D.R. Horton reports fiscal Q4 before the open tomorrow (call at 8:30 ET). It is the most important housing print of the season, and this quarter more than most.
Why this one matters
D.R. Horton is the largest U.S. builder by volume, guiding to roughly 84,000 closings this fiscal year. Its average closing price last quarter was about $362K. PulteGroup’s was $561K. That makes Horton the cleanest read on the first-time buyer, the buyer most exposed to the move in mortgage rates.
The timing makes it more important. The 30-year fixed rose for seven straight weeks to 7.40% in early October, its highest since November 2023, against about 6.3% a year ago. It eased to 7.32% last week. Horton’s quarter ran July through September, so it caught the start of that move. October, which the call will cover, caught all of it. Tomorrow is also Horton’s first look at fiscal 2027, the first full-year housing outlook anyone will give since rates went back above 7%.
What the peers have already told us
PulteGroup (Oct 22) said rates were hurting demand. Net orders fell 6% to 6,208 and closings fell 9%. Incentives were 10.4% of sales, up from 8.9% a year ago and flat on Q2. Gross margin was 24.8%, including about 70 bp of land impairments, and Q4 guidance is 24.0% to 24.5%. CEO Ryan Marshall: “The rapid increase in interest rates has stretched affordability even further,” and it “has pushed even more consumers to the sidelines.” The company said a “surge in interest rates and reduced traffic during the period limited spec sales and related closings.” Note that more than 60% of Pulte’s business is move-up and active adult buyers, a better-cushioned base than Horton’s. If Pulte’s buyers are stepping back, the entry level is unlikely to be doing better.
NVR (Oct 22) looked worse. Orders fell 7%, the cancellation rate rose to 21% from 19%, average order price fell 5%, and gross margin dropped to 18.3% from 21.0%. NVR blamed pricing pressure from weak affordability and consumer sentiment.
M/I Homes (Oct 21) saw new contracts fall 2% with cancellations flat at 12%. The CEO cited “increasingly difficult market conditions, including higher mortgage interest rates, weaker demand.”
Lennar (Sept 16), the closest comp to Horton, reported orders down 9%, incentives around 12%, and a 15.8% gross margin, guided to 15.5% to 16.0% for Q4. It cut its full-year delivery target to 80,000 to 81,000 homes. Stuart Miller: “consumer confidence has declined as rates and affordability have driven more consumers to slow their purchase decision.” That was when rates were around 6.8%.
What the suppliers are saying
Whirlpool (Oct 26) shows how weak the turnover-driven parts of housing are. North American appliance sales fell 8.3%, segment margin dropped to 3.0% from 4.9%, and the company now expects an ongoing EPS loss of about $1.30 for the year. CEO Marc Bitzer: “the pace of recovery is slower than expected.” Whirlpool is also pushing through a 7% price increase in Q4 into soft demand.
Masco (this morning) was the best result of the group, but it doesn’t contradict the others. Sales rose 3% (4% excluding the Bristan divestiture and currency). North America grew 5%, Plumbing 4%, and Decorative Architectural was flat. Adjusted operating margin rose to 17.9% from 16.3%, adjusted EPS of $1.19 was up 23%, and full-year guidance moved to $4.65 to $4.75 from $4.40 to $4.60. The gains came from price and cost, not demand. CEO Jon Nudi said “we expect the demand environment to remain challenged in the near term,” while “the long-term fundamentals of the repair and remodel market remain strong.” In other words, repair and remodel is holding up while transactions are not.
Builder orders are falling and margins are being given away. Appliance volume is weak. Repair and remodel margins are fine, but no one is forecasting a volume recovery. Horton is the company that can tell us whether the entry level gave way in October.