M/I Homes Posts Solid First Quarter Results Amidst Challenging Macro Environment
In a call with investors on April 23, 2025, M/I Homes reported solid first quarter results despite facing rapidly changing and mostly challenging macroeconomic conditions. The company's CEO and President, Bob Schottenstein, addressed the current economic environment and its impact on the housing industry and business.
When discussing last year's third quarter, where mortgage rates began to rise, Schottenstein noted that M/I Homes first implemented mortgage rate buydowns to drive traffic and incentivize sales. This strategy was continued into this year's spring selling season as demand remained choppy and challenging. While there has been some uptick in demand during the first quarter, the spring selling season was graded 'somewhere between a B to C'.
Despite these challenging conditions, M/I Homes reported very solid first quarter results. New contracts were down 10% compared to last year, but the company believes it effectively balanced pace and price, resulting in strong gross margins of 25.9%. This represents a sequential improvement over 2024's fourth quarter and reflects some pricing power in the first quarter as well as the positive impact of select new communities.
However, gross margins were down 120 basis points from last year's first quarter, largely due to the continued need for mortgage rate buydowns. As a result, gross margins are likely to be under pressure throughout the year and will remain below 2024's full-year margins of 26.6%. Nevertheless, the credit quality of M/I Homes' buyers continues to be strong, with average credit scores of 746 and average down payments of 17% or nearly $90,000.
The company delivered 1,976 homes during the quarter, a decrease of 8% from last year. Revenues also decreased by 7% to $976 million, while pretax income dropped by 19% to $146 million. However, M/I Homes' pretax income margin remained strong at 15%, and it generated a solid 19% return on equity.
The company ended the quarter with a record 226 communities and remains on track to grow its community count in 2025 by an average of 5%. In terms of market performance, M/I Homes' division income contributions were led by Dallas, Chicago, Columbus, Charlotte, and Minneapolis. New contracts in the Northern region decreased by 8%, while those in the Southern region decreased by 11% compared to last year's first quarter.
M/I Homes has an excellent land position, with its owned and controlled lot position increasing by 11% in the Southern region compared to a year ago. The company also highlighted that 58% of its deliveries come from the Southern region, while 42% come from the Northern region.
