M/I 홈스(MHO) 2026년 3분기 실적 발표 콘퍼런스 콜: 모기지 바이다운이 마진 압박

핵심 요약

• M/I 홈스(M/I Homes)는 주택 인도량과 평균 판매 가격 하락으로 인해 2026년 3분기 매출이 전년 동기 대비 5% 감소한 10억 8,000만 달러를 기록했다고 발표했습니다.
• 세전이익은 8,700만 달러로 38% 감소했으며, 희석 주당순이익(EPS)은 3.92달러에서 2.56달러로 줄었습니다. EBITDA는 1억 5,700만 달러에서 1억 300만 달러로 감소했습니다.
• 재고자산 손실 관련 비용 500만 달러를 제외한 총이익률은 21.3%로 320bp 하락했습니다. 경영진은 마진 축소의 주요 원인으로 모기지 금리 인하 지원 비용 증가와 부지 비용 상승을 꼽았습니다.
• 신규 계약은 1,861채로 2% 감소했습니다. 월별 실적은 모기지 금리가 상승함에 따라 7월 15% 증가에서 8월 6% 감소, 9월 16% 감소로 약화되었습니다.
• 재무상태표는 6억 2,000만 달러의 현금을 보유하고 9억 달러 규모의 회전한도대출 차입금이 없으며 순부채자본비율이 2%에 불과하는 등 높은 유동성을 유지했습니다.
• 경영진은 연말 단지 수가 전년 대비 약 5% 증가할 것으로 예상하지만, 불확실한 수요 속에서 신규 토지 거래, 착공, 채용 및 비용 지출에 대해 신중한 태도를 유지하고 있습니다.

주요 재무 데이터

사업 및 영업 실적

M/I 홈스의 3분기 계약 취소율은 12%였습니다. 첫 주택 구매자가 매출의 50%를 차지했으며, 선시공 주택(inventory homes)이 80%를 차지했습니다. 가장 저렴한 제품 라인인 '스마트 시리즈(Smart Series)'가 분기 매출의 약 절반을 창출했으며, 나머지는 갈아타기 및 재구매 고객이 차지했습니다.

동사는 전년 동기 대비 6% 증가한 246개 단지로 분기를 마감했습니다. 해당 기간 동안 27개 단지를 오픈하고 15개 단지를 폐쇄했습니다. 북부 지역은 계약 및 인도량이 1% 증가한 반면, 남부 지역 계약은 4% 감소하고 거래 종결(closings)은 5% 감소했습니다.

경영진은 시카고, 콜럼버스, 미니애폴리스, 댈러스, 샬롯을 사업 부문 이익의 주요 기여 지역으로 꼽았습니다. 플로리다 지역은 혼조세를 보였는데, 올랜도는 비교적 잘 버텼고 사라소타 계약은 증가했으며 템파는 감소했습니다. 경영진은 신규 진출 지역인 포트마이어스와 네이플스 사업이 기대를 상회하고 있다고 밝혔습니다.

M/I 홈스는 약 5년 공급 물량에 해당하는 약 49,000개의 소유 및 통제 부지를 보유했습니다. 약 23,400개 부지는 자체 소유분으로 약 2.5년 공급량에 해당하며, 약 25,600개 부지는 옵션 계약을 통해 통제하고 있습니다.

분기 말 재공주택(inventory)은 3,242채였으며, 이 중 721채가 완공 상태였습니다. 경영진은 수요에 대응해 착공을 소폭 줄였으며, 단지 수가 늘어났음에도 불구하고 완공된 선시공(speculative) 재고는 전년 수준을 밑돌았다고 밝혔습니다.

모기지 사업 부문은 이용률(capture rate)이 93%에서 96%로 상승해 회사 역사상 최고 수준을 기록했다고 경영진은 설명했습니다. 차주의 평균 신용점수는 748점, 평균 선납금 비율은 16%를 초과했으며, 평균 1순위 모기지 담보인정비율(LTV)은 84%였습니다.

모기지 및 타이틀 매출은 3,270만 달러로 5% 감소했습니다. 대출 실행 건수는 1,835건으로 1% 감소했으며, 평균 모기지 대출액은 40만 6,000달러에서 40만 3,000달러로 감소했습니다.

경영진 전망

경영진은 2026년 말 M/I 홈스의 단지 수가 전년 동기 대비 약 5% 증가할 것으로 추정하고 있습니다.

동사는 전체적인 전략에 중대한 변화가 없을 것으로 예상하고 있습니다. 신규 토지 거래에 대해 더욱 선별적인 접근을 유지하고, 비용과 채용을 관리하며, 일부 시장에서 제품 믹스를 조정할 계획입니다. 첫 주택 구매자 비중이 특히 높았던 약 2~4개 시장에서는 이미 갈아타기 주택 비중을 늘리는 전환이 진행 중입니다.

경영진은 분기 말 이후 모기지 금리가 소폭 하락했으나 변동성이 크고 어려운 시장 환경이 지속될 수 있다고 경고했습니다.

리스크 및 주시 영역

모기지 구매력(affordability)은 여전히 핵심 압박 요인입니다. 이번 분기 동안 30년 고정 모기지의 평균 파(par) 금리는 7월 1일 약 6.75%에서 9월 30일 거의 7.75%로 약 100bp 상승했습니다. 높아진 금리 인하 지원 비용은 총이익률에 직접적인 부담으로 작용했습니다.

경영진은 또한 높은 연료 가격, 인플레이션 우려, 지속되는 이란 분쟁을 소비자 심리와 경제적 불확실성에 영향을 미치는 요인으로 꼽았습니다.

이번 분기 중 수요가 실질적으로 약화되어, 계약 증가율이 7월 플러스에서 9월 두 자릿수 감소세로 돌아섰습니다. 플로리다와 텍사스는 중서부 및 캐롤라이나 지역보다 전반적으로 더 어려웠으며, 특히 템파와 사라소타에서 압박이 컸습니다.

분기가 진행됨에 따라 인센티브 수준이 높아졌습니다. 모기지 금리 인하 지원이 주요 인센티브로 유지된 가운데, 일부 단지에서는 마감 비용 지원 및 가격 할인도 활용했습니다. 변동금리 모기지 상품을 고려하는 고객도 늘어났습니다.

애널리스트 Q&A 주요 내용

• 2027년 전략: 경영진은 급격한 비즈니스 모델 변경이나 광범위한 토지 매각을 계획하지 않고 있습니다. 유동성을 방어하고, 신규 거래를 면밀히 검토하며, 선별적인 제품 믹스 조정을 진행할 방침입니다.
• 선시공(Speculative) 재고: 착공이 소폭 감소했습니다. 전체 선시공 재고는 3,000채를 약간 상회하는 수준을 유지한 반면, 완공된 선시공 재고는 약 700채로 단지 수 증가에도 불구하고 대체로 보합 또는 감소했습니다.
• 플로리다 가격 책정: 경영진은 광범위한 지역적 조정보다는 단지별로 가격 책정 및 인센티브 결정을 내리고 있다고 밝혔습니다. 올랜도와 신규 사업 지역인 포트마이어스, 네이플스는 비교적 양호한 실적을 거둔 반면, 템파는 계속해서 더 어려웠습니다.
• 노동력 확보: 이민 단속으로 인해 일부 시장에서 간헐적인 문제가 발생했으나, 경영진은 노동력을 전반적인 주요 제약 요인으로 보지 않았습니다. 동사는 수요가 뒷받침된다면 연간 1,000채에서 1,500채의 주택을 추가로 건설할 수 있다고 밝혔습니다.
• 판매관리비(SG&A): 비용의 5% 증가에는 추가 영업 및 건설 인력을 포함한 단지 수의 비슷한 증가 폭이 주로 반영되었으며, 광고 및 프로모션 지출 증가도 다소 포함되었습니다.
• 자본 배분: M/I 홈스는 3분기 동안 자사주 매입에 5,000만 달러를 지출했으며, 매입 한도 잔액은 2억 달러가 남아있습니다. 2022년 초 이후 동사는 발행 주식 수의 21%를 매입했습니다.

실적 발표 컨퍼런스 콜 전문

전체 실적 발표 컨퍼런스 콜 녹취록

경영진 발표

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.

질의응답

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.