D.R. Horton First Quarter Earnings Drop

America’s largest homebuilder saw its profits drop in the first quarter.

D.R. Horton posted lower first quarter earnings, as high mortgage rates and jittery consumers forced the company to lean harder on sales incentives, pressuring margins even as it beat Wall Street’s earnings expectations.

The Arlington, Texas-based builder reported net income of $594.8 million, or $2.03 per share, down from $844.9 million, or $2.61 per share, a year earlier, according to the Wall Street Journal. Revenue fell to $6.9 billion from $7.6 billion, though both figures topped analyst estimates. Closings dropped 7 percent, year-over-year, to 17,818 homes, while the average closing price slid 3 percent to $365,500.

Executives pointed squarely at affordability. Executive Chairman David Auld said “affordability constraints and cautious consumer sentiment” continue to weigh on demand, a dynamic that pushed incentives higher as the quarter progressed. Those incentives, often in the form of mortgage rate buydowns, are now expected to remain elevated into fiscal 2026.

CEO Paul Romanowski said on the earnings call that incentive levels in December suggest gross margins will decline again in the second quarter. D.R. Horton offered guidance of a home sales gross margin of 19 percent to 19.5 percent, below what analysts had expected.

There are glimmers of relief. Mortgage rates have drifted lower in recent weeks, and Romanowski said sales offices are seeing a pickup in traffic. If rates stay compressed, the cost of incentives could ease. Counterbalancing that optimism are growing concerns about the labor market. Romanowski said sustained job growth is critical for a durable rebound in housing demand.

Looking ahead, D.R. Horton plans to ramp up housing starts in the second quarter after many builders pulled back late last year to protect margins. The company forecast second-quarter revenue of $7.3 billion to $7.8 billion on 19,700 to 20,200 closings.

— Eric Weilbacher