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What changed in M/I HOMES, INC.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of M/I HOMES, INC.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+286 added−283 removedSource: 10-K (2025-02-14) vs 10-K (2024-02-16)

Top changes in M/I HOMES, INC.'s 2024 10-K

286 paragraphs added · 283 removed · 240 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

67 edited+9 added−6 removed75 unchanged
Biggest changeIn situations where we believe targeted returns are no longer likely to be achieved, we may choose to terminate certain land purchase contracts which may result in write-offs of deposits and/or pre-acquisition costs. 9 The following table sets forth our land position in lots (including lots held in joint venture arrangements) at December 31, 2023: Lots Owned Region Developed Lots Lots Under Development Undeveloped Lots (a) Total Lots Owned Lots Under Contract Total Northern 3,918 592 2,342 6,852 8,935 15,787 Southern 4,806 4,686 8,030 17,522 12,351 29,873 Total 8,724 5,278 10,372 24,374 21,286 45,660 (a) Includes our interest in raw land held by joint venture arrangements expected to be developed into 2,649 lots.
Biggest changeThe following table sets forth our land position in lots (including lots held in joint venture arrangements) at December 31, 2024: Lots Owned Region Developed Lots Lots Under Development Undeveloped Lots (a) Total Lots Owned Lots Under Contract Total Northern 3,374 1,005 2,167 6,546 11,076 17,622 Southern 5,924 4,768 6,598 17,290 17,244 34,534 Total 9,298 5,773 8,765 23,836 28,320 52,156 (a) Includes our interest in raw land held by joint venture arrangements expected to be developed into 2,233 lots.
Corporate Operations Our corporate operations and home office are located in Columbus, Ohio, where we perform the following functions at a centralized level: • establish strategy, goals and operating policies; • ensure brand integrity and consistency across all local and regional communications; • monitor and manage the performance of our operations; • allocate capital resources; • provide financing and perform all cash management functions for the Company, and maintain our relationship with lenders; • maintain centralized information and communication systems; and • maintain centralized financial reporting, internal audit functions, and risk management.
Corporate Operations Our corporate operations and home office are located in Columbus, Ohio, where we perform the following functions at a centralized level: • establish strategy, goals and operating policies; • ensure brand integrity and consistency across all local and regional communications; • monitor and manage the performance of our operations; 10 • allocate capital resources; • provide financing and perform all cash management functions for the Company, and maintain our relationship with lenders; • maintain centralized information and communication systems; and • maintain centralized financial reporting, internal audit functions, and risk management.
We design, market, construct and sell single-family homes and attached townhomes to first-time, move-up, empty-nester, and luxury buyers. In addition to home sales, our homebuilding operations generate revenue from the sale of land and lots. We use the term “home” to refer to a single-family residence, whether it is a single-family home or attached home.
We design, market, construct and sell single-family homes and attached townhomes to first-time, move-up, empty-nester, and luxury buyers. In addition to home sales, our homebuilding operations generate revenue from the sale of land and lots. We use the term “home” to refer to a single-family residence, whether it is a single-family home or an attached home.
With respect to title services, the Company’s title subsidiaries work closely with our homebuilding divisions so that we are able to provide an organized and efficient home delivery process. We also build inventory homes in most of our communities to offer homebuyers the opportunity to close on certain new homes in 90 days or less.
With respect to title services, the Company’s title subsidiaries work closely with our homebuilding divisions so that we are able to provide an organized and efficient home delivery process. 6 We also build inventory homes in most of our communities to offer homebuyers the opportunity to close on certain new homes in 90 days or less.
The DEI Committee is responsible for developing the guiding principles of our diversity, equity and inclusion program and a strategy to further these principles and achieve our goals. 11 We believe in developing each employee’s professional skill set and promoting career development. Our operating divisions assign training to our employees based upon their particular roles and responsibilities.
The DEI Committee is responsible for developing the guiding principles of our diversity, equity and inclusion program and a strategy to further these principles and achieve our goals. We believe in developing each employee’s professional skill set and promoting career development. Our operating divisions assign training to our employees based upon their particular roles and responsibilities.
We provide our homebuyers with the following products, programs and services which we believe differentiate our brand: (1) homes with high quality construction located in attractive areas and desirable communities that are supported by our 10-year transferable structural warranty; (2) our Whole Home Building Standards which are designed to deliver features and benefits that satisfy the buyer’s expectation for a better-built home, including a more eco-friendly and energy efficient home that we believe will generally save our customers up to 30% on their energy costs compared to a home that is built to minimum code requirements; (3) our onsite and online Design Studios and Design Consultants that assist our homebuyers in selecting product and design options; (4) fully furnished model homes and highly-trained sales consultants to build the buyer’s confidence and enhance the quality of the homebuying experience; (5) our mortgage financing programs that we offer through M/I Financial, including competitive fixed-rate and adjustable-rate loans and, in certain cases, interest rate buy-down incentives; (6) our Ready Now Homes program which offers homebuyers the opportunity to close on certain new homes in 90 days or less; and (7) our unwavering focus on customer care and customer satisfaction.
We provide our homebuyers with the following products, programs and services which we believe differentiate our brand: (1) homes with high quality construction located in attractive areas and desirable communities that are supported by our 10-year transferable structural warranty; (2) our Whole Home Building Standards, which are designed to deliver features and benefits that satisfy the buyer’s expectation for a better-built home, including a more eco-friendly and energy efficient home that we believe will generally save our customers up to 30% on their energy costs compared to a home that is built to minimum code requirements; (3) our onsite and online Design Studios and Design Consultants that assist our homebuyers in selecting product and design options; (4) fully furnished model homes and highly-trained sales consultants to build the buyer’s confidence and enhance the quality of the homebuying experience; (5) our mortgage financing programs that we offer through M/I Financial, including competitive fixed-rate and adjustable-rate loans and, in certain cases, interest rate buydown incentives; (6) our Ready Now Homes program which offers homebuyers the opportunity to close on certain new homes in 90 days or less; and (7) our unwavering focus on customer care and customer satisfaction.
By offering Whole Home Energy-Efficient Homes to our customers, we enable our homebuyers to save on their energy costs (the second largest cost of home ownership) compared to a home that is built to minimum code requirements, while also contributing to the reduction of greenhouse gas emissions and potential climate change impacts.
By offering energy-efficient homes to our customers, we enable our homebuyers to save on their energy costs (the second largest cost of home ownership) compared to a home that is built to minimum code requirements, while also contributing to the reduction of greenhouse gas emissions and potential climate change impacts.
We believe our communities have attractive entrances with distinctive signage and landscaping and that our attention to community detail avoids a “development” appearance and gives each community a diversified neighborhood appearance. We offer homes ranging from a base sales price of approximately $190,000 to $1,000,000 and from approximately 1,000 to 5,500 square feet.
We believe our communities have attractive entrances with distinctive signage and landscaping and that our attention to community detail avoids a “development” appearance and gives each community a diversified neighborhood appearance. We offer homes ranging from a base sales price of approximately $190,000 to $1,010,000 and from approximately 1,000 to 5,500 square feet.
For joint venture arrangements where a special purpose entity is established to own the property, we enter into limited liability company or similar arrangements (“LLCs”) with the other partners. Further details relating to our joint venture arrangements are included in Note 6 to our Consolidated Financial Statements.
For joint venture arrangements where a special purpose entity is established to 9 own the property, we enter into limited liability company or similar arrangements (“LLCs”) with the other partners. Further details relating to our joint venture arrangements are included in Note 6 to our Consolidated Financial Statements.
Our Design Studios allow our homebuyers to select from a variety of product and design options that are available for purchase as part of the original construction of their homes. Our centers are staffed with Design Consultants who help our homebuyers select the right 5 combination of options to meet their budget, lifestyle and design sensibilities.
Our Design Studios allow our homebuyers to select from a variety of product and design options that are available for purchase as part of the original construction of their homes. Our centers are staffed with Design Consultants who help our homebuyers select the right combination of options to meet their budget, lifestyle and design sensibilities.
Our communities are designed as neighborhoods that fit existing land characteristics. We strive to achieve diversity among architectural styles within a community by offering a variety of house models and several exterior design 6 options for each model.
Our communities are designed as neighborhoods that fit existing land characteristics. We strive to achieve diversity among architectural styles within a community by offering a variety of house models and several exterior design options for each model.
We offer homes ranging from a base sales price of approximately $190,000 to $1,000,000 and believe that this range of price points allows us to appeal to and attract a wide range of buyers.
We offer homes ranging from a base sales price of approximately $190,000 to $1,010,000 and believe that this range of price points allows us to appeal to and attract a wide range of buyers.
The structural warranty is for 10 years for homes sold after December 31, 2021, 10 or 15 years for homes sold after December 1, 2015 and on or before December 31, 2021 (except for homes sold in Texas), and 10 or 30 years for homes sold after April 25, 1998 and on or before December 1, 2015 (except for homes solid in Texas).
The structural warranty is for 10 years for homes sold after December 31, 2021, 10 or 15 years for homes sold after December 1, 2015 and on or before December 31, 2021 (except for homes sold in Texas), and 10 or 30 years for homes sold after April 25, 1998 and on or before December 1, 2015 (except for homes sold in Texas).
The incentives we offered on inventory homes in 2023 were based on community level market conditions and we may decide to discontinue such incentives in 2024 depending on how market conditions evolve. Backlog We sell our homes under standard purchase contracts, which generally require a homebuyer deposit at the time of signing the contract.
The incentives we offered on inventory homes in 2024 were based on community level market conditions and we may decide to discontinue such incentives in 2025 depending on how market conditions evolve. Backlog We sell our homes under standard purchase contracts, which generally require a homebuyer deposit at the time of signing the contract.
Our website also includes printable versions of our Corporate Governance Guidelines, our Code of Business Conduct and Ethics, and the charters for each of our Audit, Compensation, and Nominating and Corporate Governance Committees. The contents of our website are not incorporated by reference in, or otherwise made a part of, this Annual Report on Form 10-K. 12
Our website also includes printable versions of our Corporate Governance Guidelines, our Code of Business Conduct and Ethics, and the charters for each of our Audit, Compensation, and Nominating and Governance Committees. The contents of our website are not incorporated by reference in, or otherwise made a part of, this Annual Report on Form 10-K. 13
We may also experience extended timelines for receiving required approvals from municipalities or other government agencies that can delay our anticipated development and construction activities in our communities. During 2023, we experienced delays in receiving governmental and municipality approvals in certain of our community locations, and we may experience a similar level of delays in 2024.
We may also experience extended timelines for receiving required approvals from municipalities or other government agencies that can delay our anticipated development and construction activities in our communities. During 2024, we experienced delays in receiving governmental and municipality approvals in certain of our community locations, and we may experience a similar level of delays in 2025.
Environmental, Social and Governance During 2023, our environmental, social and governance (“ESG”) working group (which we formed in 2020 and is comprised of certain members of our leadership team and other members from a cross section of the Company) continued to focus on advancing our ESG practices and reporting.
Environmental, Social and Governance During 2024, our environmental, social and governance (“ESG”) working group (which we formed in 2020 and is comprised of certain members of our leadership team and other members from a cross section of the Company) continued to focus on advancing our ESG practices and reporting.
We leverage our presence on referral sites, such as Zillow.com, Realtor.com, and NewHomeSource.com, to drive sales leads to our internet sales managers. We also use email marketing to maintain communication with existing prospects and customers.
We leverage our presence on referral sites, such as Zillow.com, Livable.com, Realtor.com, and NewHomeSource.com, to drive sales leads to our internet sales managers. We use email marketing to maintain communication with existing prospects and customers.
Our warranty expense was approximately 0.6%, 0.7% and 0.6% of total housing revenue in 2023, 2022 and 2021, respectively. 8 Land Acquisition and Development We continuously evaluate land acquisition opportunities in the normal course of our homebuilding business, and we focus on both replenishing our lot positions and adding to our lot positions in key submarkets to expand our market share.
Our warranty expense was approximately 0.7%, 0.6% and 0.7% of total housing revenue in 2024, 2023 and 2022, respectively. Land Acquisition and Development We continuously evaluate land acquisition opportunities in the normal course of our homebuilding business, and we focus on both replenishing our lot positions and adding to our lot positions in key submarkets to expand our market share.
In 2023, we developed over 80% of our lots internally, primarily due to a lack of availability of developed lots in desirable locations in our markets. Raw land that requires development generally remains more available.
In 2024, we developed over 80% of our lots internally, primarily due to a lack of availability of developed lots in desirable locations in our markets. Raw land that requires development generally remains more available.
We remain sensitive to potential changes in market conditions, and continue to focus on controlling overhead leverage, carefully managing our investment in land and land development spending, and selectively offering incentives. Our strong balance sheet and liquidity position should also provide us with flexibility through changing economic conditions.
We remain sensitive to potential changes in market conditions, and continue to focus on controlling overhead leverage, carefully managing our investment in land and land development spending, and judiciously offering homebuyer incentives. Our strong balance sheet and liquidity position should also provide us with flexibility through changing economic conditions.
In 2023, we also published our fourth annual Environmental, Social and Governance Report which provides detailed information regarding our ESG policies, initiatives and strategies and includes certain quantifiable performance indicators for 2022. These performance indicators were largely based on the Sustainability Accounting Standards Board industry-specific standards.
In 2024, we also published our annual Environmental, Social and Governance Report which provides detailed information regarding our ESG policies, initiatives and strategies and includes certain quantifiable performance indicators for 2023. These performance indicators were largely based on the Sustainability Accounting Standards Board industry-specific standards.
The increase in the percentage of inventory homes closed in 2023 compared to 2022 was due to higher demand and more selective incentives offered on inventory homes compared to new builds.
The increase in the percentage of inventory homes closed in 2024 compared to 2023 was due to higher demand and more selective incentives offered on inventory homes compared to new builds.
We market and sell our homes under the M/I Homes brand. Our marketing efforts are directed at driving awareness, interest, demand and preference for the M/I Homes brand over other homebuilders, the resale market, and the option to remodel an existing older home.
Our marketing efforts are directed at driving awareness, interest, demand, and preference for the M/I Homes brand over other homebuilders, the resale market, and the option to remodel an existing older home.
We give significant attention to the ongoing training of all sales personnel to assure a high level of professionalism and product knowledge. As of December 31, 2023, we employed 240 home sales consultants. We also offer specialized mortgage financing programs through M/I Financial to assist our homebuyers.
We give significant attention to the ongoing training of all sales personnel to assure a high level of professionalism and product knowledge. As of December 31, 2024, we employed 275 home sales consultants. We also offer specialized mortgage financing programs through M/I Financial to assist our homebuyers.
Item 1. BUSINESS General M/I Homes, Inc. and subsidiaries is one of the nation’s leading builders of single-family homes. The Company commenced homebuilding activities in 1976. Since that time, the Company has sold over 151,400 homes.
Item 1. BUSINESS General M/I Homes, Inc. and subsidiaries is one of the nation’s leading builders of single-family homes. The Company commenced homebuilding activities in 1976. Since that time, the Company has sold over 160,000 homes.
Our financial services operations accounted for 2% of our consolidated revenues in both 2023 and 2022. See the “Financial Services” section below for additional information regarding our financial services operations. Our principal executive offices are located at 4131 Worth Avenue, Suite 500, Columbus, Ohio 43219.
Our financial services operations accounted for 3% and 2% of our consolidated revenues in 2024 and 2023, respectively. See the “Financial Services” section below for additional information regarding our financial services operations. Our principal executive offices are located at 4131 Worth Avenue, Suite 500, Columbus, Ohio 43219.
We generally employ subcontractors to install site improvements and construct homes. The construction of each home is supervised by a Personal Construction Supervisor who reports to a Production Manager, both of whom are employees of the Company. Our Personal Construction Supervisors manage the scheduling and construction process.
We generally employ subcontractors to install site improvements and construct homes. The construction of each home is supervised by a personal Construction Manager who reports to an Area Production Manager, both of whom are employees of the Company. Our personal Construction Managers manage the scheduling and construction process.
Our financial services operations support our homebuilding operations by providing mortgage loans and title services to the customers of our homebuilding operations and are reported as an independent segment. Our homebuilding operations comprise the most significant portion of our business, representing 98% of consolidated revenue in both 2023 and 2022.
Our financial services operations support our homebuilding operations by providing mortgage loans and title services to the customers of our homebuilding operations and are reported as an independent segment. Our homebuilding operations comprise the most significant portion of our business, representing 97% and 98% of consolidated revenue in 2024 and 2023, respectively.
Of the total number of homes closed in 2023 and 2022, 57% and 43%, respectively, were inventory homes which include both homes started as inventory homes and homes that started under a contract that were later cancelled and became inventory homes as a result.
Of the total number of homes closed in 2024 and 2023, 60% and 57%, respectively, were inventory homes which include both homes started as inventory homes and homes that started under a contract that were later cancelled and became inventory homes as a result.
We achieve this with “MyMIHome”, a digital experience, that delivers notification of key milestones, photos of the construction progress, checklists for customers to complete, easy access to purchase contracts and other related documents, and more. Our goal is to put the buyer first and enhance the total homebuying experience.
We achieve this with our “Journey” app, a digital experience, that delivers notification of key milestones, photos of the construction progress, checklists for customers to complete, easy access to purchase contracts and other related documents, and more. Our goal is to enhance the total homebuying experience.
The particular media used differs from market to market based on area demographics and other competitive factors. We market directly to consumers via newspaper, direct mail, billboards, radio, and television as well as internet marketing using our website, search engine optimization, paid search, and display advertising.
The particular media used differs from market to market based on area demographics and other competitive factors. We market directly to consumers via website, search engine optimization, paid search, and display advertising as well as traditional marketing efforts such as newspaper, direct mail, billboards, radio, and television.
As of December 31, 2022, we had a total of 3,137 homes in backlog, with an aggregate sales value of $1.7 billion. Homes included in year-end backlog are typically included in homes delivered in the subsequent year.
As of December 31, 2023, we had a total of 3,002 homes in backlog, with an aggregate sales value of $1.6 billion. Homes included in year-end backlog are typically included in homes delivered in the subsequent year.
As of December 31, 2023, we had a total of 3,002 homes in backlog with an aggregate sales value of $1.6 billion, in various stages of completion, including homes that are under contract but for which construction had not yet begun.
As of December 31, 2024, we had a total of 2,531 homes in backlog with an aggregate sales value of $1.4 billion, in various stages of completion, including homes that are under contract but for which construction had not yet begun.
The potential effect of these factors is uncertain and could adversely impact our operations and financial results in future periods. 4 We believe that we are well positioned to manage through the ever-evolving housing industry market conditions with our affordable product offerings, land position and planned new community openings.
The potential effects of these factors are uncertain and could adversely impact our operations and financial results in future periods. We believe that we are well positioned to manage through the evolving housing industry market conditions by focusing on our land position, new community openings, and affordable product offerings.
Consistent with our focus on improving long-term financial results, we expect to continue to emphasize the following strategic business objectives in 2024: • managing our land spend and inventory levels; • improving our construction cycle times; • opening new communities; • managing overhead spend; • maintaining a strong balance sheet and liquidity levels; and • emphasizing customer service, product quality and design, and premier locations.
Consistent with our focus on improving long-term financial results, we expect to continue to emphasize the following strategic business objectives in 2025: • promote sales where necessary through interest rate buydowns and/or other incentives; • managing our land spend and inventory levels; • managing our construction cycle times; • opening new communities; • managing overhead spend; • maintaining a strong balance sheet and liquidity levels; and • emphasizing customer service, product quality and design, and premier locations.
As a result, we can provide no assurance that the positive trends reflected in our financial and operating metrics in 2023 will continue in 2024. Sales and Marketing In 2023, we continued to focus our marketing efforts on first-time and move-up homebuyers, including home designs targeted to first-time, millennial, multi-generational and empty-nester homebuyers.
As a result, we can provide no assurance that the positive trends reflected in our financial and operating metrics in 2024 will continue in 2025. 5 Sales and Marketing We focus our marketing efforts on first-time and move-up homebuyers, including home designs targeted to first-time, multi-generational and empty-nester homebuyers. We market and sell our homes under the M/I Homes brand.
We also continue to develop new floor plans and communities specifically for the growing empty-nester market. These plans (primarily ranch and main floor master bedroom type plans) focus on move-down buyers, are smaller in size, and feature outdoor living potential, fewer bedrooms, and improved community amenities. Our homebuilding divisions often share successful floor plans with other divisions, when appropriate.
These plans (primarily ranch and main floor master bedroom type plans) focus on move-down buyers, are smaller in size, and feature outdoor living potential, fewer bedrooms, and improved community amenities. Our homebuilding divisions often share successful floor plans with other divisions, when appropriate. We continue to look for opportunities to develop more multi-family communities.
The construction of our homes typically takes approximately four to six months from the start of construction to completion of the home, depending on the size and complexity of the particular home being built, weather conditions, and the availability of labor, materials, and supplies. We remain focused on improving construction cycle times in all of our markets.
The construction of our homes typically takes approximately four to six months from the start of construction to completion of the home, depending on the size and complexity of the particular home being built, weather conditions, and the availability of labor, materials, and supplies.
Our financial services operations also experience seasonality because their loan originations correspond with the delivery of homes in our homebuilding operations. Human Capital At December 31, 2023, we employed 1,607 people (including part-time employees), including 1,247 in homebuilding operations, 233 in financial services and 127 in management and administrative services.
Our financial services operations also experience seasonality because their loan originations correspond with the delivery of homes in our homebuilding operations. 11 Human Capital At December 31, 2024, we employed 1,760 people (including part-time employees), including 1,366 in homebuilding operations, 260 in financial services and 134 in management and administrative services.
Although we centralize certain functions (such as accounting, human resources, legal, land purchase approval, and risk management) to benefit from economies of scale, our local management, generally under the direction of an Area President and supervised by a Region President, exercises considerable autonomy in identifying land acquisition opportunities, developing and implementing product and sales strategies, and controlling costs.
Although we centralize certain functions (such as accounting, human resources, legal, land purchase approval, and risk management) to benefit from economies of scale, our local management, generally under the direction of an Area President and supervised by a Region President, exercises considerable autonomy in identifying land acquisition opportunities, developing and implementing product and sales strategies, and controlling costs. 4 Industry Overview and Current Market Conditions During 2024, housing market conditions remained relatively healthy despite elevated inflation and mortgage interest rates.
Our raw materials consist primarily of lumber, concrete and similar construction materials, and while these materials are generally available from a variety of sources, we have reduced construction and administrative costs by executing national purchasing contracts with select vendors. We experienced more normalized labor and supply markets in 2023 which improved our construction cycle times.
Our raw materials consist primarily of lumber, concrete and similar construction materials, and while these materials are generally available from a variety of sources, we have reduced construction and administrative costs by executing national purchasing contracts with select vendors.
The agreements generally specify a fixed price for labor and materials and provide price protection for a majority of the higher-cost phases of construction for homes in our backlog. 7 For our buyers who are not interested in purchasing an inventory home (homes started in the absence of an executed contract), we begin construction on the home after we obtain a sales contract and preliminary written confirmation from the buyer’s lender that financing should be approved.
For our buyers who are not interested in purchasing an inventory home (homes started in the absence of an executed contract), we begin construction on the home after we obtain a sales contract and preliminary written confirmation from the buyer’s lender that financing should be approved.
In addition to single-family detached homes, we also offer attached townhomes in several of our markets. We believe that offering a wide range of homes enables us to attract first-time, millennial, multi-generational, move-up, empty-nester and luxury homebuyers.
In addition to single-family detached homes, we also offer attached townhomes in several of our markets. We believe that offering a wide range of homes enables us to attract first-time, multi-generational, move-up, empty-nester and luxury homebuyers. We devote significant resources to the research, design and development of our homes to meet the demands of our buyers and evolving market requirements.
We use the term “community” to refer to a single development in which we construct homes. At times, “multiple communities” can exist in a single development where we offer multiple product types. We primarily construct homes in planned development communities and mixed-use communities. We are currently offering homes for sale in 213 communities within 17 markets located in ten states.
We use the term “community” to refer to a single development in which we construct homes. At times, “multiple communities” can exist in a single development where we offer multiple product types. We primarily construct homes in planned development communities and mixed-use communities.
More information regarding our human capital programs and initiatives can be found in the “Employee Engagement and Safety” section of our Environmental, Social and Governance Report. A copy of our Environmental, Social and Governance Report is available on our website at www.mihomes.com under the “Investors” heading.
More information regarding our human capital programs and initiatives can be found in the “Our Employee Focus,” “Diversity, Equity, and Inclusion” and “Safety and Training” sections of our Environmental, Social and Governance Report. A copy of our Environmental, Social and Governance Report is available on our website at www.mihomes.com under the “Investors” heading.
The backlog at any given time will be affected by cancellations. Due to the seasonality of the homebuilding industry, the number of homes delivered has historically increased from the first to the fourth quarter in any year.
Due to the seasonality of the homebuilding industry, the number of homes delivered has historically increased from the first to the fourth quarter in any year.
Principal competitive factors include pricing, mortgage loan terms, underwriting criteria, interest rates, customer service and other features of mortgage loan products available to the consumer. 10 Government Regulation and Environmental Matters Our homebuilding operations are subject to various local, state and federal statutes, ordinances, rules and regulations concerning the protection of health and the environment, including the emission or discharge of materials into the environment, storm water and surface water management, soil, groundwater and wetlands protection, subsurface conditions and air quality protection and enhancement.
Government Regulation and Environmental Matters Our homebuilding operations are subject to various local, state and federal statutes, ordinances, rules and regulations concerning the protection of health and the environment, including the emission or discharge of materials into the environment, storm water and surface water management, soil, groundwater and wetlands protection, subsurface conditions and air quality protection and enhancement.
All of our homes are constructed according to proprietary designs that meet the applicable FHA and VA requirements and all local building codes. We attempt to maintain efficient operations by utilizing standardized materials.
We also strive to maximize greenspace, develop in environmentally harmonious communities, build energy efficient homes, and purchase sustainable inputs. All of our homes are constructed according to proprietary designs that meet the applicable FHA and VA requirements and all local building codes. We attempt to maintain efficient operations by utilizing standardized materials.
The “Smart Series” targets entry-level and move-down buyers and focuses significant attention on affordability, livability and design flexibility. We continue to increase our multi-family Smart Series offerings in several of our divisions.
Our “Smart Series” is market specific and intended to offer buyers excellent value, desirable locations, and pre-selected packages of upgraded finishes and appliances. The “Smart Series” targets 7 entry-level and move-down buyers and focuses significant attention on affordability, livability and design flexibility. We continue to increase our multi-family Smart Series offerings in several of our divisions.
These Smart Series townhome programs are thoughtfully designed and intended to be more affordable and take advantage of higher density opportunities either as stand-alone communities or as part of our conventional Smart Series single-family neighborhoods. Our “City Collection” floor plans offer a unique and upscale urban lifestyle by utilizing narrow lots, detached rear garages and thoughtfully designed interiors.
These Smart Series townhome programs are thoughtfully designed and intended to be more affordable and take advantage of higher density opportunities either as stand-alone communities or as part of our conventional Smart Series single-family neighborhoods.
Our homebuilding operations are also subject to various local, state and federal statutes, ordinances, rules and regulations concerning building, zoning, design, construction, sales, consumer protection and similar matters.
Environmental costs and accruals were not material to our operations, cash flows or financial position in 2024, 2023 or 2022. Our homebuilding operations are also subject to various local, state and federal statutes, ordinances, rules and regulations concerning building, zoning, design, construction, sales, consumer protection and similar matters.
However, we cannot provide any assurances that our strategic business objectives will remain successful, and we may need to adjust elements of our strategy to address evolving market conditions more effectively. Business Strategy We are focused on maximizing profitability, continuing to expand our market share using our more affordable designs and being selective in land and land development investment opportunities.
However, we cannot provide any assurances that our strategic business objectives will remain successful, and we may need to adjust elements of our strategy to address evolving market conditions more effectively.
In 2023, we reduced our average days under construction by more than 60 days. Continued improvement in supply chain and labor market conditions would enhance our ability to reduce production times. We construct inventory homes to facilitate delivery of homes on an immediate-need basis under our Ready Now Homes program and to provide presentation of new products.
We remain focused on improvements in supply chain and labor market conditions that could impact our ability to maintain production times. We construct inventory homes to facilitate delivery of homes on an immediate-need basis under our Ready Now Homes program and to provide presentation of new products.
However, we generally permit our homebuyers to cancel their obligations and obtain refunds of all or a portion of their deposits (unless home construction has started) in the event mortgage financing cannot be obtained within the period specified in their contract to maintain goodwill with the potential buyer.
However, we generally permit our homebuyers to cancel their obligations and obtain refunds of all or a portion of their deposits in the event mortgage financing cannot be obtained within the period specified in their contract. Backlog consists of homes that are under contract but have not yet been delivered.
We believe that the 20% increase in new contracts during 2023 compared to 2022 resulted from the more stable interest rate environment, our sales incentives and interest rate buy-down offerings and the low inventory levels in the housing market. In addition, supply chain conditions also normalized to a large degree with average construction cycle times improving year-over-year.
We believe that the 8% increase in new contracts during 2024 compared to 2023 resulted from our sales incentives and interest rate buydown offerings and the low inventory levels in the housing market. In addition, supply chain and labor conditions remained stable throughout 2024 which allowed us to improve construction cycle times compared to 2023.
Across all of our divisions, we currently offer over 500 different floor plans designed to reflect current lifestyles and design trends. Work-from-home needs for potential homebuyers continue to be an important planning tool for us, and we will continue to design and offer in-home spaces that are bright, functional and bring value to our buyers.
Work-from-home needs for potential homebuyers remain an important planning tool for us, and we will continue to design and offer in-home spaces that are bright, functional and bring value to our buyers. We also continue to develop new floor plans and communities specifically for the growing empty-nester market.
Backlog consists of homes that are under contract but have not yet been delivered. Ending backlog represents the number of homes in backlog from the previous period plus the number of net new contracts (new contracts for homes less cancellations) generated during the current period minus the number of homes delivered during the current period.
Ending backlog represents the number of homes in backlog from the previous period plus the number of net new contracts (new contracts for homes less cancellations) generated during the current period minus the number of homes delivered during the current period. The backlog at any given 8 time will be affected by cancellations.
Information on our website, including the Environmental, Social and Governance Report, is not incorporated by reference in or otherwise considered a part of this Annual Report on Form 10-K.
Information on our website, including the Environmental, Social and Governance Report, is not incorporated by reference in or otherwise considered a part of this Annual Report on Form 10-K. 12 Available Information We are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (“Exchange Act”), and file annual, quarterly and current reports, proxy statements and other information with the SEC.
Our City Collection enables us to participate in new infill development opportunities that extend beyond our traditional suburban markets. We design all of our product lines to reduce production costs and construction cycle times while adhering to our quality standards and using materials and construction techniques that reflect our commitment to more environmentally conscious homebuilding methods.
We design all of our product lines to reduce production costs and construction cycle times while adhering to our quality standards and using materials and construction techniques that reflect our commitment to more environmentally conscious homebuilding methods. Some of those techniques include wall, floor, and roof panelization to minimize waste as well as construction waste recycling.
Inventory levels in the housing market remain undersupplied relative to demand due to (1) the underproduction of new homes over the past decade and (2) near record low levels of existing home resale inventory.
The demographics supporting housing demand continued to be somewhat favorable as a result of a limited supply of both new and existing homes compared to the rate of household formations. Inventory levels in the housing market remain undersupplied due to the underproduction of new homes over the past decade and low levels of existing home resale inventory.
We devote significant resources to the research, design and development of our homes to meet the demands of our buyers and evolving market requirements. We regularly review the plans offered in each of our divisions to ensure that our home designs are still relevant and appropriate for that particular market.
We regularly review the plans offered in each of our divisions to ensure that our home designs are still relevant and appropriate for that particular market. Across all of our divisions, we currently offer over 500 different floor plans designed to reflect current lifestyles and design trends.
Our average sales price of homes delivered during 2023 was $483,000, and the average sales price of our homes in backlog at December 31, 2023 was $525,000.
We are currently offering homes for sale in 220 communities and operating within 17 markets located in ten states. Our average sales price of homes delivered during 2024 was $483,000, and the average sales price of our homes in backlog at December 31, 2024 was $553,000.
We continue to look for opportunities to develop more multi-family communities. In some cases where commercial and office developments are in less demand, we see potential to rezone to a higher density multi-family solution.
In some cases where commercial and office developments are in less demand, we see potential to rezone to a higher density multi-family solution. As affordability remains a key driver of sales, our “Smart Series” has remained important and represented approximately 52% of our total sales for the year ended December 31, 2024.
Available Information We are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (“Exchange Act”), and file annual, quarterly and current reports, proxy statements and other information with the SEC. These filings are available to the public on the SEC’s website at www.sec.gov. Our website address is www.mihomes.com.
These filings are available to the public on the SEC’s website at www.sec.gov. Our website address is www.mihomes.com.
Our financial services operations compete with other mortgage lenders to arrange financing for homebuyers.
Our financial services operations compete with other mortgage lenders to arrange financing for homebuyers. Principal competitive factors include pricing, mortgage loan terms, underwriting criteria, interest rates, customer service and other features of mortgage loan products available to the consumer.
With respect to current market conditions, we believe that the underproduction of new homes over the past decade and the constrained supply of resale inventory will continue to benefit the housing industry over the long term. The current demand for new homes, however, remains subject to uncertainty due to ongoing inflation concerns, consumer confidence, and the current interest rate environment.
We will continue to prioritize managing our land spend and inventory levels of finished lots and inventory homes by balancing our development investment activity and our construction pace. The current demand for new homes remains subject to uncertainty due to ongoing affordability and inflation concerns, consumer confidence, labor and material costs and availability, and the current interest rate environment.
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Industry Overview and Current Market Conditions During 2023, housing market conditions stabilized compared to the more challenging housing market conditions that were present during the second half of 2022 and the first quarter of 2023.
Added
In the second half of 2024, the Federal Reserve reduced interest rates three times for a total of 100 basis points. Despite the rate cuts by the Federal Reserve, mortgage rates continued to hover around 7% throughout 2024.
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Housing demand deteriorated during most of 2022 in connection with significant increases to 30-year fixed mortgage rates resulting from the Federal Reserve's aggressive actions to combat inflation. We believe that this interest rate environment caused many potential homebuyers to stay on the sidelines and delay their home purchases which resulted in lower new contracts and higher cancellations in 2022.
Added
On the other hand, affordability is under increasing pressure due to rising home costs. We offered sales incentives and mortgage interest rate buydowns in 2024 to further stimulate traffic and demand.
Removed
The Federal Reserve implemented more modest interest rate changes in 2023 than in 2022 which we believe improved consumer confidence. We continued to offer sales incentives and interest rate buy-downs in select communities in 2023 to further stimulate demand which, in combination with product mix, lowered our average closing price in 2023 compared to 2022.
Added
With respect to current market conditions, although the level of new and existing home inventories has increased from historically low levels, the supply of homes at affordable price points is generally still limited. In addition, demographics supporting housing demand remain favorable and we believe that they will continue to benefit the housing industry over the long-term.
Removed
As affordability remains a key driver of sales, our “Smart Series” has become more important than ever and represented approximately 55% of our total sales for the year ended December 31, 2023. Our “Smart Series” is market specific and intended to offer buyers excellent value, desirable locations, and pre-selected packages of upgraded finishes and appliances.
Added
Our use of sales incentives and mortgage interest rate buydowns in 2025 will depend on, among other things, market dynamics, including mortgage interest rates and overall housing affordability, as well as community-specific considerations, including the size and construction stage of the backlog, sales pace and lots remaining available for sale.
Removed
Some of those techniques include wall, floor, and roof panelization to minimize waste as well as construction waste recycling. We also strive to maximize greenspace, develop in environmentally harmonious communities, build energy efficient homes, and purchase sustainable inputs.
Added
We do expect some margin compression in 2025 when compared to 2024 levels as a result of the current market conditions. We also expect to increase our land acquisition and development investment activity in 2025 compared to 2024 to support future growth, subject to market conditions and available opportunities that meet our investment return standards.
Removed
Environmental costs and accruals were not material to our operations, cash flows or financial position in 2023, 2022 or 2021, although we did experience a reduction in our energy efficient home credits in 2023 when compared to prior years as the Inflation Reduction Act (“IRA”) that was enacted August 16, 2022 made the requirements for obtaining the tax credit more difficult to obtain.
Added
Business Strategy We are focused on maximizing profitability, continuing to expand our market share through our more affordable and move-up product designs and being selective in land and land development investment opportunities.
Added
The agreements generally specify a fixed price for labor and materials and provide price protection for a majority of the higher-cost phases of construction for homes in our backlog.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeAn epidemic, pandemic or similar public health issue, or fear of such an event, and the measures undertaken by governmental authorities to address it, could significantly disrupt or prevent us from operating our business in the ordinary course for an extended period and, together with any associated economic and social instability or distress, have a material adverse effect on our business, results of operations, financial condition and/or cash flows.
Biggest changeAn epidemic, pandemic or similar public health issue, or fear of such an event, and the measures undertaken by governmental authorities to address it, could significantly disrupt or prevent us from operating our business in the ordinary course for an extended period and, together with any associated economic and social instability or distress, have a material adverse effect on our business, results of operations, financial condition and/or cash flows. 23 The impact of an epidemic, pandemic or similar public health issue on our business will depend on future developments, including whether governmental authorities impose additional health and safety measures, the duration and severity of the public health issue, the acceptance and effectiveness of treatments including vaccines, and the impact of the public health issue on our employees, customers, and building partners.
There are significant risks inherent in controlling or purchasing land, especially as the demand for new homes fluctuates and land purchases become more competitive, which can increase the costs of land. There is often a significant lag time between when we acquire land for development and when we sell homes in neighborhoods we have planned, developed and constructed.
There are significant risks inherent in controlling or purchasing land, especially as the demand for new homes fluctuates and land purchases become more competitive, which can increase the costs of land. There is often a significant time lag between when we acquire land for development and when we sell homes in neighborhoods we have planned, developed and constructed.
Our ability to conduct our business may be impaired if these informational technology and computer resources, including our website and customer-facing applications, are compromised, degraded or damaged or if they fail, whether due to a virus or other harmful circumstance, intentional penetration or disruption of our information technology resources by a third party, natural disaster, hardware or software corruption or failure or error (including a failure of security controls incorporated into or applied to such hardware or software), telecommunications system failure, service provider error or failure or intentional or unintentional personnel actions (including the failure to follow our security protocols), or lost connectivity to our networked resources.
Our ability to conduct our business may be impaired if these information technology and computer resources, including our website and customer-facing applications, are compromised, degraded or damaged or if they fail, whether due to a virus or other harmful circumstance, intentional penetration or disruption of our information technology resources by a third party, natural disaster, hardware or software corruption or failure or error (including a failure of security controls incorporated into or applied to such hardware or software), telecommunications system failure, service provider error or failure or intentional or unintentional personnel actions (including the failure to follow our security protocols), or lost connectivity to our networked resources.
The unintended and/or unauthorized public disclosure or the misappropriation of 21 proprietary, personal identifying or confidential information may also lead to litigation or other proceedings against us by affected individuals and/or business partners and/or by regulators, and the outcome of such proceedings, which could include losses, penalties, fines, injunctions, expenses and charges recorded against our earnings, could have a material and adverse effect on our financial condition, results of operations and cash flows and harm our reputation.
The unintended and/or unauthorized public disclosure or the misappropriation of proprietary, personal identifying or confidential information may also lead to litigation or other proceedings against us by affected individuals and/or business partners and/or by regulators, and the outcome of such proceedings, which could include losses, penalties, fines, injunctions, expenses and charges recorded against our earnings, could have a material and adverse effect on our financial condition, results of operations and cash flows and harm our reputation.
For example: • a significant portion of our cash flow may be required to pay principal and interest on our indebtedness, which could reduce the funds available for working capital, capital expenditures, acquisitions or other purposes; • borrowings under the Credit Facility bear, and borrowings under any new facility could bear, interest at floating rates, which could result in higher interest expense in the event of an increase in interest rates; • the terms of our indebtedness could limit our ability to borrow additional funds or sell assets to raise funds, if needed, for working capital, capital expenditures, acquisitions or other purposes; • our debt level and the various covenants contained in the Credit Facility, the indentures governing our 2030 Senior Notes and 2028 Senior Notes and the documents governing our other indebtedness could place us at a relative competitive disadvantage compared to some of our competitors; and 17 • the terms of our indebtedness could prevent us from raising the funds necessary to repurchase all of the 2030 Senior Notes and the 2028 Senior Notes tendered to us upon the occurrence of a change of control, which, in each case, would constitute a default under the applicable indenture, which in turn could trigger a default under the Credit Facility and the documents governing our other indebtedness.
For example: • a significant portion of our cash flow may be required to pay principal and interest on our indebtedness, which could reduce the funds available for working capital, capital expenditures, acquisitions or other purposes; • borrowings under the Credit Facility bear, and borrowings under any new facility could bear, interest at floating rates, which could result in higher interest expense in the event of an increase in interest rates; • the terms of our indebtedness could limit our ability to borrow additional funds or sell assets to raise funds, if needed, 18 for working capital, capital expenditures, acquisitions or other purposes; • our debt level and the various covenants contained in the Credit Facility, the indentures governing our 2030 Senior Notes and 2028 Senior Notes and the documents governing our other indebtedness could place us at a relative competitive disadvantage compared to some of our competitors; and • the terms of our indebtedness could prevent us from raising the funds necessary to repurchase all of the 2030 Senior Notes and the 2028 Senior Notes tendered to us upon the occurrence of a change of control, which, in each case, would constitute a default under the applicable indenture, which in turn could trigger a default under the Credit Facility and the documents governing our other indebtedness.
There can be no assurance that this seasonality pattern will continue to exist in future reporting periods. In addition, as a result of such variability, our historical performance may not be a meaningful indicator of future results. 20 Damage to our corporate reputation or brand from negative publicity could adversely affect our business, financial results and/or stock price.
There can be no assurance that this seasonality pattern will continue to exist in future reporting periods. In addition, as a result of such variability, our historical performance may not be a meaningful indicator of future results. Damage to our corporate reputation or brand from negative publicity could adversely affect our business, financial results and/or stock price.
In addition, any failure to comply therewith could 19 give rise to fines, penalties or other liabilities, obligations to remediate, permit revocations or other sanctions and have an adverse effect on our results of operations, financial condition or business. Various advocacy groups and government agencies and the general public are increasingly focusing on the impact of climate change.
In addition, any failure to comply therewith could give rise to fines, penalties or other liabilities, obligations to remediate, permit revocations or other sanctions and have an adverse effect on our results of operations, financial condition or business. Various advocacy groups and government agencies and the general public are increasingly focusing on the impact of climate change.
We cannot provide any assurance that there will be a sufficient supply of, or satisfactory performance by, these unaffiliated third-party subcontractors, which could have a material adverse effect on our business. Tax law changes could make home ownership more expensive and/or less attractive.
We cannot provide any assurance that there will be a sufficient supply of, or satisfactory performance by, these unaffiliated third-party subcontractors, which could have a material adverse effect on our business. 16 Tax law changes could make home ownership more expensive and/or less attractive.
There can be no assurance that we will not have significant liabilities in respect of such claims in the future, which could exceed our reserves, or that the impact of such claims on our results of operations will not be material. If our ability to resell mortgages to investors is impaired, we may be required to broker loans.
There can be no assurance that we will not have significant liabilities in respect of such claims in the future, which could exceed our reserves, or that the impact of such claims on our results of operations will not be material. 19 If our ability to resell mortgages to investors is impaired, we may be required to broker loans.
In the future, our pricing strategies may be limited by market conditions. We may be unable to change the mix of our home offerings, reduce the costs of the homes we build or offer more affordable homes to maintain our gross margins or satisfactorily address changing market conditions in other ways.
In the future, our pricing strategies may be limited by market conditions. We may be unable to change the mix of our home offerings, reduce the costs of the homes we build or offer more 14 affordable homes to maintain our gross margins or satisfactorily address changing market conditions in other ways.
Increased competition levels in the homebuilding and mortgage lending industries could reduce our new contracts and homes delivered, decrease the average sales prices of homes delivered and decrease mortgage originations, which would have a negative impact on our results of operations. The homebuilding industry is fragmented and highly competitive.
Increased competition in the homebuilding and mortgage lending industries could reduce our new contracts and homes delivered, decrease the average sales prices of homes delivered and decrease mortgage originations, which would have a negative impact on our results of operations. The homebuilding industry is fragmented and highly competitive.
However, we may not always be able to 16 cause our subcontractors to discontinue potentially improper practices, and even when we can, we may not be able to avoid claims against us for personal injury, property damage or other losses relating to prior actions of our subcontractors.
However, we may not always be able to cause our subcontractors to discontinue potentially improper practices, and even when we can, we may not be able to avoid claims against us for personal injury, property damage or other losses relating to prior actions of our subcontractors.
The failure of other banks or financial institutions could have an adverse effect on our liquidity or consolidated financial statements if we have deposits at the failed banks or financial institutions, or if the failed banks or financial institutions, or any substitute or additional banks or financial institutions, participate in our Credit Facility.
The failure of banks or financial institutions could have an adverse effect on our liquidity or consolidated financial statements if we have deposits at the failed banks or financial institutions, or if the failed banks or financial institutions, or any substitute or additional banks or financial institutions, participate in our Credit Facility.
These developments are highly uncertain and outside of our control. To the extent an epidemic, pandemic or similar public health issue has a significant adverse effect on the U.S. economy, our business, results of operations, financial condition and/or cash flows could be materially adversely affected. Item 1B. UNRESOLVED STAFF COMMENTS None. 22
These developments are highly uncertain and outside of our control. To the extent an epidemic, pandemic or similar public health issue has a significant adverse effect on the U.S. economy, our business, results of operations, financial condition and/or cash flows could be materially adversely affected. Item 1B. UNRESOLVED STAFF COMMENTS None. 24
However, if labor and building material shortages and cost increases continue, our gross margins and results of operations could be adversely affected if we are unable to continue to increase prices or achieve other cost savings. We depend on the continued availability of and satisfactory performance of subcontracted labor for the construction of our homes and to provide related materials.
If labor and building material shortages and cost increases return, our gross margins and results of operations could be adversely affected if we are unable to continue to increase prices or achieve other cost savings. We depend on the continued availability of and satisfactory performance of subcontracted labor for the construction of our homes and to provide related materials.
These above conditions, among others, are complex and interrelated. Adverse changes in such business conditions may have a significantly negative impact on our business. The negative impact may be national in scope but may also negatively affect some of the regions or markets in which we operate more than others.
These above conditions, among others, are complex and interrelated. Adverse changes in such business conditions may have a significantly negative impact on our business and results of operations. The negative impact may be national in scope but may also negatively affect some of the regions or markets in which we operate more than others.
The ability to obtain surety bonds also can be impacted by the willingness of insurance companies and sureties to issue performance bonds. If we cannot obtain surety bonds when required, our results of operations and/or cash flows could be adversely impacted. The M/I Financial repurchase facility will expire in 2024.
The ability to obtain surety bonds also can be impacted by the willingness of insurance companies and sureties to issue performance bonds. If we cannot obtain surety bonds when required, our results of operations and/or cash flows could be adversely impacted. The M/I Financial repurchase facility will expire in 2025.
During 2022 and 2023, we experienced delays in receiving governmental and municipality approvals in certain of our community locations, and we expect that we may experience a similar level of delays in 2024. Governmental authorities may also restrict or place moratoriums on the availability of utilities, such as water and sewer taps.
During 2023 and 2024, we experienced delays in receiving governmental and municipality approvals in certain of our community locations, and we expect that we may experience a similar level of delays in 2025. Governmental authorities may also restrict or place moratoriums on the availability of utilities, such as water and sewer taps.
Even if potential customers do not need financing, changes in the availability of mortgage products may make it harder for them to sell their current homes to potential buyers who need financing, which may lead to lower demand for new homes. Many of our homebuyers obtain financing for their home purchases from M/I Financial.
Even if potential customers do not need financing, changes in the availability of mortgage products may make it harder for them to sell their current homes to potential buyers who need financing, which may reduce demand for new homes. 15 Many of our homebuyers obtain financing for their home purchases from M/I Financial.
Certain economic, real estate and other business conditions that have significant effects on the homebuilding industry include: • employment levels and job and personal income growth; • availability and pricing of financing for homebuyers; • short and long-term interest rates; • overall consumer confidence and the confidence of potential homebuyers in particular; • demographic trends; • changes in energy prices; • housing demand from population growth, household formation and other demographic changes, among other factors; • U.S. and global financial system and credit market stability; • private party and governmental residential consumer mortgage loan programs, and federal and state regulation of lending and appraisal practices; • federal and state personal income tax rates and provisions, including provisions for the deduction of residential consumer mortgage loan interest payments and other expenses; • the supply of and prices for available new or existing homes (including lender-owned homes acquired through foreclosures and short sales) and other housing alternatives, such as apartments and other residential rental property; • homebuyer interest in our current or new product designs and community locations, and general consumer interest in purchasing a home compared to choosing other housing alternatives; and • real estate taxes.
Certain economic, real estate and other business conditions that have significant effects on the homebuilding industry include: • employment levels and job and personal income growth; • availability and pricing of financing for homebuyers; • short and long-term interest rates; • overall consumer confidence and the confidence of potential homebuyers in particular; • demographic trends; • changes in energy prices; • population growth, household formations and other demographic changes that may be driven by, among other factors birth rate changes or U.S. immigration changes; • U.S. and global financial system and credit market stability; • private party and governmental residential consumer mortgage loan programs, and federal and state regulation of lending and appraisal practices; • federal and state personal income tax rates and provisions, including provisions for the deduction of residential consumer mortgage loan interest payments and other expenses; • the supply of and prices for available new or existing homes (including lender-owned homes acquired through foreclosures and short sales) and other housing alternatives, such as apartments and other residential rental property; • homebuyer interest in our current or new product designs and community locations, and general consumer interest in purchasing a home compared to choosing other housing alternatives; and • real estate taxes.
However, regardless of the steps we take after we become aware of practices that do not comply with applicable laws, rules or regulations, we can in some instances be subject to fines or other governmental penalties, and our reputation can be injured, due to the practices having taken place.
However, regardless of the steps we take after we become aware of practices that do not comply with applicable laws, rules or regulations, we can in some instances be subject to fines or other governmental penalties, and our reputation can be injured, due to the occurrence of the practices.
In addition, cancellations of home sales contracts in backlog may increase. 13 Although our absorption rate and new contracts improved during 2023 compared to prior year, any decline in sales activity could adversely affect our results of operations, financial condition and cash flows.
In addition, cancellations of home sales contracts in backlog may increase. Although our absorption rate, cancellation rate and new contracts improved during 2024 compared to prior year, any decline in sales activity could adversely affect our results of operations, financial condition and cash flows.
If conditions in the homebuilding industry decline, we are required to evaluate our inventory for potential impairment, which may result in additional valuation adjustments, which could be significant and could negatively impact our results of operations and financial condition. We cannot make any assurances that the measures we employ to manage inventory risks and costs will be successful.
We are required to periodically evaluate our inventory for potential impairment, which may result in additional valuation adjustments that could be significant and negatively impact our results of operations and financial condition. We cannot make any assurances that the measures we employ to manage inventory risks and costs will be successful.
FHA and VA mortgage financing support remains an important factor in marketing our homes. Any increases in down payment requirements, lower maximum loan amounts, or limitations or restrictions on the availability of FHA and VA financing support could adversely affect interest rates, mortgage availability and our sales of new homes and origination of mortgage loans.
Any increases in down payment requirements, lower maximum loan amounts, or limitations or restrictions on the availability of FHA and VA financing support could adversely affect interest rates, mortgage availability and our sales of new homes and origination of mortgage loans.
We closely monitor our sales prices and offer sales incentives and mortgage rate buy-down programs and adjust base sales prices in certain circumstances and in certain communities, which negatively impacted our sales prices and gross margins in 2023. We may or may not continue to offer these incentives in 2024.
We closely monitor our sales prices and offer sales incentives and mortgage rate buydown programs and adjust base sales prices in certain circumstances and in certain communities, which negatively impacted our sales prices and gross margins in 2024. We may or may not continue to offer these incentives in 2025.
A reduction in our gross margins from home sales could have a significantly negative impact on our financial position and results of operations. Additional external factors, such as foreclosure rates, mortgage availability, high inflation, a global economic slowdown, the prospect of a recession, and unemployment rates, could also negatively impact our results.
A reduction in our gross margins from home sales could have a significantly negative impact on our financial position and results of operations. Additional external factors, such as foreclosure rates, mortgage availability, high inflation, and unemployment rates, could also negatively impact our results.
Our land investment exposes us to significant risks, including potential impairment charges, that could negatively impact our profits if the market value of our inventory declines. We must anticipate demand for new homes several years prior to homes being sold to homeowners.
Our land investment exposes us to significant risks, including potential impairment charges, that could negatively impact our profits if the market value of our inventory declines. We must anticipate demand for new homes several years before actually selling homes to homeowners.
M/I Financial uses the MIF Mortgage Repurchase Facility to finance eligible residential mortgage loans originated by M/I Financial. This facility will expire on October 22, 2024.
M/I Financial uses the MIF Mortgage Repurchase Facility to finance eligible residential mortgage loans originated by M/I Financial. This facility will expire on October 21, 2025.
Any such increases, in addition to increases in personal income 15 tax rates, could adversely impact demand for and/or selling prices of new homes, including our homes, and the effect on our consolidated financial statements could be adverse and material. We may not be able to offset the impact of inflation through price increases.
Any such increases, in addition to increases in personal income tax rates, could adversely impact demand for and/or selling prices of new homes, including our homes, and the effect on our consolidated financial statements could be adverse and material.
As of December 31, 2023, we had approximately $693.7 million of indebtedness (net of debt issuance costs), excluding issuances of letters of credit and our $300 million mortgage repurchase facility, with M/I Financial as borrower (the “MIF Mortgage Repurchase Facility”), and we had $579.3 million of remaining availability for borrowings under the Credit Facility.
As of December 31, 2024, we had approximately $695.0 million of indebtedness (net of debt issuance costs), excluding issuances of letters of credit and our $300 million mortgage repurchase facility, with M/I Financial as borrower (the “MIF Mortgage Repurchase Facility”), and we had $569.6 million of remaining availability for borrowings under the Credit Facility.
Further reduction in the availability of mortgage financing or continued increases in mortgage interest rates or down payment requirements could adversely affect our business. Mortgage interest rates increased significantly in 2022 and 2023 from historical low rates, which increased the costs of owning a home and reduced the demand for our homes.
Further reduction in the availability of mortgage financing or continued increases in mortgage interest rates or down payment requirements could adversely affect our business. Mortgage interest rates have remained elevated since rising in 2022 after a period of historically low rates, which increased the costs of owning a home and reduced the demand for our homes.
Under our Credit Facility, non-defaulting lenders still have an obligation to fund amounts up to their commitment level under the Credit Facility.
Under our Credit Facility, non-defaulting lenders remain obligated to fund amounts up to their commitment level under the Credit Facility.
We have implemented systems and processes intended to address ongoing and evolving cyber security risks, secure our information technology, applications and computer systems, and prevent unauthorized access to or loss of sensitive, confidential and personal data.
We use information technology, digital communications and other computer resources to carry out important operational and marketing activities and to maintain our business records. We have implemented systems and processes intended to address ongoing and evolving cyber security risks, secure our information technology, applications and computer systems, and prevent unauthorized access to or loss of sensitive, confidential and personal data.
Housing market conditions stabilized during 2023 compared to the latter half of 2022 as interest rate increases moderated and consumer confidence began to improve. However, any decline in the homebuilding and mortgage lending industries and overall economy could decrease the market value of our inventory which could have a negative impact on our gross margins from home sales.
Housing market conditions improved in 2024, as interest rates continued to hover around 7% and consumer confidence continued to improve. However, any decline in the homebuilding and mortgage lending industries and overall economy could decrease the market value of our inventory which could have a negative impact on our gross margins from home sales.
Future rulings by the NLRB or other courts or governmental agencies could make us responsible for labor violations committed by our subcontractors. Governmental rulings that hold us responsible for labor practices of our subcontractors could create substantial exposures for us under our subcontractor relationships.
Future rulings by the NLRB or other courts or governmental agencies could make us responsible for labor violations committed by our subcontractors.
This regulation affects construction activities as well as sales activities, mortgage lending activities, land availability and other dealings with homebuyers. These statutes, ordinances, rules, and regulations, and any failure to comply therewith, could give rise to additional liabilities or expenditures and have an adverse effect on our results of operations, financial condition or business.
These statutes, ordinances, rules, and regulations, and any failure to comply therewith, could give rise to additional liabilities or expenditures and have an adverse effect on our results of operations, financial condition or business.
If M/I Financial is unable to sell loans to viable purchasers in the marketplace, our ability to originate and sell mortgage loans at competitive prices could be limited which would negatively affect our operations and our profitability. 18 Additionally, if the secondary mortgage market declines significantly, our ability to sell mortgages could be adversely impacted and we would be required to make arrangements with banks or other financial institutions to fund our buyers’ closings.
Additionally, if the secondary mortgage market declines significantly, our ability to sell mortgages could be adversely impacted and we would be required to make arrangements with banks or other financial institutions to fund our buyers’ closings.
In addition, if we are unable to originate mortgages for any reason going forward, our customers may experience significant mortgage loan funding issues, which could have a material impact on our homebuilding and financial services results of operations. 14 If land is unavailable at reasonable prices or terms, our homes sales revenue and results of operations could be negatively impacted and/or we could be required to scale back our operations in a given market.
In addition, if we are unable to originate mortgages for any reason, our customers may experience significant mortgage loan funding issues, which could have a material impact on our homebuilding and financial services results of operations.
The inability of our lenders to satisfy their obligations under our credit facilities could adversely affect our liquidity and financial condition. The U.S. banking industry experienced bank failures and other significant challenges in 2023.
The inability of our lenders to satisfy their obligations under our credit facilities could adversely affect our liquidity and financial condition.
Any additional increases by the Federal Reserve could further increase the costs of owning a home and reduce the demand for our homes. In addition, any reduction in the availability of the financing provided by Fannie Mae and Freddie Mac could adversely affect interest rates, mortgage availability and our sales of new homes and origination of mortgage loans.
In addition, any reduction in the availability of the financing provided by Fannie Mae and Freddie Mac could adversely affect interest rates, mortgage availability and our sales of new homes and origination of mortgage loans. FHA and VA mortgage financing support remains an important factor in marketing our homes.
The cost of complying with our warranty obligations may be significant if we are unable to recover the cost of repairs from subcontractors, materials suppliers and insurers. We also can suffer damage to our reputation, and may be exposed to possible liability, if subcontractors fail to comply with applicable laws, including laws involving matters that are not within our control.
We also can suffer damage to our reputation, and may be exposed to possible liability, if subcontractors fail to comply with applicable laws, including laws involving matters that are not within our control. When we learn about potentially improper practices by subcontractors, we try to cause the subcontractors to discontinue them.
The Company and certain of its subsidiaries have been named as defendants in certain legal proceedings which are incidental to our business.
Our results of operations, financial condition and cash flows could be adversely affected if pending or future legal claims against us are not resolved in our favor. The Company and certain of its subsidiaries have been named as defendants in certain legal proceedings which are incidental to our business.
We are subject to extensive government regulations, which could restrict our business and cause us to incur significant expense. The homebuilding industry is subject to numerous local, state, and federal statutes, ordinances, rules, and regulations concerning building, zoning, sales, consumer protection, and similar matters.
The homebuilding industry is subject to numerous local, state, and federal statutes, ordinances, rules, and regulations concerning building, zoning, sales, consumer protection, and similar matters. This regulation affects construction activities as well as sales activities, mortgage lending activities, land availability and other dealings with homebuyers.
Any increase in legal and regulatory requirements may cause us to incur substantial additional costs or, in some cases, cause us to determine that certain property is not feasible for development. Our results of operations, financial condition and cash flows could be adversely affected if pending or future legal claims against us are not resolved in our favor.
Any increase in legal and regulatory requirements may cause us to incur substantial additional costs or, in some cases, cause us to determine that certain property is not feasible for development. Changes in U.S. trade policies and retaliatory responses from other countries may substantially increase the costs or limit supplies of building materials and products used in our homes.
Removed
Periodically, as part of our normal course of business, we record asset impairment charges or write-off deposits for land that we no longer intend to purchase.
Added
If, for example, prices for new homes decline, competitors increase their use of sales incentives, interest rates increase, the availability of mortgage financing diminishes, current homeowners find it difficult to sell their current homes, homebuyers are concerned about rising inflation, or there is a downturn in local or regional economies or in the national economy, homebuyers may choose to terminate their existing home purchase contracts with us in order to negotiate for a lower price or because they cannot, or will not, complete the purchase and our remedies generally do not extend beyond the retention of deposits.
Removed
Supply chain disruptions began to subside during 2023, and we began to experience an improvement in the availability and shortage of labor and certain building products, which positively impacted our construction cycle times.
Added
Despite the Federal Reserve reducing rates by 100 basis points during the second half of 2024, mortgage rates continue to hover between 6% and 7%. Any increases by the Federal Reserve could further increase the costs of owning a home and reduce the demand for our homes.
Removed
When we learn about potentially improper practices by subcontractors, we try to cause the subcontractors to discontinue them.
Added
If land is unavailable at reasonable prices or terms, our homes sales revenue and results of operations could be negatively impacted and/or we could be required to scale back our operations in a given market.
Removed
Information technology failures and data security breaches could harm our business. We use information technology, digital communications and other computer resources to carry out important operational and marketing activities and to maintain our business records.
Added
At the same time, favorable tax law changes will not necessarily increase demand or allow for higher selling prices for homes generally or for the homes we sell. We may not be able to offset the impact of inflation through price increases.
Removed
The impact of an epidemic, pandemic or similar public health issue on our business will depend on future developments, including whether governmental authorities impose additional health and safety measures, the duration and severity of the public health issue, the acceptance and effectiveness of treatments including vaccines, and the impact of the public health issue on our employees, customers, and building partners.
Added
The cost of complying with our warranty obligations may be significant if we are unable to recover the cost of repairs from 17 subcontractors, materials suppliers and insurers.
Added
If M/I Financial is unable to sell loans to viable purchasers in the marketplace, our ability to originate and sell mortgage loans at competitive prices could be limited which would negatively affect our operations and our profitability.
Added
Further, a health and safety incident relating to our operations could be costly in terms of potential liability and reputational damage.
Added
Any failure in health and safety performance may result in penalties for non-compliance with relevant regulatory requirements, and a failure that results in a major or significant health and safety incident is likely to be costly and could expose us to liability that could be costly.
Added
Such an incident could generate significant negative publicity and have a corresponding impact on our reputation, our relationships with relevant regulatory agencies or governmental authorities, and our ability to attract customers and employees, which in turn could have a material adverse effect on our results of operations, financial condition and liquidity.
Added
Governmental rulings that hold us responsible for labor practices of our subcontractors could create substantial exposures for us under our subcontractor relationships. 20 We are subject to extensive government regulations, which could restrict our business and cause us to incur significant expense.
Added
Our business is impacted by international or cross-border trade, including the import and export of products and goods into and out of the United States and trade tensions among nations. The shipping of goods across national borders is often more expensive and complicated than domestic shipping.
Added
Political and economic tensions between governments create uncertainty with respect to tariffs, taxes and trade policies.
Added
During the past several years, the U.S. government has imposed new, or increased existing, tariffs on an array of imported materials and products that are used in the homes we build, including but not limited to, lumber, steel, aluminum and washing machines, which increases the costs of those items.
Added
Changes in U.S. administrative policy may strain international trade relations and lead to the imposition of non-tariff barriers or domestic preference procurement requirements and/or the imposition of retaliatory tariffs and other reactionary measures by foreign countries, including but not limited to Mexico, Canada, China and European countries.
Added
On February 1, 2025, President Trump 21 signed executive orders imposing additional tariffs on Canada, Mexico and China under the International Emergency Economic Powers Act. While the imposition of tariffs on Canada and Mexico was subsequently paused on February 3, 2025, uncertainty remains around the logistics of international trade in the future.
Added
Any existing, new or increased tariffs could increase the cost of, and reduce the demand for, homes we build and any cost increases will either require us to increase prices or negatively impact our margins. New or increased tariffs could also negatively affect U.S. national or regional economies, which could negatively affect the demand for our homes.
Added
In addition to our costs, natural disasters and severe weather conditions may increase the cost of homeowner’s insurance which could reduce the number of potential buyers who can afford, or who are willing to purchase homes we build in these affected areas, which could result in reduced demand for our homes in these markets. 22 Information technology failures and data security breaches could harm our business.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

2 edited+2 added−0 removed15 unchanged
Biggest changeThe CIO provides annual reports to our Board of Directors, and periodic reports to our Chief Executive Office (“CEO”), Chief Financial Officer (“CFO”) and Chief Accounting Officer (“CAO”), and other members of senior management, regarding existing and emerging cybersecurity risks and threats, the status of projects intended to strengthen our information security systems, and assessments of our information security program.
Biggest changeThe CIO provides annual reports to our Board of Directors, and periodic reports to our Chief Executive Officer (“CEO”), Chief Financial Officer (“CFO”) and Chief Accounting Officer (“CAO”), and other members of senior management, regarding existing and emerging cybersecurity risks and threats, the status of projects intended to strengthen our information security systems, and assessments of our information security program.
Risk Factors” in Part I of this Annual Report on Form 10-K for more information regarding the risk factors associated with cybersecurity risks. 23
Risk Factors” in Part I of this Annual Report on Form 10-K for more information regarding the risk factors associated with cybersecurity risks. 25
Added
The Company has integrated cyber security into its annual risk assessment process. This process identifies critical assets and assesses those assets for potential threats and vulnerabilities. Risks are prioritized based on their impact and likelihood. Controls are assessed to ensure the Company’s controls are appropriate to mitigate risks.
Added
It also allows us to identify any gaps that we need to focus on. These gaps are typically part of the Information Security Committees risk register. The Information Security Committee meets quarterly and continuously monitors and re-evaluates risks through this risk register, which was initially developed using the NIST CSF framework.

Item 2. Properties

Properties — owned and leased real estate

1 edited+1 added−1 removed0 unchanged
Biggest changeItem 2. PROPERTIES We lease all of our offices (see Note 9 to our Consolidated Financial Statements in Item 8 of this Form 10-K for additional information regarding our office leases). Due to the nature of our business, a substantial amount of property is held as inventory in the ordinary course of business. See “Item 1.
Biggest changeItem 2. PROPERTIES We lease all of our offices (see Note 9 to our Consolidated Financial Statements in Item 8 of this Form 10-K for additional information regarding our office leases). Due to the nature of our business, a substantial amount of property is held as inventory in the ordinary course of business. We discuss these properties in “Item 1.
Removed
BUSINESS – Land Acquisition and Development” and “Item 1. BUSINESS – Backlog.” Item 3. LEGAL PROCEEDINGS The Company’s legal proceedings are discussed in Note 8 to the Company’s Consolidated Financial Statements. Item 4. MINE SAFETY DISCLOSURES None. 24 PART II
Added
BUSINESS – Land Acquisition and Development” and “Item 1. BUSINESS – Backlog.”

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

6 edited+3 added−1 removed0 unchanged
Biggest changePeriod Ending Index 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 M/I Homes, Inc. $ 100.00 $ 187.20 $ 210.70 $ 295.81 $ 219.70 $ 655.28 S&P 500 100.00 131.49 155.68 200.37 164.08 207.21 S&P 500 Homebuilding Index 100.00 150.80 187.72 282.25 227.91 396.71 25 Share Repurchases Common shares purchased during each month during the fourth quarter ended December 31, 2023 were as follows: Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs (1) October 1, 2023 - October 31, 2023 20,000 $ 82.13 20,000 51,243,976 November 1, 2023 - November 30, 2023 210,000 $ 99.70 210,000 130,307,968 December 1, 2023 - December 31, 2023 23,000 $ 108.98 23,000 127,801,416 Quarter ended December 31, 2023 253,000 $ 99.15 253,000 127,801,416 (1) On July 28, 2021, the Company announced that its Board of Directors authorized the 2021 Share Repurchase Program pursuant to which the Company may purchase up to $100 million of its outstanding common shares through open market transactions, privately negotiated transactions or otherwise in accordance with all applicable laws, including pursuant to any trading plan that may be adopted in accordance with Rule 10b5-1 of the Securities Exchange Act of 1934.
Biggest changePeriod Ending Index 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 12/31/2024 M/I Homes, Inc. $ 100.00 $ 112.55 $ 158.02 $ 117.36 $ 350.04 $ 337.87 S&P 500 100.00 118.40 152.39 124.79 157.59 197.02 S&P 500 Homebuilding Index 100.00 124.48 187.16 151.13 263.07 261.28 27 Share Repurchases Common shares purchased during each month during the fourth quarter ended December 31, 2024 were as follows: Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs (1) October 1, 2024 - October 31, 2024 — $ — — 156,876,530 November 1, 2024 - November 30, 2024 — $ — — 156,876,530 December 1, 2024 - December 31, 2024 313,000 $ 163.37 313,000 106,719,705 Quarter ended December 31, 2024 313,000 $ 163.37 313,000 106,719,705 (1) On May 14, 2024, the Company announced that its Board of Directors authorized the 2024 Share Repurchase Program, which replaced the 2021 Share Repurchase Program which had $95 million of remaining availability at the time.
Performance Graph The following graph illustrates the Company’s performance in the form of cumulative total return to holders of our common shares for the last five calendar years through December 31, 2023, assuming a hypothetical investment of $100 and reinvestment of all dividends paid on such investment, compared to the cumulative total return of the same hypothetical investment in both the Standard and Poor’s 500 Stock Index and the Standard & Poor’s 500 Homebuilding Index.
Performance Graph The following graph illustrates the Company’s performance in the form of cumulative total return to holders of our common shares for the last five calendar years through December 31, 2024, assuming a hypothetical investment of $100 and reinvestment of all dividends paid on such investment, compared to the cumulative total return of the same hypothetical investment in both the Standard and Poor’s 500 Stock Index and the Standard & Poor’s 500 Homebuilding Index.
See Note 11 to our Consolidated Financial Statements for more information regarding the limit imposed by the indenture governing our 2028 Senior Notes on our ability to pay dividends on, and repurchase, our common shares to the amount of the positive balance in our “restricted payments basket,” as defined in the indenture. ITEM 6. Reserved 26
See Note 11 to our Consolidated Financial Statements for more information regarding the limit imposed by the indenture governing our 2028 Senior Notes on our ability to pay dividends on, and repurchase, our common shares to the amount of the positive balance in our “restricted payments basket,” as defined in the indenture. ITEM 6. Reserved 28
Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market for Common Shares and Dividends The Company’s common shares are traded on the New York Stock Exchange under the symbol “MHO.” As of February 14, 2024, there were approximately 298 record holders of the Company’s common shares.
Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market for Common Shares and Dividends The Company’s common shares are traded on the New York Stock Exchange under the symbol “MHO.” As of February 12, 2025, there were approximately 297 record holders of the Company’s common shares.
At that date, there were 30,137,141 common shares issued and 27,806,899 common shares outstanding.
At that date, there were 30,137,141 common shares issued and 27,114,451 common shares outstanding.
As of December 31, 2023, $127.8 million remained available for repurchase under the 2021 Share Repurchase Program. The 2021 Share Repurchase Program does not have an expiration date and may be modified, suspended or discontinued at any time. See Note 16 to our Consolidated Financial Statements for additional information.
The 2025 Share Repurchase Program replaces the 2024 Share Repurchase Program. The 2025 Share Repurchase Program does not have an expiration date and may be modified, suspended or discontinued at any time. See Note 16 to our Consolidated Financial Statements for additional information.
Removed
On February 17, 2022, the Company announced that its Board of Directors approved an increase to the 2021 Share Repurchase Program by an additional $100 million, and on November 15, 2023, the Company announced that its Board of Directors approved an additional $100 million increase.
Added
Under the 2024 Share Repurchase Program, the Company may purchase up to $250 million of its outstanding common shares through open market transactions, privately negotiated transactions or otherwise in accordance with all applicable laws, including pursuant to any trading plan that may be adopted in accordance with Rule 10b5-1 of the Securities Exchange Act of 1934.
Added
As of December 31, 2024, $106.7 million remained available for repurchase under the 2024 Share Repurchase Program.
Added
On February 11, 2025, the Company announced that its Board of Directors approved a new share repurchase program pursuant to which the Company may purchase up to $250 million of its outstanding common shares (the “2025 Share Repurchase Program”) through open market transactions, privately negotiated transactions or otherwise in accordance with all applicable laws, including pursuant to any trading plan that may be adopted in accordance with Rule 10b5-1 of the Securities Exchange Act of 1934.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

114 edited+14 added−30 removed69 unchanged
Biggest changePaul, Minnesota Austin, Texas Detroit, Michigan Dallas/Fort Worth, Texas Houston, Texas San Antonio, Texas Charlotte, North Carolina Raleigh, North Carolina Nashville, Tennessee 32 The following table shows, by segment: revenue; gross margin; selling, general and administrative expense; operating income (loss); interest (income) expense; and depreciation and amortization for the years ended December 31, 2023, 2022 and 2021: Year Ended (In thousands) 2023 2022 2021 Revenue: Northern homebuilding $ 1,523,943 $ 1,714,236 $ 1,595,746 Southern homebuilding 2,415,730 2,330,962 2,048,113 Financial services (a) 93,829 86,195 102,028 Total revenue $ 4,033,502 $ 4,131,393 $ 3,745,887 Gross margin: Northern homebuilding $ 294,994 $ 334,300 $ 331,521 Southern homebuilding 630,106 623,347 475,366 Financial services (a) 93,829 86,195 102,028 Total gross margin $ 1,018,929 $ 1,043,842 $ 908,915 Selling, general and administrative expense: Northern homebuilding $ 118,674 $ 116,801 $ 119,563 Southern homebuilding 189,938 171,473 162,705 Financial services (a) 45,115 41,813 39,737 Corporate 77,980 76,304 68,614 Total selling, general and administrative expense $ 431,707 $ 406,391 $ 390,619 Operating income (loss): Northern homebuilding $ 176,320 $ 217,499 $ 211,958 Southern homebuilding 440,168 451,874 312,661 Financial services (a) 48,714 44,382 62,291 Less: Corporate selling, general and administrative expense (77,980) (76,304) (68,614) Total operating income $ 587,222 $ 637,451 $ 518,296 Interest (income) expense - net: Northern homebuilding $ (186) $ (469) $ 76 Southern homebuilding (1,703) (1,447) (464) Financial services (a) 10,360 5,122 3,912 Corporate (28,493) (956) (1,368) Total interest (income) expense - net $ (20,022) $ 2,250 $ 2,156 Other income (b) $ (33) $ (6) $ (2,046) Loss on early extinguishment of debt (c) — — 9,072 Income before income taxes $ 607,277 $ 635,207 $ 509,114 Depreciation and amortization: Northern homebuilding $ 3,673 $ 3,308 $ 3,407 Southern homebuilding 2,965 2,790 3,644 Financial services 810 2,178 2,227 Corporate 8,343 8,898 7,637 Total depreciation and amortization $ 15,791 $ 17,174 $ 16,915 (a) Our financial services operational results should be viewed in connection with our homebuilding business as its operations originate loans and provide title services primarily for our homebuyers, with the exception of a small amount of mortgage refinancing.
Biggest changePaul, Minnesota Austin, Texas Detroit, Michigan Dallas/Fort Worth, Texas Houston, Texas San Antonio, Texas Charlotte, North Carolina Raleigh, North Carolina Nashville, Tennessee 34 The following table shows, by segment: revenue; selling, general and administrative expense; operating income (loss); interest (income) expense; and income before income taxes for the years ended December 31, 2024, 2023 and 2022: Year Ended December 31, (In thousands) 2024 2023 2022 Revenue: Northern homebuilding $ 1,900,013 $ 1,523,943 $ 1,714,236 Southern homebuilding 2,488,451 2,415,730 2,330,962 Financial services (a) 116,206 93,829 86,195 Total revenue $ 4,504,670 $ 4,033,502 $ 4,131,393 Cost of Sales: Northern homebuilding $ 1,480,326 $ 1,228,949 $ 1,379,936 Southern homebuilding 1,825,455 1,785,624 1,707,615 Financial services (a) — — — Total cost of sales $ 3,305,781 $ 3,014,573 $ 3,087,551 General and administrative expense: Northern homebuilding $ 42,908 $ 36,827 $ 36,659 Southern homebuilding 76,200 65,078 61,775 Financial services (a) 52,826 45,115 41,813 Segment general and administrative expense $ 171,934 $ 147,020 $ 140,247 Corporate and unallocated general and administrative expense 86,488 75,745 74,564 Total general and administrative expense $ 258,422 $ 222,765 $ 214,811 Selling expense: Northern homebuilding $ 95,680 $ 81,847 $ 80,142 Southern homebuilding 136,198 124,860 109,698 Financial services (a) — — — Segment selling expense $ 231,878 $ 206,707 $ 189,840 Corporate and unallocated selling expense 2,495 2,235 1,740 Total selling expense: $ 234,373 $ 208,942 $ 191,580 Operating income (loss): Northern homebuilding $ 281,099 $ 176,320 $ 217,499 Southern homebuilding 450,598 440,168 451,874 Financial services (a) 63,380 48,714 44,382 Segment operating income $ 795,077 $ 665,202 $ 713,755 Corporate selling, general and administrative expense (88,983) (77,980) (76,304) Total operating income (a) $ 706,094 $ 587,222 $ 637,451 Interest (income) expense - net: Northern homebuilding $ (228) $ (186) $ (469) Southern homebuilding (2,554) (1,703) (1,447) Financial services (a) 13,698 10,360 5,122 Segment Interest (income) expense - net $ 10,916 $ 8,471 $ 3,206 Corporate Interest (income) expense - net (38,430) (28,493) (956) Total interest (income) expense - net $ (27,514) $ (20,022) $ 2,250 Other income (b) $ — $ (33) $ (6) Income before income taxes $ 733,608 $ 607,277 $ 635,207 (a) Our financial services operational results should be viewed in connection with our homebuilding business as its operations originate loans and provide title services primarily for our homebuyers, with the exception of a small amount of mortgage refinancing.
The 2030 Senior Notes and the 2028 Senior Notes are fully and unconditionally guaranteed, on a joint and several basis, by all of M/I Homes, Inc.’s subsidiaries (the “Subsidiary Guarantors”) with the exception of subsidiaries that are primarily engaged in the business of mortgage financing, title insurance or similar financial businesses relating to the homebuilding and home sales business, certain subsidiaries that are not 100%-owned by M/I Homes, Inc. or another subsidiary, and other subsidiaries designated as Unrestricted Subsidiaries (as defined in the indentures governing the 2030 Senior Notes and the 2028 Senior Notes), subject to limitations on the aggregate amount invested in such Unrestricted Subsidiaries in accordance with the terms of the Credit Facility and the indentures governing the 2030 Senior Notes and the 2028 Senior Notes (the “Non-Guarantor Subsidiaries”).
The 2030 Senior Notes and the 2028 Senior Notes are fully and unconditionally guaranteed, on a joint and several basis, by all of M/I Homes, Inc.’s subsidiaries (the “Subsidiary Guarantors”) with the exception of subsidiaries that are primarily engaged in the business of mortgage financing, title insurance or similar financial businesses relating to the homebuilding and home sales business, certain subsidiaries that are not 100%-owned by M/I Homes, Inc. or another subsidiary, and other subsidiaries designated as Unrestricted Subsidiaries (as defined in the indentures governing the 2030 Senior Notes and the 2028 Senior Notes), subject to limitations on the aggregate amount invested in such Unrestricted Subsidiaries in accordance with the terms of the Credit Facility and the indentures governing the 2030 Senior Notes and the 2028 Senior Notes (the “Non-Guarantor 43 Subsidiaries”).
The cash used in financing activities in 2023 was primarily due to repayments of $79.9 million (net of proceeds from borrowings) under our three then-outstanding M/I Financial credit facilities and the repurchase of $65.3 million of our outstanding common shares during 2023, offset, in part, by $33.8 million in proceeds from the exercise of stock options during 2023.
The cash used in financing activities in 2023 was primarily due to repayments of $79.9 million (net of proceeds from borrowings) under our then-outstanding M/I Financial credit facilities and the repurchase of $65.3 million of our outstanding common shares during 2023, offset, in part, by $33.8 million in proceeds from the exercise of stock options during 2023.
In certain circumstances, a court could void the guarantees, subordinate amounts owing under the guarantees or order other relief detrimental to the holders of the 2030 Senior Notes and the 2028 Senior Notes. 42 The following tables present summarized financial information on a combined basis for M/I Homes, Inc. and the Subsidiary Guarantors.
In certain circumstances, a court could void the guarantees, subordinate amounts owing under the guarantees or order other relief detrimental to the holders of the 2030 Senior Notes and the 2028 Senior Notes. The following tables present summarized financial information on a combined basis for M/I Homes, Inc. and the Subsidiary Guarantors.
Because each inventory asset is unique, there are numerous inputs and assumptions used in our valuation techniques, including estimated average selling price, construction and development costs, absorption pace (reflecting any product mix change strategies implemented or to be implemented), selling strategies, alternative land uses (including disposition of all or a portion of the land owned), or discount rates, which could materially impact future cash flow and fair value estimates. 28 If communities are not recoverable based on estimated future undiscounted cash flows, the impairment to be recognized is measured as the amount by which the carrying amount of the assets exceeds the estimated fair value of the assets.
Because each inventory asset is unique, there are numerous inputs and assumptions used in our valuation techniques, including estimated average selling price, construction and development costs, absorption pace (reflecting any product mix change strategies implemented or to be implemented), selling strategies, alternative land uses (including disposition of all or a portion of the land owned), or discount rates, which could materially impact future cash flow and fair value estimates. 30 If communities are not recoverable based on estimated future undiscounted cash flows, the impairment to be recognized is measured as the amount by which the carrying amount of the assets exceeds the estimated fair value of the assets.
The financing needs of our homebuilding and financial services operations depend on anticipated sales and home delivery volume in the current year as well as future years, inventory levels and related turnover, forecasted land and lot 39 purchases, debt maturity dates, and other factors.
The financing needs of our homebuilding and financial services operations depend on anticipated sales and home delivery volume in the current year as well as future years, inventory levels and related turnover, forecasted land and lot purchases, debt maturity dates, and other factors.
Pursuant to the registration statement, the Company may, from time to time, offer debt securities, common shares, preferred shares, depositary shares, warrants to purchase debt securities, common shares, preferred shares, depositary shares or units of two or more of those securities, rights 43 to purchase debt securities, common shares, preferred shares or depositary shares, stock purchase contracts and units.
Pursuant to the registration statement, the Company may, from time to time, offer debt securities, common shares, preferred shares, depositary shares, warrants to purchase debt securities, common shares, preferred shares, depositary shares or units of two or more of those securities, rights to purchase debt securities, common shares, preferred shares or depositary shares, stock purchase contracts and units.
We expect to continue managing our balance sheet and liquidity carefully in 2024 by managing our spending on land acquisition and development and construction of inventory homes, as well as overhead expenditures, relative to our ongoing volume of home deliveries, and we expect to meet our current and anticipated cash requirements in 2024 from cash receipts, excess cash balances and availability under our credit facilities.
We expect to continue managing our balance sheet and liquidity carefully in 2025 by managing our spending on land acquisition and development and construction of inventory homes, as well as overhead expenditures, relative to our ongoing volume of home deliveries, and we expect to meet our current and anticipated cash requirements in 2025 from cash receipts, excess cash balances and availability under our credit facilities.
To the extent we elect to borrow under the Credit Facility during 2024, the actual amount borrowed and the related timing will be subject to numerous factors, which are subject to significant variation as a result of the timing and amount of land and house construction expenditures, payroll and other general and administrative expenses, and cash receipts from home deliveries.
To the extent we elect to borrow under the Credit Facility during 2025, the actual amount borrowed and the related timing will be subject to numerous factors, which are subject to significant variation as a result of the timing and amount of land and house construction expenditures, payroll and other general and administrative expenses, and cash receipts from home deliveries.
The Credit Facility contains various representations, warranties and covenants which require, among other things, that the Company maintain (1) a minimum level of Consolidated Tangible Net Worth of $1.5 billion at December 31, 2023 (subject to increase over time based on earnings and proceeds from equity offerings), (2) a leverage ratio not in excess of 60%, and (3) either a minimum Interest Coverage Ratio of 1.5 to 1.0 or a minimum amount of available liquidity.
The Credit Facility contains various representations, warranties and covenants which require, among other things, that the Company maintain (1) a minimum level of Consolidated Tangible Net Worth of $1.8 billion at December 31, 2024 (subject to increase over time based on earnings and proceeds from equity offerings), (2) a leverage ratio not in excess of 60%, and (3) either a minimum Interest Coverage Ratio of 1.5 to 1.0 or a minimum amount of available liquidity.
We believe that we are well positioned with a strong balance sheet to manage through the current economic environment. However, the challenging macroeconomic conditions described above could materially and negatively affect our performance in 2024, particularly when compared to our performance over the past few years.
We believe that we are well positioned with a strong balance sheet to manage through the current economic environment. However, the challenging macroeconomic conditions described above could materially and negatively affect our performance in 2025, particularly when compared to our performance over the past few years.
Contract liabilities expected to be recognized as revenue, excluding revenue pertaining to contracts that have an original expected duration of one year or less, are not material. 27 A performance obligation is a promise in a contract to transfer a distinct good or service to the customer.
Contract liabilities expected to be recognized as revenue, excluding revenue pertaining to contracts that have an original expected duration of one year or less, are not material. 29 A performance obligation is a promise in a contract to transfer a distinct good or service to the customer.
The fair value of a community is estimated by discounting management’s cash flow projections using an appropriate risk-adjusted interest rate. As of December 31, 2023, we utilized discount rates ranging from 13% to 16% in our valuations.
The fair value of a community is estimated by discounting management’s cash flow projections using an appropriate risk-adjusted interest rate. As of December 31, 2024, we utilized discount rates ranging from 13% to 16% in our valuations.
The amount borrowed will also be impacted by other cash receipts and payments, any capital markets transactions or other additional financings by the Company, any repayments or redemptions of outstanding debt, any additional share repurchases under the 2021 Share Repurchase Program and any other extraordinary events or transactions.
The amount borrowed will also be impacted by other cash receipts and payments, any capital markets transactions or other additional financings by the Company, any repayments or redemptions of outstanding debt, any additional share repurchases under the 2025 Share Repurchase Program and any other extraordinary events or transactions.
The timing and amount of any future purchases under the 2021 Share Repurchase Program will be based on a variety of factors, including the market price of the Company’s common shares, business considerations, general market and economic conditions and legal requirements.
The timing and amount of any future purchases under the 2025 Share Repurchase Program will be based on a variety of factors, including the market price of the Company’s common shares, business considerations, general market and economic conditions and legal requirements.
These covenants are subject to a number of exceptions and qualifications as described in the indenture governing the 2030 Senior Notes. As of December 31, 2023, the Company was in compliance with all terms, conditions, and covenants under the indenture. 4.95% Senior Notes.
These covenants are subject to a number of exceptions and qualifications as described in the indenture governing the 2030 Senior Notes. As of December 31, 2024, the Company was in compliance with all terms, conditions, and covenants under the indenture. 4.95% Senior Notes.
The guarantors for the Credit Facility are the same subsidiaries that guarantee our 2030 Senior Notes and our 2028 Senior Notes. As of December 31, 2023, the Company was in compliance with all covenants of the Credit Facility, including financial covenants.
The guarantors for the Credit Facility are the same subsidiaries that guarantee our 2030 Senior Notes and our 2028 Senior Notes. As of December 31, 2024, the Company was in compliance with all covenants of the Credit Facility, including financial covenants.
As a result, our past performance may not be indicative of future results. 31 Segment Reporting We have determined our reportable segments are: Northern homebuilding; Southern homebuilding; and financial services operations.
As a result, our past performance may not be indicative of future results. 33 Segment Reporting We have determined our reportable segments are: Northern homebuilding; Southern homebuilding; and financial services operations.
Based on current market conditions, expected capital needs and availability, and the current market price of the Company’s common shares, we expect to continue repurchasing shares during 2024.
Based on current market conditions, expected capital needs and availability, and the current market price of the Company’s common shares, we expect to continue repurchasing shares during 2025.
Cancellation Rates The following table sets forth the cancellation rates for each of our homebuilding segments for the years ended December 31, 2023, 2022 and 2021: Year Ended December 31, 2023 2022 2021 Northern 10.5 % 11.7 % 7.4 % Southern 12.1 % 16.1 % 8.1 % Total cancellation rate 11.4 % 14.3 % 7.8 % Year Over Year Comparisons Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 Northern Region.
Cancellation Rates The following table sets forth the cancellation rates for each of our homebuilding segments for the years ended December 31, 2024, 2023 and 2022: Year Ended December 31, 2024 2023 2022 Northern 9.8 % 10.5 % 11.7 % Southern 10.6 % 12.1 % 16.1 % Total cancellation rate 10.3 % 11.4 % 14.3 % Year Over Year Comparisons Year Ended December 31, 2024 Compared to Year Ended December 31, 2023 Northern Region.
ITEM 7: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW M/I Homes, Inc. and subsidiaries is one of the nation’s leading builders of single-family homes, having sold over 151,400 homes since commencing homebuilding activities in 1976. The Company’s homes are marketed and sold primarily under the M/I Homes brand.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW M/I Homes, Inc. and subsidiaries is one of the nation’s leading builders of single-family homes, having sold over 160,000 homes since commencing homebuilding activities in 1976. The Company’s homes are marketed and sold primarily under the M/I Homes brand.
At December 31, 2023 and December 31, 2022, our ratio of homebuilding debt to capital was 22% and 25%, respectively, calculated as the carrying value of our outstanding homebuilding debt (which consists of borrowings under our Credit Facility, our 2030 Senior Notes and our 2028 Senior Notes) divided by the sum of the carrying value of our outstanding homebuilding debt plus shareholders’ equity.
At December 31, 2024 and December 31, 2023, our ratio of homebuilding debt to capital was 19% and 22%, respectively, calculated as the carrying value of our outstanding homebuilding debt (which consists of borrowings under our Credit Facility, our 2030 Senior Notes and our 2028 Senior Notes) divided by the sum of the carrying value of our outstanding homebuilding debt plus shareholders’ equity.
The cash generated by operating activities in 2023 was primarily a result of net income of $465.4 million, proceeds from the sale of mortgage loans that exceeded mortgage loan originations by $72.9 million and a $46.7 million decrease in inventory, offset partially by a $35.2 million decrease in other liabilities and $31.9 million decrease in accounts payable and customer deposits.
The cash generated by operating activities in 2023 was primarily a result of net income of $465.4 million, proceeds from the sale of mortgage loans that exceeded mortgage loan originations by $72.9 million and a $46.7 million decrease in inventory, 40 offset partially by a $28.8 million decrease in other liabilities and $31.9 million decrease in accounts payable and customer deposits.
As is typical for similar credit facilities in the mortgage origination industry, at closing, the expiration of the MIF Mortgage Repurchase Facility was set at approximately one year and is under consideration for extension annually by the participating lenders.
There are no guarantors of the MIF Mortgage Repurchase Facility. As is typical for similar credit facilities in the mortgage origination industry, at closing, the expiration of the MIF Mortgage Repurchase Facility was set at approximately one year and is under consideration for extension annually by the participating lenders.
Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on February 17, 2023.
Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on February 16, 2024.
Average sales price in backlog increased to $531,000 at December 31, 2023 compared to $523,000 at December 31, 2022 primarily due to the mix of homes being sold. During the twelve months ended December 31, 2023, we opened 33 new communities in our Northern region compared to 34 during 2022.
Average sales price in backlog increased to $561,000 at December 31, 2024 compared to $531,000 at December 31, 2023 primarily due to the mix of homes being sold. During the twelve months ended December 31, 2024, we opened 21 new communities in our Northern region compared to 33 during 2023.
As of December 31, 2023, we had outstanding notes payable (consisting primarily of notes payable for our financial services operations, the 2030 Senior Notes and the 2028 Senior Notes) with varying maturities in an aggregate principal amount of $866 million, with $166 million payable within 12 months.
As of December 31, 2024, we had outstanding notes payable (consisting primarily of notes payable for our financial services operations, the 2030 Senior Notes and the 2028 Senior Notes) with varying maturities in an aggregate principal amount of $986 million, with $286 million payable within 12 months.
The Company may also experience significant variation in cash and Credit Facility balances from week to week due to the timing of such receipts and payments. There were $70.7 million of letters of credit issued and outstanding under the Credit Facility at December 31, 2023.
The Company may also experience significant variation in cash and Credit Facility balances from week to week due to the timing of such receipts and payments. There were $80.4 million of letters of credit issued and outstanding under the Credit Facility at December 31, 2024.
Our financial service operations ended 2023 with a $4.3 million increase in operating income compared to 2022, which was primarily due to the increase in revenue discussed above, partially offset by a $3.3 million increase in selling, general and administrative expense compared to 2022.
Our financial service operations ended 2024 with a $14.7 million increase in operating income compared to 2023, which was primarily due to the increase in revenue discussed above, partially offset by a $7.7 million increase in selling, general and administrative expense compared to 2023.
The mix of communities delivering homes may cause fluctuations in our new contracts and housing gross margin from year to year. For 2023, selling, general and administrative expense increased $25.3 million, and increased as a percentage of revenue to 10.7% in 2023 from 9.8% in 2022.
The mix of communities delivering homes may cause fluctuations in our new contracts and housing gross margin from year to year. For 2024, selling, general and administrative expense increased $61.1 million, and increased as a percentage of revenue to 10.9% in 2024 from 10.7% in 2023.
We expect to extend the MIF Mortgage Repurchase Facility on or prior to the current expiration date of October 22, 2024, but we cannot provide any assurance that we will be able to obtain such an extension. As of December 31, 2023, there was $165.8 million outstanding under the MIF Mortgage Repurchase Facility.
We expect to extend the MIF Mortgage Repurchase Facility on or prior to the current expiration date of October 21, 2025, but we cannot provide any assurance that we will be able to obtain such an extension. As of December 31, 2024, there was $286.2 million outstanding under the MIF Mortgage Repurchase Facility.
The cash used in investing activities during 2022 was primarily a result of an increase in our investment in joint venture arrangements. Financing Cash Flow Activities. During 2023, we used $112.2 million of cash in financing activities, compared to using $81.5 million of cash in financing activities during 2022.
The cash used in investing activities during 2023 was primarily a result of an increase in our investment in joint venture arrangements. Financing Cash Flow Activities. During 2024, we used $36.1 million of cash in financing activities, compared to using $112.2 million of cash in financing activities during 2023.
The financial covenants, as more fully described and defined in the MIF Mortgage Repurchase Facility, are summarized in the following table, which also sets forth M/I Financial’s compliance with such covenants as of December 31, 2023: Financial Covenant Covenant Requirement Actual (Dollars in millions) Leverage Ratio ≤ 12.0 to 1.0 4.73 to 1.0 Liquidity ≥ $ 10.0 $ 34.2 Adjusted Net Income > $ 0.0 $ 20.0 Tangible Net Worth ≥ $ 25.0 $ 39.9 Senior Notes. 3.95% Senior Notes.
The financial covenants, as more fully described and defined in the MIF Mortgage Repurchase Facility, are summarized in the following table, which also sets forth M/I Financial’s compliance with such covenants as of December 31, 2024: Financial Covenant Covenant Requirement Actual (Dollars in millions) Leverage Ratio ≤ 12.0 to 1.0 8.0 to 1.0 Liquidity ≥ $ 10.0 $ 56.3 Adjusted Net Income > $ 0.0 $ 27.0 Tangible Net Worth ≥ $ 25.0 $ 39.6 Senior Notes. 3.95% Senior Notes.
The Company is a party to two primary credit agreements: (1) a $650 million unsecured revolving credit facility, dated July 18, 2013, as amended (the “Credit Facility”), with M/I Homes, Inc. as borrower and guaranteed by the Company’s wholly-owned homebuilding subsidiaries and (2) a $300 million (subject to increases and decreases during certain periods) mortgage repurchase agreement, dated October 24, 2023, with M/I Financial as borrower (the “MIF Mortgage Repurchase Facility”).
The Company is a party to two primary credit agreements: (1) a $650 million unsecured revolving credit facility, dated July 18, 2013, as amended (the “Credit Facility”), with M/I Homes, Inc. as borrower and guaranteed by the Company’s wholly-owned homebuilding subsidiaries and (2) a $300 million mortgage repurchase agreement, dated October 24, 2023, as amended most recently on October 22, 2024 (the “MIF Mortgage Repurchase Facility”), with M/I Financial as borrower.
Backlog decreased 16% from 2,081 homes at December 31, 2022 to 1,754 homes at December 31, 2023. The decrease in backlog was primarily due to improved construction cycle times allowing us to deliver homes in backlog at a faster rate compared to last year.
Backlog decreased 20% from 1,754 homes at December 31, 2023 to 1,395 homes at December 31, 2024. The decrease in backlog was primarily due to improved construction cycle times allowing us to deliver homes in backlog at a faster rate compared to last year.
The increase in selling, general and administrative expense was attributable to a $3.3 million increase in general and administrative expense, which was primarily related to a $4.2 million increase in compensation related expenses as a result of an increase in incentive compensation due to our strong financial performance during the period and a $0.4 million increase in land-related expenses, partially offset by a $1.3 million decrease in miscellaneous expenses.
The increase in selling, general and administrative expense was attributable to a $11.1 million increase in general and administrative expense, which was primarily related to a $4.9 million increase in compensation related expenses as a result of an increase in headcount and incentive compensation due to our strong financial performance during the period, a $1.2 million increase in land-related expenses, and a $5.0 million increase in miscellaneous expenses.
We opened 76 communities and closed 59 communities in 2023, ending the year with a total of 213 communities, compared to 196 at the end of 2022. Although the timing of opening new communities and closing out existing communities is subject to substantial variation, we expect to grow our average community count by approximately 10% by the end of 2024.
We opened 72 communities and closed 65 communities in 2024, ending the year with a total of 220 communities, compared to 213 at the end of 2023. Although the timing of opening new communities and closing out existing communities is subject to substantial variation, we expect to grow our average community count by approximately 5% by the end of 2025.
Our principal uses of cash during 2023 were investment in land and land development, construction of homes, mortgage loan originations, investment in joint ventures, operating expenses, short-term working capital, and debt service requirements, including the repayment of amounts outstanding under our credit facilities, and the repurchase of $65.3 million of our outstanding common shares under our 2021 Share Repurchase Program (as defined below) during 2023.
Our principal uses of cash during 2024 were investment in land and land development, construction of homes, mortgage loan originations, investment in joint ventures, operating expenses, short-term working capital, and debt service requirements, including the repayment of amounts outstanding under our credit facilities, and the repurchase of $177.0 million of our outstanding common shares under our 2021 and 2024 Share Repurchase Programs.
The MIF Mortgage Repurchase Facility has an expiration date of October 22, 2024. Notes Payable - Homebuilding. Homebuilding Credit Facility .
The MIF Mortgage Repurchase Facility has an expiration date of October 21, 2025. Notes Payable - Homebuilding Homebuilding Credit Facility .
We ended 2023 with approximately 45,700 lots under control, which represents a 5.6 year supply of lots based on 2023 homes delivered, including certain lots that we anticipate selling to third parties. This represents a 9% increase from our approximately 42,100 lots under control at the end of 2022.
We ended 2024 with approximately 52,200 lots under control, which represents a 5.8 year supply of lots based on 2024 homes delivered, including certain lots that we anticipate selling to third parties. This represents a 14% increase from our approximately 45,700 lots under control at the end of 2023.
Our company-wide absorption pace of sales per community in 2023 improved to 3.3 per month compared to 3.1 per month in 2022 as a result of our 20% increase in new contracts during 2023 compared to prior year, partially offset by a smaller increase in our average community count from 179 at the end of 2022 to 202 at the end of 2023.
Our company-wide absorption pace of sales per community in 2024 remained consistent compared to 2023 at 3.3 per month as a result of our 8% increase in new contracts during 2024 compared to prior year, partially offset by a smaller increase in our average community count from 202 at the end of 2023 to 216 at the end of 2024.
This 4% increase in homebuilding revenue was primarily the result of a 3% increase in the number of homes delivered (158 units) due to increased availability of inventory homes, improved construction cycle times on our backlog homes and a 1% increase in the average sales price of homes delivered ($5,000 per home delivered) primarily due to the mix of homes delivered, partially offset by an $11.3 million decrease in land sale revenue.
This 3% increase in homebuilding revenue was primarily the result of a 5% increase in the number of homes delivered (239 units) due to increased availability of inventory homes and improved construction cycle times on our backlog homes offset in part by a 1% decrease in the average sales price of homes delivered ($7,000 per home delivered) and a $10.9 million decrease in land sales.
During 2023, the average daily amount outstanding under our then-outstanding MIF credit facilities was $49.7 million and the maximum amount outstanding was $245.7 million, which occurred during January. Universal Shelf Registration. In June 2022, the Company filed a universal shelf registration statement with the SEC, which registration statement became effective upon filing and will expire in June 2025.
During 2024, the average daily amount outstanding under our then-outstanding MIF credit facilities was $17.3 million and the maximum amount outstanding was $286.2 million, which occurred during December. Universal Shelf Registration. In June 2022, the Company filed a universal shelf registration statement with the SEC, which registration statement became effective upon filing and will expire in June 2025.
The increase in cash is primarily due to 2023 net income, home deliveries, fewer homes under construction compared to prior year, and the timing of land spend compared to prior year.
The increase in cash is primarily due to 2024 net income and home deliveries and the timing of land spend compared to prior year.
As a result, the full $650 million commitment amount of the facility was available, less any borrowings and letters of credit outstanding. There were no borrowings outstanding and $70.7 million of letters of credit outstanding at December 31, 2023, leaving $579.3 million available. The Credit Facility has an expiration date of December 9, 2026.
As a result, the full $650 million commitment amount of the facility was available, less any borrowings and letters of credit outstanding. There were no borrowings outstanding and $80.4 million of letters of credit outstanding at December 31, 2024, leaving $569.6 million available. The Credit Facility has an expiration date of December 9, 2026.
The following table summarizes the most significant restrictive covenant thresholds under the Credit Facility and our compliance with such covenants as of December 31, 2023: Financial Covenant Covenant Requirement Actual (Dollars in millions) Consolidated Tangible Net Worth ≥ $ 1,534.4 $ 2,435.5 Leverage Ratio ≤ 0.60 0.01 Interest Coverage Ratio ≥ 1.5 to 1.0 19.9 to 1.0 Investments in Unrestricted Subsidiaries and Joint Ventures ≤ $ 730.6 $ 6.0 Unsold Housing Units and Model Homes ≤ 2,881 1,477 40 Notes Payable - Financial Services.
The following table summarizes the most significant restrictive covenant thresholds under the Credit Facility and our compliance with such covenants as of December 31, 2024: Financial Covenant Covenant Requirement Actual (Dollars in millions) Consolidated Tangible Net Worth ≥ $ 1,796.8 $ 2,854.9 Leverage Ratio ≤ 0.60 (0.01) Interest Coverage Ratio ≥ 1.5 to 1.0 23.74 to 1.0 Investments in Unrestricted Subsidiaries and Joint Ventures ≤ $ 856.5 $ 6.4 Unsold Housing Units and Model Homes ≤ 3,271 1,852 Notes Payable - Financial Services.
During 2023, we experienced an 18% increase in new contracts in our Southern region, from 3,921 in 2022 to 4,616 in 2023, which was primarily due to an increase in our average number of communities to 101 communities compared to 86 communities in the prior year.
During 2024, we experienced a 4% increase in new contracts in our Southern region, from 4,616 in 2023 to 4,823 in 2024, which was primarily due to an increase in our average number of communities to 121 communities compared to 101 communities in the prior year.
We opened 76 new communities during 2023, our second highest number in Company history. We sell a variety of home types in various communities and markets, each of which yields a different gross margin. The timing of the openings of new replacement communities as well as underlying lot costs varies from year to year.
We sell a variety of home types in various communities and markets, each of which yields a different gross margin. The timing of the openings of new replacement communities as well as underlying lot costs varies from year to year.
During 2023, we generated $552.1 million of cash in operating activities, compared to generating $184.1 million of cash from operating activities in 2022.
During 2024, we generated $179.7 million of cash from operating activities, compared to generating $552.1 million of cash from operating activities in 2023.
Average sales price in backlog decreased to $520,000 at December 31, 2023 from $551,000 at December 31, 2022 primarily due to the mix of homes delivered. During 2023, we opened 43 communities in our Southern region compared to 67 in 2022.
Average sales price in backlog increased to $547,000 at December 31, 2024 from $520,000 at December 31, 2023 primarily due to the mix of homes in backlog. During 2024, we opened 51 communities in our Southern region compared to 43 in 2023.
Selling, general and administrative expense increased $18.4 million from $171.5 million in 2022 to $189.9 million in 2023 and increased as a percentage of revenue to 7.9% in 2023 from 7.4% in 2022.
Selling, general and administrative expense increased $22.5 million from $189.9 million in 2023 to $212.4 million in 2024 and increased as a percentage of revenue to 8.5% in 2024 from 7.9% in 2023.
Revenue from our mortgage and title operations increased $7.6 million, or 9%, from a $86.2 million for the twelve months ended December 31, 2022 to $93.8 million for the twelve months ended December 31, 2023 as a result of an increase in the number of loan originations, from 5,374 in 2022 to 5,395 in 2023 and an increase in the average loan amount from $385,000 in 2022 to $393,000 in 2023.
Revenue from our mortgage and title operations increased $22.4 million, or 24%, from $93.8 million for the twelve months ended December 31, 2023 to $116.2 million for the twelve months ended December 31, 2024 as a result of an increase in the number of loan originations, from 5,395 in 2023 to 6,731 in 2024 and an increase in the average loan amount from $393,000 in 2023 to $399,000 in 2024.
On July 28, 2021, the Company announced that its Board of Directors authorized a new share repurchase program pursuant to which the Company may purchase up to $100 million of its outstanding common shares (the “2021 Share Repurchase Program”).
On May 14, 2024, the Company announced that its Board of Directors authorized a new share repurchase program pursuant to which the Company may purchase up to $250 million of its outstanding common shares (the “2024 Share Repurchase Program”), which replaced the 2021 Share Repurchase Program.
During 2023, the Company repurchased 0.7 million outstanding common shares for an aggregate purchase price of $65.3 million under the 2021 Share Repurchase Program which was funded with cash on hand.
During 2024, the Company repurchased 1.2 million outstanding common shares for an aggregate purchase price of $177.0 million under the 2024 and 2021 Share Repurchase Program which was funded with cash on hand.
LIQUIDITY AND CAPITAL RESOURCES Overview of Capital Resources and Liquidity At December 31, 2023, we had $732.8 million of cash, cash equivalents and restricted cash, with $732.6 million of this amount comprised of unrestricted cash and cash equivalents, which represents a $422.0 million increase in unrestricted cash and cash equivalents from December 31, 2022.
LIQUIDITY AND CAPITAL RESOURCES Overview of Capital Resources and Liquidity At December 31, 2024, we had $821.6 million of cash, cash equivalents and restricted cash, with $821.5 million of this amount comprised of unrestricted cash and cash equivalents, which represents a $88.9 million increase in unrestricted cash and cash equivalents from December 31, 2023.
As of December 31, 2023, the Company is authorized to repurchase an additional $127.8 million of outstanding common shares under the 2021 Share Repurchase Program (see Note 16 to our Consolidated Financial Statements).
As of December 31, 2024, the Company was authorized to repurchase an additional $106.7 million of outstanding common shares under the 2024 Share Repurchase Program (see Note 16 to our Consolidated Financial Statements).
Our new contracts for 2023 increased 20% compared to 2022 as we experienced improvements in homebuyer demand as a result of the limited supply of resale and new home inventory and potential homebuyers adjusting to the interest rate environment compared to the hesitation that appeared to exist in the second half of 2022.
Our new contracts for 2024 increased 8% compared to 2023 as we experienced improvements in homebuyer demand as a result of the limited supply of resale and new home inventory, potential homebuyers adjusting to the interest rate environment, and our offering of mortgage interest rate buydowns in the second half of the year.
We plan to open additional new communities during 2024, increasing our average community count by approximately 10% compared to 2023. Income before income taxes for the twelve months ended December 31, 2023 decreased 4% from $635.2 million for the year ended December 31, 2022 to $607.3 million for the year ended December 31, 2023.
We plan to open additional new communities during 2025, increasing our average community count by approximately 5% compared to 2024. Income before income taxes for the twelve months ended December 31, 2024 increased 21% from $607.3 million for the year ended December 31, 2023 to $733.6 million for the year ended December 31, 2024.
Selling, general and administrative expense increased $1.9 million from $116.8 million in 2022 to $118.7 million in 2023 and increased as a percentage of revenue to 7.8% in 2023 from 6.8% in 2022.
Selling, general and administrative expense increased $19.9 million from $118.7 million in 2023 to $138.6 million in 2024 and decreased as a percentage of revenue to 7.3% in 2024 from 7.8% in 2023.
For the twelve months ended December 31, 2023, homebuilding revenue in our Southern region increased $84.8 million, from $2.33 billion in 2022 to $2.42 billion in 2023.
For the twelve months ended December 31, 2024, homebuilding revenue in our Southern region increased $72.7 million, from $2.42 billion in 2023 to $2.49 billion in 2024.
The gross margin of our financial services operations, however, improved by $7.6 million in 2023 compared to 2022 as a result of an increase in the number of loan originations, higher margins on loans sold, and an increase in the average loan amount during 2023 compared to prior year.
The gross margin of our financial services operations improved by $22.4 million in 2024 compared to 2023 as a result of an increase in the number of loan originations, higher margins on loans sold, and a slight increase in the average loan amount during 2024 compared to prior year. We opened 72 new communities during 2024.
The increase in selling, general and administrative expense was also attributable to a $0.2 million increase in general and administrative expense, which was primarily related to an increase in land-related expenses. During 2023, we experienced a 22% increase in new contracts in our Northern region, from 2,747 in 2022 to 3,361 in 2023.
The increase in selling, general and administrative expense was also attributable to a $6.1 million increase in general and administrative expense, which primarily related to an increase in compensation-related expenses. During 2024, we experienced a 12% increase in new contracts in our Northern region, from 3,361 in 2023 to 3,761 in 2024.
Future interest payments associated with these notes payable totaled $166 million as of December 31, 2023, with $32 million payable within 12 months. As of December 31, 2023, there were no borrowings outstanding and $70.7 million of letters of credit outstanding under our Credit Facility, leaving $579.3 million available.
Future interest payments associated with these notes payable totaled $135 million as of December 31, 2024, with $32 million payable within 12 months. As of December 31, 2024, there were no borrowings outstanding and $80.4 million of letters of credit outstanding under our Credit Facility, leaving $569.6 million available.
Year Ended December 31, (Dollars in thousands) 2023 2022 2021 Financial Services Number of loans originated 5,395 5,374 6,525 Value of loans originated $ 2,118,884 $ 2,069,615 $ 2,239,928 Revenue $ 93,829 $ 86,195 $ 102,028 Less: Selling, general and administrative expenses 45,115 41,813 39,737 Less: Interest expense 10,360 5,122 3,912 Income before income taxes $ 38,354 $ 39,260 $ 58,379 35 A home is included in “new contracts” when our standard sales contract is executed.
Year Ended December 31, (Dollars in thousands) 2024 2023 2022 Financial Services Number of loans originated 6,731 5,395 5,374 Value of loans originated $ 2,685,078 $ 2,118,884 $ 2,069,615 Revenue $ 116,206 $ 93,829 $ 86,195 Less: Selling, general and administrative expenses 52,826 45,115 41,813 Less: Interest expense 13,698 10,360 5,122 Income before income taxes $ 49,682 $ 38,354 $ 39,260 37 A home is included in “new contracts” when our standard sales contract is executed.
We expect to continue to emphasize the following strategic business objectives in 2024: • managing our land spend and inventory levels; • improving our construction cycle times; • opening new communities; • managing overhead spend; • maintaining a strong balance sheet and liquidity levels; and • emphasizing customer service, product quality and design, and premier locations.
We expect to emphasize the following strategic business objectives in 2025: • promote sales where necessary through interest rate buydowns and/or other incentives; • managing our land spend and inventory levels; • managing our construction cycle times; • opening new communities; • managing overhead spend; • maintaining a strong balance sheet and liquidity levels; and • emphasizing customer service, product quality and design, and premier locations.
(b) The available amount is computed in accordance with the borrowing base calculations under the MIF Mortgage Repurchase Facility, which may be increased by pledging additional mortgage collateral, not to exceed the maximum aggregate commitment amount of M/I Financial's repurchase agreement as of December 31, 2023, which was $300 million, which included a temporary increase applicable through February 9, 2024 (as described below) at which time the maximum aggregate commitment amount under the agreement reverts to $240 million through September 17, 2024.
(b) The available amount is computed in accordance with the borrowing base calculations under the MIF Mortgage Repurchase Facility, which may be increased by pledging additional mortgage collateral, not to exceed the maximum aggregate commitment amount of M/I Financial's repurchase agreement as of December 31, 2024, which was $300 million.
(b) Includes development reimbursements from local municipalities. 34 Reportable Segments The following table presents, by reportable segment, selected operating and financial information as of and for the years ended December 31, 2023, 2022 and 2021: Year Ended December 31, (Dollars in thousands) 2023 2022 2021 Northern Region Homes delivered 3,169 3,581 3,592 New contracts, net 3,361 2,747 3,667 Backlog at end of period 1,248 1,056 1,890 Average sales price of homes delivered $ 479 $ 478 $ 443 Average sales price of homes in backlog $ 531 $ 523 $ 484 Aggregate sales value of homes in backlog $ 663,180 $ 552,451 $ 914,130 Housing revenue $ 1,519,488 $ 1,711,627 $ 1,591,125 Land sale revenue $ 4,455 $ 2,609 $ 4,621 Operating income homes (a) $ 176,074 $ 217,309 $ 210,841 Operating income land $ 246 $ 190 $ 1,117 Number of average active communities 101 92 86 Number of active communities, end of period 102 98 90 Southern Region Homes delivered 4,943 4,785 5,046 New contracts, net 4,616 3,921 5,417 Backlog at end of period 1,754 2,081 2,945 Average sales price of homes delivered $ 485 $ 480 $ 404 Average sales price of homes in backlog $ 520 $ 551 $ 493 Aggregate sales value of homes in backlog $ 912,463 $ 1,145,719 $ 1,452,743 Housing revenue $ 2,394,884 $ 2,298,800 $ 2,039,344 Land sale revenue $ 20,846 $ 32,162 $ 8,769 Operating income homes (a) $ 437,054 $ 440,329 $ 310,550 Operating income land $ 3,114 $ 11,545 $ 2,111 Number of average active communities 101 86 96 Number of active communities, end of period 111 98 85 Total Homebuilding Regions Homes delivered 8,112 8,366 8,638 New contracts, net 7,977 6,668 9,084 Backlog at end of period 3,002 3,137 4,835 Average sales price of homes delivered $ 483 $ 479 $ 420 Average sales price of homes in backlog $ 525 $ 541 $ 490 Aggregate sales value of homes in backlog $ 1,575,643 $ 1,698,170 $ 2,366,873 Housing revenue $ 3,914,372 $ 4,010,427 $ 3,630,469 Land sale revenue $ 25,301 $ 34,771 $ 13,390 Operating income homes (a) $ 613,128 $ 657,638 $ 521,391 Operating income land $ 3,360 $ 11,735 $ 3,228 Number of average active communities 202 179 183 Number of active communities, end of period 213 196 175 (a) Includes the effect of total homebuilding selling, general and administrative expense for the region as disclosed in the first table set forth in this “Outlook” section.
(b) Includes development reimbursements from local municipalities. 36 Reportable Segments The following table presents, by reportable segment, selected operating and financial information as of and for the years ended December 31, 2024, 2023 and 2022: Year Ended December 31, (Dollars in thousands) 2024 2023 2022 Northern Region Homes delivered 3,873 3,169 3,581 New contracts, net 3,761 3,361 2,747 Backlog at end of period 1,136 1,248 1,056 Average sales price of homes delivered $ 490 $ 479 $ 478 Average sales price of homes in backlog $ 561 $ 531 $ 523 Aggregate sales value of homes in backlog $ 636,862 $ 663,180 $ 552,451 Housing revenue $ 1,897,288 $ 1,519,488 $ 1,711,627 Land sale revenue $ 2,725 $ 4,455 $ 2,609 Operating income homes (a) $ 280,505 $ 176,074 $ 217,309 Operating income land $ 594 $ 246 $ 190 Number of average active communities 95 101 92 Number of active communities, end of period 90 102 98 Southern Region Homes delivered 5,182 4,943 4,785 New contracts, net 4,823 4,616 3,921 Backlog at end of period 1,395 1,754 2,081 Average sales price of homes delivered $ 478 $ 485 $ 480 Average sales price of homes in backlog $ 547 $ 520 $ 551 Aggregate sales value of homes in backlog $ 762,821 $ 912,463 $ 1,145,719 Housing revenue $ 2,478,541 $ 2,394,884 $ 2,298,800 Land sale revenue $ 9,910 $ 20,846 $ 32,162 Operating income homes (a) $ 447,483 $ 437,054 $ 440,329 Operating income land $ 3,115 $ 3,114 $ 11,545 Number of average active communities 121 101 86 Number of active communities, end of period 130 111 98 Total Homebuilding Regions Homes delivered 9,055 8,112 8,366 New contracts, net 8,584 7,977 6,668 Backlog at end of period 2,531 3,002 3,137 Average sales price of homes delivered $ 483 $ 483 $ 479 Average sales price of homes in backlog $ 553 $ 525 $ 541 Aggregate sales value of homes in backlog $ 1,399,683 $ 1,575,643 $ 1,698,170 Housing revenue $ 4,375,829 $ 3,914,372 $ 4,010,427 Land sale revenue $ 12,635 $ 25,301 $ 34,771 Operating income homes (a) $ 727,988 $ 613,128 $ 657,638 Operating income land $ 3,709 $ 3,360 $ 11,735 Number of average active communities 216 202 179 Number of active communities, end of period 220 213 196 (a) Includes the effect of total homebuilding selling, general and administrative expense for the region as disclosed in the first table set forth in this “Outlook” section.
At December 31, 2023, M/I Financial provided financing services in all of our markets. Approximately 83% of our homes delivered during 2023 were financed through M/I Financial, compared to 78% during 2022. Capture rate is influenced by financing availability and can fluctuate from quarter to quarter. Corporate Selling, General and Administrative Expenses.
Approximately 89% of our homes delivered during 2024 were financed through M/I Financial, compared to 83% during 2023. Capture rate is influenced by financing availability and can fluctuate from quarter to quarter. Corporate Selling, General and Administrative Expenses. Corporate selling, general and administrative expense increased $11.0 million, from $78.0 million in 2023 to $89.0 million in 2024.
During 2023, we invested $343.5 million in land acquisitions and $512.1 million in land development. We invested more in land development than in land acquisitions in order to finish lots needed to start homes and allow us to open new communities.
During 2024, we invested $472.9 million in land acquisitions and $646.0 million in land development. We invested more in land development than in land acquisitions in order to finish lots needed to start homes and allow us to open new communities.
In 2023, we achieved net income of $465.4 million, or $16.21 per diluted share, compared to net income of $490.7 million, or $17.24 per diluted share in 2022. Our effective tax rate was 23.4% in 2023 compared to 22.8% in 2022.
In 2024, we achieved net income of $563.7 million, or $19.71 per diluted share, compared to net income of $465.4 million, or $16.21 per diluted share in 2023. Our effective tax rate was 23.2% in 2024 compared to 23.4% in 2023.
We remain sensitive to potential changes in market conditions, and continue to focus on controlling overhead leverage, carefully managing our investment in land and land development spending and selectively offering incentives for closing cost assistance or mortgage rate buydowns. Our strong balance sheet and liquidity position should also provide us with flexibility through changing economic conditions.
We remain sensitive to potential changes in market conditions, and will continue to focus on controlling overhead leverage in addition to carefully managing our investment in land and land development spending. Our strong balance sheet and ample liquidity should also provide us with flexibility through changing and uncertain economic conditions.
During the twelve months ended December 31, 2023, homebuilding revenue in our Northern region decreased $190.3 million, from $1.71 billion in 2022 to $1.52 billion in 2023.
During the twelve months ended December 31, 2024, homebuilding revenue in our Northern region increased $376.1 million, from $1.52 billion in 2023 to $1.90 billion in 2024.
During 2023, the average daily amount of letters of credit outstanding under the Credit Facility was $79.5 million and the maximum amount of letters of credit outstanding under the Credit Facility was $94.9 million. At December 31, 2023, M/I Financial had $165.8 million outstanding under the MIF Mortgage Repurchase Facility.
During 2024, the average daily amount of letters of credit outstanding under the Credit Facility was $76.3 million and the maximum amount of letters of credit outstanding under the Credit Facility was $86.5 million. At December 31, 2024, M/I Financial had $286.2 million outstanding under the MIF Mortgage Repurchase Facility.
The MIF Mortgage Repurchase Facility is used to finance eligible residential mortgage loans originated by M/I Financial. M/I Financial pays interest on each advance under the MIF Mortgage Repurchase Facility at a per annum rate based on Daily Adjusting One-Month Term SOFR plus a margin as defined in the repurchase agreement.
M/I Financial pays interest on each advance under the MIF Mortgage Repurchase Facility at a per annum rate based on Daily Adjusting One-Month Term SOFR plus a margin as defined in the MIF Mortgage Repurchase Facility. The MIF Mortgage Repurchase Facility also contains certain financial covenants each of which is defined in the MIF Mortgage Repurchase Facility.
Our monthly absorption rate in our Northern region improved to 2.8 per community in 2023 compared to 2.5 per community in 2022 as a result of the increase in the number of new contracts during the period compared to prior year, offset, in part, by a smaller increase in the number of average active communities. 36 Southern Region.
Our monthly absorption rate in our Northern region improved to 3.3 per community in 2024 compared to 2.8 per community in 2023 as a result of the increase in the number of new contracts and the decrease in the number of average active communities during 2024 compared to 2023. Southern Region.
The increase was primarily due to a $4.2 million increase in compensation expense primarily due to our strong financial performance during the period, partially offset by a $0.8 million decrease related to costs associated with new information systems and a $1.7 million decrease in miscellaneous expenses. Other income.
The increase was primarily due to a $4.9 million increase in compensation expense due to our strong financial performance during the period, a $2.1 million increase related to costs associated with information systems and a $4.0 million increase in miscellaneous expenses. Other income. Other income for 2023 includes equity in income from joint venture arrangements.
The cash generated by operating activities in 2022 was primarily a result of net income of $490.7 million, proceeds from the sale of mortgage loans that exceeded mortgage loan originations by $33.5 million and a $34.3 million increase in other liabilities, offset partially by a $348.7 million increase in inventory and $30.7 million decrease in accounts payable and customer deposits.
The cash generated by operating activities in 2024 was primarily a result of net income of $563.7 million and a $23.1 million increase in other liabilities, offset partially by a $297.7 million increase in inventory, loan originations that exceeded proceeds from the sale of mortgage loans by $114.0 million, a $23.8 million increase in other assets and a $21.9 million decrease in accounts payable and customer deposits.
Operating income in our Southern region decreased $11.7 million from $451.9 million in 2022 to $440.2 million in 2023. This decrease in operating income was the result of an $18.4 million increase in selling, general, and administrative expense, offset, in part, by a $6.7 million improvement in our gross margin.
Operating income in our Southern region 38 increased $10.4 million from $440.2 million in 2023 to $450.6 million in 2024. This increase in operating income was the result of a $32.9 million improvement in our gross margin offset by a $22.5 million increase in selling, general, and administrative expense.
The increase in selling, general and administrative expense was attributable to a $1.7 million increase in selling expense, due to a $1.2 million increase in variable selling expenses resulting from an increase in realtor commissions and a $0.5 million increase in non-variable selling expenses primarily related to costs associated with our sales offices and models.
The increase in selling, general and administrative expense was attributable to a $13.8 million increase in selling expense, due to a $11.6 million increase in sales and realtor commissions and a $2.2 million increase primarily related to costs associated with our sales offices and models.
These covenants are subject to a number of exceptions and qualifications as described in the indenture governing the 2028 Senior Notes.
These covenants are subject to a number of exceptions and qualifications as described in the indenture governing the 2028 Senior Notes. As of December 31, 2024, the Company was in compliance with all terms, conditions, and covenants under the indenture.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeThe table below shows the notional amounts of our financial instruments at December 31, 2023 and 2022: December 31, Description of Financial Instrument (in thousands) 2023 2022 Uncommitted IRLCs $ 174,274 $ 262,529 FMBSs related to uncommitted IRLCs 174,000 341,088 Whole loan contracts and related mortgage loans held for sale 10,398 16,507 FMBSs related to mortgage loans held for sale 152,000 232,518 Mortgage loans held for sale covered by FMBSs 160,547 233,378 44 The table below shows the measurement of assets and liabilities at December 31, 2023 and 2022: December 31, Description of Financial Instrument (in thousands) 2023 2022 Mortgage loans held for sale $ 176,329 $ 242,539 Forward sales of mortgage-backed securities (7,220) (3,005) Interest rate lock commitments 3,617 787 Whole loan contracts (335) (377) Total $ 172,391 $ 239,944 The following table sets forth the amount of gain (loss) recognized on assets and liabilities for the years ended December 31, 2023, 2022 and 2021: Year Ended December 31, Description (in thousands) 2023 2022 2021 Mortgage loans held for sale $ 6,739 $ 407 $ (2,586) Forward sales of mortgage-backed securities (4,215) (7,482) 6,117 Interest rate lock commitments 2,829 1,282 (2,143) Whole loan contracts 43 (323) 353 Total gain (loss) recognized $ 5,396 $ (6,116) $ 1,741 The following table provides the expected future cash flows and current fair values of borrowings under our credit facilities and mortgage loan origination services that are subject to market risk as interest rates fluctuate, as of December 31, 2023.
Biggest changeThe table below shows the notional amounts of our financial instruments at December 31, 2024 and 2023: December 31, Description of Financial Instrument (in thousands) 2024 2023 Uncommitted IRLCs $ 215,696 $ 174,274 FMBSs related to uncommitted IRLCs 228,000 174,000 Whole loan contracts and related mortgage loans held for sale 17,667 10,398 FMBSs related to mortgage loans held for sale 252,000 152,000 Mortgage loans held for sale covered by FMBSs 276,140 160,547 The table below shows the measurement of assets and liabilities at December 31, 2024 and 2023: December 31, Description of Financial Instrument (in thousands) 2024 2023 Mortgage loans held for sale $ 283,540 $ 176,329 Forward sales of mortgage-backed securities 2,946 (7,220) Interest rate lock commitments 532 3,617 Whole loan contracts (864) (335) Total $ 286,154 $ 172,391 The following table sets forth the amount of gain (loss) recognized on assets and liabilities for the years ended December 31, 2024, 2023 and 2022: Year Ended December 31, Description (in thousands) 2024 2023 2022 Mortgage loans held for sale $ (6,746) $ 6,739 $ 407 Forward sales of mortgage-backed securities 10,166 (4,215) (7,482) Interest rate lock commitments (3,085) 2,829 1,282 Whole loan contracts (529) 43 (323) Total gain (loss) recognized $ (194) $ 5,396 $ (6,116) 46 The following table provides the expected future cash flows and current fair values of borrowings under our credit facilities and mortgage loan origination services that are subject to market risk as interest rates fluctuate, as of December 31, 2024.
Uncommitted IRLCs are considered derivative instruments and are fair value adjusted, with the resulting gain or loss recorded in current earnings. Forward Sales of Mortgage-Backed Securities: Forward sales of mortgage-backed securities (“FMBSs”) are used to protect uncommitted IRLC loans against the risk of changes in interest rates between the lock date and the funding date.
Uncommitted IRLCs are considered derivative instruments and are fair value adjusted, with the resulting gain or loss recorded in current earnings. 45 Forward Sales of Mortgage-Backed Securities: Forward sales of mortgage-backed securities (“FMBSs”) are used to protect uncommitted IRLC loans against the risk of changes in interest rates between the lock date and the funding date.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Our primary market risk results from fluctuations in interest rates. We are exposed to interest rate risk through borrowings under our revolving credit facilities, consisting of the Credit Facility and the MIF Mortgage Repurchase Facility which permitted borrowings of up to $950.0 million at December 31, 2023, subject to availability constraints.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Our primary market risk results from fluctuations in interest rates. We are exposed to interest rate risk through borrowings under our revolving credit facilities, consisting of the Credit Facility and the MIF Mortgage Repurchase Facility which permitted borrowings of up to $950.0 million at December 31, 2024, subject to availability constraints.
Because the MIF Mortgage Repurchase Facility is effectively secured by certain mortgage loans held for sale which are typically sold within 30 to 45 days, its outstanding balance is included in the most current period presented. The interest rates for our variable rate debt represent the weighted average interest rates in effect at December 31, 2023.
Because the MIF Mortgage Repurchase Facility is effectively secured by certain mortgage loans held for sale which are typically sold within 30 to 45 days, its outstanding balance is included in the most current period presented. The interest rates for our variable rate debt represent the weighted average interest rates in effect at December 31, 2024.
Typically, the IRLCs will have a duration of less than six months; however, in certain markets, the duration could extend to nine months. Some IRLCs are committed to a specific third-party investor through the use of whole loan delivery commitments matching the exact terms of the IRLC loan.
Typically, the IRLCs will have a duration of less than six months; however, in certain markets, the duration could extend to twelve months. Some IRLCs are committed to a specific third-party investor through the use of whole loan delivery commitments matching the exact terms of the IRLC loan.
Expected Cash Flows by Period Fair Value (Dollars in thousands) 2024 2025 2026 2027 2028 Thereafter Total 12/31/2023 ASSETS: Mortgage loans held for sale: Fixed rate $178,862 — — — — — $178,862 $176,329 Weighted average interest rate 6.78% — — — — — 6.78% LIABILITIES: Long-term debt — fixed rate — — — — $400,000 $300,000 $700,000 $650,875 Weighted average interest rate — — — — 2.83% 1.69% 4.52% Short-term debt — variable rate $165,844 — — — — — $165,844 $165,844 Weighted average interest rate 7.20% — — — — — 7.20% 45
Expected Cash Flows by Period Fair Value (Dollars in thousands) 2025 2026 2027 2028 2029 Thereafter Total 12/31/2024 ASSETS: Mortgage loans held for sale: Fixed rate $291,040 — — — — — $291,040 $283,540 Weighted average interest rate 5.74% — — — — — 5.74% LIABILITIES: Long-term debt — fixed rate — — — $400,000 $— $300,000 $700,000 $651,250 Weighted average interest rate — — — 2.83% —% 1.69% 4.52% Short-term debt — variable rate $286,159 — — — — — $286,159 $286,159 Weighted average interest rate 6.19% — — — — — 6.19% 47

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