Jay McCanless: So, the good news on January being up 30%. I guess, when in ’23 did you guys start to see the turn? Just wondering when the comps are going to get harder from a year-over-year perspective.
Dave Messenger: I think that we probably started seeing a turn midway second quarter. If you’re thinking ’23, as we started out the year with relatively high interest rates, we saw some interest rate relief as we got into kind of March and April, we started seeing a pickup in sales, and then it really kind of bounced around. So, I think comps based on any given month may be hard or light just given on where we were and where interest rates were at that given time of last year.
Jay McCanless: Okay. Thanks for that. And then I guess the other question, if you’re bringing incentives down, I guess what’s more impactful right now, the volume that you’re generating or the incentives coming down? Just trying to think about what first quarter gross margin would look like relative to what you put up in the fourth quarter.
Dave Messenger: I think, while we don’t have guidance out there on margins, we’re obviously thinking that as incentives are getting pulled back, we think there’s some stability to that gross margin line. And heading into the year, I don’t think you’re going to see — we’re not anticipating it falling like it did from Q4 to Q3.
Jay McCanless: Okay. Great. That’s all I had. I’ll get back in queue. Thank you.
Operator: The next question is from Alex Rygiel with B. Riley FBR. Please go ahead.
Alex Rygiel: Thanks. A great quarter, gentlemen. How should we think about Century Complete growth in 2024 versus the base business?
Dale Francescon: Our Century Complete business has — for quite some time, it was roughly a third of our overall volume. We moved it up to 35%, 36%. We’re now just under 40%. It’s the type of thing that because we only buy finished lots and we’re typically buying them just in time, some of our constraints on growing that business is impacted by some of our land development partners and the timing in which they’re able to complete and deliver lots to us. But as we as we look at it right now, we’re just under 40% of our overall business in terms of units on Century Complete. As we’ve said, ideally, we’d like to see it get to 50%. But as the community side continues to grow, that becomes harder to make Century Complete 50%. But we’re very happy with it at the point that it currently is.
Alex Rygiel: And then, is there a magical rate right now that’s really getting your home buyers active?
Dave Messenger: I don’t know if there’s a magical rate. I know that I think we’ve talked about that in the past. I’d say right now as buyers have seen the overall rates come down, they are exhibiting more confidence and we’re seeing that demand come out to a marketplace. And so, while there may be individual buy downs that occur on a closing table, which always occurs, I think that today we’re just seeing — the fact that the macro economy and the macro interest rate levels have been coming down, buyers are more encouraged about going out and buying that house. So, I don’t know that I would say there’s definitely a magic rate out there at the moment.
Alex Rygiel: Helpful. Thank you.
Operator: The next question is from Jesse Lederman with Zelman & Associates. Please go ahead.
Jesse Lederman: Hey, thanks for taking my question and congrats on the really strong end to the year.
Dave Messenger: Hey, thanks, Jesse.
Jesse Lederman: My first question is just to follow up on the Century Complete brand. Can you remind us if there’s any gross margin or return differential between the Century Complete product and the Communities brand?
Dale Francescon: In terms of gross margin, because we’re only buying finished lots, so we really have no land profit built into the margins. The margins tend to be structurally a bit lower. On the flip side, because we are not carrying any land and developing land, the returns are significantly higher.
Jesse Lederman: Got it. Yeah, that makes sense. And then, just a quick follow up on that. Are you seeing any — I mean, you talked about the constraint there in terms of your developer — you’re kind of at the mercy of your developers. Can you talk about maybe what they’re seeing — what you’re seeing from them in terms of their ability to, I guess, announcing and continuing the development process?
Rob Francescon: Yeah, obviously, financing is tightened up in the last 12 months on that or more. But when we look at it, the stronger developers have been able to figure out workarounds, whether they can get financing or figure out other ways to fund their projects, as well as our structure sometimes on our optioned lots on how we’ll do things. So, we’ve been able to navigate that, but clearly as a general statement, it is tighter from a financing front for the land development communities. And so, we’re continuing to source good partners in that daily and we’re getting through that fine, but it has tightened up.
Jesse Lederman: That’s helpful. And one more…
Rob Francescon: I guess, one other thing on a positive side, we’ve seen a flattening of increases in LD costs. And so with that, where we were seeing rampant increases in the past, we’ve seen a flattening now, so that’s a good thing going forward.
