M/I Homes is bucking the industry trend by ramping up speculative home construction while competitors retreat to a build-to-order model. The Columbus-based builder closed 2,387 homes in the second quarter, a 15% jump year-over-year, with spec homes accounting for 78% of total sales.
The strategy reflects confidence in current buyer demand but comes with trade-offs. Gross margins compressed to 22.0% in Q2, down from higher levels competitors maintain through pre-sold inventory models. Building specs ties up capital and inventory risk, yet M/I Homes executives believe the approach captures sales faster when buyers want immediate occupancy rather than waiting through construction timelines.
Most major builders have shifted toward lower spec ratios in recent years. Standard practice now leans toward 40-60% specs, with the remainder pre-sold to reduce risk and balance cash flow. M/I Homes at 78% specs represents aggressive positioning. That density works only if the builder can move inventory quickly and sustain pricing.
The margin compression tells the real story. At 22.0% gross margin, M/I Homes operates leaner than it could with a pre-sold mix. Builders typically see gross margins of 24-28% when they lock in buyer commitments before breaking ground. Specs create downward pricing pressure if market velocity slows, inventory builds, or buyer traffic drops.
The 15% closings growth is strong. For context, the broader new home market has cooled from pandemic peaks, so this outperformance matters. M/I Homes likely benefited from its geographic footprint across 13 states and price-point diversity, from entry-level to mid-range homes.
For buyers, the spec-heavy approach means more immediate move-in options and less customization lag. Sellers benefit from faster transactions when real