M/Iホームズ (MHO) 2026年第3四半期決算説明会：住宅ローンのバイドウンが利益率を圧迫

主要なポイント

• M/I Homesの2026年第3四半期の売上高は、住宅引き渡し件数および平均販売価格の下落により、前年同期比5%減の10億8,000万ドルとなりました。
• 税引前利益は38%減の8,700万ドルとなり、希薄化後EPSは3.92ドルから2.56ドルへ減少しました。EBITDAは1億5,700万ドルから1億3,000万ドルへ減少しました。
• 棚卸資産評価損500万ドルを除く売上総利益率は21.3%となり、320ベーシスポイント低下しました。経営陣は、この粗利率縮小の主な要因として、住宅ローン金利引き下げ費用の増加と用地コストの上昇を挙げています。
• 新規契約件数は2%減の1,861戸となりました。月別の動向では、住宅ローン金利の上昇に伴い、7月は15%増であったものの、8月は6%減、9月は16%減とパフォーマンスが悪化しました。
• 貸借対照表は非常に高い流動性を維持しており、手元資金は6億2,000万ドル、9億ドルのリボルビング信用枠からの借入はなく、純負債資本比率は2%にとどまりました。
• 経営陣は年末時点のコミュニティ数が前年比で約5%増加すると予想していますが、需要の不透明感を背景に、新規土地取引、着工、採用、費用支出に対しては慎重な姿勢を維持しています。

主要財務データ

事業および業績の動向

M/I Homesの第3四半期の解約率は12%でした。販売の50%を一次取得者が占め、在庫住宅が80%を占めました。同社の最も価格を抑えた商品ラインである「Smart Series」が当四半期売上の約半数を占め、残りを買い替え顧客および二次取得者が占めました。

同社は当四半期末時点で前年同期比6%増となる246のコミュニティを展開しています。当期間中に27のコミュニティを開設し、15を閉鎖しました。北部地域では契約件数と引き渡し件数が共に1%増加した一方、南部地域では契約件数が4%減少、引き渡し（クロージング）が5%減少しました。

経営陣は、シカゴ、コロンバス、ミネアポリス、ダラス、シャーロットを事業部利益の主な牽引地域として挙げました。フロリダ州はまちまちの動きとなり、オーランドは比較的好調を維持し、サラソタでは契約件数が増加した一方、タンパは減少しました。経営陣によると、新設されたフォートマイヤーズおよびネープルズの事業は期待以上の成果を上げているとのことです。

M/I Homesは所有および管理下にある用地上で約49,000区画を保有しており、これは約5年分の供給量に相当します。このうち約23,400区画（約2.5年分）を所有し、約25,600区画はオプション契約を通じて管理しています。

四半期末時点の棚卸資産には3,242戸の住宅が含まれ、そのうち721戸が完成済み物件でした。経営陣によると、需要に合わせて着工をわずかに抑制しており、コミュニティ数が増加したにもかかわらず、完成済みの見込み建築（スペック）在庫は前年レベルを下回っています。

住宅ローン事業では獲得率が93%から96%に上昇し、経営陣はこれを過去最高水準と説明しています。借り手の平均信用スコアは748、平均頭金比率は16%を超え、1番抵当住宅ローンの平均融資比率（LTV）は84%でした。

住宅ローンおよび権原保険の売上高は5%減の3,270万ドルとなりました。ローン実行件数は1%減の1,835件で、平均ローン金額は40万6,000ドルから40万3,000ドルに減少しました。

業績予想・経営見通し

経営陣は、2026年末時点におけるM/I Homesのコミュニティ数が前年比で約5%増加すると見積もっています。

同社は全体的な戦略に重大な変更が生じるとは見込んでいません。新規の土地取引を厳選し、費用や採用を抑制しながら、特定の市場において製品ミックスを調整する方針です。一次取得者の比率が特に高かった約2〜4の市場においては、より上位の買い替え住宅へのシフトがすでに進行しています。

経営陣は、四半期末以降に住宅ローン金利がやや低下したとしつつも、変動が激しく困難な市場環境が続く可能性があると警告しました。

リスクおよび注視すべき点

住宅ローンの購買力（アフォーダビリティ）低下が最大の圧迫要因であり続けています。当四半期中、30年固定住宅ローンの平均基準金利（パーレート）は7月1日時点の約6.75%から9月30日時点の約7.75%へと100ベーシスポイント近く上昇しました。金利引き下げ費用の増大が売上総利益率を直接圧迫しました。

また、経営陣は燃料価格の高騰、インフレへの懸念、イランにおける情勢不安の継続を、消費者信頼感や経済の不確実性に影響を与える要因として挙げました。

当四半期中に需要は大幅に減退し、契約件数の伸びは7月のプラスから9月には2桁の減少へと転じました。中西部やキャロライナ諸州と比較してフロリダ州とテキサス州は全体的に厳しく、特にタンパとサラソタでの圧迫が顕著でした。

四半期が進むにつれてインセンティブ（販売促進施策）の水準が上昇しました。住宅ローン金利引き下げが引き続き主要なインセンティブであったものの、一部のコミュニティでは諸費用補助や値引きも実施されました。また、変動金利型住宅ローン商品を検討する顧客が増加しました。

アナリスト質疑応答の要点

• 2027年の戦略：経営陣は抜本的なビジネスモデルの変更や大規模な土地売却は計画していません。流動性を保護し、新規取引を厳しく精査した上で、選択的な製品ミックスの調整を行う方針です。
• 見込み建築（スペック）在庫：着工はわずかに削減されました。スペック在庫の合計は3,000戸強を維持した一方、完成済みスペック在庫は約700戸となり、コミュニティ数が増加したにもかかわらず、全体として横ばいまたは減少傾向にあります。
• フロリダ州の価格設定：経営陣は、広域的な地域一括調整ではなく、コミュニティごとに価格設定やインセンティブの決定を行っていると述べました。オーランドや新設されたフォートマイヤーズおよびネープルズの事業は比較的好調でしたが、タンパは厳しい状況が続いています。
• 労働力の確保：移民取締りにより一部の市場で一時的な問題が発生したものの、経営陣は労働力が全体的な大きな制約になっているとは考えていません。同社は需要が伴えば、年間でさらに1,000戸から1,500戸の住宅を追加建設可能であるとしています。
• 販管費：費用の5%増加は、営業および建設人員の追加を含め、コミュニティ数が同程度増加したことと、広告・プロモーション費用の若干の増加をほぼ反映しています。
• 資本配分：M/I Homesは第3四半期中に5,000万ドルの自社株買いを実施し、自社株買い枠の残高は2億ドルとなりました。2022年初頭以降、同社は発行済株式の21%を買い戻しています。

決算説明会全文文字起こし

決算説明会の完全なトランスクリプト

経営陣による説明

Operator

Good morning, and welcome to the M/I Homes, Inc. Third Quarter Earnings Conference Call. My name is Lacey, and I will be your conference operator today. [Operator Instructions] I would now like to turn the call over to Mr. Phil Creek. Please go ahead.

Phillip Creek

Thank you for joining us today. With me is Bob Schottenstein, our CEO and President; and Derek Klutch, President of our mortgage company. First, to address regulation fair disclosure, we encourage you to ask any questions regarding issues that you consider material during this call because we are prohibited from discussing significant nonpublic items with you directly. .

And as to forward-looking statements, I want to remind everyone that the cautionary language about forward-looking statements contained in today's press release also outlines to any comments made during this call. Also be advised that the company undertakes no obligation to update any forward-looking statements made during this call. With that, I'll turn the call over to Bob.

Robert Schottenstein

Thanks, Phil. Good morning, and thank you for joining us today. Our third quarter results reflect the increasingly difficult market conditions impacting the overall economy, consumer behavior and obviously, the homebuilding industry. In the face of these conditions, we produced solid results, generating $87 million of pretax income equating to an 8% plus return. .

Conditions changed notably during the quarter. Perhaps the best evidence of explaining the intra-quarter volatility is the movement in the benchmark 10-year U.S. Treasury bond. July 1, a -- the 10-year treasury was at 4.5%. By August 1, had risen to 4.75% and then began to rise at a faster pace, particularly during September, and by September 30, it had reached 5.3%.

In similar fashion, the average par contract interest rate for a 30-year fixed rate mortgage increased by nearly 100 basis points during the quarter, going from roughly 6.75% a July 1 to close to 7.75% at September 30. And combination of these rising rates, along with elevated fuel prices, concerns with inflation and the continued conflict in Iran have clearly impacted consumer confidence and demand and have contributed to growing economic uncertainty.

As of today, mortgage rates have actually come down slightly, which is very good news but the current choppy and challenging conditions may continue for some time. Regardless, this is not the first time we've managed through challenging conditions. We've been in business for 50 years. And during times like this, execution matters more than ever and a strong balance sheet is absolutely essential.

I'm proud to share that on both of these counts, M/I Homes is very well positioned to navigate the current market conditions. During the quarter, our teams executed at a very high level. And as I will explain in more detail in a few moments. Our balance sheet is rock solid as strong as at any time in our 50-year history.

For the quarter, we sold 1,861 homes 2% less than a year ago. And for the first 9 months of 2026, we have sold 6,598 homes, which is 5% more than a year ago. We continue to use mortgage rate buydowns as our primary incentive to drive sales. With rates rising during the quarter, the cost of such buydowns has increased, thereby impacting our margins.

We have carefully managed the nature and extensive rate buy downs as we deal with rising rates. And I might add, while rate buydowns are clearly important at this time, well-located communities, quality product and thoughtful design are just as, if not more important.

And I talk about how much execution matters during times like this, the quality of our product the strength of our communities and the skills of our sales associates all make a meaningful difference in our results. In other words, nearly every builder is buying down rates but the builder results from one builder to another clearly differ, and the difference is often all about execution.

During the quarter, we closed 2,241 homes a 2% decrease compared to a year ago. Year-to-date, we have closed 6,361 homes, which is 4% less than a year ago. Our third quarter total revenue decreased by 5% to [ $1.08 billion ] , and pretax income decreased 38% to what I mentioned earlier, $87 million. Our gross margin, excluding inventory charges, was 21.3%, 320 basis points lower than a year ago, down primarily due to the higher cost of rate buy downs and higher lot cost versus a year ago.

Our mortgage company's capture rate for the quarter was 96%. One of the highest capture rates we've ever seen and certainly one of the highest capture rates in the history of the home building industry. We continue to see quality buyers in terms of creditworthiness with average credit scores of 748 and average down payments over 16%.

We -- our Smart Series line of homes, which as most of you know, our most affordable line of homes, and generally appeals to the first-time homebuyer continues to be an important contributor to our sales performance. Of note, -- during the quarter, our Smart Series sales comprised about half of our sales. The other half went to second time or move-up buyers.

We ended the quarter with 246 communities and estimate that at the end of this year, our community count will be about 5% higher than last year. With respect to some comments about our markets, our division income contributions in the quarter were led by Chicago, Columbus, Minneapolis, Dallas and Charlotte.

New contracts during the third quarter in our Northern region increased by 1%. New contracts in our Southern region decreased by 4%. Our deliveries in the Northern region increased by 1% compared to last year and represented 42% of our company-wide total.

In our Southern region, our closings decreased by 5% over last year and of course, represented the other 58% of deliveries. We have an excellent land position. I repeat, we have an excellent land position. Our owned and controlled lot position in the Southern region decreased by 12% compared to last year and increased by 13% versus last year in the northern region.

41% of our total owned and controlled lots are in the north, the other 59% in the Southern region. Company-wide, we own on our books approximately 23,400 lots which is roughly a 2.5-year supply. In addition, we control approximately 25,600 lots via option contracts resulting in a total of roughly 49,000 owned and controlled lots equating to about a 5-year supply.

In my earlier remarks, I spoke about how critically important the strong balance sheet is in times like this. And as I said, our balance sheet is rock solid and continues to be in excellent condition. We ended the third quarter with an all-time record $3.3 billion of equity equating to a book value per share of $130.

We had 0 borrowings under our $900 million unsecured revolving credit facility, and we ended the quarter with over $600 million in cash. This has resulted in a debt-to-capital ratio of 18% and a net debt-to-capital ratio of 2%, one of the lowest debt levels in the homebuilding industry.

Moreover, -- and looking at our balance sheet, it's important to recognize that we are one of the few builders that does virtually 0 land banking. There's no confusion about what's on our books and what isn't. And our balance sheet has essentially 0 goodwill on it. We're very proud of our financial condition.

In closing, though these are more challenging times, we remain quite confident in the long-term fundamentals of the homebuilding industry. With our strong land position, well-located geographic footprint, well-located communities, diverse product offering and strong balance sheet, M/I Homes, is well positioned to manage through this current cycle. And with that, I'll turn it over to Phil.

Phillip Creek

Thanks, Bob. Our new contracts were down 2% when compared to last year. They were up 15% in July, down 6% in August and down 16% in September and our cancellation rate for the quarter was 12%. 50% of our third quarter sales were to first-time buyers and 80% were inventory homes.

Our community count was 246 at the end of the third quarter up 6% versus a year ago. The breakdown by region is 103 in the northern region and 143 in the Southern region. During the quarter, we opened 27 new communities while closing 15, we currently estimate that our 2026 year-end community count will be about 5% higher than last year.

We delivered 2,241 homes in the third quarter and about 35% of our third quarter closings came from inventory homes that were both sold and delivered within the quarter, and this also compares to 35% in last year's third quarter. As of 9/30, we had 5,200 homes in the field versus 5,000 homes in the field a year ago and our construction cost and cycle time were flat in the third quarter compared to the second quarter.

Revenue decreased 5% in the quarter. This decline was due to fewer homes delivered and our average sales price declined also. Our gross margin was 20.9% for the quarter including $5 million of inventory charges. Exiting these charges, our gross margin was 21.3%. Our third quarter SG&A expenses were 13.1% of revenue compared to 11.9% a year ago and our third quarter expenses increased 5% versus a year ago.

Increased costs were primarily due to our increased community count. Interest income, net of interest expense for the quarter was $3.6 million our interest incurred was $9.2 million. Our pretax income was 8% for the quarter, and our return on equity was 9%.

During the quarter, we generated $103 million of EBITDA compared to $157 million in last year's third quarter. And our effective tax rate was 23% in the third quarter compared to 24% in last year's third quarter. Our earnings per diluted share for the quarter decreased to $2.56 per diluted share from $3.92 last year. and our book value is now a record $130 per share. With that, I'll turn it over to Derek Klutch to address our mortgage company results.

Derek Klutch

Thanks, Bill. Our mortgage and title operations achieved pretax income of $13.4 million compared to $16.6 million in 2025, 3rd quarter, down 19%. And Revenue decreased 5% from last year to $32.7 million due to lower margins on loans sold, a lower average loan amount and a slight decrease in the number of loans originated. .

The average loan to value on our first mortgages for the third quarter was 84%, consistent with 2025's third quarter. 63% of the loans closed in the quarter were conventional, and 37% FHA or VA compared to 55% and 45%, respectively, for 2025's third quarter.

Our average mortgage amount decreased to $403,000 in 2026, 3rd quarter compared to $406,000 last year. Loans originated decreased to 1,835 loans, which was down 1% from last year, while the volume of loans sold decreased by 5%. The Finally, as Bob mentioned, our mortgage operation captured 96% of our business in the third quarter. This was up from 93% last year. Now I'll turn the call back over to Phil.

Phillip Creek

Thanks, Derek. As far as the balance sheet, our financial position continues to be very strong. We ended the third quarter with no borrowings under our $900 million credit facility and had a cash balance of $620 million. We continue to have one of the lowest debt levels of the public homebuilders and are well positioned with our maturities.

For bank line matures in late 2030 and our public debt matures in 2028 and 2030. Our unsold land investment at 9/30/26 is $1.9 billion compared to $1.8 billion a year ago. And at 9/30, we had $853 million of raw land and land under development and $1.1 billion of finished unsold lots.

During the third quarter, we spent $135 million on land purchases and $155 million on land development for a total of $290 million. At 9/30, we own 23,000 lots and controlled 49,000 lots. At the end of the quarter, we had 721 completed inventory homes and 3,242 total inventory homes.

And of the total inventory, 1,338 are in the Northern region and 1,904 in the Southern region. Last year at 9/30, we had 776 completed inventory homes and 3,001 total inventory homes. We spent $50 million in the third quarter, repurchasing our stock and have $200 million remaining under our current board authorization. Since the start of 2022, we have repurchased 21% of our outstanding shares. This completes our presentation. We'll now open the call for any questions or comments.

Operator

[Operator Instructions] Your first question comes from the line of Alan Ratner with Zelman & Associates.

質疑応答

Alan Ratner

You guys have been probably 1 of the most nimble builders over the last decade or so in terms of making some modest adjustments to your business model and strategy based on market conditions. I'm thinking, obviously, the growth in the Smart Series and kind of adjusting the spec mix based on market conditions. We've been in a challenging market for a while now, but it sounds like things have kind of taken another leg down this quarter with not much certainty or outlook for improvement in the near term.

So I'm curious whether there's more recent leg down and the move higher in rates is causing you to maybe think through the strategy heading into '27 and just thinking through your model, whether it's the mix of your business at spec versus BTO or price point or just land strategy. I'm curious if you're kind of making any adjustments or beginning to think about making adjustments based on the current market reality?

Robert Schottenstein

That's a great question. The first thing I want to say is you can't know what you don't know, right? I mean, sorry for saying something so obvious. But at the beginning of this year, I don't know if too many people that predicted that we would see not only the kind of rate movement that we've seen, which has trended considerably up rather than flat or down. But I don't think anyone believed or even had in their crystal ball that there would be a war beginning at the end of the first quarter, and it has continued now for 6 months.

And all of the related economic impacts that it has had, which I think have impacted in a negative way consumer confidence. That's been well documented. You've written about it as articulately as anyone. Having said all that, in good time in and bad, I think that and I didn't always know this, but it couldn't be clearer to me today as it maybe it wasn't as clear 20 years ago but in good time and bad, there's no financial piece of paper that's more important than your balance sheet.

And when things are more challenging, the importance of the balance sheet becomes more and more and more important, not because you think that we're about to enter a tsunami or some 100-year flood or something, but because you got to be prepared to deal with unexpected things like we've sort of seen happen this year. I don't think the sky is falling. I don't believe that nobody knows for sure I still think that there's so many positive underlying fundamentals that support the long-term health and vitality of the homebuilding industry we're not going to start selling a bunch of land. We've got a great land position.

Are we going to be more careful about new deals? Yes, we are. Will we control enough land, both on and off of our books to be able to manage whatever come what may come. We're not going to make any material changes. Maybe in a few markets, we might adjust our product mix a little bit company-wide. I don't see us making a lot of material changes to that.

There's a bit of a lead time associated with that anyway. I think we have a great strategy. And I think that we've been doing the right things it's easy to say execution matters. We're not perfect. We don't do everything A plus. But we do a lot of things really, really well. The 96% capture rate in our mortgage operation is yet another, it's the highest in the industry. We didn't -- that's not dumb luck. A year ago, it was 93%, and that was the highest in the industry. Pay a lot of attention to sales training more than ever. There's more sales training going on in our company today than at any time in our 50-year history.

And that didn't just start when rates went up 100 basis points. That's been going on since the beginning of the year because you've got to keep getting better. And I love the way we think about land. We were one of the few builders that was never romanced into doing land banking and a lot of off-balance sheet stuff. Maybe we should have, I don't know, but I like that we control it.

And I like that we're not painting the premium for it. And I'm liking that our best deals aren't potentially cross collateralized with a land banker who may be looking to call a bad deal. My point is we have our hands firmly on the rudder. If we don't go in the right direction, it's our fault. But we were really intensely focused on what we can control and our customer service scores are the highest in company history, our home readiness scores, which has to do with the completeness of the home at the time of closing are the highest in company history.

This is all third-party tabulated, our Google review scores across all of our divisions are the highest in company history. So when you talk about execution and focusing on controllables there's a lot to really feel good about. But this is -- these are tough conditions.

July conditions were a whole lot better than September and August was a whole lot better than September, too. And -- but I don't see any reason for some radical change. Yes, we're going to watch new hiring. We're going to control expenses. We're going to do all the things that, I guess, most of our peers are going to be doing right now as well as we're dealing with all these uncertainties. But I don't think the sky is falling, and I couldn't be -- homebuilding is a cyclical business, listen to your first rodeo either.

You've seen the cycles, maybe we're due for a bit of one because things have been pretty good for quite some time. but I wouldn't want to be any other builder. I wouldn't want to be anywhere else. I love our geographic footprint. There's times when Florida is a lot better than the Midwest and there's times when Texas is the strongest these things come and go and go up and down.

But in balance, we've got a very dominant position in the Midwest, a tremendous position in the Carolinas. Florida is a little bit of a struggle now, particularly the West Coast, but remain extremely bullish long term on Florida, and Dallas and Houston remain 2 of our best operations out of our [ 17 ] -- so just trying to tell it like I see it.

Phillip Creek

And one other thing I would add, sure echo what Bob says about how much execution matters. Obviously, having a really, really strong clean balance sheet, having a lot of liquidity is really important. So we continue to always focus on that. We have kind of reduced starts a little bit due to market conditions.

You'll see that our spec levels a little over 3,000 in total. And our finished spec levels being in that 700 range. It's pretty much flat where it was a year ago, even though we do have 5% more stores. So we're not trying to force anything because demand is an issue -- but again, we'll just continue trying to block and tackle better than others.

Operator

Your next question comes from the line of Buck Horne with Raymond James. .

Buck Horne

I appreciate all that color. Very helpful. Yes, I wanted to follow up a little bit on wanted to follow up kind of on what you're seeing you mentioned the West Coast of Florida. It looks like at least in early October, you guys have made some more significant pricing adjustments on some QMI homes, particularly in Tampa and Sarasota, maybe follow up on kind of how Florida is trending in general for you? And how you think those pricing adjustments will take? And are you making any more significant either incentive adjustments or pricing adjustments in other regions in October?

Phillip Creek

Buck, as Bob said, Florida and Texas have been a little more challenging in general than the Midwest and the Carolinas have been we've had a very, very strong operation in Florida, especially for years. Orlando has actually held up pretty good for us. Tampa, Sarasota had been a little more challenging we obviously make adjustments on a community basis periodically as we need to, and we are excited about our -- still a little bit of a startup operation in Fort Myers and Naples.

But I wouldn't say we're doing anything significantly again as kind of a subdivision by subdivision situation. If you just look at our new contracts in the third quarter, actually, compared to the prior year, Sarasota was up. Tampa was down a little bit. So it's kind of a little bit of a mixed bag in Florida. But overall, it still continues to be challenged. But we still feel really good about our leadership teams and really good about our opportunity there.

Robert Schottenstein

The only thing I might add, Fort Myers, Naples, exceeding our expectations. We're off to a very good start there. And obviously, it's a relatively new division for us, but very optimistic about that. And I just want to underscore, we probably have one of the best teams in our company in Tampa, -- so whatever the market may come, I've got tremendous confidence that we'll figure it out.

Buck Horne

I appreciate that. Yes, and go raise, right? So 1 quick on labor availability. It seems like there's been a lot more discussions about whether it's immigration enforcement activity or just other complications with getting fruits out to job sites on time? Are you seeing any effects of labor availability or immigration enforcement so far here in the -- through the third quarter?

Phillip Creek

In certain markets, and it seems to kind of come and go. We have issues with ICE and those type of issues overall, we feel good about where we are. We do have a few more houses in the field today than we did a year ago do desire to grow. We talked about community count being up 5% at the end of this year from a land position we could be doing.

And I think also from a labor standpoint, we could be doing probably 1,000 or 1,500 more homes a year if the demand was there. That's the biggest issue we have right now. So I would not say that labor is a huge issue. From a cost standpoint, especially with all the gas increases in diesel and land development, those type of things. We feel pretty good about our construction cost and land development costs have continued to be pretty flat. So we continue to focus on all those blocking and tackling things, Buck, which we were making more progress, but we feel pretty good about what we're doing.

Buck Horne

Appreciate the color. It sounds like you're doing a great job under the circumstances. All right. Good luck, guys.

Operator

Your next question comes from the line of Jay McCanless with Citizens Bank. .

Jay McCanless

So on the SG&A, could you talk about how much -- were there any onetime items in there? Or is that just where the level is now with the higher community count?

Phillip Creek

Jay, as we said, our SG&A expenses were up about 5%, which is similar to community count. For every community, in general, you have a couple more salespeople you have construction people, et cetera. So in general, that community count increase does increase that. Are we spending a little more money on the advertising, promoting side, yes, we are.

But the biggest issue is just the impact of increased community count, which we've talked about, we should like to increase that community count 5% to 10% a year is kind of our goal. We've been able to do that the last couple of years and this year.

Jay McCanless

And then the next question I had, you guys gave a lot of useful commentary about shifting into more move-up product last quarter. I guess, could you talk about what -- the numbers were -- I think you gave the already, but maybe talk about what the numbers for move-up were this quarter? And kind of following on Alan's question, are you guys looking to pivot more to move up into '27 than what you did in '26?

Phillip Creek

You're talking about the move-up buyer categories commodities .

Jay McCanless

Yes. I mean... Sure. Last quarter's conference call, you guys talked about shifting into more move-up communities focusing more on the move-up buyer -- could you talk about what you're doing this quarter, but then also kind of following on Alan's question, are you looking for ways to maybe change or communities in '27 .

Robert Schottenstein

Not really what's in place in select markets -- and I'm not going to mention which ones because there's no reason to. But in select markets, there is a greater emphasis on more move up than now. That began probably 3 to 6 months ago, and that will continue. So nothing has really changed in the last couple of quarters. In many of our markets, we have a very good mix right now, and I don't see it changing much.

But clearly, in 2 or 3 or maybe 4 of our markets, we're shifting the mix a little bit more towards the move up. That's already underway. It's playing out as we speak. And that's it's not a change during the third quarter. That was something that we started actually earlier this year. And these were markets where over 75% of our business was first time -- we never really felt great about that even before the move up the game more in vogue. We always felt sometimes things just sort of end up a certain way, I never want too many eggs in 1 basket because we don't have to do that. We're not going to.

Jay McCanless

And then the last question I had, just could you talk about what the incentive levels were this quarter and how they're trending to start the fourth quarter levels.

Phillip Creek

Well, obviously, our margins have been going down. And as Bob said, we primarily use incentives and mortgage rate buy downs every community is a little different as far as -- especially with first-time buyers, they tend to meet more help also with closing costs. I think also 1 of the things in the marketplace right now, in general, is I think the first thing all buyers expect is a reduced competitive interest rate, and you are seeing in certain markets a little more price reduction -- so it's kind of hard to figure out all the different breakdown of incentives.

Incentives definitely did increase as we went through the quarter. But again, it's just a community-by-community standpoint. We're having customers go a little bit more toward ARM products now than they were before, but that's something that's just always changing that we just have to deal with, and we track that every day and work on it every day and every community.

Operator

There are no further questions. I would now like to turn it back to Phil Creek for closing remarks. .

Phillip Creek

Thank you very much for joining us. Look forward to talking to you next quarter.

Operator

This concludes today's conference call. You may now disconnect.