Jeff Mezger: John, that’s a good question, one of the things that we all have to be mindful of is that a house isn’t a commodity. It’s somebody’s home, that’s where they live and it’s where they make memory. So there’s a lot that goes into the home besides x square feet for this price, and our buyers that, as I said in my comments, our buyers picked their floor plan, pick their lot, personalize their home, finish their home and they’re waiting for us to complete and so they can close it, and for the most part, they’re closing it. It isn’t a 100%. If some other builders out there with a crazy discount that they can’t ignore, they may move, but for the most part, they’re — they appreciate the process, the value proposition, the high levels of customer satisfaction.
The leading industry energy efficiency, the smart home technology, all those things that we put into our product over the years are meaningful to the buyer, and it’s more than just a price for footage. And if you couple that with what Jeff was talking about before, we went through pretty significant period of turbulence when rates moved up as fast as they did. And we had a lot of buyers that weren’t locked, that we had to work with the keep in the backlog because they were scared to death of 6%, when they bought it at 3.5% or 4%, and a lot of what’s coming through here in the first quarter, hitting margins as we did more than we normally do on financing concession to keep the backlog, but if you spend 2 points or 3 points on loan as opposed to a broad-based price discount, as a Company, financially, we’re far better off.
So as this backlog rotates through, that’s when we’ll go back out and evaluate what’s the right price for the community, and you get out of the financing concessions and you go to a better price proposition for the consumer. We won’t do both, we’ll go back to price, which is what we always do and we’re far better off letting the backlog turnover and clear than we would be — the example Rob gave is, it’d be bloody if you just cut your prices when you got 50, 60, 70 backlog in a community. So we think our approach is the right one.
Operator: Thank you. And our next question comes from the line of Alan Ratner with Zelman and Associates. Please proceed with your question.
Alan Ratner: Hey, guys, Happy New Year, good afternoon, thanks for all the detail. I found the — kind of walking through the examples of the community is helpful that you gave as far as ones where backlog might be a bit larger and taking a different price action there versus the smaller one, do you have any sense, if you look at your kind of 240 or so communities active today, what percentage would fit the bill of a community where the backlog is still quite large and you’re focusing maybe a little bit more on delivering that backlog as opposed to generating improved order activity versus communities where you’ve kind of made the progress working through the backlog or maybe it’s a newer community and you are kind of more pedal-to-the-metal trying to generate activity. I’m just curious what that share looks like today versus maybe three months ago when you started this quarter?
Jeff Mezger: Simple math using averages, Alan, is our backlog per community is still more than 30-per-community on average, so some are 50, some are 15, and it’s all over the place. So each community rotates through. We’ll take the steps at the right time. This isn’t a problem, by the way, it’s a good thing. If the backlog is solid and at decent margins. But Rob, I don’t know if you were looking at it, what was the range on communities where we had taken steps. It wasn’t that big in the fourth quarter at all?
Rob McGibney: No, especially not at the start of the fourth quarter. So start the fourth quarter, the kind of filter the main filter, we’re using CFO community as a candidate for a price reduction or not is whether it has more in backlog than remaining to sell. So in those cases, with more backlog than remaining to sell, we take a really hard look at those before we decide to pull the pricing lever because of the impact on backlog. When we started the fourth quarter, about 70% of our communities were not a candidate for a pricing change based on that criteria. But today, that’s shifted more to mid-to-high 30% range. So that caused us to be more defensive, I would say, in most of Q4, but with some of our communities now with lower backlog and more remaining to sell, we’ve got more communities that we’re looking at price adjustments to drive additional net sales.
Operator: Thank you. And our next question comes from the line of Susan Maklari with Goldman Sachs. Please proceed with your question.
Susan Maklari: Thank you. Good afternoon. My first question is talking a little bit about the design centers and are you seeing any change there in what people are choosing to put in their homes or any other sort of adjustments in order to reach that affordability?
