on share price appreciation including the impact of any dividends. As I look back on this journey, I’m incredibly grateful and proud of our accomplishments made possible by our dedicated employees whose unwavering commitment enabled Green Brick to realize its vision of building long-term lasting communities and providing lasting value to our homebuyers and our shareholders. Now let’s turn to our third quarter results. I’m excited to share that Green Brick completed its best third quarter in company history. We closed 956 new homes and grew home closings revenue by 26% year-over-year to $523 million, over 80% of which was again generated from infill and infill adjacent submarkets. Homebuilding gross margins moderated from our record high last quarter, but remained at the top among our public homebuilding peers, as shown on Slide 4. Year-to-date homebuilding gross margin of 33.6% was up 290 basis points and reflects a record for any year in our history through the third quarter. As shown on Slide 5, since 2022, we have generated homebuilding gross margins in excess of 30% with the exception of only three quarters. Net income attributable to Green Brick during the third quarter grew 23.5% to $89 million and earnings per share increased 26.9% year-over-year to $1.98, a record for any third quarter. Year-to-date diluted EPS of $6.12 was up 34.5% year-over-year, another record for the company for any year-to-date period through the third quarter and only $0.02 below our full year EPS of $6.14 in 2023. I believe there are several reasons for Green Brick’s consistent performance but I would like to highlight one factor that is the heart of Green Brick’s success. Specifically, while Green Brick has evolved since inbounding our core philosophy and approach to land acquisition and development remains intact. We differentiate ourselves from the prevalent land-light model by strategically acquiring high-quality land and self-developing lots on our balance sheet. This approach enables us to avoid the rising costs often associated with the land-light model, particularly in today’s demand environment for land and lot inventory. As a result, we anticipate our lot cost as a percentage of average sales price for a full year 2024 and 2025 to be flat compared to 2023 in contrast to the industry trend where land and lot costs are continually growing as a percentage of the ASP. We believe the ability to self-develop land at wholesale prices positions us favorably to control the entire land development life cycle, including giving us the ability to moderate pacing and timing as market shift, which in turn enables us to manage costs more effectively. Self-development also widens our access to land deals in a competitive land market, especially in coveted infill and infill adjacent submarkets. Despite the misconception that land-heavy leads to lower returns, Green Brick has consistently generated industry-leading return on assets and equity. Our year-to-date annualized return on equity was 27% and return on assets was 18%. Return on equity and return on assets since 2022 averaged 27.8% and 17.5%. These returns are even more impressive as we were able to generate this level of [indiscernible] market from our significant land investments, which are an investment in the long-term but do not contribute to any revenue in the current period. We believe we have one of the best land and lot positions in our industry and are well positioned to maximize the value of our land assets and generate sustainable growth for the years to come. We believe our land approach in key markets are also beneficial when analyzing market fundamentals. We have not yet seen a significant increase in competition from existing homes in our key submarkets where we have acquired land primarily in infill and infill adjacent locations. As illustrated on Slide 6, existing home inventory remains at near historic loans. Many existing homeowners continue to stay put rather than forego their low mortgage rates. As shown on Slide 7, approximately 75% of outstanding mortgages have an interest rate below 5%. We believe that under current economic conditions and the high interest rate environment, the primary challenges limited demand continued to be buyers’ psychology and affordability. Many prospective homebuyers remain cautious even if they could qualify current mortgage rates. We continue to provide our buyers the flexibility to allocate their spend out of our incentive dollars toward rate reduction buydowns and closing costs to mitigate affordability concerns. Over the long term, we continue to believe that favorable demographic shifts will serve as a strong backdrop for the homebuilding industry. As outlined on Slide 8, a wave of millennials and Gen Z are entering into prime home buying years fueling demand for the next decade. The housing market has been underbuilt for years following the financial crisis creating a significant shortage estimated between four million and seven million units. These factors collectively represent a substantial opportunity for new home construction and we believe Green Brick is well positioned to capitalize on this trend and to expand our market share with our superior land pipeline. With that, I will now turn it over to Rick who will provide more detail regarding our financial results. Rick?
Rick Costello: Thank you, Jim. Please turn to Slide 9 of the presentation. Home closings revenue grew 26% year-over-year to $523 million, the highest for any third quarter in company history. This increase was driven by 26.8% more closings year-over-year to 956 units, partially offset by an 80 basis point year-over-year decline of ASP to $547,000. We continue to expect ASP to be in the range of $540,000 to $560,000 for the fourth quarter subject to changes in product mix and business conditions. Homebuilding gross margins were 32.7% during the third quarter, down 60 basis points year-over-year. Our gross margin percentage remained the highest among our public homebuilding peers, as shown on Slide 4. The sequential increase in incentives and discounts contributed to the decline in homebuilding gross margins as we adjusted to seasonality and elevated mortgage rates during the quarter. Jed will provide more details on the sales environment shortly. The majority of Trophy’s closings in 3Q were sold during the same quarter, resulting in a more rapid flow-through of higher incentives on our P&L, which had a slight negative impact on our gross margins. SG&A as a percentage of residential unit revenue for the third quarter decreased 30 basis points year-over-year to 11.0%. Net income attributable to Green Brick increased nearly 24% to $89 million [indiscernible] per share, both a record for any third quarter in company history. As shown on Slide 10, year-to-date, we delivered 2,764 homes, generating home closing revenues of $1.51 billion, an increase of 14.6% year-over-year. Homebuilding gross margin increased 290 basis points to 33.6%, which reflects a record for any year in our history through the third quarter. Net income attributable to Green Brick increased [indiscernible] $278 million and diluted EPS grew 34.5% to $6.12, also a record for any year-to-date period through the third quarter. Net new home orders during the third quarter picked up sequentially and were up 11.3% year-over-year to 877 orders. Our ASP for new home orders was down 9.8% year-over-year to $518,000. The decrease was due to: one, our shift in community mix from closing out infill community to opening new communities and surround infill adjacent areas; and two, a higher percentage of new sales from Trophy, which typically has a lower ASP. In Q3 of 2024, Trophy represented 52% of total new home orders versus 41% in Q3 of 2023. Year-to-date, net orders totaled 2,803, an increase of 4.7% year-over-year, with revenue from new home orders of $1.54 billion. Backlog value at the end of the third quarter decreased 6.5% year-over-year to $582 million. Trophy, a spec home builder, continued to represent a low percentage of overall backlog value at less than 15%. As a result, our backlog ASP increased 5.8% year-over-year to $719,000 which stands in contrast to the lower year-over-year closing ASP. We are actively growing our presence in our existing markets with an ending community count of 106, which represents a 23% increase. Trophy is selling from 38 of those communities. Sales pace for the third quarter was 8.4 homes per average active selling community or 2.8 sales per community per month. Our cancellation rate for the third quarter remained low at 8.5%, which was again, one of the lowest among public homebuilding peers, as shown on Slide 12. As shown on the same slide, we started 1,057 homes or over 20% more home starts [indiscernible] 2024 from the previous year. Also, our units under construction increased 21% to 2,330. Year-to-date, our starts are up 28%. Spec units under construction as a percentage of total units under construction was 69% at the end of the third quarter, which is consistent with the start of 2024. During the third quarter, we bought back approximately 97,700 shares of stock for $5.4 million with a weighted average price of $55.19 per share. While we remain opportunistic with respect to potential share repurchases, our primary focus will continue to be allocating capital to grow our inventory. Last but not least, our investment-grade balance sheet continues to provide us with a solid foundation for future expansion. At the end of the quarter, our total debt to total capital ratio was only 16.4% among the best of our public homebuilding peers, as shown on Slide 11. 100% of our outstanding debt is fixed rate at an interest rate of 3.4%. Furthermore, we had $80 million of cash on hand at the end of the third quarter readily available for deployment and $360 million fully available under our lines of credit. With that, I’ll now turn it over to Jed. Jed?
Jed Dolson: Thank you, Rick. We are pleased to see a sequential increase in sales volume during the third quarter, in contrast to the declining trend observed last year at the same time. Net new orders increased 11.3% year-over-year to 877 in the third quarter. Demand accelerated from June to July as mortgage rates dropped from 7% to mid-6%. While traffic slowed down in August, we were encouraged by a rebound in September, driven by a further interest rate decline to the low 6% range as well as a modest pricing adjustment in select communities. Incentives for new orders during the third quarter averaged 5.9%, up from 4.5% last quarter. Our Dallas and Atlanta submarkets continue to be healthy. Trophy in particular, experienced a stronger rebound in traffic and sales in September, Trophy’s share of Green Brick new home orders for the third quarter increased to 52% by volume as compared to 41% in the third quarter of last year. Trophy’s competitively priced products are designed to appeal to entry-level and first on move-up homebuyers who we believe constitute a larger and growing pool of potential customers. However, this category of prospective buyers is more sensitive to interest rate fluctuations, requiring more pricing and incentives, concessions in certain communities. Year-to-date, Trophy represented 46% of closings by volume and over 35% by revenue. With our industry-leading gross margins, we believe we have more flexibility in adjusting home prices as needed. Our team remains diligent in monitoring and evaluating each community, adjusting and optimizing pricing and pace on a dynamic basis. To address affordability, we continue to offer buyers the flexibility to use their incentive package towards either the price or closing costs, including rate buy-downs. Buyers who closed use our affiliated and mortgage company continued to demonstrate strong qualifying profiles with an average FICO score of 734 and the net debt-to-income ratio of 37% during the third quarter. We are pleased to report significant progress in our new wholly-owned mortgage company Green Brick mortgage. Our team has been working diligently to implement the tech stack, draft policies and procedures and secure the warehouse lines of credit for originating loans. We are actively recruiting loan officers, processors and underwriters with an estimated launch time frame in the first quarter of next year. We’re excited to offer our customers a more comprehensive and turnkey financial solution while adding a new income stream for Green Brick. Moving to capital allocation. As Jim mentioned in his opening remarks, Green Brick’s exceptional growth and returns over the past decade starts with and is driven by our unique land strategy. To propel our growth going forward, our land team has been diligently sourcing and developing plan that positions us for future success. During the third quarter of 2024, we spent $125 million land acquisition and $70 million in land development, bringing our year-to-date total spending to $514 million. We remain on track to meet our original target of $700 million in land acquisition and development spend for the full year of 2024. Year-over-year, we added over 12,700 new lots on a gross basis. On a net basis, total lots owned and controlled at the end of the third quarter increased by 41% to over 37,000 lots. Geographically, approximately 92% of our total lots owned and controlled are located in Texas, 5% in Georgia and 3% in Florida. Approximately 67% of total lots are allocated to Trophy, our primary growth engine. Excluding 19,300 lots of long-term communities, our current pipeline provides approximately five years of lot supply for our builders based on start pace and non-master communities over the last 12 months. Additionally, over 90% of our current inventory of lots owned and controlled are expected to be self-developed. Slides 13 and 14 outline additional detail on our finished lot pipeline in our submarkets in Dallas, Fort Worth and Atlanta, our two largest markets. By the end of the year, we expect to have approximately 4,600 finished lots for our subsidiary homebuilders, positioning Green Brick to sustain growth in 2025. Our land markets remain extremely competitive as we strategically seek out high-quality land parcels to support our growth. Despite persistent pressure on overall land prices, we remain confident in our ability to leverage our strong balance sheet and deep-rooted local connections to identify and acquire land that fits our stringent underwriting requirements. During the third quarter, we continued to underwrite new deals that met or exceeded our unleveraged baseline internal rate of return of approximately 21%. Lastly, current supply chain and labor markets are both stable for land development and home construction. We have seen minimal delay in land development as a result of material or labor shortages compared to a year ago. Cycle times for completing homes construction in the third quarter improved by almost 10 days sequentially and average 5.1 months. This was one month shorter than third quarter of 2023. Trophy cycle time was only 3.6 months in Dallas during the quarter. As we expand our operations in both existing and new markets, we believe we can achieve further efficiencies and cost savings through economies of scale. With that, I’ll turn it over to Jim for closing remarks.
Jim Brickman: Thank you, Jed. As we conclude today’s call, I would like to reflect on our success as we celebrate our 10-year anniversary as a public company. This decade has been marked by a remarkable growth and achievements, achieving milestones [indiscernible] a decade ago. Our team has accomplished so much, and I am incredibly proud of what we have built. I want to express my sincere gratitude to our employees whose hard work made this possible as this wealth of our shareholders for their continued support. Looking ahead, we are excited about the opportunities that lie ahead, particularly through our Trophy brand, including our 2025 initiatives to expand our Austin presence and begin selling in the Houston market. We remain committed to continuing to expand on the foundation we have created by building high-quality communities where people want to live, attracting and retaining talented and dedicated team members and creating shareholder value. This concludes our prepared remarks, and now we open the line for questions.
Operator: [Operator Instructions] Our first question comes the line of Alex Rygiel. Alex, your line is now open.
Alex Rygiel: Thank you and very, very nice quarter. Jim, I know it’s still a little bit early, but maybe if you could help us to think about community count growth into 2025 and then maybe Rick can help us to think about SG&A, if 11% is a normalized level? Or is there some future additional leverage on that?
Jim Brickman: Sure. Thanks, Alex. We just went over this pretty broadly with the full team and Rick is probably the best prepared to do this because he just did it for us. So Rick, if you can talk about community count growth?
Rick Costello: Yes. I think really because of our spec-heavy model, Alex, we are – you are seeing the community count accounts at the same time that you’re seeing the starts. In other words, we’ll start our first x number of months of homes and when we start selling them, you’ve already seen the starts hit, and it’s just a matter of getting them to the finish line. So in that model, you’re really seeing that growth come about by the fact that its transition upwards. It’s the last three quarters’ average over 1,115 starts. And the most recent I think this quarter was around 1,050, so that’s really what you’re going to be keying off of here. In other words, it’s that kind of pace that you’re seeing.
Jim Brickman: Alex, the other thing that makes it a little more difficult for analysts and I think some investors is many of the communities that we’re adding are larger Trophy communities. And those communities are going to have much greater sales paces. So as we add these communities, our sales pace is not going to be correlated to those communities as much as it has been in the past because many of these communities should generate a lot of sales.
Alex Rygiel: And SG&A leverage?
Jim Brickman: We’ve not really discussed that that much, but it’s going to remain pretty much constant. Obviously, we’re going to grow the top line. There may be some benefit there.
Alex Rygiel: That’s helpful. And then lastly, it looks like you are entering the northern part of Austin, Texas. Is that – help us to sort of understand how that fits with the infill and infill adjacent sort of strategy of Green Brick in its broader entirety?
Jim Brickman: Well, we are entering the Austin market. It does fit in with the infill and infill [indiscernible] one of the largest deals that we just bought in Austin is in Georgetown. That is a very desirable location neighborhood the city is south probably well built out, how many lots we have there, 1,100 Jed?
Jed Dolson: Yes, excess.
Jim Brickman: And really, we have most of the builders in Austin asking for sell emotes there and they perceive it as an A+ location. Our strategy is to hopefully find more deals like that, but it’s a very competitive land market. And we’ll see how that translates on 2025.
Alex Rygiel: Very helpful. Thank you.
Operator: Thank you. And your next question comes from the line of Carl Reichardt with BTIG. Carl, your line is now open.
Carl Reichardt: Thanks. Hey, guys. Nice to talk to you. Jim, would you take a stab at giving us a sense of how October has trended with rates up? Obviously, we’ve heard from a number of your peers talking about some choppiness there. I’d like to hear your take.
Jim Brickman: Well, our take, actually, we knew you’re going to ask this or somebody on the call asked this, Carl, and our business is good. And we’re hesitant to start giving month-to-month comps because even though it’s good, as a CEO, I don’t only want to parse good news. And we think if we start giving monthly data that we need to give monthly data all the time. So we’re going to stay away from that other than saying, we’re still optimistic and we think business is good.
Carl Reichardt: Okay. Fair enough. And then – so Rick, you and I have talked a lot – all of us have talked about looking at your delivery volume and looking at your start comparing the two and kind of looking at volume two quarters out from your start space. And as the business mix changes, well, first of all, cycle times have started to improve some more. Business mix has shifted to Trophy, you’re building those faster. Is that relationship sort of two quarters out from starts pace still likely to hold as we move into 2025? Or do you think that, that pace will quicken some or change?
Jim Brickman: I don’t think it will change appreciably. And it’s a mix of deliveries. So two to three is really what the answer is going to be. And also if you go strictly by two quarters, then you’re assuming that there’s no change in our finished inventory levels at all, which – and when rates are volatile, that’s not necessarily a reasonable assumption. So I’d say two to three is probably a better guess.
Carl Reichardt: Two to three, okay.
Jed Dolson: Carl, we did a little over a thousand starts in the third quarter. That’s really a nice cadence. We think we’re seeing demand is very elastic. You may have to throw some incentives at it to make a house sale. But really, I think the cadence right now that we’re comfortable in maintaining is that around 1,000 starts and trying to match sales to it, and hopefully rates don’t go up anymore and they go down so we don’t have to attract people, buyers with incentives.
Jim Brickman: Yes. Unless there’s some dramatic change, we’ll be starting at least 1,000 homes every quarter.
Carl Reichardt: Okay, great. That’s very helpful. Thanks. If I can squeeze one more in. Just on cash flow, you’ve been effectively OCF neutral all year, all three quarters. Basically, you’re a little different than other builders. Often we see a bigger buildup in OCF in the fourth quarter. Rick, what’s your thinking on where OCF might end up in Q4? Will you end up being more positive for the year? Will that be a big flush quarter for you? Or will the investments in land sort of suck up the OCF you’d otherwise generate from closings?
Rick Costello: Yes. You got the extreme in our land closings, especially when some of the bigger deals close. We also had a situation in [indiscernible] forgiveness on our ES, our estimated tax payments that are not due until the fourth quarter because of the wind shear event we had in Texas. So that bill comes due and in effect we have to pay 3/4 of our taxes in Q4. So I think between that and the land deals, land deals are highly unpredictable. But we may start to borrow on our lines of credit here and would expect that to be a good answer. I mean, we’re spending $700 million this year and that’s likely to go up next year because we’re finding good opportunities. So – but all within range, we’re less than 16% – around 16% to total capital. Don’t see that changing dramatically, maybe up to 20% at some point.
Carl Reichardt: Okay, I appreciate that. Thanks a lot, guys.
Rick Costello: Yes.
Operator: And your next question comes from the line of Jay McCanless [Wedbush]. [Operator Instructions] And again our next question is Jay McCanless with Wedbush. And Jay your line is now open.
Jay McCanless: Hi. Thanks. So Jed did you talk about what levels of base pricing adjustments you guys are having to do versus maybe just incentives around closing costs or rate buy downs. Just wondering how deep you’re able to cut to kind of get homes moving in this environment?
Jed Dolson: Yes. It’s mainly incentive driven. We really don’t want to touch base price unless we have to. And so it’s really Jay, it’s really been month-to-month, looking at our incentive grid July was a tough month, which is always a tough month. Things got better in August and better in September and continue to be relatively consistent in October.
Jay McCanless: Consistent with September to October consistence, which means they’re Jed?
Jed Dolson: Yes, I mean, if you want to look over the past 90 to 100 days, you could use 6% incentives as a good guide.
Jay McCanless: That’s great. And then I guess the other question I had is, are there any new markets? I know one of the previous questioners asked about North Austin, but anything that you guys are looking at getting deeper, whether it’s around the Atlanta market, around Dallas, anything we should be keeping our eye on?
Jim Brickman: Well, we’re always interested in finding a good deal. We just don’t see very many good deals in private money markets. And if you take a look at kind of our strategy over the next five years, we’re in Dallas, the largest market, or now maybe the second largest market, Houston is either arguably the first or second largest market. Atlanta is the fourth or fifth largest market. And our runway for growth in these markets, that we’re continuing to improve our operational skills and buying more and more land and seeing better deal flow that gives us really a fantastic runway for growing the business. We found some great builder in Charlotte. We’d love to buy it, but we’re really happy with owning 37,000 lots in the markets I just talked about. And that really provides a nice runway for our business for the next five years.
Jay McCanless: Okay, that sounds great. Thank you.
Operator: All right. [Operator Instructions] All right. Well, I don’t see any further questions on the line, so I want to just thank everybody for joining us for today’s call. This does conclude our call today. So again, thank you for joining and you are now free to disconnect. Thank you.
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