Strong market fundamentals and order activity helped drive “solid results” for United Homes Group in the home builder’s fiscal second quarter.
“Order activity throughout the quarter was strong, and as the mix of closing with high lumber costs started to decline, we began realizing margin expansion,” United Homes Group CEO Michael Nieri said. “Based on current market conditions and what’s already in backlog, we expect to see further sequential margin improvement in the second half of the year.”
Home building revenues in the second quarter for United Homes Group was $122.1 million, compared with $142.5 million in the second quarter of 2022. Home closings decreased on a year-over-year basis to 385 from 459 homes, and the average sales price of production-built homes increased to $313,000 from $300,000. The value of the company’s backlog at the end of the quarter was $94.2 million.
Gross profit margin decreased to 19.6% from 28.8% in the second quarter of 2022. The builder attributed the decline in gross profit margin to United Homes Group offering sales incentives and selling inventory with higher lumber costs that contracted in the second half of 2022.
In United Homes Group’s second quarter as a public company, the home builder generated net income of $245.4 million, or $4.27 per share. Net income included change in fair value of derivative liabilities of $242.3 million, due to changes in fair value on potential earn-out consideration due to fluctuation in stock price during the measurement period, according to the company. The company is required to record the non-cash fair value of the earn-out as derivative liabilities on consolidated balance sheets until United Homes Group shares reach certain predetermined values.
“We see a clear runway for growth for well-capitalized home builders moving forward. Millions of existing homeowners who financed their homes with lower-rate mortgages are staying in their existing homes, resulting in a massive supply shortage in the existing-home market,” Nieri said. “I believe this creates a huge opportunity for the home building industry and especially for United Homes Group given our focus on affordability and markets with favorable in-migration trends.”