What drove the sequential improvement in gross margin, specifically regarding cost reductions and potential mix impact from move-up homes?

Cost improvements were modest (1-3%), not as high as some peers. While move-up might have a slight impact, the primary driver is well-located communities allowing for premium margins, with many communities performing above the 22% average. Mortgage buydowns are essential industry-wide. “We probably got 1%, 2%, 3% improvement depending upon the market. So that's helped a little bit. There's a lot of uncertainty still. And we were pleased to see margins slightly improve or at least not get any worse.”

Breakdown of spec vs. intra-quarter order closings and margin differences between spec and to-be-built homes.

78% of Q2 sales were specs, and 42% of deliveries were sold and closed within the quarter. To-be-built homes generally have better margins, varying from slightly to 100-200 bps higher depending on the market. The company manages spec levels closely, with fewer completed specs this year due to improved cycle times. “in nearly every one of our 17 markets, the margins on to-be-builts are better. In some, just slightly; and in others, it could be 100 or 200 basis points, perhaps more in a couple of select instances.”

Given strong margins and buydown insulation, what are the company's worries for the second half and into 2027?

Current housing conditions are "above average." While the company is performing well, the demand is suppressed by high rates, economic uncertainty, and affordability issues. Unforeseen macro events (like geopolitical conflicts) are a concern, mitigated by a strong balance sheet, low debt, and focus on high-quality land and fundamentals. “if I had to grade or if we had to grade current housing conditions, I think they're above average. They're not bad. They're not really good either, but they're -- we've seen far, far worse.”

MHO

M/I Homes (MHO) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q2 FY26)· Consumer Discretionary· Jul 29, 2026

Source: earnings call transcript

Executive summary

M/I Homes Q2 FY26 — Record Sales Pace and Strong Financial Position Despite Headwinds

M/I Homes delivered solid Q2 FY26 results, achieving record sales and a strong financial position despite a challenging macro environment with rising interest rates and economic uncertainty. The company leveraged its well-located communities, diverse product offerings, and effective mortgage rate buydown programs to drive sales pace. Management remains confident in the long-term housing fundamentals and their strategic land position.

Highlights

Second quarter record 2,387 homes sold, up 15% YoY.
Monthly sales pace averaged 3.4 homes per community, up from 3.0 a year ago.
Mortgage company achieved a record 96% capture rate, up from 92% last year.
Ended quarter with $736 million cash and no borrowings on $900 million credit facility, resulting in a net debt-to-cap ratio of negative 1%.
Book value per share increased to $128, an $11 per share increase from a year ago.

Concerns

Revenue for the quarter was $1.1 billion, down 9% from last year.
Pretax income was $105 million, down 35% from a year ago.
SG&A expenses increased to 12.6% of revenue, up from 11.3% a year ago.
Deliveries decreased 6% YoY to 2,206 homes, and average sale price declined.

Guidance & targets

Category	Target	Timeline	Confidence
Average Community Count Growth	about 5% higher medium materiality	FY26	Medium
New Store Openings	more new stores in the second half than we did the first half low materiality	H2 FY26	Medium

Segment performance

Segment	Revenue	YoY	QoQ	Margin
Northern Region Deliveries decreased compared to last year's second quarter, but new contracts showed strong growth. The region holds a significant portion of the company's owned and controlled lots. New contracts: +16% YoYDeliveries: 40% of company-wide totalOwned and controlled lots: 40% of company-wide totalOwned and controlled lots: +24% YoYCommunities: 94	—	-8%	—	—
Southern Region Deliveries decreased compared to last year, but new contracts increased. The region accounts for the majority of the company's deliveries and owned/controlled lots, though lot count decreased YoY. New contracts: +14% YoYDeliveries: 60% of company-wide totalOwned and controlled lots: 60% of company-wide totalOwned and controlled lots: -15% YoYCommunities: 140	—	-5%	—	—
Smart Series Product This product line, catering primarily to first-time buyers, saw a slight decrease in its share of total sales, indicating a modest shift towards move-up products. Accounted for 43% of company-wide salesCompared to 52% a year ago	—	—	—	—

MHO operating KPIs by quarter

MHO operating KPIs stated on its earnings calls, by fiscal quarter
KPI	Mar 2026 Q1 FY26	This call Jun 2026 Q2 FY26	Change vs prior quarter
Homes closed	1,914 During the quarter, we closed 1,914 homes a 3% decrease compared to a year ago. Source: earnings call transcript	2,206 We closed 2,206 homes in the quarter, down 6% compared to a year ago. Source: earnings call transcript	+15.3%
Homes sold	2,350 We sold 2,350 homes during the quarter. Source: earnings call transcript	2,387 For the second quarter, we sold a second quarter record 2,387 homes, 15% better than last year. Source: earnings call transcript	+1.6%
Average buyer credit score	747 We continue to see high-quality buyers in terms of creditworthiness with average credit scores of 747 and an average down payment of 15%. Source: earnings call transcript	748 We continue to see quality buyers for the most part, in terms of creditworthiness with average credit scores of 748 and an average down payment of about 15%. Source: earnings call transcript	+0.1%
Owned lots	~24.2K Company-wide, we own approximately 24,200 lots, which is slightly less than a 3-year supply. Source: earnings call transcript	~23.5K Company-wide, we own approximately 23,500 lots, which is roughly a 2.5-year supply. Source: earnings call transcript	—
Controlled lots	~25.8K In addition, we control approximately 25,800 lots via option contracts, which results in a total of roughly 50,000 owned and controlled lots equating to about a 5-year supply. Source: earnings call transcript	~25.7K In addition, we control approximately 25,700 lots via option contracts, resulting in a total of slightly more than 49,000 owned and controlled lots, which equates to about a 5-year supply. Source: earnings call transcript	—
Owned and controlled lots	~50K In addition, we control approximately 25,800 lots via option contracts, which results in a total of roughly 50,000 owned and controlled lots equating to about a 5-year supply. Source: earnings call transcript	49K+ In addition, we control approximately 25,700 lots via option contracts, resulting in a total of slightly more than 49,000 owned and controlled lots, which equates to about a 5-year supply. Source: earnings call transcript	—
Cancellation rate	8% Our cancellation rate for the quarter was 8%. Source: earnings call transcript	8% Our sales were up 13% in April, up 23% in May and up 9% in June, and our cancellation rate for the second quarter was 8%. Source: earnings call transcript	0 pt
Communities closed	24 During the quarter, we opened 22 new communities while closing 24. Source: earnings call transcript	23 During the quarter, we opened 27 new communities while closing 23. Source: earnings call transcript	-4.2%
Homes in the field	4,600 And as of March 31, we had 4,600 homes in the field versus 4,800 homes in the field a year ago. Source: earnings call transcript	5,100 And at June 30, we had 5,100 homes in the field, flat versus a year ago. Source: earnings call transcript	+10.9%
Average loan to value	85% Average loan to value on our first mortgages for the quarter was 85% compared to 83% in 2025's first quarter, 66% of the loans closed in the quarter were conventional and 34% FHA/VA, compared to 57% and 43%, respectively, for 2025's first quarter. Source: earnings call transcript	85% The average loan-to-value on our first mortgages for the second quarter was 85% compared to 83% in 2025's second quarter. Source: earnings call transcript	0 pt
Average mortgage amount	$401K Our average mortgage amount decreased to $401,000 in 2026 this first quarter compared to $406,000 last year. Source: earnings call transcript	$405K Our average mortgage amount increased to $405,000 in 2026 second quarter compared to $403,000 last year. Source: earnings call transcript	+1%
Loans originated	1,579 Loans originated increased to 1,579 loans, which was up 3% from last year, while the volume of loans sold increased by 1%. Source: earnings call transcript	1,817 Loans originated decreased to 1,817, which was down 3% from last year, while the volume of loans sold increased by 6%. Source: earnings call transcript	+15.1%
Mortgage capture rate	96% Finally, our mortgage operation captured 96% of our business in the first quarter, up from 92% last year. Source: earnings call transcript	96% Our mortgage company had a terrific and very strong second quarter, capturing a record 96% of our business. Source: earnings call transcript	0 pt

Operating figures the company stated on at least two of the calls shown, checked against each call's transcript. Click a figure to read the sentence. A dash means it was not stated that quarter.

Risks & headwinds

Macroeconomic Uncertainty & Rising Interest Rates ongoing

choppy demand, economic uncertainty, rising interest rates and the impact of the conflict in the Middle East

Mitigation:Strong balance sheet, low debt, focus on high-quality land, effective mortgage buydowns.

Suppressed Buyer Pool ongoing

massive amount of buyers that are -- potential buyers that are waiting to join homeownership that are held back by the current rate environment, the uncertainty in the economy, lack of confidence, affordability

Mitigation:Well-located communities, diverse product offering, mortgage rate buydowns.

Market-Specific Challenges current

Tampa, which historically has been one of our top-performing markets, is currently somewhat challenged in terms of the macro environment within the Greater Tampa market as is Sarasota. Certainly, Austin is still crawling its way back.

Mitigation:Focus on strong performing markets, strategic land positions, and product offerings.

Increased SG&A Expenses Q2 FY26

SG&A expenses up 3% YoY, leading to 12.6% of revenue vs 11.3% a year ago.

Mitigation:Actively managing costs and expenses, focusing on efficiency.

Increased Finished Lot Costs Q2 FY26

Finished lot cost up about 8% YoY.

Mitigation:Pricing to market, seeking pricing power where possible, developing own land.

What to watch in Q3 FY26

Average Community Count Growth

FY26

Current 234 communities (Q2 FY26 end)

Target about 5% higher than last year (FY26 average)

Why it matters

Community count growth is a key driver for future sales and deliveries.

We currently estimate that our average 2026 community count will be about 5% higher than last year.

Find out whether MHO delivers this. Inve re-checks your case every morning.

Q&A highlights

Is the slight increase in move-up product sales due to company strategy or market demand?

It's a combination of both. There's slightly more demand, and the company strategically sought locations for move-up markets where underwriting for higher-priced land opportunities penciled better, especially in infill locations.

“I think it's a little bit of both. I think there is a little bit more demand there. We've always been really strong with our move-up market... in select markets, we have strategically and we began this some time ago, probably 18 to 24 months ago, look to find more locations where we could sell the more -- the move-up market because we just thought there would be better demand for it.”

asked by Alan Ratner · answered by Robert Schottenstein

2 min read 5 chapters

Detailed narrative

Sales Performance & Product Mix

M/I Homes reported a record 2,387 new contracts in Q2 FY26, a 15% increase year-over-year, with a monthly sales pace of 3.4 homes per community. For the first six months, sales reached 4,737 homes, up 8% from a year ago.

The Smart Series, targeting first-time buyers, accounted for 43% of sales, down from 52% a year ago, indicating a slight shift towards move-up products. This shift is partly driven by market demand and strategic land acquisitions for higher-priced segments, with new communities opened in the first half having an average sale price of about $575, compared to the backlog average of $540.

Mortgage Operations & Incentives

The company's mortgage operation achieved a record 96% capture rate in Q2 FY26, up from 92% last year, contributing $14.4 million in pretax income. Average credit scores were 748, and average down payments were 15%. Mortgage rate buydowns remain the primary incentive, with government programs for spec homes offering rates slightly below 5% (4.875% 30-year fixed) and conventional rates slightly above 5%.

Incentives are tailored to individual subdivisions and buyer needs, with a wide variety of programs offered beyond just rate buydowns.

Land Strategy & Inventory Management

M/I Homes owns approximately 23,500 lots (2.5-year supply) and controls an additional 25,700 lots via option contracts (5-year total supply). 60% of owned and controlled lots are in the Southern region. The company develops about 85% of its own land and is seeing more opportunities for finished lots from various sources.

Inventory management is tight, with 510 completed inventory homes at quarter-end, down from 586 a year ago, aided by improved cycle times. Land spend in Q2 was $131 million for purchases and $155 million for development, totaling $286 million.

Financial Strength & Capital Allocation

The balance sheet remains strong with $736 million cash, no borrowings on its $900 million revolving credit facility, and a net debt-to-cap ratio of negative 1%. Equity reached a record $3.2 billion, equating to a book value per share of $128, an $11 increase YoY.

The company repurchased $50 million of stock in Q2, with $120 million remaining under authorization, having repurchased 19% of outstanding shares since 2022. Public debt matures in 2028 and 2030 with interest rates below 5%.

Market Dynamics & Outlook

While overall housing conditions are considered "above average," some markets like Tampa and Sarasota are challenged by macro factors. Newer markets like Nashville and Fort Myers/Naples are gaining traction and expected to contribute significantly in the future, despite currently being a drag on earnings.

The company remains vigilant about unforeseen events but is confident in its strong balance sheet and focus on fundamentals to navigate uncertainties, aiming for a solid 2026.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.