Meritage Homes Corporation has recently released its 10-Q report, revealing a robust performance in the second quarter of 2024 despite ongoing volatility in mortgage interest rates. The company, which designs and builds single-family attached and detached homes in the United States, operates through two segments: Homebuilding and Financial Services. It acquires and develops land, constructs, markets, and sells homes for entry-level and first move-up buyers in various states, and also offers title and escrow, mortgage, insurance, and closing/settlement services to its homebuyers. Meritage Homes Corporation was founded in 1985 and is based in Scottsdale, Arizona.
In the 10-Q report, Meritage Homes highlighted that demand for new homes remained healthy during the second quarter of 2024, driven by life events within its target demographics and a persistent shortage of existing housing supply. The company's spec building strategy and streamlined operations allowed it to capitalize on this demand, resulting in record second-quarter home closing revenue and units volume of $1.7 billion on 4,118 homes, up from $1.5 billion on 3,490 homes in the same prior year period. The 9.8% increase in home closing revenue year-over-year was driven by an 18.0% increase in volume, while the average sales price on closings decreased by 7.0% due primarily to a combination of product mix and geography shift.
Furthermore, the report revealed that home closing gross margin improved by 150 basis points to 25.9% for home closing gross profit of $439.5 million compared to 24.4% and $377.0 million, respectively, in the second quarter of 2023. The margin improvement was primarily due to lower direct costs, leverage of higher home closing revenue on overhead costs, and shorter construction cycle times, partially offset by higher lot costs. Additionally, home orders of 3,799 for the quarter ended June 30, 2024, were 13.7% higher than the second quarter of 2023, with entry-level homes representing 92% of orders in the second quarter of 2024 compared to 85% in the second quarter of 2023. The cancellation rate of 10% in the second quarter of 2024 was down slightly from 12% in the second quarter of 2023.
The company also reported a 12.7% improvement in home closing revenue for the six months ended June 30, 2024, compared to 2023, with home closing gross margin of 25.9% improving by 240 basis points year over year. Home orders and home order value increased by 14.1% and 7.5%, respectively, over the prior year for the six months ended June 30, 2024, with the cancellation rate improving from 13% in the prior year period to 9%.
Meritage Homes Corporation ended the second quarter of 2024 with 287 active communities, down from 291 at June 30, 2023, although up sequentially from 275 at March 31, 2024. The company purchased approximately 8,900 lots for $477.1 million, spent $584.3 million on land development, and started construction on 8,461 homes during the six months ended June 30, 2024.
The report also outlined the company's strategic initiatives, including delivering affordable homes on a shorter timeline, offering move-in ready homes with a 60-day closing guarantee, embracing external realtor relationships, and continuously improving the overall home buying experience through simplification and innovation. Additionally, Meritage Homes remains committed to achieving or maintaining a top 5 market position in all of its markets, maintaining and expanding home closing gross profit, carefully managing liquidity and a strong balance sheet, and promoting a positive environment for its employees.
Today the company's shares have moved 3.6% to a price of $200.1. Check out the company's full 10-Q submission here.
