Rising mortgage rates and persistent affordability constraints weighed on D.R. Horton’s home sales during its fiscal fourth quarter, contributing to year-over-year declines in both closings and new orders.
The Arlington, Texas-based builder closed 22,915 homes during the quarter, down 2% from the prior year period. Home sales revenue declined 2% to $8.4 billion.
Net sales orders fell 7% to 18,619 homes, with the value of those orders declining 9% to $6.6 billion. The cancellation rate was 23%, compared with 20% a year earlier.
On the earnings call, D.R. Horton reported an average sales price on net orders of approximately $357,000, down 2% both sequentially and year over year.
“Housing market conditions became more challenging during the fourth quarter as rising mortgage rates, affordability constraints, and cautious consumer sentiment continued to pressure new-home demand,” executive chairman David Auld said.
Margins Contract as Incentives Remain Elevated
Home sales gross margin was 19.5% in the quarter, down 120 basis points sequentially. Management attributed 80 basis points of the sequential decline to above-normal litigation costs.
Home building pre-tax income declined 11% to $891 million, while its pre-tax profit margin was 10.6%. Auld said incentives are expected to remain an important affordability tool heading into the new fiscal year.
“We expect incentives to remain elevated in fiscal 2027, the extent of which will depend on market conditions throughout the year,” he said.
D.R. Horton also pulled back sharply on starts as it worked to align inventory with the slower sales environment. The builder started approximately 13,100 homes during the September quarter, down 45% sequentially, according to the earnings call.
The builder ended Sept. 30 with approximately 28,200 homes in inventory, including 17,700 unsold homes. Of those unsold homes, 8,800 were completed.
Despite the challenging end to the year, D.R. Horton closed 84,202 homes during fiscal 2026, generating $30.6 billion in home sales revenue. Consolidated revenue for the full year totaled $33 billion, with net income attributable to the company of $2.9 billion, or $10.11 per diluted share.
Looking to Fiscal 2027
D.R. Horton enters fiscal 2027 expecting affordability constraints and elevated mortgage rates to continue influencing buyer demand.
The company expects to close between 79,000 and 84,000 homes in fiscal 2027 and generate consolidated revenue of approximately $30 billion to $32 billion.
