Tri Pointe Homes is looking to expand in 2024, particularly in its Central and Southeast regions, supported by its land pipeline and balance sheet.
During the home builder’s fourth quarter earnings call, CEO Doug Bauer said the No. 17 company on the 2023 BUILDER 100 list is targeting 17% year-over-year growth in home deliveries in 2024 and community count growth of 10% by the end of 2025.
“The prevailing positive macroeconomic conditions and strong housing fundamentals make us optimistic for 2024 and beyond,” Bauer said. “Tri Pointe is in an excellent position to expand our scale in each of our markets, particularly considering our strong land holdings and experienced team members.”
“We are actively taking steps to capitalize on numerous growth opportunities that exist in the market today and are committed to deploying our capital into accretive long-term growth initiatives,” he continued.
Bauer said Tri Pointe Homes’ West region is “close to targeted scale,” and the home builder is anticipating seeing purchase deliveries in its new Utah market beginning in 2025. Tri Pointe is looking for additional expansion in the Southeast region, with particular interest in footprint expansion in Coastal Carolina and Florida markets.
The company’s growth targets are supported by heavy investment and community count growth in the Central and East regions over the past few years.
“Over the next two years, we expect to see delivery volumes in Texas grow over 60% compared to 2023. In the Carolinas, we anticipate delivery volume growth of over 30% in that same period,” Bauer said. “Not only will this provide strong top-line growth, but increased profitability as our Texas and Carolina divisions are currently producing home building margins at or above the company average.”
Chief financial and accounting officer Glenn Keeler said Tri Pointe Homes plans to open approximately 65 new communities in 2024 and expects to close a similar number in the calendar year.
“Based on our strong land pipeline with approximately 32,000 owned or controlled lots, we expect to grow our 2025 ending community count by approximately 10%,” Keeler said. “Going forward, we expect to spend approximately $1.2 billion to $1.5 billion annually in land and land development to support our growth targets.”
Strong End to 2023
Volatile interest rates characterized the fourth quarter for Tri Pointe Homes. Demand returned in December after rates began cooling, and the final month of 2023 was the strongest month in the quarter for order activity. Bauer and Keeler said market momentum has carried into the first two months of 2024, supported by a strong demand environment.
Tri Pointe generated fourth quarter profits of $132.8 million, or $1.36 per diluted share, a decline on a year-over-year basis but an outperformance of Wall Street expectations. The home builder bested analyst expectations for profits per share in each quarter of the 2023 fiscal year. For the full fiscal year, Tri Pointe generated $343.7 million in profit, or $3.45 per share, compared with $576.1 million in profit, or $5.54 per share, in 2022.
Home sales revenue declined on a year-over-year basis in the quarter by 17% to $1.2 billion, driven by a 10% decline in home deliveries to 1,813 homes and an 8% decline in average sales price of homes delivered to $685,000. For the full year, home sales revenue declined 15% to $3.7 billion on lower deliveries (5,274 homes in 2023 versus 6,063 homes in 2022) and lower average sales prices on homes delivered ($693,000 versus $708,000).
“We remain encouraged by the fundamentals of our business, including household formations, strong demand from millennials and Gen Z buyers, a more normalized supply chain, and shorter cycle times,” Bauer said. “While each of these factors contribute to the long-term health of our industry, we are particularly optimistic about the ongoing favorable supply and demand dynamics that structurally support new-home demand.”
The strong close to 2023 was highlighted by a 143% increase in net new-home orders in the fourth quarter to 1,078 homes. Net new-home orders per average selling community increased by 109% to 6.8 orders, or 2.3 per month, compared with 3.2 orders, or 1.1 per month. The cancellation rate in the quarter also normalized to 12% from 42% in the fourth quarter of 2022. Backlog units at the end of the quarter increased 58% to 2,230 homes.
“We took a disciplined approach with our use of incentives in the fourth quarter, largely focusing on incentives toward completed or move-in-ready homes,” Keeler said. “Permanent rate buydowns remain a popular use of incentives for our home buyers. Full incentives on orders in the fourth quarter were 4.8% of revenue and have trended down to 4.4% in January. Our historical incentive level has been in the range of 3% to 4%.”
For the full fiscal year, net new-home orders increased 40% to 6,122 from 4,377 for Tri Pointe Homes. Active selling communities averaged 147.5 at year’s end, compared with 124.7 at the end of 2022. Additionally, the full-year cancellation rate declined to 10% from 19%.
“Our industry remains positioned for long-term success due to the continued supply shortage and strong consumer demand,” Bauer said. “With a strong balance sheet composed of a land portfolio focused on core locations and ample liquidity, we are well positioned to meet our objectives going forward.”
This story appeared on Builder Online
