D.R. Horton beats Wall Street estimates as home orders climb 14.6% in Q1

Dive Brief:

Strong demand for housing in the U.S. helped homebuilder D.R. Horton record a 14.6% increase in home orders in its fiscal first quarter to 9,241 from 8,064 homes in the same period a year earlier.
Overall, the Fort Worth, TX-based builder posted net income of $206.9 million for the quarter, up 31.2% from a year ago. Homebuilding revenue rose 20% to $2.8 billion year-over-year for the quarter. For the year, consolidated revenues are forecast between $13.4 billion and $13.8 billion.
The company’s average closing selling price rose 2% year-over-year for the period at $297,000. It expects to close between 43,500 and 45,500 homes this year, with the average home sales gross margin around 20% in current market conditions.

Dive Insight:

The solid financials posted by D.R. Horton underline the current strength of the housing market and support forecasts of healthy market activity this year, despite head winds including mortgage rate increases and the ongoing skilled-labor shortage.

In a call with analysts on Jan. 24, the company said optimism around job growth and overall consumer confidence is expected to outweigh the impact of mortgage rate increases — a factor that some industry observers fear may keep would-be first-time buyers on the sidelines. Company officials noted that options through its Express Homes and Freedom Homes lines have allowed it to respond to demand for lower-cost homes.

The entry-level Express Homes line accounted for 20% of home sales revenue and 28% of home closings during the first quarter. Meanwhile, the company’s Freedom Homes active-adult brand, which launched in July, is expected to be available in one-third of its same day operating markets by the end of this year.

Ahead of the spring 2017 selling season, the builder said its inventory is up 14% from a year ago at 24,500 homes, of which 3,700 are completed. Lot costs were up 9% on a per-square-foot basis during the quarter.

Recent figures from the Commerce Department reflect slow but continued growth for the residential construction market, showing building permit authorizations, an indicator of future residential construction activity, at 1.210 million in December, down from 1.212 million the month prior but 0.7% ahead of the same period last year.

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