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Tight supply of homes propels builder D.R. Horton to big sales, profits

The homebuilder raised its forecast for its fiscal year despite rising interest rates.

D.R. Horton Headquarters pictured in Arlington, Wednesday, Jan. 25, 2023.(Elías Valverde)

4:20 PM on Apr 18, 2024 CDT

Arlington-based D.R. Horton, the country’s largest homebuilder, saw a 14% year-over-year increase in sales orders despite inflation and elevated mortgage rates.

The company’s net sales orders for the second fiscal quarter ending March 31 were 26,456 homes, up from 23,142 over the same period last year. That’s also a 46% increase from the 18,069 net sales reported last quarter.

Brian Yarbrough, an Edward Jones analyst who closely tracks D.R. Horton, said the homebuilder continues to execute, benefitting from a lack of existing supply in the marketplace.

There were three months of housing inventory in the Dallas-Fort Worth area, according to March 2024 data from the MetroTex Association of Realtors. A balanced housing market requires a five- or six-month supply.

“They’re in a very good environment right now,” Yarbrough said. “There’s just a lot of demand for new homes. So you just wonder … affordability is at an all-time low. You just have to question how long this can continue.”

D.R. Horton earned $1.2 billion in profit, up 24% from $942.2 million during the same period a year ago. Consolidated revenue for the quarter was $9.1 billion.

The homebuilder reported a stronger first half this fiscal year with 44,525 net home sales orders. That’s up from 36,524 reported sales orders during the same six-month period last year. Profit was $2.1 billion, up from $1.9 billion last year. That’s an 11% increase.

The homebuilder raised its forecast for the fiscal year ending in September, citing the limited supply of both new and existing homes at affordable price points. Demographics supporting housing demand also continue to be favorable.

D.R. Horton now anticipates consolidated revenues of $37.7 billion, up $1 billion. The company also expects to close on 2,000 more homes this fiscal year.

As of March 31, the company had 45,000 homes in inventory with 27,600 unsold.

In response to recent higher mortgage rates, D.R. Horton and other builders have used incentive programs like rate buy-downs to help buyers with affordability issues. The company has also reduced the price and size of homes.

While the Federal Reserve signaled rate cuts were likely in 2024, builders and others waiting for the drop got some concerning news last week.

The latest Consumer Price Index data released by the Bureau of Labor Statistics showed inflation rose more than expected in March. The average 30-year mortgage rate for the week ending April 18 crossed the 7% threshold for the first time this year, according to Freddie Mac. Rates have remained at a two-decade high.

D.R. Horton said during Thursday’s call that it will continue to offer those buyer incentives at the same levels.

“We do expect incentives to remain near their elevated levels today, especially with the rate instability and stickiness up in that 7% range today,” said Paul Romanowski, D.R. Horton’s President and CEO.

Nick Wooten. Nick is a real estate reporter for the Dallas Morning News. He previously worked as a digital investigative reporter at 11Alive, Atlanta's NBC affiliate. He's produced award-winning state politics coverage and feature reporting at Georgia newspapers. Nick is a graduate of Mercer University in Macon, Georgia.