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D.R. Horton: So Much for the Power of Positive Thinking

Posted by: Peter Coy on July 10, 2007

If wishing could make it so, homebuilder D.R. Horton Inc. would be hammering its way to untold riches. In the spring of 2006, even as the storm clouds were beginning to gather in the housing market, “America’s Builder” was insisting that strong growth lay ahead. It simply didn’t brace itself properly for the troubles that were coming. americas-builder.gif

Here’s an excerpt from an article I wrote for the Apr. 3, 2006, edition of BusinessWeek, followed by an excerpt from a company news release today.


Horton, already No. 1 in homes sold, is aiming for close to 15% annual unit growth. The ethic is bred in the bone at Horton, which has had rising revenues and profits every quarter since it was founded by Chairman Donald Ray Horton in 1978. Donald J. Tomnitz, Horton’s CEO, says he’s expecting lots of demand from baby boomers, immigrants, and “echo boomers.” But even if that demand doesn’t materialize, the company aims to grow by grabbing business with aggressive incentives or, as a last resort, price cuts. … “Some people accuse us of being cocky, which, if you know us, we’re not. We’re very conservative people,” says Tomnitz.

Today’s news release:

D.R. Horton, Inc. (NYSE:DHI), America’s Builder, the largest homebuilder in the United States, Tuesday (July 10, 2007), reported net sales orders for the third quarter ended June 30, 2007 of 8,559 homes ($2.0 billion), compared to 14,316 homes ($3.8 billion) for the same quarter of fiscal year 2006. … The Company’s cancellation rate (sales orders cancelled divided by gross sales orders) for the third quarter of fiscal 2007 was 38%. … Donald R. Horton, Chairman of the Board, said, “Market conditions for new home sales declined in our June quarter as inventory levels of both new and existing homes remained high, and we expect the housing environment to remain challenging. … we will realize significant asset impairments which will result in a loss for both the quarter and the nine months ended June 30, 2007.”

Reader Comments


July 10, 2007 10:17 PM

DR Horton Homes is only the latest casualty of the bust. Your 2006 article hit the nail on the head - DR Horton spouting off once popular lines like "immigration growth, echo boom", basically any kind of supporting statements they could find or make up. Last I checked, Congress wanted to deport 12 to 20 million illegals. If DR Horton was counting on selling to them, they are screwed.


July 11, 2007 7:41 AM

I checked out DR. Horton in northeast Florida. Prices are ok, but just not giving enough for your buck. Housing still has to drop a good 20 - 40% to be worth wile.

Angeline Gleed

July 11, 2007 4:43 PM

The company's sales for that quarter fell 23% from a year earlier. But it doesn't necessarily follows that Dr. Horton's profitability status really is worth talking about. Being the largest home builder in the nation, you cant just expect it to doom. It will always have it ups and lows but as I have been observing the news, Horton will simply be making fortune after fortune.

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BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.

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