M/I Homes (MHO) Q3 2026 earnings review
M/I Homes' profit drops by a third, and orders stop growing
M/I Homes sold fewer homes at lower prices and kept less of each sale, so profit fell much faster than revenue. Revenue slipped 5% to $1.1 billion, and profit per share before write-downs fell by about a third. Orders dipped after three quarters of growth, and chief executive Robert Schottenstein blamed higher mortgage rates and weaker demand. The company gave no view on the fourth quarter.
| Revenue | $1.08B −5% from a year ago |
|---|---|
| Profit per share, before inventory write-downs | $2.70 $4.14 a year ago |
| Gross margin, before inventory write-downs | 21.3% 24.5% a year ago |
| Outlook | None given the company issues no revenue or profit targets |
⚖️ Verdict: 🔴 Bearish
The story got worse because the margin fell further instead of finding a bottom, and the order recovery stalled in the same quarter. Overhead also took a bigger share of a smaller revenue. The good news: record equity, no bank borrowing and another $50 million of buybacks, and the Midwest business keeps adding land while the South shrinks.
The question now is whether this quarter is a pause or the start of a second leg down. One view: orders dipped only against a record spring, and the Midwest pipeline carries the builder until mortgage rates ease. The other: each order now costs more in rate buydowns, so every sale brings a thinner margin. Fourth-quarter orders against 1,921 a year ago, and the margin before write-downs, will tell.
🐂 Bull Case
M/I Homes Keeps Adding Land in the Midwest
M/I Homes reports two regions. Northern covers its Midwest markets such as Columbus, Chicago and Minneapolis; Southern covers Florida, Texas, the Carolinas and Tennessee. For more than a year the builder has been signing up new lots in the north while letting its southern pipeline run off, and that continued this quarter.
- Northern lots under contract, land it has agreed to buy but not yet paid for: 13,396, up 24% from a year ago
- Southern lots under contract: 12,113, down 21%
- Northern orders: up 1% from a year ago
- Average price of a northern home in backlog: $577,000, up 2%
This matters because last quarter the company reported a higher gross margin in the north than in the south, so every lot it adds there replaces a weaker southern one. But Northern brings in only 40% of orders, so a stronger north cannot offset a weaker south on its own, and new lots take years to become homes.
What to watch: the Northern lot count in the land position table next quarter. A further rise while Southern lots fall would mean the builder is moving its growth to the Midwest for good.
Orders Slipped 2% After Three Quarters of Growth
New contracts are the orders a builder signs in a quarter, and they lead revenue by a few months. M/I Homes had grown orders for three straight quarters, with a record spring. This quarter it signed 1,861, 2% fewer than a year ago, against a weak base: last year's third quarter was itself down 6%.
- Orders in the first nine months: 6,598, up 5% from a year ago
- Cancellation rate: 12%, up from 8% last quarter and level with a year ago
- Sales per community per month: about 2.6 by our math, down from 3.4 last quarter
- Average community count: 240, up from 234 a year ago
So the homebuilder sold from more communities but sold less in each, which fits the "weaker demand" chief executive Robert Schottenstein described. One quarter does not settle it, but the record spring no longer looks like the start of a trend.
What to watch: fourth-quarter orders against 1,921 a year ago, reported in late January. A second decline would mean the spring recovery has run its course.
Record Equity and Another $50 Million Buyback
M/I Homes buys back its own shares at the same pace whatever the quarter brings. It spent another $50 million in the third quarter, as it has every quarter for more than two years, and chief executive Robert Schottenstein described its financial condition as "excellent".
- Shareholders' equity: record $3.25 billion, up 3% from a year ago
- Book value per share: $129.94, up 8%
- Diluted share count: 25.9 million, down 5% from a year ago
- Borrowings on the $900 million credit line: none; homebuilding debt is 18% of capital, unchanged
The buyback matters because it softens the fall in profit per share, and the builder does it without borrowing. One caution: cash fell to $621 million from $734 million a year ago. Operations used cash in the quarter because it kept buying land while deliveries fell, so it now carries net debt of 2% of capital, against a net cash position a year ago.
What to watch: the buyback amount in the fourth-quarter release. A move above $50 million would mean the board is spending the cash pile rather than holding it for land.
🐻 Bear Case
Each Home Sale Earned Less Than a Year Ago
Chief executive Robert Schottenstein said the company "produced fairly solid results". The margin numbers say otherwise. Gross margin, the share of revenue left after the cost of land and building, fell to 20.9%. Before a $4.7 million write-down of land and homes it was 21.3%. A year ago the same measure stood at 24.5%.
Cost of sales, the line for land and construction, took 78.7% of revenue, up from 75.5% a year ago. Prices went the other way, with the average closing price down 4%. So M/I Homes paid more to build each home and sold it for less, and the margin took both hits at once.
Operating income fell 38% on revenue down 5%, because overhead did not shrink with sales. The margin before write-downs now sits below every quarter of 2025, even the fourth, when the builder took $40 million of write-downs and still reported 22.6% before them. Write-downs have now appeared in five of the last six quarters.
What to watch: the gross margin before write-downs in the fourth quarter, reported in late January. Another fall would mean the money spent lowering buyers' mortgage rates, plus land costs, is still rising faster than prices, and the margin has not found a bottom.
The Southern Business Is Shrinking on Every Measure
The Southern region, M/I Homes' operations in Florida, Texas, the Carolinas and Tennessee, brings in about 60% of its orders. Management has named Tampa, Sarasota and Austin as weak markets in earlier quarters, and this quarter the whole region moved backwards while the north held level.
- Southern orders: 1,115, down 4% from a year ago
- Southern deliveries: 1,292, down 5%
- Southern backlog value: $508 million, down 16%
- Average price of a southern home in backlog: $501,000, down 8%
The price figure is the one to worry about, because a falling backlog price means the builder is accepting less, or selling smaller homes, to keep selling at all. Southern backlog value has been below the year before in every quarter of the past year, and the gap widened again after narrowing in the spring.
What to watch: Southern backlog value against $514 million at the end of last year. A further double-digit fall would mean the weakness is spreading beyond the three markets management has named.
Overhead Keeps Growing While Sales Shrink
General and administrative expense, the cost of head office, division staff and systems, rose 8% to $76.6 million while revenue fell. Selling expense, the cost of sales staff and model homes, was level in dollars. Together they took 13.1% of revenue, against 11.9% a year ago.
This matters because overhead is the one cost the company controls. It has climbed from 11.6% of revenue at the end of last year to 13.1% now, as the builder opened communities and kept staff for a recovery that has not arrived. By our math each point of overhead costs about $11 million a quarter in pre-tax profit.
What to watch: general and administrative expense in dollars in the fourth quarter. A figure above this quarter's on lower revenue would mean the cost base is set for growth the market is not delivering.
Community Count Target Needs a Big Fourth Quarter
M/I Homes gives no revenue or profit outlook, but it does set one target each year: the average number of communities it sells from. Three months ago the company said the 2026 average would be about 5% above 2025, which by our math means about 240. Communities matter because orders equal communities times the sales pace in each.
The third-quarter average was 240, and the nine-month average 236. To reach the full-year target the fourth quarter therefore has to average about 254, by our math. The builder ended September with 246 communities, so it would need to open many more than it closes in the next three months. The release does not repeat the target.
What to watch: the average community count for the fourth quarter and the full year, in the January release. A full-year average near 236 would mean the target slipped by a year, and that the 2027 order base is smaller than planned.
Risks This Quarter Didn't Answer
Five standing concerns got no new numbers in the press release, because the figures that would test them live in the quarterly filing or on the earnings call, neither of which is in these materials. Each one could move the case on its own.
- Unsold homes under construction: the count and dollar value will show whether the builder is carrying a large stock of speculative homes into a weaker market.
- Mortgage rate buydowns and incentives as a share of housing revenue: a rise above last quarter's 6.2% would say the margin fall is self-inflicted.
- Florida warranty claims: $3.4 million was still accrued at mid-year for attic ventilation problems in two communities; the warranty note will show whether that figure has grown.
- Mortgage warehouse lines: $252 million of financial services borrowings were due to expire on 20 October; the debt note will show whether the lender renewed them.
- The margin gap between speculative and built-to-order homes: management has declined to give it in every recent quarter.
👓 Other Themes
Schottenstein Says the Market Got Harder This Quarter
"Our third quarter results reflect increasingly difficult market conditions, including higher mortgage interest rates, weaker demand and growing economic uncertainty," chief executive Robert Schottenstein said. Deliveries fell 2% even though the builder sold from more communities than a year ago. Three months ago Schottenstein rated housing conditions as above average. He still cites "the long-term fundamentals of the housing industry", but offers no view on the fourth quarter.
💲 Other KPIs
Backlog, the homes customers have signed for but not yet received, is worth 9% less than a year ago, with 7% fewer homes. The gap to last year had narrowed for four straight quarters, then widened slightly this quarter. The average price in backlog slipped to $539,000 from $553,000.
Inventory, the land and homes on the balance sheet, grew 5.5% from a year ago while revenue fell. Land and lot purchases rose 17% to $135 million. Development spending fell 15%. The builder is still buying land faster than it sells homes, which is why operations used cash this quarter, and inventory growth has slowed from 9% a year ago.
The mortgage and title arm earned 19% less than a year ago, on revenue down 5.5%. Its profit has been level or lower than the year before in each of the last three quarters as fewer homes closed. A year ago it was growing while homebuilding shrank, so it no longer cushions the group.
❓ Key Questions
How many communities will open in the fourth quarter?
The full-year community count target needs a fourth-quarter average near 254 by our math, against 246 communities at the end of September. The release neither repeats the target nor says how many openings are scheduled.
What share of housing revenue went to incentives?
Last quarter mortgage buydowns and incentives took 6.2% of housing revenue, up from 4.2% a year earlier. The gross margin fell again; the split between buydown cost, lot cost and mix decides whether the fall is temporary.
Did the lenders renew the October mortgage lines?
About $252 million of financial services borrowings were due to expire on 20 October. At mid-year the company said it expected an extension but could give no assurance. The release, dated the next day, does not mention the outcome.
How large is the Florida warranty exposure now?
At mid-year $3.4 million remained accrued for attic ventilation problems in two Florida communities, after $5.5 million of charges in the first half. Such claims tend to grow after the first estimate.
What does management expect for fourth-quarter deliveries?
The company gives no revenue, delivery or margin outlook. With backlog worth 9% less than a year ago and the sales pace slowing, readers have no company figure to set against the fourth quarter.