So I would expect closings to be kind of similar in the second quarter as the first quarter and then maybe go up a little bit in the second half. Our run rate, again, hopefully will be 5% to 10% up on an annual basis for the next year or two is kind of what we’re targeting. We definitely have the land in Nashville. We just opened our third community there. So we’re starting to sell enclosed houses at a better rate there. And then our other new market, Fort Myers/Naples, it’s similar. They have a couple stores open. That’s also going to give us some growth. So, overall, we feel really good about how the business functions.
Alan Ratner: Thank you for that, Phil. That’s certainly helpful for our modeling. If I could squeak in one last one and then I’ll move it on. I was a little surprised to see your FHA share up so much year-over-year, going from 19% to 32%, because it seems like your first-time buyer share has been holding pretty steady. Any particular reason why you’ve seen that kind of mix shift in the mortgage products?
Bob Schottenstein: I was a little surprised, too, and Derek’s going to try to provide more color on that.
Derek Klutch: Yeah. Alan, we looked into that because it was surprising and I think what we’re seeing with interest rates going up, our price points still fit into the FHA loan limit and the buyers are choosing to put the lower down payment down and use the other money either to buy down the rates themselves a little bit more or to pay off some debt to be able to qualify.
Bob Schottenstein: I think last year at this time, our average down payment was closer to 20% than 18%. It might have been 19% and change. I can’t remember exactly. So it has — we still have a very high-quality buyer putting roughly $85,000 down on average. But I was surprised the down payment didn’t come down a little bit more given the FHA and maybe that hasn’t just worked its way through the system yet. I’m not sure. But…
Alan Ratner: Interesting…
Bob Schottenstein: … I hope that answers your question.
Alan Ratner: Yeah. No. Appreciate that.
Bob Schottenstein: We also — Phil mentioned townhomes. We continue, like, I suspect probably most in the industry, affordability is a gigantic challenge for the country and for builders. We’d all like to have more affordable, high margin product. That’s hard to do. What’s helping us a little bit on that front is we continue to be doing more and more attached product, whereas it was less than probably 10% of our business three years ago, today it’s probably pushing 15%, 16%, 17% of our business and likely will level out at somewhere between 15% and 20%. So that’s a — and I think a lot of that’s incremental business, so we’re excited about that.
Derek Klutch: And also if you look at our store count continues to go up. We opened 22 new stores the third quarter of 2023. We opened 20 new stores the fourth quarter of last year. And then we opened 21 new stores the first quarter of this year. So when you look at the store count overall, like 220, there’s been 60-plus opened in the last nine months. So hopefully we’re focused on the right locations, the right price point, the right product. We pay a lot of attention to that and hopefully that’s paying off also.
Alan Ratner: Great. Well, thanks a lot, and congrats again on the strong quarter.
Bob Schottenstein: Thanks, Alan, and take care.
Operator: [Operator Instructions] Your next question comes from Jay McCanless from Wedbush. Please go ahead.
Jay McCanless: Hey. Good morning. Thanks for taking my question.
Bob Schottenstein: Hi, Jay.
Jay McCanless: So to take Alan’s question a step further, assuming that you’re going to see more buyers, they’re going to need to be under the FHA and the VA loan limits, how are you feeling about your current community mix and where your pricing is set on those, and then especially as you go into the back half of the year and open up more communities, do you feel like your product will be priced appropriately to be under those limits?
Bob Schottenstein: Yes. Yes. I don’t know if any more needs to be said. I don’t know that FHA is going to continue to go up. I don’t think we know enough to know that and it may come back down, but I think that unless I’m mistaken or missing something, I think, we’re in very good shape relative to FHA loan limits across our markets. I’m looking at Derek.
Derek Klutch: And, Jay, all — almost all of our Smart Series has always been under the FHA loan limit and a good portion of our other did qualify for FHA loan limits. They just chose conventional.
Jay McCanless: Okay. That’s good to know. Thank you, Derek. So my second question, in the first quarter the orders in the south were up only about 3% after rising by a double-digit percentage the last couple of quarters. Could you discuss the competitive dynamics in the southern region and are you seeing more competition on price and/or incentives in those markets?
Bob Schottenstein: I think a lot of that is owing to weakness in the Austin market. Austin had been strong for us and Austin’s probably one of the more challenged markets right now just in terms of trying to reset with, as you know, probably the most heated of all the markets we do business in over the last several years until it wasn’t. San Antonio got a little bit softer, too. It’s a very rate-sensitive market, heavy, heavy first-time buyer. Almost 100% of our business in San Antonio is Smart Series. So — and then a little bit of softness, not much, but just a wee bit still up, but not up, the double-digit amounts in certain of the Florida markets.
Derek Klutch: Jay, if you look at the new contracts, again, in the first quarter of this year we sold over 2,500. Last year we sold right about 2,200. The southern region pretty much was flat, up 3%. The change in the Midwest really was in the first quarter of last year, the Midwest, so 828, or the northern region is, 828 versus 1162. And I think it was a combination that at that time our hotter markets, quote-unquote, the southern markets, really had a really good first quarter last year in the Midwest. Northern region was a little bit slow. When you look at this year’s first quarter, we had very strong sales in Columbus, Chicago, Minneapolis. Those markets were very strong. And again, that led to the 40% increase in sales in the northern region.
