Homebuilder D.R. Horton sees weaker Q1 as high mortgage rates cool demand
12:23 pm Tuesday, November 07th, 2023
By Ananta Agarwal
(Reuters) -U.S. homebuilder D.R. Horton said on Tuesday it expects a sequential decline in home sales in the first quarter as high mortgage rates temper demand for housing.
With current 30-year fixed mortgage rates nearing 8% and home prices continuing to surge due to a shortage of units for sale, many have deferred their home buying plans.
D.R. Horton, the largest U.S. homebuilder by volume, expects current quarter home sales in the range of 18,500 to 19,000 units, compared with 22,928 in the previous quarter ended September.
Shrinking housing demand has forced homebuilders to increase incentives such as mortgage rate buydowns, especially for entry-level buyers, and offer lower price points, among others.
“We expect to continue utilizing a higher level of incentives in fiscal 2024, particularly rate buydowns,” D.R. Horton said on a call with analysts, adding that it’s offering mortgages in the 6% range compared to the current high rates.
The Arlington, Texas based builder expects homes sold in fiscal 2024 in the range of 86,000 to 89,000 units, higher than 82,917 a year earlier, helped by the incentives.
D.R. Horton said it also expects home prices to ease due to affordability issues.
Prices have shot up in the last two years as a majority of homeowners with lower fixed mortgage rates are unwilling to re-sell and acquire a new house at a higher interest rate.
In the fourth quarter, D.R. Horton’s net income attributable fell 4.71% to $4.45 per share from a year earlier, but beat analysts’ average estimate of $3.93, according to LSEG data.
Revenue jumped 8.96% to $10.50 billion in the quarter, also above analysts’ average estimate of $10.01 billion, as incentives fueled demand.
Shares of the company rose about 3% in early trading.
(Reporting by Ananta Agarwal in Bengaluru; Editing by Shinjini Ganguli)
