To illustrate, he focused on some of the numbers. “Home closings last year were 6,621,” he noted. “This was not the goal we set. And to be frank, we were disappointed we missed our guidance even by such a narrow margin.”
Growing lack of affordability exacerbates issues
A continuing erosion in affordability didn’t help matters: “We’re in the affordable housing business, and during the year, affordability got constrained, supply chains tightened, costs inflated, and home prices went up,” Lipar said. “Beginning in January, mortgage rates started to slowly increase, but quickly accelerated as the year went on. By September, they’d surpassed 6% for the first time since November of 2008. One month later, rates exceeded 7% for the first time in over 20 years.”
The affordability crisis prompted officials at the Houston-based builder to pivot: “As affordability tightened, buyers paused, and the market decelerated. And as it did, we got back to basics. We expanded our marketing. We got back to training. We had to work for every sale. We invested time and resources to make certain our people run process building, selling, and closing homes the LGI way.”
As a result of that market-forced pivot, the company did post some notable achievements: “For the ninth consecutive year, we averaged at least six closings per community per month, an industry-leading result that demonstrates the success of our systems, processes, and people,” he said.
While other companies have resorted to layoffs amid the market downturn, LGI Homes has been hiring additional staff: “While news headlines continue to focus on layoffs, we’re in hiring mode,” Lipar told shareholders. “On Feb. 6, we welcomed 106 new sales professionals to our corporate headquarters for training. This is our largest sales training class to date.”