And then if you go to the temp buydowns where the costs are calculated based on the loan amount, that’s been running about 2.25% for a two-one buydown, those costs are obviously paid by the seller and that was only about 13% of our third quarter closings that used a temporary buydown. And then to your question specifically, but I think it’s important to see the stacked effect is our forward commitments, which include our Buy Build Secure program for extended lock programs and this is where we purchase a forward tranche of money on a specific date. We are doing that potentially daily, weekly, depending on the need and that allows us to offer an interest rate below market. We have to buy those funds before the customer is in contract, and that way, honestly, the dollars are not included in our seller contribution limits — limitations.
But when we look across the portfolio, that was only 18% of our Q3 total closings. So when you put that against the margin, it’s actually a very small kind of less than 1% on forward commitments specifically across the portfolio for Q3. Interestingly as well, the average interest rate for our forward commitments in Q3 was just about 5.5%. Hopefully, that gives you a little bit of an overview.
Anika Dholakia: Super helpful. Thank you. And then, I guess, my second question looking a little at mix. So in second quarter, spec to BTO is about 60% to 40% I believe. Now we are seeing 3Q, 55% to 40% spec BTO. So how do you expect this mix level to change based on the rate movements, the rate environment we are in and then can you just remind us on the margin spread between spec and BTO? I think I heard you say several hundred bps. I am wondering if that’s still that 300 bp to 400 bp range from previous quarters or if you are seeing that narrowing at all? Thanks.
Sheryl Palmer: Yeah. Maybe we will tackle this one together. I think in fourth quarter, Curt, we would expect the spec to be, probably, closer to what we saw in Q2, given just availability. Is that?
Curt VanHyfte: No. I would say so. I mean, generally speaking, as — I think we have said before, we have kind of — our mix between spec and to-be-built has been 60%-40%, 40%-60% over time and today we are a little more heavy relative to specs in that kind of, I guess, ratio. And we would probably look to continue to see that go forward here for the next quarter or so relative to that. But again, we are — it’s very consumer based for us. We kind of mirror that program relative to the communities that we have and to the customers that we are serving and today that mix is just right in that, like we said, 55% spec and 45% to-be-built.
Sheryl Palmer: And then when we look at the margin impact, which I think was the second part of your question. Yeah, you are right, there’s a spread there, there’s generally a few hundred basis points, 300 basis points, 400 basis points that can get larger when I look at the 55-plus resort lifestyle. So much of that is when you look at that consumer picking their own lot and their design features in the house. I mean, our spec lot premiums are about half of to-be-built and that’s really focused on the active adult. And our option revenue is about 50% higher than our specs. So when you are — when I look at the portfolio, that 300 basis points to 400 basis points is about right. When I look at the active adult, it’s actually the spread is even greater.
Anika Dholakia: Awesome. Thank you, guys. I will pass it on.
Sheryl Palmer: Thank you.
Curt VanHyfte: Thank you.
Operator: Our next question comes from Michael Rehaut with JPMorgan. Please go ahead, Mike. Your line is now open.
Doug Wardlaw: Hi, guys. Good morning. It’s Doug Wardlaw on for Mike. If I heard it correctly, in terms of seasonality, you said August was stronger than usual, September kind of tapered off a little bit from August and October was still looking nice from a historical standpoint. So I am just wondering looking forward in terms of the rate environment we are in, where do you guys think things will be in terms of typical seasonality moving into 2024? Do you think it continues to stay in line or just very much so varied on where the rate environment goes moving forward into next year?
Sheryl Palmer: I think that will be always weighing on the minds of the consumer today along with some of the other macro factors that we are seeing and I think the consumer is being faced with. But I get grounded very quickly on the lack of supply that we have and the needs of consumers to get shelter. So as I look forward, once again, assuming no significant shifts in what we are seeing in today’s environment this kind of rate for longer, I think, we all have to be prepared for that until the Fed gives some clarity around next moves around MBS, I think, that’s going to continue to weigh on folks. But when I look at next year, I think, across the industry, and certainly, for Taylor Morrison, we expect to see movement upwards on both sales and closings — sales starts and closings.
Doug Wardlaw: Got it. Thanks. And then last — got it. Thank you. And then, lastly, in terms of, incentives on a market-by-market basis, were there any particular markets that were surprising in terms of not needing as many incentives offers or more than you anticipated and do you feel that trend, if there is one, will be available moving forward?
Sheryl Palmer: Yeah. It’s a good question. When we look at where we are spending, let’s say, our forward commitment dollars, there have been a couple of surprises. I would say not surprising is where we have the greatest penetration of first-time buyers is where will spend, where we are seeing most of those forward commitment and buydown dollars show up. Places that we really haven’t used much forward commitment, the consumer just hasn’t needed it in these communities would be places like Sacramento, the Bay Area, Seattle. We have, I mean, barely used forward commitments in our Chesterdale [ph]. When I look at places where we have a more affordable consumer, let’s say Orlando and Houston, that’s where we have probably leaned in a little bit more on forward commitments.
But once again, I would say as a percentage of total incentives, a pretty small number. But a wonderful marketing tool that starts the conversation and helps us give confidence to the consumer. If they are going to buy with an inventory home that’s going to close in 30 days or 60 days or they are working on a Buy Build Secure because they are going to select their lot and build their home, to be able to lock them in with that kind of confidence for 12 months is a very powerful tool.
Doug Wardlaw: Got it. Thank you.
Sheryl Palmer: Thank you.
Operator: Our next question comes from Alan Ratner with Zelman & Associates. Alan, please go ahead. Your line is open.
Alan Ratner: Hey, guys. Good morning. Thanks as always for all the great color so far. Sheryl, first on the…
Sheryl Palmer: Hi, Alan.
Alan Ratner: …on the rate buydown topic. Good morning. So if I am thinking about this right, 18% of your closings are kind of the forward commitment full 30-year buydown, another 13% temporary buydowns, I think, is what you said. So roughly 30% or so…
Sheryl Palmer: Yeah.
