Consumer uncertainty about the economy and continued affordability challenges have pushed national homebuilder D.R. Horton to reevaluate its projected revenue for the year and reduce home construction.
In its second-quarter earnings call on Thursday, the mega builder adjusted full-year earnings predictions by nearly $3 billion and dropped home sales expectations by 5,000 for the year. While the builder has led with the title of “America’s builder”, it also reported a four-year low in new homes for the quarter and a 15% decrease in sales.
Arlington, Texas-based D.R. Horton builds single-family for-sale homes and single-family rentals in 37 states. The majority, 63%, of its buyers working with the builder’s mortgage arm, DHI Mortgage, were first-time homebuyers last quarter. According to trade publication Pro Builder, the company sold nearly 93,000 homes in 2023.
D.R. Horton leadership told investors demand slowed in the past quarter and that it expects to build about 86,000 homes in 2025.
“This year’s spring selling season started slower than expected as potential homebuyers have been more cautious due to continued affordability constraints and declining consumer confidence,” said President and CEO Paul Romanowski.
No tariff impact until 2026
The big question from analysts surrounded the tariff conversation, which created uncertainty among consumers as the stock market took hits and warnings of dramatic price increases lingered.
The National Association of Home Builders estimates tariffs on imported building materials would increase the price of a home by $10,900. These have yet to have any impact and likely won’t until next year, said D.R. Horton leadership. Hansen shared that stick and brick costs, or building materials, remain flat in the quarter while lot prices increased by 3%, up 10% year over year.
"We do feel that our strength and size and scale across our markets will put us in a good position to hold those costs and see the lower end of any impact from tariffs, wherever they land," said Romanowski.
The average price of a home by D.R. Horton in the second quarter was $372,500, down 2% from last quarter.
Leadership also expects slowed demand to continue through the year, and in response, plans to ramp up sales incentives to draw in homebuyers. These incentives include mortgage rate buydowns, which the company says are more cost-effective than dropping the price of a home. According to a homebuilder survey released Wednesday by the National Association of Home Builders, 61% of builders utilize incentives to attract buyers today.
“We expect our incentive costs to increase further over the next few months, so our home sales gross margin will likely be lower in the third quarter compared to the second quarter,” said Jessica Hansen, senior vice president of communications.
Home construction will ramp up in the coming months, too, the builder said.
Buyers inquiring about homes are highly motivated, though. So, despite softened demand, the current demand remains strong, evidenced by the low cancellation rates. The builder noted that first-time buyers might not have portfolio assets impacted by the shifting stock market, as traditionally older move-up buyers might.
“They’re more focused on getting into their first home and it ties really to their comfort in their job and their income on a go-forward basis, than it does the market for that buyer demographic,” said Romanowski.