D.R. Horton is telling investors that it will spring back to life in 2023.
As higher interest rates and inflation scared off a significant chunk of would-be buyers, sales orders for the Arlington-based builder were down 38 percent nationally year-over-year in the quarter ending Dec. 31. It also suffered a 15 percent year-over-year decline in the quarter.
On top of that, buyers were canceling sales orders because they no longer qualified for a mortgage or they were reconsidered due to affordability, the Dallas Morning News reported, from a quarterly earnings call with Horton CEO David Auld Tuesday. Last quarter, Horton’s cancellation rate was 27 percent versus 15 percent a year ago.
The company closed on 17,340 home sales last quarter — a 6 percent decrease from the same quarter in 2021. It also saw a 16 percent drop in revenue.
While the end of 2022 wasn’t pretty for Horton, the company earnings and revenues surpassed their respective Zacks Consensus Estimate, and its stock ended up getting a small bump in the pre-market trading session on Tuesday.
“Beginning in June 2022 and continuing through today, we have seen a moderation in housing demand caused by significant increases in mortgage interest rates and general economic uncertainty,” chairman Donald Horton said in a statement about the earnings results. “While these pressures may persist for some time, the supply of both new and existing homes at affordable price points remains limited, and demographics supporting housing demand remain favorable.”
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Auld assured investors that the company is looking to a sunny spring.
“The credit markets have stabilized somewhat. Consumer confidence improved a little bit. Job growth continues to be very good,” Auld said. “Overall, if you look at pent-up demand and just a generalized economy becoming less bad; very good signs for housing.”
Not mentioned in the earnings call was the pending lawsuit against the company filed in Louisiana. The suit alleges that the homebuilders used deceptive practices to sell homes that were defectively designed and constructed. A similar case is pending against Horton in Hawaii.
D.R. Horton’s saving grace, however, could be its rental arm, which generated $110 million in pre-tax profit last quarter — up 57 percent from $70 million a year before. At the end of the day, whether people are buying or selling, Horton is profiting.
— Maddy Sperling