Overview

We continue to experience very strong demand for our products as new orders increased 31% in the first quarter of 2021 compared with the prior year period, including significant increases across each of our first-time, move-up, and active adult buyer groups and in substantially all of our geographical markets. The higher demand for new housing has been driven by mortgage interest rates near historical lows, a limited supply of new and existing home inventory, an increased appeal for homeownership and single-family living, and a desire among some buyers to exit more densely populated urban centers or to relocate from higher cost geographical regions.

While home closings increased 12% in the first quarter of 2021 compared with the prior year period, the increase continues to lag the growth in new orders in recent periods. This has combined to result in a 50% year-over-year increase in our order backlog. In part, this is the result of the normal timeline between receiving an order and delivering a home. However, we have also experienced periodic disruptions in our supply chain, including the availability of certain materials and construction labor combined with delays in municipal approvals and inspections, which has elongated the production cycle in many of our markets. We are also facing cost pressures related to labor and materials, especially lumber, although we have been and believe we will continue to be able to increase pricing to offset the majority of such cost increases due to the high consumer demand.

Despite the development of vaccines and more effective treatments for the physical impacts of COVID-19, there are no reliable estimates of how long the COVID-19 pandemic will last. Therefore, the unpredictability of the current economic and public health conditions will continue to evolve. However, all of our operations are now functioning at effectively full capacity subject to health and safety protocols, and, with expectations for a material acceleration in economic growth as the pandemic continues to recede, we remain optimistic about future housing demand and our ability to continue expanding our business.

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