Meritage Homes Corporation, a company that designs and builds single-family homes in the United States, recently released its 10-Q report. The company operates through two segments: Homebuilding and Financial Services, and it offers title and escrow, mortgage, insurance, title insurance, and closing/settlement services to its homebuyers. Meritage Homes Corporation was founded in 1985 and is based in Scottsdale, Arizona.
In the first quarter of 2025, Meritage Homes experienced a healthy spring selling season due to sustained demand from favorable demographics and a limited supply of affordable homes. The company's strategy of offering move-in ready homes with a 60-day closing commitment helped meet the demand for immediately available homes with a comfortable monthly mortgage payment. Despite volatile mortgage rates and macroeconomic concerns impacting consumer sentiment, Meritage Homes believes its competitive advantage lies in its financing incentives and affordable price points.
In terms of financial performance, home closing revenue for the first quarter of 2025 decreased by 8.5% to $1.3 billion, with a 6.0% decrease in average sales price on closings. The company closed 3,416 homes, a 2.6% decrease from the same period in the prior year. The lower average sales price was attributed to increased utilization of incentives, leading to a decline in home closing gross margin to 22.0% from 25.8% in the prior year.
Meritage Homes' financial services profit was $3.6 million in the first quarter of 2025, compared to a financial services loss of $0.7 million in 2024. The company's earnings before income taxes for the first quarter of 2025 decreased to $160.2 million from $234.0 million in 2024, resulting in net earnings of $122.8 million in 2025 versus $186.0 million in 2024.
Home orders for the first quarter of 2025 decreased by 2.9% from the prior year quarter, with a 10.2% decrease in orders pace, partially offset by a 6.8% increase in average active communities. The company ended the first quarter of 2025 with 2,004 homes in backlog valued at $812.4 million, decreases of 33.9% and 34.7%, respectively, from March 31, 2024.
Meritage Homes' strategic initiatives include delivering affordable homes on a shorter timeline, offering move-in ready homes with a 60-day closing commitment, and embracing external realtor relationships. The company also aims to achieve or maintain a top 5 market position in all of its markets and maintain a strong balance sheet.
In the West Region, home closing revenue decreased by 7.0% to $479.6 million, with a 1.6% decrease in home volume and a 5.5% decline in average sales price. The Central Region experienced an 8.3% decrease in home volume, resulting in a 14.7% decline in home closing revenue to $412.5 million. The East Region saw a 2.8% increase in home volume, leading to a 3.6% decrease in home closing revenue to $449.9 million.
As a result of these announcements, the company's shares have moved -1.4% on the market, and are now trading at a price of $67.95. Check out the company's full 10-Q submission here.
