United Homes Group ended its first year as a public home builder in a better place financially and operationally than a year ago, president Jack Micenko said during the home builder’s fourth quarter earnings call.
“United Homes Group made great strides in 2023 by executing several strategic initiatives that we believe will set us on the path to become a large-scale production home builder in the Southeast of the United States,” Micenko said.
Net new-home orders during the fourth quarter of 2023 increased 8% to 294, and home closings were 387 homes compared with 389 in the fourth quarter of 2022. United Homes Group reported fourth quarter revenue of $116.8 million, up from $115.1 million a year ago.
“UHG saw orders increase 8% over the same period a year ago despite higher rates and increased competition by larger builders in our market,” said Michael Nieri, CEO of United Homes Group. “Trends have continued through the first months of 2024, with net new orders up 7.4% in January and February, as compared to the same period a year ago.”
Chief operating officer Shelton Twine said United Homes Group made a “concerted effort” to increase starts during the fourth quarter to ensure sufficient inventory for the spring selling season. The builder started 308 unsold homes in the quarter, a 75% increase compared with the prior year. Twine said the builder improved cycle times to approximately three months, a return to historical levels.
The average selling price of homes closed in the fourth quarter was $320,000, compared with $300,000 during the fourth quarter of 2022. United Homes Group reported a quarterly cancellation rate of 10.1% in the fourth quarter.
“We remain focused on the more affordable segments of the market as evidenced by our average closing price of production homes. We believe the lack of affordable resale home inventory to be a prevailing issue and that entry-level buyers will continue to make up a good portion of demand,” Micenko said. “We are, however, broadening our portfolio to appeal to more move-up buyers with expectations that the existing-home market will begin to thaw at some point.”
United Homes Group reported a net loss of $66.6 million, or -$1.38 per share, in the fourth quarter. The net loss included change in fair value of derivative liabilities of -$69.1 million. The builder said that was primarily due to changes in fair value on “potential earn-out consideration due to fluctuation in the stock price during the measurement period.”
For the full fiscal year 2023, United Homes Group reported net income of $125.1 million, or $2.35 per share, which included a change in fair value of derivative liabilities of $115.9 million. Net income in the 2022 fiscal year was $69.5 million. Revenues for the full year declined to $421.5 million from $477 million in 2022.
The builder closed 1,383 homes in 2023 compared with 1,605 homes in the prior year. Net new-home orders for 2023 increased to 1,296 homes from 1,259 homes in 2022. United Homes Group ended the year with 189 homes in backlog, valued at $57.6 million.
Land Strategy and M&A
United Homes Group ended the year with approximately 9,000 lots owned or controlled.
“With respect to our land acquisition and development efforts, we remained active in 2023, fortifying our existing market presence with a pipeline of new lots. We strive to remain as land light as possible, with the goal of minimizing the risk of carrying the land as well as the capital to hold it on our balance sheet,” Micenko said. “Throughout the year, we expanded our relationships with land bankers, giving us more avenues through which we can employ this strategy. By controlling land via third parties, we can utilize our capital more efficiently.”
In 2023, United Homes Group expanded into the Raleigh market with the acquisition of Herring Homes and expanded its presence in the upstate South Carolina market with the acquisition of Rosewood Communities.
“In January, we closed our third acquisition in just nine months of becoming a public company, acquiring Creekside Custom Homes in South Carolina,” Nieri said. “Creekside provides local scale in the high-growth coastal market and access to an attractive lot pipeline in a ‘land-light’ friendly manner that will support accelerated growth in coming years.”
Micenko said the company will continue to pursue other acquisition opportunities that fit United Homes Group “from an operational and cultural standpoint while remaining disciplined in our underwriting standards.”
“United Homes Group exited 2023 with a lot of momentum, we successfully folded two smaller home builders into our operations and added a third in the early part of the new year,” Micenko said. “We also improved our land banking capabilities and maintained a land-light focus while keeping our balance sheet in great shape. We think we are well-positioned to build on our successes of 2023 into the future.”
