What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-02-13 compared with 2025-02-14 · 149 added, 140 removed, 468 unchanged (38% of the section changed)

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M/I Homes, Inc.

and subsidiaries is one of the nation’s leading builders of single-family homes, having sold over 160,000 homes since commencing homebuilding activities in 1976.

together with its subsidiaries is one of the nation’s leading builders of single-family homes, having sold over 168,200 homes since commencing homebuilding activities in 1976.

The Company’s homes are marketed and sold primarily under the M/I Homes brand.

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While we believe that our warranty reserves are sufficient to cover our projected costs, there can be no assurances that historical data and trends will accurately predict our actual warranty costs.

During 2025, our warranty reserves have been adversely affected by warranty repairs in two of our Florida communities primarily related to attic ventilation issues.

See Note 1 and Note 8 to our Consolidated Financial Statements for additional information related to our warranty reserves.

RESULTS OF OPERATIONS

In 2024, we achieved all-time record homes delivered, revenue, and income despite the headwinds the housing industry faced throughout the year, including elevated mortgage interest rates, inflationary pressures, affordability issues and an uncertain economy.

Our new contracts for 2024 increased 8% compared to 2023 as we experienced improvements in homebuyer demand as a result of the limited supply of resale and new home inventory, potential homebuyers adjusting to the interest rate environment, and our offering of mortgage interest rate buydowns in the second half of the year.

We also had strong cash flow and liquidity in 2024 and ended the year with low leverage.

In addition, we improved construction cycle times in 2024 which helped us achieve a record annual gross margin of 26.6%, an 130 basis point improvement from 2023.

Our revenue increased 12% due to our record homes delivered which also increased 12% in 2024 compared to 2023.

Income before income taxes and net income both increased 21% from prior year, both company records.

We achieved the following results during the year ended December 31, 2024 in comparison to the year ended December 31, 2023:

• Homes delivered increased 12% to 9,055, an all-time record for our Company

• Revenue increased 12% to $4.5 billion, an all-time record for our Company

• Pre-tax income increased 21% to an all-time record $733,608, 16.3% of revenue

• Net income increased 21% to $564 million, an all-time record for our Company

• New contracts increased 8% to 8,584

• Absorption pace of sales per community remained consistent at 3.3 per month

In 2025, the housing industry faced headwinds including elevated mortgage interest rates, inflationary pressures, affordability issues and overall economic uncertainty.

These conditions softened homebuyer demand and resulted in declines across several financial and operational metrics in 2025 when compared to 2024, including new contracts which decreased 4% compared to 2024.

In 2025, our annual gross margin percentage declined 360 basis points to 23.0%.

Our revenue decreased 2% due to 1% decreases in both our homes delivered and average sales price in 2025 compared to 2024.

Despite the challenging conditions facing the housing industry, we had strong cash flow and liquidity in 2025 and ended the year with low leverage.

Our results for the year ended December 31, 2025 in comparison to the year ended December 31, 2024 were as follows:

• Homes delivered decreased 1% to 8,921

• Revenue decreased 2% to $4.4 billion

• Pre-tax income decreased 28% to $526.6, 11.9% of revenue

• Net income decreased 29% to $402.9 million

• New contracts decreased 4% to 8,199

• Absorption pace of sales per community declined to 3.0 per month compared to 3.3 per month

• Average community count increased 6% with 232 active communities at the end of 2025

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• Homebuilding debt to capital ratio improved to 18%

In addition to the results described above, our financial services operations recorded a $14.7 million increase in operating income in 2024 compared to 2023 as a result of an increase in closings and a slight increase in the average loan amount.

Our company-wide absorption pace of sales per community in 2024 remained consistent compared to 2023 at 3.3 per month as a result of our 8% increase in new contracts during 2024 compared to prior year, partially offset by a smaller increase in our average community count from 202 at the end of 2023 to 216 at the end of 2024.

We plan to open additional new communities during 2025, increasing our average community count by approximately 5% compared to 2024.

Income before income taxes for the twelve months ended December 31, 2024 increased 21% from $607.3 million for the year ended December 31, 2023 to $733.6 million for the year ended December 31, 2024.

In 2024, we achieved net income of $563.7 million, or $19.71 per diluted share, compared to net income of $465.4 million, or $16.21 per diluted share in 2023.

In addition to the results described above, our financial services operations recorded a $4.8 million increase in operating income in 2025 compared to 2024 as a result of increases in closings and average loan amount.

Our company-wide absorption pace of sales per community in 2025 declined from 3.3 per month in 2024 to 3.0 per month in 2025 as a result of lower homebuyer demand which resulted in a 4% decrease in new contracts during 2025 compared to prior year.

Our average community count did increase from 216 in 2024 to 229 in 2025.

We plan to open additional new communities during 2026 and increase our average community count by about 5% compared to 2025.

Income before income taxes for the twelve months ended December 31, 2025 decreased 28% from $733.6 million for the year ended December 31, 2024 to $526.6 million for the year ended December 31, 2025.

In 2025, our net income was $402.9 million, or $14.74 per diluted share, compared to net income of $563.7 million, or $19.71 per diluted share in 2024.

Our effective tax rate was 23.5% in 2025 compared to 23.2% in 2024.

In 2025, we recorded total revenue of $4.42 billion, of which $4.29 billion was from homebuilding and $125.5 million was from our financial services operations.

Revenue from homes delivered increased 12% from 2023 driven primarily by a 12% increase in the number of homes delivered in 2024 (943 units) as the average sales price of homes delivered remained $483,000.

Revenue from our financial services segment increased 24% to $116.2 million in 2024 as a result of an increase in loans closed and sold during the year and a slight increase in the average loan amount.

Total gross margin (total revenue less total land and housing costs) increased $180.0 million in 2024 compared to 2023 as a result of a $157.6 million increase in the gross margin of our homebuilding operations and a $22.4 million improvement in the gross margin of our financial services operations.

Our homebuilding gross margin improved $157.6 million due to the 12% increase in the number of homes delivered.

Our homebuilding gross margin percentage improved 120 basis points from 23.5% in the prior year to 24.7% in 2024.

The gross margin of our financial services operations improved by $22.4 million in 2024 compared to 2023 as a result of an increase in the number of loan originations, higher margins on loans sold, and a slight increase in the average loan amount during 2024 compared to prior year.

Revenue from homes delivered decreased 2% from 2024 driven primarily by a 1% decrease in both the number of homes delivered in 2025 (134 units) and the average sales price of homes delivered (decreased $4,000 per home).

Our revenue and average sales price reflect a $200.0 million reduction for incentives and closing costs in 2025 compared to a $131.3 million reduction for incentives and closing costs in 2024.

Revenue from our financial services segment increased 8% to $125.5 million in 2025 as a result of increases in loans closed and sold during the year and the average loan amount.

Total gross margin (total revenue less total land and housing costs) decreased $181.7 million in 2025 compared to 2024 as a result of a $190.9 million decrease in the gross margin of our homebuilding operations partially offset by a $9.3 million improvement in the gross margin of our financial services operations.

Our homebuilding gross margin declined $190.9 million and homebuilding gross margin percentage declined 390 basis points from 24.7% in the prior year to 20.8% in 2025.

The decline in gross margin dollars primarily resulted from the decreases in homes delivered and average sales price, which included a $53.3 million increase in mortgage interest rate buydowns offered, $64.9 million increase in lot costs, $47.7 million for inventory charges and $11.2 million in warranty claims in two of our Florida communities primarily relating to attic ventilation issues.

The improvement in the gross margin of our financial services operations is attributable to an increase in the number of loan originations, higher margins on loans sold, and an increase in the average loan amount during 2025 compared to prior year.

We opened 81 new communities during 2025.

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For 2025, selling, general and administrative expense increased $17.9 million, and increased as a percentage of revenue to 11.6% in 2025 from 10.9% in 2024.

Selling expense increased $25.4 million from 2023 and remained consistent as a percentage of revenue at 5.2%.

Sales and realtor commissions contributed $16.5 million to the increase in selling expense in 2024 due to the increase in the homes delivered as well as higher external sales commission rates paid during the period compared to prior year.

Selling expense increased $13.5 million from 2024 and increased as a percentage of revenue to 5.6% from 5.2% in 2024.

Realtor commissions contributed $7.7 million to the increase in selling expense in 2025 due to higher realtor commissions paid during the period compared to prior year.

In addition to commissions, costs associated with our sales offices, including compensation-related expenses and models, increased $5.8 million in 2025 due to our increased community count.

General and administrative expense increased $4.3 million in 2025 compared to 2024 and also increased as a percentage of revenue from 5.7% in 2024 to 5.9% in 2025.

The dollar increase in general and administrative expense was primarily due to an $19.4 million increase in compensation-related expenses, a $4.2 million increase in costs associated with information systems, a $3.8 million increase in professional fees, a $2.3 million increase in land-related costs, and a $6.0 million increase in miscellaneous expenses.

Housing market conditions were relatively healthy in 2024 despite inflation, elevated mortgage interest rates and rising housing prices, which impacted affordability for the average homebuyer, particularly in the second half of the year.

Despite these affordability challenges, our offering of sales incentives and mortgage interest rate buydowns helped spur our new contracts in this period.

We expect to selectively offer sales incentives in 2025 to support homebuyers, drive order activity and minimize cancellations.

Our use of sales incentives and mortgage interest rate buydowns in 2025 will depend on, among other things, market dynamics, including mortgage interest rates and overall housing affordability, as well as community-specific considerations, including the size and construction stage of the backlog, sales pace and lots remaining available for sale.

We expect some margin compression in 2025 when compared to 2024 levels as a result of the current market conditions.

We also expect to increase our land acquisition and development investment activity in 2025 compared to 2024 to support future growth, subject to market conditions and available opportunities that meet our investment return standards.

We will continue to prioritize managing our land spend and inventory levels of finished lots and inventory homes by balancing our development investment activity and our construction pace.

While we believe that the homebuilding industry will continue to benefit over the long term from a continued undersupply of available homes, positive consumer demographics, and increasing rent prices, the housing market remains subject to unpredictability as a result of uncertain macroeconomic conditions, including labor and material costs and availability, inflation, mortgage interest rates, and the economic concerns of our potential homebuyers.

Although the extent to which these factors will impact our business is unpredictable, we believe that we are well positioned to continue to grow over the long-term by focusing on our land position, new community openings, and affordable product offerings.

We remain sensitive to potential changes in market conditions, and will continue to focus on controlling overhead leverage in addition to carefully managing our investment in land and land development spending.

Our strong balance sheet and ample liquidity should also provide us with flexibility through changing and uncertain economic conditions.

We cannot provide any assurances that our strategic business objectives listed below will remain successful, and we will need to remain agile to effectively address changes in market conditions.

We expect to emphasize the following strategic business objectives in 2025:

• promote sales where necessary through interest rate buydowns and/or other incentives;

• managing our land spend and inventory levels;

• managing our construction cycle times;

• opening new communities;

• managing overhead spend;

• maintaining a strong balance sheet and liquidity levels;

• emphasizing customer service, product quality and design, and premier locations.

The dollar increase in general and administrative expense was primarily due to a $1.2 million increase in compensation-related expenses, a $1.2 million increase in costs associated with information systems, and a $1.9 million increase in miscellaneous expenses.

Looking ahead to 2026, we expect housing affordability challenges, elevated mortgage interest rates and tepid homebuyer sentiment to continue to put pressure on homebuyer demand.

Although certain industry forecasts are projecting a gradual moderation in mortgage interest rates, we anticipate that affordability challenges are likely to persist until consumer incomes, housing prices, and financing costs are more aligned.

In this environment, we may experience further margin pressure as we continue to promote targeted incentives at the community level, including mortgage interest rate buydowns, to stimulate homebuyer demand.

We intend to manage our land spending consistent with our long‑term growth objectives and focus on opportunities that meet our operating returns and location requirements.

Our inventory home strategy, construction cadence, and efforts to improve overhead efficiency will remain central to our operating approach.

As we enter our 50th year of business, we continue to believe that long‑term industry fundamentals—including limited new and resale housing supply, favorable demographic trends, and the belief that consumers want to own a home—remain supportive of future demand.

We also believe that our strong balance sheet, prudent execution of our strategies, and diverse product offerings will position us well for growth when market conditions normalize.

We will continue to monitor evolving market dynamics, maintain disciplined cost management, and invest strategically in land and development for future growth.

However, we recognize that our ability to achieve our strategic objectives and performance goals for 2026 and beyond may be limited if macroeconomic conditions continue to negatively impact homebuyer demand.

In 2026, as we celebrate our 50th year of delivering high quality communities and homes, we expect to prioritize the following business strategies:

• Employ incentives to promote sales.

• Manage inventory home levels to meet homebuyer demand;

• Manage land spend and maintain disciplined cost management;

• Open new communities aligned with long‑term growth objectives.

• Maintain a strong balance sheet and liquidity levels, and low leverage.

• Continue emphasizing product quality, customer service, and premier community locations.

During 2025, we invested $523.7 million in land acquisitions and $645.6 million in land development.

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We ended 2025 with approximately 50,000 lots under control, which represents a 5.6-year supply of lots based on 2025 homes delivered, including certain lots that we anticipate selling to third parties.

This represents a 14% increase from our approximately 45,700 lots under control at the end of 2023.

This represents a 4% decrease from our approximately 52,200 lots under control at the end of 2024.

We opened 81 communities and closed 69 communities in 2025, ending the year with a total of 232 communities, compared to 220 at the end of 2024.

Although the timing of opening new communities and closing out existing communities is subject to substantial variation, we expect to grow our average community count by approximately 5% by the end of 2025.

We believe that we are well positioned with a strong balance sheet to manage through the current economic environment.

However, the challenging macroeconomic conditions described above could materially and negatively affect our performance in 2025, particularly when compared to our performance over the past few years.

As a result, our past performance may not be indicative of future results.

Although the timing of opening new communities and closing out existing communities is subject to substantial variation, we expect to grow our 2026 average community count by about 5% compared to 2025.

Segment Reporting

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Financial services (a)

Total cost of sales $ 3,305,781 $ 3,014,573 $ 3,087,551

Total cost of sales (b)

$ 3,400,582 $ 3,305,781 $ 3,014,573

General and administrative expense:

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(89,632) (88,983) (77,980)

Total operating income (a)

Total operating income (a) (b)

$ 506,553 $ 706,094 $ 587,222

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$ (20,035) $ (27,514) $ (20,022)

Other income (b)

Other income (c)

$ — $ — $ (33)

Income before income taxes $ 526,588 $ 733,608 $ 607,277

(a) Our financial services operational results should be viewed in connection with our homebuilding business as its operations originate loans and provide title services primarily for our homebuyers, with the exception of a small amount of mortgage refinancing.

(b) Other income is comprised of the equity in (income) loss from joint venture arrangements.

The following table show supplemental segment information regarding depreciation and amortization expense for years ended December 31, 2024, 2023 and 2022:

(a) Our financial services operational results should be viewed in connection with our homebuilding business as its operations originate loans and provide title services primarily for our homebuying customers, with the exception of an immaterial amount of mortgage refinancing.

(b) For the year ended December 31, 2025, total cost of sales and operating income were reduced by $47.7 million in inventory impairment charges and write-offs of land deposits and pre-acquisition costs taken during the period.

$6.7 million and $41.0 million of these charges and write-offs were attributable to the Northern homebuilding operating segment and the Southern homebuilding operating segment, respectively.

Additionally, total cost of sales and operating income in the Southern homebuilding operating segment were reduced by $11.2 million for warranty charges in two of our Florida communities primarily relating to attic ventilation issues (See Note 8 ).

The following table shows supplemental segment information regarding depreciation and amortization expense for years ended December 31, 2025, 2024 and 2023:

Year Ended December 31,

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Land sale revenue $ 7,816 $ 2,725 $ 4,455

Operating income homes (a)

Operating income homes (a)(b)

$ 275,923 $ 280,505 $ 176,074

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Land sale revenue $ 9,828 $ 9,910 $ 20,846

Operating income homes (a)

Operating income homes (a)(b)

$ 247,906 $ 447,483 $ 437,054

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Land sale revenue $ 17,644 $ 12,635 $ 25,301

Operating income homes (a)

Operating income homes (a)(b)

$ 523,829 $ 727,988 $ 613,128

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(a) Includes the effect of total homebuilding selling, general and administrative expense for the region as disclosed in the first table set forth in this “Outlook” section.

(b) Includes $47.7 million of inventory impairment charges and write-offs of land deposits and pre-acquisition costs taken during the year ended December 31, 2025.

$6.7 million and $41.0 million of these charges and write-offs were attributed to the Northern homebuilding operating segment and the Southern homebuilding operating segment, respectively.

Year Ended December 31,

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Northern Region.

During the twelve months ended December 31, 2024, homebuilding revenue in our Northern region increased $376.1 million, from $1.52 billion in 2023 to $1.90 billion in 2024.

This 25% increase in homebuilding revenue was the result of a 22% increase in the number of homes delivered (704 units), primarily attributable to delivering prior year backlog, an increase in new contracts and a slight increase in the average sales price of homes delivered ($11,000 per home delivered), offset partially by a $1.7 million decrease in land sales.

Operating income in our Northern region increased $104.8 million, from $176.3 million in 2023 to $281.1 million in 2024.

The increase in operating income was primarily the result of a $124.7 million increase in our gross margin offset in part by a $19.9 million increase in selling, general, and administrative expense.

Our homebuilding gross margin percentage improved 270 basis points from 19.4% in 2023 to 22.1% in 2024.

The improvement in our homebuilding gross margin was primarily due to the number and mix of homes being delivered offset in part by increased costs related to incentives offered, including mortgage interest rate buydowns and closing cost assistance.

Selling, general and administrative expense increased $19.9 million from $118.7 million in 2023 to $138.6 million in 2024 and decreased as a percentage of revenue to 7.3% in 2024 from 7.8% in 2023.

The increase in selling, general and administrative expense was attributable to a $13.8 million increase in selling expense, due to a $11.6 million increase in sales and realtor commissions and a $2.2 million increase primarily related to costs associated with our sales offices and models.

The increase in selling, general and administrative expense was also attributable to a $6.1 million increase in general and administrative expense, which primarily related to an increase in compensation-related expenses.

During 2024, we experienced a 12% increase in new contracts in our Northern region, from 3,361 in 2023 to 3,761 in 2024.

Backlog decreased 9% from 1,248 homes at December 31, 2023 to 1,136 homes at December 31, 2024 as a result of more inventory homes sold in the fourth quarter of 2024 due to sales incentives offered.

The increase in new contracts was primarily due to increased demand and improved absorption rate.

Average sales price in backlog increased to $561,000 at December 31, 2024 compared to $531,000 at December 31, 2023 primarily due to the mix of homes being sold.

During the twelve months ended December 31, 2025, homebuilding revenue in our Northern region decreased $9.6 million, from $1.90 billion in 2024 to $1.89 billion in 2025.

This 1% decrease in homebuilding revenue was the result of a 4% decrease in the number of homes delivered (157 units), offset in part by a 3% increase in the average sales price of homes delivered ($17,000 per home delivered) and a $5.1 million increase in land sales.

Operating income in our Northern region decreased $3.0 million, from $281.1 million in 2024 to $278.1 million in 2025.

The decrease in operating income was primarily the result of a $4.6 million decrease in our homebuilding gross margin offset in part by a $1.6 million decrease in selling, general, and administrative expense.

Our homebuilding gross margin percentage declined 10 basis points from 22.1% in 2024 to 22.0% in 2025.

The decline in our homebuilding gross margin was primarily due to fewer home closings offset in part by a 3% increase in the average sales price of homes delivered and a more favorable mix of homes closed.

The average sales price in 2025 declined by $6,500 per home when compared to 2024 due to increased in homebuyer incentive costs including mortgage interest rate buydowns when compared to 2024.

Selling, general and administrative expense decreased $1.6 million from $138.6 million in 2024 to $137.0 million in 2025 and decreased as a percentage of revenue to 7.2% in 2025 from 7.3% in 2024.

The decrease in selling, general and administrative expense was attributable to a $1.8 million decrease in general and administrative expense that resulted from a $2.3 million decrease in land related expense and a $0.9 million decrease in professional fees offset in part by a $1.3 million increase in compensation-related expenses and $0.1 million increase in miscellaneous expense.

The decrease in general and administrative expense was partially offset by a $0.2 million increase in selling expense, due to a $1.4 million increase primarily related to costs associated with compensation-related expenses and models partially offset by a $1.2 million decrease in sales and realtor commissions.

During 2025, we experienced a 9% decrease in new contracts in our Northern region, from 3,761 in 2024 to 3,416 in 2025.

Backlog decreased 26% from 1,136 homes at December 31, 2024 to 836 homes at December 31, 2025 as a result of more

inventory homes sold in 2025 and a decrease in new contracts.

The decrease in new contracts was primarily due to a decline in homebuyer demand and increased popularity of inventory homes when compared to 2024.

Inventory homes that were sold and delivered in the fourth quarter represented 34% and 24% of the total homes delivered in the fourth quarter of 2025 and 2024, respectively.

Average sales price in backlog increased to $569,000 at December 31, 2025 compared to $561,000 at December 31, 2024 primarily due to the mix of homes being sold offset in part by increased homebuyer incentives ($6,600 per home) compared to 2024.

During the twelve months ended December 31, 2025, we opened 37 new communities in our Northern region compared to 21 during 2024.

Our monthly absorption rate in our Northern region improved to 3.3 per community in 2024 compared to 2.8 per community in 2023 as a result of the increase in the number of new contracts and the decrease in the number of average active communities during 2024 compared to 2023.

Our monthly absorption rate in our Northern region declined to 3.0 per community in 2025 compared to 3.3 per community in 2024 as a result of the decrease in the number of new contracts and the increase in the number of average active communities during 2025 compared to 2024.

Southern Region.

For the twelve months ended December 31, 2024, homebuilding revenue in our Southern region increased $72.7 million, from $2.42 billion in 2023 to $2.49 billion in 2024.

This 3% increase in homebuilding revenue was primarily the result of a 5% increase in the number of homes delivered (239 units) due to increased availability of inventory homes and improved construction cycle times on our backlog homes offset in part by a 1% decrease in the average sales price of homes delivered ($7,000 per home delivered) and a $10.9 million decrease in land sales.

Operating income in our Southern region

increased $10.4 million from $440.2 million in 2023 to $450.6 million in 2024.

This increase in operating income was the result of a $32.9 million improvement in our gross margin offset by a $22.5 million increase in selling, general, and administrative expense.

Our homebuilding gross margin improved $32.9 million, due primarily to the increase in the number of homes delivered during the period offset by the decrease in the average sales price of homes delivered.

Our homebuilding gross margin percentage improved 50 basis points from 26.1% in 2023 to 26.6% in 2024 primarily due to increased number and mix of homes delivered.

For the twelve months ended December 31, 2025, homebuilding revenue in our Southern region decreased $86.6 million, from $2.49 billion in 2024 to $2.40 billion in 2025.

This 3% decrease in homebuilding revenue was primarily the result of a 4% decrease in the average sales price of homes delivered ($18,000 per home delivered) partially offset by a slight increase in the number of homes delivered (23 units).

Operating income in our Southern region decreased $200.6 million from $450.6 million in 2024 to $250.0 million in 2025.

This decrease in operating income was the result of a $186.3 million decline in our homebuilding gross margin and a $14.3 million increase in selling, general, and administrative expense.

Our homebuilding gross margin percentage declined 680 basis points from 26.6% in 2024 to 19.8% in 2025.

The decline in our homebuilding gross margin was primarily due to the decrease in the average sales price of homes delivered, a $49.6 million increase in lot costs and the unfavorable impacts of $30.9 million in inventory impairment charges, $10.0 million in write-offs of land deposits and pre-acquisition costs and $11.2 million in warranty claims in two of our Florida communities primarily relating to attic ventilation issues taken in 2025.

Increased homebuyer incentive costs, including mortgage interest rate buydowns, decreased the average sales price of homes delivered by $8,800 per home when compared to 2024.

Selling, general and administrative expense increased $14.3 million from $212.4 million in 2024 to $226.7 million in 2025 and increased as a percentage of revenue to 9.4% in 2025 from 8.5% in 2024.

The increase in selling, general and administrative expense was attributable to a $11.1 million increase in general and administrative expense, which was primarily related to a $4.9 million increase in compensation related expenses as a result of an increase in headcount and incentive compensation due to our strong financial performance during the period, a $1.2 million increase in land-related expenses, and a $5.0 million increase in miscellaneous expenses.

Selling expense increased $11.3 million due to a $4.9 million increase in realtor commissions and a $6.4 million increase in costs related to our sales offices and models due to our increased community count.

During 2024, we experienced a 4% increase in new contracts in our Southern region, from 4,616 in 2023 to 4,823 in 2024, which was primarily due to an increase in our average number of communities to 121 communities compared to 101 communities in the prior year.

The increase in selling, general and administrative expense was attributable to a $13.3 million increase in selling expense and a $1.1 million increase in general and administrative expense.

Selling expense increased $13.3 million due to an $8.9 million increase in realtor commissions and a $4.3 million increase in costs related to our sales offices and models due to our increased community count.

General and administrative expense increased $1.1 million due to a $2.4 million increase in land-related expenses and a $0.7 million increase in miscellaneous expenses offset in part by $2.0 million decrease in compensation related expenses due to incentive compensation due to our financial performance during the period.

During 2025, we experienced a 1% decrease in new contracts in our Southern region, from 4,823 in 2024 to 4,783 in 2025, which was primarily due to a decrease in demand compared to prior year.

Backlog decreased 30% from 1,395 homes at December 31, 2024 to 973 homes at December 31, 2025.

The decrease in backlog was primarily due to improved construction cycle times allowing us to deliver homes in backlog at a faster rate compared to last year.

Average sales price in backlog increased to $547,000 at December 31, 2024 from $520,000 at December 31, 2023 primarily due to the mix of homes in backlog.

The decrease in backlog was primarily due to a decline in homebuyer demand and increased popularity of inventory homes when compared to 2024.

Inventory homes that were sold and delivered in the fourth quarter represented 44% and 32% of the total homes delivered in the fourth quarter of 2025 and 2024, respectively.

Average sales price in backlog decreased to $528,000 at December 31, 2025 from $547,000 at December 31, 2024 primarily due to increased homebuyer incentives ($9,500 per home) compared to 2024 and the mix of homes in backlog.

During 2025, we opened 44 communities in our Southern region compared to 51 in 2024.

The increase in the number of new communities opened primarily related to prior year delays that were pushed to 2024.

Our monthly absorption rate in our Southern region decreased to 3.3 per community in 2024 from 3.8 per community in 2023 due to the increase in average community count.

The decrease in the number of new communities opened primarily related to delays in 2023 that were pushed to 2024.

Our monthly absorption rate in our Southern region declined to 3.0 per community in 2025 from 3.3 per community in 2024 due to the increase in average community count.

Financial Services.

Revenue from our mortgage and title operations increased $9.3 million, or 8%, from $116.2 million for the twelve months ended December 31, 2024 to $125.5 million for the twelve months ended December 31, 2025 as a result of an increase in the number of loan originations from 6,731 in 2024 to 7,117 in 2025 and an increase in the average loan amount from $399,000 in 2024 to $407,000 in 2025.

Our financial service operations ended 2024 with a $14.7 million increase in operating income compared to 2023, which was primarily due to the increase in revenue discussed above, partially offset by a $7.7 million increase in selling, general and administrative expense compared to 2023.

The increase in selling, general and administrative expense was primarily attributable to a $6.4 million increase in compensation expense related to our improved results during the period, a $0.7 million increase in computer-related costs, and a $0.6 million increase in miscellaneous expenses.

The increase in our loan originations primarily resulted from mortgage rate buy down incentives that we offered to our homebuyers via our financial services operation.

The operating income of our financial service operations increased $4.8 million in 2025 compared to 2024, which was primarily due to the increase in revenue discussed above, partially offset by a $4.5 million increase in selling, general and administrative expense compared to 2024.

The increase in selling, general and administrative expense was primarily attributable to a $2.5 million increase in compensation related expense, a $0.8 million increase in computer-related costs, and a $1.2 million increase in miscellaneous expenses.

At December 31, 2025, M/I Financial provided financing services in all of our markets.

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Corporate selling, general and administrative expense increased $0.6 million, from $89.0 million in 2024 to $89.6 million in 2025.

The increase was primarily due to a $4.9 million increase in compensation expense due to our strong financial performance during the period, a $2.1 million increase related to costs associated with information systems and a $4.0 million increase in miscellaneous expenses.

Other income.

Other income for 2023 includes equity in income from joint venture arrangements.

Equity in income from joint venture arrangements represents our portion of pre-tax earnings from our joint venture arrangements where a special purpose entity is established (“LLCs”) with the other partners.

The Company earned less than $0.1 million of equity in income from its LLCs during 2023.

The increase was primarily due to a $0.5 million increase related to costs associated with information systems and a $0.8 million increase in miscellaneous expenses offset in part by a $0.7 million decrease in compensation expense due to our financial performance during the period.

Interest (Income) Expense - net.

The Company earned $20.0 million of interest income - net in the twelve months ended December 31, 2025 compared to earning $27.5 million of interest income - net in the twelve months ended December 31, 2024.

This was primarily due to a higher average cash balance on hand compared to prior year.

The reduction in interest income in 2025 was primarily due to a lower average cash balance on hand compared to prior year.

Income Taxes.

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Overview of Capital Resources and Liquidity

At December 31, 2024, we had $821.6 million of cash, cash equivalents and restricted cash, with $821.5 million of this amount comprised of unrestricted cash and cash equivalents, which represents a $88.9 million increase in unrestricted cash and cash equivalents from December 31, 2023.

The increase in cash is primarily due to 2024 net income and home deliveries and the timing of land spend compared to prior year.

Our principal uses of cash during 2024 were investment in land and land development, construction of homes, mortgage loan originations, investment in joint ventures, operating expenses, short-term working capital, and debt service requirements, including the repayment of amounts outstanding under our credit facilities, and the repurchase of $177.0 million of our outstanding common shares under our 2021 and 2024 Share Repurchase Programs.

At December 31, 2025, we had $689.2 million of cash, cash equivalents and restricted cash (all of which was comprised of unrestricted cash and cash equivalents), which represents a $132.3 million decrease in unrestricted cash and cash equivalents from December 31, 2024.

The decrease in cash is primarily due to decreased net income and home deliveries in 2025 and the timing of land spend compared to prior year.

Our principal uses of cash during 2025 were investment in land and land development, construction of homes, mortgage loan originations, investment in joint ventures, operating expenses, short-term working capital, and debt service requirements, including the repayment of amounts outstanding under our credit facilities, and the repurchase of $202.0 million of our outstanding common shares under the 2024 and both 2025 Share Repurchase Programs compared to $177.0 million repurchased under the 2024 and 2021 Share Repurchase Programs in 2024.

In order to fund these uses of cash, we used proceeds from home deliveries, the sale of mortgage loans, the sale of mortgage servicing rights, excess cash balances, borrowings under our credit facilities, and other sources of liquidity.

The Company is a party to two primary credit agreements:

The Company is a party to three primary credit agreements:

(1) a $900 million unsecured revolving credit facility, dated July 18, 2013, as amended (the “Credit Facility”), with M/I Homes, Inc.

as borrower and guaranteed by the Company’s wholly-owned homebuilding subsidiaries and (2) a $300 million mortgage repurchase agreement, dated October 24, 2023, as amended most recently on October 22, 2024 (the “MIF Mortgage Repurchase Facility”), with M/I Financial as borrower.

as borrower and guaranteed by the Company’s wholly-owned homebuilding subsidiaries;

(2) a $200 million mortgage repurchase agreement, dated October 24, 2023, as amended most recently on October 21, 2025 (the “MIF Mortgage Repurchase Facility”), with M/I Financial as borrower;

and (3) an uncommitted $100 million mortgage repurchase agreement dated October 21, 2025 (the “MIF Master Repurchase Facility”), with M/I Financial as borrower.

As of December 31, 2025, we had outstanding notes payable (consisting primarily of notes payable for our financial services operations, the 2030 Senior Notes and the 2028 Senior Notes) with varying maturities in an aggregate principal amount of $977 million, with $277 million payable within 12 months.

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During 2025, we generated $137.3 million of cash from operating activities, compared to generating $179.7 million of cash from operating activities in 2024.

The cash generated by operating activities in 2025 was primarily a result of net income of $402.9 million and a $36.7 million increase in other liabilities, offset partially by a $313.5 million increase in inventory, loan originations that exceeded proceeds from the sale of mortgage loans by $20.7 million, a $16.0 million decrease in other assets and a $35.9 million increase in accounts payable and customer deposits.

The cash generated by operating activities in 2024 was primarily a result of net income of $563.7 million and a $23.1 million increase in other liabilities, offset partially by a $297.7 million increase in inventory, loan originations that exceeded proceeds from the sale of mortgage loans by $114.0 million, a $23.8 million increase in other assets and a $21.9 million decrease in accounts payable and customer deposits.

The cash generated by operating activities in 2023 was primarily a result of net income of $465.4 million, proceeds from the sale of mortgage loans that exceeded mortgage loan originations by $72.9 million and a $46.7 million decrease in inventory,

offset partially by a $28.8 million decrease in other liabilities and $31.9 million decrease in accounts payable and customer deposits.

Net cash provided by operating activities decreased by $42.4 million compared to 2024 primarily as a result of the $160.8 million decline in net income and the $11.7 million reduction in the fair value adjustment of mortgage loans held for sale partially offset by the $93.3 million reduction in the amount by which the sale of mortgage loans exceeded mortgage loan originations, inventory charges and write-offs of land deposits and pre-acquisition costs of $47.7 million, and a $7.1 million increase in deferred income tax expense.

Investing Cash Flow Activities.

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This $4.8 million increase in cash usage was primarily due to a $5.1 million increase in cash contributions to our joint venture arrangements compared to prior year.

The cash used in investing activities during 2023 was primarily a result of an increase in our investment in joint venture arrangements.

Financing Cash Flow Activities.

During 2025, we used $210.0 million of cash in financing activities, compared to using $36.1 million of cash in financing activities during 2024.

The cash used in financing activities in 2024 was primarily due to the repurchase of $177.0 million of our outstanding common shares during 2024 offset, in part, by proceeds of $120.3 million (net of proceeds from borrowings) under the MIF Mortgage Repurchase Facility and $21.3 million in proceeds from the exercise of stock options during 2024.

The cash used in financing activities in 2023 was primarily due to repayments of $79.9 million (net of proceeds from borrowings) under our then-outstanding M/I Financial credit facilities and the repurchase of $65.3 million of our outstanding common shares during 2023, offset, in part, by $33.8 million in proceeds from the exercise of stock options during 2023.

On May 14, 2024, the Company announced that its Board of Directors authorized a new share repurchase program pursuant to which the Company may purchase up to $250 million of its outstanding common shares (the “2024 Share Repurchase Program”), which replaced the 2021 Share Repurchase Program.

During 2024, the Company repurchased 1.2 million outstanding common shares for an aggregate purchase price of $177.0 million under the 2024 and 2021 Share Repurchase Program which was funded with cash on hand.

As of December 31, 2024, the Company was authorized to repurchase an additional $106.7 million of outstanding common shares under the 2024 Share Repurchase Program (see Note 16 to our Consolidated Financial Statements).

On February 11, 2025 the Company announced that its Board of Directors authorized a new share repurchase program pursuant to which the Company may purchase up to $250 million of its outstanding common shares (the “2025 Share Repurchase Program”), which replaced the 2024 Share Repurchase Program.

The increase in cash used in financing activities in 2025 was primarily due to the repurchase of $202.0 million of our outstanding common shares during 2025, repayments of $9.3 million (net of proceeds from borrowings) under the MIF credit facilities and $7.0 million of debt issue costs offset, in part, by $8.4 million in proceeds from the exercise of stock options during 2025.

The cash used in financing activities in 2024 was primarily due to the repurchase of $177.0 million of our outstanding common shares during 2024, offset, in part, by proceeds of $120.3 million (net of repayments of borrowings) under the MIF Mortgage Repurchase Facility and $21.3 million in proceeds from the exercise of stock options during 2024.

On November 12, 2025, the Company announced that its Board of Directors authorized a new share repurchase program pursuant to which the Company may purchase up to $250 million of its outstanding common shares (the “Second 2025 Share Repurchase Program”), which replaced the 2025 Share Repurchase Program.

During 2025, the Company repurchased 1.6 million outstanding common shares for an aggregate purchase price of $202.0 million under the two 2025 Share Repurchase Programs and the 2024 Share Repurchase Program which was funded with cash on hand.

As of December 31, 2025, the Company was authorized to repurchase an additional $220.4 million of outstanding common shares under the Second 2025 Share Repurchase Program (see Note 16 to our Consolidated Financial Statements).

Based on current market conditions, expected capital needs and availability, and the current market price of the Company’s common shares, we expect to continue repurchasing shares during 2026.

The timing and amount of any future purchases under the 2025 Share Repurchase Program will be based on a variety of factors, including the market price of the Company’s common shares, business considerations, general market and economic conditions and legal requirements.

The timing and amount of any future purchases under the Second 2025 Share Repurchase Program will be based on a variety of factors, including the market price of the Company’s common shares, business considerations, general market and economic conditions and legal requirements.

At December 31, 2025 and December 31, 2024, our ratio of homebuilding debt to capital was 18% and 19%, respectively, calculated as the carrying value of our outstanding homebuilding debt (which consists of borrowings under our Credit Facility, our 2030 Senior Notes and our 2028 Senior Notes) divided by the sum of the carrying value of our outstanding homebuilding debt plus shareholders’ equity.

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We believe that these sources of cash, along with our balance of unrestricted cash and borrowings available under our credit facilities, will be sufficient to fund our currently anticipated working capital needs, investment in land and land development, construction of homes, operating expenses, planned capital spending, and debt service requirements for at least the next twelve months.

In addition, we routinely monitor current and anticipated operational and debt service requirements, financial market conditions, and credit relationships, and we may choose to seek additional capital by issuing new debt and/or equity securities or engaging in other financial transactions to strengthen our liquidity or our long-term capital structure.

debt and/or equity securities or engaging in other financial transactions to strengthen our liquidity or our long-term capital structure.

The financing needs of our homebuilding and financial services operations depend on anticipated sales and home delivery volume in the current year as well as future years, inventory levels and related turnover, forecasted land and lot purchases, debt maturity dates, and other factors.

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There were no borrowings outstanding and $93.2 million of letters of credit outstanding at December 31, 2025, leaving $806.8 million available.

The Credit Facility has an expiration date of December 9, 2026.

(b) The available amount is computed in accordance with the borrowing base calculations under the MIF Mortgage Repurchase Facility, which may be increased by pledging additional mortgage collateral, not to exceed the maximum aggregate commitment amount of M/I Financial's repurchase agreement as of December 31, 2024, which was $300 million.

The Credit Facility has an expiration date of September 18, 2030.

(b) The available amount is computed in accordance with the borrowing base calculations under the MIF Mortgage Repurchase Facility, which may be increased by pledging additional mortgage collateral, not to exceed the maximum aggregate commitment amount of the MIF Mortgage Repurchase Facility as of December 31, 2025, which is $200 million.

The MIF Mortgage Repurchase Facility has an expiration date of October 20, 2026.

In addition, M/I Financial entered into a new MIF Master Repurchase Facility which provides for an uncommitted maximum borrowing availability of $100 million to expire on October 20, 2026.

Notes Payable - Homebuilding

Homebuilding Credit Facility .

The Credit Facility provides for an aggregate commitment amount of $650 million and also includes an accordion feature pursuant to which the maximum borrowing availability may be increased to an aggregate of $800 million, subject to obtaining additional commitments from lenders.

The Credit Facility matures on December 9, 2026.

Interest on amounts borrowed under the Credit Facility is payable at multiple interest rate options, including one, three, or six month adjusted term secured overnight financing rate (“SOFR”) (subject to a floor of 0.25%) plus a margin of 175 basis points (subject to adjustment in subsequent quarterly periods based on the Company’s leverage ratio).

The Credit Facility provides for an aggregate commitment amount of $900 million and also includes an accordion feature pursuant to which the maximum borrowing availability may be increased to an aggregate of $1.05 billion, subject to obtaining additional commitments from lenders.

The Credit Facility matures on September 18, 2030.

Interest on amounts borrowed under the Credit Facility is payable at an adjusted term SOFR margin of 150 basis points (subject to adjustment in subsequent quarterly periods based on the Company’s leverage ratio).

Borrowings under the Credit Facility constitute senior, unsecured indebtedness and availability is subject to, among other things, a borrowing base calculated using various advance rates for different categories of inventory.

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The Credit Facility contains various representations, warranties and covenants which require, among other things, that the Company maintain (1) a minimum level of Consolidated Tangible Net Worth of $2.2 billion at December 31, 2025 (subject to increase over time based on earnings and proceeds from equity offerings), (2) a leverage ratio not in excess of 60%, and (3) either a minimum Interest Coverage Ratio of 1.5 to 1.0 or a minimum amount of available liquidity.

In addition, the Credit Facility contains covenants that limit the Company’s number of unsold housing units and model homes, as well as the amount of Investments in Unrestricted Subsidiaries and Joint Ventures (each as defined in the Credit Facility).

In addition, the Credit Facility contains covenants that limit the amount of Investments in Unrestricted Subsidiaries and Joint Ventures (each as defined in the Credit Facility).

The Company’s obligations under the Credit Facility are guaranteed by all of the Company’s subsidiaries, with the exception of subsidiaries that are primarily engaged in the business of mortgage financing, title insurance or similar financial businesses relating to the homebuilding and home sales business, certain subsidiaries that are not 100%-owned by the Company or another subsidiary, and other subsidiaries designated by the Company as Unrestricted Subsidiaries (as defined in the Credit Facility), subject to limitations on the aggregate amount invested in such Unrestricted Subsidiaries.

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Investments in Unrestricted Subsidiaries and Joint Ventures ≤ $ 918.4 $ 6.8

Unsold Housing Units and Model Homes

≤ 3,271 1,852

Notes Payable - Financial Services.

MIF Mortgage Repurchase Facility.

M/I Financial entered into the MIF Mortgage Repurchase Facility on October 24, 2023, as amended, which provides for a maximum borrowing availability of $300 million and expires on October 21, 2025.

The MIF Mortgage Repurchase Facility is used to finance eligible residential mortgage loans originated by M/I Financial.

M/I Financial pays interest on each advance under the MIF Mortgage Repurchase Facility at a per annum rate based on Daily Adjusting One-Month Term SOFR plus a margin as defined in the MIF Mortgage Repurchase Facility.

On October 21, 2025, M/I Financial entered into an amendment to the MIF Mortgage Repurchase Facility that extends the term of the MIF Mortgage Repurchase Facility for an additional year to October 20, 2026 and decreases the aggregate commitment amount from $300 million to $200 million for the entire remaining term.

The MIF Mortgage Repurchase Facility is used to finance eligible residential mortgage loans originated by M/I Financial.

M/I Financial pays interest on each advance under the MIF Mortgage Repurchase Facility at a per annum rate based on Daily Simple SOFR plus a margin as defined in the MIF Mortgage Repurchase Facility.

The MIF Mortgage Repurchase Facility provides for limits with respect to certain loan types that can secure outstanding borrowings.

The MIF Mortgage Repurchase Facility also contains certain financial covenants each of which is defined in the MIF Mortgage Repurchase Facility.

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We expect to extend the MIF Mortgage Repurchase Facility on or prior to the current expiration date of October 20, 2026, but we cannot provide any assurance that we will be able to obtain such an extension.

As of December 31, 2024, there was $286.2 million outstanding under the MIF Mortgage Repurchase Facility.

M/I Financial was in compliance with all covenants thereunder.

As of December 31, 2025, there was $198.2 million outstanding under the MIF Mortgage Repurchase Facility and M/I Financial was in compliance with all covenants thereunder.

The financial covenants, as more fully described and defined in the MIF Mortgage Repurchase Facility, are summarized in the following table, which also sets forth M/I Financial’s compliance with such covenants as of December 31, 2025:

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Tangible Net Worth ≥ $ 25.0 $ 40.2

MIF Master Repurchase Facility.

The MIF Master Repurchase Facility which provides for an uncommitted maximum borrowing availability of $100 million and expires on October 20, 2026 or upon agent demand with a 30 day notice.

The MIF Master Repurchase Facility is used to finance eligible residential mortgage loans originated by M/I Financial.

M/I Financial pays interest on each advance under the MIF Master Repurchase Facility at a per annum rate based on Daily Simple SOFR plus a margin as defined in the MIF Master Repurchase Facility.

The MIF Master Repurchase Facility contains the same financial covenants as the MIF Mortgage Repurchase Facility.

As of December 31, 2025, there was $78.7 million outstanding under the MIF Master Repurchase Facility and M/I Financial was in compliance with all covenants thereunder.

Senior Notes.

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These covenants are subject to a number of exceptions and qualifications as described in the indenture governing the 2028 Senior Notes.

As of December 31, 2024, the Company was in compliance with all terms, conditions, and covenants under the indenture.

As of December 31,

2025, the Company was in compliance with all terms, conditions, and covenants under the indenture.

See Note 11 to our Consolidated Financial Statements for more information regarding the 2030 Senior Notes and the 2028 Senior Notes.

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The 2030 Senior Notes and the 2028 Senior Notes are fully and unconditionally guaranteed, on a joint and several basis, by all of M/I Homes, Inc.’s subsidiaries (the “Subsidiary Guarantors”) with the exception of subsidiaries that are primarily engaged in the business of mortgage financing, title insurance or similar financial businesses relating to the homebuilding and home sales business, certain subsidiaries that are not 100%-owned by M/I Homes, Inc.

or another subsidiary, and other subsidiaries designated as Unrestricted Subsidiaries (as defined in the indentures governing the 2030 Senior Notes and the 2028 Senior Notes), subject to limitations on the aggregate amount invested in such Unrestricted Subsidiaries in accordance with the terms of the Credit Facility and the indentures governing the 2030 Senior Notes and the 2028 Senior Notes (the “Non-Guarantor

Subsidiaries”).

The Subsidiary Guarantors of the 2030 Senior Notes, the 2028 Senior Notes and the Credit Facility are the same and are listed on Exhibit 22 to this Form 10-K.

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In 2025 and 2024, our weighted average borrowings outstanding were $725.3 million and $723.4 million, respectively, with a weighted average interest rate of 5.37% and 5.32%, respectively.

The decrease in our weighted average borrowings related to decreased borrowings under our then-outstanding M/I Financial credit facilities during 2024 compared to 2023.

The increase in our weighted average borrowings related to increased borrowings under our then-outstanding M/I Financial credit facilities during 2025 compared to 2024.

At both December 31, 2025 and December 31, 2024, we had no borrowings outstanding under the Credit Facility.

To the extent we elect to borrow under the Credit Facility during 2026, the actual amount borrowed and the related timing will be subject to numerous factors, which are subject to significant variation as a result of the timing and amount of land and house construction expenditures, payroll and other general and administrative expenses, and cash receipts from home deliveries.

The amount borrowed will also be impacted by other cash receipts and payments, any capital markets transactions or other additional financings by the Company, any repayments or redemptions of outstanding debt, any additional share repurchases under the 2025 Share Repurchase Program and any other extraordinary events or transactions.

The amount borrowed will also be impacted by other cash receipts and payments, any capital markets transactions or other additional financings by the Company, any repayments or redemptions of outstanding debt, any additional share repurchases under the Second 2025 Share Repurchase Program and any other extraordinary events or transactions.

The Company may also experience significant variation in cash and Credit Facility balances from week to week due to the timing of such receipts and payments.

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At December 31, 2025, M/I Financial had $198.2 million outstanding under the MIF Mortgage Repurchase Facility.

During 2025, the average daily amount outstanding under our MIF Mortgage Repurchase Facility was $18.9 million and the maximum amount outstanding was $286.2 million, which occurred during January.

At December 31, 2025, M/I Financial also had $78.7 million outstanding under the MIF Master Repurchase Facility.

During 2025, the average daily amount outstanding under our then-outstanding MIF credit facilities was $20.0 million and the maximum amount outstanding was $78.7 million, which occurred during December.

Universal Shelf Registration.

In June 2022, the Company filed a universal shelf registration statement with the SEC, which registration statement became effective upon filing and will expire in June 2025.

Pursuant to the registration statement, the Company may, from time to time, offer debt securities, common shares, preferred shares, depositary shares, warrants to purchase debt securities, common shares, preferred shares, depositary shares or units of two or more of those securities, rights to purchase debt securities, common shares, preferred shares or depositary shares, stock purchase contracts and units.

The timing and amount of offerings, if any, will depend on market and general business conditions.

INTEREST RATES AND INFLATION

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These macroeconomic trends have pressured housing affordability, negatively impacted homebuyer sentiment and impacted the costs of financing land development activities and housing construction.

The annual rate of inflation in the United States was 2.9% in December 2024, as measured by the Consumer Price Index, up slightly from prior quarter, and down from 3.4% in December 2023.

The annual rate of inflation in the United States was 2.7% in December 2025, as measured by the Consumer Price Index, down slightly from the prior quarter and from 2.9% in December 2024.

As the rate of inflation has declined from 2022’s historic levels, our costs have stabilized.

However, continued increases in inflation rates could impact our costs, potentially reduce our gross margins, reduce the purchasing power of potential homebuyers, and negatively impact their ability and desire to buy a home.

Mortgage interest rates have hovered around 7% since the end of 2023.

During the second half of 2024, the Federal Reserve reduced interest rates by 100 basis points.

Mortgage interest rates remained elevated since the end of 2023, although slightly lower rates began to appear in the second half of 2025.

During 2025, the Federal Reserve reduced interest rates by 75 basis points.

High mortgage interest rates have made it more difficult for homebuyers to qualify for mortgages or to obtain mortgages at interest rates that are acceptable to them.

We plan to help combat high interest costs in 2025 by offering interest rate buydowns to potential homebuyers.

We plan to help combat high interest costs in 2026 by offering mortgage interest rate buydowns to potential homebuyers.

We believe that offering mortgage interest rate buydown incentives may cause otherwise hesitant potential homebuyers to decide to enter the homebuying market due to the improved affordability of obtaining a mortgage, and we believe we are well prepared to address increased demand in our markets with our current land position and open communities.

However, offering sales incentives, such as interest rate buydowns, may reduce our margins from the record level we achieved in 2024.

However, offering sales incentives, such as mortgage interest rate buydowns, may further reduce our margins.

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 7. Management’s Discussion and Analysis