Arlington, Texas-based D.R. Horton, the largest homebuilder in the U.S., saw a 37% year-over-year increase in sales orders last quarter despite higher mortgage rates and inflationary pressures.
The company’s sales orders for the quarter from April to June increased from 16,693 in 2022 to 22,879 in 2023, it reported Thursday. Closings increased 8% to 22,985 homes.
D.R. Horton earned $1.3 billion in profit — a 19% year-over-year decrease — on $9.7 billion in revenue in the quarter.
The homebuilder increased its expectations for its fiscal year, which ends in September. In April, the company reported expectations of up to 80,000 closings and up to $33 billion in revenue for the full fiscal year. On Thursday, the company said it now anticipates up to 83,300 closings and as much as $35.1 billion in revenue.
In response to dramatically higher mortgage rates than in 2020 to early 2022, the company and other builders nationally have used incentives such as rate buy-downs to address buyers’ affordability challenges.
D.R. Horton has also reduced the size of its homes to help keep prices down. Its average closing price for the quarter nationally was $378,600, down 3% from a year before.
“We are focused on consolidating market share by supplying more homes to meet homebuyer demand while maximizing the returns and capital efficiency of each of each of our communities,” said D.R. Horton president and CEO David Auld.
Auld said because of shortened and more reliable construction timelines, the company is not as limited as it was a year ago in how much it can build and sell. “I do believe that we’re gonna have a lot more houses to sell this year,” he said. The company started 22,000 homes during the quarter, up from about 18,000 a year before.
The company also sold 1,754 single-family rental homes for $589.6 million during the quarter but declined to disclose the buyers. In June, Bloomberg reported that Pretium Partners was acquiring thousands of homes from D.R. Horton in a deal valued at more than $1.5 billion, which has not been confirmed by D.R. Horton. It is unclear whether last quarter’s sales were tied to the reported Pretium deal.
It also recently acquired the homebuilding operations of Truland Homes, a private builder in the Alabama Gulf Coast and Florida Panhandle areas, for roughly $100 million in cash. D.R. Horton executives have previously said capital constraints for smaller builders could lead to more opportunities to pick up land and home construction sites nationally.
“It is really hard to put a lot on the ground, it is really hard to build houses, and the private guys, now they kind of struggle with capital from either private or banks, increasing in cost,” Auld said Thursday. “Do we have the opportunity to talk to a lot of these guys? Yes, we do, but it’s gonna take unique opportunities for us to invite them into the family, because we do have a special culture here, and we’re not going to screw it up trying to force a square peg in a round hole.”
Brian Yarbrough, an analyst for Edward Jones who tracks D.R. Horton, said he is cautious about the market, considering that prices have grown faster than wages. He said the average consumer may think home prices will continue to go up, prompting them to buy now.
“I think when you have prices go up as much as they did during the pandemic, that gets everyone excited and it gives false hope that that will continue, but they can’t,” Yarbrough said. “I always tell people, prices can’t outpace wage growth for long periods of time without impacting demand at some point.”
In Dallas-Fort Worth, builders closed a record number of home sales in the spring while existing home sales sank slightly over the last year. Hesitation from would-be sellers to leave low mortgage rates behind has restricted the number of new listings of pre-owned homes.
Bryan Glasshagel, a senior vice president in Dallas-Fort Worth for housing research firm Zonda, said the timing was right in the spring for North Texas builders, who had a huge number of homes under construction that they were looking to sell, to take advantage of the low supply in the pre-owned market with incentives and discounts. As demand has picked up in recent months, prices of new homes have trended up, Glasshagel said.
“I think it’s that balancing act of, ‘Okay, demand is here, we don’t want too much demand, we want to be balanced,’” he said.
