Price-wary buyers are still weighing on the nation’s largest homebuilder, pushing it to offer more incentives to sell homes.
Arlington’s D.R. Horton saw a drop in new home sales in the three months that ended with September as interest rates and stubbornly high prices sidelined prospective homebuyers.
The number of closings for D.R. Horton dropped by 1% to 23,368 during the quarter. Home sales dropped by 5% to 84,863 to end the fiscal year.
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The builder expects it will still need to entice buyers with incentives throughout the next year, such as lowering interest rates, closing-cost assistance and free upgrades, despite declining borrowing costs from the U.S. Federal Reserve.
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“New home demand is still being impacted by ongoing affordability constraints and cautious consumer sentiment, and we expect our sales incentives to remain elevated in fiscal 2026, the extent to which will depend on market conditions throughout the year,” executive chairman and former CEO David Auld said in a statement.
Revenue for the fourth fiscal quarter ending Sept. 30 dropped 3.2% to $9.7 billion and net income fell 30.8% to $905 million.
For the fiscal year ending Sept. 30, revenue fell 6.9% to $34.25 billion and net income fell by about 25% to $3.62 billion.
Nationally, the median sales price for new houses was $413,500 in August, up 41% in the last decade, according to the U.S. Census Bureau and the U.S. Department of Housing and Urban Development.
But price is only part of the rising cost of homebuying interest rates. The average interest rate on a 30-year loan dropped to 6.26% Thursday, down from nearly 8% in November 2023.
Federal Reserve governors are meeting on Wednesday and are expected to lower the key federal funds rate again by another quarter point. That should, in theory, lower rates on consumer mortgages.
“We did lean into the incentives pretty hard in the quarter as we talked about and we expected to,” CEO Paul Romanowski said during the company’s earnings call Tuesday.
“I think for our buyer, again, it still comes back to the monthly payment. And the most attractive monthly payment we can put them in is with a lower rate.”