Sheryl Palmer: Yeah. We have run for years and years somewhere in that 15% to 16% range, and honestly, we haven’t seen much movement there. The other area you didn’t ask, but I will mention that we haven’t seen much movement in is our square footage range over the last many years. You would think that given the environment we are seeing, square footage has really moved down and that just doesn’t seem to be the case, particularly on our to-be-built when the consumer is the one that makes the choice of what product they want to build. With respect to more color on the programs, I think, a couple of things worth mentioning. Obviously, we have seen interest rates double since 2021. But even having said that, most customers have really expected that the low rate environment of 2021 is not coming back and home values have remained relatively steady.
So what that has done is, obviously, made a significant impact on a consumer’s payment for the same house and the income requirements that would be necessary to buy what was a $500,000 house two years ago versus that $500,000 house today. Generally, Ken, I would tell you that, we have been — since the consumer has really kind of met us halfway. Generally speaking, we have been marketing 5.49%, 5.99%, 30-year fixed rates. There may be a really affordable community or two where we would look at a 4.99%. But generally, we are not having to do that. In fact, if you look at the data, the coupon note rate of our closings in the third quarter, I am going to tell you it jumped to something like 6.20%, compared to 5.8% last quarter. So the consumer is moving along with us, which has us generally marketing rates in the 5s.
Ken Zener: Thank you very much. Very good color.
Sheryl Palmer: Of course.
Operator: Our next question comes from Jay McCanless with Wedbush. Jay, please go ahead. Your line is now open.
Jay McCanless: Good morning, everyone. Thanks for taking my questions. Quick one on capital allocation, especially when I look at the June 2027 notes trading at a decent discount to par. Could opportunistic debt reductions be part of the capital allocation discussion going forward? You guys raised your land spend number for 2023 last quarter and you are expecting land spend to be up in 2024. I just wanted to kind of balance that against the potential to start chipping away at that stack in 2027?
Curt VanHyfte: Yeah. Good morning. Yeah. Never say never, right? I think we are pretty grounded in our overall capital allocation strategy. Our number with the payoff of our senior notes here for Q3 that we are going to be doing first quarter of next year. We have those behind us now. And so right now our number one priority is we will be investing in the business. We will continue to be opportunistic from a share repurchase standpoint and to your point, we — we will continue to look at whether or not we want to take anything else out from a senior note standpoint. But to your point, that would be an opportunistic kind of perspective.
Jay McCanless: Okay. And then, I guess, could you talk about, I think you said, during the third quarter you raised prices at 60% of communities. Have you been able to hold that type of pricing given what you have seen thus far in October, are you having to — maybe talk about what type of pricing power or pricing stability you are seeing thus far in the quarter?
Sheryl Palmer: Yeah. We haven’t — I don’t know that I could give you a tremendous amount of color for October on what percentage of the communities we have raised prices. But I would tell you that I don’t think there’s anything meaningfully different in October than what we have seen in Q3 with the exception of probably leaning in a little heavier with that first-time buyer on the forward commitments. We are always going to start there…
Jay McCanless: Okay. That’s great.
Sheryl Palmer: … Jay, because…
Jay McCanless: Thanks for taking our question.
Sheryl Palmer: …of the power. Yeah. You bet, Jay.
Operator: Our next question comes from the line of Alex Barron with Housing Research Center. Alex, please go ahead. Your line is now open.
Alex Barron: Yeah. Thanks. Sheryl, I remember a few quarters ago you used to talk about — maybe it was a couple of years ago, you used to talk about your analysis would show that consumers could pay up higher interest rates. I am wondering if you did that same analysis today, is that still the case or are we kind of at that level where the maximum is what your…
Sheryl Palmer: Yeah.
Alex Barron: … analysis used to show, you see what I am looking?
Sheryl Palmer: Yeah. No. We still do that analysis every quarter. So I appreciate the question. And I think it would be exactly what you would expect. When I look at the conventional buyer, we have still nearly 400 basis points. When I look at the fourth quarter closings, like I said, they on average closed with an average note rate of 6.23 and with that 6.23 they still had nearly 400 basis points of room. So I’d say very, very healthy on the conventional consumer. And once again, that’s just on one bucket, that’s before we look at assets and other qualifying needs. I think probably more telling is what we have seen on the FHA side and we have seen a little bit more compression. If I were to go back to this time last year, we probably had — we had close to 240 basis points in their qualifying kind of room and today that has dropped to 140 basis points.
Probably more important is when I look at the backlog, I would tell you that our backlog, when I look at all of their qualifying kind of conditions are in a very good place. The conventional buyer, when I look at incomes and LTVs and FICO scores ratios, they continue to improve and on the FHA side, they continue to get a little bit tighter.
Alex Barron: Got it. My other question was in terms of sales pace. Is there any — can you describe how the entry-level versus move-up versus active adult are doing lately?
Sheryl Palmer: Yeah. Actually our strongest pace for the quarter was entry-level and then followed by move-up. Active adult would have been third up and that would be expected in Q3 when generally we are in kind of the summer season before we move into the shoulder selling season. So, as I said, a deep, deep pool of first-time buyers and so we are seeing the traffic and we are getting the sales. We just have to put the right programs forth to make sure we can get them qualified.
Alex Barron: Got it. Thank you so much.
Sheryl Palmer: Thank you.
Operator: Those are all the questions we have. So I will turn the call over to Sheryl for closing remarks.
Sheryl Palmer: Well, thank you. Appreciate everyone joining us for our third quarter result. I wish you all a wonderful fourth quarter, a happy holiday season and we will look forward to talking to you in the new year. Bye-bye.
Operator: Thank you everyone for joining us today. This concludes our call and you may now disconnect your lines.
