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What changed in NVR, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of NVR, Inc.'s 2022 and 2023 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 2023 report.

+169 added−176 removedSource: 10-K (2024-02-14) vs 10-K (2023-02-15)

Top changes in NVR, Inc.'s 2023 10-K

169 paragraphs added · 176 removed · 148 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeOur compensation philosophy has been consistent for over 25 years and is designed to motivate and retain highly qualified and experienced employees. We provide tools for the advancement of our employees by offering training and development opportunities that align with each employee’s responsibilities and career path.
Biggest changeAll of our employees must adhere to our code of ethics and standards of business conduct that sets standards for appropriate behavior in the workplace. Our compensation philosophy has been consistent for over 25 years and is designed to motivate and retain highly qualified and experienced employees.
NVRM is an approved seller/servicer for Fannie Mae (“FNMA”) and Freddie Mac ("FHLMC") mortgage loans and an approved seller/issuer of Ginnie Mae (“GNMA”), Department of Veterans Affairs (“VA”) and Federal Housing Administration (“FHA”) mortgage loans. Regulation NVRM is subject to the rules and regulations of FNMA, GNMA, FHLMC, VA and FHA. These rules and regulations restrict certain activities of NVRM.
NVRM is an approved seller/servicer for Fannie Mae (“FNMA”) and Freddie Mac ("FHLMC") mortgage loans and an approved seller/issuer/servicer of Ginnie Mae (“GNMA”), Department of Veterans Affairs (“VA”) and Federal Housing Administration (“FHA”) mortgage loans. Regulation NVRM is subject to the rules and regulations of FNMA, GNMA, FHLMC, VA and FHA. These rules and regulations restrict certain activities of NVRM.
Ryan Homes operates in thirty-five metropolitan areas located in Maryland, Virginia, Washington, D.C., Delaware, West Virginia, Pennsylvania, Ohio, New York, New Jersey, Indiana, Illinois, North Carolina, South Carolina, Georgia, Florida and Tennessee. Our NVHomes and Heartland Homes products are marketed primarily to move-up and luxury buyers.
Ryan Homes operates in thirty-six metropolitan areas located in Maryland, Virginia, Washington, D.C., Delaware, West Virginia, Pennsylvania, Ohio, New York, New Jersey, Indiana, Illinois, North Carolina, South Carolina, Georgia, Florida and Tennessee. Our NVHomes and Heartland Homes products are marketed primarily to move-up and luxury buyers.
Unless the context otherwise requires, references to “NVR”, “we”, “us” or “our” include NVR, Inc. and its consolidated subsidiaries. We are one of the largest homebuilders in the United States. We operate in thirty-five metropolitan areas in fifteen states, and Washington, D.C.
Unless the context otherwise requires, references to “NVR”, “we”, “us” or “our” include NVR, Inc. and its consolidated subsidiaries. We are one of the largest homebuilders in the United States. We operate in thirty-six metropolitan areas in fifteen states, and Washington, D.C.
During the four quarters of each of 2022, 2021 and 2020, approximately 4% in 2022, 3% in 2021 and 6% in 2020 of a reporting quarter’s opening backlog cancelled during the quarter. We can provide no assurance that our historical cancellation rates are indicative of the actual cancellation rate that may occur in future periods.
During the four quarters of each of 2023, 2022 and 2021, approximately 4% in 2023, 4% in 2022 and 3% in 2021 of a reporting quarter’s opening backlog cancelled during the quarter. We can provide no assurance that our historical cancellation rates are indicative of the actual cancellation rate that may occur in future periods.
Forward-looking statements contained in this document include those regarding market trends, NVR’s financial position, business strategy, the outcome of pending litigation, investigations or similar contingencies, projected plans and objectives of management for future operations.
Forward-looking statements contained in this document include those regarding market trends, our financial position and financial results, business strategy, the outcome of pending litigation, investigations or similar contingencies, projected plans and objectives of management for future operations.
Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results or performance of NVR to be materially different from future results, performance or achievements expressed or implied by the forward-looking statements.
Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results or performance to be materially different from future results, performance or achievements expressed or implied by the forward-looking statements.
NVRM’s mortgage loans in process that had not closed had an aggregate principal balance of approximately $2.5 billion as of December 31, 2022 compared to approximately $3.9 billion as of December 31, 2021.
NVRM’s mortgage loans in process that had not closed had an aggregate principal balance of approximately $2.9 billion as of December 31, 2023 compared to approximately $2.5 billion as of December 31, 2022.
Human Capital As of December 31, 2022, we had approximately 6,550 full time employees, of whom approximately 5,500 worked in our homebuilding operations, and approximately 1,050 worked in our mortgage banking operations, compared to December 31, 2021, when we had approximately 6,600 full time employees, of whom approximately 5,600 worked in our homebuilding operations, and approximately 1,000 worked in our mortgage banking operations.
Human Capital As of December 31, 2023, we had approximately 6,300 full time employees, of whom approximately 5,300 worked in our homebuilding operations, and approximately 1,000 worked in our mortgage banking operations, compared to December 31, 2022, when we had approximately 6,550 full time employees, of whom approximately 5,500 worked in our homebuilding operations, and approximately 1,050 worked in our mortgage banking operations.
The average price of homes in backlog increased to $472,200 at December 31, 2022 from $454,200 at December 31, 2021. Backlog may be impacted by customer cancellations for various reasons that are beyond our control, such as the customer’s failure to obtain mortgage financing, inability to sell an existing home, job loss or a variety of other reasons.
The average price of homes in backlog decreased to $465,000 at December 31, 2023 from $472,200 at December 31, 2022. Backlog may be impacted by customer cancellations for various reasons that are beyond our control, such as the customer’s failure to obtain mortgage financing, inability to sell an existing home, job loss or a variety of other reasons.
North East: New Jersey and Eastern Pennsylvania Mid East: New York, Ohio, Western Pennsylvania, Indiana and Illinois South East: North Carolina, South Carolina, Tennessee, Florida and Georgia Backlog Backlog, which represents homes sold but not yet settled with the customer, totaled 9,162 units and approximately $4.3 billion at December 31, 2022 compared to 12,730 units and approximately $5.8 billion at December 31, 2021.
North East: New Jersey and Eastern Pennsylvania Mid East: New York, Ohio, Western Pennsylvania, Indiana and Illinois South East: North Carolina, South Carolina, Tennessee, Florida and Georgia Backlog Backlog, which represents homes sold but not yet settled with the customer, totaled 10,229 units and approximately $4.8 billion at December 31, 2023 compared to 9,162 units and approximately $4.3 billion at December 31, 2022.
Our homes combine traditional, transitional, cottage or urban exterior designs with contemporary interior designs and amenities, generally include two to four bedrooms and range from approximately 1,000 to 10,000 finished square feet. During 2022, the prices at which we settled homes ranged from approximately $160,000 to $2.6 million and averaged $454,300.
Our homes combine traditional, transitional, cottage or urban exterior designs with contemporary interior designs and amenities, generally include two to four bedrooms and range from approximately 1,000 to 10,000 finished square feet. During 2023, the prices at which we settled homes ranged from approximately $190,000 to $2.6 million and averaged $450,700.
Such risk factors include, but are not limited to the following: the economic impact of COVID-19 and related supply chain disruptions, general economic and business conditions (on both a national and regional level); interest rate changes; access to suitable financing by NVR and NVR’s customers; increased regulation in the mortgage banking industry; the ability of our mortgage banking subsidiary to sell loans it originates into the secondary market; competition; the availability and cost of land and other raw materials used by NVR in its homebuilding operations; shortages of labor; weather related slow-downs; building moratoriums; governmental regulation; fluctuation and volatility of stock and other financial markets; mortgage financing availability; and other factors over which NVR has little or no control.
Such risk factors include, but are not limited to the following: general economic and business conditions (on both a national and regional level); interest rate changes; access to suitable financing by us and our customers; increased regulation in the mortgage banking industry; the ability of our mortgage banking subsidiary to sell loans it originates into the secondary market; competition; the availability and cost of land and other raw materials used by us in our homebuilding operations; shortages of labor; the economic impact of a major epidemic or pandemic; weather related slow-downs; building moratoriums; governmental regulation; fluctuation and volatility of stock and other financial markets; mortgage financing availability; and other factors over which we have little or no control.
During 2021, our average price of homes settled was $403,900. Markets Our four reportable homebuilding segments operate in the following geographic regions: Mid Atlantic: Maryland, Virginia, West Virginia, Delaware and Washington, D.C.
During 2022, our average price of homes settled was $454,300. Markets Our four reportable homebuilding segments operate in the following geographic regions: Mid Atlantic: Maryland, Virginia, West Virginia, Delaware and Washington, D.C.
Expressed as the total of all cancellations during the period as a percentage of gross sales during the period, our cancellation rate was 14.2%, 9.2% and 14.9% in 2022, 2021, and 2020, respectively.
Expressed as the total of all cancellations during the period as a percentage of gross sales during the period, our cancellation rate was approximately 13%, 14% and 9% in 2023, 2022, and 2021, respectively.
Because NVRM originates mortgage loans almost exclusively for our homebuilding customers, NVRM is dependent on our homebuilding segment. In 2022, NVRM closed approximately 17,000 loans with an aggregate principal amount of approximately $6.3 billion as compared to approximately 17,700 loans with an aggregate principal amount of approximately $6.1 billion in 2021.
Because NVRM originates mortgage loans almost exclusively for our homebuilding customers, NVRM is dependent on our homebuilding segment. In 2023, NVRM closed approximately 15,900 loans with an aggregate principal amount of approximately $5.7 billion as compared to approximately 17,000 loans with an aggregate principal amount of approximately $6.3 billion in 2022.
See “Risk Factors” in Item 1A of this Form 10-K for additional information regarding these risks. We are dependent upon building material suppliers for a continuous flow of raw materials. Whenever possible, we utilize standard products available from multiple sources.
See “Risk Factors” in Item 1A of this Form 10-K for additional information regarding these risks. We are dependent upon building material suppliers for a continuous flow of raw materials. Whenever possible, we utilize standard products available from multiple sources. In the past, such raw materials have been generally available to us in adequate supply.
NVR undertakes no obligation to update such forward-looking statements except as required by law.
We undertake no obligation to update such forward-looking statements except as required by law.
Other than those units that are cancelled, and subject to potential construction delays due to continued supply chain disruptions, we expect to settle substantially all of our December 31, 2022 backlog during 2023. See “Risk Factors” in Item 1A and “Seasonality” in Item 7 of this Form 10-K.
Other than those units that are cancelled, we expect to settle substantially all of our December 31, 2023 backlog during 2024. See “Risk Factors” in Item 1A and “Seasonality” in Item 7 of this Form 10-K.
We generally do not engage in land development (see discussion below of our land development activities). Instead, we typically acquire finished building lots from various third party land developers pursuant to fixed price finished lot purchase agreements (“LPAs”) that require deposits that may be forfeited if we fail to perform under the LPAs.
Instead, we typically acquire finished building lots from various third party land developers pursuant to fixed price finished lot purchase agreements (“LPAs”) that require deposits that may be forfeited if we fail to perform under the LPAs.
In the past, such raw materials have been generally available to us in adequate supply, however, increased construction activity and demand for building materials, coupled with the ongoing effects of the COVID-19 pandemic, has led to supply chain disruptions and longer construction cycle times during 2021 and 2022.
However, increased construction activity and demand for building materials, coupled with the ongoing effects of the COVID-19 pandemic, led to supply chain disruptions and longer construction cycle times during 2021 and 2022. During 2023, we began to see improvements in our supply chains and in turn improvement in our construction cycle times.
We strive to promote employees from within our workforce, as we believe this provides both long-term success and continuity to our operations and growth for our employees.
We provide tools for the advancement of our employees by offering training and development opportunities that align with each employee’s responsibilities and career path. We strive to promote employees from within our workforce, as we believe this provides both long-term success and continuity to our operations and growth for our employees.
NVHomes operates in Delaware and the Washington, D.C., Baltimore, MD and Philadelphia, PA metropolitan areas. Heartland Homes operates in the Pittsburgh, PA metropolitan area. During 2022, approximately 16% of our home settlements accounting for approximately 21% of our homebuilding revenue occurred in the Washington, D.C. metropolitan area.
NVHomes operates in Delaware, New Jersey, and the Washington, D.C., Baltimore, MD and Philadelphia, PA metropolitan areas. Heartland Homes operates in the Pittsburgh, PA metropolitan area. We generally do not engage in land development (see discussion below of our land development activities).
None of our employees are covered by collective bargaining agreements. Our employees are our most important asset. We are committed to hiring and developing an inclusive workplace with a strong diversity of backgrounds and perspectives. All of our employees must adhere to our code of ethics and standards of business conduct that sets standards for appropriate behavior in the workplace.
None of our employees are covered by collective bargaining agreements. Our employees are our most important asset. We are committed to continually developing an inclusive culture that attracts a diverse workforce and enables them to contribute to the success of the company by emphasizing their unique perspectives and backgrounds.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIncreases in prevailing interest rates could have a material adverse effect on our sales, profitability, stock performance, ability to service our debt obligations and future cash flows. 4 Table of Contents Our financial results also are affected by the risks generally incident to our mortgage banking business, including interest rate levels, the impact of government regulation on mortgage loan originations and servicing and the need to issue forward commitments to fund and sell mortgage loans.
Biggest changeWe are also subject to potential volatility in the price of commodities that impact costs of materials used in our homebuilding business. Increases in 4 Table of Contents prevailing interest rates could have a material adverse effect on our sales, profitability, stock performance, ability to service our debt obligations and future cash flows.
We are an approved seller/servicer of FNMA and FHLMC mortgage loans and an approved seller/issuer of GNMA, VA and FHA mortgage loans, and are subject to all of those agencies’ rules and regulations. Any significant impairment of our eligibility to sell/service these loans could have a material adverse impact on our mortgage operations.
We are an approved seller/servicer of FNMA and FHLMC mortgage loans and an approved seller/issuer/servicer of GNMA, VA and FHA mortgage loans, and are subject to all of those agencies’ rules and regulations. Any significant impairment of our eligibility to sell/service these loans could have a material adverse impact on our mortgage operations.
High rates of inflation generally affect the homebuilding industry adversely because of their adverse impact on interest rates. High interest rates not only increase the cost of borrowed funds to homebuilders but also have a significant adverse effect on housing demand and on the affordability of permanent mortgage financing to prospective purchasers.
High rates of inflation generally affect the homebuilding industry adversely because of their adverse impact on interest rates. High interest rates not only increase the cost of borrowed funds to homebuilders and developers but also have a significant adverse effect on housing demand and on the affordability of permanent mortgage financing to prospective purchasers.
The tightening of credit standards and the availability of suitable mortgage financing could prevent customers from buying our homes and could prevent buyers of our customers’ homes from obtaining mortgages they need to complete that purchase, either of which could result in potential customers’ inability to buy a home from us.
The tightening of credit standards and limited availability of suitable mortgage financing could prevent customers from buying our homes and could prevent buyers of our customers’ homes from obtaining mortgages they need to complete that purchase, either of which could result in potential customers’ inability to buy a home from us.
Our mortgage banking operations are also dependent upon the securitization market for mortgage-backed securities, and could be materially adversely affected by any fluctuation or downturn in such market. 7 Table of Contents Our current indebtedness may impact our future operations. As of December 31, 2022 we had $900 million in senior notes outstanding.
Our mortgage banking operations are also dependent upon the securitization market for mortgage-backed securities, and could be materially adversely affected by any fluctuation or downturn in such market. 7 Table of Contents Our current indebtedness may impact our future operations. As of December 31, 2023 we had $900 million in senior notes outstanding.
Insofar as we underwrite our originated loans to those standards, we bear no increased concentration of credit risk from the issuance of loans, except in certain limited instances where 6 Table of Contents repurchases or early payment default occur.
Insofar as we underwrite our originated loans to those standards, we bear no increased concentration of credit risk from the issuance of loans, except in certain limited instances where 6 Table of Contents repurchases or early payment defaults occur.
Increases in interest rates may have a material adverse effect on our mortgage banking revenue, profitability, stock performance, ability to service our debt obligations and future cash flows.
Volatility in interest rates may have a material adverse effect on our mortgage banking revenue, profitability, stock performance, ability to service our debt obligations and future cash flows.
We also may experience marketing losses resulting from daily increases in interest rates to the extent we are unable to match interest rates and amounts on loans we have committed to originate with forward commitments from third parties to purchase such loans.
We also may experience secondary marketing losses resulting from daily movements in interest rates to the extent we are unable to match interest rates and amounts on loans we have committed to originate with forward commitments from third parties to purchase such loans.
Our homebuilding customers account for almost all of our mortgage banking business. The volume of our continuing homebuilding operations therefore affects our mortgage banking business. Our mortgage banking business also is affected by interest rate fluctuations.
The volume of our continuing homebuilding operations therefore affects our mortgage banking business. Our mortgage banking business also is affected by interest rate fluctuations.
Potential changes to federal laws and regulations could have the effect of limiting the activities of FNMA and FHLMC, the entities that provide liquidity to the secondary mortgage market, which could lead to increases in mortgage interest rates.
The mortgage industry is subject to regulation at the federal, state and local level. Potential changes to federal laws and regulations could have the effect of limiting the activities of FNMA, GNMA and FHLMC, the entities that provide liquidity to the secondary mortgage market, which could lead to increases in mortgage interest rates.
These developments and other consequences of an outbreak could materially and adversely affect our operations, profitability and cash flows. Weather-related and other events beyond our control may adversely impact our operations. Extreme weather or other events, such as significant snowfalls, hurricanes, tornadoes, earthquakes, forest fires, floods, terrorist attacks or war may affect our markets, our operations and our profitability.
Weather-related and other events beyond our control may adversely impact our operations. Extreme weather or other events, such as significant hurricanes, tornadoes, earthquakes, forest fires, floods, snowfalls, terrorist attacks or war may affect our markets, our operations and our profitability.
Over the long term, these disruptions could lower demand for our products, impair our ability to 8 Table of Contents sell and/or build homes in our normal manner, increase our losses on contract land deposits, and negatively impact our lending and secondary mortgage market activities.
Over the long term, these disruptions could lower demand for our products, impair our ability to sell and/or build homes in our normal manner, increase our losses on contract land deposits, and negatively impact our lending and secondary mortgage market activities. These developments and other consequences of an outbreak could materially and adversely affect our operations, profitability and cash flows.
Environmental laws and conditions may result in delays, cause us to incur substantial compliance and other costs, or prohibit or severely restrict homebuilding activity in certain environmentally sensitive regions or areas, thereby adversely affecting our sales, profitability, stock performance, ability to service our debt obligations and future cash flows.
Environmental laws and conditions may result in delays, cause us to incur substantial compliance and other costs, or prohibit or severely restrict homebuilding activity in certain environmentally sensitive regions or areas.
Any downturn in the national economy or the local economies of the markets in which we operate could have a material adverse effect on our sales, profitability, stock performance and ability to service our debt obligations. In particular, during 2022, approximately 16% of our home settlements, accounting for 21% of our homebuilding revenue, occurred in the Washington, D.C. metropolitan area.
Any downturn in the national economy or the local economies of the markets in which we operate could have a material adverse effect on our sales, profitability, stock performance and ability to service our debt obligations.
Our business and earnings depend on the ability of our potential customers to obtain mortgages for the purchase of our homes. In addition, many of our potential customers must sell their existing homes in order to buy a home from us.
In addition, many of our potential customers must sell their existing homes in order to buy a home from us.
Thus, we are dependent to a significant extent on the economy and demand for housing in that market. Because almost all of our customers require mortgage financing, the availability of suitable mortgage financing could impair the affordability of our homes, lower demand for our products, and limit our ability to fully deliver our backlog.
Because almost all of our customers require mortgage financing, limited availability of suitable mortgage financing could impair the affordability of our homes, lower demand for our products, and limit our ability to fully deliver our backlog. Our business and earnings depend on the ability of our potential customers to obtain mortgages for the purchase of our homes.
There is uncertainty regarding governmental actions that may occur, and the effects of economic relief efforts on the U.S. economy, either of which could be potential disruptors to our business.
The recent COVID-19 pandemic had a significant impact on our operations and supply chains. 8 Table of Contents There is no guarantee that a future health epidemic will not occur, which could result in uncertainty regarding governmental actions that may occur, and the effects of economic relief efforts on the U.S. economy, either of which could be potential disruptors to our business.
Our business and operations could be adversely affected by health epidemics, including the COVID-19 pandemic, impacting the markets, states and local communities in which we operate. The COVID-19 pandemic had a significant impact on our supply chains. General uncertainty continues regarding the near-term and long-term impact of the COVID-19 virus on the domestic and international economy and on public health.
Our business and operations could be adversely affected by health epidemics, impacting the markets, states and local communities in which we operate.
These events may impact our physical facilities or those of our suppliers or subcontractors and our housing inventories, causing us material increases in costs, or delays in construction of homes, which could have a material adverse effect upon our sales, profitability, stock performance, ability to service our debt obligations and future cash flows.
These events may impact our physical facilities or those of our suppliers or subcontractors and our housing inventories, causing us material increases in costs, or delays in construction of homes. In addition, demand could be negatively impacted in certain of our markets perceived to be more vulnerable to increased severe weather events and other impacts of climate change.
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We are also subject to potential volatility in the price of commodities that impact costs of materials used in our homebuilding business.
Added
Our financial results also are affected by the risks attributable to our mortgage banking business, including interest rate levels, the impact of government regulation on mortgage loan originations and servicing and the need to issue forward commitments to fund and sell mortgage loans. Our homebuilding customers account for almost all of our mortgage banking business.
Removed
Increased regulation of the mortgage industry could harm our future sales and earnings. The mortgage industry remains under intense scrutiny and continues to face increasing regulation at the federal, state and local level.
Added
In recent years, an increasing number of state and Federal regulations have been enacted or proposed to reduce the impact of greenhouse gas emissions and other human activities on climate change. Some of this legislation relates to matters such as restrictions and reporting on carbon dioxide emissions and higher building code energy efficiency standards.
Removed
The ultimate impact of the COVID-19 pandemic or a similar health epidemic is highly uncertain and subject to change. There is no guarantee that a future outbreak of COVID-19 or any other widespread epidemics will not occur.
Added
The impact of such restrictions and requirements on us and our suppliers could increase our operating and compliance costs, as well as the cost of raw materials used in the building process.
Added
Higher operating costs could result in us having to increase our home prices to a level that may adversely affect our sales, or if we are unable to increase prices, negatively impact our profitability. Increased regulation of the mortgage industry could harm our future sales and earnings.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe lease has a term of 10 years from the commencement date which is expected to be in the fourth quarter of 2023 and contains an option for three five year extensions. In addition, we own a production facility of approximately 100,000 square feet in Dayton, Ohio.
Biggest changeThe Lavonia facility will be approximately 170,000 square feet with a lease term of 15 years from the commencement date which is expected to be later in 2024, and contains an option for four five year extensions. In addition, we own a production facility of approximately 100,000 square feet in Dayton, Ohio.
In connection with the operation of the homebuilding segment, we lease production facilities in the following seven locations: Thurmont, Maryland; Burlington County, New Jersey; Farmington, New York; Kings Mountain, North Carolina; Darlington, Pennsylvania; Portland, Tennessee; and Richmond, Virginia. These facilities range in size from approximately 40,000 square feet to 400,000 square feet and total approximately one million square feet.
In connection with the operation of the homebuilding business, we lease production facilities in the following seven locations: Thurmont, Maryland; Burlington County, New Jersey; Farmington, New York; Kings Mountain, North Carolina; Darlington, Pennsylvania; Portland, Tennessee; and Richmond, Virginia. These facilities range in size from approximately 40,000 square feet to 400,000 square feet and total approximately one million square feet.
Each of these leases contains various options for extensions of the lease and for the purchase of the facility. Additionally, certain facility leases have early termination options. These leases currently expire between 2027 and 2040. During 2022 we entered into a lease agreement for a new production facility in Fayetteville, North Carolina of approximately 145,000 square feet.
Each of these leases contains various options for extensions of the lease and for the purchase of the facility. Additionally, certain facility leases have early termination options. These leases currently expire between 2027 and 2040. We have entered into lease agreements for new production facilities in Fayetteville, North Carolina and Lavonia, Georgia.
We anticipate that, upon expiration of existing production facility and office leases, we will be able to renew them or obtain comparable facilities on terms acceptable to us.
Our plant utilization was 56% and 58% of total capacity in 2023 and 2022, respectively. We anticipate that, upon expiration of existing production facility and office leases, we will be able to renew them or obtain comparable facilities on terms acceptable to us.
Removed
Our plant utilization was 58% and 61% of total capacity in 2022 and 2021, respectively.
Added
The Fayetteville facility will be approximately 145,000 square feet with a lease term of 10 years from the commencement date, which is expected to be in the first quarter of 2024, and contains an option for three five year extensions.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe following table provides information regarding common stock repurchases during the quarter ended December 31, 2022: Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs October 1 - 31, 2022 23,573 $ 4,071.41 23,573 $ 527,875 November 1 - 30, 2022 4,931 $ 4,094.45 4,931 $ 507,685 December 1 - 31, 2022 — $ — — $ 507,685 Total 28,504 $ 4,075.40 28,504 The information required by this item with respect to securities authorized for issuance under equity compensation plans is provided under Item 12 of this Form 10-K. 10 Table of Contents STOCK PERFORMANCE GRAPH The following graph compares the cumulative total return to holders of our common stock since December 31, 2017 with the Dow Jones US Home Construction Index and the S&P 500 Index for that same period, assuming that $100 was invested in NVR stock and the indices on December 31, 2017.
Biggest changeThe information required by this item with respect to securities authorized for issuance under equity compensation plans is provided under Item 12 of this Form 10-K. 11 Table of Contents STOCK PERFORMANCE GRAPH The following graph compares the cumulative total return to holders of our common stock since December 31, 2018 with the Dow Jones US Home Construction Index and the S&P 500 Index for that same period, assuming that $100 was invested in NVR stock and the indices on December 31, 2018. .
Repurchase activity is conducted pursuant to publicly announced Board authorizations, and is typically executed in accordance with the safe-harbor provisions of Rule 10b-18 promulgated under the Securities Exchange Act of 1934, as amended.
Repurchase activity is conducted pursuant to publicly announced Board authorizations, and is typically executed in accordance with the safe-harbor provisions of Rule 10b-18 and Rule 10b5-1 promulgated under the Securities Exchange Act of 1934, as amended.
In addition, the Board resolutions authorizing us to repurchase shares of our common stock specifically prohibit us from purchasing shares from our officers, directors, Profit Sharing Plan Trust or Employee Stock Ownership Plan Trust. The repurchase authorizations do not have expiration dates.
In addition, the repurchase authorizations specifically prohibit us from purchasing shares from our officers, directors, Profit Sharing Plan Trust or Employee Stock Ownership Plan Trust.
We have never paid a cash dividend on our shares of common stock and have no current intention to do so in the future. We had two share repurchase authorizations outstanding during the quarter ended December 31, 2022.
We have never paid a cash dividend on our shares of common stock and have no current intention to do so in the future. During the quarter ended December 31, 2023, we fully utilized the remaining amount available under a $500 million share repurchase authorization that was publicly announced on August 2, 2023.
(dollars in thousands, except per share data) Our shares of common stock are listed and principally traded on the New York Stock Exchange under the trading symbol “NVR.” As of the close of business on February 13, 2023, there were 178 shareholders of record of our common stock.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Our shares of common stock are listed and principally traded on the New York Stock Exchange under the trading symbol “NVR.” As of the close of business on February 12, 2024, there were 158 shareholders of record of our common stock.
For the Year Ended December 31, Comparison of 5 Year Cumulative Total Return 2017 2018 2019 2020 2021 2022 NVR, Inc. $ 100 $ 69 $ 109 $ 116 $ 168 $ 131 S&P 500 $ 100 $ 96 $ 126 $ 149 $ 192 $ 157 Dow Jones US Home Construction $ 100 $ 68 $ 101 $ 125 $ 190 $ 148
For the Year Ended December 31, Comparison of 5 Year Cumulative Total Return 2018 2019 2020 2021 2022 2023 NVR, Inc. $ 100 $ 156 $ 167 $ 242 $ 189 $ 287 S&P 500 $ 100 $ 131 $ 156 $ 200 $ 164 $ 207 Dow Jones US Home Construction $ 100 $ 148 $ 183 $ 278 $ 217 $ 391
On May 4, 2022 and August 3, 2022, we publicly announced the Board of Directors’ approval to repurchase our outstanding common stock in one or more open market and/or privately negotiated transactions, up to an aggregate of $500,000 per authorization.
On November 9, 2023, we publicly announced that our Board of Directors had approved a new repurchase authorization in the amount of up to $750 million. Each share repurchase authorization authorized the repurchase of our outstanding common stock in one or more open market and/or privately negotiated transactions, with no expiration date.
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Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Added
The following table provides information regarding common stock repurchases during the quarter ended December 31, 2023: Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (in thousands) October 1 - 31, 2023 32,486 $ 5,984.32 32,486 $ 17,891 November 1 - 30, 2023 — $ — — $ 767,891 December 1 - 31, 2023 (1) 14,262 $ 6,452.19 14,262 $ 675,870 Total 46,748 $ 6,127.06 46,748 (1) Of the shares repurchased in December 2023, 2,823 shares were repurchased under the August 2, 2023 authorization, which fully utilized the August 2023 authorization.
Added
The remaining 11,439 shares were repurchased under the November 9, 2023 share repurchase authorization. On February 14, 2024, the Board of Directors approved an additional repurchase authorization of up to an aggregate of $750 million with terms and conditions consistent with our prior authorizations. The repurchase authorization does not have an expiration date.

Item 7. Management's Discussion & Analysis

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

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Biggest changeThe following tables summarize certain homebuilding operating activity by reportable segment for each of the last three years: 14 Table of Contents Selected Segment Financial Data: Year Ended December 31, 2022 2021 2020 Revenues: Mid Atlantic $ 4,766,329 $ 4,049,871 $ 3,668,542 North East 892,543 767,828 538,772 Mid East 2,147,262 1,891,729 1,524,667 South East 2,520,636 1,992,265 1,596,908 Year Ended December 31, 2022 2021 2020 Gross profit margin: Mid Atlantic $ 1,280,596 $ 987,926 $ 690,058 North East 226,666 163,990 102,621 Mid East 476,659 391,405 282,443 South East 751,734 469,520 327,483 Year Ended December 31, 2022 2021 2020 Gross profit margin percentage: Mid Atlantic 26.9 % 24.4 % 18.8 % North East 25.4 % 21.4 % 19.0 % Mid East 22.2 % 20.7 % 18.5 % South East 29.8 % 23.6 % 20.5 % Year Ended December 31, 2022 2021 2020 Segment profit: Mid Atlantic $ 994,027 $ 734,941 $ 437,849 North East 157,333 105,432 50,677 Mid East 343,236 271,756 168,605 South East 577,030 329,982 205,029 Segment Operating Activity: Year Ended December 31, 2022 2021 2020 Units Average Price Units Average Price Units Average Price New orders, net of cancellations: Mid Atlantic 7,816 $ 526.6 8,749 $ 522.4 9,230 $ 453.8 North East 1,679 $ 528.3 1,685 $ 497.4 1,738 $ 416.6 Mid East 4,344 $ 400.5 5,567 $ 369.3 5,780 $ 330.9 South East 5,325 $ 399.4 6,720 $ 363.6 6,334 $ 307.7 Total 19,164 $ 462.8 22,721 $ 436.1 23,082 $ 380.1 15 Table of Contents Year Ended December 31, 2022 2021 2020 Units Average Price Units Average Price Units Average Price Settlements: Mid Atlantic 9,042 $ 527.1 8,310 $ 487.3 8,363 $ 438.6 North East 1,763 $ 506.3 1,666 $ 460.9 1,375 $ 391.8 Mid East 5,518 $ 389.1 5,414 $ 349.4 4,719 $ 323.1 South East 6,409 $ 393.3 6,150 $ 323.9 5,309 $ 300.8 Total 22,732 $ 454.3 21,540 $ 403.9 19,766 $ 370.8 Year Ended December 31, 2022 2021 2020 Units Average Price Units Average Price Units Average Price Backlog: Mid Atlantic 3,692 $ 536.3 4,918 $ 534.8 4,479 $ 470.9 North East 885 $ 553.9 969 $ 511.5 950 $ 447.8 Mid East 1,853 $ 403.2 3,027 $ 381.3 2,874 $ 344.5 South East 2,732 $ 405.7 3,816 $ 393.7 3,246 $ 323.7 Total 9,162 $ 472.2 12,730 $ 454.2 11,549 $ 396.2 Operating Data: Year Ended December 31, 2022 2021 2020 New order cancellation rate: Mid Atlantic 14.4 % 9.0 % 14.9 % North East 12.2 % 8.6 % 13.1 % Mid East 16.4 % 10.2 % 14.5 % South East 12.6 % 8.8 % 15.8 % Year Ended December 31, 2022 2021 2020 Average active communities: Mid Atlantic 160 155 177 North East 36 34 40 Mid East 126 129 138 South East 93 106 112 Total 415 424 467 Homebuilding Inventory: As of December 31, 2022 2021 Sold inventory: Mid Atlantic $ 727,501 $ 867,892 North East 156,798 154,053 Mid East 278,034 342,011 South East 413,576 439,892 Total (1) $ 1,575,909 $ 1,803,848 16 Table of Contents As of December 31, 2022 2021 Unsold lots and housing units inventory: Mid Atlantic $ 111,816 $ 87,412 North East 23,013 14,656 Mid East 17,044 12,892 South East 31,791 14,193 Total (1) $ 183,664 $ 129,153 (1) Total segment inventory differs from consolidated inventory due to certain consolidation adjustments necessary to convert the reportable segments’ results, which are predominantly maintained on a cash basis, to a full accrual basis for external financial statement presentation purposes.
Biggest changeThe following tables summarize certain homebuilding operating activity by reportable segment for each of the last three years: Selected Segment Financial Data: Year Ended December 31, 2023 2022 2021 Revenues: Mid Atlantic $ 4,189,957 $ 4,766,329 $ 4,049,871 North East 948,289 892,543 767,828 Mid East 1,723,514 2,147,262 1,891,729 South East 2,452,845 2,520,636 1,992,265 Year Ended December 31, 2023 2022 2021 Gross profit margin: Mid Atlantic $ 1,023,993 $ 1,280,596 $ 987,926 North East 243,634 226,666 163,990 Mid East 372,671 476,659 391,405 South East 629,843 751,734 469,520 Year Ended December 31, 2023 2022 2021 Gross profit margin percentage: Mid Atlantic 24.4 % 26.9 % 24.4 % North East 25.7 % 25.4 % 21.4 % Mid East 21.6 % 22.2 % 20.7 % South East 25.7 % 29.8 % 23.6 % Year Ended December 31, 2023 2022 2021 Segment profit: Mid Atlantic $ 745,323 $ 994,027 $ 734,941 North East 169,012 157,333 105,432 Mid East 257,865 343,236 271,756 South East 440,538 577,030 329,982 16 Table of Contents Segment Operating Activity: Year Ended December 31, 2023 2022 2021 Units Average Price Units Average Price Units Average Price New orders, net of cancellations: Mid Atlantic 8,434 $ 515.5 7,816 $ 526.6 8,749 $ 522.4 North East 1,879 $ 573.2 1,679 $ 528.3 1,685 $ 497.4 Mid East 4,514 $ 396.5 4,344 $ 400.5 5,567 $ 369.3 South East 6,902 $ 366.4 5,325 $ 399.4 6,720 $ 363.6 Total 21,729 $ 448.4 19,164 $ 462.8 22,721 $ 436.1 Year Ended December 31, 2023 2022 2021 Units Average Price Units Average Price Units Average Price Settlements: Mid Atlantic 8,032 $ 521.5 9,042 $ 527.1 8,310 $ 487.3 North East 1,736 $ 546.2 1,763 $ 506.3 1,666 $ 460.9 Mid East 4,391 $ 392.4 5,518 $ 389.1 5,414 $ 349.4 South East 6,503 $ 377.2 6,409 $ 393.3 6,150 $ 323.9 Total 20,662 $ 450.7 22,732 $ 454.3 21,540 $ 403.9 Year Ended December 31, 2023 2022 2021 Units Average Price Units Average Price Units Average Price Backlog: Mid Atlantic 4,094 $ 522.5 3,692 $ 536.3 4,918 $ 534.8 North East 1,028 $ 602.0 885 $ 553.9 969 $ 511.5 Mid East 1,976 $ 412.1 1,853 $ 403.2 3,027 $ 381.3 South East 3,131 $ 378.4 2,732 $ 405.7 3,816 $ 393.7 Total 10,229 $ 465.0 9,162 $ 472.2 12,730 $ 454.2 Operating Data: Year Ended December 31, 2023 2022 2021 New order cancellation rate: Mid Atlantic 12.8 % 14.4 % 9.0 % North East 11.9 % 12.2 % 8.6 % Mid East 13.9 % 16.4 % 10.2 % South East 12.3 % 12.6 % 8.8 % Year Ended December 31, 2023 2022 2021 Average active communities: Mid Atlantic 166 160 155 North East 36 36 34 Mid East 110 126 129 South East 115 93 106 Total 427 415 424 17 Table of Contents Homebuilding Inventory: As of December 31, 2023 2022 Sold inventory: Mid Atlantic $ 796,591 $ 727,501 North East 220,511 156,798 Mid East 268,269 278,034 South East 412,873 413,576 Total (1) $ 1,698,244 $ 1,575,909 As of December 31, 2023 2022 Unsold lots and housing units inventory: Mid Atlantic $ 116,165 $ 111,816 North East 18,804 23,013 Mid East 20,559 17,044 South East 60,953 31,791 Total (1) $ 216,481 $ 183,664 (1) Total segment inventory differs from consolidated inventory due to certain consolidation adjustments necessary to convert the reportable segments’ results, which are predominantly maintained on a cash basis, to a full accrual basis for external financial statement presentation purposes.
Although we believe that the compensation costs recognized in 2022 are representative of the cumulative ratable amortization of the grant-date fair value of unvested Options and RSUs outstanding, changes to the estimated input values such as expected term and expected volatility and changes to the determination of whether performance condition grants will vest, could produce widely different expense valuations and recognition.
Although we believe that the compensation costs recognized in 2023 are representative of the cumulative ratable amortization of the grant-date fair value of unvested Options and RSUs outstanding, changes to the estimated input values such as expected term and expected volatility and changes to the determination of whether performance condition grants will vest, could produce widely different expense valuations and recognition.
Options and RSUs which are subject to a performance condition are treated as a separate award from the “service-only” Options and RSUs, and compensation expense is recognized when it becomes probable that the stated performance target will be achieved. We calculate the fair value of our Options, which are non-publicly traded, using the Black-Scholes option-pricing model.
Options and RSUs which are subject to a performance condition are treated as a separate award from the “service-only” Options and RSUs, and compensation expense is recognized when it becomes probable that the stated performance target will be achieved. We calculate the fair value of our Options, which are not publicly traded, using the Black-Scholes option-pricing model.
Discussions of 2020 items and year-to-year comparisons between 2021 and 2020 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.
Discussions of 2021 items and year-to-year comparisons between 2022 and 2021 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.
We were in compliance with all covenants under the Senior Notes at December 31, 2022. Credit Agreement We have an unsecured revolving credit agreement (the "Credit Agreement") with a group of lenders which may be used for working capital and general corporate purposes. The Credit Agreement provides for aggregate revolving loan commitments of $300,000 (the "Facility").
We were in compliance with all covenants under the Senior Notes at December 31, 2023. Credit Agreement We have an unsecured revolving credit agreement (the "Credit Agreement") with a group of lenders which may be used for working capital and general corporate purposes. The Credit Agreement provides for aggregate revolving loan commitments of $300,000 (the "Facility").
Insofar as we underwrite our originated loans to the standards and specifications of the ultimate investor, we have no further financial obligations from the issuance of loans, except in certain limited instances where repurchases or early payment default occur.
Insofar as we underwrite our originated loans to the standards and specifications of the ultimate investor, we have no further financial obligations from the issuance of loans, except in certain limited instances where repurchases or early payment defaults occur.
Although we consider the warranty and product liability accrual reflected on the December 31, 2022 consolidated balance sheet to be adequate (see Note 14 to the accompanying consolidated financial statements included herein), there can be no assurance that this accrual will prove to be adequate over time to cover losses due to increased costs for material and labor, the inability or refusal of manufacturers or subcontractors to financially participate in corrective action, unanticipated adverse legal settlements, or other unanticipated changes to the assumptions used to estimate the warranty and product liability accrual.
Although we consider the warranty and product liability accrual reflected on the December 31, 2023 consolidated balance sheet to be adequate (see Note 13 to the accompanying consolidated financial statements included herein), there can be no assurance that this accrual will prove to be adequate over time to cover losses due to increased costs for material and labor, the inability or refusal of manufacturers or subcontractors to financially participate in corrective action, unanticipated adverse legal settlements, or other unanticipated changes to the assumptions used to estimate the warranty and product liability accrual.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. (dollars in thousands, except per share data) Results of Operations This section of this Form 10-K generally discusses 2022 and 2021 items and year-to-year comparisons between 2022 and 2021.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. (dollars in thousands, except per share data) Results of Operations This section of this Form 10-K generally discusses 2023 and 2022 items and year-to-year comparisons between 2023 and 2022.
Insofar as we underwrite our originated loans to those standards, we bear no increased concentration of credit risk from the issuance of loans, except in certain limited instances where repurchases or early payment default occur.
Insofar as we underwrite our originated loans to those standards, we bear no increased concentration of credit risk from the issuance of loans, except in certain limited instances where repurchases or early payment defaults occur.
Liability estimates are determined based on our judgment considering such factors as historical experience, the likely current cost of corrective action, manufacturers’ and subcontractors’ participation in sharing the cost of corrective action, consultations with third party experts such as engineers, and discussions with our General Counsel and outside counsel retained to handle specific product liability cases.
Liability estimates are determined based on our judgment considering such factors as historical experience, the likely current cost of corrective action, manufacturers’ and subcontractors’ participation in sharing the cost of corrective action, consultations with third party experts such as engineers, and 24 Table of Contents discussions with our General Counsel and outside counsel retained to handle specific product liability cases.
For presentation purposes below, the contract land deposit reserve at December 31, 2022 and 2021 has been allocated to the reportable segments for the respective years to show contract land deposits on a net basis.
For presentation purposes below, the contract land deposit reserve at December 31, 2023 and 2022 has been allocated to the reportable segments for the respective years to show contract land deposits on a net basis.
During the four quarters of each of 2022, 2021 and 2020, approximately 4% in 2022, 3% in 2021 and 6% in 2020, of a reporting quarter’s opening backlog cancelled during the quarter. We can provide no assurance that our historical cancellation rates are indicative of the actual cancellation rate that may occur in future years.
During the four quarters of each of 2023, 2022 and 2021, approximately 4% in 2023, 4% in 2022 and 3% in 2021, of a reporting quarter’s opening backlog cancelled during the quarter. We can provide no assurance that our historical cancellation rates are indicative of the actual cancellation rate that may occur in future years.
See further discussion of contract land deposit impairment charges in Note 3 in the accompanying consolidated financial statements. (2) The increase in equity-based compensation expense in 2022 was primarily attributable to a four year block grant of Options and RSUs in May 2022. See further discussion of equity-based compensation in Note 12 in the accompanying consolidated financial statements.
See further discussion of contract land deposit impairment charges in Note 3 in the accompanying consolidated financial statements. (2) The increase in equity-based compensation expense in both 2023 and 2022 was primarily attributable to a four year block grant of Options and RSUs in May 2022.
Our reportable segments' results include the intercompany profits of our production facilities for home packages delivered to our homebuilding divisions. Costs related to homes not yet settled are reversed through the consolidation adjustment and recorded in inventory. These costs are subsequently recorded through the consolidation adjustment when the respective homes are settled.
Our reportable segments' results include the intercompany profits of our production facilities for home packages delivered to our homebuilding divisions. Costs related to homes not yet settled are reversed through the consolidation adjustment and recorded in inventory. These costs are subsequently recorded through the 20 Table of Contents consolidation adjustment when the respective homes are settled.
Impact of Inflation, Changing Prices and Economic Conditions See “Risk Factors” included in Item 1A of this Form 10-K for a description of the impact of inflation, changing prices and economic conditions on our business and our financial results. See also the discussion of the current business environment in the Overview section above.
Impact of Inflation, Changing Prices and Economic Conditions See “Risk Factors” included in Item 1A of this Form 10-K for a description of the impact of inflation, changing prices and economic conditions on our business and our financial results. See also the discussion of the current business environment in the Overview section above. 25 Table of Contents
Repurchase Agreement Our mortgage banking subsidiary, NVRM, has an unsecured revolving mortgage repurchase agreement (the "Repurchase Agreement") which is non-recourse to NVR. The purpose of the Repurchase Agreement is to finance the origination of mortgage loans by NVRM. The Repurchase Agreement provides borrowing capacity up to $150,000, subject to certain sublimits. The Repurchase Agreement expires on July 19, 2023.
Repurchase Agreement Our mortgage banking subsidiary, NVRM, has an unsecured revolving mortgage repurchase agreement (the "Repurchase Agreement") which is non-recourse to NVR. The purpose of the Repurchase Agreement is to finance the origination of mortgage loans by NVRM. The Repurchase Agreement provides borrowing capacity up to $150,000, subject to certain sublimits. The Repurchase Agreement expires on July 17, 2024.
Although we consider the allowance for losses on contract land deposits reflected on the December 31, 2022 consolidated balance sheet to be adequate (see Note 1 to the accompanying consolidated financial statements included herein), there can be no 23 Table of Contents assurance that this allowance will prove to be adequate over time to cover losses due to unanticipated adverse changes in the economy or other events adversely affecting specific markets or the homebuilding industry.
Although we consider the allowance for losses on contract land deposits reflected on the December 31, 2023 consolidated balance sheet to be adequate (see Note 1 to the accompanying consolidated financial statements included herein), there can be no assurance that this allowance will prove to be adequate over time to cover losses due to unanticipated adverse changes in the economy or other events adversely affecting specific markets or the homebuilding industry.
In addition, the Credit Agreement provides for a $100,000 sublimit for the issuance of letters of credit of which there was approximately $11,000 outstanding at December 31, 2022. The Credit Agreement termination date is February 12, 2026. There were no borrowings outstanding under the Credit Agreement as of December 31, 2022.
In addition, the Credit Agreement provides for a $100,000 sublimit for the issuance of letters of credit of which there was approximately $13,000 outstanding at December 31, 2023. The Credit Agreement termination date is February 12, 2026. There were no borrowings outstanding under the Credit Agreement as of December 31, 2023.
Calculated as the total of all cancellations during the period as a percentage of gross sales during the period, our cancellation rate was approximately 14%, 9% and 15% in 2022, 2021, and 2020, respectively.
Calculated as the total of all cancellations during the period as a percentage of gross sales during the period, our cancellation rate was approximately 13%, 14% and 9% in 2023, 2022, and 2021, respectively.
Our analysis is focused on whether we can sell houses at an acceptable profit margin and sales pace in a particular community in the current market with which we are faced.
Our analysis is focused on whether we can sell houses at an acceptable profit margin and sales pace in a particular community in the current market.
The increase in the average settlement price was primarily attributable to a 15% higher average sales price of units in backlog entering 2022 compared to the same period of 2021, coupled with a 10% increase in the average sales price of New Orders during the first six months of 2022 compared to backlog entering 2021.
The increase in the average settlement price was primarily attributable to an 8% higher average sales price of units in backlog entering 2023 compared to backlog entering 2022, coupled with a 10% increase in the average sales price of New Orders during the first six months of 2023 compared to the same period in 2022.
Although we consider the mortgage repurchase reserve reflected on the December 31, 2022 consolidated balance sheet to be adequate (see Note 16 to the accompanying consolidated financial statements included herein), there can be no 24 Table of Contents assurance that this reserve will prove to be adequate over time to cover losses due to unanticipated changes to the assumptions used to estimate the mortgage repurchase reserve.
Although we consider the mortgage repurchase reserve reflected on the December 31, 2023 consolidated balance sheet to be adequate (see Note 15 to the accompanying consolidated financial statements included herein), there can be no assurance that this reserve will prove to be adequate over time to cover losses due to unanticipated changes to the assumptions used to estimate the mortgage repurchase reserve.
Net cash used by financing activities in 2022 was $1,905,136. Cash was used primarily to repurchase 323,652 shares of our common stock at an aggregate purchase price of $1,500,358 under our ongoing common stock repurchase program, discussed above. In addition, cash was used to redeem the outstanding $600,000 principal amount of 3.95% Senior Notes due September 15, 2022.
Cash was used primarily to repurchase 323,652 shares of our common stock at an aggregate purchase price of $1,500,358 under our ongoing common stock repurchase program, discussed above. 23 Table of Contents In addition, cash was used to redeem the outstanding $600,000 principal amount of 3.95% Senior Notes due September 15, 2022.
The net contract land deposit balances below also include approximately $6,900 and $10,100 at December 31, 2022 and 2021, respectively, of letters of credit issued as deposits in lieu of cash.
The net contract land deposit balances below also include approximately $7,700 and $6,900 at December 31, 2023 and 2022, respectively, of letters of credit issued as deposits in lieu of cash.
As of December 31, 2022, we had a total of $900,000 in outstanding Senior Notes which mature in May 2030.
Capital Resources Senior Notes As of December 31, 2023, we had a total of $900,000 in outstanding Senior Notes which mature in May 2030.
Joint Venture Limited Liability Corporations (“JVs”) We had an aggregate investment totaling approximately $27,200 in five JVs, expected to produce approximately 5,300 lots. Of the lots to be produced by the JVs, approximately 4,900 lots were controlled by us and approximately 400 lots were either under contract with unrelated parties or currently not under contract.
Joint Venture Limited Liability Corporations (“JVs”) We had an aggregate investment totaling approximately $29,200 in four JVs, expected to produce approximately 5,200 lots. Of the lots to be produced by the JVs, approximately 4,850 lots were controlled by us and approximately 350 lots were either under contract with unrelated parties or currently not under contract.
We generally expect to assign the raw land contracts to a land developer and simultaneously enter into an LPA with the assignee if the project is determined to be feasible. Key Financial Results Our consolidated revenues for the year ended December 31, 2022 totaled $10,526,434, an increase of 18% from $8,951,025 in 2021.
We generally expect to assign the raw land contracts to a land developer and simultaneously enter into an LPA with the assignee if the project is determined to be feasible. Key Financial Results Our consolidated revenues for the year ended December 31, 2023 totaled $9,518,202, a decrease of 10% from $10,526,434 in 2022.
Net cash provided by operating activities was $1,870,101, due primarily to cash provided by earnings in 2022 and by a decrease in inventory of $159,091 attributable to a decrease in units under construction at December 31, 2022 compared to December 31, 2021. Additionally, cash was provided by net proceeds of $156,756 from mortgage loan activity.
Net cash provided by operating activities was $1,870,101, due primarily to cash provided by earnings in 2022 and by a decrease in inventory of $159,091 attributable to a decrease in units under construction at December 31, 2022 compared to December 31, 2021.
At December 31, 2022, there was no debt outstanding under the Repurchase Agreement and there were no borrowing base limitations. See Note 9 of this Form 10-K for additional disclosures regarding our Senior Notes, Credit Agreement and Repurchase Agreement. Cash Flows For the year ended December 31, 2022, cash, restricted cash and cash equivalents decreased by $62,466.
At December 31, 2023, there was no debt outstanding under the Repurchase Agreement and there were no borrowing base limitations. See Note 8 of this Form 10-K for additional disclosures regarding our Senior Notes, Credit Agreement and Repurchase Agreement. Cash Flows For the year ended December 31, 2023, cash, restricted cash and cash equivalents increased by $640,926.
Cash was primarily used as a result of a decrease in customer deposits of $103,659 attributable to the decrease in our ending backlog year over year. Net cash used in investing activities in 2022 was $27,431. Cash was used primarily for purchases of property, plant and equipment of $18,428 and investments in unconsolidated joint ventures totaling $9,735.
A primary use of cash was the decrease in customer deposits of $103,659 attributable to the decrease in our ending backlog at December 31, 2023. Net cash used in investing activities in 2022 was $27,431. Cash was used primarily for purchases of property, plant and equipment of $18,428 and investments in unconsolidated joint ventures totaling $9,735.
We expect, however, to continue to acquire substantially all of our finished lot inventory using LPAs with forfeitable deposits. 12 Table of Contents As of December 31, 2022, we controlled approximately 131,900 lots as discussed below.
We expect, however, to continue to acquire substantially all of our finished lot inventory using LPAs with forfeitable deposits. 13 Table of Contents As of December 31, 2023, we controlled approximately 141,500 lots as discussed below.
As of December 31, 2022, we had a strong liquidity position with approximately $2,500,000 in cash and cash equivalents, approximately $289,000 in unused committed capacity under our revolving credit facility and $150,000 in unused committed capacity under our revolving mortgage repurchase facility.
As of December 31, 2023, we had a strong liquidity position with approximately $3,100,000 in cash and cash equivalents, approximately $287,000 in unused committed capacity under our revolving credit facility and $150,000 in unused committed capacity under our revolving mortgage repurchase facility.
The corporate capital allocation charge is based on the segment’s monthly average asset balance and is as follows for the years presented: 19 Table of Contents Year Ended December 31, 2022 2021 2020 Corporate capital allocation charge: Mid Atlantic $ 143,251 $ 124,316 $ 124,426 North East 30,623 25,431 22,850 Mid East 51,376 43,686 40,256 South East 77,654 59,354 51,701 Total corporate capital allocation charge $ 302,904 $ 252,787 $ 239,233 (4) The consolidation adjustments and other in each period are primarily driven by changes in units under construction as well as significant fluctuations in lumber prices year over year.
The corporate capital allocation charge is based on the segment’s monthly average asset balance and is as follows for the years presented: Year Ended December 31, 2023 2022 2021 Corporate capital allocation charge: Mid Atlantic $ 135,618 $ 143,251 $ 124,316 North East 33,269 30,623 25,431 Mid East 39,005 51,376 43,686 South East 80,913 77,654 59,354 Total corporate capital allocation charge $ 288,805 $ 302,904 $ 252,787 (4) The consolidation adjustments and other in each period are primarily driven by changes in units under construction as well as significant fluctuations in lumber prices year over year.
If new orders and selling prices of the homebuilding segment decline, NVRM’s operations will also be adversely affected. In addition, NVRM’s operating results may be adversely affected in future periods due to tightening and volatility of the credit markets, changes in investor funding times, increased regulation of mortgage lending practices and increased competition in the mortgage market.
In addition, NVRM’s operating results may be adversely affected in future periods due to tightening and volatility of the credit markets, changes in investor funding times, increased regulation of mortgage lending practices and increased competition in the mortgage market.
The following table summarizes the results of our mortgage banking operations and certain statistical data for each of the last three years: Year Ended December 31, 2022 2021 2020 Loan closing volume: Total principal $ 6,313,416 $ 6,073,934 $ 5,317,811 Loan volume mix: Adjustable rate mortgages 8 % 3 % 2 % Fixed-rate mortgages 92 % 97 % 98 % Operating profit: Segment profit $ 125,756 $ 176,251 $ 143,319 Equity-based compensation expense (3,606) (4,647) (3,246) Mortgage banking income $ 122,150 $ 171,604 $ 140,073 Capture rate: 83 % 89 % 90 % Mortgage banking fees: Net gain on sale of loans $ 152,668 $ 205,582 $ 168,720 Title services 46,793 42,958 38,554 Servicing fees 203 792 760 $ 199,664 $ 249,332 $ 208,034 Loan closing volume in 2022 increased by approximately $239,500, or 4%, from 2021.
The following table summarizes the results of our mortgage banking operations and certain statistical data for each of the last three years: Year Ended December 31, 2023 2022 2021 Loan closing volume: Total principal $ 5,736,532 $ 6,313,416 $ 6,073,934 Loan volume mix: Adjustable rate mortgages 2 % 8 % 3 % Fixed-rate mortgages 98 % 92 % 97 % Operating profit: Segment profit $ 138,313 $ 125,756 $ 176,251 Equity-based compensation expense (5,520) (3,606) (4,647) Mortgage banking income $ 132,793 $ 122,150 $ 171,604 Capture rate: 87 % 83 % 89 % Mortgage banking fees: Net gain on sale of loans $ 162,658 $ 152,668 $ 205,582 Title services 40,754 46,793 42,958 Servicing fees 185 203 792 $ 203,597 $ 199,664 $ 249,332 Loan closing volume in 2023 decreased by approximately $576,900, or 9%, from 2022.
Although we are unable to predict the extent to which this will impact our operational and financial performance, we believe that we are well positioned to take advantage of opportunities that may arise from future economic and homebuilding market volatility due to the strength of our balance sheet and our disciplined lot acquisition strategy.
We believe that we are well positioned to take advantage of opportunities that may arise from future economic and homebuilding market volatility due to the strength of our balance sheet and our disciplined lot acquisition strategy.
The backlog turnover rate is impacted by various factors, including, but not limited to, changes in New Order activity, internal production capacity, external subcontractor capacity, building material availability and other external factors over which we do not exercise control.
See “Risk Factors” in Item 1A of this Form 10-K. 15 Table of Contents The backlog turnover rate is impacted by various factors, including, but not limited to, changes in New Order activity, internal production capacity, external subcontractor capacity, building material availability and other external factors over which we do not exercise control.
Because we sell all of our loans and do not service them, there is often a substantial delay between the time that a loan goes into default and the time that the investor requests us to reimburse them for losses incurred because of the default.
Because we sell all of our loans (a small subset of such loans are serviced for a short period of time prior to sale), there is often a substantial delay between the time that a loan goes into default and the time that the investor requests us to reimburse them for losses incurred because of the default.
Our backlog represents homes sold but not yet settled with our customers. As of December 31, 2022, our backlog decreased on a unit basis by 28% to 9,162 units and on a dollar basis by 25% to $4,325,876 when compared to 12,730 units and $5,782,035, respectively, as of December 31, 2021.
Our backlog represents homes sold but not yet settled with our customers. As of December 31, 2023, our backlog increased on a unit basis by 12% to 10,229 units and on a dollar basis by 10% to $4,756,926 when compared to 9,162 units and $4,325,876, respectively, as of December 31, 2022.
Lot Purchase Agreements ("LPAs") We controlled approximately 125,100 lots under LPAs with third parties through deposits in cash and letters of credit totaling approximately $543,100 and $6,900, respectively. Included in the number of controlled lots are approximately 11,200 lots for which we have recorded a contract land deposit impairment reserve of approximately $57,100 as of December 31, 2022.
Lot Purchase Agreements ("LPAs") We controlled approximately 134,900 lots under LPAs with third parties through deposits in cash and letters of credit totaling approximately $617,000 and $7,700, respectively. Included in the number of controlled lots are approximately 10,700 lots for which we have recorded a contract land deposit impairment reserve of approximately $53,400 as of December 31, 2023.
The decrease in both backlog units and dollars was primarily attributable to a 21% decrease in New Orders during the six-month period ending December 31, 2022 compared to the same period in 2021.
The increase in both backlog units and dollars was primarily attributable to a 16% increase in New Orders during the six-month period ending December 31, 2023 compared to the same period in 2022. Backlog dollars were higher primarily due to the increase in backlog units as of December 31, 2023.
The increase in the average sales price of New Orders was attributable to significant price appreciation resulting from strong demand through the first quarter of 2022. 18 Table of Contents Homebuilding Segment Reconciliations to Consolidated Homebuilding Operations In addition to the corporate capital allocation and contract land deposit impairments discussed above, the other reconciling items between homebuilding segment profit and homebuilding consolidated profit before tax include unallocated corporate overhead (which includes all management incentive compensation), equity-based compensation expense, consolidation adjustments and external corporate interest expense.
Homebuilding Segment Reconciliations to Consolidated Homebuilding Operations In addition to the corporate capital allocation and contract land deposit impairments discussed above, the other reconciling items between homebuilding segment profit and homebuilding consolidated profit before tax include unallocated corporate overhead (which includes all management incentive compensation), equity-based compensation expense, consolidation adjustments and external corporate interest expense.
Seasonality We generally have higher New Order activity in the first half of the year and higher home settlements, revenues and net income in the second half of the year. However, our typical seasonal New Order and settlement trends may be affected by significant changes in market conditions.
Seasonality We generally have higher New Order activity in the first half of the year and higher home settlements, revenues and net income in the second half of the year. However, since 2020 our typical seasonal New Order and settlement trends have been affected by the pandemic, supply chain disruptions and the significant fluctuations in mortgage interest rates.
Our backlog of homes sold but not yet settled with the customer as of December 31, 2022 decreased on a unit basis by 28% to 9,162 units and decreased on a dollar basis by 25% to $4,325,876 when compared to December 31, 2021.
Our backlog of homes sold but not yet settled with the customer as of December 31, 2023 increased on a unit basis by 12% to 10,229 units and increased on a dollar basis by 10% to $4,756,926 when compared to December 31, 2022.
Equity-Based Compensation We recognize equity-based compensation expense within our income statement for all share-based payment arrangements, which include non-qualified stock options to purchase shares of NVR common stock ("Options") and restricted share units ("RSUs").
Equity-Based Compensation We recognize equity-based compensation expense within our income statement for all share-based payment arrangements, which include Options and RSUs.
Our net income for 2022 was $1,725,575, or $491.82 per diluted share, increases of 40% and 53% compared to 2021 net income and diluted earnings per share, respectively. Our homebuilding gross profit margin percentage was 25.8% in 2022 compared to 22.3% in 2021. Settlements for the year ended December 31, 2022 totaled 22,732 units, an increase of 6% from 2021.
Our net income for 2023 was $1,591,611, or $463.31 per diluted share, decreases of 8% and 6% compared to 2022 net income and diluted earnings per share, respectively. Our homebuilding gross profit margin percentage was 24.3% in 2023 compared to 25.8% in 2022. Settlements for the year ended December 31, 2023 totaled 20,662 units, a decrease of 9% from 2022.
Homebuilding Operations The following table summarizes the results of our consolidated homebuilding operations and certain operating activity for each of the last three years: Year Ended December 31, 2022 2021 2020 Financial data: Revenues $ 10,326,770 $ 8,701,693 $ 7,328,889 Gross profit margin $ 2,664,499 $ 1,938,578 $ 1,391,488 Gross profit margin percentage 25.8 % 22.3 % 19.0 % Selling, general and administrative expenses $ 532,353 $ 474,808 $ 431,008 Operating data: New orders (units) 19,164 22,721 23,082 Average new order price $ 462.8 $ 436.1 $ 380.1 Settlements (units) 22,732 21,540 19,766 Average settlement price $ 454.3 $ 403.9 $ 370.8 Backlog (units) 9,162 12,730 11,549 Average backlog price $ 472.2 $ 454.2 $ 396.2 New order cancellation rate 14.2 % 9.2 % 14.9 % 13 Table of Contents Consolidated Homebuilding Homebuilding revenues increased 19% in 2022 compared to 2021, as a result of a 6% increase in the number of units settled and a 12% increase in the average settlement price year over year.
Income before tax from our mortgage banking segment totaled $132,793 in 2023, an increase of 9% when compared to $122,150 in 2022. 14 Table of Contents Homebuilding Operations The following table summarizes the results of our consolidated homebuilding operations and certain operating activity for each of the last three years: Year Ended December 31, 2023 2022 2021 Financial data: Revenues $ 9,314,605 $ 10,326,770 $ 8,701,693 Cost of sales $ 7,051,198 $ 7,662,271 $ 6,763,115 Gross profit margin percentage 24.3 % 25.8 % 22.3 % Selling, general and administrative expenses $ 588,962 $ 532,353 $ 474,808 Operating data: New orders (units) 21,729 19,164 22,721 Average new order price $ 448.4 $ 462.8 $ 436.1 Settlements (units) 20,662 22,732 21,540 Average settlement price $ 450.7 $ 454.3 $ 403.9 Backlog (units) 10,229 9,162 12,730 Average backlog price $ 465.0 $ 472.2 $ 454.2 New order cancellation rate 12.8 % 14.2 % 9.2 % Consolidated Homebuilding Homebuilding revenues decreased 10% in 2023 compared to 2022, as a result of a 9% decrease in the number of units settled and a 1% decrease in the average settlement price.
(3) This item represents the elimination of the corporate capital allocation charge included in the respective homebuilding reportable segments.
See further discussion of equity-based compensation in Note 11 in the accompanying consolidated financial statements. (3) This item represents the elimination of the corporate capital allocation charge included in the respective homebuilding reportable segments.
Year Ended December 31, 2022 2021 2020 Homebuilding consolidated gross profit: Mid Atlantic $ 1,280,596 $ 987,926 $ 690,058 North East 226,666 163,990 102,621 Mid East 476,659 391,405 282,443 South East 751,734 469,520 327,483 Consolidation adjustments and other (71,156) (74,263) (11,117) Homebuilding consolidated gross profit $ 2,664,499 $ 1,938,578 $ 1,391,488 Year Ended December 31, 2022 2021 2020 Homebuilding consolidated profit before taxes: Mid Atlantic $ 994,027 $ 734,941 $ 437,849 North East 157,333 105,432 50,677 Mid East 343,236 271,756 168,605 South East 577,030 329,982 205,029 Reconciling items: Contract land deposit impairment reserve (1) (27,300) 22,163 (24,633) Equity-based compensation expense (2) (78,931) (53,587) (47,548) Corporate capital allocation (3) 302,904 252,787 239,233 Unallocated corporate overhead (129,998) (139,611) (114,921) Consolidation adjustments and other (4) (1,719) (56,511) 54,561 Corporate interest income 32,457 2,840 8,464 Corporate interest expense (37,995) (51,393) (39,356) Reconciling items sub-total 59,418 (23,312) 75,800 Homebuilding consolidated profit before taxes $ 2,131,044 $ 1,418,799 $ 937,960 (1) This item represents changes to the contract land deposit impairment reserve, which are not allocated to the reportable segments.
External corporate interest expense is primarily comprised of interest charges on our 3.00% Senior Notes due 2030, and is not charged to the operating segments because the charges are included in the corporate capital allocation discussed above. 19 Table of Contents Year Ended December 31, 2023 2022 2021 Homebuilding consolidated gross profit: Mid Atlantic $ 1,023,993 $ 1,280,596 $ 987,926 North East 243,634 226,666 163,990 Mid East 372,671 476,659 391,405 South East 629,843 751,734 469,520 Consolidation adjustments and other (6,734) (71,156) (74,263) Homebuilding consolidated gross profit $ 2,263,407 $ 2,664,499 $ 1,938,578 Year Ended December 31, 2023 2022 2021 Homebuilding consolidated profit before taxes: Mid Atlantic $ 745,323 $ 994,027 $ 734,941 North East 169,012 157,333 105,432 Mid East 257,865 343,236 271,756 South East 440,538 577,030 329,982 Reconciling items: Contract land deposit impairment reserve (1) 3,279 (27,300) 22,163 Equity-based compensation expense (2) (93,987) (78,931) (53,587) Corporate capital allocation (3) 288,805 302,904 252,787 Unallocated corporate overhead (175,208) (129,998) (139,611) Consolidation adjustments and other (4) 44,619 (1,719) (56,511) Corporate interest income 142,083 32,457 2,840 Corporate interest expense (26,749) (37,995) (51,393) Reconciling items sub-total 182,842 59,418 (23,312) Homebuilding consolidated profit before taxes $ 1,795,580 $ 2,131,044 $ 1,418,799 (1) This item represents changes to the contract land deposit impairment reserve, which are not allocated to the reportable segments.
In addition to funding growth in our homebuilding and mortgage banking operations, we historically have used a substantial portion of our excess liquidity to repurchase outstanding shares of our common stock in open market and privately negotiated transactions. This ongoing repurchase program assists us in accomplishing our primary objective, creating increases in shareholder value.
See Note 12 of this Form 10-K for additional discussion of our leases. 22 Table of Contents In addition to funding growth in our homebuilding and mortgage banking operations, we historically have used a substantial portion of our excess liquidity to repurchase outstanding shares of our common stock in open market and privately negotiated transactions.
Future interest payments on our remaining outstanding Senior Notes total approximately $199,050, with approximately $27,000 due within the next twelve months. 21 Table of Contents (ii) Payment obligations totaling approximately $348,000 under existing LPAs for deposits to be paid to land developers, assuming that contractual development milestones are met by the developers and we exercise our option to acquire finished lots under those LPAs.
(ii) Payment obligations totaling approximately $391,300 under existing LPAs for deposits to be paid to land developers, assuming that contractual development milestones are met by the developers and we exercise our option to acquire finished lots under those LPAs. We expect to make the majority of these payments within the next three years.
New Orders were flat despite a 7% increase in the average number of active communities year over year due primarily to the impact of the significant increase in mortgage interest rates in 2022 as previously discussed in the "Consolidated Homebuilding" section above.
The increase in New Orders was primarily attributable to a 24% increase in the average number of active communities year over year. In addition, New Orders were impacted favorably by higher absorption rates attributable to improved demand as previously discussed in the "Consolidated Homebuilding" section above.
Mortgage Banking Segment We conduct our mortgage banking activity through NVRM, a wholly owned subsidiary. NVRM focuses almost exclusively on serving the homebuilding segment customer base.
This favorable impact was offset partially by the recognition of previously deferred home package costs that included higher priced lumber. Mortgage Banking Segment We conduct our mortgage banking activity through NVRM, a wholly owned subsidiary. NVRM focuses almost exclusively on serving the homebuilding segment customer base.
Gross profit margins were favorably impacted by the aforementioned 10% increase in the average settlement price, offset partially by higher material and labor costs year over year. Segment New Orders were flat while the average sales price of New Orders increased 6% in 2022 compared to 2021.
Gross profit margins were negatively impacted primarily by higher incentives and closing costs, offset partially by lower lumber costs. Segment New Orders increased 4% while the average sales price of New Orders decreased 1% in 2023 compared to 2022.
In 2022, the consolidation adjustment was favorably impacted by a reduction in the number of units under construction year over year, resulting in a decrease in intercompany profits deferred year over year. This favorable impact was offset by the recognition of previously deferred home package costs that included higher priced lumber.
In 2022, the consolidation adjustment was favorably impacted by a reduction in the number of units and value of the units under construction, resulting in a decrease in intercompany profits deferred. The consolidation adjustment in 2023 was favorably impacted by a reduction in the value of units under construction, resulting in a decrease in intercompany profits deferred.
We believe that all of the loans that we originate are underwritten to the standards and specifications of the ultimate investor to whom we sell our originated loans. We employ a quality control department to ensure that our underwriting controls are effective, and further assess the underwriting function as part of our assessment of internal controls over financial reporting.
We employ a quality control department to ensure that our underwriting controls are effective, and further assess the underwriting function as part of our assessment of internal controls over financial reporting. 21 Table of Contents We maintain a reserve for losses on mortgage loans originated that reflects our judgment of the present loss exposure from the loans that we have originated and sold.
Some of these properties may require rezoning or other approvals to achieve the expected yield. These properties are controlled with cash deposits totaling approximately $10,100 as of December 31, 2022, of which approximately $2,500 is refundable if we do not perform under the contract.
These properties are controlled with cash deposits and letters of credit totaling approximately $13,000 and $100, respectively, as of December 31, 2023, of which approximately $3,800 is refundable if we do not perform under the contract.
Gross profit margins were favorably impacted by the aforementioned 8% increase in the average settlement price attributable to improved pricing power in prior quarters, offset partially by higher material and labor costs year over year. 17 Table of Contents Segment New Orders decreased 11% while the average sales price of New Orders increased 1% in 2022 compared to 2021.
Gross profit margins were negatively impacted primarily by higher costs for labor, certain materials, lots, incentives and closing costs, offset partially by lower lumber costs. 18 Table of Contents Segment New Orders increased 8% while the average sales price of New Orders decreased 2% in 2023 compared to 2022.
The increase was primarily attributable to a 9% increase in the average loan balance for loans closed, driven by a 12% increase in the homebuilding segment’s average home settlement price in 2022 as compared to 2021.
The decrease was primarily attributable to a 7% decrease in the number of loans closed, driven by a 9% decrease in the homebuilding segment’s number of homes settled in 2023 as compared to 2022.
The increase in SG&A expense year over year was attributable primarily to an increase of approximately $24,800 in equity-based compensation due to a four year block grant of Options and RSUs in the second quarter of 2022, as well as, to an increase of approximately $9,900 in selling and marketing costs and an increase of approximately $6,500 in personnel costs attributable to higher average headcount year over year.
In addition, SG&A expense was higher due to an increase in equity-based compensation of approximately $13,800 due to the issuance of a four year block grant of non-qualified stock options to purchase shares of NVR common stock ("Options") and restricted stock units ("RSUs") in the second quarter of 2022.
Land Under Development We owned land with a carrying value of approximately $27,100 that we intend to develop into approximately 1,900 finished lots. We had additional funding commitments of approximately $2,100 under a joint development agreement related to one project, a portion of which we expect will be offset by development credits of approximately $900.
We had additional funding commitments totaling approximately $11,500 to one of the JVs at December 31, 2023. Land Under Development We owned land with a carrying value of approximately $36,900 that we intend to develop into approximately 1,750 finished lots.
The increase in the number of units settled was primarily attributable to a 10% higher backlog unit balance entering 2022 compared to the same period in 2021, offset partially by an 11% decrease in New Orders in the first six months of 2022 compared to the same period in 2021.
The decrease in the number of units settled was primarily attributable to a 28% lower backlog unit balance entering 2023 compared to the same period in 2022, offset partially by a higher backlog turnover rate. The gross profit margin percentage in 2023 decreased to 24.3% from 25.8% in 2022 .
New orders, net of cancellations (“New Orders”) during 2022 were 19,164, a decrease of 16% from 2021 while our average New Order sales price increased 6% to $462.8 in 2022.
New orders, net of cancellations (“New Orders”) during 2023 were 21,729, an increase of 13% from 2022 while our average New Order sales price decreased 3% to $448.4 in 2023.
See “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities” in Item 5 of this Form 10-K for disclosure of amounts repurchased during the fourth quarter of 2022. For the year ended December 31, 2022, we repurchased 323,652 shares of our common stock at an aggregate purchase price of $1,500,358.
This ongoing repurchase program assists us in accomplishing our primary objective, creating increases in shareholder value. See “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities” in Item 5 of this Form 10-K for disclosure of amounts repurchased during the fourth quarter of 2023.
These favorable factors were partially offset by higher material and labor costs year over year. The number of New Orders decreased 16% while the average sales price of New Orders increased 6% in 2022 when compared to 2021.
Gross profit margins were negatively impacted by higher costs for labor, certain materials, incentives and closing costs, offset partially by lower lumber costs. New Orders increased 13% while the average sales price of New Orders decreased 3% in 2023 when compared to 2022.
Other than those units that are cancelled, and subject to potential construction delays due to continued supply chain disruptions, we expect to settle substantially all of our December 31, 2022 backlog during 2023. See “Risk Factors” in Item 1A of this Form 10-K.
Other than those units that are cancelled, we expect to settle substantially all of our December 31, 2023 backlog during 2024.
Overview Business Environment and Current Outlook During the second quarter of 2022, we began to experience a significant decline in the demand for new homes as home affordability was negatively impacted by rising mortgage interest rates and higher home prices.
Overview Business Environment and Current Outlook In 2023, housing demand improved as the rapid rise in mortgage interest rates during 2022 began to stabilize and homebuyers adjusted to the higher mortgage interest rate environment. In addition, new home demand was favorably impacted by a limited supply of inventory in the resale market.
Lots Controlled and Land Deposits: As of December 31, 2022 2021 Total lots controlled: Mid Atlantic 48,200 47,900 North East 11,300 11,900 Mid East 21,800 23,700 South East 50,600 41,400 Total 131,900 124,900 As of December 31, 2022 2021 Contract land deposits, net: Mid Atlantic $ 212,273 $ 257,244 North East 54,558 51,257 Mid East 44,813 52,537 South East 191,332 146,246 Total $ 502,976 $ 507,284 Year Ended December 31, 2022 2021 2020 Contract land deposit impairments (recoveries), net: Mid Atlantic $ 3 $ 16 $ 114 North East 75 — 60 Mid East 369 10 293 South East — — 1,045 Total $ 447 $ 26 $ 1,512 Mid Atlantic The Mid Atlantic segment had an approximate $259,100, or 35%, increase in segment profit in 2022 compared to 2021, driven by improved gross profit margins and an increase in segment revenues of approximately $716,500, or 18%, year over year.
Lots Controlled and Land Deposits: As of December 31, 2023 2022 Total lots controlled: Mid Atlantic 46,000 48,200 North East 14,300 11,300 Mid East 22,200 21,800 South East 59,000 50,600 Total 141,500 131,900 As of December 31, 2023 2022 Contract land deposits, net: Mid Atlantic $ 222,922 $ 212,273 North East 61,182 54,558 Mid East 46,804 44,813 South East 253,292 191,332 Total $ 584,200 $ 502,976 Mid Atlantic The Mid Atlantic segment had an approximate $248,700, or 25%, decrease in segment profit in 2023 compared to 2022, driven by a decrease in segment revenues of approximately $576,400, or 12%, coupled with a decrease in gross profit margins.
Segment New Orders decreased 22% while the average sales price of New Orders increased 8% in 2022 compared to 2021. As previously discussed in the "Consolidated Homebuilding" section above, New Orders in 2022 were negatively impacted by the significant increase in mortgage interest rates.
The segment’s gross profit margin percentage remained relatively flat. Segment New Orders and the average sales price of New Orders increased 12% and 9%, respectively, in 2023 compared to 2022. New Orders were impacted by higher absorption rates attributable to improved demand as previously discussed in the "Consolidated Homebuilding" section above.
Cash was provided from stock option exercise proceeds totaling $142,370. At December 31, 2022 and 2021, the homebuilding segment had restricted cash of $48,455 and $60,730, respectively. Restricted cash in each year was attributable to customer deposits for certain home sales.
Cash was provided from stock option exercise proceeds totaling $196,717. At December 31, 2023 and 2022, restricted cash totaled $52,550 and $51,429, respectively. Restricted cash was attributable to customer deposits for certain home sales and cash collected from customers for loans in process and closed mortgage loans held for sale.
See Notes 3, 4 and 5 to the consolidated financial statements included herein for additional information regarding LPAs, JVs and land under development, respectively. Raw Land Purchase Agreements In addition to the lots we currently control as discussed above, we have certain properties under contract with land owners that are expected to yield approximately 19,300 lots.
Raw Land Purchase Agreements In addition to the lots we currently control as discussed above, we have certain properties under contract with land owners that are expected to yield approximately 22,700 lots. Some of these properties may require rezoning or other approvals to achieve the expected yield.
The increase in segment profit was driven by an increase of segment revenues of approximately $255,500, or 14%, year over year and improved gross profit margins. Segment revenues increased due to increases in the number of units settled and the average settlement price of 2% and 11%, respectively, year over year.
The decrease in segment profit was driven by a decrease in segment revenues of approximately $423,700, or 20%, coupled with a decrease in gross profit margins. Segment revenues decreased due to a 20% decrease in settlements year over year, offset partially by a 1% increase in the average settlement price.
Selling, general and administrative ("SG&A") expenses in 2022 increased by $57,545 compared to 2021, but as a percentage of revenue decreased to 5.2% in 2022 from 5.5% in 2021 due to improved leveraging of SG&A costs.
Selling, general and administrative ("SG&A") expenses in 2023 increased by approximately $56,600 compared to 2022, and as a percentage of revenue increased to 6.3% in 2023 from 5.2% in 2022. The increase in SG&A expense was due primarily to an increase of approximately $42,400 in personnel costs attributable in part to higher earned incentive compensation.
The increase in the average sales price of New Orders was attributable to significant price appreciation resulting from strong demand through the first quarter of 2022. Mid East The Mid East segment had an approximate $71,500, or 26%, increase in segment profit in 2022 compared to 2021.
The increase in the average sales price of New Orders was attributable to a shift in New Orders to higher priced markets within the segment, coupled with a shift to higher priced communities in certain markets. Mid East The Mid East segment had an approximate $85,400, or 25%, decrease in segment profit in 2023 compared to 2022.
Segment revenues increased due primarily to a 9% increase in the number of units settled and an 8% increase in the average settlement price year over year.
Segment revenues decreased due primarily to an 11% decrease in the number of units settled and a 1% decrease in the average settlement price. The decrease in settlements was primarily attributable to a 25% lower backlog unit balance entering 2023 compared to backlog entering 2022.
Our material contractual obligations primarily consist of the following: (i) Payments due to service our debt and interest on that debt. In June 2022, we used cash holdings to redeem $600,000 in outstanding 3.95% Senior Notes that were set to mature in September 2022. The Senior Notes were redeemed at par, plus accrued interest.
Our material contractual obligations primarily consist of the following: (i) Payments due to service our debt and interest on that debt. Our current outstanding Senior Notes total $900,000 and mature in May 2030. Future interest payments on our current outstanding Senior Notes total approximately $172,050, with $27,000 due within the next twelve months.
The increase in the average settlement price was primarily attributable to a 14% higher average sales price of units in backlog entering 2022 compared to backlog entering 2021. The segment’s gross profit margin percentage increased to 25.4% in 2022 from 21.4% in 2021.
The average settlement price was negatively impacted by a 14% decline in the average sales price of New Orders during the first six months of 2023 compared to the same period in 2022. The segment’s gross profit margin percentage decreased to 25.7% in 2023 from 29.8% in 2022.
We maintain a reserve for losses on mortgage loans originated that reflects our judgment of the present loss exposure from the loans that we have originated and sold. At December 31, 2022 and 2021, we had repurchase reserves of approximately $21,800 and $21,400, respectively. NVRM is dependent on our homebuilding operation’s customers for business.
At December 31, 2023 and 2022, we had repurchase reserves of approximately $18,600 and $21,800, respectively. NVRM is dependent on our homebuilding operation’s customers for business. If new orders and selling prices of the homebuilding segment decline, NVRM’s operations will also be adversely affected.
Net cash used in investing activities in 2021 was $18,179. Cash was used primarily for purchases of property, plant and equipment. Net cash used by financing activities in 2021 was $1,397,012. Cash was used primarily to repurchase shares of our common stock under our ongoing common stock repurchase program as discussed above.
Net cash used in investing activities in 2023 was $24,100. Cash was used primarily for purchases of property, plant and equipment of $24,877. Net cash used by financing activities in 2023 was $832,967.
We expect to make the majority of these payments within the next three years. (iii) Obligations under operating and finance leases related primarily to office space and our production facilities. See Note 13 of this Form 10-K for additional discussion of our leases.
(iii) Obligations under operating and finance leases related primarily to office space and our production facilities.

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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 changeBecause we sell all of the mortgage loans we originate into the secondary markets, we have made the assumption that the portfolio of mortgage loans held for sale will mature in the first year. 25 Table of Contents Maturities (000's) 2023 2024 2025 2026 2027 Thereafter Total Fair Value Mortgage banking segment Interest rate sensitive assets: Mortgage loans held for sale $ 319,481 — — — — — $ 319,481 $ 316,806 Average interest rate 5.6 % — — — — — 5.6 % Other: Forward trades of mortgage-backed securities (a) $ (16,060) — — — — — $ (16,060) $ (16,060) Forward loan commitments (a) $ 11,300 — — — — — $ 11,300 $ 11,300 Homebuilding segment Interest rate sensitive assets: Interest-bearing deposits $ 2,453,692 — — — — — $ 2,453,692 $ 2,453,692 Average interest rate 4.4 % — — — — — 4.4 % Interest rate sensitive liabilities: Fixed rate obligations $ — — — — $ 900,000 $ 900,000 $ 788,166 Average interest rate — % — — — 3.0 % 3.0 % (a) Represents the fair value recorded pursuant to ASC 815, Derivatives and Hedging . 26 Table of Contents Item 8.
Biggest changeMaturities (000's) 2024 2025 2026 2027 2028 Thereafter Total Fair Value Mortgage banking segment Interest rate sensitive assets: Mortgage loans held for sale $ 216,211 — — — — — $ 216,211 $ 222,560 Average interest rate 6.5 % — — — — — 6.5 % Other: Forward trades of mortgage-backed securities (a) $ (18,297) — — — — — $ (18,297) $ (18,297) Forward loan commitments (a) $ 60,982 — — — — — $ 60,982 $ 60,982 Homebuilding segment Interest rate sensitive assets: Interest-bearing deposits $ 3,085,220 — — — — — $ 3,085,220 $ 3,085,220 Average interest rate 5.3 % — — — — — 5.3 % Interest rate sensitive liabilities: Fixed rate obligations $ — — — — — $ 900,000 $ 900,000 $ 803,646 Average interest rate — % — — — — 3.0 % 3.0 % (a) Represents the fair value recorded pursuant to ASC 815, Derivatives and Hedging . 26 Table of Contents Item 8.
See Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations and Note 9 to the accompanying consolidated financial statements included herein for further discussion of these debt instruments. Our mortgage banking segment is exposed to interest rate risk as it relates to its lending activities, including originating mortgage loans and providing rate lock commitments to borrowers.
See Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations and Note 8 to the accompanying consolidated financial statements included herein for further discussion of these debt instruments. Our mortgage banking segment is exposed to interest rate risk as it relates to its lending activities, including originating mortgage loans and providing rate lock commitments to borrowers.
For variable rate debt, interest rate changes generally will not affect the fair value of the variable debt instruments but will affect earnings and cash flow. At December 31, 2022, there was no debt outstanding under our credit facility or loan repurchase facility.
For variable rate debt, interest rate changes generally will not affect the fair value of the variable debt instruments but will affect earnings and cash flow. At December 31, 2023, there was no debt outstanding under our credit facility or loan repurchase facility.
The following table represents the contractual balances of our on-balance sheet financial instruments at the expected maturity dates, as well as the fair values of those on-balance sheet financial instruments at December 31, 2022.
The following table represents the contractual balances of our on-balance sheet financial instruments at the expected maturity dates, as well as the fair values of those on-balance sheet financial instruments at December 31, 2023.
We do not engage in speculative or trading derivative activities. All of the mortgage banking segment’s loan portfolio is held for sale and subject to forward sale commitments. See Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations and Note 15 to the accompanying consolidated financial statements included herein for further discussion of these items.
We do not engage in speculative derivative activities. All of the mortgage banking segment’s loan portfolio is held for sale and subject to forward sale commitments. See Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations and Note 14 to the accompanying consolidated financial statements included herein for further discussion of these items.
Added
Because we sell all of the mortgage loans we originate into the secondary markets, we have made the assumption that the portfolio of mortgage loans held for sale will mature in the first year.

Other NVR 10-K year-over-year comparisons