Allan Merrill: So Alex, let me kind of handle the first question. We’ve talked about a conversion ratio, a backlog conversion ratio in Q2 in the kind of 55% to 60% range. It’s not, as you said, predominantly just from the specs that were canceled that are sitting there. There are some specs frankly that will close. But frankly that 55% to 60% is more in line with historical levels and still below where we have been in ’18 and ’19. So we’re just kind of seeing some normalization in the backlog conversion ratio and frankly not back to levels where we’ve been at historically and a lot of that cycle time. Picking up a month makes a big difference in converting your backlog. So I think it is way more of that than any mix issue associated with formerly sold homes that became specs.
Second question on the production universe, Dave, maybe has the number immediately at hand, but interesting fun fact, Alex. In the last 20 quarters, we’ve only had four quarters where specs represented more than half of our close over five years. The first quarter happened to be slightly one of those quarters. I don’t really see us trying to do what everybody else is doing. One of the challenges in the last year with buyers has been, can you tell me when my is going to be ready. We feel a lot better about being able to answer that question in a really competitive way with yes, we can tell you and here’s when it’s going to be available and we have confidence in that. There are some markets and we have some buyer profiles within our footprint where specs have been and will continue to be a part of it.
But I don’t think you should expect us to become something that we haven’t traditionally been, build huge numbers of specs and then try and engage in price discovery. We’re selling a different home. We’ve got a different buyer experience, a different mortgage experience. And I really don’t feel like playing in other people’s sandbox is our best strategy.
Alex Barron: Got it. Now, I guess a month ago or two months ago, builders were talking about getting inbound calls from people looking for new starts, new work, and that seemed to present an opportunity to potentially get better costs on those new starts. But at that timeframe, it seemed like prices were still heading downward right now. It would seem from other commentary of builders that given the momentum in new sales and stuff like that that maybe prices won’t be heading downward anymore. So do you think there’s still going to be that opportunity to get better costs?
Allan Merrill: I do. And the costs that we have gotten aren’t in the P&L yet because those homes haven’t reached the delivery stage. And I also think it’s important to understand that just because home prices may not fall as far from here as was feared, I think we’re going to get to a point where we do have year-over-year price reductions because of the action that occurred in the first quarter really started last summer. So we’ve got to get to the other side where we’ve got a one year anniversary. And I think as it becomes more evident what closing prices are, that actually is going to be valuable in those negotiations because we’re a good example. We just reported a $533,000 ASP and guided down almost $20, well, guess what? That reflects changes that occurred six and nine months ago. I think some more of that data being in the market actually helped the case. With the trades for why costs have to keep coming down.
David Goldberg: Alex, I think the other part of that is not just the price side, but also the volume side. We see some pullback in volume and it clearly appears it starts volumes are down as an industry. There’ll be some excess labor out there that we think we can go get some cost savings from.
Alex Barron: Okay. Very helpful. Thanks a lot.
