Meritage Homes CORP recently released its 10-Q report. Meritage Homes Corporation, together with its subsidiaries, designs and builds single-family attached and detached homes in the United States. It operates through Homebuilding and Financial Services, acquires and develops land, and sells homes to entry-level and first move-up buyers across Arizona, California, Colorado, Utah, Texas, Alabama, Florida, Georgia, Mississippi, North Carolina, South Carolina, and Tennessee. The company also provides title and escrow, mortgage, insurance, title insurance, and closing and settlement services to its homebuyers.
In Item 2, management said the homebuilding market remained softer than expected in the second quarter of 2026, citing affordability pressure, weaker consumer confidence, and military conflict-related economic effects, with severe winter storms earlier in the year also weighing on demand. Meritage said buyers increasingly needed financing help to manage monthly payments, and it continued to rely on incentives such as interest rate locks and buy-downs as a key selling tool versus resale homes. Construction cycle times stayed below 110 calendar days, versus a historical normalized level of about 120 days and more than 150 days in prior years, while land costs remained elevated after years of high acquisition and development spending. The company said its all-spec strategy was intended to support affordability, home closing revenue, gross margin, cost control, and liquidity.
Second-quarter home closings fell to 3,725 from 4,170 a year earlier, a 10.7% decline. Home closing revenue dropped 14.1% to $1.388 billion from $1.616 billion, while average sales price on closings fell 3.8% to $372,600 from $387,500. Home closing gross profit declined to $253.6 million from $341.3 million, and gross margin narrowed to 18.3% from 21.1%. The company said lower volume, lower pricing, and higher lot costs drove the decline, partly offset by direct-cost savings and shorter construction cycles.
Financial services profit was $5.3 million, little changed from $5.6 million a year earlier. Commissions and other sales costs fell to $91.8 million from $108.8 million, and general and administrative expenses declined to $52.4 million from $55.2 million. Earnings before income taxes fell to $120.6 million from $193.1 million, and net earnings dropped to $90.6 million from $146.9 million. The effective tax rate was 24.8%, compared with 23.9% in the prior-year quarter.
For the first six months of 2026, closings fell 11.8% to 6,692 from 7,586, and average sales price declined 4.4% to $372,900 from $389,900. Home closing revenue decreased 15.6% to $2.496 billion from $2.958 billion, and gross margin fell 360 basis points to 17.9%. Net income was $145.9 million, down from $269.7 million a year earlier. Commissions and other sales costs decreased to reflect lower volume, and G&A expenses fell on lower compensation expense and reduced discretionary spending.
Home orders in the quarter totaled 3,575, down 8.7% from 3,914, while order value fell 11.1% to $1.376 billion from $1.547 billion. The company said the order pace dropped 18.6% to 3.5 net homes per month, though average active communities increased 13.8%. The cancellation rate rose to 13% from 10%. For the first half, orders declined 7.1% to 7,239 and order value fell 10.6% to $2.777 billion, with cancellations at 12% versus 9% a year earlier.
At June 30, 2026, backlog stood at 1,715 homes valued at $661.9 million, down from 1,748 homes and $695.5 million a year earlier. Meritage ended the quarter with 340 active communities, up from 312 a year earlier and 336 at year-end 2025. During the first six months, it purchased about 4,700 lots for $277.4 million, spent $405.8 million on land development net of reimbursements, and started construction on 6,453 homes. The company said it ended the quarter with a 26.8% debt-to-capital ratio and a 17.1% net debt-to-capital ratio. As a result of these announcements, the company's shares have moved -0.86% on the market, and are now trading at a price of $70.20. Check out the company's full 10-Q submission here.
