Taylor Morrison Reports Strong Q3, Aiming Higher for 2024 Growth

Taylor Morrison, the seventh-largest company on the 2024 BUILDER 100 list, delivered “better-than-expected” results in the fiscal third quarter and is positioned to exceed its lofty growth targets for the 2024 fiscal year.

The builder’s targets include 10% annual home closings growth, an annualized absorption pace in the low-three range, and a community count between 330 and 340.

“This year, with just over two months to go, we expect to meet or exceed each of these metrics with anticipated double-digit closings growth to approximately 12,725 homes at a home closings growth margin of around 24.3% as 2024 has shaped up to be another milestone year for our company,” CEO and chairman Sheryl Palmer said.

The headline numbers in the strong third quarter results include a 29% year-over-year increase in home closings to 3,394 homes and 26% year-over-year growth in home closings revenue to $2 billion. Net sales orders increased 9% to 2,830 in the third quarter, benefiting from a 5% increase in community count and a 4% increase in the monthly absorption pace to 2.8 per community. The builder’s year-to-date monthly absorption pace is 3.2 per community.

“By meeting the needs of well-qualified home buyers with appropriate product offerings in prime community locations, we continue to benefit from healthy demand and pricing resiliency across our portfolio,” Palmer said. “We had begun to see traffic recover in June and July, which translated into improving order volume throughout the third quarter, with sales activity ending on a high note in September. While still early in October, demand has generally been healthy and consistent with seasonal trends.”

By consumer group, third quarter orders for Taylor Morrison consisted of 30% entry-level buyers, 43% move-up buyers, and 27% resort lifestyle buyers. Orders were strongest in the resort lifestyle segment with 20% year-over-year growth, while move-up sales and entry-level sales increased by 8% and 4%, respectively.

Palmer said the company was able to lean on customizable finance incentives in lieu of “big price adjustments” in the quarter. Mortgage forward commitments below market interest rates were used in about a third of the quarter's closings.

To-be-built homes accounted for 40% of sales in the quarter, down from 45% in the third quarter of 2023. Palmer said offering a mix of to-be-built and spec homes, Taylor Morrison is “better able to compete for sales against builders with more limited options.”

Cancellations in the third quarter were 9.3% of gross orders, down from 11.4% a year ago. Taylor Morrison started 2,864 homes and ended the quarter with 8,490 homes under production. The builder’s backlog at quarter-end was 5,692 homes, with a value of $3.8 billion.

The company generated profit of $251 million in the quarter, or $2.37 per share, representing over 50% growth on a year-over-year basis. The results also bested Wall Street profit per share projections of $2.06.

“As we head into 2025, we are confident that our long-standing emphasis on capital-efficient growth will yield another year of strong performance, supported by tailwinds driving the need for new construction and our favorable positioning as a diversified home builder,” Palmer said.

Resale Market and Resale Competition

While much attention has been generated by the loosening of the existing-home market, particularly in Florida and Texas, Palmer and Erik Heuser executive vice president and chief corporate operations officer, said Taylor Morrison has not been “meaningfully impacted.”

Heuser said the total number of resale listings in Taylor Morrison’s operating MSAs has increased by 30% since the beginning of the year, but internal research suggests less than a fifth of resale listings surrounding its communities can be considered “truly competitive.”

“Only 19% of the resale listings within a 3-mile radius of communities [in Florida, Texas, and Arizona] would be considered truly competitive to our homes taking into account square footage, price, product type, and vintage factors,” Heuser said during the home builder’s earnings call.

Taking the analysis on a national scale, the numbers are even more positive for Taylor Morrison, with only 17% of current resale listings likely to be considered truly competitive to the builder’s national portfolio.

“We believe that a normalizing resale market should be expected over time, but we will continue to examine relevant MSA submarket and asset level impacts,” Heuser said.

Another wrinkle in the resale market that began playing out in the third quarter were the new rules governing commissions and buyer representation agreements. Palmer said, following the effective date of the new rules, Taylor Morrison saw more customers opt for self-service within their online home reservation system.

“In fact, the third quarter brought record highs for the year in online reservations with a conversion rate of 58% and a 17% contribution to sales,” Palmer said. “Realtor participation on our online reservation tools continued to trend downward with meaningful improvement year over year.”

Land Update

At the end of the third quarter, Taylor Morrison’s home building lot supply was 83,579 homesites, of which a record 58% were controlled off balance sheet. Heuser said the company is moving closer to its near-term goal of controlling 60% to 65% of its lot supply off-balance sheet.

The builder’s home building lots represented 6.6 years of supply, of which 2.7 years were owned. Home building land acquisition and development spend totaled $593 million, up from $552 million a year ago. Development-related spend accounted for 46% of land spend in the quarter, according to the home builder.