D.R. Horton (NYSE:DHI) executives said the company delivered a “solid start” to fiscal 2026 while navigating affordability pressures and cautious consumer sentiment, pointing to increased incentives, disciplined inventory management, and continued emphasis on capital efficiency and shareholder returns.
First-quarter results and operating backdrop
President and CEO Paul Romanowski said D.R. Horton generated consolidated pre-tax income of $798 million on $6.9 billion in revenue, for a pre-tax profit margin of 11.6%. Net income totaled $595 million, and earnings were $2.03 per diluted share, down from $2.61 in the prior-year quarter.
Closings, pricing, orders, and cancellations
Home sales revenue in the quarter was $6.5 billion on 17,818 homes closed, compared with $7.1 billion on 19,059 homes closed a year earlier. Chief Operating Officer Mike Murray said the average closing price was $365,500, flat sequentially and down 3% year over year.
Murray also highlighted the company’s positioning on affordability, noting its average sales price on homes closed is about $135,000 (nearly 30%) below the average sales price of new homes in the U.S., and that the median price of D.R. Horton homes is $70,000 lower than the median price of an existing home.
Chief Financial Officer Bill Wheat said net sales orders increased 3% year over year to 18,300 homes, while order value was unchanged at $6.7 billion. The cancellation rate was 18%, consistent with the prior year and down from 20% sequentially. The average price of net sales orders was $364,000, flat sequentially and down 2% year over year.
Community count expanded meaningfully: the average number of active selling communities was up 2% sequentially and up 12% year over year. On the call, management said it expects community count to remain at a higher level but drift toward the mid- to high-single-digit growth range as the year progresses.
Margins, incentives, and cost trends
Home sales gross margin was 20.4%, up 40 basis points sequentially. The company attributed the improvement entirely to a recovery of prior-period warranty costs received during the quarter. Excluding that benefit, management said home sales gross margin would have been 20.0%.
On costs, executives said home sales revenue per square foot was flat sequentially, while “stick-and-brick” costs were down about 1% and lot costs increased 2%. Looking to the second quarter, management expects gross margin pressure from higher incentives and rising lot costs. The company guided to second-quarter home sales gross margin of 19% to 19.5% and said it expects margin to be lower in the second quarter than the first.
Executives provided additional detail in Q&A on incentive dynamics, saying incentives increased ratably through the quarter and that the company exited the quarter at a higher incentive level. They described incentives as running in the high-single-digit percentage of sales and said they “might have ticked up to low double-digit.” A large portion of the incentive cost was tied to mortgage rate buy-downs set when rates were slightly higher. Management added that if mortgage rates remain lower, it would expect the cost of providing those incentives to decline somewhat, but that potential benefit was not included in guidance.
On financing products, management said adjustable-rate mortgages remained in the low single digits as a percentage of homes financed through the company’s mortgage operation, with most activity still centered on 30-year fixed-rate offerings. They also noted a “tick up” in temporary buy-downs to a low double-digit percentage during the quarter, up from a mid- to high-single-digit range previously.
Homebuilding SG&A expense declined 1% year over year in absolute dollars, but SG&A as a percentage of revenues rose to 9.7% from 8.9% due primarily to lower closings volume. In response to analyst questions, management said there was “nothing unusual” in SG&A and that the company expects improved leverage as closings grow over the year, while reiterating it does not provide full-year margin or expense ratio guidance.
Inventory, land strategy, rentals, and capital returns
D.R. Horton started 18,500 homes in the December quarter, up 27% sequentially, and said it expects second-quarter starts to be higher than the first quarter. The company ended the quarter with 30,400 homes in inventory, including 20,000 unsold homes. Completed unsold homes were 7,300, down by 2,000 from September; management said 900 completed unsold homes had been finished for more than six months. The company also reported median cycle time from start to close improved by two weeks from a year ago, which management said supports holding fewer homes in inventory and turning inventory more efficiently.
On land, Murray said the company’s lot position at December 31 consisted of approximately 590,500 lots, with 25% owned and 75% controlled through purchase contracts. Executives emphasized a preference for building on lots developed by others to enhance capital efficiency and flexibility. The company said 67% of homes closed during the quarter were on lots developed by Forestar or third parties, up from 65% a year ago.
First-quarter homebuilding investments in lots, land, and development totaled $2.0 billion, including $1.3 billion for finished lots, $610 million for land development, and $80 million for land acquisition. In discussing the land market, management said it had not seen “significant capitulation” in raw land pricing, describing sellers as patient, but noted some improvement in development cost discussions as activity has slowed and said it is seeing more “rational conversations” on pacing with development partners.
Rental operations generated $110 million of revenue from the sale of 397 single-family rental homes. Rental property inventory at quarter end was $2.9 billion, consisting of $2.5 billion in multifamily rental properties and $356 million in single-family rental properties. Romanowski said the company remains focused on improving the capital efficiency and returns of rental operations and added in Q&A that its single-family rental strategy has shifted more toward forward-sale scenarios rather than building, leasing, and selling fully stabilized assets.
Financial services delivered pre-tax income of $58 million on $185 million of revenue, a 31.4% pre-tax profit margin.
Forestar reported revenue of $273 million on 1,944 lots sold, with pre-tax income of $21 million. Forestar’s owned and controlled lot position was 101,000 lots, and the company said 62% of Forestar’s owned lots are under contract with or subject to a right of first offer to D.R. Horton. D.R. Horton purchased $180 million of finished lots from Forestar during the quarter.
On capital allocation, Wheat said homebuilding cash provided by operations was $498 million and consolidated cash provided by operations was $854 million for the first three months. Over the past 12 months, the company generated $3.6 billion of cash from operations and returned $4.4 billion to shareholders through repurchases and dividends. During the quarter, D.R. Horton repurchased 4.4 million shares for $670 million; management said the share count is down 9% from a year ago. The company paid a $0.45 per share dividend totaling $132 million and declared the same quarterly dividend to be paid in February.
At quarter end, stockholders’ equity was $24 billion and book value per share was $82.60, up 5% year over year. The company reported $6.6 billion in consolidated liquidity, including $2.5 billion in cash and $4.1 billion of available credit facility capacity. Debt totaled $5.5 billion, with $600 million of homebuilding senior notes maturing in the next 12 months. Consolidated leverage was 18.8%, and management said it plans to maintain leverage around 20% over the long term.
Guidance: For the second quarter, the company expects consolidated revenue of $7.3 billion to $7.8 billion and homebuilding closings of 19,700 to 20,200 homes. It guided to a home sales gross margin of 19% to 19.5% and a consolidated pre-tax profit margin of 10.6% to 11.1%. For fiscal 2026, D.R. Horton reiterated expectations for consolidated revenue of approximately $33.5 billion to $35.0 billion and homebuilding closings of 86,000 to 88,000 homes, with an expected tax rate of about 24.5%, operating cash flow of at least $3 billion, share repurchases of around $2.5 billion, and dividend payments of around $500 million.
About D.R. Horton (NYSE:DHI)
D.R. Horton, Inc is a national homebuilding company that designs, constructs and sells new residential properties across the United States. The company’s core operations focus on building single-family detached homes, townhomes and condominiums for a range of buyer segments. In addition to home construction and sales, D.R. Horton provides complementary services through subsidiaries that support the mortgage, title and closing processes for its customers, enabling integrated transaction workflows from inventory development to home delivery.
Founded in 1978 by Donald R.
