Century Communities (CCS) Q3 2026 earnings review
Century Communities opens record neighborhoods, but high rates cut sales
Century Communities, one of the largest US homebuilders, saw higher mortgage rates choke off its fledgling sales recovery. Third-quarter deliveries missed the company's plan and home sales revenue fell 12% from a year ago as average home prices dropped. Executive chairman Dale Francescon pointed to lower construction costs and a record community count, but a $20 million inventory write-down still pushed profit down by two-thirds.
| Home sales revenue | $842.5M -11.8% from a year ago |
|---|---|
| Profit per share, excluding one-offs | $1.01 -33.6% from a year ago |
| Homebuilding gross margin, excluding one-offs | 19.3% 20.0% last quarter |
| Full-year home sales outlook | Cut $300M middle of the range: -14.7% from 2025 |
⚖️ Verdict: 🔴 Bearish
The story got worse because last quarter's upturn in buyer orders reversed and finance chief Scott Dixon cut the full-year outlook. By our math, stripping out the newly acquired HistoryMaker business leaves fourth-quarter deliveries from businesses owned a year ago down 20% from last year. One positive: strong demand in Texas and a record 343 open neighborhoods give the builder more places to sell once rates ease.
The question now is whether lower construction costs and the expanded Texas footprint can keep gross margin excluding one-offs near 19%, or whether rising mortgage rates will force deeper price discounts. The conference call's disclosure on third-quarter buyer incentives and fourth-quarter margin will tell.
🐂 Bull Case
Active Communities Reached a Record and Texas Grew
Century Communities wants to grow by opening more neighborhoods, which it calls selling communities, in affordable markets. That expansion continued in the third quarter even as buyer demand slowed across the country. The homebuilder ended September with a record 343 open neighborhoods, up 6.9% from a year ago and 3.9% from the second quarter. Texas led that growth, with active neighborhoods jumping 17.8% from last year to 86.
More open locations allowed Texas and Century Complete, the group's lowest-priced brand aimed at entry-level buyers, to win more buyer contracts while other regions shrank. Net new home contracts in Texas rose 21.0% from a year ago to 524 homes, and deliveries there climbed 17.4%. Century Complete grew buyer contracts 3.7% to 840 homes and increased deliveries 11.4% to 928 homes, at an average price of $252,000.
What to watch: monthly sales per neighborhood in the fourth quarter. A rebound above the 2.3 pace implied by our math this quarter would show the record community count can drive volume growth without deeper price cuts.
Lower Building Costs Helped Lift Book Value
Management has worked all year to lower the cost of building each house so it can afford buyer discounts. Executive chairman Dale Francescon said "Our direct construction costs, finished lot costs, and fixed G&A excluding advertising all decreased vs. the prior quarter". Keeping overhead tight held selling, general, and administrative expenses (advertising and corporate overhead) to $118.8 million, down nearly 1% from a year ago.
Those cost savings kept the builder profitable and lifted its book value per share, the net accounting value of its assets per share, to a record $90.61. Share buybacks also shrank the diluted share count by 5.1% from a year ago to 28.5 million shares, which increases the assets backing each remaining share.
What to watch: the exact percentage change in direct construction costs on the conference call. A second straight quarter of lower building costs would show that supplier requests for higher fuel and lumber prices have not hurt margins.
🐻 Bear Case
Higher Mortgage Rates Reversed the Order Recovery
Last quarter, buyer orders and backlog turned up from a year earlier, raising hopes that sales volume had turned a corner. In the third quarter, higher borrowing costs ended that recovery. Executive chairman Dale Francescon said the period brought "a significant rise in interest rates, continued inflation and macroeconomic uncertainty, which weighed heavily on consumer confidence in general and first-time homebuyers in particular".
- Net new home contracts: 2,284 homes, down 4.3% from a year ago and down 12.7% from last quarter
- Monthly orders per average community: 2.3 homes, down about 8% from 2.5 a year ago by our math
- Regional order drops from a year ago: Southeast down 22.2%, West down 20.5%, Mountain down 16.3%
- Homes delivered: 2,442, missing the company's 2,500 to 2,700 plan
Because Century sells and closes more than half of its homes within the same quarter, weaker buyer traffic immediately reduced closings and forced finance chief Scott Dixon to cut the full-year outlook. By our math, stripping out 100 homes from the newly acquired HistoryMaker business leaves fourth-quarter deliveries from businesses owned a year ago down 19.5% from last year at the middle of the range.
What to watch: fourth-quarter deliveries against the implied 2,389 to 2,689 range. Falling near the bottom of that reduced range would show that high mortgage rates are still slowing quick move-in sales.
Write-Downs and Price Cuts Squeezed Gross Margin
Dale Francescon highlighted operational progress and lower construction costs from the second quarter. However, price cuts, regional mix shifts, and land write-downs outweighed those savings and pushed profitability down. The average sales price of a delivered home fell 10.2% from a year ago, or $39,200, to $345,000, and dropped 3.7% from the second quarter as cheaper Texas and Century Complete homes made up a larger share of closings.
Cost of home sales (the cost of land and building the houses) rose 2.9 percentage points of home sales revenue from a year ago to 85.0%. That jump included a $19.6 million inventory impairment, a write-down on communities where home prices no longer cover costs, which took 2.3 percentage points off the margin. Even excluding one-offs and interest, homebuilding gross margin fell 0.7 percentage points from last quarter to 19.3%, while selling and overhead costs rose 1.6 percentage points from a year ago to 14.1% of home sales revenue.
What to watch: fourth-quarter inventory impairments and gross margin excluding one-offs. Another margin drop below 19.3% would mean buyer incentives are rising faster than construction costs are falling.
Credit Line Borrowings Rose as Buybacks Slowed
Century has built its investment case on returning cash by buying back shares well below book value while keeping debt conservative. As home closings slowed this year and inventory rose to $3.74 billion, the builder leaned heavily on its revolving credit line to fund operations. Borrowings on the credit line reached $456.0 million at the end of September, up from $329.6 million in June and $51.5 million at the end of 2025.
That borrowing pushed net homebuilding debt to 34.9% of net capital, up 9.0 percentage points since December and 3.5 percentage points higher than a year ago. With debt rising and the HistoryMaker purchase closing in early October, the company slowed share repurchases to $11.6 million in the third quarter, down from $19.6 million in the second quarter and $40.0 million in the first. Century also expanded its credit line capacity to $1.2 billion.
What to watch: credit line borrowings at year-end after fourth-quarter closings and the HistoryMaker payment. A net debt ratio staying near 35% would limit how much cash the builder can spend on share buybacks.
Risks this quarter didn't answer
Four standing concerns from prior quarters cannot be measured from the earnings release alone because the numbers live in the conference call or the quarterly filing.
- Buyer incentive levels: not quantified in the release after averaging 12% of home prices in the second quarter; the conference call will show whether higher mortgage rates forced bigger discounts.
- Adjustable-rate mortgage share and buyer credit: the release gives no update on how many buyers used adjustable-rate loans (35% in the second quarter) or whether cancellations rose.
- Supplier cost requests: management said direct construction costs fell from the second quarter, but did not give the percentage or say whether fuel, asphalt, and lumber requests are showing up in new starts.
- Energy tax credit expiration: the third-quarter reported tax rate fell to 20.3%, while the nine-month rate excluding one-offs was 25.5%; the filing will detail the effect of losing federal Section 45L credits.
👓 Other Themes
HistoryMaker Purchase Triples the Dallas Footprint
On October 7, Century bought the assets of HistoryMaker Homes, a builder in Dallas-Fort Worth, "in support of our strategy of deepening our share in existing markets to drive improved margins and returns", chief executive Rob Francescon said. The deal will "increase Century's Dallas division's active communities from 12 to 41 communities" and "triple deliveries from 211 to 669 homes on a trailing-twelve-month basis". Management did not disclose the price and included 100 HistoryMaker deliveries in its fourth-quarter outlook.
💲 Other KPIs
Backlog — homes under contract that have not yet closed — slipped 0.7% from a year ago after rising 0.7% in the second quarter. Unit backlog fell 1.0% from last year to 1,106 homes as deliveries exceeded new orders by 158 homes. Average backlog price held steady at $374,300, up 0.3% from a year ago.
Pre-tax profit from mortgage, title, and insurance services more than doubled from $3.0 million a year ago as revenues rose 9.3% to $21.2 million and segment costs fell 8.6%. However, profit dropped 37.5% from $9.9 million in the second quarter, which had benefited from accounting gains on the locked loan pipeline.
The total land pipeline — lots the builder owns plus lots it controls through option contracts — edged down 2.0% from 62,239 a year ago and rose 1.4% from the second quarter. Century continued shifting risk off its balance sheet: owned lots fell 8.3% from last year to 33,473, while controlled lots rose 6.8% to 27,496, or 45.1% of the total.
🔮 Guidance
Cut. The middle of the range dropped by 625 homes to 9,500, or down 8.5% from last year, and now includes 100 fourth-quarter closings from HistoryMaker. By our math, excluding HistoryMaker leaves fourth-quarter deliveries from businesses owned a year ago at 2,439 homes at the middle of the range, down 19.5% from a year ago. Management has now lowered its full-year delivery outlook five times across the last seven quarters.
Cut. The middle of the range fell by $300 million to $3.35 billion, pointing to a 14.7% drop from 2025. By our math, after $2.47 billion in the first nine months, the plan leaves $876 million for the fourth quarter at the middle of the range, down 21.2% from a year ago. Both lower unit deliveries and a lower average home price drove the reduction.
❓ Key Questions
What did Century pay for HistoryMaker Homes?
The release states that HistoryMaker adds 29 active Dallas neighborhoods and 100 fourth-quarter deliveries, but omits the purchase price and how much land debt or credit line borrowing it took to close the deal on October 7.
Which regions caused the $19.6 million inventory write-down?
Inventory impairments jumped from zero in the first half of the year to $19.6 million in the third quarter, taking 2.3 percentage points off gross margin. Investors need to know how many communities were written down and whether more are close to impairment.
How much did buyer incentives rise on new orders?
In the second quarter, incentives averaged 12% of home prices and management planned for them to stay flat in the third quarter. With mortgage rates rising and gross margin excluding one-offs falling 0.7 percentage points, the call needs to quantify third-quarter incentives.
What share of buyers used adjustable-rate mortgages?
Adjustable-rate loans reached nearly 35% of mortgage volume in the second quarter, prompting a new risk warning in the last filing about buyer cancellations and foreclosures. Management did not disclose the third-quarter share or cancellation rate in the release.