Century Communities

Century Communities said rising mortgage rates were hurting home sales and it would build less in response

Century Communities told analysts their home sales declined as “the rapid increases in mortgage rates and overall economic uncertainty kept many homebuyers on the sidelines.” “Dale Francescon – Chairman and Co-Chief Executive Officer: Our backlog at quarter-end consisted of 3,455 sold homes valued at $1.4 billion. Net new contracts declined to 1,318 homes with weakness across all our regions as we believe the rapid increases in mortgage rates and overall economic uncertainty kept many homebuyers on the sidelines. The summer season for home buying is typically the slowest period of the year and this trend was especially pronounced this year as many potential homebuyers simply took the summer off. Regarding trends in the quarter, net new contracts increased each month throughout the quarter, with this improvement in sales pace continuing into October. In fact, the sales activity we experienced this last weekend was the strongest we have seen in over six months. However, we expect home sales will continue to be pressured by the volatility that we are seeing in interest rates.” (Century Communities, Inc. Q3 2022 Earnings Call, 10/26/2022)

Century Communities told analysts that “our plan is to continue to match our starts with our sales… and not start building up significant backlog until we see a sustainable improvement in demand.” “Dale Francescon – Chairman and Co-Chief Executive Officer: Homebuyers are continuing to look for homes that are closer to completion in order to lock in their interest rates, and our sales continue to be impacted by the fact that we simply did not have a significant number of homes available for a near-term move-in. Going forward, our plan is to continue to match our starts with our sales, focus our sales efforts on homes with more near-term completions and not start building up significant backlog until we see a sustainable improvement in demand.” (Century Communities, Inc. Q3 2022 Earnings Call, 10/26/2022)

Century Communities Co-CEO: “we think existing home sales will be constrained going forward as buyers will be very reluctant to walk away from the extremely attractive interest rates that they secured over the past several years.” “Rob Francescon – Co-Chief Executive Officer and President: Additionally, we think existing home sales will be constrained going forward as buyers will be very reluctant to walk away from the extremely attractive interest rates that they secured over the past several years. The homebuilding industry continues to be challenged by municipal and utility delays, supply chain issues, and trade shortages though these pressures are slowly getting better.” (Century Communities, Inc. Q3 2022 Earnings Call, 10/26/2022)

Century Communities CFO: “as our sales have come down the last couple of quarters, we have really pulled back on the starts.” “David Messenger – Chief Financial Officer: Yes. So, we have pulled back on our starts. I think probably two quarters ago and I know definitely last quarter on our calls, we had mentioned that we had begun matching our start with our sales. And so as our sales have come down the last couple of quarters, we have really pulled back on the starts. And so, you can see that over the next couple of quarters as we deliver the homes that we have under construction, and the homes that we have in our backlog, you’re going to see our inventories come down pretty significantly. So, I think that what we’re starting now we are looking far enough ahead that we’re trying to prevent the problem of getting into a position where we’ve got a community with too many specs that’s not going to be able to meet demand.” (Century Communities, Inc. Q3 2022 Earnings Call, 10/26/2022)

Century Communities still reported a year over year increase in sales and home prices

Century Communities reported a 22% year over year increase in home sales thanks to an 8% increase in average sales price to $425,000.“David Messenger – Chief Financial Officer: Thank you, Rob. During the third quarter of 2022, net income increased 27% year-over-year to $144.5 million from $114 million, while earnings per diluted share of $4.44 increased 34% from $3.31 in the year ago period. Pretax income was $172.1 million, a year-over-year increase of 18%. Home sales revenues for the third quarter grew to $1.1 billion, a 22% increase, compared to year ago levels. This improvement in revenues was driven by an 8% year-over-year increase in our average sales price to 425,000 and home deliveries of 2,630, a 13% year-over-year increase.” (Century Communities, Inc. Q3 2022 Earnings Call, 10/26/2022)