Smith Douglas Homes doubles down on pace despite margin pain

Most homebuilders grinding through a weaker-than-expected first half of 2026 have slowed their new-home production pace to protect margins, work through standing inventory and rebalance starts with new orders. Smith Douglas Homes, ranked 27th on HousingWire’s Homebuilder Rankings, wasn’t one of them. During the builder’s Q1 earnings call in April, Smith Douglas Homes executives stated that they plan to prioritize pace over price, despite a relatively weak demand environment. On the company’s Q2 2026 earnings call held on Thursday, executives remained committed to this strategy. During Q2, home closings increased 25% year over year, home closing revenue was up 22%, net new home orders increased 32% and backlog homes moved up 17%. At first glance, these results convey success. The bad news? The builder’s gross profit margin fell to 17.6%, down 560 basis points compared with a year ago, and the average sales price fell 3% to $325,000. Smith Douglas Homes, which primarily serves the entry-level buyer segment, is highly sensitive to rising mortgage rates and affordability pressures. As a result, the company had to “buy” many of their sales with generous incentives and discounts. Still, ...