D.R. Horton, the largest homebuilder in the United States, reported a decline in first quarter earnings as affordability issues and cautious consumer sentiment continued to impact demand for new homes.
The company’s net income for the quarter was $594.8 million, or $2.03 per share, compared to $844.9 million, or $2.61 per share, during the same period last year. Revenue also fell from $7.6 billion to $6.9 billion year-over-year. Despite these declines, both net income and revenue exceeded analyst expectations.
Home closings dropped by 7 percent to 17,818 units over the previous year, while the average closing price decreased by 3 percent to $365,500.
Executive Chairman David Auld said “affordability constraints and cautious consumer sentiment” are continuing to affect demand and have led D.R. Horton to increase sales incentives as the quarter progressed. These incentives—often mortgage rate buydowns—are expected to remain at higher levels into fiscal 2026.
CEO Paul Romanowski noted that incentive levels observed in December indicate gross margins will likely decrease again in the second quarter. The company projects a home sales gross margin of between 19 percent and 19.5 percent for that period, which is below what analysts had anticipated.
Romanowski added that there are signs of improvement as mortgage rates have recently declined and traffic at sales offices has increased. He stated that if mortgage rates remain lower, it could reduce the need for costly incentives going forward. However, he cautioned that concerns about job growth persist: sustained employment gains are necessary for a lasting recovery in housing demand.
Looking ahead, D.R. Horton plans to increase housing starts in the second quarter after many builders slowed activity late last year in an effort to protect profit margins. The company forecasts revenue between $7.3 billion and $7.8 billion on 19,700 to 20,200 closings for its next quarter.
