MDC Holdings will shift its focus to quick move-in homes in 2023 as it looks to ride out what appears to be a challenging year for home builders.
“We feel that these initiatives are the right approach for today’s new-home environment and should lead to better net sales relative to the second half of 2022,” said executive chairman Larry A. Mizel.
“While 2022 was a banner year for our company from a financial perspective, it was a challenging one for new-home sales, as the combination of rising mortgage rates and overall economic uncertainty led to a sharp decline in order activity in the second half of the year. We began experiencing slower gross order and increased cancellation activity in the second and third quarters, and this carried into the fourth quarter.”
MDC, one of the nation’s leading home builders, saw its quarterly profit slashed in half compared with the same quarter last year. New orders dropped by 55% to 1,502 homes, and cancellations increased to 24.6% from 8.7% compared with the same quarter last year.
The home building company said it pulled in a profit of $79.8 million in the fourth quarter, down 51% from $162.7 million during the same period last year. The company cited increased financing costs, economic uncertainty, and eroding consumer confidence as key factors that caused higher rates of cancellation and lower rates of new orders.
While MDC saw a hefty drop in profits on a quarterly basis, the home building company still had a pretty good year—generating only 2% less profit than last year on an annual basis and seeing a 4% increase in quarterly home sale revenues.
“MDC generated net income of $562 million for fiscal year 2022, or $7.67 per diluted share, representing one of the most profitable years in our company’s history,” Mizel said. “Home sale revenues increased 9% year over year, helping us generate over $900 million of cash flow from operating activities. We ended the year with a debt-to-capital ratio of 32.6% and total cash and cash equivalents and marketable securities of $1.28 billion.”