MI HOMES INC
For the period ended Sep 30, 2024. Filed Nov 1, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2024 · Filed Nov 1, 2024
MHO$131.60-2.0%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-06-30; filed 2024-07-31.
0000799292-24-000070
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-11-01.
0000799292-24-000092
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 143 previous paragraphs and 142 current paragraphs.
66 unchanged; 63 reworded; 13 added; 14 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 12 previous and 12 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (13)
Current report
We continued to generate strong results during the three and nine months ended September 30, 2024. For the quarter ended September 30, 2024, we achieved year-to-date and third quarter records for revenue, income before taxes, and net income. In addition, we achieved a third quarter record for gross margin of 27.1%. We also increased homes delivered by 8% for the third quarter (to a third quarter record of 2,271 homes) and 9% for the nine months ended September 30, 2024 compared to the respective periods in 2023. For the nine months ended September 30, 2024 new contracts benefited from a strong first half of the year, increasing 7% year-to-date despite our third quarter new contracts being even with last year’s third quarter. Although the Federal Reserve Board decreased interest rates in September 2024, which we believe should help improve the affordability of and accelerate demand for new housing, interest rates during the third quarter remained elevated and negatively impacted overall demand.
Current report
•Number of homes delivered increased 8% to 2,271 homes (a third quarter record) and 9% to 6,653 homes (a year-to-date record), respectively;
Current report
•Gross margins improved 20 basis points to 27.1% (a third quarter record) and 200 basis points to 27.3%, respectively;
Current report
•Income before income taxes increased 6% to $188.7 million (a third quarter record) and 20% to $563.1 million (a year-to-date record), respectively;
Current report
•Net income increased 5% to $145.4 million (a third quarter record) and 19% to $430.3 million (a year-to-date record), respectively;
Current report
•New contracts were even with last year at 2,023 and increased 7% to 6,825 from 6,389 (the third highest year-to-date level in Company history), respectively;
Current report
Southern Region. During the three month period ended September 30, 2024, homebuilding revenue in our Southern region decreased $60.1 million, from $674.5 million in the third quarter of 2023 to $614.4 million in the third quarter of 2024. This 9% decrease in homebuilding revenue was the result of a 7% decrease in the number of homes delivered (99 units) and an $11.8 million decrease in land sales. Operating income in our Southern region decreased $21.5 million from $135.6 million in the third quarter of 2023 to $114.1 million during the quarter ended September 30, 2024. This decrease in operating income was the result of a $16.5 million decline in our gross margin and a $5.0 million increase in selling, general, and administrative expense. With respect to our homebuilding gross margin, our housing gross margin declined $14.5 million, due primarily to the decrease in the number of homes delivered during the period and the mix of homes being delivered compared to prior year. Our housing gross margin percentage declined 10 basis points from 27.6% in prior year’s third quarter to 27.5% in the third quarter of 2024, primarily due to the mix of homes being delivered. Our land sale gross margin declined $2.0 million in the third quarter of 2024 compared to the third quarter of 2023 as a result of no land sales in the current quarter.
Current report
Selling, general and administrative expense increased $5.0 million from $49.5 million in the third quarter of 2023 to $54.5 million in the third quarter of 2024 and increased 160 basis points as a percentage of revenue to 8.9% from 7.3% in the third quarter of 2023. This increase in selling, general and administrative expense was primarily attributable to a $4.5 million increase in general and administrative expense, which was due to a $2.4 million increase in compensation-related expenses, a $0.4 million increase in land-related expenses, and a $1.7 million increase in miscellaneous expenses. The increase in selling, general and administrative expense was also attributable to a $0.5 million increase in selling expense primarily due to a $2.2 million increase in non-variable selling expense primarily as a result of increased costs associated with our sales offices and models due to our increased community count, offset partially by a $1.7 million decrease in variable selling expenses resulting from decreases in sales commissions produced by the lower number of homes delivered.
Current report
Nine Months Ended September 30, 2024 Compared to Nine Months Ended September 30, 2023
Current report
Northern Region. Homebuilding revenue in our Northern region increased $256.9 million, from $1.11 billion in the nine months ended September 30, 2023 to $1.37 billion in the nine months ended September 30, 2024. This 23% increase in homebuilding revenue was primarily the result of a 21% increase in the number of homes delivered (488 more units) and the mix of homes delivered with an increase in the average sales price of homes delivered ($8,000 per home delivered), offset in part by a $0.4 million decrease in land sale revenue. Operating income in our Northern region increased $76.6 million, from $129.8 million during the nine months ended September 30, 2023 to $206.4 million during the nine months ended September 30, 2024. The increase in operating income was primarily the result of a $90.6 million increase in our gross margin offset partially by a $14.0 million increase in selling, general and administrative expense. With respect to our homebuilding gross margin, our housing gross margin improved $90.1 million, and our housing gross margin percentage improved 290 basis points from 19.4% in the nine months ended September 30, 2023 to 22.3% for the same period in 2024, primarily due to the mix of homes being delivered in addition to the increase in the number of homes delivered. Our land sale gross margin improved $0.4 million in the nine months ended September 30, 2024 compared to the same period in 2023 as a result of the mix of lots sold in the current year compared to the prior year.
Current report
Selling, general and administrative expense increased $14.0 million, from $86.2 million for the nine months ended September 30, 2023 to $100.2 million for the nine months ended September 30, 2024, but improved by as a percentage of revenue at 7.3% in 2024 compared to 7.7% in 2023. The increase in selling, general and administrative expense was attributable to a $11.0 million increase in selling expense, primarily attributable to a $9.8 million increase in variable selling expenses resulting from increases in sales commissions produced by the higher number of homes delivered and a $1.2 million increase in costs associated with our sales offices and models. The increase in selling, general and administrative expense was also attributable to a $3.0 million increase in general and administrative expense, which was primarily related to a $1.3 million increase in compensation-related expenses and $1.7 million increase in other miscellaneous expenses.
Current report
$300 million (and was subject to increases and decreases during certain periods). The MIF Mortgage Repurchase Facility was scheduled to expire on October 22, 2024.
Current report
On October 22, 2024, M/I Financial entered into an amendment to the MIF Mortgage Repurchase Facility that extends the term of the MIF Mortgage Repurchase Facility for an additional year to October 21, 2025 and increases the aggregate commitment amount to $300 million for the entire remaining term. As is typical for similar credit facilities, the amended MIF Mortgage Repurchase Facility expires after one year and is under consideration for extension annually by the participating lenders.
Removed paragraphs (14)
Previous report
We generated strong results during the first half of 2024. For the quarter ended June 30, 2024, we achieved all-time quarterly records in gross margin, income before income taxes, net income and diluted earnings per share and a second quarter record for revenue. In addition, our homes delivered increased 12% and our new contracts for the second quarter of 2024 increased 3% compared to the second quarter of 2023. Our performance reflects favorable demographic trends and rising household formations, which led to improvements in homebuyer demand, despite elevated and volatile mortgage interest rates that continued to challenge housing affordability. Homebuyers continued to demonstrate a strong desire for homeownership in an environment that was also impacted by an undersupply of new and resale homes. We also had strong cash flow and ended the quarter with ample liquidity and low leverage.
Previous report
•Number of homes delivered increased 12% to 2,224 homes (our second highest level for the second quarter) and increased 10% to 4,382 homes (a year-to-date record), respectively;
Previous report
•Gross margins improved 240 basis points to 27.9% (an all-time quarterly record) and 300 basis points to 27.5%, respectively;
Previous report
•Income before income taxes increased 25% to $194.1 million (an all-time quarterly record) and 29% to $374.4 million (an all-time year-to-date record), respectively;
Previous report
•Income before income taxes as a percentage of revenue increased by 220 basis points to 17.5% (an all-time quarterly record) and 290 basis points to 17.4% (an all-time year-to-date record), respectively;
Previous report
•Net income increased 24% to $146.7 million (an all-time quarterly record) and 29% to $284.8 million (an all-time year-to-date record), respectively;
Previous report
•New contracts increased 3% to 2,255 from 2,197 and 10% to 4,802 from 4,368 (second highest year-to-date level in Company history), respectively;
Previous report
During the three months ended June 30, 2024, we experienced a 6% increase in new contracts in our Northern region, from 949 in the second quarter of 2023 to 1,002 in the second quarter of 2024. Homes in backlog increased 29% from 1,253 homes at
Previous report
Southern Region. During the three month period ended June 30, 2024, homebuilding revenue in our Southern region increased $9.3 million, from $604.9 million in the second quarter of 2023 to $614.2 million in the second quarter of 2024. This 2% increase in homebuilding revenue was the result of a 5% increase in the number of homes delivered (66 more units) due to increased availability of inventory homes, offset partially by a 3% decrease in the average sales price of homes delivered ($17,000 per home delivered), which was primarily due to mix. Operating income in our Southern region increased $9.9 million from $109.9 million in the second quarter of 2023 to $119.8 million during the quarter ended June 30, 2024. This increase in operating income was the result of a $15.1 million improvement in our gross margin, offset partially by a $5.3 million increase in selling, general, and administrative expense. With respect to our homebuilding gross margin, our housing gross margin improved $14.2 million, due primarily to the increase in the number of homes delivered during the period and the mix of homes being delivered compared to prior year, offset partially by the decrease in the average sales price of homes delivered. Our housing gross margin percentage improved from 26.1% in prior year’s second quarter to 27.9% in the second quarter of 2024, primarily due to the mix of homes being delivered. Our land sale gross margin improved $0.9 million in the second quarter of 2024 compared to the second quarter of 2023 as a result of the mix of lots sold in the current year compared to the prior year.
Previous report
Selling, general and administrative expense increased $5.3 million from $46.5 million in the second quarter of 2023 to $51.8 million in the second quarter of 2024 and increased as a percentage of revenue to 8.4% from 7.7% in the second quarter of 2023. The increase in selling, general and administrative expense was attributable to a $2.9 million increase in selling expense primarily due to a $0.8 million increase in variable selling expenses resulting from increases in sales commissions produced by the higher number of homes delivered as well as a $2.1 million increase in non-variable selling expense primarily as a result of increased costs associated with our sales offices and models due to our increased community count. This increase in selling, general and administrative expense was also attributable to a $2.4 million increase in general and administrative expense, which was due to a $1.9 million increase in compensation-related expenses, a $0.2 million increase in land-related expenses, and a $0.3 million increase in miscellaneous expenses.
Previous report
Six Months Ended June 30, 2024 Compared to Six Months Ended June 30, 2023
Previous report
Northern Region. During the first half of 2024, homebuilding revenue in our Northern region increased $106.7 million, from $766.6 million in the first six months of 2023 to $873.3 million in the first six months of 2024. This 14% increase in homebuilding revenue was primarily the result of a 14% increase in the number of homes delivered (214 more units) due to the mix of homes delivered, in addition to a $0.7 million increase in land sale revenue and a slight increase in the average sales price of homes delivered ($1,000 per home delivered). Operating income in our Northern region increased $44.9 million, from $86.0 million during the first half of 2023 to $130.9 million during the six months ended June 30, 2024. The increase in operating income was primarily the result of a $52.8 million increase in our gross margin offset partially by a $7.9 million increase in selling, general and administrative expense. With respect to our homebuilding gross margin, our housing gross margin improved $52.3 million, and our housing gross margin percentage improved 370 basis points from 18.7% in the first six months of 2023 to 22.4% for the same period in 2024, primarily due to the mix of homes being delivered in addition to the increase in the number of homes delivered. Our land sale gross margin improved $0.5 million in the first half of 2024 compared to the same period in 2023 as a result of the mix of lots sold in the current year compared to the prior year.
Previous report
Selling, general and administrative expense increased $7.9 million, from $57.0 million for the six months ended June 30, 2023 to $64.9 million for the six months ended June 30, 2024, but remained flat as a percentage of revenue at 7.4% for both periods. The increase in selling, general and administrative expense was attributable to a $6.2 million increase in selling expense, primarily attributable to a $5.5 million increase in variable selling expenses resulting from increases in sales commissions produced by the higher number of homes delivered and an $0.7 million increase in costs associated with our sales offices and models. The increase in selling, general and administrative expense was also attributable to a $1.7 million increase in general and administrative expense, which was primarily related to a $1.0 million increase in compensation-related expenses and $0.7 million increase in other miscellaneous expenses.
Previous report
Repurchase Facility is $240 million through September 17, 2024 and will increase to $270 million from September 18, 2024 until maturity. The MIF Mortgage Repurchase Facility expires on October 22, 2024. As is typical for similar credit facilities in the mortgage origination industry, at closing, the expiration of the MIF Mortgage Repurchase Facility was set at approximately one year and is under consideration for extension annually by the participating lenders. We expect to extend the MIF Mortgage Repurchase Facility on or prior to the current expiration date of October 22, 2024, but we cannot provide any assurance that we will be able to obtain such an extension.
Reworded paragraphs (63)
Previous wording
M/I Homes, Inc. and subsidiaries (the “Company” or “we”) is one of the nation’s leading builders of single-family homes having sold over 156,200 homes since commencing homebuilding activities in 1976. The Company’s homes are marketed and sold primarily under the M/I Homes brand. The Company has homebuilding operations in Columbus and Cincinnati, Ohio; Indianapolis, Indiana; Chicago, Illinois; Minneapolis/St. Paul, Minnesota; Detroit, Michigan; Ft. Myers/Naples, Tampa, Sarasota and Orlando, Florida; Austin, Dallas/Fort Worth, Houston and San Antonio, Texas; Charlotte and Raleigh, North Carolina; and Nashville, Tennessee.
Current wording
M/I Homes, Inc. and subsidiaries (the “Company” or “we”) is one of the nation’s leading builders of single-family homes having sold over 158,200 homes since commencing homebuilding activities in 1976. The Company’s homes are marketed and sold primarily under the M/I Homes brand. The Company has homebuilding operations in Columbus and Cincinnati, Ohio; Indianapolis, Indiana; Chicago, Illinois; Minneapolis/St. Paul, Minnesota; Detroit, Michigan; Ft. Myers/Naples, Tampa, Sarasota and Orlando, Florida; Austin, Dallas/Fort Worth, Houston and San Antonio, Texas; Charlotte and Raleigh, North Carolina; and Nashville, Tennessee.
Previous wording
We achieved the following results during the second quarter and first half of 2024 in comparison to the second quarter and first half of 2023:
Current wording
We achieved the following results during the three and nine months ended September 30, 2024 in comparison to the three and nine months ended September 30, 2023:
Previous wording
•Revenue increased 9% to $1.11 billion (a second quarter record) and 7% to $2.16 billion (a year-to-date record), respectively;
Current wording
•Revenue increased 9% to $1.14 billion (a third quarter record) and 8% to $3.30 billion (a year-to-date record), respectively;
Previous wording
•Shareholders’ equity of $2.74 billion (a record high);
Current wording
•Shareholders’ equity of $2.85 billion (a record high);
Previous wording
•Book value per common share increased to a record high $100 per share; and
Current wording
•Book value per common share increased to a record high $105 per share; and
Previous wording
In addition to the results described above, our financial services operations also achieved all-time record quarterly revenues and strong income before income taxes for the first half of 2024, benefiting from higher margins and an increase in loans originated.
Current wording
In addition to the results described above, our financial services operations also achieved third quarter record quarterly revenues and strong income before income taxes for the first nine months of 2024, benefiting from higher margins and an increase in loans originated.
Previous wording
Our company-wide absorption pace of sales per community for the second quarter of 2024 declined slightly to 3.5 per month compared to 3.7 per month for the prior year’s second quarter as a result of the limited lot supply in the increased number of our communities in closeout status. We plan to open additional new communities during 2024 and increase our average community count by approximately 5% from 2023.
Current wording
Our company-wide absorption pace of sales per community for the third quarter of 2024 declined slightly to 3.2 per month compared to 3.4 per month for the prior year’s third quarter. We plan to open additional new communities during the fourth quarter of 2024 and increase our average community count by about 5% from 2023.
Previous wording
Income before income taxes for the second quarter of 2024 increased 25% from $155.4 million in the second quarter of 2023 to an all-time quarterly record $194.1 million in 2024. We also achieved all-time quarterly record net income of $146.7 million, or $5.12 per diluted share, in 2024's second quarter, compared to net income of $118.0 million, or $4.12 per diluted share, in 2023's second quarter. Our effective tax rate was 24.4% in 2024’s second quarter compared to 24.0% in 2023. Income before income taxes increased from $291.3 million in the first half of 2023 to $374.4 million in the first half of 2024, an all-time year-to-date record. We achieved all-time year-to-date record net income of $284.8 million, or $9.90 per diluted share, during 2024's first half compared to net income of $221.1 million, or $7.77 per diluted share, in the six months ended June 30, 2023. Our effective tax rate was 23.9% in 2024's first half compared to 24.1% in the same period in 2023.
Current wording
Income before income taxes for the third quarter of 2024 increased 6% from $178.0 million in the third quarter of 2023 to a third quarter record $188.7 million in 2024. We also achieved a third quarter record for net income of $145.4 million, or $5.10 per diluted share, in 2024's third quarter, compared to net income of $139.0 million, or $4.82 per diluted share, in 2023's third quarter. Our effective tax rate was 22.9% in 2024’s third quarter compared to 21.9% in 2023. Income before income taxes increased from $469.3 million in the nine months ended September 30, 2023 to $563.1 million in the first nine months of 2024, a year-to-date record. We achieved a year-to-date record for net income of $430.3 million, or $14.99 per diluted share, during 2024's first nine months compared to net income of $360.1 million, or $12.58 per diluted share, in the nine months ended September 30, 2023. Our effective tax rate was 23.6% in 2024's first nine months compared to 23.3% in the same period in 2023.
Previous wording
During the quarter ended June 30, 2024, we achieved record second quarter total revenue of $1.11 billion, of which $1.07 billion was from homes delivered, $7.0 million was from land sales and $30.8 million was from our financial services operations. Revenue from homes delivered increased 9% in 2024's second quarter compared to the same period in 2023 driven primarily by a 12% increase in the number of homes delivered (234 units), offset partially by a 2% decrease in the average sales price of homes delivered ($11,000 per home delivered). Revenue from land sales decreased $1.6 million from the second quarter of 2023 due to fewer land sales in the current year compared to the prior year. Revenue from our financial services segment increased 22% to an all-time quarterly record $30.8 million in the second quarter of 2024 as a result of higher margins on and an increase in loans sold during the period compared to the second quarter of 2023, partially offset by a decrease in the average loan amount. For the first half of 2024, we recorded year-to-date record total revenue of $2.16 billion, of which $2.09 billion was from homes delivered, $10.2 million was from land sales and $57.7 million was from our financial services operations. Revenue from homes delivered increased 7% in the first half of 2024 compared to the same period in 2023 driven primarily by a 10% increase in the number of homes delivered (385 units), partially offset by a 2% decrease in the average sales price of homes delivered ($12,000 per home delivered). Revenue from land sales increased $1.4 million from the six months ended June 30, 2023 due to increased land sales in 2024's first six months compared to the prior year. Revenue from our financial services segment increased 14% to $57.7 million in the first half of 2024 as a result of higher margins on loans sold during the period compared to the first half of 2023 and an increase in loans sold during the period, partially offset by a decrease in the average loan amount compared to the first half of 2023.
Current wording
During the quarter ended September 30, 2024, we achieved record third quarter total revenue of $1.14 billion, of which $1.11 billion was from homes delivered, $1.6 million was from land sales and $30.0 million was from our financial services operations. Revenue from homes delivered increased 10% in 2024's third quarter compared to the same period in 2023 driven primarily by an 8% increase in the number of homes delivered (175 units) and a 2% increase in the average sales price of homes delivered ($8,000 per home delivered). Revenue from land sales decreased $12.9 million from the third quarter of 2023 due to fewer land sales in the current year compared to the prior year. Revenue from our financial services segment increased 27% to an all-time quarterly record $30.0 million in the third quarter of 2024 as a result of higher margins on and an increase in loans sold during the period compared to the third quarter of 2023. For the nine months ended September 30, 2024, we recorded year-to-date record total revenue of $3.30 billion, of which $3.20 billion was from homes delivered, $11.8 million was from land sales and $87.7 million was from our financial services operations. Revenue from homes delivered increased 8% in the nine months ended September 30, 2024 compared to the same period in 2023 driven primarily by a 9% increase in the number of homes delivered (560 units), partially offset by a 1% decrease in the average sales price of homes delivered ($5,000 per home delivered). Revenue from land sales decreased $11.5 million from the nine months ended September 30, 2023 due to decreased land sales in 2024's first nine months compared to the prior year. Revenue from our financial services segment increased 18% to $87.7 million in the first nine months of 2024 as a result of higher margins on loans sold and an increase in loans sold during the period compared to the nine months ended September 30, 2023, partially offset by a decrease in the average loan amount compared to the nine months ended September 30, 2023.
Previous wording
Total gross margin (total revenue less total land and housing costs) increased $51.1 million in the second quarter of 2024 compared to the second quarter of 2023 as a result of a $45.6 million improvement in the gross margin of our homebuilding operations (housing gross margin and land sales gross margin) and a $5.5 million increase in the gross margin of our financial services operations. With respect to our homebuilding gross margin, our gross margin on homes delivered (housing gross margin) improved $44.6 million and our housing gross margin percentage improved by 210 basis points to 25.8% from 23.7%. The improvement in gross margin primarily resulted from the 12% increase in homes delivered, and our improvement in gross margin percentage was primarily due to the mix of homes being delivered. Our housing gross margin may fluctuate from quarter to quarter depending on the mix of communities delivering homes due to the variation in margin between different communities. Our gross margin on land sales (land sale gross margin) increased $1.0 million in the second quarter of 2024 compared to the second quarter of 2023 as a result of the mix of lots sold in the current year compared to the prior year. The gross margin of our financial services operations increased $5.5 million in the second quarter of 2024 compared to the second quarter of 2023 as a result of higher margins on and an increased number of loans sold, and an increase in the number of loan originations, offset partially by a decrease in the average loan amount during the second quarter of 2024 compared to the second quarter of 2023. Total gross margin increased $99.8 million in the first half of 2024 compared to the same period in 2023 as a result of a $92.7 million improvement in the gross margin of our homebuilding operations in addition to a $7.1 million improvement in the gross margin of our financial services operations. With respect to our homebuilding gross margin, our gross margin on homes delivered improved $90.3 million and our housing gross margin percentage improved 290 basis points from 22.6% in prior year’s first half to 25.5% in 2024's first half. These increases are primarily due to the 10% increase in the number of homes delivered primarily due to the mix of homes delivered, offset partially by the 2% decrease in the average sales price of homes delivered. Our gross margin on land sales improved $2.4 million in 2024's first six months compared to the same period in 2023. The gross margin of our financial services operations increased $7.1 million in the first half of 2024 compared to the same period in 2023 as a result of higher margins on, an increased number of loans sold during the first half of 2024 compared to the first half of 2023, and an increase in the number of loan originations, partially offset by a decrease in the average loan amount.
Current wording
Total gross margin (total revenue less total land and housing costs) increased $27.7 million in the third quarter of 2024 compared to the third quarter of 2023 as a result of a $21.3 million improvement in the gross margin of our homebuilding operations (housing gross margin and land sales gross margin) and a $6.4 million increase in the gross margin of our financial services operations. With respect to our homebuilding gross margin, our gross margin on homes delivered (housing gross margin) improved $23.4 million and our housing gross margin percentage declined by 30 basis points to 25.1% from 25.4%. The improvement in gross margin dollars primarily resulted from the 8% increase in homes delivered. Our housing gross margin may fluctuate from quarter to quarter depending on the mix of communities delivering homes due to the variation in margin between different communities. Our gross margin on land sales (land sale gross margin) decreased $2.0 million in the third quarter of 2024 compared to the third quarter of 2023 as a result of the mix of lots sold in the current year compared to the prior year. The gross margin of our financial services operations increased $6.4 million in the third quarter of 2024 compared to the third quarter of 2023 as a result of higher margins on and an increased number of loans sold, and an increase in the number of loan originations. Total gross margin increased $127.5 million in the nine months ended September 30, 2024 compared to the same period in 2023 as a result of a $114.0 million improvement in the gross margin of our homebuilding operations in addition to approximately $13.6 million improvement in the gross margin of our financial services operations. With respect to our homebuilding gross margin, our gross margin on homes delivered improved $113.7 million and our housing gross margin percentage improved 180 basis points from 23.5% in prior year’s first nine months to 25.3% in 2024's first nine months. These increases are primarily due to the 9% increase in the number of homes delivered primarily due to the mix of homes delivered, offset partially by the 1% decrease in the average sales price of homes delivered. Our gross margin on land sales improved $0.3 million in 2024's first nine months compared to the same period in 2023. The gross margin of our financial services operations increased $13.6 million in the nine months ended September 30, 2024 compared to the same period in 2023 as a result of an increased number of loans sold, offset in part by lower average loan amount during the first nine months of 2024 compared to the first nine months of 2023, and increases in the number of loan originations and the average loan amount.
Previous wording
We opened 38 new communities during the first half of 2024 and closed 40 communities. We sell a variety of home types in various communities and markets, each of which yields a different gross margin. The timing of the openings of new replacement communities as well as underlying lot costs varies from year to year. The mix of communities delivering homes may cause fluctuations in our new contracts, absorption pace and housing gross margin from year to year.
Current wording
We opened 57 new communities during the nine months ended September 30, 2024 and closed 53 communities. We sell a variety of home types in various communities and markets, each of which yields a different gross margin. The timing of the openings of new replacement communities as well as underlying lot costs varies from year to year. The mix of communities delivering homes may cause fluctuations in our new contracts, absorption pace and housing gross margin from year to year.
Previous wording
For the three months ended June 30, 2024, selling, general and administrative expense increased $15.0 million, and increased as a percentage of revenue from 10.6% in the second quarter of 2023 to 11.0% in the second quarter of 2024. Selling expense increased $6.6 million from 2023's second quarter and increased as a percentage of revenue to 5.3% in 2024's second quarter from 5.1% for the same period in 2023. Variable selling expense for sales commissions contributed $3.8 million to the increase due to the higher number of homes delivered as well as higher co-op rates during the period compared to prior year. Non-variable selling expense increased $2.8 million primarily as a result of increased costs associated with our sales offices and models due to our increase in community count from prior year. General and administrative expense increased $8.4 million compared to the second quarter of 2023 and increased as a percentage of revenue from 5.5% in the second quarter of 2023 to 5.8% in the second quarter of 2024. The increase in general and administrative expense was primarily due to a $6.7 million increase in compensation-related expenses, a $0.6 million increase in land-related expenses, a $0.6 million increase in computer costs, a $0.3 million increase in advertising expenses, and a $0.2 million increase in miscellaneous expenses. For the six months ended June 30, 2024, selling, general and administrative expense increased $24.9 million, and increased as a percentage of revenue from 10.3% in the six months ended June 30, 2023 to 10.8% in the first six months of 2024. Selling expense increased $11.5 million from the first half of 2023 and increased as a percentage of revenue to 5.2% in 2024's first half from 5.0% for the same period in 2023. Variable selling expense for sales commissions contributed $7.7 million to the increase due to the higher number of homes delivered during the first half of 2024 and higher co-op rates during the period compared to prior year. Non-variable selling expense increased $3.8 million primarily as a result of increased costs associated with our sales offices and models due to our increase in community count from prior year. General and administrative expense increased $13.4 million compared to the first half of 2023 and increased as a percentage of revenue from 5.3% in the six months ended June 30, 2023 to 5.6% in the first six months of 2024. The increase in general and administrative expense was primarily due to a $9.3 million increase in compensation-related expenses, a $1.3 million increase in computer costs, a $1.2 million increase in land-related expenses, a $0.3 million increase in professional fees, and a $1.3 million increase in miscellaneous expenses.
Current wording
For the three months ended September 30, 2024, selling, general and administrative expense increased $17.8 million, and increased as a percentage of revenue from 10.5% in the third quarter of 2023 to 11.2% in the third quarter of 2024. Selling expense increased $5.4 million from 2023's third quarter and increased as a percentage of revenue to 5.2% in 2024's third quarter from 5.1% for the same period in 2023. Variable selling expense for sales commissions contributed $2.5 million to the increase due to the higher number of homes delivered as well as higher co-op rates during the period compared to prior year. Non-variable selling expense increased $2.9 million primarily as a result of increased costs associated with our sales offices and models due to our increase in community count from prior year. General and administrative expense increased $12.4 million compared to the third quarter of 2023 and increased as a percentage of revenue from 5.3% in the third quarter of 2023 to 6.0% in the third quarter of 2024. The increase in general and administrative expense was primarily due to a $7.6 million increase in compensation-related expenses due to higher headcount and incentives, a $0.9 million increase in professional fees, a $0.7 million increase in computer costs, a $0.6 million increase in land-related expenses, and a $2.6 million increase in various other expenses. For the nine months ended September 30, 2024, selling, general and administrative expense increased $42.8 million, and increased as a percentage of revenue from 10.4% in the nine months ended September 30, 2023 to 10.9% in the nine months ended September 30, 2024. Selling expense increased $16.9 million from the nine months ended September 30, 2023 and increased as a percentage of revenue to 5.2% in 2024's first nine months from 5.1% for the same period in 2023. Variable selling expense for sales commissions contributed $10.2 million to the increase due to the higher number of homes delivered during the first nine months of 2024 and higher co-op rates during the period compared to prior year. Non-variable selling expense increased $6.7 million primarily as a result of increased costs associated with our sales offices and models due to our increase in community count from prior year. General and administrative expense increased $25.9 million compared to the nine months ended September 30, 2023 and increased as a percentage of revenue from 5.3% in the nine months ended September 30, 2023 to 5.7% in the nine months ended September 30, 2024. The increase in general and administrative expense was primarily due to a $16.9 million increase in compensation-related expenses due to higher average headcount and incentives, a $2.0 million increase in computer costs, a $1.8 million increase in land-related expenses, a $1.2 million increase in professional fees, and a $4.0 million increase in various other expenses.
Previous wording
Housing market conditions improved during the second quarter of 2024 compared to the same period in 2023. However, the housing market remains subject to unpredictability as a result of uncertainty regarding the near-term direction of mortgage interest rates as well as various macroeconomic conditions, including labor and material costs and availability, inflation, and the economic concerns of our potential homebuyers. The extent to which these factors will impact our business is unpredictable. We believe that we are well positioned to manage through these economic conditions with our affordable product offerings, land position and planned new community openings. We remain sensitive to potential changes in market conditions, and continue to focus on controlling overhead leverage, carefully managing our investment in land and land development spending and selectively offering homebuyer concessions, such as mortgage interest rate buydowns, to support homebuyers, drive order activity and minimize cancellations. Our strong balance sheet and ample liquidity should also provide us with flexibility through changing economic conditions. However, we cannot provide any assurances that the strategic business objectives listed below will remain successful, and we may need to adjust elements of our strategy to effectively address evolving market conditions.
Current wording
Housing market conditions remain relatively healthy. Although inflation and mortgage interest rates remain elevated, demographics supporting housing demand continue to be favorable as a result of the limited supply of both new and existing homes at affordable price points compared to the rate of household formations. While strong demand for housing (which has recently been supported by incentives and mortgage rate buydowns) has driven new home sales over the past two years, we anticipate that the Federal Reserve Board’s recent reduction to interest rates coupled with more controlled inflation could further encourage demand. However, the housing market remains subject to unpredictability as a result of uncertainty regarding various macroeconomic conditions, including interest rates, labor and material costs and availability, inflation, policies that may stem from the outcome of the U.S. elections and the economic concerns of our potential homebuyers. Although the extent to which these factors will impact our business is unpredictable, we believe that we are well positioned to continue to grow by focusing on our land position, new community openings, and affordable product offerings. We remain sensitive to potential changes in market conditions, and continue to focus on controlling overhead leverage, carefully managing our investment in land and land development spending and selectively offering homebuyer concessions, such as mortgage interest rate buydowns, to support homebuyers, drive order activity and minimize cancellations. We continue to have a healthy backlog with a record average sales price that is 7% higher than at the end of the third quarter of 2023. Our strong balance sheet and ample liquidity should also provide us with flexibility through changing economic conditions. We cannot, however, provide any assurances that our strategic business objectives listed below will remain successful, and we will need to remain agile to effectively address changes in market conditions.
Previous wording
During the first six months of 2024, we invested $226.8 million in land acquisitions and $263.9 million in land development compared to $141.7 million and $201.3 million, respectively, during the first six months of 2023. We invested in more land acquisitions in the first half of 2024 compared to the second quarter of 2023 in line with the land supply needs of our divisions. We continue to closely review our land acquisition and land development spending and monitor our ongoing pace of home sales and deliveries, and we will adjust our land and investment spend accordingly.
Current wording
During the nine months ended September 30, 2024, we invested $365.6 million in land acquisitions and $444.7 million in land development compared to $247.6 million and $352.6 million, respectively, during the nine months ended September 30, 2023. We invested in more land acquisitions in the nine months ended September 30, 2024 compared to the third quarter of 2023 in line with the land supply needs of our divisions. We continue to closely review our land acquisition and land development spending and monitor our ongoing pace of home sales and deliveries, and we will adjust our land and investment spend accordingly.
Previous wording
We ended the second quarter of 2024 with approximately 49,500 lots under control, which represents an approximately six-year supply of lots based on the past twelve months of homes delivered, including certain lots that we anticipate selling to third parties. This represents a 20% increase from our approximately 41,300 lots under control at the end of last year’s second quarter.
Current wording
We ended the third quarter of 2024 with approximately 52,200 lots under control, which represents an approximately six-year supply of lots based on the past twelve months of homes delivered, including certain lots that we anticipate selling to third parties. This represents a 16% increase from our approximately 44,800 lots under control at the end of last year’s third quarter.
Previous wording
We opened 38 communities and closed 40 communities in the first half of 2024, ending the second quarter with 211 active communities, compared to 195 at the end of last year’s second quarter. Although the timing of opening new communities and closing existing communities is subject to substantial variation, we expect to grow our average community count by approximately 5% by the end of 2024.
Current wording
We opened 57 communities and closed 53 communities in the nine months ended September 30, 2024, ending the third quarter with 217 active communities, compared to 204 at the end of last year’s third quarter. Although the timing of opening new communities and closing existing communities is subject to substantial variation, we expect to grow our average community count by approximately 5% by the end of 2024.
Previous wording
The following table shows, by segment: revenue; gross margin; selling, general and administrative expense; operating income (loss); and interest (income) expense - net for the three and six months ended June 30, 2024 and 2023:
Current wording
The following table shows, by segment: revenue; gross margin; selling, general and administrative expense; operating income (loss); and interest (income) expense - net for the three and nine months ended September 30, 2024 and 2023:
Previous wording
The following table presents, by reportable segment, selected operating and financial information as of and for the three and six months ended June 30, 2024 and 2023:
Current wording
The following table presents, by reportable segment, selected operating and financial information as of and for the three and nine months ended September 30, 2024 and 2023:
Previous wording
The following table sets forth the cancellation rates for each of our homebuilding segments for the three and six months ended June 30, 2024 and 2023:
Current wording
The following table sets forth the cancellation rates for each of our homebuilding segments for the three and nine months ended September 30, 2024 and 2023:
Previous wording
Northern Region. During the three months ended June 30, 2024, homebuilding revenue in our Northern region increased $80.9 million, from $383.9 million in the second quarter of 2023 to $464.8 million in the second quarter of 2024. This 21% increase in homebuilding revenue was primarily the result of a 21% increase in the number of homes delivered (168 more units), which was primarily the result of the mix of homes being delivered. Operating income in our Northern region increased $25.9 million from $46.9 million in the second quarter of 2023 to $72.8 million during the quarter ended June 30, 2024. This increase in operating income was the result of a $30.5 million improvement in our gross margin offset partially by a $4.5 million increase in selling, general and administrative expense. With respect to our homebuilding gross margin, our housing gross margin improved $30.3 million and our housing gross margin percentage improved 310 basis points to 23.0% in the second quarter of 2024 from 19.9% in the prior year’s second quarter. These improvements were primarily due to the increase in the number of homes delivered in addition to the mix of homes delivered compared to prior year. Our land sale gross margin improved $0.1 million in the second quarter of 2024 compared to the same period in 2023 as a result of the mix of lots sold in the current year compared to the prior year.
Current wording
Northern Region. During the three months ended September 30, 2024, homebuilding revenue in our Northern region increased $150.3 million, from $348.2 million in the third quarter of 2023 to $498.5 million in the third quarter of 2024. This 43% increase in homebuilding revenue was primarily the result of a 37% increase in the number of homes delivered (274 more units), a 5% increase in the average sales price of homes being delivered and the mix of homes being delivered. Operating income in our Northern region increased $31.7 million from $43.8 million in the third quarter of 2023 to $75.5 million during the quarter ended September 30, 2024. This increase in operating income was the result of a $37.8 million improvement in our gross margin partially offset by a $6.1 million increase in selling, general and administrative expense. With respect to our homebuilding gross margin, our housing gross margin improved $37.9 million and our housing gross margin percentage improved 120 basis points to 22.3% in the third quarter of 2024 from 21.1% in the prior year’s third quarter. These improvements were primarily due to the increase in the number of homes delivered in addition to the mix of homes delivered compared to prior year. Our land sale gross margin declined $0.1 million in the third quarter of 2024 compared to the same period in 2023 as a result of the mix of lots sold in the current year compared to the prior year.
Previous wording
Selling, general and administrative expense increased $4.5 million, from $29.6 million for the quarter ended June 30, 2023 to $34.1 million for the quarter ended June 30, 2024 but improved as a percentage of revenue to 7.3% in 2024's second quarter from 7.7% in 2023's second quarter. The increase in selling, general and administrative expense was attributable to a $3.3 million increase in selling expense primarily due to a $3.0 million increase in variable selling expenses resulting from increases in sales commissions produced by the higher number of homes delivered as well as a $0.3 million increase in non-variable selling expense primarily as a result of increased costs associated with our sales offices and models. This increase in selling, general and administrative expense was also attributable to a $1.2 million increase in general and administrative expense, which was primarily related to a $0.7 million increase in compensation-related expenses and $0.5 million increase in land related expenses.
Current wording
Selling, general and administrative expense increased $6.1 million, from $29.2 million for the quarter ended September 30, 2023 to $35.3 million for the quarter ended September 30, 2024 but declined 130 basis points as a percentage of revenue to 7.1% in 2024's third quarter from 8.4% in 2023's third quarter. The increase in selling, general and administrative expense was attributable to a $4.9 million increase in selling expense primarily due to a $4.3 million increase in variable selling expenses resulting from increases in sales commissions produced by the higher number of homes delivered as well as a $0.6 million increase in non-variable selling expense primarily as a result of increased costs associated with our sales offices and models. This increase in selling, general and administrative expense was also attributable to a $1.2 million increase in general and administrative expense, which was primarily related to a $0.5 million increase in compensation-related expenses and $0.2 million increase in land related expenses.
Previous wording
June 30, 2023 to 1,618 homes at June 30, 2024. The increases in new contracts and backlog were primarily a result of improved demand compared to prior year. Average sales price in backlog increased to $527,000 at June 30, 2024 compared to $504,000 at June 30, 2023 primarily due to the mix of homes being sold. During the second quarter of 2024, we opened three new communities in our Northern region compared to nine during the second quarter of 2023. The decrease was a result of delays in approvals for entitlements and permits, and longer development timelines, all of which delayed community openings during the period. Our monthly absorption rate in our Northern region improved to 3.5 per community in the second quarter of 2024 compared to 3.1 per community in 2023's second quarter due to increased availability of and demand for inventory homes.
Current wording
During the three months ended September 30, 2024, we experienced less than 1% increase in new contracts in our Northern region, from 885 in the third quarter of 2023 to 890 in the third quarter of 2024. Homes in backlog increased 7% from 1,397 homes at September 30, 2023 to 1,493 homes at September 30, 2024. The increases in new contracts and backlog were primarily a result of improved demand compared to prior year. Average sales price in backlog increased approximately 3% to $538,000 at September 30, 2024 compared to $521,000 at September 30, 2023 primarily due to the mix of homes being sold. We opened seven new communities in our Northern region during the third quarter of 2024 and 2023. Our monthly absorption rate in our Northern region improved to 3.3 per community in the third quarter of 2024 compared to 2.9 per community in 2023's third quarter due to increased availability of and demand for inventory homes.
Previous wording
During the three months ended June 30, 2024, our new contracts increased slightly in our Southern region, from 1,248 in the second quarter of 2023 to 1,253 in the second quarter of 2024, which was primarily due to our increased community count compared to prior year. Homes in backlog decreased, however, by 20% from 2,255 homes at June 30, 2023 to 1,804 homes at June 30, 2024, primarily as a result of improved construction cycle times allowing us to deliver homes in backlog at a faster rate compared to last year and increased availability of inventory homes compared to prior year. Average sales price in backlog increased to $538,000 at June 30, 2024 from $509,000 at June 30, 2023 primarily due to the mix of homes being sold. During the three months ended June 30, 2024, we opened 14 new communities in our Southern region compared to opening six communities during 2023's second quarter. Our monthly absorption rate in our Southern region declined to 3.5 per community in the second quarter of 2024 compared to 4.4 per community in the second quarter of 2023 as a result of the limited lot supply in the increased number of our communities in closeout status.
Current wording
During the three months ended September 30, 2024, our new contracts decreased slightly in our Southern region, from 1,136 in the third quarter of 2023 to 1,133 in the third quarter of 2024, which was primarily due to slightly weakened demand. However, homes in backlog decreased by 17% from 2,036 homes at September 30, 2023 to 1,681 homes at September 30, 2024, primarily as a result of improved construction cycle times allowing us to deliver homes in backlog at a faster rate compared to last year and a slight decrease in new contracts. Average sales price in backlog increased to $549,000 at September 30, 2024 from $503,000 at September 30, 2023 primarily due to the mix of homes being sold. During the three months ended September 30, 2024, we opened twelve new communities in our Southern region compared to opening fifteen communities during 2023's third quarter. Our monthly absorption rate in our Southern region declined to 3.1 per community in the third quarter of 2024 compared to 3.8 per community in the third quarter of 2023 as a result of a slight decline in new contracts and a decline in new communities compared to prior year.
Previous wording
Financial Services. Revenue from our mortgage and title operations increased 22% to an all-time quarterly record $30.8 million in the second quarter of 2024 from $25.3 million in the second quarter of 2023 due to higher margins on loans sold during the period compared to prior year’s second quarter and a 26% increase in the number of loan originations from 1,281 in 2023's second quarter to 1,618 in the second quarter of 2024, partially offset by a decrease in the average loan amount from $402,000 in the quarter ended June 30, 2023 to $395,000 in the quarter ended June 30, 2024.
Current wording
Financial Services. Revenue from our mortgage and title operations increased 27% to an all-time quarterly record $30.0 million in the third quarter of 2024 from $23.6 million in the third quarter of 2023 due to higher margins on loans sold during the period compared to prior year’s third quarter and a 15% increase in the number of loan originations from 1,469 in 2023's third quarter to 1,695 in the third quarter of 2024, and an increase in the average loan amount from $394,000 in the quarter ended September 30, 2023 to $403,000 in the quarter ended September 30, 2024.
Previous wording
Our financial services segment experienced a $4.1 million increase in operating income in the second quarter of 2024 compared to 2023's second quarter, which was primarily due to the increase in revenue discussed above offset, in part, by a $1.4 million increase in selling, general and administrative expense compared to the second quarter of 2023, which was primarily the result of an increase in compensation-related expenses.
Current wording
Our financial services segment experienced a $4.1 million increase in operating income in the third quarter of 2024 compared to 2023's third quarter, which was primarily due to the increase in revenue discussed above offset, in part, by a $2.3 million increase in selling, general and administrative expense compared to the third quarter of 2023, which was primarily the result of an increase in compensation-related expenses.
Previous wording
At June 30, 2024, M/I Financial provided financing services in all of our markets. Approximately 87% of our homes delivered during the second quarter of 2024 were financed through M/I Financial, compared to 81% in the second quarter of 2023. Capture rate is influenced by financing availability and competition in the mortgage market and can fluctuate from quarter to quarter.
Current wording
At September 30, 2024, M/I Financial provided financing services in all of our markets. Approximately 89% of our homes delivered during the third quarter of 2024 were financed through M/I Financial, compared to 86% in the third quarter of 2023. Capture rate is influenced by financing availability and competition in the mortgage market and can fluctuate from quarter to quarter.
Previous wording
Corporate Selling, General and Administrative Expense. Corporate selling, general and administrative expense increased $3.9 million from $19.8 million for the second quarter of 2023 to $23.7 million for the second quarter of 2024. This increase primarily resulted from a $2.2 million increase in compensation-related expenses and a $1.2 million increase in miscellaneous expenses.
Current wording
Corporate Selling, General and Administrative Expense. Corporate selling, general and administrative expense increased $4.5 million from $19.7 million for the third quarter of 2023 to $24.2 million for the third quarter of 2024. This increase primarily resulted from a $2.9 million increase in compensation-related expenses and a $1.6 million increase in miscellaneous expenses.
Previous wording
Interest Income, net of Interest Expense. The Company earned $7.3 million of interest income - net for the three months ended June 30, 2024 compared to earning $4.7 million of interest income - net for the three months ended June 30, 2023. This increase was primarily due to a higher average cash balance on hand compared to prior year.
Current wording
Interest Income, net of Interest Expense. The Company earned $6.7 million of interest income - net for the three months ended September 30, 2024 compared to $5.8 million for the three months ended September 30, 2023. This increase was primarily due to a higher average cash balance on hand compared to prior year.
Previous wording
Income Taxes. Our overall effective tax rate was 24.4% for the three months ended June 30, 2024 and 24.0% for the three months ended June 30, 2023. The increase in the effective tax rate from the three months ended June 30, 2023 was primarily attributable to a $0.7 million decrease in tax benefit from equity compensation in 2024.
Current wording
Income Taxes. Our overall effective tax rate was 22.9% for the three months ended September 30, 2024 and 21.9% for the three months ended September 30, 2023. The increase in the effective tax rate from the three months ended September 30, 2023 was primarily attributable to a $0.8 million decrease in tax benefit from equity compensation in 2024.
Previous wording
During the six months ended June 30, 2024, we experienced a 22% increase in new contracts in our Northern region, from 1,777 in the six months ended June 30, 2023 to 2,164 in the first half of 2024. Homes in backlog increased 29% from 1,253 at June 30, 2023 to 1,618 homes at June 30, 2024. The increase in new contracts and homes in backlog was primarily due to improved demand. Average sales price in backlog increased to $527,000 at June 30, 2024 compared to $504,000 at June 30, 2023 primarily due to the mix of homes being sold. During the six months ended June 30, 2024, we opened 10 new communities in our Northern region compared to 20 new communities opened during the first half of 2023. The decrease was a result of delays in approvals for entitlements and permits, and longer development timelines, all of which delayed community openings during the period. Our monthly absorption rate in our Northern region improved to 3.7 per community in the six months ended June 30, 2024 from 2.9 per community in the same period in 2023 as a result of increased availability of and demand for inventory homes.
Current wording
During the nine months ended September 30, 2024, we experienced a 15% increase in new contracts in our Northern region, from 2,662 in the nine months ended September 30, 2023 to 3,054 in the first nine months of 2024. Homes in backlog increased 7% from 1,397 at September 30, 2023 to 1,493 homes at September 30, 2024. The increase in new contracts and homes in backlog was primarily due to improved demand. Average sales price in backlog increased to $538,000 at September 30, 2024 compared to $521,000 at September 30, 2023 primarily due to the mix of homes being sold. During the nine months ended September 30, 2024, we opened 17 new communities in our Northern region compared to 27 new communities opened during the nine months ended September 30, 2023. The decrease was a result of delays in approvals for entitlements and permits, and longer development timelines, all of which delayed community openings during the period. Our monthly absorption rate in our Northern region improved to 3.5 per community in the nine months ended September 30, 2024 from 2.9 per community in the same period in 2023 as a result of increased availability of and demand for inventory homes.
Previous wording
Southern Region. During the six months ended June 30, 2024, homebuilding revenue in our Southern region increased $28.1 million from $1.20 billion in the first half of 2023 to $1.23 billion in the first half of 2024. This 2% increase in homebuilding revenue was the result of a 7% increase in the number of homes delivered (171 more units) due to increased availability of inventory homes and improved construction cycle times on our backlog homes and a $0.7 million increase in land sale revenue, offset partially by a 4% decrease in the average sales price of homes delivered ($22,000 per home delivered) primarily due to the mix of homes delivered. Operating income in our Southern region increased 14% from $207.5 million in the first half of 2023 to $237.6 million during the six months ended June 30, 2024. This increase in operating income was the result of a $39.9 million improvement in our gross margin, offset partially by a $9.8 million increase in selling, general, and administrative expense. With respect to our homebuilding gross margin, our gross margin on homes delivered improved $38.0 million, due primarily to the increase in the number of homes delivered during the period as well as due to the mix of homes delivered, offset partially by the decrease in average sale price of homes delivered. Our housing gross margin percentage improved 260 basis points from 25.1% in the six months ended June 30, 2023 to 27.7% in the same period in 2024 primarily due to mix, offset partially by the decrease in average sales price of homes delivered compared to prior year. Our land sale gross margin improved $1.9 million in the first half of 2024 compared to the same period in 2023 as a result of the mix of lots sold in the current year compared to the prior year.
Current wording
Southern Region. During the nine months ended September 30, 2024, homebuilding revenue in our Southern region decreased $32.0 million from $1.87 billion in the nine months ended September 30, 2023 to $1.84 billion in the nine months ended September 30, 2024. This 2% decrease in homebuilding revenue was the result of an $11.1 million decrease in land sale revenue and a 3% decrease in the average sales price of homes delivered ($15,000 per home delivered) primarily due to the mix of homes delivered, offset in part by a 2% increase in the number of homes delivered (72 units). Operating income in our Southern region increased 3% from $343.2 million in the nine months ended September 30, 2023 to $351.7 million during the nine months ended September 30, 2024. This increase in operating income was the result of a $23.4 million improvement in our gross margin, offset partially by a $14.8 million increase in selling, general, and administrative expense. With respect to our homebuilding gross margin, our gross margin on homes delivered improved $23.5 million, due primarily to the increase in the number of homes delivered during the period and the mix of homes delivered, offset partially by the decrease in average sale price of homes delivered. Our housing gross margin percentage improved 160 basis points from 26.0% in the nine months ended September 30, 2023 to 27.6% in the same period in 2024 primarily due to the mix of homes delivered, offset partially by the decrease in average sales price of homes delivered compared to prior year. Our land sale gross margin declined $0.1 million in the nine months ended September 30, 2024 compared to the same period in 2023 as a result of the mix of lots sold in the current year compared to the prior year.
Previous wording
Selling, general and administrative expense increased $9.8 million from $91.8 million in the first half of 2023 to $101.6 million in the first half of 2024 and increased as a percentage of revenue to 8.3% compared to 7.7% in 2023’s same period. The increase in selling, general and administrative expense was attributable to a $4.8 million increase in selling expense primarily due to a $2.2 million increase in variable selling expenses resulting from increases in sales commissions produced by the higher number of homes delivered and a $2.6 million increase in non-variable selling expenses primarily related to costs associated with our sales offices and models due to our increased community count. The increase in selling, general and administrative expense was also attributable to a $5.0 million increase in general and administrative expense, which was primarily related to a $3.3 million increase in compensation-related expenses due to our strong financial performance during the period, a $0.9 million increase in land-related expenses, and a $0.8 million increase in other miscellaneous expenses.
Current wording
Selling, general and administrative expense increased $14.8 million from $141.3 million in the nine months ended September 30, 2023 to $156.1 million in the nine months ended September 30, 2024 and increased as a percentage of revenue to 8.5% compared to 7.5% in 2023’s same period. The increase in selling, general and administrative expense was attributable to a $5.4 million increase in selling expense primarily due to a $5.0 million increase in non-variable selling expenses primarily related to costs associated with our sales offices and models due to our increased community count and a $0.4 million increase in variable selling expenses resulting from increases in sales commissions produced by the higher number of homes delivered. The increase in selling, general and administrative expense was also attributable to a $9.4 million increase in general and administrative expense, which was primarily related to a $5.7 million increase in compensation-related expenses due to our increased headcount and our strong consolidated financial performance during the period, a $1.3 million increase in land-related expenses, and a $2.4 million increase in other miscellaneous expenses.
Previous wording
During the six months ended June 30, 2024, we experienced a 2% increase in new contracts in our Southern region, from 2,591 in the six months ended June 30, 2023 to 2,638 in the first half of 2024 primarily due to the increase in our average number of communities compared to prior year. Homes in backlog decreased 20% from 2,255 homes at June 30, 2023 to 1,804 homes at June 30, 2024 due primarily to improved construction cycle times allowing us to deliver homes in backlog at a faster rate compared to last year in addition to increased availability of inventory homes compared to prior year. Average sales price in backlog increased from $509,000 at June 30, 2023 to $538,000 at June 30, 2024 primarily due to the mix of homes delivered. During the six months ended June 30, 2024, we opened 28 communities in our Southern region, compared to opening 14 during the first half of 2023. Our monthly absorption rate in our Southern region declined to 3.8 per community in the first half of 2024 from 4.5 per community in the first half of 2023 as a result of the limited lot supply in the increased number of our communities in closeout status.
Current wording
During the nine months ended September 30, 2024, we experienced a 1% increase in new contracts in our Southern region, from 3,727 in the nine months ended September 30, 2023 to 3,771 in the first nine months of 2024 primarily due to the increase in our average number of communities compared to prior year. Homes in backlog decreased 17% from 2,036 homes at September 30, 2023 to 1,681 homes at September 30, 2024 due primarily to improved construction cycle times allowing us to deliver homes in backlog at a faster rate compared to last year in addition to increased availability of inventory homes compared to prior year. Average sales price in backlog increased from $503,000 at September 30, 2023 to $549,000 at September 30, 2024 primarily due to the mix of homes delivered. During the nine months ended September 30, 2024, we opened 40 communities in our Southern region, compared to opening 29 during the nine months ended September 30, 2023. Our monthly absorption rate in our Southern region declined to 3.5 per community in the nine months ended September 30, 2024 from 4.2 per community in the nine months ended September 30, 2023 as a result of the limited lot supply in the increased number of our communities in closeout status.
Previous wording
Financial Services. Revenue from our mortgage and title operations increased 14% from $50.5 million in the first half of 2023 to $57.7 million in the first half of 2024 due to higher margins on loans sold during the period compared to 2023's first half, proceeds from the sale of mortgage servicing rights, and a 25% increase in the number of loan originations from 2,539 in the first half of 2023 to 3,174 in the first half of 2024, offset partially by a decrease in the average loan amount from $398,000 in the six months ended June 30, 2023 to $391,000 in the six months ended June 30, 2024.
Current wording
Financial Services. Revenue from our mortgage and title operations increased 18% from $74.1 million in the nine months ended September 30, 2023 to $87.7 million in the nine months ended September 30, 2024 due to higher margins on loans sold during the period compared to 2023's first nine months, proceeds from the sale of mortgage servicing rights, and a 21% increase in the number of loan originations from 4,008 in the nine months ended September 30, 2023 to 4,869 in the nine months ended September 30, 2024, offset partially by a decrease in the average loan amount from $396,000 in the nine months ended September 30, 2023 to $395,000 in the nine months ended September 30, 2024.
Previous wording
Our financial services segment experienced a $4.4 million increase in operating income in the first half of 2024 compared to the same period in 2023, which was primarily due to the increase in revenue discussed above, partially offset by a $2.8 million increase in selling, general and administrative expense compared to the first half of 2023. The increase in selling, general and administrative expense was primarily attributable to a $1.7 million increase in compensation related expenses, a $0.5 million increase in indemnification reserves during the period, and a $0.6 million increase in other miscellaneous expenses.
Current wording
Our financial services segment experienced a $8.5 million increase in operating income in the nine months ended September 30, 2024 compared to the same period in 2023, which was primarily due to the increase in revenue discussed above, partially offset by a $5.1 million increase in selling, general and administrative expense compared to the nine months ended September 30, 2023. The increase in selling, general and administrative expense was primarily attributable to a $4.6 million increase in compensation related expenses, a $0.6 million increase in indemnification reserves during the period, and a $0.1 million decrease in other miscellaneous expenses.
Previous wording
At June 30, 2024, M/I Financial provided financing services in all of our markets. Approximately 88% of our homes delivered during the first half of 2024 were financed through M/I Financial, compared to 79% during the six months ended June 30, 2023. Capture rate is influenced by financing availability and can fluctuate from quarter to quarter.
Current wording
At September 30, 2024, M/I Financial provided financing services in all of our markets. Approximately 88% of our homes delivered during the nine months ended September 30, 2024 were financed through M/I Financial, compared to 82% during the nine months ended September 30, 2023. Capture rate is influenced by financing availability and can fluctuate from quarter to quarter.
Previous wording
Corporate Selling, General and Administrative Expense. Corporate selling, general and administrative expense increased $4.4 million from $37.0 million for the six months ended June 30, 2023 to $41.4 million for the six months ended June 30, 2024, primarily due to a $2.3 million increase in compensation-related expenses, a $0.8 million increase in computer-related costs, a $0.8 million increase in advertising expenses, and a $0.5 million increase in miscellaneous expenses incurred during the period.
Current wording
Corporate Selling, General and Administrative Expense. Corporate selling, general and administrative expense increased $8.9 million from $56.7 million for the nine months ended September 30, 2023 to $65.6 million for the nine months ended September 30, 2024, primarily due to a $5.3 million increase in compensation-related expenses, a $1.0 million increase in computer-related costs, a $0.9 million increase in advertising expenses, and a $1.7 million increase in miscellaneous expenses incurred during the period.
Previous wording
Interest Income, net of Interest Expense. The Company earned $14.3 million of interest income - net for the six months ended June 30, 2024 compared to incurring $6.1 million of interest expense - net for the six months ended June 30, 2023. This was primarily due to a higher average cash balance on hand compared to prior year.
Current wording
Interest Income, net of Interest Expense. The Company earned $20.9 million of interest income - net for the nine months ended September 30, 2024 compared to $11.9 million for the nine months ended September 30, 2023. This was primarily due to a higher average cash balance on hand compared to prior year.
Previous wording
Income Taxes. Our overall effective tax rate was 23.9% for the six months ended June 30, 2024 and 24.1% for the six months ended June 30, 2023. The decrease in the effective rate from the six months ended June 30, 2023 was primarily attributable to a $0.6 million increase in tax benefit from equity compensation in 2024.
Current wording
Income Taxes. Our overall effective tax rate was 23.6% for the nine months ended September 30, 2024 and 23.3% for the nine months ended September 30, 2023. The increase in the effective rate from the nine months ended September 30, 2023 was primarily attributable to a $0.2 million decrease in tax benefit from equity compensation in 2024.
Previous wording
At June 30, 2024, we had $837.5 million of cash, cash equivalents and restricted cash, with $837.3 million of this amount comprised of unrestricted cash and cash equivalents, which represents a $104.7 million increase in unrestricted cash and cash equivalents from December 31, 2023. The increase in cash is primarily due to house closings, the timing of land spend compared to prior year as well as a larger beginning of year balance on hand. Our principal uses of cash for the six months ended June 30, 2024 were investment in land and land development, construction of homes, mortgage loan originations, investment in joint ventures, operating expenses, short-term working capital, and debt service requirements, including the repayment of amounts outstanding under our credit facilities, and the repurchase of $75.6 million of our outstanding common shares under both the 2021 and 2024 Share Repurchase Programs (as defined below). In order to fund these uses of cash, we used proceeds from home deliveries, the sale of mortgage loans, the sale of mortgage servicing rights, excess cash balances, borrowings under our MIF Mortgage Repurchase Facility (as defined below), and other sources of liquidity.
Current wording
At September 30, 2024, we had $719.9 million of cash, cash equivalents and restricted cash (all of which was comprised of unrestricted cash and cash equivalents), which represents a $12.7 million decrease in unrestricted cash and cash equivalents from December 31, 2023. This decrease in cash is primarily due to house closings and the timing of land spend compared to prior year offset by a larger beginning of year balance on hand. Our principal uses of cash for the nine months ended September 30, 2024 were investment in land and land development, construction of homes, mortgage loan originations, investment in joint ventures, operating expenses, short-term working capital, and debt service requirements, including the repayment of amounts outstanding under our credit facilities, and the repurchase of $125.8 million of our outstanding common shares under both the 2021 and 2024 Share Repurchase Programs (as defined below). In order to fund these uses of cash, we used proceeds from home deliveries, the sale of mortgage loans, the sale of mortgage servicing rights, excess cash balances, borrowings under our MIF Mortgage Repurchase Facility (as defined below), and other sources of liquidity.
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