"Land sellers have been slower to adjust," Balogh said. "I think you just constantly hear the same feedback, that we’re just going to wait this thing out." This "wait and see" approach from land owners makes it incredibly difficult for builders to underwrite new projects. For a new community to be viable, the builder must be able to purchase the land, develop it, and sell homes at a price point that covers today’s high interest rates and incentive costs while still leaving room for profit.
Sawyer was blunt about the difficulty of this calculation, stating that "the underwriting deals today are extremely difficult." Because of this, Ashton Woods is being "extremely disciplined" about new land commitments. The company is only moving forward with deals that "really make sense" under current market conditions, rather than banking on a future decrease in interest rates or a sudden surge in home prices.
This discipline has led the company to focus its expansion efforts on "A-tier" locations—premium, centrally located areas where demand is traditionally less sensitive to economic downturns. While these locations are more expensive to acquire, they offer a level of security and price resilience that peripheral or "B and C-tier" markets currently lack.
Methodically Reducing Spec Inventory
Another key component of Ashton Woods’ defensive strategy is the aggressive management of its "spec" inventory—homes that are started without a pre-existing sales contract. In a booming market, spec homes are a windfall because they allow for quick deliveries. In a slowing market, however, an oversupply of spec homes can lead to forced liquidations and massive price cuts.
Ashton Woods ended the quarter with 2,444 spec homes, a reduction of 192 units compared to the previous year. This 7.3% decrease is even more significant when considering that the company actually increased its active community count by 15% during the same period, growing from 193 to 222 communities. On a per-community basis, spec inventory fell by roughly 20%, from 13.7 homes to 11.0.
This reduction was particularly intentional within the Starlight Homes brand, which operates almost exclusively on a spec-build model to cater to entry-level buyers who often need to move quickly. By keeping a tighter lid on inventory, Ashton Woods avoids the "inventory overhang" that plagued the industry during previous downturns. Only about 500 of the company’s unsold specs are in the final stages of construction, meaning the builder has very little "standing inventory" that it is under immediate pressure to sell.
"This reduction reflects our continued focus on matching spec starts to sales pace," Sawyer said, reinforcing the company’s commitment to discipline over growth. By aligning production so closely with actual demand, Ashton Woods is attempting to navigate a "soft landing" within its own operations, ensuring that it remains lean and agile as the broader housing market continues its search for a new equilibrium.
