D.R. Horton, the largest homebuilder in the United States, reported a decline in first quarter earnings as affordability challenges and consumer caution impacted its business. The company’s net income fell to $594.8 million, or $2.03 per share, compared to $844.9 million, or $2.61 per share, in the same period last year. Revenue also dropped from $7.6 billion to $6.9 billion.
Despite these declines, both net income and revenue surpassed analyst expectations according to the Wall Street Journal. Home closings decreased by 7 percent year-over-year to 17,818 units, while the average closing price dropped by 3 percent to $365,500.
David Auld, Executive Chairman of D.R. Horton, attributed the results to ongoing affordability issues and cautious consumer sentiment: “affordability constraints and cautious consumer sentiment” continue to weigh on demand, a dynamic that pushed incentives higher as the quarter progressed.” He noted that sales incentives such as mortgage rate buydowns increased throughout the quarter and are expected to remain high into fiscal 2026.
Chief Executive Officer Paul Romanowski commented during an earnings call that incentive levels observed in December suggest further pressure on gross margins for the next quarter. The company forecasted a home sales gross margin between 19 percent and 19.5 percent for the second quarter—below what analysts had anticipated.
Romanowski added that there are some positive signs for future demand as mortgage rates have recently declined and sales offices have seen more traffic: “If rates stay compressed, the cost of incentives could ease.” However, he also expressed concern about labor market conditions: “sustained job growth is critical for a durable rebound in housing demand.”
Looking forward, D.R. Horton plans to increase housing starts in the second quarter after many builders reduced activity late last year to protect profit margins. The company projects second-quarter revenue between $7.3 billion and $7.8 billion with expected closings ranging from 19,700 to 20,200 homes.
