LGI Homes posted year-over-year gains in closings, revenue, and earnings during the third quarter, even as affordability pressures continued to weigh on buyer demand and slow sales activity.
The Texas-based builder delivered 1,222 homes during the quarter, up 10.4% from a year earlier, including 33 currently and previously leased homes. Its 1,189 new-home closings generated $437.5 million in home building revenue, an increase of 10.3% year over year. Total revenue increased 10.2% to $444.5 million.
“We delivered strong third quarter financial results, generating year-over-year growth in closings, revenue, and earnings while maintaining strong profitability, expanding our community count, and further strengthening our balance sheet,” chairman and CEO Eric Lipar said.
Net income increased to $24.6 million from $19.7 million in the prior-year quarter, while diluted earnings per share increased to $1.05 from $0.85.
Margins Improve Sequentially
Home building gross margin was 20.2% in the third quarter, while adjusted home building gross margin was 23.7%. Both were above the midpoint of LGI Homes’ previous guidance ranges and improved 40 basis points sequentially.
Lipar attributed the margin performance in part to the company’s predominantly self-developed, on-balance-sheet land position and its approach to balancing affordability and profitability.
“Our teams also did an excellent job managing costs. SG&A expenses declined on an absolute-dollar basis, and SG&A as a percentage of total revenues improved 180 basis points year over year,” he said.
The builder also continued expanding its footprint, ending the third quarter with 151 active communities, an increase of 7.1% from the prior-year period.
Affordability Weighs on Sales
Despite stronger closings and revenue, LGI Homes said affordability pressure contributed to slower sales activity during the quarter.
Through the first nine months of 2026, net orders totaled 2,869, compared with 4,098 during the same period in 2025. The cancellation rate increased to 48.9% from 28.1%, while ending backlog declined to 685 homes from 1,305 a year earlier.
The trend marks a reversal from the beginning of the year, when LGI Homes ended the first quarter with 1,699 homes in backlog, up 63.4% year over year. At the time, management pointed to improving sales activity and a growing backlog as evidence of steady demand heading into the spring selling season.
By the third quarter, however, affordability had become a more significant headwind.
“We continue to see interest in homeownership and are leaning into our proven sales and marketing strategies to improve sales pace while maintaining our disciplined approach to balancing affordability and profitability,” Lipar said.
LGI Homes Narrows 2026 Closing Outlook
Based on its year-to-date results and current market conditions, LGI Homes narrowed its full-year closing guidance and now expects to deliver between 4,600 and 4,800 homes in 2026. The company said the revised outlook reflects slower sales activity as affordability pressures continue to weigh on demand.
The builder maintained the remainder of its full-year guidance, including an expected average sales price between $360,000 and $370,000 and adjusted home building gross margin between 22.5% and 24.5%.
“As we head into the final quarter of the year, our focus is on finishing 2026 strong,” Lipar said. “Affordability remains the key consideration for today’s buyers, and we have intentionally broadened our sales process to work with more prospective customers who may need additional time to qualify.”
