D.R. Horton (DHI) 29 Oct 242024 Q4 Earnings call transcript

Company Profile

Participants

Jessica Hansen	executive
Paul Romanowski	executive
Michael Murray	executive
Bill Wheat	executive
Stephen Kim	analyst
Matthew Bouley	analyst
John Lovallo	analyst
Carl Reichardt	analyst
Richard Reid	analyst
Michael Rehaut	analyst
Alan Ratner	analyst
Eric Bosshard	analyst
Anthony Pettinari	analyst
Kenneth Zener	analyst
Rafe Jadrosich	analyst
Susan Maklari	analyst
Jade Rahmani	analyst

Call transcript

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Operator

Good morning, and welcome to the Fourth Quarter 2024 Earnings Conference Call for D.R. Horton, America's Builder, the largest builder in the United States. [Operator Instructions]

I will now turn the call over to Jessica Hansen, Senior Vice President of Communications for D.R. Horton.

Jessica Hansen

good and Tom, you, morning. Thank call Welcome and our quarter discuss XXXX to financial our fiscal results. fourth to

Before we of get defined started, today's call includes Private Litigation by forward-looking Securities Reform Act XXXX. the statements as

any such no different. is actual Although D.R. that Horton statements based assumptions, assurance be on not will are outcomes there reasonable materially believes

publicly any statements forward-looking date information not this statements. call, conference upon any of Horton undertake D.R. does revise to All available based update obligation to and forward-looking are the Horton or D.R. on

Additional annual lead are performance which Form information most to material is contained on factors that Commission. of about could Form filed our changes with in report and report both in D.R. XX-K the quarterly Horton's Securities recent XX-Q, Exchange on and

can investor.drhorton.com, presentations be Investor website this our under for your release on to file reference. call, our on investor and the and Events data Presentations to updated in post plan and earnings about weeks. at XX-K found supplementary we our morning's X After site News we This Relations section will

Now over Romanowski, CEO. President and to call I turn our Paul will the

Paul Romanowski

Thank of on solid were per to Earnings quarter billion billion, pretax of revenues finish the profit call I'm Bill our Vice Mike XX.X%. $X.X and also pleased results Vice for produced of $XX you, Officer; Executive margin by team Operating a and Chief President Chief Murray, the Officer. The Wheat, consolidated year, by diluted joined on our income and highlighted D.R. Horton Jessica, $X.XX. and good fourth be morning. Executive Financial this with President share to pretax

income on pretax of to increased $XX.XX, $XX.X earnings billion, year, of and was profit our XX.X%. margin share the a For pretax revenues consolidated with diluted billion $X.X X% per

the homebuilding was on Our was return and XX.X% on on return equity XX.X%. assets for year was Return inventory XX.X%. pretax

the companies periods. return on S&P of in X- for assets the ranks XX-year XX% X-, past XXX top all Our and

of all we generated year was for and the to $X.X this billion, repurchases cash shareholders returned consolidated XXXX flow from operations through cash Our and we dividends.

or approximately by Our year. full distributions million year from XXXX prior the increased $XXX XX% share

generated flow Over outstanding operations, have we we the past and X billion reduced years, by have from our of share XX%. $X count cash

challenges For increased orders and from sales market continued our net affordability year. conditions, the despite the competitive slightly quarter, prior

Our with sales in was seasonality to line below the quarter, pace our from but third normal fourth expectations.

in address our of causing start have the help mortgage near sidelines rates the we homebuyers the many this continuing mortgage with expect during earlier demand in smaller rate as from and plans. to to continued floor To the term. rates, uncertainty is combined lower decreased spur highs be that buyers their are buy-downs potential While volatility have and general and sell rates some XXXX. to to We on incentives year, stay of season, affordability, election use we such believe more

demand and XX% conditions. With and our incentives incentive before local the fourth each that tenured margin seasonally quarter, the of experience position in find best also our seek pace, pricing gross and balance slower of inventory typically operators enter market the current We community right spring. fall returns closings are to will sales, our sales we levels levels representative quarter of sold generally during same in the and

spring limited addition XXXX, supporting to demand continue on supply the price a points fiscal For the profit demographic of we and to supply both at limited and lots housing of generally favorable, the season. dependent full available margins homes for finished home in of see strength new and existing new construction. year affordable a homebuilding selling will be of are upcoming largely and our Overall, volume the

fiscal to pipeline, on affordable in the construction we finished cycle XXXX. can positioned available efficiency share our times and cash and and on more We continued of product to on consistent, our for remain flows XX,XXX inventory, lots With adequate capital returns are in homes our our operations through focus enhancing return so offerings, improvement well we Mike? sustainable that of focused shareholders capital all produce repurchases dividends.

Michael Murray

income XXXX fourth Earnings XXXX. of to XX% decreased share the on share the XX% to quarter. year $XX the the compared quarter decreased fiscal revenue in per for million. quarter of year, $X.XX diluted $XX.XX diluted $XX.XX Earnings X% fiscal to increased in to And per billion consolidated share $XX.X the per billion. for on $X.X $X.X revenues Net net billion year for full increased to slightly for prior $X.XX compared of to income

revenues quarter $X.X home year. billion closed XX,XXX on in homes XX,XXX to billion homes prior on $X.X were sales fourth Our closed compared the

was down Our year $XXX,XXX the quarter both price prior average for from and sequentially quarter. X%, Bill? the closing

Bill Wheat

Our the to net homes and to third quarter, sales both sales slightly line were seasonality home normal billion. quarter the in the year expectations. quarter our order and in this XX,XXX orders decreased from was year X% prior $X.X our fourth increased consistent with sequential to value orders prior from and decline net with fourth closings sales in quarter below our but the the The

quarter rate sequentially up from XX% the cancel quarter. year was and the prior XX%, Our unchanged for from

sales from net and prior X% price was quarter number average active and in average prior was selling of Jessica? sequentially year fourth flat XX% the year. Our of from communities orders sequentially quarter. the down the X% $XX,XXX, up The

Jessica Hansen

basis, roughly Our per gross basis The gross in sequentially, cost on per the down and September stick and brick the profit the during quarter. was from was revenue primarily June margin from were X.X%. while of X.X% X% square points June our to quarter. XX.X%, foot decreased XX lot costs in home increased costs a sequentially incentive homes fourth foot On square revenues to home due sales decrease closed margin down quarter sales higher

compared the our the homes anticipate few expect lower levels quarter to gross the on quarter. be to We so first incentive sales we our over further to months, next closed increase fourth home margin in

other of home on dependent rates will be full demand market Our in the Bill? for and sales XXXX during changes fiscal levels in conditions. addition housing season spring and selling incentive mortgage gross the year the margin interest to

Bill Wheat

our quarter, the the In a up year. in by X.X%, SG&A was increased expense year, last XX% from XXX revenues the and homebuilding points basis percentage same homebuilding expenses quarter of as prior fourth from SG&A

For the X.X% homebuilding SG&A year, was of fiscal XX up from revenues, XXXX. points basis

to Our costs ] in due SG&A primarily platform. periods [ homebuilding both are our expansion operating of the

our both XXX increased count and employee states, up count markets a ago, states. market are XXX Our year markets Paul? to while in community from XX from XX XX% in average

Paul Romanowski

at XX,XXX September approximately than X,XXX down a seasonally quarter ago of homes our XX total homes pace of further combination which X,XXX greater end our a resulted completed, year-end at a have of and and increase homes complete and homes quarter from of in June. of for XX,XXX this year been homes started than XX,XXX from year cycle the the in lower X unsold were slowing were ended in unsold with completed in improvement inventory, the September months. The sales We times. construction XX% XX,XXX our at unsold. homes

homes a week third ago. almost fourth For year a from quarter, cycle and month by time decreased our in a quarter from the the we closed

to inventory faster Our position inventory starts and turn our based continue and manage on Mike? market XXXX. in our we times will improved pace cycle to homes housing conditions. and And us

Michael Murray

party, purchase XX% relationships consisted were lots, the of on focused We through were September fourth These relationships owned position Of the homes lot approximately at Our quarter, XX% quarter. allow maximize land developers country XXX,XXX by lot developed and XX% we from closed controlled up a the build of which more across remain during to with a either contracts. XX homebuilding in others. to third us our prior the returns. homes developed XX% by on or lots were year Forestar

portfolio and strong to key competitive a is flexible lot our capital-efficient Our position.

homebuilding finished for which land billion $X.X in was Our development and investments development quarter million was $XXX billion, totaled for lots, fourth land and for $XXX $X.X was land acquisition. lots, of million

For the homebuilding up from XXXX. year, Paul? and totaled and investments billion, fiscal lots, XX% $X.X development land our

Paul Romanowski

$XXX rental generated XXX of units. homes income million of fourth revenues rental In and of rental from multifamily $XXX our quarter, operations sale pretax single-family the X,XXX the on million

For the X,XXX multifamily of generated rental revenues homes single-family the of rental $X.X X,XXX billion $XXX income of operations full rental units. million and on year, our from pretax sale

a build purpose-built model rental in which we to and sell construct merchant operate entities. continue We

rental our operations by labor enhancing efficient of utilization land provide purchasing more for homebuilding opportunities to per synergies trade providing Our our parcels. scale and and

inventory September properties. $XXX Our multifamily rental of which of property and at rental of $X.X XX $X.X properties consisted was billion, rental single-family billion million

for to inventory around remain level current Jessica? next the We several total quarters. the expect rental our

Jessica Hansen

reported for $XXX majority-owned of lots quarter pretax income lot fourth revenues our with Forestar, on development the residential X,XXX of $XXX million. company, sold million

pretax a billion $X.X $XXX Forestar income, XX,XXX and year, with XX.X%. profit pretax delivered generating full million the margin For of of revenues of lots,

a XX,XXX Forestar's and under with Horton. $XXX owned fourth our to of XX finished owned lots at million Forestar's were the subject D.R. position of quarter September lot in was to from first of XX% right are offer purchased controlled lots contract lots. Forestar. are

net liquidity XX.X%. Forestar with ratio year-end a approximately debt-to-capital million had $XXX of of at

of returns-focused business relationship strategic a model. vital our is Our with Forestar component

Forestar's growing homebuilding of in on them the the market several share well lots Mike? capitalize platform finished sheet, strong, shortage to lot operating separately industry over to the capitalized and balance next and significant aggregate position years. supply

Michael Murray

of revenues, [ earned XX.X%. the million profit fourth pretax quarter pretax income with on ] in services of of $XX Financial margin $XXX million a

on income margin million For earned revenues services profit $XXX pretax XX.X%. with million pretax of of of the year, a financial $XXX

D.R. of for for During originations average of company's the mortgage an the ratio accounted XX% XX Horton to financing operations our by homes and our buyers. company XX% related this all FHA loan-to-value an and closed the loan average essentially fourth of loans with our VA and quarter, quarter homebuilding score mortgage FICO volume. originating of mortgage of handled had XX%. Borrowers X DHI our

First-time company of by the our XX% handled Bill? homebuyers mortgage this closings represented quarter.

Bill Wheat

Our consistent sustain cash and operating strategy and disciplined that an platform balanced growth to flow. returns, capital allocation is produces

significant balance leverage strong flexibility market financial which conditions substantial with adapt with us and changing opportunities. have liquidity, to to We and a sheet provides

operations share cash we shareholder distributed returns. consolidated of the enhance was all our repurchases dividends through and cash and by XXXX, fiscal During to billion, we $X.X provided generated

share During million the million stock common the X.X prior million. repurchased our year-end. from XX.X repurchased X% shares outstanding for And $X.X of $XXX year, by count shares the we quarter, which billion, for reduced for we

authorization remaining Our $X.X share at September XX repurchase billion. was

total $XXX a during due also liquidity, our of $X.X paid facilities. we for and $XX XX, of billion million of In of of we cash on year. $X.X notes senior capacity $XXX of quarter, the of XXXX. billion cash issued During million At the dividends available August, $X.X billion we consisting in had of September million dividends consolidated paid credit

we we have and at maturity, maturities notes Subsequent $X.X debt fiscal XX at billion. repaid September no to Our $XXX XXXX. year-end, totaled of additional senior million in

We X.X%. was stockholders' billion at XX to and XX% leverage leverage September At the up plan $XX.X term. from year a was share leverage $XX.XX, and our was consolidated net cash long XX.X%, over XX, ago. book September Our XX% maintain value was our of around equity

our cash increased our to the cash by Jessica? XX.X%. Based XX.X%, on financial For flow, return $X.XX Board assets our strong recently per our was year, equity on return and was position our share. and on XX% quarterly dividend

Jessica Hansen

Looking the of position. [indiscernible] the level our sales more largely business plan forward, built spring. we strength with seasonality, the up, was community on from will lot dependent the our full normal fiscal return results beginning year for to expect this XXXX be our

$XX.X release XX,XXX in by to to homes. to billion, generate operations be As closed $XX to this of in range XX,XXX of our the revenues homebuilding of approximately press the we fiscal expect our year homes and morning, consolidated XXXX, million for full outlined

We fiscal XXXX for of XX.X%. forecast income tax an rate approximately

to dividend generate flows expect cash of operations cash portion more fiscal flow We XXXX $X.X $XXX XXXX, payments around than substantial currently of fiscal to to We our to from annual and common in repurchase this a addition year, enhance approximately billion returns. of shareholder our stock utilize million. in to plan making

be by of For XX,XXX consolidated expect range homes. homebuilding our ended in December XX,XXX to $X.X of and currently homes to generate quarter fiscal operations to our billion, closed the to billion XX, first we revenues $X.X

to in the around for approximately to percentage approximately in quarter, XX.X% margin the of financial We to we pretax first quarter homebuilding quarter home humbling of margin revenues expect our services profit income a gross the and rate tax We anticipate SG&A expect as be XX% XX.X%. Paul? first sales around our be a X.X%. be

Paul Romanowski

offerings. reflect our results industry-leading footprint share, position affordable In closing, market product focus and experienced geographic our broad and teams, on

to All continuing of these are key operating consistent ability components cash that platform flow, produce our returns, to our market of share. growth and aggregate while sustain

to capital of continued to you disciplined We D.R. high our the Horton to flexibility, have our long-term of provide we significant family value returns financial consistently approach vendors to estate land shareholders families hard employees, provide to plan allocation remarks. maintain entire the to our company. Thank improve and operations and our enhance for XXXX. This to prepared agents real and together developers, trade and your individuals forward and and work. to concludes opportunities partners, our more look working during We efforts homeownership

We will now questions. host

Operator

And first question coming morning from Stephen Evercore [Operator your Instructions] Kim is ISI. from this

Stephen Kim

I color. regarding your of questions to a the couple Appreciate wanted ask guide.

of guide, can rental for your First particular, the by you other revenue. be give revenue a in I also And didn't think, that all, the ASP was influenced factor closing. lot

the both best? for if you a year or terms quarter help about little rental revenue are thinking could full So revenue think of first However disaggregate I for just you sequentially I'm bit. wanted assuming in and us to the see it you and year-over-year? is guide. What dollars, in

Bill Wheat

revenue Yes, revenues the well. weighted relatively to bit in our in and Steve. consolidated would half would half heavier revenues flat first the as expect in a those the be in the quarter rental of a lighter of little year be We than guide year, first so Implied the back little year-over-year.

assuming of relatively recent with ASP, we're terms ASP In flat trends.

to forward going to going the spring into conditions be levels. market that's incentive as well course, Of subject as

Stephen Kim

you. Got

the the That's the market of Okay. helpful. just of bit there. of delve sort it's little election, comment particular, think second are right. I think -- about question you conditions, we affordability. to maybe realize into sidelines that on maybe you All I buyers all the And kind which about a then some tough your But in waiting out sort talked wanted how

we And see if to so I that. wanted could disaggregate

traffic? for today kind example. previous like you buyers help us other strike, seeing in on maybe draw can Can half or of of respect when about back what And talk you seeing what versus with you're you're your to XXXX, maybe distinction you between list a interest the times saw went what calendar

sidelines? sense better Just of us is to help the this causing get effects to actual people versus much true unaffordability a of on how psychological wait

Paul Romanowski

combination were previously affordability A were seeing on today lines, in We It they the been side Yes, buyers the certainly challenged. total are normal for Steve. of little is a And the our consistent traffic. seasonality. the terms It in I But in still, below up say see prior sit still expectations year-over-year. sit motivated but both, were Hence, was in sales. quarter. would than and on of sales has our the our we with that fence. we results line quarters. quarter

move and There's sure noise we're think on issue this The demand. don't lot we've market the stretch election out a people I is volatility there, the structural product just to combined a continue take seeing that's with of a news in pause. people with make I think got seen, monthly a forward. But today, today. and is focus just rate to it we to affordability to we certainly get for payment our and position

Stephen Kim

Just rates your what's come mortgage next guide? a down that clarification embedded there. Are in to you year? Is looking for

Paul Romanowski

expect to around one another. aren't going month to way to would we we business to to to as the We're or that going respond and week month. week market we go expectation our continue No, and manage --

Operator

next coming Your Matthew question from is Barclays. Bouley from

Matthew Bouley

at have So inventory XX,XXX and the, looking XX,XXX than little versus it the a guide a guess that is homes in during XX,XXX comparing maybe I higher guess, the you to delivery that is of I year. typically ratio XXXX, at and in bit the moment,

you have as the it saying where a is have you cycle ramp kind of can expectation a degree of kind Or spring? you where kind down times in there bigger into ratio of that to that is? maybe get such come an starts So for are

Michael Murray

looking actually Matt, at I to in play think we're come both into XXXX.

the We our seen into times lot past our through to have fourth cycle position tremendous year the our we market. that quarter improvement with starts over in have, the and with continuing ability lean

able it market ability about to the 'XX. feel what opening see And fiscal in our X.Xx into we'll implies that starts. almost be housing to turn good the really unfold, we As we press inventory,

Jessica Hansen

Yes.

from expect only year. pick lower it quarter, as we up the average first up probably in and the our So starts the they spring. into to for for move were they're stepped the full than QX, would slightly where We

Michael Murray

Right.

Matthew Bouley

if it. building on kind number. of of if the the I'm your the Got is in of could affordability missed you how I homes. kind just And smaller embedding building home you're But floor smaller And then think Okay. in that curious guess just topic for sizes about apologies beyond speak numbers, efficiency the the was what versus down size about expectation XXXX? that And of of what kind plans, you balance I home QX? of

kind So decision? that of into what goes

Jessica Hansen

I'll we're the and Yes, specifics, Paul where with commentary he start thinks you his on going. give then can

for In sequentially And down part product, attached our to of a continue terms townhomes, X% were quarter, of see closings of making footage we is the mix. square bigger again, both up that percentage and predominantly we driver year-over-year.

So attached we're of single-family roughly this quarter detached XX% homes. -- were versus closings our product

Paul Romanowski

And helps position to ability smaller enter plans, the us our spring to the and we market in efficiency that do as deliver. for see into we

points market still we'll overall, drive is for that our we That continue homes have And reduced product. being other in number that looking they're a provide to purposefully just freedom to ability. continue marketplace. payments. that in do move-up need we what from the significant smaller shift it that said, than comes have the lean We we buyers have towards and in the because of No affordable to of affordable the monthly price to

Operator

UBS. Lovallo is Your next question coming John from from

John Lovallo

generally described market new you inventory supply think I of as and in existing The first one the is limited homes. that the

so, And where as regard? saw you come feeling there particular that in markets in trend online? seeing that more And you're worsening you Just overall the quarter some if how are curious inventory are about conditions if progressed?

Paul Romanowski

overall haven't numbers The grown significantly.

where number think continues limited markets. still supply month's of we're our still most across you're -- the of that to from the we supply that at, people compete the people expand. insurance, that mortgage to our are seeing, a which premiums, competitive I about ability home, relatively there's still price against they way. with significant lock-in consistent points more supply insurance We rate and But pressure see low resale markets sales have, very low And just we on not competitive rate. our And seeing market. advantage good grow abilities with at the a effect impacting new still that in with attractive a feel stable offer we the see in

John Lovallo

Understood. first quarter basis XXX XX.X%, about And the point of then margin step down. gross on outlook

guys I think step you majority incentives. in that attributed of the up to just

are make that, the you what so, case. And of sure percentage can next where trend want expecting help current just a with few months? are those revenue? Just to your levels if you that And as the over to incentive us is

Bill Wheat

right, Yes, started higher QX. And that's The margin due in incentives. down for guide we higher step John. seeing really, to incentives later in level in QX those our is

in expect incentive and of than some it's levels costs gone, increasing, basis, trend to Jessica? the Where August, so of our you do stats, was is On have buydowns it expect that's in lower year-over-year into September a was based month into volatility the QX. margin our And why QX. increase recently further Our that in interest rate we rates on have and a continue rates. to in

Jessica Hansen

had buyers rate the buydown with it. a just that associated you give I'll Yes.

buydown, over So year was it from a mortgage rate some a the form was of up ago. our XX% flat but quarter, had company of the buyers during sequentially, utilizing which XX%

in And closings flat fourth quarter, XX% so the that relatively was to our overall which equates sequentially. also of

continued necessarily percentage being buyers buyers the just of bought our the it, be it's in level, a expectation of think utilizing mortgage our higher that would buydown. already the necessarily the So just going of with financial down is it's associated not increase significant through company, be the utilize percentage that to cost costs the it would And I with an really not it. closings is majority

Operator

coming from is from Reichardt Your Carl BTIG. next question

Carl Reichardt

at impact any Can any hurricanes themselves? you then communities impact or Just given focus one there driving cost? And It's or traffic, big reliance ops a all a you X-parter. impact brokers? buyers' on talk has all long negative about to on been been from the the traffic time. for Any for positive sales settlement has at your rates

Michael Murray

that Carl, the of first part I'll take question.

all, First across with impact as was hurricanes, the horrified those families just the on that else many of so had everyone regions.

our codes adverse in family, see building we very fared a Fortunately, our very the build We have those weather Thankfully, significant storms. on the we those Horton not impact with to, employees did communities. in current events. homeowners, D.R. and communities perform well well

rightly that time, on same crews a municipalities, utility services permanent it a than you so, can diverted the and electrification for down slow see responding, crews But some us, becomes residents inspections down to effect of At is our the slow it the can rather kind that business. restoring focus to and processing. any of and issue timing

on these So very D.R. Horton the as we or fortunate well. family pretty feel storms D.R. Horton

Paul Romanowski

way As in as and well. to seem been settlements. NAR shift response, terms broker to or haven't realtor community the in the have NAR to requirements largely a much commissions. it what one of change satisfy and/or much need other I of the they to They're significant do of settlement the they seen handling adjusting far traffic,

time. realtors in play sales office across with will generally the their able But again, have showing of think been we us, up I consistent performance settlement. available in navigate the that the limited the to that our have out market, requirements homes our still with number over of and still

Carl Reichardt

employee All talked then 'XX. you up to QX right. in bit average and store quite And count a

SG&A expect for number we in continue you of what that markets those get count add flattening of growth or a grow to of might store expectations new presently? terms slowdown the do better a at that you so are Or As we what you're looking 'XX, to your might you'd see next leverage in year?

Bill Wheat

new markets growth. a that, some to digit, investment double moderate into growth we expect would rates as these to to in we count double Clearly, near And prepare bit. last making have low for community so. Yes. the has I single those or growth year The been grow been for an high

so we'd that to expect towards back well. mid-single-digit level naturally, moderate And as the start to

always recently, do sure some investments to making So expect we growth here support we SG&A, forward. we that yes, to a make control but been want our to level going have higher

Operator

Next from question is Wells from Sam Fargo. coming Reid

Richard Reid

like the And sounds lower to September as the margin it fourth you in last for August. that will your quarter? XX.X%, So gross moved it rate XX.X% November quarter, line guidance October intra-quarter, from July, with look versus then or kind Or exit of imply does is be that levels? that the below December

Jessica Hansen

full the September said, where in incorporated have quite where we month. question, costs, in It from the further to were for be do off we Sam. that but lowest QX expect margin in as we our month quarter. of Great increases Yes. year expect Not September our because to gross of we incentive not in our guide the was to closings is

Richard Reid

I you. Got [ on then XX,XXX to touch And around ]. unsold inventories wanted your completed

Just unsold that in, wanted like concentration are you're geographic of specifically and investors the Texas? in seeing there if whether details on a to any focus markets Florida dispersion, was of some interested inventories see completed

Paul Romanowski

the it do when footprint. No. age, that not is quarter that get times. our we seen We that's around increase and units D.R. expect where still and we've across trend over quarters, sales are start seeing and a expectations And inventory. next we'll sit inventory completed seen in concerned. start improvement the stack our cycle No few in in across We why to completed back down. to our geographic place being sensitivity slightly below we've seen Horton or up our We've those

community-backed we've with As that down to. sales next completed number we need adjusted we're we to needed But few homes starts have quarters. community adjust pace and we over we hit today. and where need the the the have comfortable

Operator

is Rehaut question Your from coming from Michael JPMorgan. next

Michael Rehaut

the But I issue. can on into of a maybe I sense not low Florida trying this apologies stated get kind regional when want a you you base of a that, Texas, you bit all But digits inventory obviously, a levels, missed kind demand is any of perhaps with like versus broad possible. flat around if give that focus earlier. where single to just closings, a particularly times about know is and to delve to of that color, up that and reflect I little footprint? on think an you've your more feel us And kind does you guide that broadly, Or the couple just if weaker regional feel sense, for if stronger challenges? across of

Michael Murray

reflecting with I region. we've also don't any Texas, been and in, think the markets. guide are concern is given biggest a The markets competitive Florida that very

we starts starts spring lean capacity the that that we'll around largely expectations adjust comfort think, And conditions. taken the unfolds. on And reflective, we a we built pace a of I year, that so of basis into as and the was for guide been lots pause those as looking that to footprint have, available the buyers have that's see that across level have pace, next in markets. And have reflected forward the selling spring into the we

Michael Rehaut

September the from wondering lot you a a during kind appreciate into margin mentioned lower fluctuated little month but secondly, -- to was to month a I lower strongest was September a or higher of just quarter. I with And you pace was competitors if earlier, just throughout and some rates the sales get I Obviously, that Okay. being points sales quarter, the that. what a guess, was sense of that's your this heard but again, point the curious your incentives. standpoint, standpoint. rate September order saw there I quarter, pace that an perhaps a from apologies demand missed of of a order talk We've -- standpoint. growth if August, I wanted bit September, from and standpoint. growth

kind just the September So things to relative you during of and the saw, where curious how quarter rest? on what was trended

Michael Murray

the of at are a that behold, through choppy jump Fed about, And we we saw of before after a We thinking going trend in lot wow, we month keep sales the environment under are the X%, I'm X%. pretty XX trajectory to to basis buyers' psyche riding lo just in. think I think quarter above and rates. chart and ended I We affected the it's the smooth then points good the started and quarter cuts rates the and saw a of down. look October going rates quarter. turnaround October. I that the mortgage And up trend. just If pretty

it's of kind crazy rates. So predicting interest

hard discernible a trend, and saw see we sales to buyer other was pause. any on choppy that So than some

Jessica Hansen

the through volatility. month rate to October have still date, of just And continued

Operator

next Ratner Your Zelman & from Alan coming from is question Associates.

Alan Ratner

spring the least obviously know of and don't bit taking at looking 'XX. surface know at. market your be on you below My whatever what on that now, in XX% to the near move heard to that had, relates share. strategy I your question, look grow guess, is as other And orders, on a peers, it's share. or it it they're from several long preliminary And the based larger to target the a like, can I about would significant as to which guide closings, how a consolidate Horton, the you've you've by market a a is been metrics right goal unfolds. I'm guess covering around But I rate of X% broader amount obviously term, expect to is we've And 'XX in just in thinking I

a think if desire that aggressive? from match think the share prove the share? So growth. guys at see function you some now there competitors, of year that up what more to incentives higher seemingly Just that Is of point would need when or maybe stronger function meaningful to a kind no guys for actually I'm the some out you you activity you the price of might talk differential, competitive a you too points? of price can feel it your the maybe dynamics take out about of do set a to do that curious about to market you right is some don't in aggressive need of curious that outlook, you Do

Paul Romanowski

do good we feel Alan, position. very our

We We selling spring ahead have the of position. are still lot do season. well the

we inventory the stronger in a into market time spring. the improvement to if lean have see and We that cycle the market need we

to a a shift great going not as to should to and stronger are goal positioned a stay our the to respond about up operators position lean see today. market And we to and and other ability great the best that about reaching, gauge and always the higher We are we market. than in their operators than Our the it's feel it it have in significant the we're guide in numbers spring. field show our going

Alan Ratner

in is, of where of given Is the imagination, Is years. that talked maybe where of with your But this necessity supply builder to was out given a in thought we've of several chain was resale that. though the last it. others you of kind demand if the kind at spec That's Got kind your appreciate around to business. And the now the spec second extent by your kind any models then stretch build-to-order shown where where about I market? Obviously, somewhat acceleration? huge spec especially And pivoted of least never have to backlog of strategy. XXX% even out you and to turns a the signs I'm helpful. curious be were question the build-to-order, of some of position is some of the demand the portion the is. the -- course spring returning always over that's past that tight

Michael Murray

I the wouldn't a of of surpass a efficiency times. in We've strategy -- challenges. kind by driven building our cycle a into the supply lot community process and sea change community chain shift

by in to going and about especially our the mean can line qualified community upon I a of what in or mortgage the allow decisions depending may those particular and a more are presale when we focus customer expiring. will local to them still homebuyer first-time community days, operators see they're that conditions to serve make market like. get lease with community that for the demand, We segment the seeking something with with for be house close the that tremendous XX

Operator

Your from Company. next from Cleveland Bosshard Eric question Research is coming

Eric Bosshard

strategy? ticked or it's cost more increased is incentive if are this more is? just things, that a where gotten this -- you for higher? customers is what it's your the the rates The Just of Or we spender just for the could. and that Two investing lowering is clarity, I costs, cost and strategy the vision back expensive gotten as more for little

Paul Romanowski

It's our are buyers. based increase and rates our We little need to more for expectation. in on lean our stay incentives and achievability they where a

That's our expect order quarter, maintain the of and payments affordability remain little cost off a looking are next have market a But elevated to going maintain forward to that rates. will for. spread incentives want more. in looking into bigger monthly to they we to buyers So

Bill Wheat

uncertain, And or then, increase. are incentives Eric, more to rates volatile those when

is we're in to where more so the uncertain, of much higher. cost level it's choosing regardless And is the or just periods those how where buy

Eric Bosshard

redundant, phenomenon Okay. ask And of about But challenges. then talked lately you it potentially affordability second question, I'll this nonetheless. which is

beyond Is Your solution that or affordability? that affordability that this incentives, there can you a challenges that demand? limiting one unlock is key you look more for as the of phenomenon help solutions see you other of homes. bit anything more to at Any factors address smaller incremental

Michael Murray

a for, continually the selection the municipalities dirt, sense homes product asking improvements it are with see where can are to to horizontal location as makes homes and what underlying the numbers. are looking requirements it's or cost ultimate in and to that of to the themselves. Neighborhood the evaluating [indiscernible] have cost into affordability lot do going whether We development of

efficient and work partners to ways that as our It's that try can not our business we possible able for make something bring people us program, of with business of to a continually to we It's do. [indiscernible] do combination and labor as looking along houses every share our planful that we shareholders. with thing pass afford And one starts trade in they're to everything. sure a to those market. And savings day get to and so can the be to it's with

Operator

from Prizbilski from question Your Wolfe Research. is Paul coming next

Unknown Analyst

buyer. was more to can constraint? Your the down that are incentives case? still the with rate increased right the payments greatest has I for been Or wondering, the DTI issues the Is accelerating create shifted backlog or quarter of And impediment over any that monthly have historically, now? payment entry for quarter-over-quarter.

Jessica Hansen

buyer we an profile. Obviously, seen issue we've changed. I haven't think affordability big in harped that on being a hasn't the change

a And low fourth the a So our more a little tick We and income if a And various year's with reasons. ago. home household to look up can was slight year very cadence quarter us intra-quarter bit it than do did you was it high line on our is ago does last take XXs see to for pivot. QX. rate qualify rate, double-digit it our a for to rate several can manage. at QX But in years with and consistent in today -- comfortable low for

Unknown Analyst

was what How Okay. promotion? October? I was in average wondering, so And rate your XQ? XQ that compared what is it to far

Paul Romanowski

prior staying settle we We're of Yes. maintained but have of may That to weeks. out last below quarter there. quarters. in offerings to rates in where few in the our and have couple where that moved over of is X.X% terms the end they kind the X.X% X.X% up in We'll really next still the drift couple. are in that up, Rates X% see market

Jessica Hansen

Yes.

the in middle right it's is that, X.X%. of backlog Our at

Operator

from Your coming Citi. from next Anthony question Pettinari is

Anthony Pettinari

you had then brick stick those saw step fiscal maybe is wondering margins trending And in you the brick it in a pretty in that quarter-over-quarter costs really favorable John's and big I You driving of say question, move is quarter, not and down? had how referencing just fair stick and think I in was terms to XQ.

Jessica Hansen

That's Yes. fair. very

benefit quarter. but was a of expect a we in to for quarters, said of benefit this we've still be lumber behind think I the couple us, that the closings

roughly year-over-year. move throughout case see brick percent, base a flat, I our think as stick sequentially we'd And and down costs about take give or X% we is were and Our side. stick the on and 'XX X.X% relatively brick

Anthony Pettinari

issues Got watching could it. see or And we or you'll how the are I'm perspective there impacting I from just it. out? a plays coming of Got as it see be builder election buyers X up, that with X curious, the you really industry mean kind that

Michael Murray

the be is over. I happy election would think everybody

move and sentiment buyer help their will that the ability forward to decision. think life I with

Operator

from Your Research next Seaport Partners. from question is Ken coming Zener

Kenneth Zener

hear you Can me?

Jessica Hansen

Yes, go ahead.

Kenneth Zener

just to Obviously, right. the expecting. go through to basic check. or I thoughts here. what all Street few what All I you were want a just probably But All want not right.

tight which issue the is price Therefore, supply part mean, narrative But the that in do under sense. First, terms is do high. We slowing of construction? supply makes I you on you think part can of the the see look, given incentives, -- using affordability. of of you're whole think

in you issue margins? demand we're have your a it's forward affordability, -- because are gross affects that, already on new most in still have of incentives. you are so an seems because might builders rate-neutral have do offering pulled strictly dominant Is the given been you that most these homebuyers That builders markets, environment Or think long-term me to that view new incentives? that that therefore,

Paul Romanowski

that their XX% a our have those do -- first-time also lot our we think in that have resale the don't buyers that we coming offices. means homebuyers. not lock-in house sell the buyers coming of the I don't market into fact that of in homes are

their XX% there's I to home. means from Although need Those think move it's need of lack -- existing we they a going too. sell want, or more on than out don't there.

building So some we pent-up be demand. could

we aren't inventory we that more people to moving buyers bit resale to because going around and so concerned means a that start offices. little that's our more, if into And are see rise provide

more price points, challenged. resale We buydowns We are rate certainly because hear competitive from that of availability at with and market today. affordable it's our do that that realtors, the our

Kenneth Zener

-- management. years, margins view prior But the over the the higher that at comment, think rates, to have to of what the talked higher And the is time structurally of had perhaps do in want point gross you margins contrast a some XX% issue current you gross can last still you or you your bigger under that at actually be guys? I about structurally do given you XX% do -- a couple have confidence for persistency these incentives? Or affordability been

Jessica Hansen

returns. maximize do to to said we going to what do Ken, need that we're we've always

the to And lower to term quarter we've reasons compression. the the quarter meet could the gross the business higher so average cost quarter. we the that going of believe that margins long compressing we're could of the for I and on capital time, average, means in short deleveraging to margin our advantages we from of returns, that's if periods gross going we're the And over approach But be see in But do margin think, scale there's because term, take. maximize long-term market structurally done. to to

Bill Wheat

of which longer-term to And range view, the we of high end the above a about is XX.X%, step-down historic to are margins. talking our margin

times And there at So level. going meet but been are periods a we the will market, where be of and to we we higher -- have need to.

Operator

Rafe coming is question next from Your from Bank Jadrosich of America.

Rafe Jadrosich

you're spoke Can inflation XXXX? the you anticipating in what then You talk and about and expecting. first that inflation for stick about brick land through the quarter you're

Jessica Hansen

were full high So we percentage single double-digit a a this year we've single. On seen on increase a from lot a low double-digit digit high little bit quarter-over-quarter of our basis, was a to percentage. moderation cost up a in basis, it quarter. But

that mid-single-digit lot a past percentage. is digit it throughout to mid-single least moderate our costs to already. that have get at will increase a of and a couple of to continue base comparisons as can we expect we cost cycled maybe quarters those through I continue inflation we some case So as think But move

Rafe Jadrosich

level do fiscal then That's hold together, Okay. kind all putting you really net that margins? to we think of would what how And just 'XX of in of helpful. price need

Bill Wheat

a amount. would need small We

but With mid- flat. overall expect not on to our stick because a significant do high and the price, lot cost impact amount costs relatively brick you at need remain small a we to amount the

Operator

from question Maklari Goldman from is next Susan Sachs. Your coming

Susan Maklari

business. bit the a want in of to side cost just on more focus I the

upward seen what have several there. as cost about trajectory of you're that 'XX? you last element the the think thinking wood they're over the prices lumber next in fiscal inflating general You generally you seeing quarters product feels It like on and about you're Can a how talk weeks. about structure in and several

Paul Romanowski

we're for brick. Sue, seen lumber as some year, come next up we We And have at we relatively and look -- looking recently. have stick flat

business, to which we from have flat. seen the our trades relatively labor a as good hold markets. tends We response We mean looking see costs can for

as months, So the several in where it we kind and feel at but XXXX. all, movement don't expect aren't brick next over look down stick much like we over lumber in -- goes exactly sure we or the of as move up we next

Susan Maklari

then And maybe to of side rental the turning the That's Okay. helpful. business.

you You on do you think the stay lower hold about talk in you managing as next several seeing to there, can mentioned in how relatively that thinking and about you that your that comments just rental that versus for you're your well? are side? the need the flat expect years. that inventories higher But meeting about rates potential And demand as that

Jessica Hansen

Haven't on investment profile it. going business of the out conditions first years, to depend terms in on our to over to return get we quarters. where The next A comment through invest that's what willing in quick on part. rental on market that the we're clarification several the was and spoken

Paul Romanowski

market. a relatively we Yes. going in demand And terms our in production, feel of look starts in months seen past I the we to as over still overall, at the come reduction see buyers timing XX consistently think the solid certainly to in and have We've market. it's number of we apartment the about positioning, market, the inventory the and good that

will go-forward with a that about good monitor positioning starts we quarter-to-quarter feel still our basis. we of So it what on terms do segment, and in and

Operator

question coming from Jade Rahmani next from Your KBW. is

Jade Rahmani

demand to XXX sidelines see What that would the through treasury? it and as -- Would you categorized? reduction? level of a around rates point would need you see And you've the XX-year basis would off get buyers be spur need to to need

Michael Murray

most than what's buyers predict treasury. to to and spreads Hard think for I any in drive rate, the seeing off sidelines. underlying helpful rates come it's the the is us benchmark or XX-year to more rates, going given again whether the in stability But one

saw in in more some in there's going was escape to rates that in afford and ability fearful not mortgages a because is we they're tighter and sales to a house. or quarter, their the they're but the down quarter, we waiting to demand. And the for seasonality Stability rates have well, So come as trading a a to third environment. negative we had stronger that volatility to fourth ban

Jade Rahmani

APR to mid-X% do range. one of the offering, the range it or in is I've Xs, in that terms X% range? low In X-ish be you're most competitor at in percent the least seen currently but seem

Paul Romanowski

was The offering to to mid-X. range in average I across over alluded think kind market our mid-X of X%. in earlier, can backlog, Our the the as just

Operator

floor Q&A closing back today's conclude session. I now the would does Romanowski like remarks. to Paul This to for hand

Paul Romanowski

We fiscal to share speaking look Due just you, today quarter Thank entire efforts, XXrd the results. forward first XXXX. largest the Horton completed your in year on we everyone's to call in to family appreciate builder as time the Congratulations States. consecutive with successful and Tom. to our you on the a January D.R. United

in represent and you to accomplish honored on everything XXXX. are call, we We this fiscal look will forward to we together

Operator

you. Thank today's call. conclude This conference does

disconnect day. wonderful lines you may this your and a Thank your for participation. time, phone You at have

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