Eric Lipar: Yes. Another great question, Michael. We chose not to say 180 specifically for community count growth, the following year. Part of the reason is we are very opportunistic, very selective on new acquisitions. We talked about never taking an inventory impairment in our life of LGI, which is a hats off to the acquisitions and development teams across the nation for pulling that feat off, and we’re very proud of that. So we’re cautious in our buying right now. And that being said, it really depends on what new acquisitions look like for the next 6 to 12 months. So 180 is possible, but we would have to buy some new deals and keep adding community count to hit that number the year after.
Michael Rehaut: Okay. I appreciate that. A couple of other quick ones, if I can squeeze in. I wanted to know, number one, if you could give us any sense of how February is tracking in terms of closings for the month, about another 10 days or so or 8 days — perhaps 8, 9 days to close out. And also, the interest amortization — usually, it’s in the low 1s. And it looks like based on guidance, you’re looking more like 2%-ish. And I just wanted to make sure I had that right as well?
Eric Lipar: Yes, I can take the first part of the question on closings for February. January sales were not as robust as we’d like, Mike. So January, closings were lighter. In February, we expect to close probably around 350, which is up from January, down from last year’s February. And then sales, last couple of weeks have been very strong in the month of February, and that will lead to March, and we believe we can increase closings year-over-year in the month of March.
Charles Merdian: Yes. And I can take the interest question for you, Mike, is, we expect a lot of these new communities were projects that we developed. So as interest rates increased over the last year or so, that interest has been capitalized against these development projects, and we expect them to start coming through the income statement. So we do expect interest to tick up both just from the sheer volume of development communities plus a higher cost of debt capital. And then purchase accounting is a small factor into that delta in the guidance as well. And we would expect that absolute number to generally be about the same year-over-year. So it will be a smaller portion. So a little bit higher on the interest coming through and a little bit smaller on purchase accounting.
Operator: Our next question will be coming from Jay McCanless of Wedbush.
Jay McCanless: So my first question, Eric, when you were talking about the sales decline in January, you said that December leads were pretty soft, which I was surprised to hear because most of your competitors talked about volume and interest levels really picking up in December. So maybe if you could give us some more depth on that, please?
Eric Lipar: Yes. I think we just didn’t see that, Jay. I think part of this, we were really focused on ending the year strong and getting to that over 6,700 closings last year which we are proud of. That’s what we said we’re going to do. It allowed us to increase closings year-over-year. And we just didn’t see the strong sales pace in December. It’s very typical for us, which certainly around the holidays, the first year for sales and orders to slow down, but that’s just what we saw. It’s been a lot better in February.
Jay McCanless: And then as I think part of what you talked about also is maybe some new incentives and/or affordability plays that you could have with the customers. Maybe talk more about that. And then to take it a step further from that, there is a significant amount of multifamily supply that’s going to be hitting the market this year. What is the strategy or strategies to defend against that and continue to pull in your — what I still believe is your core customer into the LGI neighborhoods?
Eric Lipar: Yes. I think a couple of things there is, Jay, we’re always going to be talking to our customers about the advantage of a homeownership versus renting. I mean, if there’s more supply of rental houses out there or rental units apartments, we’re still going to continue to talk about the value of home ownership. Right now, affordability is strained. The gap between the monthly payments to get into homeownership compared to renting an apartment, it’s probably the widest it’s ever been or certainly the widest over the last 12 months or so. And that’s a challenge for us, and that goes back to a lot of the previous discussions that we’ve had. How do you combat that challenge? Well, you spend more money on advertising. You drive leads — more leads to our communities because we’re probably going to have to talk to more people in order to get customers that are qualified.
We’re also working on smaller square footage houses. We’ve talked about that on a couple of previous calls. A percentage of houses under 1,500 square foot that we sold in 2021, that was 21% of our houses were under 1,500 square feet. And in 2023, that was 29%. And that trend is likely to continue into 2024. So that’s some of the tools that we have: increased spending on marketing, doing more training, looking at smaller square footage in order to keep that absorption pace up.
