Key facts
- Century expects Q4 incentives to increase by 2-2.5% of the average selling price.
- Century's Q3 starts (2,502) exceeded orders (2,284).
- Meritage's Q3 specs per community estimated at 16-17.
- Century's Q3 homes under construction to backlog ratio was around 3.7x.
- Meritage's Q3 homes under construction to backlog ratio was 3.2x.
Builders are facing elevated inventory levels entering the fourth quarter due to an abrupt slowdown in housing demand in September and October. Century Communities and Meritage Homes, in particular, have shown concerning levels of homes under construction relative to their backlogs. Century noted that it expects incentives to increase by an additional 2-2.5% of the average selling price in Q4, on top of the 13% already represented in Q3. The company also started more homes than it received orders for in the third quarter. Meritage's speculative inventory, or 'specs,' per community is estimated to have risen slightly in Q3. Both companies' ratios of homes under construction to backlog value remained above 3x in Q3, significantly higher than the typical 1x to 1.8x seen in the market.