Largest Home Builder Sounds Alarms

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Largest Home Builder Challenge

D.R. Horton, the nation’s largest home builder, is raising alarms about new challenges ahead.

In its recent fiscal fourth quarter, the largest home builder reported closing sales of over 23,600 homes—a 3.1% increase from last year. However, revenue fell nearly 5% to $10 billion, largely due to rising mortgage rates and the company’s need to offer financial incentives to attract buyers.

Mortgage rates recently dipped from about 8% to around 6% but have since surged past 7%, prompting many potential homeowners to wait for better conditions. Chief Executive Paul Romanowski noted that this volatility, coupled with uncertainty surrounding the upcoming elections, is keeping buyers on the sidelines. This is a significant issue for the largest home builder in the U.S. as it works to maintain sales momentum.

To counteract these trends, the largest home builder has implemented a strategy involving significant interest-rate buydowns—upfront payments to lower mortgage rates. In fact, 80% of buyers financing through the largest home builder utilized buydowns in the last quarter, an increase from 74% the previous year.

As costs rise, the largest home builder’s profit margins are tightening, with projections for the coming year falling short of Wall Street expectations. The impact is being felt across the industry, with shares of the largest home builder and competitors like Lennar and PulteGroup all taking hits.

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M/I Homes Delivers Impressive Q3 Results

In other builder news, M/I Homes, Inc. has announced impressive results for the third quarter of 2024, showcasing strong growth across the board.

In a record-breaking quarter, M/I Homes delivered 2,271 homes, an 8% increase from last year. Revenue also surged by 9%, reaching $1.1 billion. Pre-tax income climbed 6% to $188.7 million, translating to a net income of $145.4 million, or $5.10 per diluted share.

Shareholders are benefiting as well, with equity hitting an all-time high of $2.8 billion—a 17% increase year-over-year—and a book value per share of $105. The company also repurchased $50 million of its common stock and achieved a robust return on equity of 20%.

New contracts held steady at 2,023, compared to 2,021 last year, with backlog units valued at $1.73 billion. CEO Robert H. Schottenstein highlighted the company’s excellent financial health, supported by low debt levels and diverse offerings across 217 communities nationwide.

M/I Homes will host an earnings conference call today at 10:00 A.M. Eastern Time, with a replay available on their website.

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Law Professor Challenges NAR Settlement Terms

And finally, a University at Buffalo law professor is raising significant concerns over a proposed billion-dollar settlement involving the National Association of Realtors, aimed at reforming home-selling practices.

In March, the NAR and other defendants agreed to pay approximately $1 billion to home sellers who alleged that the commission structure violated antitrust laws. The settlement seeks to alter how commissions are advertised, specifically regarding buyer’s agents. However, Professor Tanya Monestier, who sold her home last year, argues the settlement fails to effectively address the underlying issues.

In her 132-page formal objection filed with the U.S. District Court for the Western District of Missouri, Monestier claims the agreement allows for potential loopholes, enabling agents to maintain high commission rates despite the proposed changes. She also criticizes the minimal financial relief for affected homeowners, estimating it could be less than $25 per person.

Monestier further contests the substantial fees—$333 million—sought by plaintiffs’ attorneys, stating that such costs detract from the benefits intended for consumers. She emphasizes the need for stronger enforcement measures beyond the real estate industry itself.

A fairness hearing is scheduled for November 26, where Monestier hopes her insights will foster a more equitable resolution. The deadline to submit an objection to the settlement was October 28th. 

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