M/I Huizen’ Earnings figures for the fourth quarter of 2025 Details were revealed this week about how one of the country’s top 20 homebuilding companies will pursue a contrarian, spec-heavy strategy. Based on the company’s geographic footprint, product lineup and construction operational efficiencies, M/I executives are betting that a measured spec strategy will pay off when the spring homebuilding sales season opens in a few weeks.
While competitors have turned away from spec homes, the Ohio-based homebuilder is relying on this blueprint to maintain a positive sales pace, with greater pricing flexibility, amid weak demand and affordability constraints.
No less than 75% of M/I Homes’ turnover comes from specifications. This helped maintain positive sales pace and operational efficiency, but the company’s gross profit margin has declined, from 24.6% in the fourth quarter of 2024 to 18.1% last quarter.
Executives admitted that generous incentives, especially buying mortgage interest, are needed to move this spec inventory.
Still, Chairman, President and CEO Robert Schottenstein reaffirmed his commitment to this strategy, especially as the spring selling season approaches.
“I think we feel very good about where we are right now, and not to be crazy. I mean, if we didn’t, we would change. We want to be very aggressive to make sure that we have the standing product in the field, the inventory, so that we can take advantage of what is hopefully a decent sales environment over the next three to four or five months. So I think we feel like our strategy is the right strategy,” he said during the earnings call.
M/I Homes is not the only public builder following this blueprint. Hovnanian enterprisesdecided to stick with a spec-heavy approach after posting a net loss last quarter. On the other end of the spectrum, KB house is aggressively working to reduce specifications to just 30% of sales, with the goal that built-to-order homes will soon make up the remaining 70%.
Other builders, such as Beazer Homes, Smith Douglas Homes and others, are hoping to reduce their specifications, despite acknowledging the difficulty of achieving that goal in the short term.
Carefully maintaining growth and pace
Phillip Creek, Executive Vice President & CFO, said that while a spec-heavy approach is central to M/I Home’s strategy for the coming quarters, the management team has increased vigilance and caution.
“Now execution really matters. We’re trying to make sure we don’t put too much inventory into the finished specifications,” Creek said. “Our hopes and plans are that we want to close a few more homes this year than we did last year. We have more stores. But again, we’re staying focused. You know, we’re trying to run a conservative business. We’re trying not to get too far ahead of inventory.”
The builder’s goal is to maintain a sales pace of approximately three homes per community per month. Maintaining that pace in current market conditions often requires generous incentives and purchasing mortgage interest. Achieving mortgage rates below five is the key to closing deals, executives say.
This spec-intensive approach could maintain a positive sales pace and growth trajectory, but could also weigh on margins throughout the year.
“Margins will probably continue to be under pressure, but it’s not clear to me at this point that the pressure will be as great in ’26 as it was in ’25. So hopefully things are starting to level off a little bit. Again, we’ll know when we know,” Schottenstein said.
Schottenstein said most of its divisions saw a slight improvement in demand last quarter compared to the year before. For this reason, he remains optimistic.
“Just putting things into context, we’ve all seen a lot worse. And you know, I think I’m optimistic about the first four or five months of this year in terms of demand and the sales season,” he said.
Geographic breakdown
M/I Homes operates in 10 states in the Midwest and Southeast, and new business in the fourth quarter increased in both regions over the past quarter. Schottenstein specifically mentioned Columbus, Dallas, Chicago, Orlando and Minneapolis as strong markets, and Creek added that Charlotte and Raleigh have also performed well.
In Florida, Orlando was the best market. In Texas, Dallas and Houston performed well. Executives cited San Antonio and Austin as areas of concern for the company. While they didn’t elaborate on the poor performance, home prices in Austin fell about 5.5% last year, the largest decline of any major metro area in the country.
During the fourth quarter, M/I Homes recorded $51 million in impairments, including $40 million in inventory and $11 million in warranty, primarily from starter communities with an average sales price of less than $375,000. Most of these communities were located in the San Antonio and Austin markets.
“You always have some problem subdivisions,” Creek said. “If we don’t achieve an acceptable pace over a period of time, we make the business decision, often to reduce the price.”
How M/I Homes determines a community’s product mix
When asked how M/I Homes makes decisions about a community’s product mix, including models, home size and cost type, Schottenstein provided insights.
Zoning ultimately determines what can be built in a community, but there is some wiggle room within these zoning parameters. Once these parameters are set, there will be an internal debate to determine the strategy for each individual community.
“The debate takes place within the division. Sometimes it comes down to business conversations about what we’re going to do with that if we get that deal done and that’s going to be a new store for us? What’s that store going to look like? What are we going to sell in that store? Who’s the buyer? And you know, that’s a lot more art than science,” he said.
It is common for plans to change as market conditions evolve. For example, communities that were initially provided with larger homes may later shift to smaller homes. M/I homes can maintain the same density while adjusting lot sizes to reflect buyer demand or prices. This type of recalibration is a normal process.
Every land transaction undergoes strict approval at company level. The corporate land team reviews each of these deals, and larger projects may undergo multiple reviews; Lessons learned in one market are often applied to other divisions.
Key Takeaways
M/I Homes posted revenue of $1.15 billion last quarter, which narrowly fell short of Wall Street expectations. The reliance on spec homes to maintain the desired sales pace indicates that the organization is not immune to broader macroeconomic trends impacting the sector.
This spec-heavy approach resulted in a significantly lower gross profit margin compared to a year ago. However, executives believe that having sufficient inventory will pay off as builders enter the typically busy spring sales season.
How M/I Homes executes this strategy will be critical. As Creek noted, his team is trying to find the right balance: delivering enough homes to meet demand during the spring selling season, without building up excess inventory that will sit on the market for an extended and costly period.
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