A year ago, almost to the day, we wrote:

Signs of strain among private homebuilders are beginning to reshape the strategies of large national public homebuilding enterprises.

Armed with lower-cost, longer-term debt, public builders are leveraging the current environment of sustained high borrowing costs to edge out privately held operators struggling to replenish lot supplies. This trend — originating in 2023 and continuing into 2024 through the present — underscores a deliberate strategy by large public firms to lock down local scale and market share, capitalizing on smaller builders’ limitations in accessing affordable capital to sustain growth.

LGI Homes, Inc., a prime example of this tactical approach, highlights how public builders harness operational discipline and strategic expansion to consolidate their market position."

A Year Later: The Buyers Fewer Can Reach

Fast-forward to fall 2025, and the gap between housing demand and affordability has stretched to its widest in decades.

The National Association of REALTORS® reports that the share of first-time buyers has fallen to a record low of 21%, while their median age has climbed to 40, the highest ever recorded.

The historically low share of first-time buyers underscores the real-world consequences of a housing market starved for affordable inventory,” said NAR’s Jessica Lautz.

In other words, the core household LGI serves — the “rental refugee” priced out of resale — has never been more financially cornered.

And yet, in this environment, LGI’s third-quarter earnings defied the gravitational pull of paralysis. Wolfe Research analyst Trevor Allinson noted that LGI’s sequential order surge of more than 40% was “much better than normal seasonal trends,” driven not by desperation but by disciplined execution.

It appears,” Allinson observed, “that LGI’s operational DNA — its controlled land base, cost visibility, and field-level sales intensity — has reasserted itself at the very moment the broader market is gasping for pace.”

“Margins Reflect Disciplined Execution, Not Elevated Pricing”

Chairman and CEO Eric Lipar framed LGI’s performance around intentional simplicity.

We’ve been successful in maintaining the overall strength of our margins even while operating in the most challenging segment of the market. That’s on purpose,” he told analysts.

LGI closed 1,107 homes in Q3, generating nearly $397 million in revenue and delivering gross margins of 21.5% and adjusted margins of 24.5%, both within guidance.

Lipar emphasized four principles behind that resilience: thoughtful financing incentives, competitive but selective pricing, independence from institutional land bankers, and self-developed lots that embed development profit in every home sold.

Because we primarily self-develop our lots, our margins include the profit a developer would have earned. This adds several hundred basis points to our margins and sets our performance apart from other builders who rely on purchasing finished lots,” he said. “In short, our margins reflect disciplined execution, not elevated pricing.”

That margin integrity has proved critical as affordability has deteriorated.

LGI remains focused on affordability and meeting buyers at a monthly payment where they are able and willing to transact,” Lipar said. During the quarter, LGI leaned into forward-rate buydowns and selective discounts up to $50,000 on older inventory. “Going to extremes in buydowns just to move a few incremental homes is something we’re working hard to avoid,” he added.

The result: net orders up 44% sequentially, and backlog up 20% year-over-year.

The Power Of the Low-Basis Lot

LGI Chief Financial Officer Charles Merdian distilled the balance-sheet side of the story.

Revenue in the third quarter totaled $396.6 million, down 39% compared to the prior year, driven by a 39% decline in closings,” he said, acknowledging the volume compression.

But LGI’s competitive moat lies beneath the surface — in the land, its vintage, and in the shrewdness of its purchase price, IRR/hurdle rate calculus, and location.

At September 30, our portfolio consisted of 62,564 owned and controlled lots,” Merdian reported, “a decrease of 8.8% year-over-year … our land position provides a meaningful cost advantage that supports margin stability even in a volatile market.”

The company’s average finished lot cost of about $70,000, representing just over 20 percent of its ASP, gives LGI a price elasticity its competitors may envy.

Our development spend is sequentially coming down … as we continue to focus on absorptions and work through vacant developed land, we think eventually we are going to be in a position where the land inventory has been right-sized,” he said.

LGI’s low-basis inventory, most of it self-developed, serves as its “hidden margin insurance policy.” It allows flexibility to adjust price without erasing profit, providing an optionality that few land-bank-dependent builders can claim.

SG&A Discipline: Volume as the Unlock

Merdian also underlined cost control:

We’ve been averaging around $30 million in quarterly G&A expense going all the way back to the beginning of 2024 … our leadership infrastructure is in place so that should be limited additional costs related to that.”

Lipar added the field perspective:

We look at SG&A as it’s really all about leverage and volume and absorptions … the total percentage of SG&A that was 16% last quarter is entirely dependent on the volume. Volume is not where we want it … it’s improving in Q4.”

At LGI, operational excellence remains less a slogan than a system — cycle-time management, cost tracking, field accountability, and strong sales pull-through, scaled to every community.

Liquidity and Optionality

Vice President of Investor Relations Joshua Fattor noted LGI’s financial headroom:

We ended the quarter with $1.75 billion of debt outstanding … and remain focused on reducing leverage, ending the quarter with a debt-to-capital ratio of 45.7 percent.” Liquidity stood at $429.9 million, up $107 million from the prior quarter. “As inventory levels decreased and development spend moderates, leverage will continue moving toward the midpoint of our targeted range of 35 to 45%,” he said.

In an environment where credit availability defines survival, LGI’s balance sheet is less of a burden and more of a weapon.

Our liquidity and balance sheet strength underscore our ability to weather volatility while continuing to invest strategically in our business,” Fattor said.

The Rental-Refugee Customer—and the 3.99% Lifeline

Lipar described LGI’s buyer base in blunt terms:

About just over 60% of our customers are taking FHA mortgages … government makes up 70 to 75% of our customers … we’re offering a 3.99% 5/1 ARM product, which has been very positive in the market and well received by our customers.”

In a market where NAR says the typical first-time buyer must now put down 10% — the highest since 1989 — and delay homeownership until 40, LGI’s ability to engineer affordability through financing has become its growth engine. Lipar’s view of the customer — working-class, rent-burdened, often reliant on FHA or VA— translates into every operational decision, from lot selection to floor-plan scale.

These buyers, priced out of existing inventory and squeezed by rent inflation, find in LGI a rare doorway to ownership.

Rates are down and sales were up,” Lipar said simply. “This recent increase in the pace of sales is an encouraging sign … our October closings demonstrate that the fourth quarter is off to a strong start.”

Parallels at the Top: D.R. Horton’s Similar Playbook

As The Builder’s Daily reported yesterday, D.R. Horton is running a kindred race. America’s largest builder also leaned on 3.99% mortgage buydowns, sacrificing margin to preserve pace. Horton’s 20% gross margin, though down, still allows it to outcompete smaller operators. COO Michael Murray told analysts the firm will keep seeking “tuck-in opportunities” that accelerate delivery and deepen local scale.

The takeaway: operational excellence and capital strength now amount to table stakes to play in new-home construction's entry-level market. Both Horton and LGI wield those traits as competitive weapons, while private builders face what Horton’s executives call “limitations on capital and cost.”

A Market Rewarding the Steady Hand

For LGI, the proof is in its forward momentum. Lipar guided to Q4 closings of 1,300 to 1,500 homes—up 26% from Q3—and an average selling price between $365,000 and $375,000. Community count should finish around 145 by year-end and grow another 10 to 15% in 2026.

Our long-term view of the housing market remains solidly optimistic,” Lipar said. “The underlying demographic trends continue to support our strategy, while the widening supply gap makes the attainable housing options LGI provides more valuable than ever.”

Wolfe Research’s Allinson agrees. His note to investors sums it up this way:

In a market where nearly everyone else is managing to stand still, LGI is managing to move units. Orders matter again—and so does discipline.”

The TBD Take

A year ago, LGI stood out as a model for how public builders would convert private-sector distress into growth. And they're still doing that. Today, however, LGI's numbers make a case study in endurance. The company’s self-developed land, rigorous SG&A controls, and laser focus on affordability keep it alive in the one segment where the American dream feels most endangered.

As NAR warns of a generation losing $150,000 in unrealized housing wealth, LGI’s steady hand illustrates what it takes to keep the ladder from splintering altogether. In a year defined by higher-for-longer rates and hesitant households, LGI Homes is proving that execution—not exuberance—is what still sells homes.