Question · Q3 2025
Steven Kim sought clarification on the gross margins for new communities, asking if they are expected to be similar to current company averages over the community's entire life or just at opening, given that margins typically rise as a community matures. He also asked for a breakdown of the increase in incentives over recent quarters, specifically how much is attributable to forward purchase commitments versus other types of incentives.
Answer
Phillippe Lord (CEO, Meritage Homes) explained that in the current market, with high discounts and affordability challenges, they don't anticipate significant margin upside through a community's lifespan, modeling new communities to open and perform similar to today's margin profile. Hilla Sferruzza (EVP and CFO, Meritage Homes) stated that financing-related incentives, primarily forward purchase commitments with some 3-2-1s/2-1s, constitute about 40% of the total incentive pool, with the remaining 60% being non-financing related.