During a quarter when demand trends appeared to be returning to normalized levels, LGI Homes reported its highest net order pace in two years for the first quarter. Despite starting the quarter with limited homes in inventory and its lowest backlog in four years, the home builder closed 1,366 homes and generated over $487 million in revenue.
“As demand increased and buyers responded to modest rate incentives, smaller product offerings, lower, more stable interest rates, and our targeted marketing, we pivoted from a cash generation focus to driving order growth,” LGI Homes chairman and CEO Eric Lipar said. “The success of our efforts was highlighted by a 12.5% increase in net orders in the first quarter compared to last year’s strong comp, and a 148% increase in net orders from the fourth quarter of 2022.”
Lipar said the strong pace of net orders (7.6 homes per community per month) allowed LGI Homes to raise prices in many communities and increase starts pace during the quarter. LGI Homes started construction on 1,712 homes in the first quarter, up significantly on a sequential basis from the 646 homes started in the fourth quarter of 2022. The average sales price per home closed increased 4.5% on a year-over-year basis to $356,777.
“Our inventory is really in good shape right now. We’re ramping up starts, and we’ll keep raising prices as long as the orders are there,” Lipar said on the home builder’s quarterly earnings call. “But once you get to the point where you have finished inventory sitting in a community, then that’s when you have to do some price discovery and really start moving some of that inventory to generate some cash.”
While demand conditions contributed to a quarterly revenue that outperformed analyst expectations, profits per share for LGI Homes, $1.14, lagged slightly behind projections of $1.25 per share.
“Recent demand trends are encouraging, and we remain optimistic on the long-term outlook for the housing market,” Lipar said. “We are confident that our unique business model, entry-level spec focus, strong balance sheet, and dedicated employees position us to capitalize on these trends and deliver strong results throughout the rest of the year.”
At the end of the first quarter, LGI Homes’ land portfolio consisted of 69,724 owned and controlled lots, a 25.2% decrease year over year and a 3% decrease on a sequential basis. Of its land portfolio, 82.7% lots were owned, a decrease of 2.4% on a year-over-year basis.
