U.S. homebuilder D.R. Horton misses profit estimates; shares tumble

FILE PHOTO: A house under construction is seen at Hawthorne Estates by D. R. Horton in Medford, New Jersey, U.S., May 23, 2022. REUTERS/Andrew Kelly/File Photo

(Reuters) -U.S. homebuilder D.R. Horton Inc missed estimates for first-quarter profit on Tuesday, sending its shares down 8% in premarket trading.

Net income attributable to the company for the quarter ended December was $2.82 per share, compared with analysts’ estimates of $2.88 per share, according to LSEG data.

Despite a recent decline in the popular 30-year fixed mortgage rates to about 6.6%, a majority of homeowners in the U.S. remain locked into a rate below 5%.

The “rate lock-in” effect has constrained the supply of existing homes in the U.S., forcing buyers to turn to relatively more expensive new homes at a time when home prices remain elevated.

Affordability challenges have prompted homebuilders to provide incentives on home sales to customers, with the most popular among them being mortgage rate buydowns.

D.R. Horton flagged expectations of a sequential decline in homebuilding gross margins in November due to a higher incentive load, offsetting gains from higher home sales.

The Arlington, Texas-based homebuilder reported pre-tax profit margins of 16.1% in the first quarter, compared to 17.5% last year.

(Reporting by Ananta Agarwal and Rupali Chaudhary in Bengaluru; Editing by Shweta Agarwal)