Century Communities Profile
Century Communities, Inc. engages in the development, design, construction, marketing and sale of single-family attached and detached homes in 18 states.
In many of the company’s projects, in addition to building homes, the company is responsible for the entitlement and development of the underlying land. The company builds and sells homes under its Century Communities and Century Complete brands.
The company’s Century Communities brand has an emphasis on serving the entry-level homebuilding market but offers a wide range of buyer profiles, including entry-level, first and second time move-up, and lifestyle homebuyers; and provides the company’s homebuyers with the ability to personalize their homes through certain option and upgrade opportunities. The company’s Century Complete brand targets entry-level homebuyers, primarily sells homes through retail studios and the internet, and generally provides no option or upgrade opportunities.
The company’s homebuilding operations are organized into the following five reportable segments: West, Mountain, Texas, Southeast, and Century Complete. The company’s indirect wholly-owned subsidiaries, Inspire Home Loans Inc., Parkway Title, LLC, IHL Home Insurance Agency, LLC, and IHL Escrow Inc., which provide mortgage, title, insurance, and escrow services, respectively, primarily to the company’s homebuyers, have been identified as the company’s Financial Services segment. Additionally, the company’s wholly owned subsidiary, Century Living, LLC, is engaged in the development, construction and management of multi-family rental properties, all located in Colorado. Century Living, LLC is included in the company’s Corporate segment.
While the company offers homes that appeal to a broad range of entry-level, move-up, and lifestyle homebuyers, the company’s offerings are heavily weighted towards providing affordable housing options in each of the company’s homebuyer segments. Additionally, the company prefers building move-in-ready homes over built-to-order homes. Of the 9,568 homes delivered during 2023, approximately 92% of the company’s deliveries were made to entry-level homebuyers that were below the Federal Housing Administration-insured mortgage limits and approximately 99% of homes delivered were built as move-in ready homes.
The company is one of the largest homebuilders in the United States. As of December 31, 2023, the company operated in the 18 states and over 45 markets.
The company operates within the following reportable segments:
West (California and Washington).
Mountain (Arizona, Colorado, Nevada, and Utah).
Texas.
Southeast (Alabama, Florida, Georgia, North Carolina, South Carolina, and Tennessee).
Century Complete (Alabama, Arizona, Florida, Georgia, Indiana, Kentucky, Louisiana, Michigan, North Carolina, Ohio, South Carolina).
Financial Services (which provide mortgage, title, and insurance services to the company’s and other homebuyers).
The company’s Corporate operations are a non-operating segment, as it serves to support the company’s homebuilding, and to a lesser extent the company’s Financial Services operations, through functions, such as the company’s executive, finance, treasury, human resources, accounting and legal departments. Additionally, the company’s wholly owned subsidiary, Century Living, LLC, is engaged in the development, construction and management of multi-family rental properties, all located in Colorado. Century Living, LLC is included in the company’s Corporate segment.
Homebuilding Operations
Strategy
The company is focused on offering homes that appeal to a broad range of entry-level, move-up, and lifestyle homebuyers, while heavily weighting the company’s offerings towards providing affordable housing options in each of the company’s homebuyer segments; preferring building move-in-ready homes over built-to-order homes, which allows for a faster construction process, advantageous pricing with subcontractors, and a shortened time period from home sale to home delivery, thus allowing the company’s customers greater certainty on their financing and allowing the company to more appropriately price the homes and deploy the company’s capital; maintaining a strong pipeline of future land holdings, including favoring lot option contracts to manage the company’s risk to land holdings; and increasing the company’s market share within its existing markets through organic growth and/or acquisitions of other homebuilders already operating in the market.
The core of the company’s business plan is to acquire land strategically, based on the company’s understanding of population growth patterns, local markets, entitlement restrictions and infrastructure development. The company focuses on locations within its markets that are generally characterized by diverse economic and employment bases and demographics and increasing populations. These conditions create strong demand for new housing, and these locations represent attractive opportunities for long-term growth. The company’s construction expertise across an extensive product offering allows the company flexibility to pursue a wide array of land acquisition opportunities and appeal to a broad range of potential homebuyers, from entry-level to first- and second-time move-up buyers and lifestyle homebuyers. Additionally, the company’s diversified product strategy enables the company to adapt quickly to changing market conditions and to optimize returns while strategically reducing portfolio risk.
Despite future macro-economic uncertainty, especially in relation to the interest rate environment, the company is well-positioned to benefit from the ongoing shortage of both new and resale homes available for purchase in the company’s key markets and the favorable demographics that support the need for new affordable housing.
Land Acquisition Process
The company acquires land for its homebuilding operations with the primary intent to construct single-family detached or attached homes for sale on the acquired land. From time to time the company may sell land to other developers and homebuilders where the company has excess land positions. The company generally acquires land for cash, either through bulk acquisitions of land or through option contracts. The company typically purchases lots for its Century Communities brand, which range in status at acquisition from entitled for residential construction but requiring the installation of streets, common areas, and wet and dry utilities to lots, which are fully developed and immediately available for permitting and construction of the residence. For lots requiring development work, the company negotiates, contracts for, and oversees the work performed by subcontractors internally, and in some limited cases, the company may hire a third-party general contractor for these services. For the company’s Century Complete brand, the company typically purchase lots, which are immediately available for permitting and construction of the residence. The company’s land acquisition process typically includes soil tests, independent environmental studies, other engineering work and financial analysis, which includes an evaluation of expected returns, projected gross margins, estimated sales pace and pricing.
The company strives to strategically manage its lot pipeline in order to maintain a balance between the number of owned lots as compared to lots the company controls through option and other contracts.
Design and Construction
The company engages architects, engineers and other professionals in connection with the home design process who are familiar with local market preferences, constraints, conditions and requirements. The company generally owns the architectural design rights to its home plans. The company serves as the general contractor, with all construction work typically performed by subcontractors. While the company maintains long-standing relationships with many of its subcontractors and design professionals, the company typically does not enter into long-term contractual commitments with them and as a result may be subject to shortages of qualified and skilled labor. The company’s personnel, along with subcontracted marketing and design consultants, carefully design the exterior and interior of the company’s home plans to coincide with the needs of targeted homebuyers.
When constructing homes, the company uses various construction materials and components, including lumber, steel and concrete. It typically takes the company four to five months, or more in some instances, to construct a home.
The company is dependent upon building material suppliers for a continuous flow of certain materials. Whenever possible, the company utilizes standard products available from multiple national and international sources and utilizes the company’s buying power and relationships throughout the supply chain to ensure availability of products. The company may also contract on a national level, directly with suppliers in many instances, to ensure availability and competitive prices of key materials. Further, the company designs and engineers its homes for energy efficiency to reduce the impact on the environment and lower energy costs to the company’s homeowners.
Homebuilding Marketing and Sales Process – Century Communities Brand
The company’s Century Communities brand has a focus on affordable housing options in each market but builds an extensive range of home types across a variety of price points. The company’s Century Communities brand strives to provide the company’s customers with ‘A Home for Every Dream’.
In many of the company’s communities, the company provides its customers with certain customization options to suit their lifestyle needs and has developed a number of home designs with features, such as outdoor living spaces, one-story living and first floor primary bedroom suites to appeal to broad design needs. At times the company offers homebuyers environmentally friendly alternatives, such as solar power to supplement a home’s energy needs.
The company sells its homes through its own sales representatives often with the assistance of independent real estate brokers. The company’s in-house sales force typically works from sales offices located in model homes close to or in each community. Additionally, the company provides the ability for its customers to purchase homes directly on the company’s website. Sales representatives assist potential buyers by providing them with basic floor plans, price information, development and construction timetables, and tours of model homes where available. Sales personnel are trained by the company and generally have had prior experience selling new or resale homes in the local market.
The company advertises directly to potential homebuyers through the internet and digital marketing, marketing brochures and to a lesser extent newspapers. The company may also use billboards, radio and television advertising, along with the company’s website, to market the location, price range and availability of its homes. The company also attempts to operate in conspicuously located areas that permit the company to take advantage of local traffic patterns. Model homes play a significant role in the company’s marketing efforts by creating an attractive atmosphere and assisting the customer in visualizing the livability of the company’s floor plans.
Homebuilding Marketing and Sales Process – Century Complete Brand
The company’s Century Complete brand primarily sells affordable homes to entry-level buyers through the company’s own sales representatives located in retail locations, which the company refers to as studios, as opposed to model homes, however, model and vignetted homes are used in certain instances. The company leases its studios within strip malls or other high traffic retail centers, located centrally to the company’s homes under construction. The company’s studios are generally leased for a period of three years and average approximately 1,600 square feet. The company also sells homes directly through its Century Complete website and utilizes the services of independent real estate brokers in many cases. The company’s Century Complete brand intends to provide the company’s customers with ‘More Home, Less Money’.
The company’s Century Complete brand often competes with resales, as well as other new home builders within the submarkets in which the company operates. The company leverages its studios, advertising and marketing efforts to generate homebuyer leads, which are then actively pursued by the company’s sales associates.
Customer Experience
The company maintains customer service staff whose role includes providing a positive experience for each customer throughout the pre-closing process, home closing process and beyond. This group is also responsible for providing after sales customer service. The company’s customer service initiatives include using customer survey results to improve the company’s standards of customer satisfaction. Generally, the company provides each homeowner with product warranties covering workmanship and materials for one year from the time of closing, and warranties covering structural systems from the time of closing through the statute of repose with the states the company operates in, or ten years, whichever is shorter. The subcontractors who perform most of the actual construction also provide to the company customary warranties on workmanship.
Seasonality
The company typically experiences the highest new home order activity during the spring, although this activity is also highly dependent on the number of active selling communities, timing of new community openings and other market factors. Since it typically takes the company four to five months to construct a new home, the company delivers more homes in the second half of the year (year ended December 2023) as spring and summer home starts convert to home deliveries. Because of this seasonality, home starts, construction costs and related cash outflows have historically been highest in the second and third quarters, and the majority of cash receipts from home deliveries occurs during the second half of the year.
Financial Services Operations
The company offers home financing for its customers and other homebuyers through the company’s wholly owned subsidiary, Inspire Home Loans Inc. (which the company refers to as ‘Inspire’). Inspire is authorized to originate Federal National Mortgage Association (‘Fannie Mae’), Federal Home Loan Mortgage Corporation (‘Freddie Mac’), Government National Mortgage Association (‘Ginnie Mae’), FHA, Department of Veterans Affairs-guaranteed (‘VA’), and the U.S. Department of Agriculture (‘USDA’) mortgages (which the company refers to collectively as the ‘government sponsored entities’). The company also offers title and homeowners insurance services through its wholly owned subsidiaries, Parkway Title, LLC (which the company refers to as ‘Parkway’), IHL Home Insurance Agency, LLC (which the company refers to as ‘IHL Insurance’), and IHL Escrow Inc. (which the company refers to as ‘IHL Escrow’), respectively. These operations along with Inspire collectively comprise the company’s Financial Services operating segment. The company’s customers’ use of Inspire, Parkway, IHL Insurance, and IHL Escrow provides the company with a competitive advantage by enabling more control over the quality of the overall home buying process for the company’s customers, while also helping the company align the timing of the house construction process with the company’s customers’ financing, title and insurance needs.
The results of operations of the company’s Financial Services operating segment are primarily driven by the results of Inspire. Because Inspire originates mortgage loans primarily for the company’s homebuilding customers, Inspire is dependent on the company’s homebuilding operations and its results of operations are highly correlated with the company’s homebuilding operations, and to a lesser degree the overall market demand for mortgages.
Inspire sells substantially all of the loans it originates, either as loans with servicing rights released, or with servicing rights retained, in the secondary mortgage market within a short period of time after origination, generally within 30 days. This strategy results in owning the loans for only a short period of time. After the loans are sold, Inspire may be responsible for potential losses associated with mortgage loans originated and sold in the event of errors or omissions relating to customary industry-standard representations and warranties made by Inspire that the loans met certain requirements. Representations include underwriting standards, the existence of primary mortgage insurance, and the validity of certain borrower representations in connection with the loans.
Governmental Regulation and Environmental Matters
The company is subject to regulations promulgated by the Federal Consumer Financial Protection Bureau regarding residential mortgage loans.
History
Century Communities, Inc. was founded in 2002. The company, a Delaware corporation, was incorporated in 2013.
