M/I Homes Q3 2026 Earnings Results & Report

M/I Homes EPS Results

• Actual EPS: $2.70
• Consensus EPS: $3.25
• Beat/Miss: Missed by -$0.55
• One Year Ago EPS: $3.92
• EPS Beat Rate: 2 of last 8 quarters

M/I Homes Revenue Results

• Actual Revenue: $1.08 billion
• Expected Revenue: $1.11 billion
• Beat/Miss: Missed by -$29.78 million
• YoY Revenue Growth: -1.90%

M/I Homes (NYSE:MHO) is a homebuilder that plans and constructs single-family homes in a range of styles and price points. Its communities serve buyers including first-time homeowners, move-up buyers and luxury-home customers.

Founded in 1976 and headquartered in Columbus, Ohio, the company operates in markets across the Midwest, Mid-Atlantic, Southeast and Texas. Its homebuilding operations are complemented by services that help buyers with mortgage financing and title-related needs.

Robert H. Schottenstein serves as the company’s chairman and chief executive officer.

M/I Homes Q3 2026 Earnings Call Transcript

Key Takeaways

• Negative Sentiment: Third-quarter profitability declined materially: revenue fell 5% to $1.08 billion, pre-tax income dropped 38% to $87 million, and diluted EPS declined to $2.56 from $3.92 a year earlier. Gross margin excluding inventory charges fell 320 basis points to 21.3%, primarily due to higher mortgage-rate buydown costs and lot costs.
• Negative Sentiment: Demand weakened as the quarter progressed. New contracts were up 15% in July but fell 6% in August and 16% in September, with overall quarterly contracts down 2%; incentives increased as mortgage rates approached 7.75%, while Florida and Texas remained more challenging markets.
• Positive Sentiment: M/I Homes maintained a very strong balance sheet with $620 million in cash, no borrowings under its $900 million revolver, an 18% debt-to-capital ratio, and a 2% net debt-to-capital ratio. Management emphasized that its substantial liquidity and largely on-balance-sheet land position provide flexibility during the downturn.
• Positive Sentiment: The mortgage operation captured a company-record 96% of eligible homebuyer business, up from 93% a year ago, despite mortgage income falling 19%. Buyers remained relatively well qualified, with an average credit score of 748 and average down payments above 16%.
• Neutral Sentiment: Management does not plan major strategic changes for 2027, but will be more selective on new land deals, control hiring and expenses, and modestly increase move-up product in several markets. Community count is expected to end 2026 about 5% above last year, while starts have been reduced to avoid building ahead of demand.

Presentation

[Operator]

Good morning, and Welcome to the M/I Homes Inc Third Quarter Earnings Conference Call. My name is Lacey, and I will be your conference operator today. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star, followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I would now like to turn the call over to Mr. Phil Creek. Please go ahead.

[Phil Creek, EVP and CFO at M/I Homes]

Thank you for joining us today. With me is Bob Schottenstein, our CEO and President, and Derek Klutch, President of our mortgage company. First, to address Regulation Fair Disclosure, we encourage you to ask any questions regarding issues that you consider material during this call because we are prohibited from discussing significant non-public items with you directly. As to forward-looking statements, I want to remind everyone that the cautionary language about forward-looking statements contained in today's press release also applies to any comments made during this call. Also, be advised that the company undertakes no obligation to update any forward-looking statements made during this call. With that, I'll turn the call over to Bob.

[Bob Schottenstein, CEO and President at M/I Homes]

Thanks, Phil. Good morning, and thank you for joining us today. Our third quarter results reflect the increasingly difficult market conditions impacting the overall economy, consumer behavior, and obviously, the home building industry. In the face of these conditions, we produce solid results, generating $87 million of pre-tax income, equating to an 8%+ return. Conditions changed notably during the quarter. Perhaps the best evidence of explaining the intra-quarter volatility is the movement in the benchmark 10-year U.S. Treasury bond. July 1st, the 10-year Treasury was at 4.5%. By August 1st, it had risen to 4.75%. It then began to rise at a faster pace, particularly during September, and by September 30th, it had reached 5.3%.

[Bob Schottenstein, CEO and President at M/I Homes]

In similar fashion, the average par contract interest rate for a 30-year fixed rate mortgage increased by nearly 100 basis points during the quarter, going from roughly 6.75% at July 1 to close to 7.75% at September 30th. The combination of these rising rates, along with elevated fuel prices, concerns with inflation, and the continued conflict in Iran, have clearly impacted consumer confidence and demand and have contributed to growing economic uncertainty. As of today, mortgage rates have actually come down slightly, which is very good news. The current choppy and challenging conditions may continue for some time. Regardless, this is not the first time we've managed through challenging conditions. We've been in business for 50 years, and during times like this, execution matters more than ever, and a strong balance sheet is absolutely essential.

[Bob Schottenstein, CEO and President at M/I Homes]

I am proud to share that on both of these counts, M/I Homes is very well-positioned to navigate the current market conditions. During the quarter, our teams executed at a very high level. As I will explain in more detail in a few moments, our balance sheet is rock solid, as strong as at any time in our 50-year history. For the quarter, we sold 1,861 homes, 2% less than a year ago. For the first nine months of 2026, we have sold 6,598 homes, which is 5% more than a year ago. We continue to use mortgage rate buydowns as our primary incentive to drive sales. With rates rising during the quarter, the cost of such buydowns has increased, thereby impacting our margins. We have carefully managed the nature and extent of rate buydowns as we deal with rising rates.

[Bob Schottenstein, CEO and President at M/I Homes]

I might add, while rate buydowns are clearly important at this time, well-located communities, quality product, and thoughtful design are just as, if not more important. When I talk about how much execution matters during times like this, the quality of our product, the strength of our communities, and the skills of our sales associates all make a meaningful difference in our results. In other words, nearly every builder is buying down rates, but the builder results from one builder to another clearly differ, and the difference is often all about execution. During the quarter, we closed 2,241 homes, a 2% decrease compared to a year ago. Year-to-date, we have closed 6,361 homes, which is 4% less than a year ago. Our third quarter total revenue decreased by 5% to $1.08 billion, and pre-tax income decreased 38% to what I mentioned earlier, $87 million.

[Bob Schottenstein, CEO and President at M/I Homes]

Our gross margin, excluding inventory charges, was 21.3%, 320 basis points lower than a year ago, down primarily due to the higher cost of rate buydowns and higher lot cost versus a year ago. Our mortgage company's capture rate for the quarter was 96%, one of the highest capture rates we have ever seen, and certainly one of the highest capture rates in the history of the home building industry. We continue to see quality buyers in terms of creditworthiness, with average credit scores of 748 and average down payments over 16%. Our Smart Series line of homes, which as most of you know, are our most affordable line of homes and generally appeals to the first-time homebuyer, continues to be an important contributor to our sales performance. Of note, during the quarter, our Smart Series sales comprised about half of our sales.

[Bob Schottenstein, CEO and President at M/I Homes]

The other half went to second-time or move-up buyers. We ended the quarter with 246 communities and estimate that at the end of this year, our community count will be about 5% higher than last year. With respect to some comments about our markets, our division income contributions in the quarter were led by Chicago, Columbus, Minneapolis, Dallas, and Charlotte. New contracts during the third quarter in our northern region increased by 1%. New contracts in our southern region decreased by 4%. Our deliveries in the northern region increased by 1% compared to last year and represented 42% of our company-wide total. In our southern region, our closings decreased by 5% over last year and of course, represented the other 58% of deliveries. We have an excellent land position. I repeat, we have an excellent land position.

[Bob Schottenstein, CEO and President at M/I Homes]

Our owned and controlled lot position in the southern region decreased by 12% compared to last year and increased by 13% versus last year in the northern region. 41% of our total owned and controlled lots are in the north, the other 59% in the southern region. Company-wide, we own on our books approximately 23,400 lots, which is roughly a 2.5-year supply. In addition, we control approximately 25,600 lots via option contracts, resulting in a total of roughly 49,000 owned and controlled lots, equating to about a five-year supply. In my earlier remarks, I spoke about how critically important a strong balance sheet is in times like this, and as I said, our balance sheet is rock solid and continues to be in excellent condition. We ended the third quarter with an all-time record $3.3 billion of equity, equating to a book value per share of $130.

[Bob Schottenstein, CEO and President at M/I Homes]

We had zero borrowings under our $900 million unsecured revolving credit facility, and we ended the quarter with over $600 million in cash. This has resulted in a debt-to-capital ratio of 18% and a net debt-to-capital ratio of 2%, one of the lowest debt levels in the home building industry. Moreover, in looking at our balance sheet, it's important to recognize that we are one of the few builders that does virtually zero land banking. There's no confusion about what's on our books and what isn't. Our balance sheet has essentially zero goodwill on it.

[Bob Schottenstein, CEO and President at M/I Homes]

We're very proud of our financial condition. In closing, though these are more challenging times, we remain quite confident in the long-term fundamentals of the home building industry. With our strong land position, well-located geographic footprint, well-located communities, diverse product offering, and strong balance sheet, M/I Homes is well positioned to manage through this current cycle. With that, I'll turn it over to Phil.

[Phil Creek, EVP and CFO at M/I Homes]

Thanks, Bob. Our new contracts were down 2% when compared to last year. They were up 15% in July, down 6% in August, and down 16% in September. Our cancellation rate for the quarter was 12%. 50% of our third-quarter sales were to first-time buyers, and 80% were inventory homes. Our community count was 246 at the end of the third quarter, up 6% versus a year ago. The breakdown by region is 103 in the northern region and 143 in the southern region. During the quarter, we opened 27 new communities while closing 15. We currently estimate that our 2026 year-end community count will be about 5% higher than last year. We delivered 2,241 homes in the third quarter, and about 35% of our third-quarter closings came from inventory homes that were both sold and delivered within the quarter.

[Phil Creek, EVP and CFO at M/I Homes]

This also compares to 35% in last year's third quarter. As of 9/30, we had 5,200 homes in the field versus 5,000 homes in the field a year ago, and our construction cost and cycle time were flat in the third quarter compared to the second quarter. Revenue decreased 5% in the quarter. This decline was due to fewer homes delivered and our average sale price declined also. Our gross margin was 20.9% for the quarter, including $5 million of inventory charges. Excluding these charges, our gross margin was 21.3%. Our third-quarter SG&A expenses were 13.1% of revenue compared to 11.9% a year ago, and our third-quarter expenses increased 5% versus a year ago. Increased costs were primarily due to our increased community count. Interest income net of interest expense for the quarter was $3.6 million, and our interest incurred was $9.2 million.

[Phil Creek, EVP and CFO at M/I Homes]

Our pre-tax income was 8% for the quarter, and our return on equity was 9%. During the quarter, we generated $103 million of EBITDA compared to $157 million in last year's third quarter. Our effective tax rate was 23% in the third quarter, compared to 24% in last year's third quarter. Our earnings per diluted share for the quarter decreased to $2.56 per diluted share from $3.92 last year, and our book value is now a record $130 per share. With that, I will turn it over to Derek Klutch to address our mortgage company results.

[Derek Klutch, President of M/I Financial at M/I Homes]

Thanks, Phil. Our mortgage and title operations achieved pre-tax income of $13.4 million, compared to $16.6 million in 2025's third quarter, down 19%. Revenue decreased 5% from last year to $32.7 million due to lower margins on loans sold, a lower average loan amount, and a slight decrease in the number of loans originated. The average loan to value on our first mortgages for the third quarter was 84%, consistent with 2025's third quarter. 63% of the loans closed in the quarter were conventional and 37% FHA or VA, compared to 55% and 45% respectively for 2025's third quarter.

[Derek Klutch, President of M/I Financial at M/I Homes]

Our average mortgage amount decreased to $403,000 in 2026's third quarter compared to $406,000 last year. Loans originated decreased to 1,835 loans, which was down 1% from last year, while the volume of loans sold decreased by 5%. Finally, as Bob mentioned, our mortgage operation captured 96% of our business in the third quarter. This was up from 93% last year. Now I will turn the call back over to Phil.

[Phil Creek, EVP and CFO at M/I Homes]

Thanks, Derek. As far as the balance sheet, our financial position continues to be very strong. We ended the third quarter with no borrowings under our $900 million credit facility and had a cash balance of $620 million. We continue to have one of the lowest debt levels of the public home builders and are well-positioned with our maturities. Our bank line matures in late 2030, and our public debt matures in 2028 and 2030. Our unsold land investment at 9/30/2026 is $1.9 billion, compared to $1.8 billion a year ago, and at 9/30, we had $853 million of raw land and land under development and $1.1 billion of finished unsold lots. During the third quarter, we spent $135 million on land purchases and $155 million on land development, for a total of $290 million. At 9/30, we owned 23,000 lots and controlled 49,000 lots.

[Phil Creek, EVP and CFO at M/I Homes]

At the end of the quarter, we had 721 completed inventory homes and 3,242 total inventory homes. Of the total inventory, 1,338 are in the northern region and 1,904 are in the southern region. Last year, at 9/30, we had 776 completed inventory homes and 3,001 total inventory homes. We spent $50 million in the third quarter repurchasing our stock and have $200 million remaining under our current board authorization. Since the start of 2022, we have repurchased 21% of our outstanding shares. This completes our presentation. We will now open the call for any questions or comments.

[Operator]

As a reminder, if you would like to ask a question, please press star one on your telephone keypad. Your first question comes from the line of Alan Ratner with Zelman & Associates. Please go ahead.

[Alan Ratner, Managing Director at Zelman & Associates]

Hey, good morning. Thanks for all the detail and taking my question.

[Phil Creek, EVP and CFO at M/I Homes]

Thanks, Alan. Good to talk to you.

[Alan Ratner, Managing Director at Zelman & Associates]

Likewise. You guys have been probably one of the most nimble builders over the last decade or so in terms of making some modest adjustments to your business model and strategy based on market conditions. I am thinking of, obviously, the growth in the Smart Series and kind of adjusting the spec mix based on market conditions. We have been in a challenging market for a while now, but it sounds like things have kind of taken another leg down this quarter with not much certainty or outlook for improvement in the near term.

[Alan Ratner, Managing Director at Zelman & Associates]

I am curious whether this more recent leg down and the move higher in rates is causing you to maybe think through the strategy heading into 2027 and just thinking through your model, whether it is the mix of your business at spec versus BTO or price point or just land strategy. I am curious if you are kind of making any adjustments or beginning to think about making adjustments based on the current market reality.

[Bob Schottenstein, CEO and President at M/I Homes]

That is a great question. The first thing I want to say is you cannot know what you don't know, right? Sorry for saying something so obvious, but at the beginning of this year, I don't know of too many people that predicted that we would see not only the kind of rate movement that we have seen, which has trended considerably up rather than flat or down, but I don't think anyone believed or even had in their crystal ball that there would be a war beginning at the end of the first quarter, and that has continued now for six months.

[Bob Schottenstein, CEO and President at M/I Homes]

All of the related economic impacts that it has had, which I think have impacted, in a negative way, consumer confidence. That has been well documented. You have written about it as articulately as anyone. Having said all that, in good time and in bad I think that, and I didn't always know this, but it couldn't be clearer to me today as it maybe wasn't as clear 20 years ago.

[Bob Schottenstein, CEO and President at M/I Homes]

But in good time and in bad, there's no financial piece of paper that's more important than your balance sheet. When things are more challenging, the importance of the balance sheet becomes more and more important. Not because you think that we're about to enter a tsunami or some 100-year flood or something, but because you got to be prepared to deal with unexpected things like we've sort of seen happen this year. I don't think the sky is falling. I don't believe that. Nobody knows for sure. I still think that there's so many positive underlying fundamentals that support the long-term health and vitality of the home building industry. We're not going to start selling a bunch of land.

[Bob Schottenstein, CEO and President at M/I Homes]

We've got a great land position. Are we going to be more careful about new deals? Yes, we are. But we control enough land, both on and off of our books, to be able to manage what may come. We're not going to make any material changes. Maybe in a few markets, we might adjust our product mix a little bit company-wide. I don't see us making a lot of material changes to that. There's a bit of a lead time associated with that anyway. I think we have a great strategy, and I think that we've been doing the right things. It's easy to say execution matters. We're not perfect. We don't do everything A-plus, but we do a lot of things really well. The 96% capture rate in our mortgage operation is yet another. It's highest in the industry. That's not dumb luck.

[Bob Schottenstein, CEO and President at M/I Homes]

A year ago, it was 93%, and that was the highest in the industry. Pay a lot of attention to sales training, more than ever. There's more sales training going on in our company today than at any time in our 50-year history. That didn't just start when rates went up 100 basis points. That's been going on since the beginning of the year, because you got to keep getting better. I love the way we think about land. We were one of the few builders that was never romanced into doing land banking and a lot of off-balance sheet stuff. Maybe we should have, I don't know, but I like that we control it, and I like that we're not paying a premium for it.

[Bob Schottenstein, CEO and President at M/I Homes]

I'm liking that our best deals aren't potentially cross-collateralized with a land banker who may be looking to call a bad deal. My point is, we have our hands firmly on the rudder. If we don't go in the right direction, it's our fault. But we're really intensely focused on what we can control, and our customer service scores are the highest in company history. Our home readiness scores, which has to do with the completeness of the home at the time of closing, are the highest in company history. This is all third-party tabulated. Our Google Review scores across all of our divisions are the highest in company history. So when you talk about execution and focusing on controllables, there's a lot to really feel good about. These are tough conditions.

[Bob Schottenstein, CEO and President at M/I Homes]

July conditions were a whole lot better than September, and August was a whole lot better than September, too. I don't see any reason for some radical change. We're going to watch new hiring. We're going to control expenses. We're going to do all the things that my guess most of our peers are going to be doing right now as well as we're dealing with all these uncertainties. But I don't think the sky is falling. Home building is a cyclical business. This isn't your first rodeo either. You've seen the cycles. Maybe we're due for a bit of one because things have been pretty good for quite some time. But I wouldn't want to be any other builder. I wouldn't want to be anywhere else. I love our geographic footprint.

[Bob Schottenstein, CEO and President at M/I Homes]

There's times when Florida is a lot better than the Midwest, and there's times when Texas is the strongest. These things come and go and go up and down. But in balance, we've got a very dominant position in the Midwest, a tremendous position in the Carolinas. Florida is a little bit of a struggle now, particularly the West Coast, but remain extremely bullish long-term on Florida. Dallas and Houston remain two of our best operations out of our 17. Just trying to tell it like I see it.

[Phil Creek, EVP and CFO at M/I Homes]

Alan, one other thing I would add. I echo what Bob says about how much execution matters. Obviously, having a really strong, clean balance sheet, having a lot of liquidity is really important, so we continue to always focus on that. We have kind of reduced starts a little bit due to market conditions. You'll see that our spec level's a little over 3,000 in total, and our finished spec levels being in that 700 range is pretty much flat where it was a year ago, even though we do have 5% more stores. So we're not trying to force anything because demand is an issue. But again, we'll just continue trying to block and tackle better than others.

[Alan Ratner, Managing Director at Zelman & Associates]

Very helpful. Thank you very much for all the color.

[Bob Schottenstein, CEO and President at M/I Homes]

Thanks, Alan.

[Operator]

Your next question comes from the line of Buck Horne with Raymond James. Please go ahead.

[Buck Horne, Managing Director at Raymond James]

Hey, good morning, guys. Appreciate all that color. Very helpful. Wanted to follow up a little bit on-

[Phil Creek, EVP and CFO at M/I Homes]

Good morning.

[Buck Horne, Managing Director at Raymond James]

Hey, good morning. Wanted to follow up kind of on what you're seeing. You mentioned the West Coast of Florida. It looks like at least in early October, you guys have made some more significant pricing adjustments on some QMI homes, particularly in Tampa and Sarasota. Can you maybe follow up on how Florida's trending in general for you and how you think those pricing adjustments will take, and are you making any more significant either incentive adjustments or pricing adjustments in other regions in October?

[Phil Creek, EVP and CFO at M/I Homes]

Buck, as Bob said, Florida and Texas have been a little more challenging in general than the Midwest and the Carolinas have been. We've had a very strong operation in Florida, especially for years. Orlando's actually held up pretty good for us. Tampa, Sarasota have been a little more challenging. We obviously make adjustments on a community basis periodically as we need to, and we are excited about our still a little bit of a startup operation in Fort Myers and Naples.

[Phil Creek, EVP and CFO at M/I Homes]

But I wouldn't say we're doing anything significantly. Again, it's kind of a subdivision-by-subdivision situation. If you just look at our new contracts in the third quarter, actually, compared to the prior year, Sarasota was up, Tampa was down a little bit. So it's kind of a little bit of a mixed bag in Florida. Overall, it still continues to be challenged, but we still feel really good about our leadership teams and really good about our opportunity there.

[Bob Schottenstein, CEO and President at M/I Homes]

The only thing I might add, Fort Myers, Naples, exceeding our expectations. We're off to a very good start there. And obviously it's a relatively new division for us. But very optimistic about that. I just want to underscore, we probably have one of the best teams in our company in Tampa. So whatever the market may come, I've got tremendous confidence that we'll figure it out.

[Buck Horne, Managing Director at Raymond James]

No, I appreciate that. Yeah, and go Rays, right? So, one quick on labor availability. It seems like there's been a lot more discussions about whether it's immigration enforcement activity or just other complications with getting crews out to job sites on time. Are you seeing any effects of labor availability or immigration enforcement so far here through the third quarter?

[Phil Creek, EVP and CFO at M/I Homes]

In certain markets, and it seems to kind of come and go, we have issues with ICE and those type issues. Overall, we feel good about where we are. We do have a few more houses in the field today than we did a year ago. We do desire to grow. We talked about community count being up 5% at the end of this year. From a land position, we could be doing, and I think also from a labor standpoint, we could be doing probably 1,000 or 1,500 more homes a year if the demand was there. That's the biggest issue we have right now. I would not say that labor is a huge issue.

[Phil Creek, EVP and CFO at M/I Homes]

From a cost standpoint, especially with all the gas increases and diesel and land development and those type things, we feel pretty good about our construction costs and land development costs have continued to be pretty flat. We continue to focus on all those blocking and tackling things, Buck, and wish we were making more progress, but we feel pretty good about what we're doing.

[Buck Horne, Managing Director at Raymond James]

Appreciate the call. It sounds like you're doing a great job under the circumstances. All right. Good luck, guys.

[Bob Schottenstein, CEO and President at M/I Homes]

Thanks, Buck.

[Phil Creek, EVP and CFO at M/I Homes]

Thanks, Buck.

[Operator]

Your next question comes from the line of Jay McCanless with Citizens JMP Securities. Please go ahead.

[Jay McCanless, Managing Director at Citizens JMP Securities]

Hey, good morning, everyone.

[Bob Schottenstein, CEO and President at M/I Homes]

Good morning.

[Phil Creek, EVP and CFO at M/I Homes]

Hey, Jay.

[Jay McCanless, Managing Director at Citizens JMP Securities]

Hey. On the SG&A, could you talk about how much, were there any one-time items in there, or is that just where the level is now with the higher community count?

[Phil Creek, EVP and CFO at M/I Homes]

Jay, as we said, our SG&A expenses were up about 5%, which is similar to community count. For every community, in general, you have a couple more salespeople, you have construction people, et cetera. In general, that community count increase does increase that. Are we spending a little more money on the advertising, promoting side? Yes, we are. But the biggest issue is just the impact of increased community count, which we've talked about. We sure like to increase that community count, 5%-10% a year is kind of our goal. We've been able to do that the last couple of years and this year.

[Jay McCanless, Managing Director at Citizens JMP Securities]

Okay. The next question I had, you guys gave a lot of useful commentary about shifting into more move-up product last quarter. I guess, could you talk about what the numbers were? I think you gave them out already, but maybe talk about what the numbers for move-up were this quarter and kind of following on Alan's question, are you guys looking to pivot more into 2027 than what you did in 2026?

[Phil Creek, EVP and CFO at M/I Homes]

You are talking about the move-up buyer categories that we were talking about, Buck?

[Jay McCanless, Managing Director at Citizens JMP Securities]

The move-up communities. Yeah. I mean, you all

[Phil Creek, EVP and CFO at M/I Homes]

Buck, Jay, I did not follow the question. Will you re-ask it?

[Jay McCanless, Managing Director at Citizens JMP Securities]

Sure. Last quarter's conference call, you guys talked about shifting into more move-up communities, focusing more on the move-up buyer. Could you talk about what you're doing this quarter, but then also kind of following on Alan's question, are you looking for ways to maybe change that mix to move-up communities in 2027?

[Bob Schottenstein, CEO and President at M/I Homes]

Not really. What's in place in select markets, and I'm not going to mention which ones because there's no reason to. But in select markets, there is a greater emphasis on more move-up than now. That began probably three to six months ago, and that will continue. So nothing has really changed in the last couple of quarters. In many of our markets, we have a very good mix right now, and I don't see it changing much. But clearly in two or three or maybe four of our markets, we're shifting the mix a little bit more towards the move-up. That's already underway.

[Bob Schottenstein, CEO and President at M/I Homes]

It's playing out as we speak. It's not a change during the third quarter. That was something that we started actually earlier this year. These were markets where over 75% of our business was first time. We never really felt great about that, even before the move-up became more in vogue. We always felt, sometimes things just sort of end up a certain way. I never want too many eggs in one basket because we don't have to do that, and we're not going to.

[Jay McCanless, Managing Director at Citizens JMP Securities]

Got it. The last question I had, just could you talk about what the incentive levels were this quarter and how they're trending to start the fourth quarter?

[Bob Schottenstein, CEO and President at M/I Homes]

Incentive levels.

[Phil Creek, EVP and CFO at M/I Homes]

Well, obviously our margins have been going down, and as Bob said, we primarily use incentives in mortgage rate buydowns. Every community is a little different, especially with first-time buyers, they tend to need more help also with closing costs. I think also one of the things in the marketplace right now in general is, I think, the first thing all buyers expect is a reduced competitive interest rate. You are seeing in certain markets a little more price reduction.

[Phil Creek, EVP and CFO at M/I Homes]

So it's kind of hard to figure out all the different breakdown of incentives. Incentives definitely did increase as we went through the quarter. But again, it's just a community by community standpoint. We're having customers go a little bit more toward ARM products now than they were before. But that's something that's just always changing that we just have to deal with, and we track that every day and work on it every day in every community.

[Jay McCanless, Managing Director at Citizens JMP Securities]

Okay, great. That's all I had. Thanks, guys.

[Bob Schottenstein, CEO and President at M/I Homes]

Thank you, Jay.

[Operator]

There are no further questions. I would now like to turn it back to Phil Creek for closing remarks.

[Phil Creek, EVP and CFO at M/I Homes]

Thank you very much for joining us. Look forward to talking to you next quarter.

[Operator]

This concludes today's conference call. You may now disconnect.

Participants

Executives

• Phil Creek, EVP and CFO
• Bob Schottenstein, CEO and President
• Derek Klutch, President of M/I Financial

Analysts

• Alan Ratner, Managing Director at Zelman & Associates
• Buck Horne, Managing Director at Raymond James
• Jay McCanless, Managing Director at Citizens JMP Securities