Despite market headwinds, D.R. Horton ended its fiscal year strong, reporting a company-record level of home closings for the full fiscal year 2023.

The largest home builder on the 2023 BUILDER 100 closed 82,917 homes for the full year and closed an additional 6,175 single-family rental homes and 2,112 multifamily rental units for the full fiscal year.

“Despite continued high mortgage rates and inflationary pressures, our net sales orders increased 39% [in the fourth quarter] from the prior-year quarter as a result of limited new and existing homes at an affordable price point,” executive vice chair David Auld said during the builder’s earnings call.

“We are focused on consolidating market share by supplying more homes at an affordable price point to meet home buyer demand while maximizing the returns and capital efficiency in each of our communities.”

In the company’s fourth quarter, ended Sept. 30, D.R. Horton reported profit of $1.51 billion, or $4.45 per share, surpassing analyst expectations by nearly $0.50 per share.

For the full fiscal year, D.R. Horton’s profit per share decreased 16% to $13.82 from $16.51 per share in fiscal 2022. Full-year profit decreased 19% to $4.7 billion from $5.9 billion in fiscal 2022. Revenues in the fourth quarter increased 9% on a year-over-year basis to $10.5 billion while full-year revenues increased 6% to $35.5 billion.

“To adjust to changing market conditions and higher mortgage rates, we have increased our use of incentives and are reducing the size of our homes where possible to provide better affordability for our home buyers,” Michael Murray, executive vice president and chief operating officer, said. “We expect to continue utilizing a higher level of incentives in fiscal year 2024, particularly rate buydowns in the current interest rate environment.”

Net sales orders in the fourth quarter increased 39% to 18,939 homes and 34% in value to $7.3 billion compared with the fourth quarter of 2022. The home builder’s cancellation rate in the quarter was 21% compared with 32% in the prior-year period. In the full fiscal year, net sales orders increased 3% to 78,342 homes, while cancellation rates improved 1 percentage point to 20%. D.R. Horton’s sales order backlog of homes under contract at the end of the quarter decreased 23% to 15,197 homes and 26% in value to $5.9 billion.

President and CEO Paul Romanowski said construction cycle times decreased by a month sequentially for homes closed in the fourth quarter.

“We will continue to manage our homes in inventory and starts pace based on market conditions,” Romanowski said. “We expect further improvements in our cycle times and housing inventory turns in fiscal 2024.”

Land Update

At the end of September, D.R. Horton had 42,000 homes in inventory, of which 27,000 were unsold. Seven thousand of the company’s unsold homes were completed. The builder’s land and lot portfolio totaled 568,400 lots at the end of the year, of which 25% were owned and 75% were controlled through land and lot purchase contracts.

“Our fourth quarter investments in lots, land, and development totaled $3.2 billion, up 7% sequentially. Our current quarter investments consisted of $1.5 billion for finished lots, $580 million for land development, and $290 million for land acquisition,” Murray said.

For the full fiscal year, D.R. Horton invested $8 billion in lots, land, and development, up from 6% in fiscal 2022.

Rental Operations

D.R. Horton’s rental operations generated pre-tax income of $217.2 million on revenues of $1.4 billion in the fourth quarter, compared with a pre-tax loss of $13.1 million on revenues of $21.1 million in the fourth quarter of 2022.

During the quarter, D.R. Horton sold 3,006 single-family rental homes for $973.1 million, compared with 96 homes for $21.1 million in the prior-year period. For the full fiscal year, the builder sold 6,175 single-family rental homes, a significant improvement from 774 homes in fiscal 2022. The company sold 1,582 multifamily units in the quarter and 2,112 units for the full fiscal year, compared with no units and 775 units in the prior-year period, respectively.