Chris Martin - Investor Relations Doug Bauer - Chief Executive Officer Mike Grubbs - Chief Financial Officer Tom Mitchell - Chief Operating Officer and President.

Nishu Sood - Deutsche Bank Ivy Zelman - Zelman & Associates Jay McCanless - Sterne Agee Mark Weintraub - Buckingham Research Alex Barron - Housing Research Center.

Greetings, and welcome to the TRI Pointe Homes’ First Quarter 2015 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Chris Martin, Investor Relations. Thank you, sir. You may begin..

Good morning. Welcome to TRI Pointe’s first quarter 2015 earnings conference call. Earlier today, the company released its financial results for the quarter. Documents detailing these results are available on the company’s new Investor Relations website at www.tripointegroup.com.

Before the call begins, I would like to remind everyone that certain statements made in the course of this call are not based on historical information and constitute forward-looking statements.

These statements are based on management’s current expectations and beliefs and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those described or implied in these forward-looking statements.

I refer you to the company’s filings made with the SEC for a more detailed discussion of the risks and factors that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today.

The company undertakes no duty to update these forward-looking statements that are made during the course of this call. Additionally, non-GAAP financial measures will be discussed on this conference call.

The company’s presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP.

Reconciliations of these non-GAAP financial measures to the most comparable measures prepared in accordance with GAAP can be accessed through the TRI Pointe website and the filings with the SEC at www.sec.gov.

Hosting the call today is Doug Bauer, the company’s Chief Executive Officer; Mike Grubbs, the company’s Chief Financial Officer; and Tom Mitchell, the company’s Chief Operating Officer and President. With that, I will now turn the call over to Doug..

Thank you, Chris and good morning everyone. Welcome to TRI Pointe Group’s first quarter 2015 earnings call. As a supplement to our prepared remarks, we have posted a slide deck in the Investors section of our website with highlights from the quarter.

I will begin the call with an overview of our operations and then turn it over to Mike to provide a financial review for the quarter then I will wrap it up with some final remarks before we open it up for questions. I am extremely pleased with our company’s performance for the first quarter 2015.

New home orders increased 79% as a result of the implementation of Tri Pointe Group’s operating philosophy across all of our homebuilding companies as well as overall improvement in market conditions. During the quarter, we closed 65% of our 2014 year ending backlog.

Homebuilding gross margins stayed flat on a sequential basis, but above our expectations as pricing remained firm in several markets and showed improvement in others. SG&A costs as a percent of revenue declined on a year-over-year basis, as did our cancellation rate.

We opened 16 new communities in the quarter which leaves us well positioned for the remainder of 2015. In short, our team’s focus and execution over the past three months produced great results in the quarter and laid the foundation for continued success.

With the integration and transition of WRECO behind us, we are now tasked with unlocking the embedded value present in the combined company. This value will be realized from increased deliveries, the strategic monetization landholdings and the realization of cost savings and procurement benefits that come with being a much larger company.

Other value creation initiatives are less tangible, but no less important such as the benefit of our 2015 key strategic objectives and the adoption of performance based compensation all with a focus on increasing shareholder value.

In addition, we recently launched Tri Pointe Connect, our mortgage company and expect to be operational on all of our markets by June of 2015. A lot of our success in the first quarter can be attributable to this these initiatives.

And I believe that they will have a positive impact over the next several years as we continue to invest in our operations and teams to make our homebuilding companies more profitable in the future. Now let me give you an update on each of our homebuilding companies.

Pardee Homes generated excellent results during the quarter producing the highest absorption rate and the gross margins across all of our homebuilding companies. Demand for Pardee’s coastal projects remains strong and we continue to balance our sales pace with periodic price increases to make sure we maximize the value of the each home.

We recently opened three new communities in Pacific Highlands Ranch located in San Diego County, giving us a total of four active communities in this development. Each of these communities has its own unique characteristics and targets different buyer segments.

But they also serve as an excellent example of our commitment putting long dated assets into production to generate better returns as we expect these communities to start having an impact on our bottom line this year and for years to come.

Turning to the Inland Empire, we have experienced robust demand in several of our projects East of the I-15 corridor. Thanks to strong operational execution and home pricing that is within the FHA loan limits.

Our Inland Empire division at Pardee is selling at an absorption pace of six orders per community per month with gross margins above the company average. And I am happy to say the return of the entry level buyer in this part of California bodes well for the company given our long land supply in places like Lake Elsinore, Banning and Beaumont.

In Las Vegas, Pardee Homes also had a solid quarter with both gross margins and orders higher on a year-over-year basis. In general demand seems to be stronger at both ends of the spectrum as our entry level and higher end projects experienced better sales trends than our home offerings that cater to the middle of the market.

Our Tri Pointe Homes brand turned in another solid performance this quarter generating 4.3 orders per community per month. In Southern and Northern California we experienced strong demand trends which enabled us to raise prices in many of our communities.

Demand for Tri Pointe Homes in Denver continue to be strong as well, however while we enjoyed strong price in absorption increases in select communities. The market continues to suffer from a lack of skilled labor and available sub-trade. That said, we continue – we see continued growth and like the long-term outlook for the Denver market.

Turning now to the Pacific Northwest, Quadrant Homes experienced a 53% increase in new orders on a year-over-year basis.

As we mentioned during our last call earnings call, we refocused the operations at Quadrant by eliminating two other brand extensions and putting all of our sales and operating efforts on new product offerings under the Quadrant brand.

These initiatives implemented by the leadership team at Quadrant were instrumental in raising the sales pace from 2.6 orders per community per month in the first quarter 2014 to 4.9 orders per community per month in the first quarter this year.

While gross margins remained below company average, we were able to implement price increases in several communities during the quarter that should result in gross margin improvement in the second half of the year.

Our Maracay Homes brand in Arizona also experienced a strong rebound in sales during the quarter, with orders up 53% on a year-over-year basis. Our operations in Phoenix have improved considerably over the last 12 months, thanks to better consumer confidence, a great response to our product offerings and a veteran operating team in the marketplace.

The market improvement has allowed Maracay to narrow incentives and increase prices in select communities, which should help bring gross margins up as the year progresses. Our Trendmaker homes brand in Houston experienced a sales decline of 8% in the quarter compared to the first quarter of 2014.

However, this exceeded the sales performance that we had forecasted in our business plan during the quarter. Gross margins at Trendmaker have held up relatively well too coming in at about the same levels as the overall company average.

This performance speaks to the well seasoned operating team and the brand recognition that Trendmaker has established in the Houston market both with buyers and realtors for over 45 years.

While we continue to be cautious about the short-term outlook for the Houston market, we are encouraged by the way Trendmaker’s business has performed and our team’s ability to navigate choppy market conditions. Finally, our Winchester Homes brand in the mid-Atlantic also posted year-over-year increase in orders, with unit sales up 41%.

Despite this increase in orders, gross margins continued to be depressed through Winchester as the market remains stagnant and competitive making price increases difficult to combine. The spring selling season gets off to a later start in the mid-Atlantic as compared to other regions of the country.

So, we should have a better sense for the health of this market in the months to come. Now, I would like to turn it over to Mike for more detail on the numbers..

Thanks, Doug. Good morning. I would also like to welcome everyone to today’s call. I am going to highlight some of our key results and key financial metrics for the quarter and then finish my remarks with an update on our expectations and outlook for both the second quarter and full year 2015.

As a reminder, our merger with WRECO was accounted for as a reverse acquisition with WRECO as the accounting acquirer and legacy TRI Pointe as an accounting acquiree.

As a result, the consolidated financial statements for all periods prior to the closing of the merger will only reflect the historical financial statements of WRECO and will not include legacy TRI Pointe operations. Accordingly, legacy TRI Pointe results for the three months ended March 31, 2014 are not included in the GAAP results.

As part of our press release and in the slide deck located on the Investor Relations section of our website, we have included supplemental data of the combined company to add back legacy TRI Pointe.

Our first quarter included strong top line growth highlighted by the 55% increase in our home sales revenue over the previous year as a result of a 31% increase in home deliveries and an 18% increase in our average sales price.

Our homebuilding gross margin came in better than expected at 19.9%, which was flat as compared to the fourth quarter of 2014.

During the quarter, we are also successful in recognizing additional operating leverage improvements as reflected in our selling, general and administrative expense ratio, which improved to 13.8% as a percentage of home sales revenue compared to 16.1% in the same period a year ago.

This resulted in net income for the quarter of $15.3 million, or $0.09 per diluted share compared to $7.6 million or $0.06 per diluted share a year ago. We averaged 113 active selling communities during the quarter, up 25% from the same period a year ago, which helped fuel the significant increase in our net new home orders.

During the quarter, we opened 16 new communities, of which 7 were in California, 4 in Virginia, Maryland, 2 in Texas, 2 in Arizona, and 1 in Washington. In addition, we closed 7 communities during the quarter and ended with 117 active selling communities in line with the guidance we provided on our last call.

For the second quarter of 2015, we anticipate opening an additional 16 new selling communities, of which 6 are in California, 3 in Washington, 2 in the Virginia, Maryland area, 2 in Texas, 2 in Nevada, and 1 in Arizona. We also anticipate closing 9 communities and ending the quarter with 124 active selling communities.

During the quarter, our net new home orders increased 79% from the same period last year on a GAAP basis for 1,194 homes and increased 48% on an adjusted basis when including legacy Tri Pointe in the same period last year.

Our investment and product strategies are working as we have delivered one of the highest absorption rates per community per month of the publicly traded homebuilders, while continuing to raise our average net sales prices.

Our absorption rate of 3.5 orders per community per month for the quarter was an increase of 44% from 2.5 orders per community per month for the first quarter of 2014. We experienced significant increases in our net new home orders, along with absorption rates in all of our segments except for Trendmaker in Houston.

Our new home order activity resulted in quarter earning backlog of 1,558 homes, up 48% compared to last year’s first quarter with an average sales price and backlog of 605,000, up 8% as compared to 2014. Meanwhile, our dollar value of backlog increased 59% year-over-year to $943 million.

The increase in our average sales price of homes and backlog was primarily attributable to the inclusion of Tri Pointe Homes brand in this year’s results. During the quarter, we converted 65% of our fourth quarter 2014 backlog by delivering 668 homes.

Our average sales price in backlog – I am for homes delivered increased to 560,000, an 18% increase over 476,000 for the comparable period a year ago.

And again, this increase in the average sales price was primarily attributable to the addition of legacy Tri Pointe, which had an average sales price of homes delivered of 769,000 as well as increases in all of our reporting segments, except Winchester.

During the second quarter, we anticipate converting approximately 50% of our 1,558 homes in backlog as of March 31, 2015. Our homebuilding gross margin was 19.9% for the quarter, which was down 100 basis points year-over-year, but flat sequentially from the previous quarter.

Excluding the interest impairments and lot option abandonments in cost of home sales, our adjusted homebuilding gross margin was 21.8% compared to 22.5% for the first quarter of 2014. As I mentioned on our last call, we expected our full year homebuilding gross margins to be slightly higher than they were in 2014.

After our results for the first quarter and the visibility of our gross margins in backlog, we now anticipate improvement in our gross margins for the full year to approximately 21%. We expect to see gross margins relatively flat on a sequential basis in the second quarter and moving higher in the back half of the year.

Our gross margin improvement is impacted substantially by the percentage of deliveries coming out of California, where we achieve our highest gross margins. As for selling, general and administrative expenses, we continue to make progress in our operating leverage during the first quarter.

SG&A expense as a percentage of home sales revenue was 13.8% as a result of our focus on operational efficiencies, along with higher home sales revenue. This represented a 230 basis point improvement compared to 16.1% in the same period in the previous year.

The favorable leverage impact of higher revenues in the quarter more than offset increased expenses that we incurred primarily to support our community count growth, higher first quarter deliveries and our anticipated increase in deliveries in the second half of the year.

We expect to see sequential improvement in our SG&A expense ratio for the remainder of this year, particularly in the third and fourth quarter. For the full year 2015, we expect SG&A expense as a percentage of home sales revenue to improve to a range of 10.5% to 11% compared to the 11.3% we delivered during the full year of 2014.

During the first quarter, we spent $187 million on land acquisition development. As we mentioned before, we are targeting land acquisition and development spend of approximately $900 million to $1 billion for the full year of 2015. The focus of our land strategy is for communities, which will deliver homes in 2017 and beyond.

We currently own or control substantially all of the land needed to meet our plan deliveries for 2015 and ‘16. Now, I would like to make a few comments related to the balance sheet.

At quarter end, we had approximately $2.4 billion of real estate inventory, representing 25,750 owned lots with another 3,568 lots controlled, 63% of our lots owned and controlled are located in entitlement constrained California market.

A detailed breakdown of our lots owned are reflected in our 10-Q, in addition there will be a summary of lots owned and controlled by state in the slide deck in the Investor Relation section of our website.

As of March 31, 2015, we had total outstanding debt of $1.2 billion and a ratio of net debt to capital with 42.9%, an improvement of 810 basis points over the prior year. We ended the quarter with $107 million of cash on hand and additional liquidity of $104 million available under our $425 million unsecured revolving credit facility.

We are in the final process of expanding this credit facility to $550 million with an additional $150 million accordion feature in order to provide additional liquidity for working capital requirements as we continue to fund the growth in the company. We anticipate that this increase will be completed in the second quarter.

Before I turn the call back over to Doug for some closing remarks I would like to summarize our outlook for 2015. Our outlook remains unchanged for the full year 2015 where the company expects to increase home deliveries by 25% over the 2014 combined deliveries of legacy TRI Pointe and WRECO homebuilders.

During the quarter, we expect to deliver approximately 50% of our 1,558 homes in backlog at the end of the first quarter. As I discussed earlier we expect to open 16 new communities in the second quarter resulting in 124 active selling communities at June 30, 2015.

For the full year 2015, we expect to grow our active selling community count by 15% to 20% as compared to the year ended 2014. We anticipate our homebuilding gross margin for the second quarter to be flat sequentially from the first quarter and our full year homebuilding gross margins to be approximately 21%.

And then finally we are reiterating our 2015 outlook for earnings per diluted share to a range of $1.15 to $1.30. And now I want turn the call back over to Doug for some closing remarks..

Thanks Mike. In conclusion I am very pleased with our team’s execution during the quarter and our product offerings as we progress through the remainder of 2015 and beyond. California is and should continue to be a great source of profits for TRI Pointe Group for years to come. Thanks for our well-positioned landholdings within the state.

While our brands in the rest of the country should benefit from improving housing market conditions and the implementation of a more focused operating strategy. TRI Pointe Group is committed to being a best in class builder in each of our markets offering products from entry level to move up across all of our brands.

The integration and transition has gone remarkably well and is now complete. All of our team members are fully engaged in developing and building quality homes and providing an outstanding customer experience.

With that said we still have a lot of work to do in order to realize the full potential of our company, but our first quarter results give me confidence that we have the right people and strategy in place to capitalize on the opportunities that lie ahead. Finally, I want to thank all of our team members for a job well done this quarter.

That concludes our prepared remarks. And I will now open it up for questions..

Thank you. [Operator Instructions] Our first question comes from the line of Nishu Sood with Deutsche Bank. Please proceed with your question..

Thanks and good start to the year guys. My first question I wanted to ask was about the increase on the gross margin guidance.

Mike you have kind of laid out the numbers just above 20% to 21%, you mentioned that a lot of it is mix driven increase in California or deliveries in the back half of the year, I wanted to ask Doug you were mentioning some pricing power that you are seeing in some of your divisions, is that a part of that as well or is the increase in the gross margins that you are expecting strictly from mix shift to California.

The reason I am asking it implies quite a big pickup in gross margins from the 19.9% in the first two quarters of the year to get to the 21%.

So, I just was wondering if you could give us some more color there?.

Yes, Nishu, this is Mike. I mean, it’s a little bit of both. Obviously, we have seen a little bit of pricing power in some of the markets, for instance, in a quadrant and then in Arizona at Maracay.

But as I mentioned before, the reason our margins are lower in the first half is because our percentage of California deliveries are low in the first half of the year and then higher in the back half of the year. So, that’s driving some of the margin also in the back half of the year, but we see margin improvement in several of our segments..

Got it. And then with absorptions being really strong, the pace you had mentioned for the first two months of the year clearly continued into March. We would love your thoughts on the April as well, but with those absorptions up and gross margins coming in much better than expected, you are maintaining your overall EPS guidance.

Is there less land sale mix than you are expecting in there and more on the flowing through the volumes and the margins in ASPs or how does that look relatively speaking?.

No, we are still expecting the same amount of land sales that we had previously talked about. When we talk about April, I think we have put it on our slides and maybe didn’t mention in the script. We continue to see good absorption in April. We average about 3.47 sales in April, we had 4.10 sales and it’s on the slide deck.

So, we see – continue to see good margin or good absorption in our projects, but we are still sticking with our guidance of the $1.15 to $1.30 and it’s a pretty wide range. So, right now, we will look to maybe adjust that potentially at the end of the second quarter to see where our results are..

Got it, great.

And on the absorptions you – we talked about this last quarter where you mentioned that there are quite a few different directions that the individual legacy WRECO operations might be going, but in thinking about it in terms of applying the Tri Pointe operating model to the legacy WRECO divisions and the effect that, that might have on absorptions, the dramatic absorption gains were mostly driven by the legacy WRECO operations, up 2.5 to 3.3.

The legacy Tri Pointe operations were more stable. I think they may have been – even been down slightly.

If you were to characterize it in terms of innings, where are you in terms of getting absorptions to where you want them to be in the legacy WRECO operations?.

Well, I mean, I think we feel good about our absorptions. Obviously, the market has helped that as well when you look at Arizona. I mean, overall, we typically like to see our absorptions around 3.

When you look at the broad mix of product that we have across all of our segments, California is typically absorbed higher than that, Houston, where we sell a higher end product averaging around 500,000. We are typically selling around 2 months and we have been below that right now in the first quarter. So, I think we feel good about our pace.

We are averaging around 3.5 right now, a little bit above our expectations, but I mean….

So, I – Nishu, this is Doug, having a pace of the overall company of 3 is very strong when you look at the broad mix of product and price points, right now we are at 3.5, which is very good.

We pointed out in the Inland Empire east of the I-15, we are at 6, but remember that’s an entry level buyer and you should have good pace out there for that buyer segment. So, it’s really product driven, market driven.

So, what I would echo is we really – the teams have really engaged our operating philosophy, because as you know, the more pace you can generate, hopefully you will get some period expenses that drop to the bottom line. So, we see the teams engaging in that philosophy across the board.

Houston is still at an ASP of about $500,000 is selling just under two homes per community per month, but it’s still holding a very healthy margin in Houston..

Got it. Thanks. Appreciate the color..

Our next question comes from the line of Ivy Zelman with Zelman & Associates. Please proceed with your question..

Good morning. Thank you. Guys, just with respect to what you are seeing with respect to demand being stronger, absorptions and new community openings.

Are you surprised that the overall starts aren’t better knackered with macro data, would you believe that the overall market is growing and therefore start data will increase I guess just getting your perspective on that.

And at the same time, you are very favorable on your comments on entry level in terms of where your operations in Pardee and in Southern California and Inland Empire, so maybe give us some perspective on strategically how much capital would you be willing to allocate to maybe those secondary markets because there is now demand and an opportunity to grow the overall pie in that entry level and I guess what is entry level and entry level in California and Southern California price point and in Vegas and in Phoenix wherever else? And then I have a follow-up about the drought, so if you can start there?.

Hi, Ivy, it’s Doug. Start data is pretty choppy I kind of focus a little bit more on permit data. I am not an expert in the collection of all that data, it does surprise me periodically. Obviously there were some strong weather conditions on the East Coast during the winter months.

But as you look at the earnings call season and everybody is having good orders trends, one would conclude that starting one home - pulling permits and starting one home is going to happen.

I also think though that some of the macro data is also impacted by the fact that the private builder that maybe a little more capital constrained that maybe has had a bigger impact on that data historically may not be able to generate the type of velocity that they did 10 years ago. That’s again my theory, but I don’t have any great evidence for it.

We are very excited about where we have seen the first four months of this year, kind of teeing us up for a strong back half of 2015. So it’s looking very good. As far as the entry level buyer and being opportunistic, I call it we are opportunistic.

I mean we generally at an average sales price of 550 is more in a premium brand, but we do have the capability to turn on the spigot quite a bit with Pardee in the Inland Empire and Vegas to continue to increase our home deliveries in that segment.

And it definitely has seen a nice market attraction, as we look at the I-15 corridor East, we command that market and we have got the land there in place to continue to increase deliveries and grow that market. So that’s as far as capital we have the land, we are just going to continue to put it to use in those corridors and in those marketplaces..

One thing Ivy, I will add to that. We are currently investing capital in development in both Beaumont and Camden Hills [ph] master plan community and like Elsinore to fuel that demand segment going forward.

So we are very optimistic about our opportunities there and see continued interest from that affordable entry level buyer and having product that fits within FHA guidelines is the key to helping that happen..

And maybe just elaborate just on the entry level buyer, is this – the perception of credits improving, is this mortgage lenders getting more willing to take out the credit overlays, what are you seeing that might be driving those affordable buyers, is it rents that continue to move buyers, everybody is saying why is ’15 better especially as we’re starting to see pickup at entry level, if you could elaborate on that mortgage…?.

The credit box is still the credit box, but what we have anecdotally felt is that reduction in the insurance premium, Tom as we talk to our sales team in the Inland Empire it has definitely helped. And so the other thing and I think you asked this the last quarter, is that boomerang buyer in that marketplace has come back quite a bit.

I would say over 35%, 40% of our sales in that marketplace are those buyers and frankly they are some of the strongest buyers. They now understand the credit process. And they also know not to load up on options and put themselves in the top position.

So we have found those boomerang buyers to be some of the best getting – navigating through the current credit process, you still have to show up with all the documentation, but we haven’t had any material challenges in that area..

But also the rental rates that you did suggest are playing a factor in that and household formation is happening. That millennial buyer segment is beginning as well and that’s certainly more on the entry level. So, we are encouraged overall..

To sneak in, do you have any data that tells you of the percent of your orders, how many are millennials?.

I don’t have that data in front of me, but we could probably dig into it and get a little better understanding of it. It’s obviously with our product mix. It will be more focused in the Pardee Las Vegas and Inland Empire, but just in looking at those divisions, we will take a look at that..

Yes, I think it would help receive some of the secular bears that young people don’t want to own today. With respect to the drought, there is a lot of concern, people are going to start leaving California in droves because of not being able to water their lawns and the quality of life on the water concerns.

Can you help alleviate some of those fears?.

Well, I think the drought is over. Last night I woke up at 3 am and it’s been pouring all night. Obviously, it’s a little too early to call the drought over. And actually, I heard it snowed up in this year as it’s really not a new home, a new housing issue and it’s too early to address the impact.

The government orders actually came out in the news two days ago really impact existing housing, some of the older housing stock and really the water usage in landscaping in and around the various water districts. But as far as Tri Pointe in California is concerned, over 80% of our lots have water agreements in place.

So, we feel very secure in where we stand right now, but it’s still obviously early in this whole drought kind of emergency order. I frankly believe that California is very creative and the technology is always here. I mean, you look at San Diego County, everybody forgets that we have this thing called the Pacific Ocean right off our coast.

And San Diego has been a ton of money putting desalination plants in place and they actually have some of the best water availability in that county. So, nobody is leaving California. Everybody is still enjoying our golden state.

And we are in a really good position with our property having our most of our water agreements in place, water rights agreements in place..

I think the fear was that permits won’t get approved going forward and there will be more constraints on municipalities and then I promise I am done. No more questions for me..

Yes, that’s always – hey listen, there is definitely always a no growth segment out there and they will try to hold on to that shingle, but frankly, the new housing is not the issue. We actually are the solution.

As far as our developments between potable and non-potable water and our usage with low flow plumbing devices, we are actually a solution and it’s never been targeted for sure from the governor on down.

But yes, you are going to get whatever crazies you want out there saying well – we got to put that slogan out there, but that’s nowhere in anybody’s vernacular. No discussions that I have seen with any of the water agencies..

Thanks guys..

Our next question comes from the line of Jay McCanless with Sterne Agee. Please proceed with your question..

Good morning, everyone. First question I had with the sequential decline in the average backlog price from 4Q to 1Q.

Can you discuss what drove that and where you anticipate the average backlog price is going to trim this year?.

Yes, I think Jay we have talked about that in the past as well. This is Mike sorry. It’s really mix driven, some of the – as we talk our backlog ASPs probably going to drop throughout the years. We are bringing new communities on at lower price points. We still have guided to an ASP of around 550.

I think we have talked about the peak to trough on that between quarters is relatively small. Just like this year, we delivered – at this quarter we delivered the $560,000 average sales price and saw our backlog ASP drop..

Okay.

So, it’s probably still around 550 is the right number to use?.

Correct..

Okay.

The second question I had there was roughly a $10 million increase year-over-year for G&A cost, is that a good run-rate delta to use for the rest of the year or were there some one-time items in the numbers this quarter?.

Well, it will just be one-time item, but I mean it’s a pretty good run rate to use per quarter, obviously when you talk about our SG&A leverage there is going to be significant improvement as we deliver more houses in the future quarters.

We have the people in place to deal that deliver the growth that we are going through this year the 25% increase in deliveries, so pretty good run rate on a quarterly basis..

Okay.

And then just one other quick one, Northern California we have seen the existing markets there, not just the Bay Area but other areas around the San Mateo started doing a lot better, could you discuss what you guys have on the ground there and what you are seeing at the market level?.

Yes, Jay. This is Tom. Northern California has been extremely strong. Obviously starting in the core Bay Area and then moving outward and eastward as you suggested. But starting in that core area in San Mateo we have got a product that’s doing phenomenal. We have opened up two new communities in Alameda that are doing well and Milpitas is doing well.

As we go outward and get into our Brentwood communities seem quite a big pickup in sales activity there. And then even as we go further out into Vacaville and Tracy we have seen some excellent results relative to absorption as well as we are beginning to see from price elasticity in those markets as well..

Jay, I would add in the core Bay Area, we have been blessed with some double-digit price increases in the first quarter and in that Eastern Contra Costa County area that Tom described we have also had some price increases in the single digits, but it’s all – and all our communities are doing very well up there..

It sounds good. Thanks guys..

[Operator Instructions] Our next question comes from line of Mark Weintraub with Buckingham Research. Please proceed with your question..

Thank you.

First, I was hoping if you have any updated thoughts on potential land disposition or JVs in the coming quarters?.

Yes. Mark, this is Tom. We continue to work on optimizing our development plans for all those longer land assets and we are making good progress there. We have had some conversations relative to potential JV opportunities and stay tuned as we continue to move forward with some of those strategies, but nothing concrete to report right now..

Okay, great.

And then also I was trying to get a sense as to what you are seeing on the cost side and in particular whether you are building and presumably certainly on the sticks and bricks you are seeing some reductions or seeing some reductions and is that built into the gross margin expectation for the second half of the year or could that even potentially be a good thing yet to come?.

Mark, this is Doug. Yes, the gross margin expectation and cost and I will call it stick and brick direct building costs are built into that expectation. Generally speaking and I would lump labor and materials into one category across all six brands.

We expect and have felt a little bit in the first quarter, but expect for the whole year to see anywhere from 1% to 3% cost increases in labor and materials. Labor is probably the biggest component to that and that’s for the full year 2015..

Okay, thank you..

Our next question comes from the line of Alex Barron with Housing Research Center. Please proceed with your question..

Thanks and great job guys..

Thanks Alex..

Sorry I got a little tied here. I wanted to focus a little bit on the – I am sorry I lost my train of thought. I will come back. Let me come back, I apologize..

Our next question is a follow-up from Jay McCanless with Sterne Agee. Please proceed with your question..

Alright. Thanks for taking my follow-up.

Wanted to ask on Texas, I heard the commentary about gross margins holdings stable, but can you talk about are you having to do extra maybe sales incentives to outside brokers, how are the operating margins holding up in that market, any commentary on that would be appreciated?.

Hi Jay, it’s Doug. As we mentioned our gross margins are in line with our current company average. So we have been able to hold that, it’s still very competitive and incentives vary from completed inventory to maybe running a special for broker incentive to not running incentive. So it’s very project specific.

We haven’t had a great week last week in Houston, one of our strongest. So we have got a very strong operating team there, they are veterans in the marketplace, keyed in on each one of our communities. But it’s continued to be a competitive marketplace and they are actually doing a very good job of holding margins as we continue to move forward..

Okay. It sounds great. Thanks..

Our next question comes from the line of Alex Barron with Housing Research Center. Please proceed with your question..

Okay. My apologies earlier, I wanted to talk about Houston, I wanted to see if you guys could give a little bit more color since I think you are towards the higher end of the price point there.

First, I wanted to see if you could give us what is the range of your prices there and if you are seeing a very different experience at different price points or different parts of the city.

And then second I wanted to see if you could talk about the progression through the quarter if you saw any significant difference in the sales activity and whether buyers were mentioning any impact from the oil as far as their purchases..

Hi, Alex, this is Doug. Our ASP is just right around $500. So we are definitely viewed and build through a premium product and buyer profile there. Trendmaker brand and recognition with the realtor is a very big relocation market is very strong. So our sales pace for orders per community per month is just under two.

And it was that way at the end of the fourth quarter and it kind of continues. April was a little softer. We started May with a big bang. So that’s generally where we are seeing it. We don’t build in the entry level product segments. I couldn’t really talk to you about that.

We have had a very strong sales success in South Houston, down in Clear Lake we opened up new communities down there to actually a list of buyers that were waiting to sign up and we have had tremendous success because it’s a very underserved, undersupplied marketplace down there.

I would say the most competitive areas is in that oil and gas corridor kind of west of town. But again we continue to get our share of buyers because of our brand recognition and our product execution in that marketplace..

Okay, great.

And then as far as land sales if I recall I think last quarter when you guys talked about roughly $100 million, is that going to be like one-time thing or is it more spread out in the remainder of the year?.

Well, we didn’t give an update on our land sale, one of the large land sales is the Pacific Highlands Ranch, it’s still under contract to close in the second quarter whereas we still guided to roughly around $100 million of the land sales for 2015. We think we are in a pretty good shape for that to deliver that.

But it does – it’s obviously lumpy throughout the year, big second quarter and then probably a heavier fourth quarter. Our focus going forward Alex is to really drive our homebuilding EPS. I mean our goal is to drive our homebuilding operations and grow our homebuilding operations.

So we want to have less reliance on land sales and really be able to deliver those lots to be able to deliver homes for our own sales [ph]..

Alright.

And in terms of the margin, Mike on those land sales is it likely to be low, are you just basically selling non-strategic lands or is this land that has pretty good margins embedded?.

Well, for instance the commercial side sale is a 16 acre site in Pacific Highlands Ranch which we owned since 1981, I believe it has a pretty significant margin on that project. And the other land sales are still decent margins. There is really not any land sales with lower margins..

Got it, okay. Thanks..

I am not sure what your definition of low is but?.

And as well a lot of builders they sell lands with less than 10% margins, sometimes even a loss kind of like what you guys had this quarter. So I guess my definition would be less than 10%..

Yes. When you look at this quarter it’s really related to our land held for future investments, it’s maintenance costs, property taxes, things like that is really not – it’s costs where there was really no land sales which is driving that..

Got it. Okay, cool. Thanks..

We will look for a little bit higher margins in the second quarter related to land sale..

Okay, thanks..

Mr. Bauer, we have no further questions at this time. I would now like to turn the floor back over to you for closing comments..

Thank you everyone for joining us today. We look forward to chatting with all of you at our next quarter’s call. Have a great day. Thank you..

Ladies and gentlemen, this does conclude today’s teleconference. You may disconnect your lines at this time. Thank your for your participation and have a wonderful day..