Given economic uncertainty, elevated mortgage rates, inflation concerns, and affordability pressures, many public home builders have pointed to softness among entry-level buyers while finding relatively stronger demand from move-up and luxury buyers.
In the current quarterly earnings cycle, M/I Homes, No. 13 on the 2026 Builder 100 list, experienced a shift in sales mix toward move-up product. The company’s affordable Smart Series line accounted for 43% of sales, compared to 52% in the second quarter of 2025. Similarly, Meritage Homes, a 100% spec builder and the fifth largest company on the Builder 100 list, detailed an intentional shift in its business toward first-time move-up product in the second quarter.
“Our goal is to be around a one-third/two-third mix of first-move up and entry-level homes, consistent with the demographics of the U.S. population,” Meritage Homes CEO Phillippe Lord shared with investors during the company’s earnings call. “We are intentionally rebalancing our portfolio to achieve that over time, starting with a heavier allocation to the acquisition of land for the first move-up customers.”
The quarterly results of LGI Homes and Smith Douglas Homes, companies with heavy exposure to the entry-level segment, run counter to this trend.
Entry-level builder LGI Homes, No. 20 on the Builder 100 list, experienced an 8.8% increase in total home closings in the second quarter to 1,440 homes and a 3.7% increase in home building revenues to $501.5 million with an average sales price of $367,407.
“Demand for new homes during the second quarter was mixed, but still proved more resilient than many would have expected,” LGI Homes chairman and CEO Eric Lipar told investors. “We ended the quarter with 1,298 homes in backlog, up 61% compared to the prior year. The increase reflects both continued interest in homeownership and a longer buying process as customers navigate affordability challenges and financing qualification requirements.”
Georgia-based Smith Douglas Homes, No. 33 on the Builder 100 list, reported a 25% year-over-year increase in second quarter closings to 839 and a 22% increase in home closing revenue to $273 million. The builder’s average sales price in the quarter was $325,000. Additionally, Smith Douglas saw order volume grow by 32% in the quarter to 970.
“Overall, the company executed well in the quarter against a home building backdrop that continues to be marked by uncertainty and affordability challenges for new home buyers,” CEO and vice chairman Greg Bennett said during the company’s earnings call. “Our team did an excellent job working with buyers to find the right combination of price, personalization, and value to keep our production-oriented building model running smoothly. We saw consistent traffic and a relatively stable sales pace throughout the quarter.”
In the second quarter, Smith Douglas drove its construction cycle time down to an average of 55 days, emphasizing efficiency.
“This remains a key component of our returns focused business model, and one we feel differentiates our company from the competition,” Bennett said. “Not only does this discipline allow us to work through our community sufficiently, but it also shortens the time between sale and close, which helps reduce the possibility of cancellations.”
Land Strategy
Builders continue to emphasize capital discipline and both LGI Homes and Smith Douglas highlighted land strategies designed to support future growth while limiting risk.
LGI Homes said land acquisition conditions have improved as more opportunities have come to market and transaction economics have become more favorable. According to Lipar, the company is finding more deals that meet its underwriting standards, particularly projects entering the market later in the development process, allowing the builder to underwrite using current market conditions with greater certainty around costs and demand.
The builder ended the second quarter with 151 active communities, up 3.4% on a year-over-year basis. LGI Homes also recorded its sixth consecutive quarter of reducing its overall lot position while concentrating investment in markets where demand and expected returns remain strongest.
Smith Douglas Homes continued expanding its footprint while maintaining its land-light operating model. Average community count increased 20% year over year to 110 active communities. At quarter end, the builder controlled 23,527 lots, including just 664 owned lots, with the remainder secured primarily through option agreements and land banking arrangements.
“Our land-light strategy remains a core component of this performance,” chief financial officer Russ Devendorf said during the company’s earnings call. “By relying primarily on third-party lot developers and option agreements, we can align lot delivery with demand, maintain flexibility, and deploy capital efficiently.”
Outlook
Lipar said LGI Homes maintains confidence in achieving its objectives for the duration of 2026 given the visibility the company has into the second half of the year.
“[We] remain focused on balancing sales pace, profitability, and inventory management as we create long-term value for our shareholders,” he said. “Our development pipeline positions us well for additional community openings in 2027 and continued community count growth.”
Smith Douglas Homes also struck a cautiously optimistic tone, pointing to resilient consumer demand, favorable building conditions, and greater discipline across the home building industry.
“As we turn our focus to the back half of the year, we feel cautiously optimistic about the state of the home building industry and our company’s positioning,” Bennett said. “The U.S. consumer has proven to be resilient in the face of rising rates and macroeconomic uncertainty, while building conditions continue to be favorable.”
