Eric Lipar: Yes, it’s another great question, Truman. And there’s a lot of talk about rate buydowns and incentives. For clarification, what we’ve been really focused on, is giving the consumer the lowest fixed rate possible every week. And what has that involved over the last couple quarters, is really paying two or three discount points if you will, to get the lowest rate possible on a week to week basis. And that has been over 7% here recently, even paying a couple points. We have not purchased any big forward commitments, which instead of costing two to three points may cost 600 900 1,000 basis points to get a rate materially lower from that and that is very expensive to do, but we’re continuing to analyze it. We’re continuing to analyze sales week to week and what incentives are going to be best for our customers.
Truman Patterson: Okay, perfect. And then just one final one for me. Just in your fourth quarter gross margin guide, any discussion around there? Does that contemplate any buyers or incremental rate buydowns incentives needed for any buyers that might get kicked out due to affordability or any way you can help us think about, the sensitivity of buyers that might not be able to qualify without a buydown today?
Eric Lipar: Yes. I think it does contemplate that, Truman. I think, it’s an unknown. When rates got to 6.5% to 7% we didn’t necessarily expect them to go to 7.5% or 8%. And I think from this point forward, where do they go from here. So when we’re giving our gross margin guide, we said, similar to slightly down. So we think, we got 100 to 200 basis points of room either for mortgage incentives, we’ll see where the costs come in, see what percentage of our business comes from the wholesale, investors and then geographic mix also plays a role in that.
Truman Patterson: All right. Thank you all
Eric Lipar: Thank you.
Operator: One moment for our next question. And our next question will come from Ken Zener of Seaport Research. Your line is open, Ken.
Ken Zener: Good afternoon, everybody.
Eric Lipar: Good afternoon.
Charles Merdian: Good afternoon.
Ken Zener: So couple different angles here. I believe you said, you bought finished lots that you saw in the market. And was it 23 communities? Is that what you actually said?
Eric Lipar: 23 overall, nine of which were finished lots Ken, is what we said.
Ken Zener: And how does that play into — when you find that attractive ,given your self-development bias to buy raw land and keep that 300 basis point spread development to buying it from somebody? What makes you go ahead and do this? Is it because you’re trying to get — something just literally opportunistically came up? And how do you think about that relative to the margin bias you have for your existing land development business or process?
Eric Lipar: Yes. It’s really opportunistic, Ken. And that’s the positive about being in a more challenging market, a more challenging affordability market, where we’re seeing lower absorptions than historical past but we’re seeing tremendous opportunities to grow our community count. And I think that’s one of the most exciting things that we shared on the call is the ability to buy these new communities. Instead of buying bigger land positions which take a lot more capital, there’s more timing and development risk. What we’re seeing in the market today, on these 23 communities, these are smaller deals, most are coming from private builders or private developers, probably average lot size around 100 lots instead of a few hundred lots, less capital intensive, less risk, stress testing these deals to meet our margin requirements probably works at half the absorption pace as a larger community.
So really accretive earnings. We can get in there and create closings quicker. And that led to us being confident that we’re on track for our community count growth this year. We’re confident that we’re going to have 150 communities by the end of 2024, which is substantial growth and 180 communities by the end of 2025. All those developments are already in play. It’s just a matter of timing of getting them open.
