Alan Ratner: … a third of your business is kind of seeing a rate buydown of some sort right now. We have heard from some other builders share much higher than that. And I am curious, A, why not offer it more across the Board in an effort to maybe drive that absorption rate closer to that low 3 target you guys have? And I guess within the fourth quarter guide for margins to be down 100 bps, are you able to share kind of an explicit forecast on how high that share ultimately does go in the fourth quarter?
Sheryl Palmer: Yeah. Thanks, Alan. There’s a lot in there, so let me try. So the reason I went into such great detail on kind of the different programs is I do think there’s some real confusion out there when we talk about discount points versus forward commitments. We have always had some form of discount points or closing cost assistance. We didn’t even talk about the buyers that really just want some support on cash out of pocket and that’s more important to them. So that’s why that 94%. I think that’s getting blurred across some of the chatter out there on how many are getting forward commitments. So when I look at 30% and you align that with our first-time buyer mix, you align that with our cash business, it actually makes a lot of sense.
We have those programs available for each of our consumers, so it’s really about once they come in the door and we work with them, understanding which program is going to make the most sense for them to get that payment where they need it. When I look into Q4, generally the fourth quarter, Alan, is a higher penetration of inventory homes. I expect that we will see that in this Q4 as well. When I look at the penetration of inventory homes in backlog today, it’s higher than what we would have had in Q3, so that’s going to have an impact. We also benefited in the third quarter from some pull-in of some larger, higher margin, which kind of blurs the Q3 and Q4 margin trajectory. What I would keep focused on is we are taking our margin up for the year from what we said last quarter.
Alan Ratner: That’s really helpful, Sheryl. And yeah, I appreciate the discount points, because I feel like we might be talking apples and oranges across some of these disclosures in the industry right now. So…
Sheryl Palmer: I think so. And…
Alan Ratner: Appreciate that.
Sheryl Palmer: …it needs to be separated.
Alan Ratner: Yeah. Exactly. Hopefully, others can follow suit and provide similar disclosures as you guys do coming forward. Second question, I was hoping you could help me better understand kind of the bridge that gap from your current absorption pace, which is running, for the year, you are probably going to end up somewhere in the high 2s to 7 to 8 range, maybe versus that intermediate-term target, I guess, of something in the low 3s. So, basically, you expect your absorptions to probably climb 15%, 20% from here. What timeframe should we think about that occurring in? What should we think about the mix of your business doing as that happens, either from a price standpoint, a margin standpoint, assuming the market kind of stays where it is today, rates stay elevated and maybe there’s some choppiness there, what needs to happen for that absorption rate to move higher into that low 3 range?
Sheryl Palmer: Yeah. I think the timing is moving into next year. Alan, I am saying that, we are not giving any specific guidance for 2024 yet, but I think, as we have said all year that, we have got a shift in our overall mix of communities. Erik talked about some of those where we have taken communities with more positions to really push mix and returns. So as you look into 2024, I am with you on 2023, as we move into the fourth quarter, with the environment we are in, we will probably be somewhere in that high 2 number. But as we look at 2024, you should expect something in the 3 range, the low 3 range.
Erik Heuser: And Alan, from an underwriting perspective, we have been underwriting kind of that 3 threshold for some time and so just ensuring that the math makes sense for every submarket and every asset, so that we are looking at the elasticity. And there have been times in the cycle where we have really pushed for price and margin and so we have got that kind of that lever to pull between those two and so we are just ensuring that from an underwriting standpoint, we are set up for the future.
Alan Ratner: Yeah. Got it. I appreciate that, guys. Thank you.
Sheryl Palmer: Thank you.
Operator: Our next question comes from the line of Ken Zener with Seaport Research. Ken, please go ahead. Your line is now open.
Ken Zener: Thank you. Good morning, everybody.
Curt VanHyfte: Good morning.
Ken Zener: Hello.
Sheryl Palmer: Good morning.
Ken Zener: Oh! Good. So I really do appreciate your disclosures. I think it’s actually kind of raising more questions than answering, which that’s probably why people don’t do it, but thank you very much. I wonder if you can summarize…
Sheryl Palmer: Okay.
Ken Zener: … these incentives. I know it. You give an inch. But is there a way for you to talk about the incentives you have offered related to these different aspects that are part of the operating environment to influence buyers? Is there — can you say it’s 4% or 6% or where in perspective, obviously, you are giving us much more detail?
Sheryl Palmer: Yeah. I can try and cover maybe…
Ken Zener: $110,000 [ph]
Sheryl Palmer: So say that last thing one more time Ken, builders say what?
Ken Zener: Oh! Yeah. There’s just — some of the builders have talked about it being 4% or 6% of ASP and while — maybe while you are thinking about that, you did give us such good granular details. Is there a way to think about your options as a percent of your ASP? I know you mentioned $110,000 on your to-be-built, but is there a total number you have for options…
Sheryl Palmer: Yeah.
Ken Zener: … as a percent of your reported ASP?
