Amid ongoing policy uncertainty and related consumer hesitation, D.R. Horton suggests the spring selling season gotten off to a slow start.

“This year’s spring selling season started slower than expected, as potential home buyers have been more cautious due to continued affordability constraints and declining consumer confidence,” Paul Romanowski, president and CEO of D.R. Horton, said during the company’s second quarter earnings call.

In part due to the sluggish beginning to the spring selling season, D.R. Horton’s net sales orders decreased 15% year-over-year to 22,437 in the second quarter and order value decreased 17% to $8.4 billion.

Horton’s earnings report coincided with the release of the latest NAHB/Wells Fargo Housing Market Index (HMI), which indicated builder sentiment remained negative in April. The same economic uncertainty weighing down consumer confidence as well as elevated building material costs contributed to builder confidence remaining constrained.

“Policy uncertainty is having a negative impact on home builders, making it difficult for them to accurately price homes and make critical business decisions,” NAHB chief economist Robert Dietz said. “The April HMI data indicates that the tariff cost effect is already taking hold, with the majority of builders reporting cost increases on building materials due to tariffs.”

The Impact of Tariffs

According to the NAHB’s HMI, 60% of builders reported their suppliers have already increased or announced future increases of material prices due to tariffs. On average, suppliers have increased their prices by 6.3% in response to announced or expected tariffs. As a result, builders estimate a typical cost effect from recent tariff actions at $10,900 per home, according to the NAHB.

Romanowski says while the tariff picture is changing day-to-day, the scale and size of D.R. Horton will likely allow the builder to hold costs and “see the lower end of any impact from tariffs wherever they land.”

“The input of items that will be covered by a tariff are only part of our cost input,” he said. “We have labor, we have our vendor partners and labor partners that look at their level of profit. And I think we’re all going to have to come to the table and adjust to deliver a house that the market finds compelling and can afford.”

“We’ve seen lumber holding pretty steady and about 20% of the lumber that we use in our homes is through Canada,” Romanowski said on the call when asked about lumber specifically. “Should we see tariffs accelerate or hold up at a higher level, we’ll look to adjust that. But, I think with where we are today, you won’t see those lumber prices come through really [until] toward the end of this fiscal year and into 2026.”

Sales, Incentives, and Consumer Sentiment

D.R. Horton said, where necessary, it increased sales incentives in the fiscal second quarter—ended March 31—to find the market and drive traffic.

“We will continue to adjust our product offerings, sales incentives, and number of homes in inventory based on the level of demand for new homes in each of our local markets,” Romanowski said.

The builder’s cancellation rate in the second quarter was 16%, down from 18% sequentially in the fiscal first quarter but a tick higher than the 15% rate a year ago. While D.R. Horton has focused more on rate buydowns than price cuts, NAHB’s HMI survey revealed 29% of builder cut prices in April with an average price reduction of 5%. Sixty-one percent of builders utilized sales incentives in April, according to the NAHB.

Romanowski said weekly sales in March and April outpaced February levels, suggesting an improving market and the success of tactics such as price adjustments and incentives.

“We expect our incentive levels to remain elevated and increase further [over the next few months],” Romanowski said. “The extent to which [they will increase] will depend on market conditions and changes in mortgage rates.”

Housing Starts

Against the backdrop of constrained affordability, rising costs, and pockets of labor shortages, overall housing starts decreased 11.4% in March to a seasonally adjusted annual rate of 1.32 million units, according to the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. For single-family homes, the rate of starts declined 9.7% year-over-year to a seasonally adjusted annual rate of 940,000.

For its part, D.R. Horton started 20,000 homes in the fiscal second quarter and ended the quarter with 36,900 homes in inventory, down from 24,900 starts and 45,000 homes in inventory in the same period a year ago. The builder projects its starts pace will accelerate in the third quarter.

“For homes we closed in the second quarter, our construction cycle times improved a few days from the first quarter and approximately three weeks from a year ago,” Romanowski said. “Our improved cycle times position us to turn our housing inventory faster, and we will continue to manage our homes and inventory and starts pace based on market conditions.”