John Lovallo: Okay, that’s really helpful. And then quick follow up here. In your outlook, how are you guys sort of thinking about mortgage rates? I mean, I guess the question is, if rates were to stay at a similar level than they were today, how much risk is there for what you guys are talking about today?
Douglas Yearley: Little. I — we sold a lot of houses at 8%. We’ll sell more houses at 7.25%. And if my long monologue about where the ten year is and where the 170 spread typically is and where we think things are coming, if I’m right and we can break through that 7% into 6% land, yeah, every time there’s a drop in rates, our business should get better. That’s proven true over the past couple of years, so we are optimistic.
Operator: Thank you. And our final question today comes from Truman Patterson with Wolfe. Please go ahead.
Truman Patterson: Hey, good morning every guys and thanks for squeezing me in first. Just want to make sure for clarity, when you were talking about 2024 inventory dollars overall, kind of being flattish, is the expectation that included homes under construction and land as well, correct?
Martin Connor: Yes. I mean the land spend is a little tough to really project this early compared to the end of the year, but yes.
Truman Patterson: Yea. Understood. Just two quick ones for me. You all rely pretty heavily on Realtors given your consumer base. I’m hoping you can remind us what portion of your sales have a Realtor associated with them? What’s your kind of typical broker commission and just any thoughts on the preliminary NAR ruling and the impact on your business?
Douglas Yearley: Sure. So two-thirds of our sales involve an outside Realtor representing our client. On average, we pay that Realtor 2.25% of the delivered price of the home. When you do the math, that comes out to 1.5% of total revenue of the company is with third-party Realtors. It’s too early to comment on the NAR litigation. Obviously, there’s appeals and there’s other litigation that has popped up since that case. But I think longer term, the industry, we are all encouraged to believe that the third-party commissions will be coming down.
Truman Patterson: Okay, perfect. And then Doug, you mentioned eventually getting to 60% option land. I’m just trying to understand, do you think that could potentially take a pause in 2024 on that progression? We’ve just been hearing that developer cost of capital and availability is tightening, so it might make it a little more expensive to option those deals, perhaps find better raw land, owned deals that you could possibly bring on your balance sheet. Just trying to understand how you’re thinking about opportunities in 2024 there.
Douglas Yearley: Yes, I think it’s a fair comment, Truman. Land banking got more expensive and so we probably did a little bit less land banking, which is one of the reasons that we didn’t option as much land. However, we are — even though we’re at 50% owned, 50% optioned and the progression to 60-40 may take a bit more time, that doesn’t change our obsession with capital efficiency, with driving IRRs and therefore ROEs. Because if we’re not going to land bank it, which may keep it off our books and keep it optioned longer, we’re going to get terms from our land sellers through purchase money mortgages where even though we own the land, we don’t pay for it until some date in the future through a purchase money mortgage format. So the IRRs are still being driven and are still very much focused on as we underwrite land, even if it’s taking a bit longer to move the option bucket higher.
Operator: Thank you. This concludes our question-and-answer session. I’d like to turn the conference back over to management for any closing remarks.
Douglas Yearley: Thank you, Rocco, you’ve been terrific. Thank you everyone for your interest and support of our great company and we wish all of you a wonderful holiday season.
Operator: Thank you. The conference has now concluded and we thank you all for attending today’s presentation. You may now disconnect your lines and have a wonderful day.
