M/I Homes, Inc. (MHO) Income Statement

The revenue trajectory has shifted from double-digit growth in early 2024 to consistent year-over-year declines over the last three quarters. This deceleration appears driven by affordability constraints from elevated mortgage rates, which have dampened buyer demand despite record new contracts in Q2 2026. The record contract volume suggests market share gains, but the conversion to revenue is lagging, likely due to extended construction timelines and buyer cancellations.

The 260 basis point year-over-year decline in gross margin underscores the competitive pricing environment and the cost of mortgage rate buydowns to sustain sales. MHO's gross margin now trails peers like Champion Homes (26.4%) and Green Brick (31.2%), suggesting a structural disadvantage in product mix or land costs. The persistence of margin compression, even as revenue stabilizes, indicates that pricing power is limited in the current rate environment.

The lack of SG&A reduction despite lower revenue highlights negative operating leverage, as fixed overhead costs are not scaling down with volume. This is particularly concerning given that SG&A as a percentage of revenue rose to 12.2% in 2026Q2 from 11.3% in the prior year. The company appears unable to offset margin pressure with cost cuts, which may indicate that management is prioritizing market share over profitability.

The rise in COGS ratio suggests that land and construction costs are not declining in tandem with revenue, possibly due to fixed land basis and labor costs. While SG&A has remained relatively stable in absolute terms, the lack of reduction in overhead is notable. The company's ability to manage costs will be critical to restoring margins, but the current trend suggests limited flexibility.