Dive Brief:

• CalAtlantic, the country’s fifth-largest homebuilder, saw new-home orders increase 4% and deliveries jump 10% in the first quarter of 2017 from a year ago while net income climbed 14% to $0.62 per diluted share year-over-year, according to the company.

• A shift in community mix, competitive pricing and higher construction costs proved to be a drag on gross margin during a strong spring selling season, with the company reporting 20.5% in Q1 2017 from 21.0% in Q1 2016. The company had 562 average active selling communities in the first quarter, down from 571 a year ago, though it opened 31 new communities in Q1.

• The company reported an average selling price of $444,000, up 3% from a year ago, while the dollar value of its net new-home orders was up 7% for the period. Home sales generated $1.3 billion in revenues for the period.

Dive Insight:

CalAtlantic’s Q1 earnings report comes alongside a flurry of activity for the builder. Last week, the company announced plans to purchase 739 lots in nine communities around the Minneapolis–St. Paul area from Mattamy Homes. It also opened a 36-home community in Charlotte, NC. The previous weekend, CalAtlantic opened six communities around the country, including two in Texas and one in San Diego.

“Land acquisition and development continues to be our primary use of capital as our land pipeline remains strong and we continue to find opportunities that meet our underwriting criteria,” said CalAtlantic President and CEO Larry Nicholson during a call with investors and analysts last week. “Given our current land partition, our operating teams are focused on identifying and acquiring land that will result in new community openings for 2018 and beyond.”

During the call, Nicholson acknowledged a lower-than-expected community count, noting that a few closed out earlier than anticipated and others were delayed by zoning approvals or developer issues — events that he said were the result of broader, industry-wide issues. “[T]he two things as a company we’re focused on obviously are sales, but [also] margin and getting communities opened, and getting them opened right,” he said.

The California community count was down in Q1, largely mirroring the overall company trend for the period, and will be down in Q2, said CalAtlantic chief financial officer Jeff McCall. He said the company is expecting to see “a nice rebound” in Q3 and Q4.

CalAtlantic was formed in October 2015 from the merger of The Ryland Group and Standard Pacific Homes. 

For more housing news, sign up for our daily residential construction newsletter.