Tri Pointe's Long Game Bets On Disciplined Growth, Not Speed
Tri Pointe Home’s Q3 earnings call reflected a disciplined builder that is sticking to its guns and prioritizing price over pace, as it sacrifices near-term sales in favor of its long-term growth.
While Lennar stays true to its even-flow machine and D.R. Horton emphasizes scale, Tri Pointe has decided to ease back — for now — as it works to sell through its existing inventory without compromising on pricing.
During the call, CEO Douglas Bauer said that Tri Pointe is working through a near-term sales slowdown, as low consumer confidence negates the positive impact of moderating mortgage interest rates. However, Bauer anticipates an uptick in buyer demand at the end of next year, heading into 2027.
Here’s the short-term strategy to address this reality, in a nutshell:
In the short-term, we are prioritizing inventory management, disciplined cost control, and the sale of move-in-ready homes while steadily increasing the mix of to-be-built homes over time,” Bauer said.
Scaling Down New Home Starts
Tri Pointe anticipates growing its community count by 10 to 15% by the end of 2026, but this growth trajectory only tells part of the story. The builder scaled back on new home starts in Q3 and anticipates maintaining this lower start pace once again in Q4, as it works through its existing and under-construction inventory.
The approach makes sense in the current environment, given elevated inventory levels and a seasonally slower period,” Wolfe Research director of equity research Trevor Allinson wrote.
Demand is softer, revenues are declining, margins are tighter, and new homes are sitting on the market for longer. A reduction in new home starts is a discerning response to this reality.
However, there is hope on the horizon.
Home buyer interest remains somewhat muted with lower confidence driven by slow job growth and broader economic uncertainty. However, we continue to see underlying demand for homeownership among needs-based buyers. We anticipate that home shoppers are preparing to reengage when conditions stabilize, leading to more normalized absorptions,” Bauer noted.
Tri Pointe’s emphasis on attracting the builder's prototypical buyers seeking a higher-end, conveniently located product also gives Bauer confidence.
Executives believe that their established, move-up customers, with an average household income of $220,000, are well-positioned to reengage with the market in the not-too-distant future.
This segment has demonstrated resilience even amid shifting market conditions, supported by strong income profiles, down credit, and larger down payments.”
Prioritizing Price Over Pace
Bauer was clear that Tri Pointe doesn’t plan to retreat on price to spur sales momentum as it heads into the new year. The builder pays a premium for what Bauer referred to as “main and main, great locations”, and is determined to maintain its value proposition and hold the line on pricing.
We’re more of a premium brand proposition, so we look at our value proposition as it enters the market,” Bauer explained. “We'll price the product appropriately to the marketplace to have the right value proposition that we propose.”
Easing back on starts will allow Tri Pointe to work through its existing and under-construction inventory while maintaining its target pricing.
This discipline partially explains why the builder’s quarterly incentives measured 8.2% of quarterly sales. While a slight uptick from Q2, it narrowly beats out Pulte’s 8.7% and is much lower than Lennar’s 14.3% incentive rate.
Just like Pulte, Tri Pointe’s incentives are roughly one-third financial and two-thirds spent on design studio upgrades. The builder’s more established move-up buyers don’t require the same level of financial assistance that entry-level buyers need.
Most of our customers really don't need to have a significantly lower interest rate to qualify for the home, so they prefer to use more of their incentive dollars on design studio personalization,” said Linda Mamet, Executive VP and Chief Marketing Officer.
Moving to a More Balanced Approach
Tri Pointe’s home orders continue to decline, which is partially responsible for a glut of spec homes on the market — an imbalance that is forcing the builder to be more generous with incentives and conceding more on margins than it would like to.
This is an imbalance that should work itself out in the short term.
We've got about three-fourths of our orders running at specs into the end of the year. All the builders have a little bit more inventory than what they anticipated. So we'll burn through that inventory going into the first quarter or so of next year and then get to a more balanced approach,” Bauer explained.
Primed for Future Growth and Optimizing Operational Efficiency
Tri Pointe’s decision to reduce new home starts is also rooted in declining backlog, which will likely persist during Q4. Wolfe Research anticipates backlog to be down more than 40% YOY as the year comes to a close, but also forecasts that the company’s orders will begin growing again during Q1 of 2026.
Tri Pointe’s SG&A expenses increased annually from 10.8% to 12.9% during Q3, but Allison predicts some positive movement on this front next year.
With the majority of the fixed G&A for the new communities in place, we expect nice SG&A leverage on the closings once they occur,” he wrote.
With orders expected to pick up in 2026 and Tri Pointe’s prediction that its buyers will come off the sidelines later in the year and into 2027, the builder is preparing now for future growth. The company strengthened its liquidity and also owns or controls 32,000 lots, as it readies itself to respond to future changes in demand.
Tri Pointe also anticipates that growth in its new markets will have a measurable impact on the business soon. The builder expanded into Utah in 2023 and delivered its first two communities in the state this past quarter. Expansion into the Central Florida and the Coastal Carolinas markets followed last year. All three are growing markets that Bauer expects to “generate meaningful growth" for Tri Pointe in 2027 and beyond.
Tri Pointe is Pacing, Not Racing, to the New Year
For Tri Pointe Homes, the phrase “price over pace” about sums up its positioning for navigating carefully in the present and preparing for a more explosive mid-term future. Instead of pushing inventory and reducing prices to build momentum, the builder is focusing on quality over quantity as it works through its current and under-construction inventory amid declining sales and orders.
Tri Pointe’s disciplined approach to pricing and inventory management offers a roadmap for holding the line on prices even amid a challenging market with rising incentives and lower homebuyer demand. The builder is adapting — while staying true to its core principles.