What changed in this filing

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Item 1A. Risk Factors

2025-02-26 compared with 2024-02-20 · 117 added, 126 removed, 535 unchanged (31% of the section changed)

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◦ our ability to acquire finished lots and land parcels suitable for residential homebuilding at reasonable prices;

◦ labor and raw material shortages and price fluctuations that could delay or increase the cost of home construction;

◦ labor and raw material shortages and price fluctuations that could delay or increase the cost of home construction or land development;

◦ the impact of an epidemic or pandemic;

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◦ we may be subject to litigation, arbitration or other claims;

◦ information system failures, cyber incidents or breaches in security;

◦ information system failures, cyber incidents or breaches in security by us or third parties upon which we rely;

◦ complex and evolving U.S.

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◦ access to financing sources may not be available on favorable terms, or at all.

◦ the impact of financial industry and capital markets turmoil.

Operational Risks Related to Our Business

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If suitable lots or land at reasonable prices become less available, the number of homes we may be able to build and sell could be reduced, and the cost of land could be increased substantially, which could adversely impact us.

As competition for suitable land increases, the cost of undeveloped lots and the cost of developing owned land could also rise and the availability of suitable land at

acceptable prices may decline, which could adversely impact us.

The availability of suitable land assets could also affect the success of our land acquisition strategy, which may impact our ability to maintain or increase the number of our active communities, as well as to sustain and grow our revenues and margins, and achieve or maintain profitability.

As competition for suitable land increases, the cost of undeveloped lots and the cost of developing owned land could also rise and the availability of suitable land at acceptable prices may decline, which could adversely impact us.

The availability of suitable land assets could also affect the

success of our land acquisition strategy, which may impact our ability to maintain or increase the number of our active communities, as well as to sustain and grow our revenues and margins, and achieve or maintain profitability.

Additionally, developing undeveloped land is capital intensive and time consuming and we may develop land based upon forecasts and assumptions that prove to be inaccurate, resulting in projects that are not economically viable.

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The recording of a significant inventory impairment could negatively affect our reported earnings per share and negatively impact the market perception of our business.

Labor and raw material shortages, price fluctuations and supply chain constraints 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 and 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 as a result of broader economic disruptions, such as the COVID-19 pandemic.

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

For example, the federal government has previously imposed new or increased tariffs or duties on an array of imported materials and goods that are used in connection with the construction and delivery of our homes, including lumber, raising our costs for these items (or products made with them).

Labor and raw material shortages, price fluctuations and supply chain constraints could delay or increase the cost of home construction or land development, which could materially and adversely affect us.

For example, the federal government previously imposed, and has recently proposed, new or increased tariffs or duties on an array of imported materials and goods that are used in connection with the construction and delivery of our homes, including lumber, raising our costs for these items (or products made with them).

Such government-imposed tariffs and trade regulations on imported building supplies, and retaliatory measures by other countries, may in the future have significant impacts on the cost to construct our homes and on our customers’ budgets, including by causing disruptions or shortages in our supply chain.

We have also experienced labor shortages, price fluctuations and increased labor costs, including as a result of inflation or wage increases, particularly over the past two years due to historic inflation rates in the United States.

We cannot predict what changes to trade policy will be made by the current presidential administration, the U.S.

Congress or other governments, including whether existing tariff policies will be maintained or modified or whether the entry into new bilateral or multilateral trade agreements will occur, nor can we predict the effects that any such changes would have on our business.

We have also experienced labor shortages, price fluctuations and increased labor costs, including as a result of inflation or wage increases, particularly over the past few years, before stabilizing recently, due to historic inflation rates in the United States.

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

Additionally, in 2021, we saw a significant increase in the cost of our lumber related to undersupply as a result of increased demand and shutdowns of lumber mills due to the COVID-19 pandemic.

We may see additional lumber cost pressures in the future.

Further, 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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In the event of shortages in labor or raw materials in such markets, local subcontractors, tradespeople and suppliers may choose to allocate their resources to homebuilders with an established presence in the market and with whom they have longer-standing relationships.

Labor and raw material shortages, price increases for labor and raw materials and supply chain constraints 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.

Labor and raw material shortages, price increases for labor and raw materials and supply chain constraints could cause delays in and increase our costs of home

construction or land development, which in turn could have a material adverse effect on our business, prospects, liquidity, financial condition and results of operations.

Our business and results of operations are dependent on the availability, skill and performance of subcontractors.

We engage subcontractors to perform the construction of our homes and, in many cases, to select and obtain the raw materials used in constructing our homes.

We engage subcontractors to perform the construction of our homes and the development of our raw land and, in many cases, to select and obtain the raw materials used for such work.

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

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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.

Despite our quality control and jobsite safety efforts, we may discover from time to time that our subcontractors have engaged in improper construction or safety practices or have installed defective materials in our homes.

When we discover these issues, we typically utilize our subcontractors to repair the homes in accordance with our new home warranty.

The adverse costs of satisfying our warranty and other legal obligations in these instances may be significant and we may be unable to recover the costs of warranty-related repairs from subcontractors, suppliers and insurers, which could have a material adverse impact on our business, prospects, liquidity, financial condition and results of operations.

We may also suffer reputational damage, and may be exposed to potential liability, from the actions of subcontractors or their failure to comply with applicable laws, including matters which are beyond our control.

When we discover these issues, we typically utilize our subcontractors to repair the defects.

The adverse costs of repairing such defects or satisfying our warranty and other legal obligations in these instances may be significant and we may be unable to recover the costs from subcontractors, suppliers and insurers, which could have a material adverse impact on our business, prospects, liquidity, financial condition and results of operations.

Attempts at mitigation may not be successful, and we could be subject to claims relating to actions of, or matters relating to, our subcontractors.

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

As a homebuilder and developer, we are subject to construction defect, product liability and home and other warranty claims, including moisture intrusion and related claims, arising in the ordinary course of business.

As a homebuilder and developer, we are subject to construction defect, product liability and home and other warranty claims arising in the ordinary course of business.

These claims are common to the homebuilding industry and can be costly.

There can be no assurance that any developments we undertake will be free from defects once completed and any defects attributable to us may lead to significant contractual or other liabilities.

We rely on subcontractors to perform the construction of our homes and, in some cases, to select and obtain building materials.

There can be no assurance that any developments we undertake or homes we build will be free from defects once completed, and any defects attributable to us may lead to significant contractual or other liabilities.

We rely on subcontractors to perform the construction of our homes and the development of our communities and, in some cases, to select and obtain building materials.

Although we provide subcontractors with detailed specifications and perform quality control procedures, subcontractors may, in some cases, use improper construction processes or defective materials.

Defective products used in the construction of our homes can result in the need to perform extensive repairs.

Defective products used during construction or defective construction of our homes or communities can result in the need to perform extensive repairs.

The cost of performing such repairs, or litigation arising out of such issues, may be significant if we are unable to recover the costs from subcontractors, suppliers and/or insurers.

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Any joint venture investments that we make 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.

We have established LGI Mortgage Solutions and LGI Insurance Solutions, two separate joint ventures with a long-time, third-party preferred lender and third-party insurance agency.

We have two equity-method real estate joint ventures and four additional joint ventures engaged primarily to provide services, such as mortgage and insurance, to our homebuyers.

We may co-invest in the future with third parties through other partnerships, joint ventures or other entities, acquiring non-controlling interests in or sharing responsibility for managing the affairs of a land acquisition and/or a development.

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

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

These relief measures were 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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Inflation may also accompany higher interest rates, which could adversely impact potential customers’ ability to obtain financing on favorable terms, thereby decreasing demand for our homes.

We have experienced a significant increase in land, labor, materials and construction costs.

In an inflationary environment, such as the current economic environment, depending on the homebuilding industry and other economic conditions, we may be unable to raise the sales prices of our homes enough to offset the increasing costs of our operations, which would decrease our profit margins.

Historically, we have experienced a significant increase in land, labor, materials and costs related to construction.

In an inflationary environment, such as the economic environment we have experienced recently, depending on the homebuilding industry and other economic conditions, we may be unable to raise the sales prices of our homes enough to offset the increasing costs of our operations, which would decrease our profit margins.

Furthermore, if we need to lower the sales prices of our homes to meet demand, the value of our land inventory may decrease.

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

Inflation may 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.

Higher mortgage interest rates, tightening of mortgage lending standards and mortgage financing requirements, and untimely or incomplete mortgage loan originations for our homebuyers 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 increased significantly since January 2022, which has negatively impacted the overall housing market.

The current and continued macroeconomic conditions impacting the homebuilding industry are rapid inflation and rising interest rates.

The current and continued macroeconomic conditions impacting the homebuilding industry include inflation and mortgage interest rates.

The significant burden of inflation and higher mortgage interest rates for our customers since January 2022 are viewed by us as the primary driver behind the subsequent decrease in demand for new homes.

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The federal government has a significant role in supporting mortgage lending through its conservatorship of Federal National Mortgage Association (“Fannie Mae”) and Federal Home Loan Mortgage Corporation (“Freddie Mac”), both of which purchase or insure mortgage loans and mortgage loan-backed securities, and its insurance of mortgage loans through or in connection with the Federal Housing Administration (“FHA”), the Veterans Administration (“VA”) and the U.S.

Department of

Agriculture (“USDA”).

Department of Agriculture (“USDA”).

FHA and USDA backing of mortgage loans has been particularly important to the mortgage finance industry and to our business.

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Increased lending volume and losses insured by the FHA have resulted in a reduction of the FHA insurance fund.

The USDA rural development program provides for zero down payment and 100% financing for homebuyers in qualifying areas.

The USDA rural development program provides for zero down payment and 100%

financing for homebuyers in qualifying areas.

If the USDA program was discontinued or if funding was decreased, then our business could be adversely affected.

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We require a deposit from our homebuyers for all homes reflected in our backlog, and generally, we have the right to retain the deposit if the homebuyer does not complete the purchase.

In some cases, however, a homebuyer may cancel the purchase contract and receive a complete or partial refund of the deposit for reasons such as state and local law requirements, the homebuyer’s inability to obtain mortgage financing, the homebuyer’s failure to sell their current home, or our inability to complete and deliver the house within the defined time.

In some cases, however, a homebuyer may cancel the purchase contract and receive a complete or partial refund of the deposit for reasons such as state and local law requirements, the homebuyer’s inability to obtain mortgage financing or the homebuyer’s failure to sell their current home.

Homebuyers may also choose to cancel their purchase contract and forfeit their deposit.

As of December 31, 2024, we had 599 homes with an ending backlog value of $236.5 million.

With the weakening of the housing market, we have experienced an increase in cancellation rates.

With the weakening of the housing market over the past several years, we have experienced an increase in cancellation rates.

If economic conditions decline further, if mortgage financing becomes less available or more costly, or if our homes become less attractive due to market price declines or due to other conditions at or in the vicinity of our communities, we could experience an additional increase in homebuyers canceling their purchase contracts with us, which could have an adverse effect on our business and results of operations.

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We cannot predict whether and to what extent the housing markets in the geographic areas in which we operate will grow, particularly if interest rates for mortgage loans, land costs, and construction costs continue to rise or stay at similar levels.

Other factors that might impact the homebuilding industry include uncertainty in domestic and international financial, credit and consumer lending markets amid slow economic growth or recessionary conditions in various regions or industries around the world, including as a result of an epidemic or pandemic, the conflict between Russia and Ukraine, the conflict in the Middle East, or the 2024 U.S.

presidential and other elections, tight lending standards and practices for mortgage loans that limit consumers’ ability to qualify for mortgage financing to purchase a home, including increased minimum credit score requirements, credit risk/mortgage loan insurance premiums and/or other fees and required down payment amounts, higher home prices, more conservative appraisals, changing consumer preferences, higher loan-to-value ratios and extensive buyer income and asset documentation requirements, changes to mortgage regulations, slower rates of population growth or population decline in our markets, or Federal Reserve policy changes.

presidential and other elections, and/or tightening of mortgage lending standards, practices and regulation in the geographic areas in which we operate, or if interest rates for mortgage loans or home prices continue to rise or stay at similar levels, there could likely be a corresponding adverse effect on our business, prospects, liquidity, financial condition and results of operations, including, but not limited to, the number of homes we sell, our average sales price per home closed , cancellations of home purchase contracts and the amount of revenues or profits we generate, and such effect may be material.

presidential administration, tight lending standards and practices for mortgage loans

that limit consumers’ ability to qualify for mortgage financing to purchase a home, including increased minimum credit score requirements, credit risk/mortgage loan insurance premiums, homeowners’ insurance premiums and/or other fees and required down payment amounts, higher home prices, more conservative appraisals, changing consumer preferences, higher loan-to-value ratios and extensive buyer income and asset documentation requirements, changes to mortgage regulations, slower rates of population growth or population decline in our markets, or Federal Reserve policy changes.

If there is limited economic growth, declines in employment and consumer income, changes in consumer behavior, including as a result of an epidemic or pandemic, the conflict between Russia and Ukraine, the conflict in the Middle East, impacts from the change in U.S presidential administration, and/or tightening of mortgage lending standards, practices and regulation in the geographic areas in which we operate, or if interest rates for mortgage loans or home prices continue to rise or stay at similar levels, there could likely be a corresponding adverse effect on our business, prospects, liquidity, financial condition and results of operations, including, but not limited to, the number of homes we sell, our average sales price per home closed , cancellations of home purchase contracts and the amount of revenues or profits we generate, and such effect may be material.

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 changes, among other factors (which may be driven by birth rate changes, economic factors or U.S.

immigration policies);

availability and pricing of mortgage financing for homebuyers;

housing affordability;

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 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 another significant or sustained downturn, it would materially adversely affect our business and results of operations in future years.

In 2022, the Federal Reserve’s aggressive actions to stem inflation caused mortgage interest rates to increase significantly.

The resulting increased costs of borrowing negatively impacted customer sentiment and accelerated existing affordability constraints for potential homebuyers.

As a result, many homebuyers paused their home purchasing decisions.

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 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.

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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Furthermore, our market share in certain of our markets may be lower as compared to some of our competitors.

In addition, the homebuilding industry has been subject to increasing consolidation, which could result in existing competitors increasing their market share.

Such changes have the potential to increase competitive dynamics in affected markets.

Many of our competitors also have longer operating histories and longstanding relationships with subcontractors and suppliers in the markets in which we operate or to which we may expand.

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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 Texas, Arizona, Florida, Georgia, New Mexico, Colorado, North Carolina, South Carolina, Washington, Tennessee, Minnesota, Oklahoma, Alabama, California, Oregon, Nevada, West Virginia, Virginia, Pennsylvania, Maryland and Utah.

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 Texas, could have a material adverse effect on our business, prospects, liquidity, financial condition and results of operations.

Our communities on the West coast are especially susceptible to restrictive government regulations and environmental laws.

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, a result could be a reduction in employment or other negative economic consequences, which in turn could adversely impact our home sales and activities in certain of our markets.

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

Our communities in our West segment are especially susceptible to restrictive government regulations and environmental laws.

Moreover, certain insurance companies doing business in states in which we operate could restrict, curtail or suspend the issuance of homeowners’ insurance policies on single-family homes.

This could both reduce the availability of hurricane and other types of natural disaster insurance, in general, and increase the cost of such insurance to prospective purchasers of homes.

This could both reduce the availability of hurricane, fire and other types of natural disaster insurance, in general, and increase 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.

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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, increase mortgage default risk, 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, affect the desirability of our land or projects or result in potential buyers facing higher costs for, or being unable to obtain, fire, flood or other hazard insurance coverage in certain areas, thereby adversely affecting our ability to market homes or sell land in those areas and possibly increasing the costs of homebuilding completion.

In addition to directly damaging our land or projects, many of these natural events could damage roads and highways providing access to our assets, affect the desirability of our land or projects or result in potential buyers facing higher costs for, or being unable to obtain, fire, flood or other hazard insurance coverage in certain areas, thereby reducing the number of potential buyers who can afford, or are willing, to purchase homes in those areas, adversely affecting our ability to market homes or sell land in those areas and possibly increasing the costs of homebuilding completion.

For example, the incidence of large wildfires in California has substantially increased in recent years, and the risk of future wildfires is expected to increase.

The housing markets in areas affected by California’s recent wildfires have been adversely affected by increased insurance costs and difficulties in obtaining homeowners’ insurance, which we expect to be exacerbated by the recent wildfires in Los Angeles.

These natural events could also prompt governmental authorities to adopt more stringent building codes, which would likely increase development costs in affected areas and negatively impact home affordability and/or demand.

Furthermore, the occurrence of natural disasters, severe weather and other adverse geological conditions has increased in recent years due to climate change and may continue to increase in the future.

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New and existing laws and regulations or other governmental actions may increase our expenses, limit the number of homes that we can build or delay completion of our projects.

We are subject to numerous local, state, federal and other statutes, ordinances, rules and regulations concerning zoning, development, building design, construction, accessibility, anti-discrimination and other matters, which, among other things, impose restrictive zoning and density requirements, the result of which is to limit the number of homes that can be built within the boundaries of a particular area.

the boundaries of a particular area.

We may encounter issues with entitlement, not identify all entitlement requirements during the pre-development review of a project site, or encounter zoning changes that impact our operations.

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As a result of any of these statutes, ordinances, rules or regulations, the timing of our home sales could be delayed, the number of our home sales could decline and/or our costs could increase, which could have a material adverse effect on our business, prospects, liquidity, financial condition and results of operations.

We 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.

We 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/or delay completion of our projects.

We are subject to a variety of local, state, federal and other laws, statutes, ordinances, rules and regulations concerning the environment, hazardous materials, the discharge of pollutants and human health and safety.

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From time to time, the EPA and similar federal, state or local agencies review land developers’ and homebuilders’ compliance with environmental laws and may levy fines and penalties, among other sanctions, for failure to strictly comply with applicable environmental laws, including those applicable to the control of storm water discharges during construction, or impose additional requirements for future compliance as a result of past failures.

Any such actions taken with respect to us may

increase our costs and result in project delays.

Any such actions taken with respect to us may increase our costs and result in project delays.

Further, we expect that increasingly stringent requirements will be imposed on land developers and homebuilders in the future.

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capacity, amongst other things, to achieve net zero by 2050.

We anticipate that 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 and the COP 28 stocktake.

Despite the issuance of an executive order on January 20, 2025 initiating the process to withdraw the United States from the Paris Agreement, we anticipate that a variety of legislation may be enacted or considered for enactment at the state and local levels relating to climate change and energy.

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.

On June 1, 2022, the Biden Administration launched the National Initiative to Advance Building Codes, an initiative to modernize building codes, improve climate resilience, and reduce energy costs and the Inflation Reduction Act of 2022, through various grants and tax incentives, encourages municipalities to adopt stricter energy codes, both of which could increase the cost to construct homes and cause delays.

On June 1, 2022, the Biden Administration launched the National Initiative to Advance Building Codes, an initiative to modernize building codes, improve climate resilience, and reduce energy costs and the Inflation Reduction Act of 2022 (the “IRA 2022”), through various grants and tax incentives, encourages municipalities to adopt stricter energy codes, both of which could increase the cost to construct homes and cause

Pursuant to an executive order issued on January 20, 2025, the disbursement of funds appropriated under the IRA 2022 and the Infrastructure Investment and Jobs Act was paused.

Certain state and local governments in areas such as California have passed, or are considering, legislation banning the use of natural gas-fired appliances in new homes, which could affect our costs to construct homes as well as consumer demand for the homes we construct.

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These matters could adversely affect our business, prospects, liquidity, financial condition and results of operations.

As a homebuilding and land development business with a wide variety of historic ownership, development, homebuilding and construction activities, we could be liable for future claims for damages as a result of the past or present use of hazardous materials, including building materials or fixtures known or suspected to be hazardous or to contain hazardous materials or due

to use of building materials or fixtures that are associated with mold.

Any such claims may adversely affect our business, prospects, financial condition and results of operations.

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Climate change is a focus of both the SEC and investors.

In March 2022, the SEC proposed extensive climate-related

disclosure requirements that, if adopted, would require U.S.

public companies to dramatically expand the climate-related

disclosures in their SEC filings, including the disclosure of scope 1, 2, and 3 emissions for some companies.

These rules are

expected to be finalized in the first half of 2024.

In September 2023, California passed climate-related disclosure mandates that

are broader than the SEC’s proposed rules.

Compliance with these disclosure rules may be costly and subject a company to

criticism by regulators, investors, the media or other stakeholders for the accuracy, adequacy or completeness of its ESG

disclosures and could adversely impact a company’s reputation and financial position.

In March 2024, the SEC adopted a set of rules that require a wide range of climate-related disclosures, including material climate-related risks, information on any climate-related targets or goals that are material to the registrant’s business, results of operations, or financial condition, Scope 1 and Scope 2 GHG emissions on a phased-in basis by certain larger registrants when those emissions are material and the filing of an attestation report covering the same, and disclosure of the financial statement effects of severe weather events and other natural conditions including costs and losses.

Compliance dates under the final rule are phased in by registrant category.

Multiple lawsuits have been filed challenging the SEC’s new climate rules, which have been consolidated in the U.S.

Court of Appeals for the Eighth Circuit.

In April 2024, the SEC issued an order staying the final rules until judicial review is complete.

In September 2023, California passed climate-related disclosure mandates that are broader than the SEC’s rules.

Compliance with these disclosure rules may be costly and subject a company to criticism by regulators, investors, the media or other stakeholders for the accuracy, adequacy or completeness of its ESG disclosures and could adversely impact a company’s reputation and financial position.

Changes in tax law could adversely affect our business.

tax law is always subject to change (possibly with retroactive effect).

For example, in August 2022, the United States enacted the Inflation Reduction Act of 2022, which contains significant changes to U.S.

For example, in August 2022, the United States enacted the IRA 2022, which contains significant changes to U.S.

tax law including, but not limited to, a corporate minimum tax and 1% excise tax on stock repurchases.

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We expect this seasonal pattern to continue over the long term, but we can make no assurances as to the degree to which our historical seasonal patterns will occur in the future.

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 changes, among other factors;

availability and pricing of mortgage financing for homebuyers;

housing affordability;

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.

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

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

In 2022, the Federal Reserve’s aggressive actions to stem inflation caused mortgage interest rates to increase significantly.

The resulting increased costs of borrowing negatively impacted customer sentiment and accelerated existing affordability constraints for potential homebuyers.

As a result, many homebuyers paused their home purchasing decisions.

Additionally, we experienced continued challenges from ongoing supply chain disruptions and higher construction and development costs during 2023.

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.

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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If we are required to seek additional financing to fund our operations, continued volatility in these markets may restrict our flexibility to access such financing.

Furthermore, any downgrade of our credit ratings or other

negative rating actions by credit agencies may make it more difficult and costly for us to access capital.

Furthermore, any downgrade of our credit ratings or other negative rating actions by credit agencies may make it more difficult and costly for us to access capital.

If we are not successful in obtaining sufficient funding for our planned capital and other expenditures or if we do not properly allocate our funding, we may be unable to acquire additional land for development and/or to construct new housing.

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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, and if, such opportunities arise.

We may be unable to achieve the anticipated benefits of any such growth or expansion, including through add-on 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.

We may be unable to achieve the anticipated benefits of any such growth or expansion, including through add-on 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.

In such cases, we will likely need to employ additional personnel or consultants that are knowledgeable of such markets.

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Experienced employees working in the homebuilding, development and construction industries are highly sought after.

Failure to attract and retain such personnel or to ensure that their experience

and knowledge is not lost when they leave the business through retirement, redundancy or otherwise may adversely affect the standards of our service and may have an adverse impact on our business, prospects, liquidity, financial condition and results of operations.

Failure to attract and retain such personnel or to ensure that their experience and knowledge is not lost when they leave the business through retirement, redundancy or otherwise may adversely affect the standards of our service and may have an adverse impact on our business, prospects, liquidity, financial condition and results of operations.

Termination of the employment agreement with our Chief Executive Officer could be costly and prevent a change in control of our company.

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As of December 31, 2024, borrowings under the Credit Agreement bore interest at a rate of the Secured Overnight Financing Rate (“SOFR”) plus 1.85% per annum.

In addition, as of December 31, 2023, we had outstanding $300.0 million aggregate principal amount of the 2029 Senior Notes (as defined herein) and $400.0 million aggregate principal amount of the 2028 Senior Notes (as defined herein).

In addition, as of December 31, 2024, we had outstanding $400.0 million aggregate principal amount of the 2028 Senior Notes (as defined herein), $300.0 million aggregate principal amount of the 2029 Senior Notes (as defined herein) and $400.0 million aggregate principal amount of the 2032 Senior Notes (as defined herein).

The Board will consider a number of factors when evaluating our level of indebtedness and when making decisions regarding the incurrence of new indebtedness, including the purchase price of assets to be acquired with debt financing, if any, the estimated market value of our assets and the ability of particular assets, and our company as a whole, to generate cash flow to cover the expected debt service.

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Our current financing agreements contain, and the financing arrangements we enter into in the future likely will contain, provisions that limit our ability to do certain things.

ratio of not greater than 60.0%, (iii) liquidity of at least $50.0 million and (iv) a ratio of EBITDA to interest expense for the most recent four quarters of at least 1.75 to 1.00.

In particular, the Credit Agreement requires us to maintain (i) a tangible net worth of not less than $1,218.2 million plus 50% of the net proceeds of equity issuances after December 31, 2022 plus 50.0% of our positive consolidated earnings after taxes for each fiscal quarter ended after December 31, 2022, (ii) a leverage ratio of not greater than 60.0%, (iii) liquidity of at least $50.0 million and (iv) a ratio of EBITDA to interest expense for the most recent four quarters of at least 1.75 to 1.00.

The Credit Agreement contains various covenants that, among other restrictions, limit the amount of our additional debt and our ability to make certain investments.

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As of December 31, 2024, borrowings under the Credit Agreement bore interest at a rate of SOFR plus 1.85% per annum.

In addition, as of December 31, 2023, we had outstanding $300.0 million aggregate principal amount of the 2029 Senior Notes, which bear interest at a fixed rate of 4.000%, and $400.0 million aggregate principal amount of the 2028 Senior Notes, which bear interest at a fixed rate of 8.750%.

In addition, as of December 31, 2024, we had outstanding $400.0 million aggregate principal amount of the 2028 Senior Notes, which bear interest at a fixed rate of 8.750%, $300.0 million aggregate principal amount of the 2029 Senior Notes, which bear interest at a fixed rate of 4.000%, and $400.0 million aggregate principal amount of the 2032 Senior Notes, which bear interest at a fixed rate of 7.000%.

If our operations do not generate sufficient cash from operations at levels currently anticipated, we may seek additional capital in the form of debt financing.

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Higher interest rates could increase debt service requirements on our current floating rate indebtedness and on any floating rate indebtedness we subsequently incur, and could reduce funds available for operations, future business opportunities or other purposes.

If we need to repay existing indebtedness during periods of rising interest rates, we could be required to refinance our then-existing indebtedness on unfavorable terms or liquidate one or more of our assets to repay such indebtedness at times which may not permit realization of the maximum return on such assets and could result in a loss.

at times which may not permit realization of the maximum return on such assets and could result in a loss.

The occurrence of either such event or both could materially and adversely affect our cash flows and results of operations.

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We cannot be certain that we will be successful in maintaining adequate internal control over our financial reporting and financial processes.

Furthermore, as we grow our business, our internal controls will become more complex, and we will require significantly more resources to ensure our internal controls remain effective.

Additionally, the existence of any material weakness or significant deficiency would require management to devote significant time and incur significant expense to remediate any such material weakness or significant deficiency and management may not be able to remediate any such material weakness or significant deficiency in a timely manner.

The existence of any material weakness in our internal control over financial reporting could also result in errors in our

financial statements that could require us to restate our financial statements, cause us to fail to meet our reporting obligations and cause investors to lose confidence in our reported financial information, all of which could materially and adversely affect us.

The existence of any material weakness in our internal control over financial reporting could also result in errors in our financial statements that could require us to restate our financial statements, cause us to fail to meet our reporting obligations and cause investors to lose confidence in our reported financial information, all of which could materially and adversely affect us.

We may change our operational policies, investment guidelines and our business and growth strategies without stockholder consent, which may subject us to different and more significant risks in the future.

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We participate in certain unconsolidated entities where we may be adversely impacted by the failure of the limited partnership or joint venture or its participants to fulfill their obligations.

We currently participate through a real estate investment fund as a limited partner and operate through a mortgage service joint venture with independent third parties in which we do not have a controlling interest.

As of December 31, 2023 and 2022, we have contributed a total of $21.5 million and $11.2 million, respectively, relating to our investment in the real estate investment fund and the mortgage joint venture.

We currently participate through two equity-method real estate joint ventures and four additional joint ventures as a limited partner and with independent third parties in which we do not have a controlling interest.

As of December 31, 2024 and 2023, we have contributed a total of $28.3 million and $21.5 million, respectively, within other assets on the balance sheet relating to our investment in joint ventures associated with our operations.

Contributions into these unconsolidated entities are used by the entities to invest in certain real estate transactions and residential mortgage services, respectively.

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We are required to comply with laws and regulations governing many aspects of our business, such as land acquisition and development, home construction and sales, and employment practices.

Despite our oversight, contractual protections, and other mitigation efforts, our employees or subcontractors could violate some of these laws or regulations, as a result of which we may incur fines, penalties or other liabilities, which could be significant, and our reputation with governmental agencies, customers, vendors or suppliers could be damaged.

Despite our oversight, contractual protections, and other mitigation efforts, our employees or subcontractors could violate some of these laws or regulations, as a result of which

we may incur fines, penalties or other liabilities, which could be significant, and our reputation with governmental agencies, customers, vendors or suppliers could be damaged.

We are subject to litigation, arbitration or other claims, which could materially and adversely affect us.

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We may suffer uninsured losses or material losses in excess of insurance limits.

We could suffer physical damage to property and liabilities resulting in losses that may not be fully recoverable by insurance.

We could suffer physical damage to property or sustain liabilities resulting in losses that may not be fully recoverable by insurance.

Insurance against certain types of risks, such as terrorism, earthquakes, floods or personal injury claims, may be unavailable, available in amounts that are less than the full market value or replacement cost of investment or underlying assets or subject to a large deductible or self-insurance retention amount.

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Should an uninsured loss or a loss in excess of insured limits occur or be subject to deductibles or self-insurance retention, we could sustain financial loss or lose capital invested in the affected property, as well as anticipated future income from that property.

Furthermore, we could be

liable to repair damage or meet liabilities caused by risks that are uninsured or subject to deductibles.

Furthermore, we could be liable to repair damage or meet liabilities caused by risks that are uninsured or subject to deductibles.

We may also be liable for any debt or other financial obligations related to affected property.

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usage errors by employees and other related risks.

In addition, cybersecurity risk is exacerbated with the advancement of technologies like artificial intelligence, which malicious third parties are using to create new, sophisticated and more frequent attacks.

Any cyber incident, attack, breach or other disruption or failure in these information systems, or other systems or infrastructure upon which they rely, could adversely affect our ability to conduct our business and could have a material adverse effect on our business, prospects, liquidity, financial condition and results of operations.

Furthermore, any failure or security breach of information systems or data could result in a violation of applicable privacy, data security, or other laws;

Furthermore, any failure or security breach of information systems or data could result in diversion of management or work force attention;

increased costs required to prevent, respond to or mitigate an incident;

a violation of applicable privacy, data security, or other laws;

significant legal and financial exposure;

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Third parties, as well as independent mortgage lenders and other firms involved in real property transactions, could experience their own cybersecurity incidents or IT resource failures that disrupt or prevent their performance of necessary real estate transaction services.

For example, the third-party lender in our mortgage solutions joint venture recently identified a cybersecurity incident that included unauthorized third-party access to its systems.

Such cybersecurity incidents or IT resource failures could significantly disrupt our ability to close on land transactions or our customers’ ability to close on their homes, as well as our production schedules and delivery forecasts, and could have a material impact on our operations or consolidated financial statements, including by causing home sales contract cancellations.

For example, in late 2023, the third-party lender in our mortgage solutions joint venture identified a cybersecurity incident that included unauthorized third-party access to its systems.

Such cybersecurity incidents or IT resource failures could significantly disrupt our ability to close

on land transactions or our customers’ ability to close on their homes, as well as our production schedules and delivery forecasts, and could have a material impact on our operations or consolidated financial statements, including by causing home sales contract cancellations.

Our business is subject to complex and evolving U.S.

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Furthermore, federal, state and local government bodies or agencies have in the past adopted, and may in the future adopt, more laws and regulations affecting data privacy.

Such laws and regulations governing data privacy and the unauthorized disclosure of personal information, such as the California Consumer Privacy Act (CCPA), may significantly impact our business activities and require substantial compliance costs, which could have a material adverse effect on our business, prospects, liquidity, financial condition and results of operations.

Such laws and regulations governing data privacy and the unauthorized disclosure of personal information, such as the California Privacy Rights Act (CPRA), may significantly impact our business activities and require substantial compliance costs, which could have a material adverse effect on our business, prospects, liquidity, financial condition and results of operations.

Any actual or perceived failure by us to adequately address privacy and data security concerns or comply with applicable privacy and data security laws, regulations and policies could result in proceedings or actions against us by governmental entities or others;

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Acts of war, any outbreak or escalation of hostilities between the United States and any foreign power, acts of terrorism, political uncertainty or conflicts, such as the conflict between Russia and Ukraine and the conflict in the Middle East, or civil unrest may cause disruption to the U.S.

economy, or the local economies of the markets in which we operate, cause shortages of

building materials, increase costs associated with obtaining building materials, result in building code changes that could increase costs of construction, result in uninsured losses, affect job growth and consumer confidence, or cause economic changes that we cannot anticipate, all of which could reduce demand for our homes and adversely impact our business, prospects, liquidity, financial condition and results of operations.

economy, or the local economies of the markets in which we operate, cause shortages of building materials, increase costs associated with obtaining building materials, result in building code changes that could increase costs of construction, result in uninsured losses, affect job growth and consumer confidence, or cause economic changes that we cannot anticipate, all of which could reduce demand for our homes and adversely impact our business, prospects, liquidity, financial condition and results of operations.

While we do not have any customer or direct supplier relationships in any of the foreign countries or regions involved in the current military conflicts, such conflicts and any related sanctions, export controls or actions that may be initiated by nations ( e.g.

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We may not have access to such equity or debt capital on favorable terms at the desired times, or at all.

Financial industry and capital markets turmoil may materially and adversely affect our liquidity and consolidated financial statements.

In 2023, federal and state banking regulators closed several U.S.

banks, with which we had no banking, financing or other business relationships or dependencies, precipitating financial industry and capital markets turmoil centered on concerns about the stability and solvency of other banks and financial institutions and the attendant risk they may be closed and/or forced by governmental agencies into receivership or sale.

The failure of other banks and financial institutions, if it occurs, could have a material adverse effect on our liquidity or consolidated financial statements if we have placed cash and cash equivalent deposits at such banks or financial institutions, or if such banks or financial institutions, or any substitute or additional banks or financial institutions, participate in the Credit Agreement.

Under the Credit Agreement, non-defaulting lenders are not obligated to cover or acquire a defaulting lender’s respective commitment to fund loans or to issue letters of credit, and may not issue additional letters of credit if we do not enter into arrangements to address the risk with respect to the defaulting lender (which may include cash collateral).

If the non-defaulting lenders are unable or unwilling to cover or acquire a defaulting lender’s respective commitment, potentially due to other demands they face under other credit instruments to which they are party, or because of regulatory restrictions, among other factors, we may not be able to access the Credit Agreement’s full borrowing or letter of credit capacity.

Cautionary Statement about Forward-Looking Statements

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• volatility and uncertainty in the credit markets and broader financial markets;

• disruption in the terms or availability of mortgage financing or increase in the number of foreclosures in our markets;

• elevated mortgage interest rates for prolonged periods, disruption in the terms or availability of mortgage financing or increase in the number of foreclosures in our markets;

• the cyclical and seasonal nature of our business;

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• our leverage and future debt service obligations;

• changes in, liabilities under, or the failure or inability to comply with, governmental laws and regulations, including environmental laws and regulations;

• changes in, liabilities under, or the failure or inability to comply with, governmental laws and regulations, including environmental, privacy and security laws and regulations;

• the timing of receipt of regulatory approvals and the opening of projects;

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors