Meritage Homes Reports 15% Decline in Third-Quarter Orders
News related to:Meritage Homes Corporation · 3 min read
SCOTTSDALE, Ariz., Oct. 28, 2026 /CourierPR/ -- Meritage Homes Corporation, the fifth-largest U.S. homebuilder, reported third-quarter 2026 results that reflected a challenging market environment. The company saw a 15% year-over-year decline in third-quarter orders, driven by a 21% lower average absorption pace, despite a 7% increase in the average community count.
In the third quarter of 2026, Meritage Homes was able to convert nearly 190% of its backlog, delivering 3,187 homes across its larger footprint of 348 communities. The company generated home closing revenue of $1.2 billion, with an adjusted home closing gross margin of 17.9%, excluding $6.0 million of real estate inventory impairments and terminated land deal walk-away charges. Selling, general, and administrative expenses (SG&A) as a percentage of home closing revenue were 11.0%, nearly in line with the prior year period.
The company reduced its land investments by almost 40% year-over-year to $329 million. During the quarter, Meritage Homes returned $86 million to shareholders via share repurchases and dividends. The company stated that it had returned nearly $380 million of capital to shareholders, representing 177% of total earnings so far this year.
As of September 30, 2026, Meritage Homes ended the third quarter with cash of $677 million, no borrowings under its revolving credit facility, and a net debt-to-capital ratio of 18.9%. The company's book value per share increased 4% year-over-year.
The period ended September 30, 2026, saw orders of 3,083 homes for the third quarter, down 15% year-over-year as a result of a 21% lower average absorption pace, which was partially offset by a 7% increase in the average community count. The third-quarter 2026 average sales price (ASP) on orders of $383,000 was down 2% from the third quarter of 2025, primarily due to higher utilization of incentives and related costs, including rate buy-downs, as well as geographic mix.
The 17% year-over-year decrease in home closing revenue in the third quarter of 2026 to $1.2 billion was due to a 14% lower closing volume of 3,187 homes combined with a 4% decrease in ASP on closings to $365,000. The year-over-year decline in ASP on closings was primarily due to higher utilization of incentives and related costs, including rate buy-downs, as well as geographic mix.
Home closing gross margin of 17.4% in the third quarter of 2026 was 170 basis points lower than 19.1% in the prior year, as a result of higher lot and incentive costs coupled with lost leverage on lower home closing revenue, which were partially offset by direct cost savings and lower performance-based compensation expense. Excluding $6.6 million of real estate inventory impairments and a $0.6 million net credit related to terminated land deal walk-away charges in the third quarter of 2026, and $8.7 million of real estate inventory impairments and $5.8 million in terminated land deal walk-away charges in the prior year, adjusted home closing gross margin was 17.9% and 20.1% for the third quarters of 2026 and 2025, respectively. In the third quarter of 2026, the company incurred $0.9 million of terminated land deal walk-away charges, which were more than offset by $1.5 million of recoveries related to previously incurred walk-away charges.
The effective income tax rate was 20.1% in 2026 compared to 22.6% in 2025. The 2026 tax rate reflected acquired below-market transferable clean fuel production tax credits. Net earnings were $68 million ($1.04 per diluted share) for the third quarter of 2026, a 32% decrease from $99 million ($1.39 per diluted share) for the third quarter of 2025, mainly resulting from lower home closing revenue and gross profit. Excluding quarterly impairments and walk-away charges for each period, adjusted diluted EPS was $1.11 and $1.55 for the third quarters of 2026 and 2025, respectively.