Taylor Morrison Home NYSE: TMHC reported first-quarter 2026 results that management said reflected the benefits of its diversified strategy, disciplined execution, and positioning in core locations, while acknowledging a backdrop of higher mortgage rates and consumer caution.
First-quarter performance and capital allocation
Chairman and CEO Sheryl Palmer said the company delivered 2,268 homes at an average price of $578,000, generating approximately $1.3 billion in home closings revenue. Adjusted home closings gross margin was 20.6%, and adjusted earnings per diluted share were $1.12. Palmer added that book value per share increased 11% year-over-year to $64.
On capital deployment, Palmer said Taylor Morrison invested $503 million in land and development and repurchased $150 million of shares during the quarter. The company ended the quarter with $1.6 billion in liquidity.
Orders mix shift, backlog rebuild, and inventory progress
Palmer highlighted what she called a key shift back toward build-to-order demand. The company’s share of to-be-built orders increased to 38% in the first quarter from 28% in the fourth quarter, which Palmer said helped Taylor Morrison begin to rebuild backlog. Backlog increased 23% from year-end to 3,465 homes.
Management also pointed to initiatives aimed at supporting build-to-order. Palmer said the company hosted more than 140 design center open house events across the country during the quarter, which drove to-be-built activity with an average conversion rate of 23%. She also said mortgage incentive programs for build-to-order customers can provide confidence and buying power “generally at less cost than incentives required for spec sales.”
Palmer said incentives on new orders declined by more than 100 basis points sequentially, and the company made progress reducing finished inventory. Finished inventory declined 30% from year-end to 863 homes, as the company reached targeted spec levels in most communities.
CFO Curt VanHyfte provided additional operating detail, stating that net orders totaled 2,914 homes, down 14% year-over-year, with an average selling price of $603,000, up 2% from the prior year. Monthly absorption pace was 2.7 net orders per community, up from 2.4 in the fourth quarter but below 3.3 in the prior-year quarter. The company ended the quarter with 356 active selling communities, up 4% sequentially and year-over-year.
Cancellation trends “remained manageable,” VanHyfte said, with a 10% cancellation rate as a percentage of gross orders, down from 12.5% in the prior quarter and 11% a year ago. He described it as the lowest cancellation rate since the third quarter of 2024.
On production, VanHyfte said Taylor Morrison started 2,371 homes in the quarter, or about 2.2 homes per community per month, reflecting the company’s efforts to reduce spec as it works through inventory. Total specs declined 9% sequentially to 2,692. In response to an analyst question, VanHyfte said the company expects starts in the second quarter to “approximate” sales as it aligns starts with community-level demand, aided by cycle times that are down more than one month year-over-year.
Margins, incentives, and cost commentary
VanHyfte said reported net income was $99 million, or $1.01 per diluted share, and adjusted net income was $109 million, or $1.12 per diluted share, after excluding $8.2 million of inventory impairment charges and $5.6 million of pre-acquisition abandonment charges. The prior-year quarter included reported net income of $213 million, or $2.07 per diluted share, and adjusted net income of $226 million, or $2.19 per diluted share.
Adjusted home closings gross margin of 20.6% exceeded the company’s guidance of about 20%, which VanHyfte attributed to factors including favorable costs and product and geographic mix. On a reported basis, gross margin was 20% due to the impairment charges. VanHyfte said the decline from the prior year’s higher margin reflected “a higher mix of spec home closings and elevated incentive levels.”
Looking ahead, VanHyfte said margin trajectory will be shaped by offsetting forces: “the recent rise in mortgage rates and a more cautious demand environment are likely to sustain incentive pressure,” while the rebuilding of the to-be-built sales mix should be a tailwind. He said Taylor Morrison continues to expect “gradual margin improvement beginning in the second half of the year,” contingent on the sales and interest-rate backdrop, with an assumption of stable construction costs and mid-single-digit lot cost inflation.
In the Q&A, VanHyfte said several positive mix factors benefited first-quarter margins—including more closings than anticipated in higher-margin divisions and more to-be-built closings pulled into the quarter—while fewer lower-margin closings occurred than expected and shifted into the second quarter. He said those dynamics are expected to reverse in the second quarter, alongside continued inventory clearing and higher interest rates.
Palmer said the sequential incentives improvement reflected a combination of the to-be-built mix shift and greater discipline on spec pricing. She also said Taylor Morrison replaced “in many instances” its most expensive forward commitment programs with another version of its proprietary “buy-build program,” which she said can provide customers a lower monthly payment than some forward commitment rates. Palmer added that “incentive pressures” should be expected as long as rates remain elevated, but said the company was “cautiously optimistic that incentive levels will stabilize.”
Asked about geopolitical-related inflation pressures, VanHyfte said costs were down quarter-over-quarter and that, as of the call, the company had not seen tangible cost impacts from the Middle East conflict, despite broader news reports. If impacts were to emerge, he said it would likely be “mainly a Q4 event” and that the company expects its cost reduction strategies to offset much of any pressure.
Land, Yardly build-to-rent, and technology initiatives
Chief Corporate Operations Officer Erik Heuser said the company owned or controlled 75,626 homesites at quarter end, with 51% controlled off balance sheet. While the controlled ratio declined due to takedowns and deal reevaluation, Heuser said the company intends to manage toward its long-term target of at least 65% controlled. He also said Taylor Morrison had a 6.2-year controlled supply of lots, with three years owned based on trailing 12-month closings.
Heuser discussed land financing tools including seller financing, joint ventures, option agreements, and land banking, describing seller financing as the preferred and typically lowest-cost option when available. He said approximately 10,000 controlled lots were in land banks at quarter end, representing about 13% of total lot supply and about 25% of controlled lots. Heuser said only 6% of lots approved by the investment committee in the first quarter were tagged for land bank financing. He added that capitalized interest attributable to land banking and seller financing-related project financing was about 25 to 30 basis points in the first quarter.
On Yardly, the company’s build-to-rent platform, Heuser said Taylor Morrison closed the sale of one joint venture-owned Yardly community for approximately $41 million. The company had 16 projects actively leasing and 13 under development, and about 90% of Yardly units were controlled off balance sheet through its land bank, with total investment of about $320 million at quarter end. Heuser said the company has been encouraged by engagement with policymakers and views Yardly’s model as distinct from scattered single-family rental activity targeted in recent legislative discussions.
Palmer also outlined technology initiatives, highlighting the company’s online reservation system. She said Taylor Morrison recorded more than 1,000 reservations in the quarter with a 58% conversion rate, and that reservation buyers transact at higher average selling prices and stronger option attachment. She also said the company achieved its lowest co-broke rate in years, which she attributed to the reservation platform.
Palmer said the company now has more than a dozen AI-powered applications in production across several functions, with adoption more than doubling year-over-year. She said more than 2.4 million internal AI interactions were recorded in the first quarter, compared with about 3 million for all of last year. On the customer side, Palmer said an AI-powered contact center is providing real-time agent coaching and automated quality management, contributing to more than 11,000 online sales appointments generated in the quarter. She said the company is achieving this “through technology and automation, not incremental spend,” and that overall technology costs are declining.
Guidance reaffirmed amid macro uncertainty
Despite what Palmer described as intensified macro uncertainty, geopolitical turmoil, and higher mortgage rates impacting consumer confidence, management reaffirmed full-year 2026 guidance. VanHyfte reiterated expectations for approximately 11,000 home closings at an average closing price of $580,000 to $590,000, and an ending community count of 365 to 370.
Additional full-year targets include an SG&A ratio in the mid-10% range of home closings revenue, an effective tax rate of about 25%, approximately $2 billion in land investment, and about $400 million in share repurchases. For the second quarter, the company expects 2,500 to 2,600 closings at an average closing price of about $575,000 and a home closings gross margin of at least 20%, excluding inventory-related charges.
Palmer said the company is positioning 2026 as a year to “set the stage” for re-acceleration in 2027 and beyond, including plans to open more than 125 new communities in 2026—roughly 30% more than in 2025—with about 40 already opened in the first quarter and about 45 more expected to open in the second quarter. She also highlighted planned expansion in Esplanade communities, including the anticipated grand opening of the company’s first Esplanade in Nevada, which she said has generated a lead list of more than 1,400 and is expected to command record lot and option premiums.
About Taylor Morrison Home NYSE: TMHC
Taylor Morrison Home Corporation NYSE: TMHC is a leading national homebuilder and developer specializing in the design, construction and sale of single-family detached and attached homes. The company's portfolio spans entry-level, first-time, move-up and active-adult segments, offering buyers a diverse array of architectural styles, floor plans and personalized design options. Through its vertically integrated model, Taylor Morrison manages land acquisition, community development, construction and sales to deliver quality homes and customer-focused experiences across its markets.
The company's heritage traces back to Morrison Homes, founded in 1977, and Taylor Woodrow, established in 1921 in the United Kingdom.
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