Affordability Slows Closings for D.R. Horton, But Orders Tick Up in Q4

New home demand remained impacted by affordability and cautious consumer sentiment, resulting in declines in fourth quarter and full-year closings at D.R. Horton, the nation’s largest builder. 

D.R. Horton delivered homebuilding revenue of $8.6 billion and home closings of 23,368 in the fourth quarter, declines of 4% and 1%, respectively, compared to the same period a year ago. In the builder’s full fiscal year, ended September 30, revenue declined 7% to $31.5 billion while home closings fell 5% to 84,863 homes. 

Given the continued hesitation of home buyers, incentives remained an important element of D.R. Horton’s strategy in the fourth quarter. According to executive vice president and chief operating officer Mike Murray, the builder’s average closing price of $365,600 is 30% lower than the average sales price of new homes in the United States and $65,000 lower than the median price of existing homes. The builder anticipates incentive levels will remain elevated in fiscal 2026. 

“We strive to offer our customers an attractive value proposition by providing quality homes at affordable price points,” president and CEO Paul Romanowski told investors during the builder’s earnings call. “We will continue to tailor our product offerings, sales incentives, and number of homes in inventory based on demand in each of our markets to maximize returns.”

Despite the challenging market conditions, D.R. Horton’s balance of pace, price, incentives helped drive a 5% increase in net sales orders during the fourth quarter to 20,078. The builder reported a fourth quarter cancellation rate of 20%, down 1% from the same period a year ago and in line with the company’s historical average. For the full fiscal year, net sales orders decreased 4% to 83,423 homes while the cancellation rate remained flat at 18%. 

“We recognize the current volatility and uncertainty in the economy and we will continue to adjust to market conditions in a disciplined manner to enhance the long-term value of our company,” Romanowski said. “Looking ahead, we have a positive outlook for the housing market over the medium to long term.”

In the fourth quarter, D.R. Horton reported a profit of $905.3 million, or $3.04 per share, down 29% and 22%, respectively, on a year over year basis. The results were below the consensus Wall Street projections for profit per share by nearly $0.25. For the full fiscal year, profit declined by 25% to $3.6 billion while profit per share fell by 19% to $11.57. 

Starts Pace and Land Strategy

D.R. Horton started 14,600 homes in the fourth quarter and ended the year with 29,600 homes in inventory, down 21% from a year ago. Of the builder’s inventory homes, 19,600 were unsold and 9,300 of the unsold homes were completed. 

Romanowski said improvements in cycle time allowed the company to hold fewer homes in inventory and improve the efficiency in turning housing inventory. In the fourth quarter, the median cycle time for D.R. Horton improved by one week compared to the third quarter and by two weeks compared to the fourth quarter of 2024.  

The builder ended the 2025 fiscal year with 591,900 lots, down 6.5% from the end of the 2024 fiscal year. Approximately 25% of D.R. Horton’s total lots were owned. Of homes closed during the fourth quarter, 65% were on a lot developed by third parties or Forestar, D.R. Horton’s residential lot development subsidiary. 

Guidance for 2026 

D.R. Horton projects headwinds to demand, namely affordability constraints and weak consumer confidence, will persist into next year. However, despite these expectations, D.R. Horton is projecting annual home closing growth in 2026 between 1.3% and 3.7%.