But you know land bank is, it’s a market deal. But so there is plenty of capital out there for us to continue using land bank and I do think land bank will be a higher percentage of our option lots going forward.
Operator: Your next question is from the line of Mike Dahl with RBC Capital Markets.
Mike Dahl: Just back on the gross margin dynamic, I think 4Q actually came in a little above where you had been expecting kind of on the roadshow and the guidance. I think it’s the upper end, I think is kind of more consistent with where you initially pegged it. So it seems like margins came in a little stronger, the demand environment as you characterized it pretty solid, but the midpoint of the gross margin range may be a little bit light of where the initial expectation was. So can you, better off on it, but talk a little bit more about some of the moving pieces there and ex purchase accounting changes in incentives, any regional dynamics we should be aware of on that, maybe Houston coming in lower margins, help us on that a little bit more?
Russ Devendorf: Yes. Are you talking about Mike, are you talking about Q4 or are you talking more about prospectively into 2024 margin?
Mike Dahl: Yes, prospectively against the backdrop where you actually beat a little in Q4, but then I think your initial expectation when we have been going through the process would be a little above 26% for full year of ’24 and now the midpoint is a little below 26%. So just trying to understand kind of moving piece.
Russ Devendorf: Yes. The biggest moving piece right there is when we put the model together, we weren’t we still hadn’t gone through or finalized some of our purchase accounting, the valuation stuff on Houston. So a lot of the movement right now and look I think I don’t want to commit to anything, but I hope that we’re a bit conservative on what we expect some of the purchase accounting and what some of our margin to be. But sitting here today still not even finished with first quarter and look things feel pretty good and I see our backlog margins and where those are going with our trailing 13 weeks and it feels pretty good, but I don’t, we don’t want to put something out that we don’t feel comfortable right now. We intend look, when we do our first quarter call in May, hopefully, we’ll have, we’ll be able to tighten some things up.
But sitting here today, we kind of felt, okay, the midpoint still is pretty close to what we described on the roadshow. We have a little bit more clarity on our purchase accounting, what Houston that the acquisition should hit as far as margin. So that’s really the biggest moving piece. Everything else is exactly what we thought just in terms of the margin compression coming from the land as I mentioned to Rafe.
Mike Dahl: Yes, that helps. Maybe just as a quick follow-up, could you help us understand kind of since purchase accounting might be heavier in the initial quarters, what the first quarter gross margin is expected to be? That’s kind of a follow-up to the margin question. But then secondarily, same idea on the closings, I think the 2,600 to 2,800 might be a little light of expectations. And Greg, I certainly appreciate that the business is not linear and you articulated some difficulties on the municipality side. But can you speak to that a little bit more and maybe what’s tempering the closings expectations here?
Russ Devendorf: Yes, we should finish north of 26% and I think we’re just I’ve got to go back and look and see where we are year to date February, but I feel like our margins are going to be north of the 26%. And when we look at our aging of our backlog or as we roll through backlog, there’s, it’s interesting because I do see some positive movement on margins. I actually see where margins get better in a couple of months out. And I think part of that is, if you think about what happened last year just in terms of December when you know rates moved down and we were able to pull back a little bit on incentives, you know kind of raising prices. I think you’re seeing some of that where you probably where we were discounting more, in third in to early fourth quarter last year.
Well, some of that stuff is again given our cycle times, we’ll close a lot of that stuff within 3 to 5 months. And so I think that you what the phenomenon you’ll see is maybe we have a little bit lower margins early on, it could get a little bit better, just from the timing and then you know again what we’re selling you know today in the next few months with the stuff that will close at the end of the year and so we’ll kind of see you know the jury is still out. You know how strong is this market going to be. Right now like Greg said, we feel the market is pretty good. Buyer demand is still there. Still, we’ll see what the Fed does today. Still interested to see what the rate environment does. So again, like I said, we feel like margins should be north of the 26%.
And then in terms of your second part, which was in terms of the closings, the 2,600 to 2,800, we feel pretty good sitting here today about the midpoint. We did we met with for instance, we met with our Nashville Division President yesterday, right? There is we’re still experiencing and this is one of the risks that we outlined during the roadshow. There’s a lot of municipality delays with Platts, even with some of our developers just getting lots online that’s always been and I tell you outside of market risk, just bringing lots online that’s the biggest risk to our plan. And meeting yesterday there is just one community that I think it’s going to take 20 homes out of our plan because the developer was supposed to deliver at the end of this quarter, and it’s probably going to be end of second quarter now is best guess.