Greetings and welcome to the Tri Pointe Homes Third Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, David Lee, General Counsel of TRI Pointe Homes. Please go ahead.

Good morning, and welcome to TRI Pointe Homes' earnings conference call. Earlier this morning, the Company released its financial results, results for the third quarter of 2023. Documents detailing these results, including a slide deck are available at www.tripointehomes.com through the Investors link and under the Events and Presentations tab. Before the call begins, I would like to remind everyone that certain statements made on this call, which are not historical facts. Including statements concerning future financial and operating performance are forward-looking statements that involve risks and uncertainties and other factors that could cause actual results to differ materially are detailed in the Company's SEC filings. Except as required by law, the Company undertakes no duty to update these forward-looking statements. Additionally, reconciliations of non-GAAP financial measures discussed on this call to the most comparable GAAP measures can be accessed through Tri Pointe's website and in its SEC filings. Hosting the call today are, Doug Bauer, the Company's Chief Executive Officer; Glenn Keeler, the Company's Chief Financial Officer; Tom Mitchell, the Company's Chief Operating Officer and President; and Linda Mamet, the Company's Chief Marketing Officer. With that, I will now turn the call over to Doug.

Thank you, David and good morning to everyone on today's call. During the call, we will review operating results for the third quarter, provide a market update, and discuss key operating highlights. In addition, we will update our fourth quarter outlook. Tri Pointe delivered another strong quarter, achieving 1,223 deliveries and the average sales price of $675,000, leading to home sales revenue of $825 million. We exceeded the high end of our delivery guidance for the quarter, which is a testament to the success, we've achieved in efficiently converting our backlog, and to our ability to sell and close move-in ready homes during the quarter. Throughout 2023, our strategy to increase construction starts, combined with improved cycle times has significantly bolstered our inventory of spec homes. Under the current market backdrop, having availability of quick move-in homes has allowed us to ramp up our delivery potential, and to capture share in today's under supplied housing market in higher interest rate environment. This topline performance for the third quarter translated into a homebuilding gross margin of 22.3%, pre-tax income of $100 million and diluted earnings per share of $0.76. We are proud of these results and expect a strong finish to the year. We opened 13 new communities during the third quarter, bringing our active selling community count to 163, which is an all-time high for Tri Pointe. The 30 new communities opened during the quarter were well received by our customers, generating average monthly absorption pace of 4.4 homes per community. Our strategic focus to geographically diversify our business from our historical concentration in California is progressing well. Currently, California represents 29% of our active selling community mix, while our Texas growth markets have Austin, Houston, and Dallas-Fort Worth account for 34% of our total active selling communities. We are…

Thanks, Doug and good morning. I'm going to highlight some of our results and key financial metrics for the third quarter, and then finish my remarks with our expectations and outlook for the fourth quarter. At times, I will be referring to certain information from our slide deck, which is posted on our website. Slide 6 of the earnings call deck provides some of the financial and operational highlights from our third quarter. We delivered 1,223 homes at an average sale -- selling price of $675,000, resulted in home sales revenue of approximately $825 million. Deliveries came in above the midpoint of our guidance range by 16%, as we were able to take advantage of the strong demand environment and deliver move-in ready spec homes during the quarter. Gross margin percentage for the quarter was 22.3%, which was above our guidance range due to a favorable mix of the additional deliveries, we were able to pull into the quarter. Adjusted gross margin was 25.6% for the quarter and represented a 70 basis point improvement sequentially from the second quarter, resulting from the pricing power we experienced during the spring selling season. SG&A expense as a percentage of home sales revenue was on the lower end of our guidance range at 12.3%. And finally, net income for the third quarter was $75 million or $0.76 per diluted share. We generated 1,513 net new home orders in the third quarter, which was 122% increase compared to the prior year. Our absorption pace was 3.3 homes per community per month, and 84% increase compared to the prior year, and higher than we would normally expect seasonally for third quarter. In terms of market color, demand was broad-based based across our -- both our product and market segments. Absorptions were 3.7 for our entry-level…

Thanks, Glenn. In closing our industry is positioned for long-term success with the continued supply imbalances and strong consumer demand. At Tri Pointe, we are focused on steady growth to both the top and bottom line. This focus will continue to benefit our shareholders with a very simple formula of increasing book value per share year-over-year. I would also like to thank all of our team members for their excellent work and commitment to building our passionate culture. Tri Pointe has earned distinguished recognition from Great Place to Work and Fortune Magazine. On 2023 Best Workplaces in Construction, Best Workplaces for Millennials, and Best Workplaces for Women. We are extremely proud of these designations and of our people who put into action Tri Pointe values, mission, and beliefs that we are in a life changing business by delivering an outstanding customer experience. Now, I'd like to turn the call back over to the operator for any questions. Thank you.

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] And our first question comes from Joe Ahlersmeyer with Deutsche Bank. Please go ahead.

Hey, good morning everybody. How are you?

Yes. Great.

Great, yes. I appreciate you highlighting the tripling of the book value there do that a few more times and you will really be in business. The, the question I had though, first -- the question I had, first off was on community count in the third and fourth quarter here. I think you had said before, 155 to 165 by year end. It looks like you were ahead of that even in the third quarter, but now then you're saying it might be a little bit lower sequentially. I know there's timing in there, but maybe you could just go through some of what those timing puts and takes were around the communities?

Yes, it's just the stronger absorption that we experienced this year, Joe. This is Glenn. The -- there's about 15 to 20 communities that are close to close out in the fourth quarter. We're opening eight new communities in the fourth quarter so that's -- it's just timing of when those communities close will depend on the ending number. But overall we opened the total number of communities we thought we were going to open this year, with the additional eight in the fourth quarter. So it's just the timing of close out.

Got it. And then you referenced the absorptions on the ones that you opened which were higher than the average. But then, as you're kind of talking about the October absorption and what you used to do prior to the pandemic, I would think those were lower absorption communities on average to begin with. So maybe just talk about the mix of your communities in the fourth quarter, and, and how that would play into comparability versus that 2.5 history?

Well, I think what we try to highlight there is usually you do get a nice talk when you initially opened a community right? There is some pent-up demand there. And we were just trying to highlight that those 30 communities were well received within the quarter. But it's still a mix of an overall 163 communities. And we just try to highlight that, that seasonality that we've seen so far in October feel similar to pre-pandemic level of the seasonality.

Got it. All right, well congrats on the good results.

Thank you.

Our next question comes from Stephen Kim with Evercore ISI. Please go ahead.

Yes, thanks very much guys. Congrats on the good results. You talked about being prepared to do, maybe a little more with incentives given the market environment, in order to maintain sort of targeted sales pace. And I gather you talked about, you talked about forward purchase commitments, which I think is something you haven't really done much since, maybe early in the year. So as you talk -- as you introduce these rate buy downs through forward purchase commitments, can you give us a sense for how you're doing that? How -- what kind of significant -- what the -- what the magnitude is of the buy downs? And what the uptake seems to be so far in October?

Hello Stephen, this is Linda. Yes, thank you. So we use forward commitments on a very limited basis at select communities, and even on the select home sites. And to give you an idea of the magnitude, only 7% of the loans that we funded in the third quarter used a forward commitment. So most of our homebuyers are using a permanent rate buy down. And our typical incentive level is in the third quarter was 3.8% of homebuilding revenue, and customers were typically using approximately 2% of that, the closing costs and overall financing.

Got it. Now, has any of that changed in, as you've moved into October and into the fourth quarter?

Not significantly, month-to-date in October, our incentive is at 3.9% of revenue. So we expect it to be similar, but we will adjust if we see there is changes in mortgage interest rate.

And, and Just to clarify that rather it is order revenue, not delivery revenue.

Yes.

That's really helpful. Yes, thanks. That was going to be my -- yes.

But, yes, fairly, fairly consistent so far in, in October from what we experienced in the third quarter Stephen.

Oh, that's really encouraging. So yes, I appreciate that, that color. Moving on to SG&A, your guide was a little higher on SG&A than we expected, even though the closings were kind of looking like in line. But the -- I'm curious as to whether or not you've seen an increase in your agent commissions, and also with the, the court case playing out in Texas, curious -- curious as to, how you guys are positioned relative to moving with the market if you were to see agent commissions broadly across the market comes down, particularly on buyer agency?

Stephen, I'll take a chance on that and Linda could chime in as well. But overall, we've seen a slight uptick in outside broker commissions, just the percentage of usage. Overall though, compared to our peers said, we're a pretty low we're on the lower end of, of usage of outside brokers, so I think we've done a pretty good job with that historically. And then, and related to the Texas Tri Pointe, Linda, do you have any color there?

We'll say, right, we'll be watching the outcome of that that. But as Glenn said, I mean our broker's sales on third quarter orders was 71%. So we are typically in that high 60s, low 70 percent range for broker attachment to sales.

And that's typically times like a 3% incentive, right? Sorry, not incentive but 3% commission, right?

Actually no. We aim to, to really keep that under control and our average commissions as a percentage of the home price in the third quarter was 2.3%.

A lot of times in certain markets, Stephen we'll just give a flat fee or a fixed amount versus an actual percentage, just, just depends on the market, the community, the demand for the community and things like that.

Great. Appreciate it guys.

Thank you.

Our next question comes from Truman Patterson with Wolfe Research. Please go ahead.

Hey, good morning everyone, thanks for taking my questions. First question earlier in the year all builders were expecting some pretty nice cost tailwinds this year. I'm just hoping you could give an update on kind of the, the cost trends here, here in the back half of 2023, labor and materials and given the recent rate move, perhaps the sequential softening you're seeing. Do you think there's a chance to perhaps push back on any labor, material cost going into 2024 or it's just kind of the underlying inflationary pressures, likely to keep everything kind of elevated as we sit today?

Good morning, Truman, this is Tom, I'll take a little bit of that one. We're feeling really good that the market is normalizing relative to supply chain, and trade availability, and labor supply it's got tighten constraints, but it is beginning to normalize. On the cost front, we are largely able to maintain the cost reductions we achieved in the first couple of quarters. So we feel really good about that, and that's our goal going forward into 2024 is to really focus on maintaining that cost structure, continuing to focus on cycle times, and just capitalizing on a more normalized market.

Okay.

Yes, Truman, I would add. This is Doug. Going forward, I, I think it will continue to be very normal. I don't think interest rates are going to drive cycle times or costs one way or the other. Obviously, that will be driven more by starts and velocity. So we, we've seen as Tom said, a very steady market and it's also showing up in our customer satisfaction scores that are, are going up very nicely. And that's, that's very important in our business.

Okay. Okay. Got you. And then hoping you all could give an update on kind of the Carolinas, Dallas expansion, if you will, as well as the recent Utah entrance. And given your balance sheet a tougher, just banking lending environment for smaller privates, could you just, just discuss the appetite you have for M&A in the current environment? I think you mentioned you're looking at Florida and Charleston, would that be Greenfield or potential M&A opportunity?

Yes, Truman, this is Doug. Right now we're looking at both, I would tell you that the M&A environment is, is a little limited. And so we, we've been pursuing more of the organic strategy as we've mentioned in Utah. We're actively recruiting for Florida and Charleston. And that could take along with an M&A opportunity within the local market. So we're looking at both, but we're going to pursue organic, which is something we can control and, and be very disciplined about our growth. So that, that's, that's kind of a current update.

All right. Thank you all.

Our next question comes from Alan Ratner from Zelman & Associates. Please go ahead.

Hey guys, good morning. Thanks for taking my questions. First question, I guess on capital allocation. You guys have done a really good job of taking advantage of what I'm sure you, you feel is an unjustified discount here on your stock price with the buybacks. You do have a maturity coming up next year, and obviously with rates climbing up here. I was just curious, if you can give us an update on your thinking on the balance sheet. Is the plan to pay down that maturity next year? Anything else that you're contemplating with that?

Hey, Alan, this is Glenn. Good question. Right now we're putting ourselves in a position to pay those bonds off next year. With the current bond market and the rates, it's not too attractive to refinance. And so, we plan on deleveraging and paying those bonds down. But as you can see, we have ample liquidity to do that while still investing in land and, and being active in our share repurchase program.

Got you. That makes sense. The second question on, on the margin guide some of your peers have guided for some sequential pressure on margin in the fourth quarter with the expectation or assumption that incentives might creep higher. And I know you had similar commentary in the press release, but your guidance is, is pretty flat sequentially and it sounds like there hasn't really been any notable shifts in your incentives thus far in the quarter. So can you just explicitly highlight, what is your expectation for incentives for the quarter embedded within your guidance right now?

Yes, like we discussed so far in October, we've seen consistent with the third quarter from an incentive perspective. Now, if rates stay elevated, like we said in our comments we'll look at that and we'll look to incentivize certain communities that aren't meeting our sales expectations. But overall we're going into the, the fourth quarter with a strong margin in backlog, and that supports that guidance. And we don't -- right now our sales are really to generate deliveries next year in 2024 largely. And so that shouldn't impact, our Q4 margin.

Yes. Alan, the other thing. This is Tom, this is Tom. Just to add a little bit more color there, of course we're focused on target absorptions for our business plan and, and we are right on that seasonality that we normally built into our, our business plan. We've got 86% of our fourth quarter backlog locked those that are going through our Tri Pointe Connect. And so we feel good about the fourth quarter coming up.

Great. Appreciate that, Tom. Thanks guys.

Thanks, Alan.

Our next question comes from Tyler Batory from Oppenheimer & Co. Please go ahead.

Thank you. Good morning. My, my first question on the impact of, of higher mortgage rates. What do you think about a possible lag effect from, from higher rates, I mean in the past when you saw rates spike, was traffic or sales pace impacted right away or does it take a few weeks to filter through. I'm just trying to get a sense of maybe for the, for the industry or maybe for you as well perhaps the full impact of this run to 8% here might not have been told yet.

Yes. That's a really good question. The homebuilders typically --- we sell, we just happen to sell the most expensive durable good that our consumers are going to buy, right? And you hit the nail on the head. And what's interesting to me is the reaction by The Street in the construct, because as we saw at the beginning of the year, there is a very rapid increase in interest rates, right? The Fed increased rates seven times in 2022 that was such a psychological effect on the consumer that it really caused a bigger pause. You saw what happened in the first part. And you saw what happened in 2023. The consumer adjust, interest rates don't drive a homebuilding market, and that's the thesis that the market is missing. The consumer and the homebuilding market is driven by jobs, and household formations. And the consumer ultimately adjust. So this increase in rates lately and the volatility that we've seen, obviously it wasn't -- hasn't been as volatile as significant of an increase that we saw in 2022, it's the reason we're still seeing very good demand. It's seasonal but I mean we opened several new communities in last couple of weeks with pre-qualification less from 10 to 80 people. So the market for the homebuilders is very solid. And yes, there is some temporary puts and takes, and maybe a little longer conversion cycle, but your question is spot on. You, you, you'll see the consumer adjust and, and we'll move into the spring selling season. And, and, and the beauty of the homebuilders is we have these levers to pull to continue to move product.

Okay, great.

Hi, Tyler. This is Tom.

Yes.

I'm going to add just a little, little color to that as well to try to put it into perspective, I think everybody does the math based on medium household income, I think it's important to note that our typical buyers are much more significantly qualified and have higher income levels than medium household incomes. And it gives them more purchasing power. And if you think about it, if you go back to Q2, interest rates from the end of Q2 to the end of Q3 are up about 100 bps. But on our average loan amount that's about $300 per month and the incomes of our qualified buyers really can absorb that, that's why we don't see as big of a effect on that demand profile.

Okay, great. Appreciate that. My, my follow-up question on, on ASP, it's closing ASP. You talked about price increases in two-thirds we have communities during the quarter, looks like ASP was a touch lower than the, than the guide. So I'm assuming there's a little bit of mix, mix there that's impacting that. So now let's talk about pricing trends and then, then also interested how you're thinking about, about ASP next year in 2024 as well?

Yes, Tyler, this is Glenn. So we didn't talk about it with some modest price increases that two-thirds of the communities in the quarter. But that ASP you're right, it was a little lower than our guidance, and that was purely mix, the additional deliveries we pulled into the quarter were -- they came from largely from our Texas and Charlotte markets, and so that was just a, a mix factor, and ASP going into 2024 as I discussed on previous calls will be lower than, than 2023. But again, that is just more mix related because you'll have a heavier weighting towards Texas and Charlotte than, than the current mix. A lot of new communities open this year and next year in those markets. That is just driving that ASP. So I think I had mentioned on the last call, something around $625,000 to $630,000 ASP range for next year and that still feels like a good target.

Okay. That's all from me. Thank you for the detail.

Thanks, Tyler.

Our next question comes from Carl Reichardt with BTIG. Please go ahead.

Thanks. Good morning everybody. I missed the absorptions for entry level during the quarter, Glenn. But I also wondered, so you've I think raised prices in two -thirds, modest price increase two-thirds of your storage. Well, can you break that out between move up and entry level in terms of the, the price increases you've put in place?

So, yes, that entry level absorption Carl was 3.7% and it was 3.1% for both first move up and second move up. And we don't have the breakout in front of us between price increases between those cohorts. But I, I think it was probably more on the move up side, you would see a higher percentage of those price increases, but it was just more really market dependent, more than anything. So like in Charlotte, for instance, where we're more entry-level first move up that was a market where you saw price increases across the board really just because of the level of demand. So I would say it was fairly broad based.

Okay. Thank you, Glenn. And then, when it was down there in August, we talked a lot about the premium entry level as a, as a differentiating point for you product wise. And, and I'm interested again you do spec but you're trying to build that product up, so that, that customers can still choose options upgrades. So within the move up cohort and the premium entry-level cohort, have you begun to notice trade down effects. So people taking fewer options and upgrades in their homes and or a shift into smaller homes, in either cohort as you go to offset the affordability challenges that, that we see out there. Thanks.

Hey, Carl. It's Tom. Good questions obviously. Because we do such a great job on our option and studio business, I mean it's a big component of, of our offering. In Q3 we did not really see any decline relative to options spend. On closings we averaged $76,000 per home, which was about 11.2% of revenue year-to-date, we're at 0.6% of revenue with that dollar amount being about $81,000 per house. So we're still seeing a significant amount of spend in our design studios because people in today's market still do want to personalize their home, and it's a driving factor. You saw we introduced the Bobby Berk collection, that's going to be very popular and a big driver. And it will also help us streamline and be more efficient through our studio. So we're excited about that. We have put into the marketplace some smaller footages because we're very aware of attainable price points, and so that is something that we are seeing that people are accepting smaller footages for affordability reasons.

Great. Thank you so much, Tom.

Our next question comes from Jay McCanless with Wedbush Securities. Please go ahead.

Good morning, everyone. Doug, you made the comment earlier that you see the M&A environment is limited. Could you maybe unpack that a little bit. Is it limited by the valuations you're seeing or just not the right -- so any color there would be helpful.

I would say limited by the number of offerings, Jay. We're, we're looking at packages, packages, they're few right now, but it's, it's not so much evaluation, it's more in opportunities, the number.

Okay. And then thus far in October, you said you raised price in two-thirds of, of community starting 3Q. Do you feel like you have that same type of pricing power now or you had to slow it down a little bit, just given the 70 bp move we've seen in mortgage rates over the last few days or few weeks?

So that, that pricing increasing was about $7,000 per house, it's about 1%, so it's very modest. And I would imagine, we'll continue to keep it very modest, very, be very mindful of, of making sure our product is attainable price and payment is, is the name of the game, especially more on the entry level. But we've had a, a lot of success in our new community openings that we talked about earlier, and we'll continue to see some price movement in those as well.

Okay. That's great. That's all I had. Thanks everyone.

Thanks, Jay.

Our next question comes from Mike Dahl with RBC Capital Markets. Please go ahead.

Good morning, thanks for taking my questions. Just to go back to the kind of current environment as you noted some consumers may adjust the builders have the tools to adjust, as well to meet the market. We have heard some of your peers already leaning back into incentives when they're talking about the trend from September into October, and your commentary sounds a little bit different. So I'm curious given your other comments around what happened last year. Do you have a view that, hey, it's been a quick move over a short period of time. Let's, let's give it a little time to see where it was before we jumped to got on, on pulling incentive or the price lever or has pace just not fallen to levels that are kind of triggering for you at this point. And just maybe talk to that a little bit more because it does seem different than what some of your peers have described.

Well, as, as we mentioned we continue to manage to our pace that we desire in our business plan. I think year-to-date Glenn, or, what about 3.3, 3.4 absorption. So our seasonal pace that we're seeing right now is it just maybe a tick softer than what we saw back in 2019, yes. But we'll, we'll continue to use the tools to move into building our backlog for the Q1 and Q2. The other thing I'd, I'd point out is comparing peers is a little bit difficult in the sense that we have, what, 163 active communities and our focus on land acquisition is to be in, in the premium markets, A locations with A product. And frankly that trumps the B locations. And within every one of our markets, we're seeing higher incentives from builders in, in locations that are different. So there's a lot more to that question and how you answer it and how you execute it. And, and one of the strengths that Tri Pointe adds is, is our land strategy that we start years ago when we buy land, and it's, it's proven out. I mean in Houston, which is one of the most competitive markets in the U.S., our land, our community locations have been selling very well, because it's location. It's the old adage, Mike, it's location, location, location. So we can drive a better absorption, drive a better premium, and, and we're not at the whims of a plane as much of the incentive gain possibly because our buyer profile, as Tom pointed out is very strong as well. So there is more detail behind that. You can't just lump this all in one industry.

Yes, that's fair. Makes sense. Helpful. And my second question is on the mortgage venture, I know, I know you will have more to say once it closes or when it's closer to close. But is there any order of magnitude you could give us in terms of -- maybe had you owned this outright in 2023 here is what the incremental contribution would be from a profitability standpoint, that's one. And then two, from a more of an operational standpoint, I mean, presumably with the joint venture partner you have prepared yourself with all the same tools that the other builders who have wholly-owned ventures have in the current environment, but is there anything operationally where you think there could be a meaningful difference for you as a, as a wholly-owned versus JV?

Hey, Mike, this is Glenn. To the first part of your question. We'll, we'll update you on more of the economics as we get further into 2024 and actually you're up and running. But there should be a positive benefit to the Company, as we'll have 100% of the economics versus right now being in a joint venture, obviously. But from an operational standpoint, I think it's really all about the consumer, we'll be able to control that process from end-to-end. And I think that will be the big advantage from us, from a customer experience perspective.

Okay. Thank you.

Our next question comes from Alex Barron with Housing Research Center. Please go ahead.

Hey guys, good morning and good job on the quarter. I was hoping you could elaborate on the what -- on the consumer, what, what your average statistics look like, meaning what's the average income, what's the average down payment, what's your average FICO score that type of thing. And also wondering if you guys have an average interest rates after incentives that people are, are getting, how does that compare to market?

Good morning, Alex. This is Tom. I'll, I'll take the first part and then Linda can talk about the, the second question there. But as I said, we've got an exceptional buyer profile and that largely breaks down with our average buyer having an average income of about $185,000, an average FICO score of 749, our average debt to income is right around 40%, average loan to value is about 81.5%. 79% of our buyers are using conventional financing. So we've got a really strong buyer pool and it's very consistent as well.

Yes. [Multiple Speakers] I'm going to add. Oh, go ahead, Linda.

Just to provide you some more information about the average interest rates for our buyers. As we mentioned with 86% of our fourth quarter backlog locked. Those buyers that have already closed or expected to close, have an average interest rate of 6.6%. And then obviously rates increased more at the end of the quarter and into October. So the loans that we locked in the third quarter have an average interest rate of 6.7%.

Very helpful, thank you. Doug, you were going to say something?

Yes, I was going to say the exact same thing Linda said.

Great. Well, I appreciate you guys sharing that because I think it helps to highlight that it's not your median income household buying your homes, which is something that I think people oftentimes don't quite get. But anyway, the other question that I had was, what is your average build time and how much has that come down say versus a year ago. Because I'm kind of looking at your order trends which are obviously very different than the deliveries you're having. So, I'm assuming all those homes obviously are coming at some point. I'm just trying to figure out what kind of a lag is there between typically order and the delivery these days?

Good, good questions, Alex. As we stated on average, we've been able to reduce our cycle times from to about six day, weeks in reduction. And so it's very back to a normalized schedule template. Our average is 112 day schedule so it's about a 5.5 month construction cycle. And it varies based on product and market anywhere from 100 to 145 days, and it's five to seven months in duration. And so we're back to those templates and we're going to continue to evaluate and see if there's further reductions there coming, as we continue to look to more efficient product and, and reuse that efficient product that we've designed over the last couple of years. So we're, we're optimistic on the cycle time front.

Awesome. And if I could ask one more going back to the, the discussion of the, the average consumer that, that buys your homes, have you guys done some hypothetical testing just how much more rate paying these guys could take. In other words, could, could, they pay 8% theoretically, could they pay higher than that.

Yes, thanks, Alex. We stress test our buyers at the time that they are pre-qualifying. And right now we're stress testing typically at 8.5%, and don't see issues for our buyers at that level.

Got it. Well, thanks so much and best of luck.

Thank you.

There are no further questions at this time. I would like to turn the floor back over to Doug Bauer for closing comments. Please go ahead.

Well, thanks everyone for joining us today. And we want to wish all of you a safe and, and wonderful holiday season. I can't believe the, the holidays are right around the corner. And look forward to reporting some strong results next February as we get back together. Thank you.

This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation and have a great day.