Continued new-home demand, particularly in infill and infill-adjacent locations, helped Green Brick Partners deliver home closings revenue of $454 million in the second quarter, the second-highest quarterly figure in company history.
“We believe our exceptional results were the result of our infill and infill-adjacent locations, self-development strategy, and focus on operational efficiency,” Green Brick Partners co-founder and CEO Jim Brickman said during the home builder’s quarterly earnings call. “Strong sales momentum carried into the second quarter as all of our brands experienced demand that was above normal seasonality.”
During the second quarter, Green Brick delivered 783 homes and reported a home building gross margin of 31.3%. The higher margins drove second quarter profits to $1.63 per share, a 19% increase on a year-over-year basis and the second-best quarterly result in company history, according to Brickman. The average home price of homes delivered decreased 11.3% year over year to $454,455, and Brickman said the company has continued the sequential decrease in incentives offerings that began in January.
Net orders increased 51% year over year to 822 homes in the second quarter, the highest second quarter figure in company history. Green Brick’s quarterly absorption rate remained elevated at 9.9 homes per active selling community and the company cancellation rate decreased 400 basis points year over year to 7.4%. As a result, backlog at the end of the quarter was 59% higher than the beginning of the year and community count increased 10% year over year during the quarter.
“We have continued to see demand for homes, particularly in infill and infill-adjacent locations where we have a strong presence and where there is limited resale inventory competition because existing homeowners are reluctant to sell their homes and forfeit their low interest rate loans,” Brickman said.
Brickman said Green Brick Partners’ presence in infill and infill-adjacent submarkets remains a key long-term advantage for the company. Approximately 80% of the company’s revenue year-to-date has been generated from self-developed infill and infill-adjacent locations. Additionally, roughly 75% of the company’s lots finished or to-be-finished in the Dallas-Fort Worth and Atlanta markets this year will be located in high-performing infill and infill-adjacent locations.
“We also ramped up our starts during the second quarter by 25% over the first quarter to 833 units, which has allowed us to better align starts with our improved sales pace,” Brickman said. “Additionally, we are pleased to have seen further normalization of the supply chain and labor availability in our markets and improved cycle times that we expect will continue to result in higher returns on capital.”
At the end of the quarter, Green Brick Partners owned 21,389 lots, including 3,897 finished lots and 10,917 lots in communities under development, and controlled 5,045 lots.
“Land acquisition plays a pivotal role in our overall success and is based on a disciplined approach in site selection and underwriting,” Brickman said. “We believe our abundant cash reserves and liquidity will continue to open a wide array of possibilities for us to capitalize on land and lot opportunities in this marketplace.”