Welcome to Lennar’s Fourth Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. After the presentation, we will conduct a question-and-answer session. Today’s conference is being recorded. If you have any objections, you may disconnect at this time. I will now turn the call over to Alexandra Lumpkin for the reading of the forward-looking statements.

Thank you, and good morning. Today’s conference call may include forward-looking statements, including statements regarding Lennar’s business, financial condition, results of operations, cash flows, strategies and prospects. Forward-looking statements represent only Lennar’s estimates on the date of this conference call and are not intended to give any assurance as to actual future results. Because forward-looking statements relate to matters that have not yet occurred, these statements are inherently subject to risks and uncertainties. Many factors could affect future results and may cause Lennar’s actual activities or results to differ materially from the activities and results anticipated in forward-looking statements. These factors include those described in this morning’s press release and our SEC filings, including those under the caption Risk Factors contained in Lennar’s Annual Report on Form 10-K, most recently filed with the SEC. Please note that Lennar assumes no obligation to update any forward-looking statements.

I would like to introduce your host, Mr. Stuart Miller, Executive Chairman. Sir, you may begin.

Great. Good morning, everyone, and thank you. This morning, I’m here in Miami with Rick Beckwitt, our Chief Executive Officer; Jon Jaffee, our President; Diane Bessette, Chief Financial Officer; and Dave Collins, our Controller; and of course, you’ve just heard from Alex. I’m going to start, as I always do with a brief overview, Jon and Rick are going to give some additional operational remarks, and Diane will deliver further detail on our fourth quarter and year-end numbers, as well as some guidance for our first quarter and our full-year 2020. As always, when we get to our Q&A, we’d like to ask that you limit your questions to just one question and one follow-up, so that we can accommodate as many participants as possible. So let me go ahead and begin by saying that this is another excellent quarter and year-end for the company, as we continue to focus on performance, cash flow, and total shareholder returns. We’re very pleased to report record quarterly performance together with a record strong finish to 2019 that started off paused and sluggish and ended the year with a rather robust housing market. Our results reflect both the continued strength in the housing market, as well as our continued focus on leveraging size and scale to drive greater cash flow and higher returns on equity and on capital. On the macro front, the housing market continued to strengthen throughout the fourth quarter, confirming the continuing trends that we reported in our last two quarterly earnings calls. The market for new homes has continued a steady improvement from last year’s pause, as lower interest rates have stimulated demand, while the overall fundamentals of the economy have remained strong. We clearly saw traffic and sales continue to strengthen in the fourth quarter, as a combination…

Thanks, Stuart. We had a strong quarter in each of our business segments, driven by a solid execution of our operating strategies. Homebuilding revenues for the fourth quarter totaled $6.5 billion, representing an 8% increase from 2018. This was driven by a 16% increase in deliveries to 16,420 homes, partially offset by a 7% decrease in average sales price. Deliveries for the quarter exceeded the high-end of our guidance, as we carefully matched available inventory with strong buyer demand. The decline in average sales price was driven by our continued strategic focus on the very robust entry-level market, as our percentage of first-time buyers increased year-over-year. Our gross margin for the quarter totaled 21.5%, which was the top side of our guidance, and up 110 basis points sequentially from the third quarter. This sequential improvement benefited from the direct cost savings that Jon will discuss, as well as a higher number of deliveries, which allowed us to leverage our field expense. Our SG&A in the quarter was 7.6%. This marks an all-time fourth quarter low and highlights the power of our increased market scale and operating leverage. Homebuilding operating earnings totaled $893 million, up 11% from the prior year. We’re proud of the fact that our homebuilding earnings are growing at a faster rate than revenues once again, demonstrating our operating leverage. Net earnings for the quarter totaled $674 million, up 11% from 2018, excluding the gain on the sale of Rialto and non-recurring expenses in the prior year. New orders for the quarter increased 23% to 13,089 homes, exceeding the high-end of our guidance. From a dollar value perspective, new orders totaled $5.2 billion in the fourth quarter, which was up 23% from the prior year as well. New orders increased significantly in each of our operating in our…

Thanks, Rick. As we look back on the quarter in our fiscal year, we can clearly see the benefits we are receiving from our significant size and scale across the platform. For both the fourth quarter and for the year, we delivered the most homes in Lennar’s history. We continue to see the benefits in our direct construction costs and in our SG&A that are not only result of this size and scale, but also of our focus on process, particularly the simplification of processes to maximize efficiencies. Turning first to direct construction costs. I noted last quarter, we had visibility that our direct costs are going down sequentially, and will contribute positively to our gross margins going forward. In our fourth quarter, 70 basis points of our 110 basis points of sequential margin improvement came from our direct construction costs. In the fourth quarter, our direct cost as a percentage of our average sales price was 45.5%. Throughout 2019, this cost to price ratio has trended downward each quarter. We expect this trend to continue throughout 2020, even though we’re projecting lower sales prices in 2020 due to a higher mix of entry-level homes. Looking at cost per square foot, year-over-year, our direct costs were up less than 1%, while our average square footage was down by 4%. This is an improvement from the third quarter’s 3% year-over-year increase and marks the lowest rate of year-over-year direct costs increase in 12 quarters. Going forward, as we deliver more entry-level homes and our average selling price and square footage will both continue to be lower. While this is occurring, the ability to both lower our direct construction costs as a percentage of average sales price and to keep our cost per square foot relatively flat, demonstrate the value of the…

Thank you, Jon, and good morning to everyone. So please let me start with reemphasizing a few points from our fourth quarter starting with homebuilding. So as Rick mentioned, deliveries increased 16% from the prior year and exceeded the upper range of our guidance by 3%, as we benefited from a strong housing market and a continued focus on returns. Our fourth quarter gross margin was 21.5%, which was at the higher-end of our guidance and the prior year’s gross margin was 22.1% excluding CalAtlantic purchase accounting. Our fourth quarter SG&A was 7.6%, which is the lowest quarter SG&A percent we have ever achieved and was below our guidance. This compared to 7.9% in the prior year. New orders increased 23% from the prior year and exceeded the upper range of our guidance by 6%. Absorption for the fourth quarter was a 3.4 versus 2.7 in the price year, as we benefited from increased demand and focused on accelerating the closeout of slower-paced communities to enhance returns. Our ending community count was 1,283. And finally, for homebuilding joint ventures, land sales and other categories, we had a combined loss of $2 million, compared to $4 million of earnings in the prior year. And then turning to Financial Services. As Stuart mentioned, operating earnings were $81 million, compared to $58 million in the prior year, and here’s the detail of the components. Mortgage operating earnings increased to $57 million from $44 million in the prior year. Mortgage earnings improved due to an increase in capital volume as a result of higher homebuilding deliveries and a higher capture rate and reduction in loan origination costs, primarily driven by technology initiatives, which enabled us to reduce headcount, as Stuart mentioned. Title operating earnings were $22 million, net of non-controlling interest, compared to $18…

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Truman Patterson with Wells Fargo. Your line is open.

Hi, good morning, everybody, and nice quarter. Thanks for taking my questions. First, I just wanted to start off kind of a multi-part question on entry-level, multiple industry participants are moving to the entry-level. Do you all see an upcoming supply imbalance or are you seeing robust enough demand that’s really allowing the entry-level communities to generate greater than historical absorption paces? And on the prior call, you all suggested that, maybe you could get the 44% entry-level in 2020. Do you think there’s possibly upside to that level given the demand that you’ve been seeing? And finally, could you just give an update on kind of the gross margin profile versus your other segments, how much of a drag it might be on your margin profile?

Truman, let me start just at a macro level and say, it’s important for everyone to remember that the entry-level part of the market has remained impaired for the longest period of time since the downturn and really had a very difficult time getting started. So that part of the market is probably the most supply constrained. When you note that a number of participants are migrating towards that market, it has most recent – more recently become accessible. Demand is very strong in that part of the market. And I think it’s going to be sometime before it gets saturated. Rick, Jon, maybe you’d like to talk about margin and…

Yes. So from a – from an overall mix standpoint and our position, I think, we really have benefited from the fact that this has been something that we strategically target for the last several years. We’ve been very methodical on lining up communities, repositioning products, working with our developer partners to really secure excellent positions that are sizable. When you’re dealing with a single-family or an entry-level product, you need some larger communities, because your absorption pace in these communities is much faster. So, we’re really well-positioned. From a mix standpoint, do we get up to 44%? I think, it’s too soon to tell. We’re probably in the low-40% right now, and we’re just going to see how the years evolve. From a margin standpoint, as Diane said, the margins tend to be slightly lower than our first-time move-up and move-up product, but they come with higher velocity. And as a result, the IRRs associated with the build out of those communities is much, much higher, and that’s why we focused on that. Jon, anything else?

You covered it.

Okay. Okay, thanks for that. Your rotation towards option lots, it’s – your traction has been a little bit faster than what we’ve expected in the past couple of quarters. Could you just discuss the health of the option land market, whether these lots are becoming more available across the industry or whether this is purely the result of your land developer partners? And kind of part two of that question, could you just give an update on the strategy to expand your developer partner relationships? I believe you were at three previously, what you’re kind of thinking throughout 2020?

So, I think, what this really reflects is, as a management team, when we – when Stuart, Jon, and I sit down and we make a plan, we execute on the plan. And we really decided that we were going to convert and increase the amount of our option position. We worked with our regional trade partners and our regional developers and have significantly expanded that program. We haven’t necessarily entered into new arrangements with different developers. Rather, what we’ve done is expand the footprint of those relationships to other markets and that’s what you’re seeing in the increase. In addition to that, our teams out there are really leveraging the relationships they have in all of their markets to increase that percentage.

Okay, thanks, guys.

Thank you.

Our next question comes from Alan Ratner with Zelman & Associates. Your line is open.

Hey, guys, good morning. Congrats on the very strong performance. So I was hoping to drill in a little bit just in terms of your thinking right now on the capital allocation. You mentioned, the focus on return several times. And this year was a huge year for cash flow as you were expecting, so great to see that it come to fruition. If I look at how you spend your cash this year, debt on the balance sheet came down by about $800 million, buybacks were about $500 million. I know a lot of builders say the first and main use of cash is for growing the business, but it certainly seems like you’re in a pretty enviable position where you can do that and throw off a lot of cash flow. So should we think about the, generally, the use of cash this year towards debt reduction and buyback is kind of how you’re thinking about prioritizing that or has that shifted at all given the fact that your debt to capital is now down to that 30% type level?

So, as we noted in our comments, we expect to continue to pay down debt certainly, as it comes due. I think we noted that over the next year, over 2020, we have about $600 million of longer-term debt coming due. You can expect that we’ll pay that down out of cash flow. But additionally, returns to shareholders focus on returning of capital to shareholders is something that will be continued and properly balanced. As we’ve looked at our business and looked at our growth expectations, normal operations today are cash flow positive. As we noted, last year we produced $1.6 billion, and we expect to continue that trend and more. And that excess capital is going to be balanced exactly as noted. We’re very focused on our balance sheet, very focused on total shareholder return.

Thank you for that, Stuart. And second question, if I could on the SFR, the expansion there. First off, I guess, just more housekeeping. Were there any orders this quarter that, that flowed through the order line that works geared towards SFR? And I guess, more high-level, as you start to build these homes and existing communities, can you talk a little bit about the product that you’re building for rental? Is it comparable to your for sale product? And if so, is there any concern about cannibalizing that piece of the business, or is it being priced differently that, that it shouldn’t compete?

So let me just start off by saying is that, right now, this business is very small in the grand scheme of things. And what we’ve really done is focused on positioning to grow something that’s substantive. So from an order perspective for the last quarter, the orders associated with this were de minimis. What we’ve really been focusing on is identifying markets that we can build a good business that is focused on providing products that the market needs. Within our existing communities, what we’ve really done is looked at sectioning off different phases or sections of the community that will be priced completely differently than our other sale for product. So smaller footprint, lower specification levels, not a lot of change from home-to-home pretty identical features right down the street.

Got it.

But let me back up for a second and say this. SFR has been a part of the sales program for the past two years, both in our company and others. It’s basically been on a one-off basis. It’s more mom-and-pop-oriented. What we have been innovating over the past years and we dilated this in Reno. It’s a continuation of that. It’s a more structured program and we’ve been focusing on looking at single-family plan for rent communities, which is where we have innovated and our kind of branding going forward a new way of thinking about single-family for rent. We are at the early stages of this. It has been an evolutionary track for the company. You’re going to see others follow suit. Capital is starting to understand this business, and this will be an emergent story as we go forward. But the single-family for rent that we’re talking about is single-family communities for rent, which will be – there’ll be a circle around that community. While there will be similarities with other single-family product, it won’t be directly competitive, but instead, this product is going to enable a consumer that wants single-family, but might not quite be able to get into a for sale program, very enthusiastic about this and it’s a uniquely Lennar branded program.

I just had two points. One is, we don’t think it will cannibalize our existing product at all. It’s the same product. It’s really filling the need, as Stuart just mentioned, of a consumer that can afford to buy and doesn’t make sense for them to buy. The other point is, the focus on this for us will further enhance our builder of choice position with the trade as we have more volume and this is even more consistent and higher volume. So we see that as being very complimentary to our construction platform.

Great. Thanks a lot, guys. Good luck.

Thank you.

Our next question comes from Michael Rehaut with JPMorgan. Your line is open.

Thanks. Good morning, everyone, and congrats on the results. My first question I had is focusing just on some of your comments around inventory and driving returns and the resulting cash flow. I don’t know if I heard and maybe totally don’t give, but I was just trying to get a sense when you talked about having inventory, your balance of inventory down $3 billion over the next two years, I was wondering if you could give us what that number is, or at the end of this year, just to get a sense of where that number could go? And with that amount of inventory balance reduction, should we be expecting potentially an acceleration of share repurchase with the use of that, as that cash frees up? I mean, obviously, you have a $1.2 billion of debt due next year. But given you’re still declining debt to cap, I would assume, you’d want some debt on the balance sheet and you can kind of push that maturity out. So just trying to get a sense again of the finer numbers around that, that inventory reduction and how we should think about the use of that cash?

Well, let me start off by just generally telling you how we look at the dollar value difference. Yes, we’ve told you that what we want to do is take our own supply from 4.1 years to three years by 2021. And if you step back and you look at it, you can calculate that two different ways. We – which – it’s about one year of land purchase, so we buy about $3 billion of land a year. So $3 billion sort of sums up to that number. Looking at it in a different way, based on our guidance of 50 – 54,000 to 55,000 homes for next year. If we don’t have to buy the homesites associated with that, our average lot finished homesite or underdeveloped, in some cases, finished our homesite is about 54,000, 55,000, which gets you to the same $3 billion number.

And so, look, it’s a pretty straight math calculation to look at the $3 billion number. Mike, you’re correct in highlighting that this is additive to cash flow, as we migrate in this direction. We do expect that cash flow will continue to benefit from our inventory and land strategy. And I think that your question is, does that mean that we accelerate things like debt and shareholder – a return of capital to shareholders? And the answer to that is decidedly, yes.

Great, thank you. I guess, second question just a little bit finer tuning granularity around order growth and how to think about that for the upcoming year? Obviously, you gave first quarter guidance and as well as community count growth expected to be 1% or – 1% to 2%, I believe, for the year as soon as a year-end over year-end if you could clarify that? But how should we think about the sales pace component of that, given that you’ve kind of mentioned that you continue to expect to shift a little bit more towards entry-level, which is higher, sales pace versus other segments, other buyer segments, as well as the fact that, you’d expect the broader market to continue to improve a little bit, given where we are with rates and affordability, et cetera? So, just trying to kind of break out the pieces of that, I think expectations perhaps are in a low to mid single-digit type of range for sales pace growth. But any thoughts around how you’re thinking about that for the first quarter and the full year would be very helpful?

Hey, Mike, it’s Jon. First of all, that is correct. It’s your year-end to year-end comparison. As we think about pace, it really goes back to my commentary about a very disciplined production approach and matching sales pace to that. So to the extent that the market is stronger or not, we’ll adjust pricing accordingly. So we expect our pace to be a consistent one. And to the extent, the market is stronger, we would hope that we’ll see improvement in margins over what we’re projecting. To the extent that the market were to soften, we expect the pace to be consistent and we would do some reflection of that in our margins.

I’d say additionally, that, as part of our land and inventory management program, looking internally, we have clearly focused on more of our higher-paced communities and focusing on those communities with greater absorption. And we’ve clearly and decidedly been pruning some of the slower-pace communities that might have come from CalAtlantic legacy that, that are more of a drag on some of our returns. So this is all part of our inventory management program. And we’ve been looking community by community to enhance that the absorption rate, therefore, enhancing returns.

Okay. So just to be clear, then, given that shift that you’re describing Stuart, it wouldn’t be unreasonable to expect an order growth rate for the year that would exceed the community count growth that you’re looking for?

Well, I think that definitely. I mean, if you just look at the guidance we gave with regard to deliveries, the delivery growth is higher than the increase in communities. So you’ll get a natural increase in overall sales that are greater than the 1% to 2% growth in community count.

And that’s a more efficient, more effective business model.

That’s right. We’ve strategically focused on getting higher velocity out of each community, as opposed to growing communities at a higher rate.

Right. Thank you.

Thank you. Our next question comes from Carl Reichardt with BTIG. Your line is open.

Thanks. Happy New Year, everybody.

Good morning, Carl.

Jon, I wanted to ask a little bit about subcontractor trade costs, obviously, starts for a flat this year, we build a reporting some really significant order growth and move to the entry-level, which increases number of units started sort of it for two reasons: one, the velocity and also just business is better. How are you thinking about the trades? You didn’t seem like they had a lot of overcapacity or not enough work last year? Are they going to look even with your scale and trying to get more aggressive on their pricing to you? And how do you combat that? Is it just scale? Is it just product simplicity and a focus on everything’s included and even flow? I’m just curious what your perspective is, maybe not just this year, but also maybe for a year or two?

Sure. Well, as you look backward, and as you look forward, there is a severe shortage of labor in the industry, particularly skilled labor. And we really don’t see that improving, because a lot of the labor out there is actually aging out from the workforce. So we expect that pressure to continue. And as we started several years ago, we really thought about the fact that as volume grows, there’ll be more pressure on the system. And that’s why we really reinvented ourselves with its focus of being the builder of choice. So it’s much more than just volume and scale that has a big part, that’s strategically positioned us to be most desirable, but it has everything to do with this even flow production and predictability that gives trades or everything is included platform is really critical, because one of the big obstacles for trade is that they go out to a job site and it’s not ready for them. That inefficient use of labor that’s already in short supply, backed up on itself and creates real issues. And because of that, the trades find us more favorable to work for to get the jobs run smoother than more predictable. They don’t have the starts and stops of options and upgrades. And so we are continuing to focus on how do we get even better at that, at least, even more disciplined about even flow. So that, as we move forward, the trades you’re actually able to make more money on our business, because it’s efficient, not because we’re paying them more.

That makes sense. And then Stuart or Rick, just on pricing, again, the mix to the entry-level more price sensitive customer. We’ve seen builders in the past, use price to control pace, so that production can actually catch up. But you’re running even flow and your mix is changing. How do you look at your pricing power as you head into this year with such robust demand? But what’s likely to be a more price sensitive consumer? And obviously, using dynamic pricing, I’m sure it’s helping manage pace? But again, is this different than what we’ve seen in the past, where builders were shoving price to try to hold the pace off?

Yes. I don’t think it’s different. It’s – for us, it’s going to be, as we’ve said, to be on a very consistent pace. And if the market is strong, right, they’re currently is showing signs of now, as Stuart said, it’s strong. And we see that across our markets that we will have pricing power greater than we had in the last year or two. That will unfold, as the months go by, and we’ll see exactly what the market is like. But as we look at it right now, it is strong. And we would expect to be able to benefit from that.

Yes. And I think the thing to focus on, we will solve to price, whether that’s a higher price or lower price, but we’re very focused on net operating margin for each community.

Thanks, Rick. Thanks, all.

Thank you. Our next question comes from Stephen Kim with Evercore ISI. Your line is open.

Yes. Thanks very much, guys. Good quarter. Thanks for the information regarding your outlook for the year and the quarter. I had a little question about the interplay of the margins and the order cadence you suggested in 1Q. And I guess, in general, my question is your margin assumption for the quarter versus the year, since you said that you expected the first quarter to be the low in the year and you gave a pretty healthy guide for the full-year? Can you give us a sense for when in the year you’re expecting to see that, that fairly meaningful step up in the margin? Is that going to be like how to 2Q, 3Q events? Or is that something that you’re sort of envisioning will happen later in the year? And if it is, like as soon as the second quarter, is that a reflection of the current environment allowing you to get better price than the order comment you made up about 8% would suggest?

Hey, Steve, it’s Jon. As an overview, remember, that our first quarter is always our lowest from a volume perspective, and therefore, our field has spread out. It has a bigger impact on the margins in the first quarter. And you always see that trend with us. So what we don’t see it sequentially throughout the year, our margins will improve as we get greater field leverage, just purely based on volume. The improvement is throughout the year, though, based on what we expect to see with this more efficient, both gross margin and operating margin out of the efficiencies, we’re gaining in our systems and our costs and our SG&A that should flow through all of our numbers. So it’s really the combination of those two things progressing throughout the year.

Yes, Stephen, maybe the only thing I’d add is, I think, if you look at the growth of gross margin in 2019 that would give you a really good proxy for what we’re expecting in 2020 with the back-half of the year having the highest increase in margin.

Got it. All right, that’s helpful. Secondly, I was really intrigued by this comment, Stuart, you made about how you saw the improvement in the Financial Services business and I guess, specifically, you cited the mortgage origination business and some of the tech initiatives that you’ve got going on there. As I believe, you used the word proxy for what we might see from many of your other tech initiatives across the company. And I was curious if you could give us a little bit of a preview as to what you meant by that. I think you had said, homebuilding customer acquisition costs and even flow in construction management, as I think about some of the initiatives you’ve got, obviously, you have the eye buyer investments in open door, which could lead to customer acquisition costs. Could – but I’m particularly intrigued by this even flow in construction management. How – in what way could be improvement we saw in your mortgage origination business be a proxy for that?

So thank you for listening to the call carefully, Steve. Yes, that’s exactly what I said. And it starts with the fact that, that in our Financial Services group, which is where we really initiated many of our technology initiatives, we had a management team start to dip the toe than a foot than a leg into the technology stream. And as they became more entrenched, there was kind of a feedback loop that began. That said, wow, this really does have import. This really can have impact. And the more we did, the more we explored, the more we found, we could change the way that our business operates. If you think about the migration from, I think, it was $8,600, $8,700 per loan in 2017 towards a 6,000 or 5,600 per loan cost of origination. That’s a sizable step over a fairly short period of time. And it comes from management focus and integration of new technologies new ways of doing business that hadn’t been done or tried before. And the feedback that comes from early successes, feeding the adventure of drilling deeper and trying more. We’re starting to see many of those things happen in and around our dynamic pricing program. We’ve talked about it before. Early adoption starts to breed some early successes, it takes sometime for those earlier successes to start accelerate, start to accelerate and start to translate into real cost reductions. But we’re starting to see real efficiency in the way that our inventory turns. If we look back from this year’s at year-end back to last year’s year-end, the efficiency with which we’re driving closings through the year is having real bottom line impact in the way that our business has configured and we think that, that will accelerate. As it relates to customer acquisition, we’ve talked about a number of our initiatives, open door being one of them, but other – others of them are more internally focused about customer acquisition, and then lead scoring, developing into a driven-focused Internet sales consultant approach to the way that we handle our customers. We think that, that as it starts to drive as we start to drive adoption, we’ll drive costs down inefficiencies up. So there are a lot of initiatives going on behind the scenes. If you would ask me this question at the beginning of the innovation cycle in Financial Services, it would have been hard to demonstrate the specific areas, where costs would come from, but its management focus, early successes and adoption and that cycle that drives the cost structure down. And I think that the Financial Services group in that regard is a proxy for the way that we’re seeing things starting to happen on the homebuilding side as well. Does that help?

Yes. No, that’s very interesting. I guess, just the one little clarification on my part would be the numbers you gave around the mortgage cap, mortgage origination costs declining. I assume you’re implying from that, that your improvement that you traced out for us has been better than what you believe the industry overall has been. So that’s not just an industry issue, that’s a Lennar issue. And similarly, you expect that in these other avenues as well, is that correct?

Listen, I can’t really look at what the rest of the industry is doing at a micro level. But from what we understand at a macro level, the costs within the industry have been migrating higher and we are an outlier in that regard.

Great. Thanks very much.

You’re welcome. How about one more question?

Thank you. Our next question will come from Susan Maklari with Goldman Sachs. Your line is open.

Good morning. This is actually Charles Brown filling in for Susan. Thanks for taking my question and congratulation on strong results.

Thank you.

I was just wondering if you can provide an update on some of your key markets, such as Florida, Texas and California? And also specifically for Texas, if you think your success in this region is reflective of your recent initiative in this market?

So let’s start with Texas. I can tell you that we had strong performance in each one of our Texas markets, San Antonio, Austin, Dallas and Houston, all up high double digits. The region was up 48% year-over-year in orders. And it really is driven by the fact that we’ve completely repositioned to a much higher percentage of entry-level product. Right now, we’re about 50% of our sales and communities are below $250,000 price point, and about 70% of our communities are below 300,000. So it’s the strength of that reposition that’s really fueling the market there. With regard to Florida, since Florida are very strong, particularly on the lower price points and that first time move-up, and that really is across the board. It’s about the North and East West. Jon, do you want to talk about California?

California has clearly seen a recovery, if you look at it from a year-over-year perspective, the prior year, California really fallen off and the pause affected California perhaps more than any other parts of the country. What we saw in the fourth quarter was a much healthier market, a clear recovery back to normal sales paces. Even in the Bay Area, which was perhaps the most impaired by a market slowdown in fourth quarter 2018. We’ve seen that market come back to life. I wouldn’t describe that as robust yet, but certainly a lot healthier.

Okay. Thank you for your time, guys.

All right, very good. Well, I thank, everybody, for joining us on our call. We look forward to reporting in 2020. As you can hear, we’re pretty enthusiastic about the year to come and look forward to apprised. Thank you all for joining.

That concludes today’s conference. Thank you for participating. You may disconnect at this time.