I read a really interesting piece from HousingWire about M/I Homes that challenges how we typically think about the homebuilding business. According to their reporting, M/I is making a bold move right now by building a lot of spec homes before buyers are even lined up. In the second quarter of this year, about seventy-eight percent of their sales came from completed or nearly completed specs, and they grew their total sales by fifteen percent year over year. The trade-off is that their gross profit margin slipped from around twenty-five percent down to twenty-two percent. On the surface, that looks like they're just throwing incentives at buyers to move homes faster, but there's more to the strategy than that.
What HousingWire points out is that M/I is essentially shortening the time between when a buyer makes a decision and when they get the keys to their home. In a shaky market where people are nervous about rates and their financial situation, having a completed home ready to go in weeks rather than waiting months can be a real advantage. A buyer who won't commit to something that won't be done for nine months might be comfortable closing on a home they can see and touch today. That's a different kind of value proposition.
The math on this actually makes sense. The reporting walks through how, even though their margin percentage went down, the actual dollars of profit can still grow because they're selling more homes overall. A fifteen percent increase in sales volume can more than offset a few percentage points of margin loss. And that's not even counting the benefits of turning inventory faster, deploying capital more efficiently, and keeping their building teams steady and productive while competitors are scaling back.
But here's where HousingWire identifies the real question. M/I is getting these sales partly through financing incentives and price concessions. That works for now, but it's not a sustainable long-term answer because it trains customers to chase the deals rather than value the homes. The next evolution has to be building the product and controlling the land in a way that makes the homes attractive and affordable on their own merits, where incentives are just the final piece instead of the main engine.
What I am seeing locally is that this spec versus custom debate matters enormously for the Bay Area and East Bay, where our market has been so sensitive to rate movements and affordability. The builders who can deliver a completed home to an entry-level or first-time buyer without dragging out the process for months might actually capture meaningful share. That speed-to-close advantage is real when people are anxious. The trick, like M/I is discovering, is making sure you're not just buying those sales through unsustainable giveaways.
