D.R. Horton : Highest Revenue Gain – Public Company
Marice Richter
Business Press Correspondent
Selling new homes during a recession is a struggle for any homebuilder, but D.R. Horton managed to sidestep a lot of the pain that others in the industry experienced during the financial downturn often referred to as the Great Recession. Although not completely unscathed by the problems that savaged the housing market, the Fort Worth homebuilder that calls itself “America’s Builder” has stayed on track by strategically positioning itself to withstand economic upheaval. “Our key focus is to be the best at what we do,” said Chairman Donald R. Horton. “We focus on delivering a positive home-buying experience to our customers, investing our capital to meet anticipated demand, and adapting our business to the ever-changing housing environment in each of our local markets.” The numbers indicate that Horton, the nation’s largest homebuilder based on the number of houses sold in the past year, is on the right track. In its 2013 third-quarter earnings report, Horton announced that its pretax income increased 184 percent, to $205.1 million, compared with $72.2 million in the third quarter of 2012. Horton’s third-quarter profit was $146 million. Sales orders for the third quarter increased 12 percent, to 6,822 houses from 6,079 houses in the third quarter of 2012 and the value of sales orders increased 30 percent, to $1.8 billion, up from $1.4 billion. “Homes sold, closed and in backlog all increased double-digit percentages, while the dollar values all increased 30 percent or more,” companyofficials said in the third-quarter report. “Our average sales price increased 15 percent, to $268,000, reflecting pricing power across most of our markets and increased demand from move-up buyers.” Don Tomnitz, the company’s chief executive officer, said in a statement that the homebuilder’s third quarter was “the most profitable third quarter since 2006,” before the economic collapse and recession. Horton, who founded the company in 1978, believes it is poised to take advantage of growing demand as the economy continues to gather momentum, despite rising mortgage rates and some lingering buyer skittishness. “Our recent results and other national data indicate the overall demand for new homes is continuing to improve,” Horton said. “Demand has increased in most of our markets, while the supply of homes for sale has become limited relative to the increased demand.” Federal data show that there were 161,000 new homes for sale at the end of June – a number “significantly below average historical levels,” Horton said. Despite modest increases, mortgage rates remain at historically low levels and home pricing is extremely affordable at this point in the economy’s recovery, he said. Looking ahead, Horton said the company expects continued profit growth due to its inventory, strong balance sheet and the large number of markets the company serves. D.R. Horton builds in 78 markets in 27 states, covering most regions of the country, with prices ranging from $100,000 to more than $900,000. The company also offers mortgage financing and title services to its homebuyers. The company’s long-term prospects, Horton said, are tied to the robustness of the economy and facts such as employment, household income and consumer confidence. “To see long-term sustainable improvement in-house, we need to continue to see improvement in the overall economy,” Horton said.
INDUSTRY INSIGHT
D.R. Horton closed 19,954 homes in 2012, up 16 percent from 2011 and nearly 3,500 more than second-ranked PulteGroup, which had 16,505 closings, and 6,152 more than third-ranked Lennar Corp., which posted 13,802 closings. Rounding out the top 10 builders based on closings are NVR (9,843), KB Home (6,282), Hovnanian Enterprises (5,356), The Ryland Group (4,809), Beazer Homes USA (4,428), Meritage Homes Corp. (4,238), and Habitat for Humanity International (3,866).