What changed in this filing

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Item 1A. Risk Factors

2025-02-25 compared with 2024-02-29 · 144 added, 161 removed, 477 unchanged (39% of the section changed)

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These risks and uncertainties, together with other factors described elsewhere in this Annual Report on Form 10-K, have the potential to affect our business, financial condition, results of operations, cash flows, strategies or prospects in a material and adverse manner.

The risk factors described below are those that we think may be material with regard to an investment in us, as well as certain risk factors that may be generally applicable to all business enterprises, but not all general risk factors.

The risk factors described below are those that we believe are material with regard to an investment in us, as well as certain risk factors that may be generally applicable to all business enterprises, but not all general risk factors.

We are subject to the many risks that affect all or most business enterprises in the United States and our business or financial condition could be materially affected by those risks.

Industry, Economic and Regulatory Risks

Our industry is cyclical and adverse changes in general and local economic conditions could reduce the demand for homes and, as a result, could have a material adverse effect on us.

Our business can be substantially affected by adverse changes in general and local economic or business conditions that are outside of our control, including changes in short-term and long-term interest rates;

employment levels and job and personal income growth;

availability and pricing of mortgage financing for homebuyers;

consumer confidence generally and the confidence of potential homebuyers in particular;

consumer spending;

financial system and credit market stability;

private party and government mortgage loan programs (including changes in FHA, USDA, VA, Fannie Mae and Freddie Mac conforming mortgage loan limits, credit risk/mortgage loan insurance premiums and/or other fees, down payment requirements and underwriting standards), and federal and state regulation, oversight and legal action regarding lending, appraisal, foreclosure and short sale practices;

federal and state personal income tax rates and provisions, including provisions for the deduction of mortgage loan interest payments, real estate taxes, the cost of homeowners insurance and other expenses;

supply of and prices for available new or resale homes (including lender-owned homes) and other housing alternatives, such as apartments, single-family rentals and other rental housing;

homebuyer interest in our current or new product designs and new home community locations;

general consumer interest in purchasing a home compared to choosing other housing alternatives;

and interest of financial institutions or other businesses in purchasing wholesale homes.

Adverse changes in these conditions may affect our business nationally or may be more prevalent or concentrated in particular submarkets in which we operate.

The homebuilding industry is cyclical in nature and if we experience a significant or sustained downturn as a result of the economic factors described above or otherwise, it would materially adversely affect our business and results of operations.

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The risks described above can cause demand and prices for our homes to fall or cause us to take longer and incur more costs to develop the land and build our homes.

We may not be able to recover these increased costs by raising prices because of market conditions.

The risks described above could also lead some homebuyers to cancel or refuse to honor their home purchase contracts altogether, which would increase our cancellation rate.

If any of the risks described above develops, it could have a material adverse effect on our overall business and results of operations.

Inflation could adversely affect our business and financial results.

The United States continues to experience inflationary conditions, which, at times, has resulted in increasing costs of land, raw materials and labor needed to operate our business.

The United States has recently experienced inflationary conditions, which, at times, has resulted in increasing costs of land, raw materials and labor needed to operate our business.

If our markets have an oversupply of homes relative to demand, we may be unable to offset any such increases in costs with corresponding higher sales prices for our homes.

Inflation may also continue to accompany higher interest rates, which could adversely impact potential customers’ ability to obtain financing on favorable terms, thereby further decreasing demand.

Inflation may continue to accompany higher interest rates, which could adversely impact potential customers’ ability to obtain financing on favorable terms, thereby further decreasing demand.

If we are unable to raise the prices of our homes to offset the increasing costs of our operations, our margins could decrease.

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Inflation can also raise our costs of capital and decrease our purchasing power, making it more difficult and/or more expensive to maintain sufficient funds to operate our business.

Our operations may be negatively impacted by inflation due to increasing construction costs, labor and materials, as well as land acquisition financing costs.

The Federal Reserve materially raised interest rates in 2022 and into the summer of 2023 (and may continue to increase interest rates in the future to further combat inflation).

The elevated interest rate environment that persisted into late 2023 negatively impacted our financing costs, and in turn our gross margin.

Our operations have previously been negatively impacted by inflation due to increasing construction costs, labor and materials, as well as land acquisition financing costs and such impacts could continue into the future.

The elevated interest rate environment that persisted into late 2023 negatively impacted our construction loan financing costs, which in turn affected our gross margin.

Additionally, the increased use of sales incentives to combat higher mortgage rates negatively impacted our SG&A expense.

If inflationary conditions continue in future periods, it could materially adversely affect our business and financial results.

The tightening of mortgage lending standards and mortgage financing requirements, untimely or incomplete mortgage loan originations for our homebuyers and rising mortgage interest rates could adversely affect the availability of mortgage loans for potential purchasers of our homes and thereby materially and adversely affect our business, prospects, liquidity, financial condition and results of operations.

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Mortgage interest rates have generally trended downward for the last several decades and reached historic lows in 2021, which —during that period— made the homes we sell more affordable.

Mortgage interest rates increased substantially during 2022 and 2023 in response to the Federal Reserve’s actions to combat inflationary pressures, which negatively impacted consumer affordability.

We cannot predict future mortgage interest rates, and, if mortgage interest rates continue to increase or remain at elevated levels for an extended period of time, whether as a result of additional action by the Federal Reserve or otherwise, the ability of prospective homebuyers to finance home purchases may be adversely affected, and, as a result, our operating results may be significantly impacted.

Mortgage interest rates increased substantially through December 2024 since their historic lows, which negatively impacted consumer affordability.

We cannot predict future mortgage interest rates, and should these rates continue to climb or stay elevated over an extended timeframe, the financing ability of prospective homebuyers could be adversely affected.

As a result, our operating results may be significantly impacted.

Our homebuilding activities are dependent upon the availability of mortgage financing to homebuyers, which is expected to be impacted by continued regulatory changes and fluctuations in the risk appetites of lenders.

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The elimination or curtailment of state bonds to assist homebuyers could materially and adversely affect our business, prospects, liquidity, financial condition and results of operations.

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In addition, certain current regulations impose, and future regulations may strengthen or impose new standards and requirements relating to the origination, securitization and servicing of residential consumer mortgage loans, which could further restrict the availability and affordability of mortgage loans and the demand for such loans by financial intermediaries and, as a result, adversely affect our home sales, financial condition and results of operations.

Further, if, due to credit or consumer lending market conditions, reduced liquidity, increased risk retention or minimum capital level obligations and/or regulatory restrictions related to certain regulations, laws or other factors or business decisions, these lenders refuse or are unable to provide mortgage loans to our homebuyers, or increase the costs to borrowers to obtain such loans, the number of homes we close and our business, prospects, liquidity, financial condition and results of operations may be materially adversely affected.

Entry-level and first-time move-up homebuyers are the primary sources of demand for our new homes.

Entry-level and first-time move-up homebuyers are a significant source of demand for our new homes.

Entry-level homebuyers are generally more affected by the availability of mortgage financing than other potential homebuyers and many of our potential move-up homebuyers must sell their existing homes in order to buy a home from us.

A limited availability of suitable mortgage financing could prevent customers from buying our homes and could prevent buyers of our customers’ homes from obtaining mortgages they need to complete such purchases, either of which could result in potential customers’ inability to buy a home from us, which could have a material adverse effect on our sales, profitability, cash flows and ability to service our debt obligations.

Our industry is cyclical and adverse changes in general and local economic conditions could reduce the demand for homes and, as a result, could have a material adverse effect on us.

Our business can be substantially affected by adverse changes in general economic or business conditions that are outside of our control, including changes in short-term and long-term interest rates;

employment levels and job and personal income growth;

housing demand from population growth, household formation and other demographic factors;

availability and pricing of mortgage financing for homebuyers;

consumer confidence generally and the confidence of potential homebuyers in particular;

consumer spending;

financial system and credit market stability;

federal and state personal income tax rates and provisions, including provisions for the deduction of mortgage loan interest payments, real estate taxes and other expenses;

supply of and prices for available new or resale homes (including lender-owned homes) and other housing alternatives, such as apartments, single-family rentals and other rental housing;

homebuyer interest in our current or new product designs and new home community locations;

general consumer interest in purchasing a home compared to choosing other housing alternatives;

interest of financial institutions or other businesses in purchasing wholesale homes;

and real estate taxes.

Adverse changes in these conditions may affect our business nationally or may be more prevalent or concentrated in particular submarkets in which we operate.

Inclement weather, natural disasters (such as earthquakes, hurricanes, tornadoes, floods, prolonged periods of precipitation, droughts and fires), other calamities and other environmental conditions can delay the delivery of our homes and/or increase our costs.

Civil unrest or acts of terrorism can also have a negative effect on our business.

If the homebuilding industry experiences a significant or sustained downturn, it would materially adversely affect our business and results of operations in future years.

The potential difficulties described above can cause demand and prices for our homes to fall or cause us to take longer and incur more costs to develop the land and build our homes.

We may not be able to recover these increased costs by raising prices because of market conditions.

The potential difficulties described above could also lead some homebuyers to cancel or refuse to honor their home purchase contracts altogether.

Regional factors affecting the homebuilding industry in our current markets could materially and adversely affect us.

Our business strategy is focused on the acquisition of suitable land and the design, construction and sale of primarily single-family homes in residential subdivisions, including planned communities, in Florida, Texas, Tennessee, North Carolina, South Carolina, Georgia, Colorado, and the Washington, D.C.

metropolitan area, which comprises Northern Virginia and Maryland.

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A prolonged economic downturn in the future in one or more of these areas, or a particular industry that is fundamental to one or more of these areas, particularly within Florida and Texas, our largest markets, could have a material adverse effect on our business, prospects, liquidity, financial condition and results of operations.

In addition, climate factors such as hurricanes, drought, excessive heat and similar items could also negatively impact the desirability of residing in certain areas, which could also negatively impact our results of operations.

To the extent the oil and gas industry, which can be very volatile, is negatively impacted by declining commodity prices, climate change, legislation or other factors, it could result in a reduction in employment or other negative economic consequences, which could adversely impact our homebuilding revenues and activities in our Texas markets.

Moreover, certain insurance companies doing business in Florida and Texas have restricted, curtailed or suspended the issuance of homeowners’ insurance policies on single-family homes.

This has both reduced the availability of hurricane and other types of natural disaster insurance in Florida and Texas, in general, and increased the cost of such insurance to prospective purchasers of homes in Florida and Texas.

Certain insurance companies have increased the cost of and/or restricted, curtailed or suspended the issuance of homeowners’ insurance policies on single-family homes.

This has both reduced the availability of insurance, particularly in Florida and Texas, our largest markets, and increased the cost of such insurance to prospective purchasers of homes.

Mortgage financing for a new home is conditioned, among other things, on the availability of adequate homeowners’ insurance.

There can be no assurance that homeowners’ insurance will be available or affordable to prospective purchasers of our homes in the Florida and Texas markets.

Long-term restrictions on, or unavailability of, homeowners’ insurance in the Florida and Texas markets could have an adverse effect on the homebuilding industry in such markets in general, and on our business within such markets in particular.

There can be no assurance that homeowners’ insurance will be available or affordable to prospective purchasers of our homes.

Long-term restrictions on, or unavailability of, homeowners’ insurance in any of the markets in which we operate could have an adverse effect on the homebuilding industry in such markets in general, and on our business within such markets in particular.

Additionally, the availability of permits for new homes in new and existing developments could be adversely affected by the significantly limited capacity of the schools, roads and other infrastructure in such markets.

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Furthermore, if buyer demand for new homes in these markets decreases, home prices could decline, which would have a material adverse effect on our business.

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The homebuilding industry is highly competitive and, if our competitors are more successful or offer better value to our customers, our business could decline.

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Additionally, our corporate headquarters are located in Jacksonville, Florida, an area that is often impacted by severe weather events, and our operations may be substantially disrupted if our corporate headquarters are forced to close.

The occurrence of any of these events could damage our land parcels and projects, cause delays in completion of our projects, reduce consumer demand for housing and cause shortages and price increases in labor or raw materials, any of which could affect our sales and profitability.

The occurrence of any of these events could damage our land parcels and projects, cause delays in completion of our projects, reduce consumer demand for housing by making such regions less desirable and cause shortages and price increases in labor or raw materials, any of which could affect our sales and profitability.

In addition to directly damaging our land or projects, many of these natural events could damage roads and highways providing access to our assets or affect the desirability of our land or projects, thereby adversely affecting our ability to market an d sell homes in those areas and possibly increasing the costs of homebuilding.

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There are some risks of loss for which we may be unable to purchase insurance coverage.

For example, losses associated with hurricanes, landslides, prolonged periods of precipitation, earthquakes and other weather-related and geologic events may not be insurable and other losses, such as those arising from terrorism, may not be economically insurable.

For example, losses associated with floods, hurricanes, landslides, prolonged periods of precipitation, earthquakes and other weather-related and geologic events may not be insurable and other losses, such as those arising from terrorism, may not be economically insurable.

A sizeable uninsured loss could materially and adversely affect our business, prospects, liquidity, financial condition and results of operations.

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A major health and safety incident relating to our business could be costly in terms of potential liabilities and reputational damage.

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Due to health and safety regulatory requirements and the number of projects we work on, health and safety performance is critical to the success of all areas of our business.

Any failure in health and safety performance may result in penalties for non-compliance with relevant regulatory requirements or litigation, and a failure that results in a major or significant health and safety incident is likely to be costly in terms of potential liabilities incurred as a result.

Any failure in health and safety performance, whether by us or a subcontractor, may result in penalties for non-compliance with relevant regulatory requirements or litigation, and a failure that results in a major or significant health and safety incident is likely to be costly in terms of potential liabilities incurred as a result.

Such a failure could generate significant negative publicity and have a corresponding impact on our reputation and our relationships with relevant regulatory agencies, governmental authorities and local communities, which in turn could have a material adverse effect on our business, prospects, liquidity, financial condition and results of operations.

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For instance, a significant portion of our homebuilding operations are concentrated within Florida and Texas.

A prolonged economic downturn in one or more of the areas in which we operate could have a material adverse effect on our business, prospects, liquidity, financial condition and results of operations, and a disproportionately greater impact on us than other homebuilders with larger scale and more diversified operations and geographic footprint.

A prolonged economic downturn or reduction in demand for homes in one or more of the areas in which we operate, could have a material adverse effect on our business, prospects, liquidity, financial condition and results of operations, and a disproportionately greater impact on us than other homebuilders with larger scale and more diversified operations and geographic footprint.

Difficulties with appraisal valuations in relation to the proposed sales price of our homes could force us to reduce the price of our homes for sale.

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The forfeiture of land contract deposits or inventory impairments may result in a loss that could have a material adverse effect on our profitability, stock performance, ability to service our debt obligations and future cash flows.

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We are subject to warranty and liability claims arising in the ordinary course of business that can be significant.

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The federal government or a state government may change its income tax laws by eliminating, limiting or substantially reducing these income tax benefits without offsetting provisions, which may increase the after-tax cost of owning a new home for many of our potential homebuyers.

For example, the Tax Cuts and Jobs Act, which became effective January 1, 2018, contained substantial changes to the Internal Revenue Code of 1986, as amended (the “Code”), including (i) limitations on the ability of our homebuyers to deduct property taxes, (ii) limitations on the ability of our homebuyers to deduct mortgage interest and (iii) limitations on the ability of our homebuyers to deduct state and local income taxes.

Any similar future changes could also have a material adverse impact on our business, prospects, liquidity, financial condition and results of operations.

For example, the Tax Cuts and Jobs Act, which became effective January 1, 2018, contained substantial changes to the Internal Revenue Code of 1986, as amended (the “Code”).

Further changes in income tax laws by the federal government to eliminate or substantially reduce income tax benefits associated with homeownership could adversely affect demand for and sales prices of new homes.

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Federal income tax credits currently available to certain builders of energy-efficient new homes may not be extended by future legislation.

On August 12, 2022, the U.S.

Congress passed the Inflation Reduction Act of 2022, which was signed into law on August 16, 2022.

Such act extended the availability of the Code Section 45L credit for energy-efficient new homes (the “Federal Energy Credits”), which provides a tax credit of $2,000 per qualifying home ($1,600 after the benefit is deducted from cost of sales as required by the IRS) to eligible homebuilders, and made the Federal Energy Credits available for homes delivered through December 31, 2022.

Additionally, the Inflation Reduction Act of 2022 also expanded the credit to eligible homebuilders, resulting in an increase from $2,000 to either $2,500 or $5,000 per qualifying home, depending on which specified energy efficiency standards are achieved, effective January 1, 2023 through December 31, 2032.

In August 2022, the U.S.

Congress passed the Inflation Reduction Act of 2022, which extended the availability of the Code Section 45L credit for energy-efficient new homes (the “Federal Energy Credits”) and provided a tax credit of $2,000 per qualifying home ($1,600 after the benefit is deducted from cost of sales as required by the IRS) to eligible homebuilders for homes delivered through December 31, 2022.

Additionally, the Inflation Reduction Act of 2022 expanded the credit to eligible homebuilders, resulting in an increase from $2,000 to either $2,500 or $5,000 per qualifying home, depending on which specified energy efficiency standards are achieved, effective January 1, 2023 through December 31, 2032.

For the year ended December 31, 2023 , we claimed $3 million of Federal Energy Credits.

For the year ended December 31, 2024 , we have estimated $12 million of Federal Energy Credits within our income tax provision.

The decrease in the amount of expected Federal Energy Credits in 2023 compared to the amount claimed in 2022 was primarily due to homes delivered in 2023 that were already under construction around the time of the change in the eligibility criteria, for which modifications to fully qualify under the new standards were deemed impractical.

The increase in the amount of expected Federal Energy Credits in 2024 compared to the amount claimed in 2023 was primarily due to more homes delivered in 2024 that are expected to qualify for Federal Energy Credits compared to the prior year.

Generally, in a given year, the Company aims to build as many energy-efficient new homes as possible.

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Such trading conflicts and related escalating governmental actions that result in additional tariffs, duties and/or trade restrictions could increase our construction costs further, cause disruptions or shortages in our supply chains and/or negatively impact the U.S., regional or local economies, and, individually or in the aggregate, materially and adversely affect our business and our operating results.

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We and our subcontractors are subject to environmental, health and safety laws and regulations, which may increase our costs, result in liabilities, limit the areas in which we can build homes and delay completion of our projects.

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These indemnities obligate us to reimburse the indemnified parties for damages related to environmental matters, and, generally, there is no term or damage limitations on these indemnities.

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Environmental laws and regulations relating to climate change and energy can have an adverse impact on our activities, operations and profitability and on the availability and price of certain raw materials, such as lumber, steel and concrete.

There is a growing concern from advocacy groups and the general public that the emissions of greenhouse gases and other human activities have caused, and will continue to cause, significant changes in weather patterns and temperatures and the frequency and severity of natural disasters.

Government mandates, standards and regulations enacted in response to these projected climate change impacts and concerns could result in restrictions on land development in certain areas or increased energy, transportation and raw material costs.

On February 19, 2021 the United States rejoined the Paris Agreement, which requires countries to review and “represent a progression” in their intended nationally determined contributions, which set greenhouse gas emission reduction goals, every five years.

A variety of new legislation may be enacted or considered for enactment at the federal, state and local levels relating to climate change and energy, including in response to the United States’ reentry into the Paris Agreement.

This legislation could relate to, for example, matters such as greenhouse gas emissions control and building and other codes that impose energy efficiency standards or require energy saving construction materials.

New building or other code requirements that impose stricter energy efficiency standards or requirements for building materials could significantly increase our cost to construct homes.

As climate change concerns continue to grow, legislation, regulations, mandates, standards and other requirements of this nature are expected to continue to be enacted and become costlier for us to comply with.

Government mandates, standards and regulations enacted in response to projected climate change impacts and concerns could result in restrictions on land development in certain areas, as well as increased costs for energy, transportation and raw materials.

To the extent that the United States enters into geopolitical agreements, such as the Paris Agreement, a variety of new legislation may be considered or enacted at the federal, state, and local levels addressing climate change and energy.

New building or other code requirements that impose stricter energy efficiency standards or requirements for building materials could significantly increase our construction costs.

Additionally, certain areas in the United States either have enacted or are considering a ban on the use of natural gas appliances and/or natural gas hookups, in new construction.

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The regulatory environment for mortgage lending is complex and ever changing and has led to an increase in the number of audits, examinations and investigations in the industry.

The 2008 housing downturn resulted in numerous changes in the regulatory framework of the financial services industry.

More recently, in response to COVID-19, federal agencies, state governments and private lenders are proactively providing relief to borrowers in the housing market by, subject to requirements, suspending home foreclosures and granting payment forbearance, among other things.

These relief measures are temporary, but these changes and others could become incorporated into the current regulatory framework.

Any changes or new enactments could result in more stringent compliance standards, which could adversely affect our financial condition and results of operations and the market perception of our business.

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We may not be able to pass any increased land costs to our customers, which could adversely impact our revenues, earnings and margins.

Although when the fair market value of controlled lots deviates from that of which the option contracts were originally executed, we attempt to renegotiate the terms of the option contracts to ensure that the yields are aligned with current market conditions, there is no guarantee our renegotiating efforts will be successful.

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Although when the fair market value of controlled lots deviate from that of which the option contracts were originally executed, we attempt to renegotiate the terms of the option contracts to ensure that the yields are aligned with current market conditions, there is no guarantee our renegotiating efforts will be successful.

Increases in our can cellation rate could have a negative impact on our homebuilding revenues and gross margins.

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Accordingly, the timing and quality of our construction depend on the availability and skill of our subcontractors.

While we anticipate being able to obtain sufficient materials and reliable subcontractors and believe that our relationships with subcontractors are good, we do not have long-term contractual commitments with any subcontractors, and we can provide no assurance that skilled subcontractors will continue to be available at reasonable rates and in our markets.

We do not have long-term contractual commitments with any subcontractors, and we can provide no assurance that skilled subcontractors will continue to be available at reasonable rates and in our markets.

In addition, as we expand into new markets, we typically must develop new relationships with subcontractors in such markets, and there can be no assurance that we will be able to do so in a cost-effective and timely manner, or at al l.

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The inability to contract with skilled subcontractors at reasonable rates on a timely basis could have a material adverse effect on our business, prospects, liquidity, financial condition and results of operations.

A continued shortage of building materials or labor, or continued increases in materials or labor costs, could delay or increase the cost of home construction, which could materially and adversely affect us.

A shortage of building materials or labor, or increases in materials or labor costs, could delay or increase the cost of home construction, which could materially and adversely affect us.

The residential construction industry experiences labor and raw material shortages from time to time, including shortages in qualified subcontractors, tradespeople and supplies of insulation, drywall, cement, steel and lumber.

These labor and raw material shortages can be more severe during periods of strong demand for housing, during periods following natural disasters that have a significant impact on existing residential and commercial structures or a result of broader economic disruptions.

We continue to experience labor shortages.

It is uncertain whether these shortages will continue as is, improve or worsen.

Further, pricing for labor and raw materials could be affected by the factors discussed above and various other national, regional, local, economic and political factors, including changes in immigration laws and trends in labor migration and tariffs.

For instance, in 2023, Florida enacted legislation that will impose more stringent immigration eligibility requirements that could cause our labor shortage to worsen.

Pricing for labor and raw materials could be affected by the factors discussed above and various other national, regional, local, economic and political factors, including changes in immigration laws and trends in labor migration and tariffs.

Our success in recently entered markets or those we may choose to enter in the future depends substantially on our ability to source labor and local materials on terms that are favorable to us.

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Labor and raw material shortages and price increases for labor and raw materials could cause delays in and increase our costs of home construction, which in turn could have a material adverse effect on our business, prospects, liquidity, financial condition and results of operations.

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Investors in mortgages could require that we repurchase loans or compensate them for losses stemming from mortgages we have sold.

Our financial services segment originates mortgages primarily for our homebuilding clients.

Almost all of these mortgages are promptly sold in the secondary mortgage market on a servicing released, nonrecourse basis, though we retain liability for certain limited representations, such as fraud, and warranties related to the sale of loans.

Consequently, mortgage investors have previously and may again seek to have us repurchase loans or reimburse them for losses incurred on mortgages we have sold, asserting breaches of our limited representations or warranties.

While we believe our reserves are sufficient for known losses and anticipated repurchase demands, given the mortgage industry’s volatility and the uncertainty surrounding the resolution of these claims, unforeseen repurchases or losses in handling them beyond our expectations could result in additional expenses.

Future claims of this nature could impose substantial liabilities on us, potentially exceeding our reserves, and could materially impact our financial results.

Furthermore, an increase in mortgage default rates could adversely affect our ability to sell mortgages or the prices we can command for their sale.

If we are unable to develop our communities successfully or within expected time-frames, our results of operations could be adversely affected.

Although our preference is to acquire finished lots, from time to time, we may also acquire property that requires further development before we can begin building homes.

Although our preference is to acquire finished lots, from time to time, we also acquire property that requires further development before we can begin building homes.

When a community requires additional developments, we devote substantial time and capital in order to obtain development approvals, acquire land and construct significant portions of project infrastructure and amenities before the community generates any revenue.

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Further, if legal standards for the classification of independent contractors change or appear to be changing, we may need to modify our compensation and benefits structure for such independent contractors, including by paying additional compensation or reimbursing expenses.

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There can be no assurance that legislative, judicial, administrative or regulatory (including tax) authorities will not introduce proposals or assert interpretations of existing rules and regulations that would change the independent contractor classification of any individual or vendor currently characterized as independent contractors doing business with us.

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Strategic and Financial Risks

Our future success depends upon our ability to successfully adapt our business strategy to changing home buying patterns and trends.

Our success depends upon our ability to successfully adapt our business strategy to changing home buying patterns and trends.

Future home buying patterns and trends could reduce the demand for our homes and, as a result, could have a material adverse effect on our business and results of operations.

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We believe that, due to anticipated generational shifts, changing demographics and other factors, the demand for more affordable homes will increase.

If we are unable to successfully adapt our business strategy to shifts in consumer demands, our business will be materially adversely impacted.

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We cannot make any assurances that our growth or expansion strategies will be successful, and we may incur a variety of costs to engage in such strategies, including through targeted acquisitions, and the anticipated benefits may never be realized.

We have expanded our business through selected investments in new geographic markets and by diversifying our products in certain markets.

We continue to expand our business through selective investments in new geographic markets and by diversifying our products in certain markets.

Investments in land, developed lots and home inventories can expose us to risks of economic loss and inventory impairments if housing conditions weaken or we are unsuccessful in implementing our growth strategies.

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The availability of land, lots and home inventories for purchase at favorable prices depends on a number of factors outside of our control.

We may compete for available land with entities that possess significantly greater financial, marketing and other resources.

We often face competition from other homebuilders and others for available land.

In addition, some state and local governments in markets where we operate have approved, and others may approve, slow-growth or no-growth initiatives and other ballot measures that could negatively impact the availability of land and building opportunities within those areas.

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Finally, our ability to begin new projects could be negatively impacted if we elect not to purchase land under our land banking option contracts.

We intend to grow our operations in existing markets, and we may expand into new markets or pursue opportunistic purchases of other homebuilders on attractive terms as such opportunities arise.

We intend to grow our operations in existing markets, and we intend to expand into new markets and pursue opportunistic purchases of other homebuilders on attractive terms as such opportunities arise.

We may be unable to achieve the anticipated benefits of any such growth or expansion, including through targeted acquisitions or through efficiencies that we may be unable to achieve, the anticipated benefits may take longer to realize than expected, or we may incur greater costs than expected in attempting to achieve the anticipated benefits.

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We may not be able to complete or successfully integrate our recent acquisitions or any potential future acquisitions or experience challenges in realizing the expected benefits of each such acquisition.

From time-to-time, we acquire other businesses to expand our presence in new and existing geographic markets.

We may not be able to successfully finance or integrate any businesses that we acquire.

From time-to-time, we acquire other businesses to expand our presence in new and existing geographic markets or to expand into opportunities to contribute to our long-term strategy.

We may not be able to successfully integrate any businesses that we acquire into our operations and may not achieve the synergies we expected from an acquisition.

Furthermore, the integration of any acquisition may divert management’s time and resources from our core business and disrupt our operations.

Moreover, even if we were successful in integrating newly acquired businesses or assets, expected synergies or cost savings may not materialize, resulting in lower than expected benefits to us from such transactions.

We may spend time and money on projects that do not increase our revenue.

Additionally, when making acquisitions, it may not be possible for us to conduct a detailed investigation of the nature of the business or assets being acquired, for instance, due to time constraints in making the decision and other factors.

Additionally, when making acquisitions, it may not be possible for us to conduct a thorough investigation of the nature of the business or assets being acquired, for instance, due to time constraints in making the decision and other factors.

We may become responsible for additional liabilities or obligations not foreseen at the time of an acquisition.

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All of the above risks could have a material adverse effect on our business, prospects, liquidity, financial condition and results of operations.

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Our joint venture investments could be adversely affected by our lack of sole decision-making authority, our reliance on the financial condition of our joint venture partners and disputes between us and our joint venture partners.

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In addition, we may be liable for the actions of our joint venture partners in certain circumstances.

There are various potential conflicts of interest in our relationship with DF Capital and certain of its managed funds, including with certain of our executive officers and directors who are investors in certain funds managed by DF Capital, which could result in decisions that are not in the best interest of our stockholders.

Conflicts of interest may exist or could arise in the future with DF Capital and certain of its managed funds, including with certain of our executive officers and directors who are also investors in certain funds managed by DF Capital.

Once a potential lot acquisition that requires a significant upfront commitment of capital is approved by our land acquisition committee, we seek a land bank partner.

Historically, we have provided, and we expect to continue to provide DF Capital with the opportunity to have one of its managed funds participate in transactions that require additional funding.

Such transactions may not be on terms that are as attractive as those we might be able to achieve if we sought other partners.

If DF Capital does not wish to participate in and finance the transaction, we turn to other potential financing sources.

Conflicts with DF Capital and certain of its managed funds may include, without limitation:

conflicts arising from the enforcement of agreements between us and DF Capital and/or certain of its managed funds;

conflicts in determining whether to offer DF Capital the opportunity to participate in a potential lot acquisition financing;

if DF Capital does participate, conflicts in determining the terms of the financing;

and conflicts in future transactions that we may pursue with DF Capital and/or one of its managed funds.

Interest expense on debt we incur may limit our cash available to fund our growth strategies.

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In addition, future indebtedness we obtain may contain financial covenants limiting our ability to, for example, incur additional indebtedness, make certain investments, reduce liquidity below certain levels and pay dividends to our stockholders and otherwise affect our operating policies.

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If we default on one or more of our debt agreements, it could have a material adverse effect on our business, prospects, liquidity, financial condition and results of operations.

Adverse developments affecting financial institutions, including bank failures, could adversely affect our liquidity and financial performance.

We have undrawn committed funding from numerous financial institutions under our syndicated revolving line of credit.

Additionally, we may hold domestic cash deposits in Federal Deposit Insurance Corporation (“FDIC”) insured banks which exceed the FDIC insurance limits.

Bank failures, events involving limited liquidity, defaults, non-performance, or other adverse developments that affect financial institutions, or concerns or rumors about such events, may lead to liquidity constraints.

The failure of banks, or other adverse conditions in the financial or credit markets impacting financial institutions at which we maintain balances, or have undrawn commitments under our revolving line of credit, could adversely impact our liquidity and financial performance.

There can be no assurance other financial institutions would provide replacement commitments under our line of credit or that our deposits in excess of the FDIC or other comparable insurance limits will be backstopped by the U.S.

or that any bank or financial institution with which we do business will be able to obtain needed liquidity from other banks, government institutions, or by acquisition in the event of a failure or liquidity crisis.

Adverse developments affecting financial institutions, including bank failures, could adversely affect our liquidity and financial performance.

Volatility in the credit and capital markets may impact our cost of capital and our ability to access necessary financing and the difficulty in obtaining sufficient capital could prevent us from acquiring lots for construction or increase costs and delays in the completion of our homes under construction.

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If we are unable to obtain letters of credit or surety bonds when required, or the conditions imposed by issuers increase significantly, our liquidity and results of operations could be adversely affected.

Access to financing sources may not be available on favorable terms, or at all, especially in light of current market conditions, which could adversely affect our ability to maximize our returns.

Access to financing sources may not be available on favorable terms, or at all, which could adversely affect our ability to maximize our returns.

Our access to additional third-party sources of financing will depend, in part, on:

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• our cash flow;

• the market price per share of our common stock.

• the market price per share of our Class A common stock.

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The global credit and equity markets and the overall economy can be extremely volatile, which could have a number of adverse effects on our operations and capital requirements.

For the past decade, the domestic financial markets have experienced a high degree of volatility, uncertainty and, during certain periods, tightening of liquidity in both the high yield debt and equity capital markets, resulting in certain periods when new capital has been both more difficult and more expensive to access.

The domestic financial markets have in the past experienced a high degree of volatility, uncertainty and, during certain periods, tightening of liquidity in both the high yield debt and equity capital markets, resulting in certain periods when new capital has been both more difficult and more expensive to access.

If we are unable to access the credit markets, we could be required to defer or eliminate important business strategies and growth opportunities in the future.

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We depend on key management personnel and other experienced employees.

Our success depends to a significant degree upon the contributions of certain key management personnel, including, but not limited to, Patrick Zalupski, our founder, President, Chief Executive Officer and Chairman of the Board of Directors, our Senior Vice President and Chief Operating Officer, Doug Moran, and our Senior Vice President and Chief Financial Officer, Anabel Fernandez.

Our success depends to a significant degree upon the contributions of certain key management personnel, including, but not limited to, Patrick Zalupski, our founder, President, Chief Executive Officer and Chairman of the Board of Directors, National President, Doug Moran, and our Senior Vice President and Chief Financial Officer, Anabel Ramsay.

Although we have entered into employment agreements with Mr.

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Moran and Ms.

Fernandez, there is no guarantee that Mr.

Ramsay, there is no guarantee that Mr.

Zalupski, Mr.

Fernandez will remain employed by us.

Ramsay will remain employed by us.

Our ability to retain our key management personnel or to attract suitable replacements should any members of our management team leave is dependent on the competitive nature of the employment market.

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Further, such a loss could be negatively perceived in the capital markets.

We have obtained key man life insurance that would provide us with proceeds in the event of the death or disability of the Chief Executive Officer and/or the Chief Operating Officer.

We have obtained key man life insurance that would provide us with proceeds in the event of the death or disability of the Chief Executive Officer and/or the National President.

Experienced employees in the homebuilding, land acquisition, development and construction industries are fundamental to our ability to generate, obtain and manage opportunities.

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Zalupski, our founder, President, Chief Executive Officer and Chairman of the Board of Directors, owns, through personal holdings and an entity that he controls, 100% of our Class B common stock (representin g approximately 83% of the total combined voting power of our Class A and Class B common stock as of December 31, 2024 ).

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As a result, Mr.

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Zalupski’s concentration of stock ownership may also adversely affect the trading price of our Class A common stock to the extent investors perceive a disadvantage in owning stock of a company with significant stockholders.

Sales of shares pledged for margin loans by our directors and officers could cause our stock price to decrease.

Sales of shares pledged for margin loans or prepaid variable forward sales contracts by our directors and officers could cause our stock price to decrease.

Under the Dream Finders Homes, Inc.

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As of December 31, 2024 , Mr.

Zalupski had 17,500,000 shares of our Class B common stock pledged as security for a margin loan.

In the event that such margin loan (or any other margin loan by an officer or director) were to be called and the shares of common stock were sold on the open market by the lender, the price of our common stock would likely decline materially.

Zalupski had 17,500,000 share s of our Class B common stock pledged as security for a margin loan.

Further, our directors, officers and employees may purchase or use financial instruments (including prepaid variable forward sales contracts, equity swaps, collars and exchange-traded funds).

These types of financial instruments are designed to hedge or offset any decrease in the market value of the Company’s securities and can be speculative in nature and therefore can create the appearance that the transaction is based on material nonpublic information.

Accordingly, a ny such financial instruments must be pre-cleared by the designated compliance officer and approved by the Board of Directors (without the vote of the requesting person).

As of December 31, 2024 , Mr.

Zalupski had 2,000,000 shares of our Class B common stock subject to prepaid variable forward sales contracts that are expected to settle starting in 2027.

In the event that such margin loan (or any other margin loan by an officer or director) were to be called and the shares of common stock were sold on the open market by the lender or if we otherwise have a large number of shares being sold on the open market by the counterparties to variable forward sale contracts, the price of our common stock could decline materially.

Certain of our directors have significant duties with, and spend significant time serving, entities that may compete with us in seeking acquisitions and business opportunities and, accordingly, may have conflicts of interest in pursuing business opportunities.

Certain of our directors hold positions of responsibility with other entities whose businesses are involved in certain aspects of the real estate industry, including in DF Capital, with which we partner for certain land banking opportunities.

Certain of our directors hold positions of responsibility with other entities whose businesses are involved in certain aspects of the real estate industry with which we partner for certain land banking opportunities.

These directors may become aware of business opportunities that may be appropriate for presentation to us, as well as to the other entities with which they are or may become affiliated.

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These conflicts of interest may not be resolved in our favor.