Jan 24, 2024 - Economy
Homebuilder pain could be buyers' gain
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D.R. Horton's profit margins on home sales fell short of expectations in its most recent quarter, the company reported Tuesday.
Why it matters: The largest U.S. homebuilder's margins disappointed because it's been cutting prices to whip up sales. That's a welcome development for would-be buyers struggling to find homes to purchase amid low inventory and high mortgage rates.
State of play: The company is trying to build more affordable houses, and is lowering its selling prices by offering incentives like mortgage buydowns.
- "We have increased our use of incentives and reduced home prices and sizes of our home offerings where necessary to provide better affordability to homebuyers," CFO Bill W. Wheat told analysts after the company reported results.
- "Based on current market conditions, mortgage rates, and continued affordability challenges, we expect our incentive levels to remain elevated in the near term," he said.
The bottom line: Buyers might be happy to hear it, but Wall Street wasn't.
- D.R. Horton's share price fell 9.2%, its worst tumble since June 2020.
