Meritage Homes slipped past earnings estimates to end the year with a quarterly profit of $262.4 million—a 10% increase from the same quarter in 2021.

But despite strong earnings growth, the builder reported a drop in quarterly home orders and a 39% cancellation rate as higher financing costs continued to force home buyers to pull back from the market.

“Ongoing economic uncertainty continued to impact buyer psychology and undermine housing demand this quarter, generating a 46% decrease in fourth quarter orders,” said executive chairman Steven J. Hilton.

During the fourth quarter, home closing revenues increased 32% compared with 2021, totaling $2 billion.

Average absorption pace for the quarter was 2.2 homes per month, down from 4.5 per month in the fourth quarter of 2021. However, gross sales pace stayed within the company’s target range of three to four per month—hinting that consumer demand is still present at the right price in today’s market.

“Our closings of 4,540 homes this quarter drove our $2 billion fourth quarter 2022 home closing revenue,” said CEO Phillippe Lord. “Combined with our home closing gross margin of 25.2% and our SG&A leverage of 8.4%, we generated a 13% year-over-year increase in our diluted EPS from $6.25 to $7.09 this quarter.”

The home builder’s reported earnings surpassed estimates by 0.85% and marks the fourth consecutive quarter that Meritage has surprised market watchers.

“Looking into 2023, we are starting the new year on the right foot,” Lord said. “We believe we have the right level of completed and near-completed homes to sell in nearly all of our stores, and we are working to find the market clearing price to get back to our target absorption pace of three to four net sales per month. As our strategy is centered on affordable, move-in ready product, we believe we can continue to capture market share over the coming year.”