Homebuilder D.R. Horton braces for decline in Q1 sales due to soaring mortgage rates

D.R. Horton, a U.S. homebuilder major, anticipated a drop in home sales in the first quarter. This outlook is influenced by the impact of elevated mortgage rates, nearing 8%, and soaring home prices driven by a scarcity of available units for sale. Consequently, a number of prospective buyers have postponed their plans to purchase homes. The leading U.S. homebuilder in terms of volume, D.R. Horton, anticipates home sales for the current quarter to be in the range of 18,500 to 19,000 units. This marks a decline from the previous quarter, which concluded in September with 22,928 units sold. Due to a decrease in housing demand, homebuilders are responding by implementing various incentives, including mortgage rate buydowns, particularly targeted at entry-level buyers, and introducing lower price points. D.R. Horton plans to maintain increased incentive levels, primarily through rate buydowns, in fiscal 2024. They mentioned providing mortgages in the 6% range, which contrasts with the prevailing high rates at 8%. Aided by these incentives, the Texas-based builder foresees selling within the range of 86,000 to 89,000 units in the fiscal year 2024, surpassing the previous year’s figure of 82,917. D.R. Horton foresees a decline in home prices, attributing it to affordability challenges. The surge in prices over the past two years is linked to a significant number of homeowners with lower fixed mortgage rates being reluctant to re-sell and acquire new houses at higher interest rates. In the fourth quarter, D.R. Horton reported a 4.71% decline in net income attributable, settling at $4.45 per share compared to the previous year. Despite this decrease, it exceeded analysts’ average estimate of $3.93, according to LSEG data. The company’s revenue saw a notable 8.96% increase, reaching $10.50 billion, surpassing analysts’ projection of $10.01 billion, driven by heightened demand fuelled by incentives.

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Homebuilder D.R. Horton braces for decline in Q1 sales due to soaring mortgage rates

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