Jesse Lederman: Thanks for the commentary. That’s really helpful. One last one for me just on the mortgage rate buy-down. You talked about maybe needing to do a little more. What exactly would that entail? Would that mean, if you were buying down rates from seven to six and if rates go up to eight, would you still buy down from eight to six?
Robert Schottenstein: That differs from market-to-market. There’s some we may have to do more. Some of our markets as long as, I mean, I don’t want to get into too much of this because some of our competitors might be listening. But in some of our markets, if we can just be in that six and a half to six and three quarter buy-bought-down rate, we can see really good activity. Over half of our sales are specs, so we don’t have to provide long-term forward commitments. When over half your sales are specs, you can deliver the house within 30 or 60 days, and that helps as well. Some markets we have to get in the low sixes. It’s very expensive to get into the high fives. A lot of the fine print with that product, exceptionally high, credit scores north of 780 [ph] and so forth, very few buyers can even do that.
It might draw traffic, but then it might create frustration. A little bit of the two-one buy-down we’re seeing. That’s — I’ve never personally been a big fan of that, because I’ve never been a big fan of adjustable rate mortgages. But we’re seeing some buyers take that. This is a subdivision business and within each market. There are certain communities where we’re doing more even within the same market, and that’s how we’re managing it. Right now, it takes a lot of precision and a lot of focus. And it’s day-to-day, week-to-week.
Jesse Lederman: Very helpful commentary. Thank you, and good luck on the upcoming quarter.
Robert Schottenstein: Thanks a lot, Jesse.
Operator: Thank you. Our next question comes from the line of Carl Reichardt at BTIG. Please go ahead. Your line is open.
Carl Reichardt: Thanks. Hey, guys. Hope you’re doing well.
Phillip Creek: Hi, Carl. Good to just talk to you.
Carl Reichardt: Me too. Just a big picture once again for me. So, your owned options split on your lots is roughly 50-50. I’m curious, A, if you’re expecting that over the next couple of three years to change in any meaningful direction. Then second, what you’re thinking about in terms of finished lot options on the option side versus land bank options versus self-development on the owned side? And then last, whether or not that mix is going to shift over time as you continue to do more Smart Series if we’re expecting future lots to be more supportive of lower-end homes or if you’re happy with your split right now between move-up and Smart Series?
Robert Schottenstein: So, the answers are no, not sure, and probably, no. Let me be more specific.
Carl Reichardt: Okay. Thanks. I’ll get out of queue.
Robert Schottenstein: Right. Sorry for the sarcasm. I’m going to take part of that, and then maybe Phil will jump in on. First question about owned versus optioned. As long as I think I’ve sat in this chair, the person sitting next to me has been iron-assed, and that’s Phil Creek, about not letting us ever get in a position where we own more than a two- to three-year supply. And he’s right, and that’s the way we think about the business. On top of the two- to three-year supply that we own, we try to control another several years beyond that so that we can achieve 10% to 15% top-line growth if the market will allow. I don’t see that changing. That is as — there’s not a lot of things in this world that are black and white. That’s pretty black and white at M/I Homes. So I don’t see that changing. The second question, remind me what it was again.
Carl Reichardt: I was asking about finished lot option contracts versus land bank on the option side. And then, what percentage of the business is subsidized?
Robert Schottenstein: Yes. Land banking is not something that we’re very interested in. We don’t feel – we’ve never felt we needed to do it. I know some builders do and maybe they understand it better than we do. But it’s not something that we’ve ever felt we needed to do. Our number one priority with respect to land, and frankly, even now that’s even more emphasized in our company, is to do what it takes to secure premier locations. Things get choppy and we’re seeing it now with rising rates. Many of our locations are still performing at a very, very high level. Shockingly so, in light of the fact that rates have just gone up as fast as they have over the last 12 to whatever number of months. So job one, premier locations, and land banking not particularly interested in, we’d love to maintain, if we could, a roughly 50% balance between that which we internally develop and that which we buy from developers on option contracts.
Honestly, if we could, we’d love 80%, 90% to be bought from third-party developers under option contracts. That’s not rational. We wouldn’t have a business if that’s all we did. There’s too many markets where there’s virtually no developers and we’re not going to use our balance sheet to support land bankers. So right now, the 50-50 is a little bit skewed towards our own development. I’ll let Phil jump into that. That’s moved closer to 60% to 70% internally developed here over the last year or so.
Phillip Creek: Yes, Carl, just to stay on that a little bit. We like to own a two to three-year supply of land based on current closing rate to stay with our closing run rate of about 8,000, we own about 23,000. So that’s kind of where we are. And inside that two to three-year supply, we like to have a one year of finished lots. And again, that’s about where we are also. So we feel good about what we own. As far as off the books, tying up another year or two is fine. We have a little over 20,000 lots off the books. The risk dollars we have in that is about 75 million bucks. It’s about 8% of the value of the contracts. We believe kind of the best land bankers, the land seller. But again, every deal is a little bit different. Bob talked about, job one is premier locations.
