But that’s one of the things that we are seeing, is we’ve got the benefit of a structurally lower tax rate because of the acceleration of our zero energy ready homes. So just as you’re thinking about margin, make sure you think about that piece in our case as well.
Jay McCanless: Good to know. Thank you, Allan. I know you don’t like talking about the current month, but anything you could give us on what pricing power looks like and what you’ve been able – it sounded like it got a little better in January, but just maybe directly where pricing power is now, where you feel like you can take price?
Allan Merrill: Look, I think we were able to off the strength of the momentum that we built in December, right? That was better than we expected to do. We found the market, we started pulling some levers, and some of that’s on incentive, some of that is on base pricing. So as we rolled into January, we were tweaking those things, and we’ve been able to sustain a decent sales pace through January. I don’t have January numbers, so I can’t kind of get into that. I mean, the month isn’t closed for us yet. But I would tell you, pretty encouraged about this spring selling season and encouraged that we’ll be able to at least sustain the improvements that we have claimed. There’s a chance, regardless of rates, we get a little euphoria, a little enthusiasm in the spring. We may be able to do a bit better than that, but we’re not predicated in our guidance for margins that things get better from an incentive and pricing standpoint than they are right now. Does that make sense?
Jay McCanless: It does.
Allan Merrill: Okay. So that’s kind of how we’re thinking about the year.
Jay McCanless: And theoretically, it doesn’t get better because there is still pretty intense competition, I would think, from some of your larger competitors to keep up their sales paces. Is that what you’re assuming with this guide?
Allan Merrill: Yes, and I think at an even higher level. Affordability is still pretty darn challenged, right? I mean, that’s a reality. It’s different from three years ago, four years ago, five years ago, six years ago, 6.5, 6.75. Okay, we can talk about buy downs, but you’re talking about monthly payments that are quite elevated relative to where they were a few years ago. We’ve always got a chart in our deck that talks about payment as a percentage of income, and that continues to be at a pretty elevated level. And I think the reality of that is one of the things that just says, let’s be a bit cautious about how much better this gets given the reality of that affordability picture.
Jay McCanless: And then if we could talk about cycle time a little bit, where is that now versus maybe where it was in the September quarter and year ago?
Allan Merrill: It’s significantly improved. I think year-over-year, we’re about 70 days of cycle time improved. I may be off by a couple, but it’s about that. I think we’ve still got a month to go get back relative to what I’ll call, the pre-COVID period. We are not expecting that we’re going to get all that back this year. I hope we do. We’ll try to, but I think we’ve got a build cycle that we look at across 13 stages, and we’ve got that down right at 70 days year-over-year. And as I said, I’m – we’re targeting another 20 or 30 over the next year or two.
Jay McCanless: And then the last one I have, if you could talk about input costs, both labor and materials, what trends you’re seeing there and what you’re expecting for at least the next couple of quarters.
David Goldberg: Jay, it’s Dave. Start me with material costs, I would tell you, and we’ve talked about this a little before, lumber costs have really declined since the peak in late ’22. We’ve seen a little bit of a pickup recently, but nothing overly significant, especially because we’re just starting to see for the first time, square footages in our house come down a little bit in the last couple of quarters. So it’s a pretty recent trend. Again, kind of per house, maybe a little bit up, but nothing significant material side. And on the labor side, I would tell you it’s pretty similar. We haven’t really seen a lot of discounts on the labor side, but we haven’t seen a lot of price pressure and a lot of cost pressure on the labor side. So it’s been relatively benign overall with a nice tailwind from lumber offsetting some higher costs across other materials.
Allan Merrill: Look, if demand is super strong this spring. We’re going to get some cost pressures, there’s no question. And it’ll[ph] start on the labor side. If that happens, we’re going to have some pricing power. So I feel like if we’re in a pro cyclic mini cycle here this spring, and I’m not predicting that, but that’s sort of the case of rates come down, it gooses demand a little bit. Yes, we’re going to see some cost pressures. We’re going to have even more pricing power. I Am not worried about an unfavorable mix where we end up with less pricing power and more cost pressure. That doesn’t seem likely over the next couple of quarters.
