Eric Lipar: Well, I think the vast majority of them — almost all of them would have been under construction at some point being a spec builder.
Carl Reichardt: All right. figured as much. All right, thanks a lot. Appreciate it.
Eric Lipar: Yes, thanks Carl.
Operator: And our next question will come from Jay McCanless of Wedbush. Your line is open.
Jay McCanless: Hey, good afternoon everybody. My first question what do you think — I don’t want to call it a hiccup, but a little bit slower sales pace in September and now you’ve seen the rebound in October. Was that a larger competitor trying to make their year or were there some other things going on there that we need to know about?
Eric Lipar: No, I think Jay, this is Eric October sales are similar to September and it’s a little slower than July and August. And I don’t want to say it’s all about rates, but certainly, rates are higher in September and October than they were in July and August. We’re seeing those 7% plus rates, which the rate really doesn’t matter as we talked about. It’s really more about affordability and really our success is not really determined on what our competitors are doing. We are seeing more builders doing price discounts. Certainly a lot of them are doing mortgage commitments and everybody’s got their own view on incentives and we’re continuously watching the cost of rent versus the cost of own. Based on where rates and pricing is today that difference between those two is probably as high as it’s ever been.
But our teams has also — our teams across the country are also focused on the reason to buy, and it’s not a mathematical equation, it’s not a spreadsheet equation. All the reasons that customers buy homes for their lifestyle decisions, those are all still there and that’s what we’re focused on.
Jay McCanless: And then, asking the sales pace question a different way. Is the goal maybe for the next call it 12 to 24 months to sell at something at the lower end of normal five to 5.5 per month to get the company to 140 communities by year end, rather than trying to brute force, open a bunch or buy a bunch of small builders?
Eric Lipar: Yes. No, well, I think the focus is on maintaining our historical margins at the highest absorption rate possible, right. I think, that would be a way to describe it. And we’re pretty excited about putting up a 5.6 absorption pace and creating 14.5 pretax, because the absolute dollars with the way our average sales price has increased over the last few years, the absolute dollars coming through the income statements, very positive for us. So, the sales pace, whether it’s four a month or five a month or six or eight a month during the pandemic, is one item that we closely look at. And we all want more sales and closings, but we also have to be protective of the margins and make good long-term decisions for the company.
But you’re right, we are really excited about our community count growth and we are going to be increasing revenue and closings for the company overall, because of all that community count growth, irregardless of how many closings per community that equates to.
Jay McCanless: Got it. And then the other question I had just, are you seeing enough savings on lumber yet to maybe contribute a little bit more to doing mortgage rate buydowns or is that going to flow through like first half of ’24?
Charles Merdian: Yes, Jay, I would describe it as relatively nominal at this point. It is $2000 month over month, but certainly something that gives us a little bit more flexibility. We’ve seen it more in the last two months, which is really looking more into the first quarter of ’24, really by the time those houses get completed and are available to close.
Jay McCanless: Okay. Great. That’s all I had. Thanks guys.
Operator: I would now like to turn the conference back over to Eric for closing remarks.
Eric Lipar: Yes. Thanks everyone for participating on today’s call and for your continued interest in LGI Homes. Have a great afternoon.
Operator: Ladies and gentlemen, this concludes today’s conference. Thank you for participating. You may now disconnect.
