FORT WORTH, Texas — Read this story and more North Texas business news from our partners at the Dallas Business Journal
A publicly traded national homebuilder in the process of moving its corporate headquarters from Southern California to Dallas had a record-setting year in 2022, but is adjusting to the housing market slowdown with price cuts, mortgage rate buydowns and a reduction in headcount, executives of Landsea Homes Corp. said Tuesday.
Landsea Homes (Nasdaq: LSEA) on Monday announced it is moving its headquarters to Uptown Dallas from its current location in Newport Beach, Calif.
Being headquartered in Dallas will help Landsea cut costs and boost the company’s goal of building more homes in Texas, which will be a key market for the company, Landsea founder and CEO John Ho said during an earnings call Tuesday.
"We are relocating our corporate headquarters to Dallas, Texas, from Southern California, a move that should provide cost savings over time,” Ho said. “That will allow us to operate more effectively as a national home builder. This move should also signal our commitment to growing our homebuilding presence in that state.”
Landsea Homes generated total revenue in 2022 of over $1.4 billion and pre-tax income of $101 million, for earnings of $1.70 per diluted share — all records for the company, Ho said.The company closed 2,370 homes during the year, representing a 45% increase over 2021, he said.
But significant challenges arose in the second half of 2022, Ho said.
“While 2022 was a record year in terms of profitability, it was also a year in which the demand environment became more challenging due to a rapid rise in mortgage rates and a subsequent decline in homebuyer confidence,” Ho said. “This change in market dynamics caused buyers who were in the market for a new home to become more cautious and prompted buyers in our backlog to cancel their purchase contracts. As a result, our net new order activity in the third and fourth quarters dropped off significantly as compared to the prior year.”
Market conditions began to improve in December and that has carried over into this year, but demand continues to remain volatile and subject to changes in mortgage rates, Ho added.
In response to the uncertain demand, Landsea is proactively negotiating with suppliers, vendors and contractors to make sure the prices the company is paying reflect the new market realities as well as Landsea's increased size and scale, the CEO said. The company is prepared to walk away from land option agreements if they no longer meet its needs, and the homebuilder has reduced its headcount by about 8%, Ho said.
Landsea currently builds homes and residential communities in Arizona, Florida, Texas and California.
Its new headquarters office will be at 1717 McKinney in Dallas, where Landsea has signed a lease for 7,716 square feet on the building’s 10th floor.
In terms of homebuilding, Landsea’s footprint in Texas is relatively small, making up just 3% of the company’s revenue in 2022. The company currently owns or controls 1,087 lots, mostly in the Austin and San Antonio markets.
California made up 35% the company’s 2022 homebuilding revenue in 2022, Florida made up 33% and Arizona made up 22%.
The company wants to boost its presence in the Lone Star State, but changing the geographical percentages will take time, Ho said.
"Texas will come on toward the end of the year, but generally, it will be around the same split (at year-end)," he said.
Landsea’s full year 2022 results:
- Home sales revenue increased 49% to $1.4 billion
- Total homes delivered increased 45% to 2,370 homes
- Net income of $73.6 million, or $1.70 per diluted share
Landsea’s Q4 2022 financial summary:
• Total revenue was $426 million in Q4 2022, vs. $398.5 million in Q4 2021.
• New home deliveries were 703 with a dollar value of $417.5 million and an average sales price $594,000 in Q4 2022. This compares to 534 homes with a dollar value of $333.1 million and average sales price $624,000 in Q4 2021.
• Net new home orders were 88 homes with a dollar value of $57.5 million for an average sales price of $653,000 in Q4 2022. This compares to 440 homes with a dollar value of $313.1 million, an average sales price of $712,000 in Q4 2021.
• The number of selling communities increased to 58 in Q4 2022 vs. 35 in Q4 2021
• Total homes in backlog decreased 33% to 670 homes with a dollar value of $380.9 million and an average sales price of $569,000 in Q4 2022, compared to 998 homes with a dollar value of $586.2 million and an average sales price of $587,000 in Q4 2021.
• Total lots owned and controlled by Landsea increased 33% to 11,593 in Q4 2022, from 8,740 in Q4 2021. Of those lots 54% are controlled and 46% are owned.