M/I Homes reported improved sales results in the fourth quarter despite inflation, economic uncertainty, and mortgage rate volatility.

President and CEO Robert Schottenstein said M/I Homes ended the year in its strongest financial position in company history and is optimistic about the spring selling season.

“We believe our industry will continue to benefit from strong fundamentals, including favorable demographic trends and an undersupply of housing,” Schottenstein said. “Looking ahead, we are well positioned to continue delivering strong results given the strength of our balance sheet, our diverse product offerings, and our well-located communities.”

Executive vice president and chief financial officer Phillip Creek said demand trended positively as rates declined in the fourth quarter, with new contract activity increasing 35% in October, 92% in November, and 64% in December. Overall, new contracts in the fourth quarter increased 61% on a year-over-year basis to 1,588 homes.

Schottenstein said M/I Homes’ December sales were the best month of the fourth quarter, and January sales for the builder exceeded 2023 levels. Fifty-three percent of sales in the fourth quarter were made to first-time buyers, while 62% of sales in the quarter were inventory homes, according to Creek.

“Our Smart Series, which is our most affordably priced product, continues to have a positive impact not just on our sales, but our overall performance,” Schottenstein said. “Smart Series sales comprised 53% of total company sales in the fourth quarter.”

M/I Homes improved cycle times by 10 days sequentially in the fourth quarter and by more than 60 days overall in 2023 compared with 2022.

For the full year, M/I Homes sold 7,977 homes, an increase of 20% compared with 2022 with a monthly sales pace of 3.3 homes per community compared with a pace of 3.1 homes per community in 2022. The builder’s cancellation rate improved significantly, dropping to 13% in the fourth quarter of 2023 compared with 30% in the fourth quarter of 2022.

Homes delivered in the fourth quarter decreased 15% to 2,019. For the full year, deliveries decreased 3% to 8,112. However, Schottenstein said M/I Homes began 2023 with 15% fewer homes in the field than 2022. He noted, on a regional basis, performance was strongest in its divisions in Charlotte and Raleigh, North Carolina; Columbus, Ohio; Dallas; and Orlando, Sarasota, and Tampa, Florida.

The builder ended 2023 with 3,002 units in backlog with a sales value of $1.6 billion, both down compared with a backlog of 3,137 homes and a value of $1.7 billion at the end of 2022.

In the fourth quarter, profit decreased to $105.3 million from $130.4 million in the prior-year period. Profits per share declined to $3.66, missing Wall Street projections by $1.28. For the full year, profits were $465.4 million in 2023 compared with $490.7 million in 2022.

Schottenstein said the company spent $344 million on land purchases and $512 million on land development in 2023, representing an increase in investment compared with 2022. At the end of the calendar year, M/I Homes owned 24,374 lots and controlled 21,286 lots via option compared with 25,004 and 17,049 lots, respectively, at the end of 2022.