D.R. Horton Inc.

01/22/2026 | Press release | Distributed by Public on 01/22/2026 14:01

Quarterly Report for Quarter Ending December 31, 2025 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes included in this quarterly report and with our annual report on Form 10-K for the fiscal year ended September 30, 2025. Some of the information contained in this discussion and analysis constitutes forward-looking statements that involve risks and uncertainties. Actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to these differences include, but are not limited to, those described in the "Forward-Looking Statements" section following this discussion.
BUSINESS
D.R. Horton, Inc. is the largest homebuilding company in the United States as measured by number of homes closed. We construct and sell homes through our operating divisions in 126 markets across 36 states. Our common stock is included in the S&P 500 Index and listed on the New York Stock Exchange and NYSE Texas under the ticker symbol "DHI." Unless the context otherwise requires, the terms "D.R. Horton," the "Company," "we" and "our" used herein refer to D.R. Horton, Inc., a Delaware corporation, and its predecessors and subsidiaries.
Our business operations consist of homebuilding, rental, a majority-owned residential lot development company, financial services and other activities. Homebuilding is our core business and primarily includes the construction and sale of single-family homes with sales prices generally ranging from $250,000 to more than $1,000,000, with an average closing price of $365,500 during the three months ended December 31, 2025. Approximately 84% of our home sales revenue in the three months ended December 31, 2025 was generated from the sale of single-family detached homes, with the remainder from the sale of attached homes, such as townhomes and duplexes.
We have closed more than 1.2 million homes during our 47-year history, and we have been the largest volume homebuilder in the United States every year since 2002. Our product offerings include a broad range of homes for entry-level, move-up, active adult and luxury buyers.
Our rental segment consists of single-family and multi-family rental operations. Single-family rental operations construct homes within single-family rental (build-to-rent) communities, and then either sell homes to an investor as they are completed or lease the homes and market the entire community for a bulk sale. Multi-family rental operations develop, construct, lease and sell residential rental properties, the substantial majority of which are apartment communities.
At December 31, 2025, we owned 62% of the outstanding shares of Forestar Group Inc. (Forestar), a publicly traded residential lot development company listed on the New York Stock Exchange and NYSE Texas under the ticker symbol "FOR." Forestar operates across many of our homebuilding operating markets and is a key part of our homebuilding strategy to maintain relationships with land developers and control a large portion of our land and lot position through land purchase contracts.
Our financial services operations provide mortgage financing and title agency services to homebuyers in many of our homebuilding markets. DHI Mortgage, our wholly owned subsidiary, provides mortgage financing services primarily to our homebuyers and sells substantially all of the mortgages it originates and the related servicing rights to third-party purchasers after origination. Our wholly owned subsidiary title companies issue title insurance policies and provide examination, underwriting and closing services primarily to our homebuilding customers.
In addition to our homebuilding, rental, Forestar and financial services operations, we engage in other business activities through our subsidiaries. We conduct insurance-related operations, own water rights and other water-related assets and own non-residential real estate including ranch land and improvements. The results of these operations are immaterial for separate reporting and therefore are grouped together and presented as other.
OVERVIEW
During the three months ended December 31, 2025, our number of homes closed and our home sales revenues decreased 7% and 9%, respectively, compared to the prior year period, and our consolidated revenues decreased 10% to $6.9 billion compared to $7.6 billion. Our pre-tax income was $798.1 million in the three months ended December 31, 2025 compared to $1.1 billion in the prior year period, and our pre-tax operating margin was 11.6% compared to 14.6%. Net income was $601.4 million in the three months ended December 31, 2025 compared to $851.9 million in the prior year period, and our diluted earnings per share were $2.03 compared to $2.61.
In the trailing twelve months ended December 31, 2025, our return on equity (ROE) was 13.7% compared to 19.1% in the prior year period, and our return on assets (ROA) was 9.4% compared to 13.4%. ROE is calculated as net income attributable to D.R. Horton for the trailing twelve months divided by average stockholders' equity, where average stockholders' equity is the sum of ending stockholders' equity balances for the trailing five quarters divided by five. ROA is calculated as net income attributable to D.R. Horton for the trailing twelve months divided by average consolidated assets, where average consolidated assets is the sum of total asset balances for the trailing five quarters divided by five.
During the first quarter, new home demand continued to be impacted by ongoing affordability constraints and cautious consumer sentiment. Compared to the prior year quarter, our net sales orders were up 3%, the value of net sales orders was essentially flat, and home sales revenues decreased by 9%. Home sales gross margin decreased to 20.4% in the first quarter from the prior year quarter as we increased sales incentives, such as buydowns of mortgage rates for our homebuyers. We strive to remain well positioned with affordable product offerings and a flexible lot supply and will continue to manage our home pricing, sales incentives and number of homes in inventory based on the level of demand in each of our local markets. We expect to maintain an elevated level of sales incentives to support demand and may increase them further, depending on market conditions and changes in mortgage interest rates.
We remain focused on our relationships with land developers across the country to maximize returns and capital efficiency. Within our homebuilding land and lot portfolio, lots controlled through purchase contracts represented 75% of the lots owned and controlled at both December 31, 2025 and September 30, 2025 and 76% at December 31, 2024. We continue to prioritize the purchase of finished lots from Forestar and other land developers when possible. During the three months ended December 31, 2025, 67% of the homes we closed were on lots developed by either Forestar or a third party compared to 65% in the prior year period.
We believe our strong balance sheet and liquidity provide us with flexibility to operate effectively through changing economic conditions. We plan to generate strong cash flows from our operations and manage our product offerings, incentives, home pricing, sales pace and inventory levels to optimize the return on our inventory investments in each of our communities based on local housing market conditions.
STRATEGY
Our operating strategy focuses on consistently enhancing long-term value to our shareholders by leveraging our financial and competitive positions to maximize the returns on our inventory investments and generate strong profits and cash flows from operations, while managing risk and maintaining financial flexibility to navigate changing economic conditions. Our strategy includes the following initiatives:
•Developing and retaining highly experienced and productive teams of personnel throughout our company that are aligned and focused on continuous improvement in our operational execution and financial performance.
•Maintaining a significant cash balance and strong overall liquidity position while controlling our level of debt.
•Allocating and actively managing our inventory investments across our operating markets to diversify our geographic risk.
•Offering new home communities that appeal to a broad range of entry-level, move-up, active adult and luxury homebuyers based on consumer demand in each market.
•Modifying product offerings, sales pace, home prices and incentives as necessary in each of our markets to meet consumer demand and maintain affordability.
•Delivering high quality homes and a positive experience to our customers both during and after the sale.
•Managing our inventory of homes under construction relative to demand in each of our markets, including starting construction on unsold homes to capture new home demand and actively controlling the number of unsold completed homes in inventory.
•Investing in lots, land and land development in desirable markets, while controlling the level of land and lots we own in each market relative to the local new home demand.
•Controlling a significant portion of our land and finished lot position through purchase contracts and prioritizing the purchase of finished lots from Forestar and other land developers when possible.
•Controlling the cost of labor and goods provided by subcontractors and vendors.
•Improving the efficiency of our land development, construction, sales and other key operational activities.
•Controlling our selling, general and administrative (SG&A) expense infrastructure to match production levels.
•Ensuring that our financial services business provides high quality mortgage and title services to homebuyers efficiently and effectively.
•Investing in our rental operations to meet rental demand in high growth suburban markets and selling these properties profitably.
•Opportunistically evaluating potential acquisitions to enhance our operating platform.
We believe our operating strategy, which has produced positive results in recent years, will allow us to successfully operate through changing economic conditions and maintain our strong financial performance and competitive position. However, we cannot provide any assurance that the initiatives listed above will continue to be successful, and we may need to adjust parts of our strategy to meet future market conditions.
KEY RESULTS
Key financial results as of and for the three months ended December 31, 2025, as compared to the same period of 2024 unless otherwise indicated, were as follows:
Consolidated Results:
•Consolidated revenues decreased 10% to $6.9 billion compared to $7.6 billion.
•Consolidated pre-tax income decreased 28% to $798.1 million compared to $1.1 billion.
•Consolidated pre-tax income was 11.6% of consolidated revenues compared to 14.6%.
•Income tax expense was $196.7 million compared to $258.0 million, and our effective tax rate was 24.6% compared to 23.2%.
•Net income attributable to D.R. Horton decreased 30% to $594.8 million compared to $844.9 million.
•Net income attributable to D.R. Horton per diluted share decreased 22% to $2.03 compared to $2.61.
•Stockholders' equity was $24.0 billion compared to $24.2 billion and $24.9 billion at September 30, 2025 and December 31, 2024, respectively.
•Book value per share increased to $82.60 compared to $82.15 and $78.53 at September 30, 2025 and December 31, 2024, respectively.
•Debt to total capital was 18.8% compared to 19.8% and 17.0% at September 30, 2025 and December 31, 2024, respectively. Net debt to total capital was 11.2% compared to 11.0% and 7.6% at September 30, 2025 and December 31, 2024, respectively.
Homebuilding:
•Homebuilding revenues decreased 9% to $6.5 billion compared to $7.2 billion.
•Homes closed decreased 7% to 17,818 homes, and the average closing price of those homes decreased 3% to $365,500.
•Net sales orders increased 3% to 18,300 homes, and the value of net sales orders was $6.7 billion in both periods.
•Sales order backlog increased 3% to 11,376 homes, and the value of sales order backlog was $4.3 billion in both periods.
•Home sales gross margin was 20.4% compared to 22.7%.
•Homebuilding SG&A expense was 9.7% of homebuilding revenues compared to 8.9%.
•Homebuilding pre-tax income decreased 30% to $708.1 million compared to $1.0 billion.
•Homebuilding pre-tax income was 10.8% of homebuilding revenues compared to 14.1%.
•Homebuilding cash and cash equivalents totaled $1.9 billion compared to $2.2 billion and $2.5 billion at September 30, 2025 and December 31, 2024, respectively.
•Homebuilding inventories totaled $20.2 billion compared to $20.3 billion and $20.7 billion at September 30, 2025 and December 31, 2024, respectively.
•Homes in inventory totaled 30,400 compared to 29,600 and 36,200 at September 30, 2025 and December 31, 2024, respectively.
•Owned lots totaled 145,500 compared to 147,000 and 154,400 at September 30, 2025 and December 31, 2024, respectively. Lots controlled through purchase contracts totaled 445,000 compared to 444,900 and 485,400 at September 30, 2025 and December 31, 2024, respectively.
•Homebuilding debt was $3.2 billion at both December 31, 2025 and September 30, 2025 compared to $2.4 billion at December 31, 2024.
Rental:
•Rental revenues were $109.5 million compared to $217.8 million.
•Single-family rental homes closed totaled 397 compared to 311.
•There were no multi-family rental units closed compared to 504.
•Rental pre-tax income was $0.2 million compared to $11.9 million.
•Rental inventory totaled $2.9 billion compared to $2.7 billion and $3.0 billion at September 30, 2025 and December 31, 2024, respectively.
Forestar:
•Forestar's revenues increased 9% to $273.0 million compared to $250.4 million. Revenues in the current and prior year quarters included $183.7 million and $218.6 million, respectively, of revenue from land and lot sales to our homebuilding segment.
•Forestar's lots sold decreased 17% to 1,944 compared to 2,333. Lots sold to D.R. Horton totaled 1,627 compared to 2,112.
•Forestar's revenue from tract acres sold was $29.3 million compared to no tract acres sold in the prior year quarter.
•Forestar's pre-tax income was $20.8 million compared to $21.9 million.
•Forestar's pre-tax income was 7.6% of revenues compared to 8.7%.
•Forestar's cash and cash equivalents totaled $211.7 million compared to $379.2 million and $132.0 million at September 30, 2025 and December 31, 2024, respectively.
•Forestar's inventories totaled $2.9 billion compared to $2.6 billion and $2.7 billion at September 30, 2025 and December 31, 2024, respectively.
•Forestar's owned and controlled lots totaled 101,000 compared to 99,800 and 106,000 at September 30, 2025 and December 31, 2024, respectively. Of these lots, 40,700 were under contract to sell to or subject to a right of first offer with D.R. Horton compared to 40,400 and 43,800 at September 30, 2025 and December 31, 2024, respectively.
•Forestar's debt was $793.2 million compared to $802.8 million and $806.8 million at September 30, 2025 and December 31, 2024, respectively.
•Forestar's debt to total capital was 30.8% compared to 31.2% and 33.3% at September 30, 2025 and December 31, 2024, respectively. Forestar's net debt to total capital was 24.6% compared to 19.3% and 29.5% at September 30, 2025 and December 31, 2024, respectively.
Financial Services:
•Financial services revenues increased 1% to $184.6 million compared to $182.3 million.
•Financial services pre-tax income was $58.0 million compared to $48.6 million.
•Financial services pre-tax income was 31.4% of financial services revenues compared to 26.7%.
RESULTS OF OPERATIONS - HOMEBUILDING
We conduct our homebuilding operations in the geographic regions, states and markets listed below. Our homebuilding operating divisions are aggregated into six reporting segments, also referred to as reporting regions, which comprise the markets below. Our financial statements and the notes thereto contain additional information regarding segment performance.
State Reporting Region/Market State Reporting Region/Market State Reporting Region/Market
Northwest Region Southeast Region North Region
Colorado Colorado Springs Alabama Baldwin County Delaware Northern Delaware
Denver Birmingham Southern Delaware
Fort Collins Huntsville Illinois Chicago
Oregon Bend Mobile Indiana Fort Wayne
Eugene/Springfield Montgomery Indianapolis
Medford Tuscaloosa Northwest Indiana
Portland/Salem Florida Cape Coral/Fort Myers Iowa Des Moines
Utah Salt Lake City/Provo/Ogden Deltona/Daytona Beach Iowa City/Cedar Rapids
St. George Gainesville Kansas/Missouri Kansas City
Washington Bremerton Jacksonville Kentucky Louisville/Lexington
Central Washington Lakeland Maryland Baltimore
Kennewick/Pasco/Richland Miami/Fort Lauderdale Eastern Maryland
Seattle/Tacoma/Everett/Olympia Ocala Suburban Washington, D.C.
Spokane Orlando Western Maryland
Vancouver Palm Bay/Melbourne Minnesota Minneapolis/St. Paul
Panama City Nebraska Omaha
Southwest Region Pensacola New Jersey Northern New Jersey
Arizona Phoenix Port St. Lucie Southern New Jersey
Tucson Tallahassee Ohio Cincinnati/Dayton
California Bakersfield Tampa/Sarasota/Punta Gorda Columbus
Bay Area West Palm Beach Pennsylvania Central Pennsylvania
Fresno/Tulare Louisiana Baton Rouge Philadelphia
Los Angeles County Lake Charles/Lafayette Pittsburgh
Modesto/Merced/Stockton Mississippi Gulf Coast Virginia Northern Virginia
Redding/Chico/Yuba City Hattiesburg Richmond
Riverside County Jackson Virginia Beach/Williamsburg
Sacramento Western Virginia
San Bernardino County East Region West Virginia Eastern West Virginia
Hawaii Oahu Georgia Atlanta Northern West Virginia
Nevada Las Vegas Augusta Wisconsin Southeast Wisconsin
Reno Central Georgia
New Mexico Albuquerque Savannah/Brunswick
Santa Fe Valdosta
North Carolina Asheville
South Central Region Charlotte
Arkansas Little Rock Greensboro/Winston-Salem
Northwest Arkansas New Bern/Greenville
Oklahoma Oklahoma City Raleigh/Durham/Fayetteville
Tulsa Wilmington
Texas Abilene South Carolina Charleston
Austin Columbia
Beaumont Greenville/Spartanburg
Bryan/College Station Hilton Head
Corpus Christi Myrtle Beach
Dallas Tennessee Chattanooga
East Texas Knoxville
Fort Worth Memphis
Houston Nashville
Killeen/Temple/Waco Northeast Tennessee
Lubbock
Midland/Odessa
New Braunfels/San Marcos
San Antonio
The following tables and related discussion set forth key operating and financial data for our homebuilding operations by reporting segment as of and for the three months ended December 31, 2025 and 2024.
Net Sales Orders (1)
Three Months Ended December 31,
Net Homes Sold Value (In millions) Average Selling Price
2025 2024 %
Change 		2025 2024 %
Change 		2025 2024 %
Change
Northwest 923 1,019 (9) % $ 487.6 $ 533.7 (9) % $ 528,300 $ 523,700 1 %
Southwest 2,022 2,174 (7) % 966.2 1,049.5 (8) % 477,800 482,800 (1) %
South Central 4,931 4,559 8 % 1,477.4 1,430.7 3 % 299,600 313,800 (5) %
Southeast 4,237 4,422 (4) % 1,417.2 1,501.9 (6) % 334,500 339,600 (2) %
East 3,868 3,587 8 % 1,335.1 1,239.4 8 % 345,200 345,500 - %
North 2,319 2,076 12 % 978.3 898.3 9 % 421,900 432,700 (2) %
18,300 17,837 3 % $ 6,661.8 $ 6,653.5 - % $ 364,000 $ 373,000 (2) %
Sales Order Cancellations
Three Months Ended December 31,
Cancelled Sales Orders Value (In millions) Cancellation Rate (2)
2025 2024 2025 2024 2025 2024
Northwest 161 164 $ 95.1 $ 93.6 15 % 14 %
Southwest 430 370 211.9 182.7 18 % 15 %
South Central 998 991 318.9 321.9 17 % 18 %
Southeast 970 1,064 329.0 368.6 19 % 19 %
East 850 789 303.8 280.5 18 % 18 %
North 593 551 242.2 232.4 20 % 21 %
4,002 3,929 $ 1,500.9 $ 1,479.7 18 % 18 %
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(1)Net sales orders represent the number and dollar value of new sales contracts executed with customers (gross sales orders), net of cancelled sales orders.
(2)Cancellation rate represents the number of cancelled sales orders divided by gross sales orders.
Net Sales Orders
The value of net sales orders was $6.66 billion (18,300 homes) for the three months ended December 31, 2025 compared to $6.65 billion (17,837 homes) in the prior year period. The slight increase in value was attributable to a 3% increase in sales order volume, offset by a 2% decrease in the average selling price.
In regions where sales order volume increased, the markets contributing most to the increase were the Fort Worth and Houston markets in the South Central, the Myrtle Beach market in the East and the Pittsburgh and Richmond markets in the North. In regions where sales order volume decreased, the markets contributing most to the decrease were the Seattle and Salt Lake City markets in the Northwest, the Las Vegas market in the Southwest and the Florida markets (particularly Jacksonville) in the Southeast.
During the first quarter, new home demand continued to be impacted by ongoing affordability constraints and cautious consumer sentiment. We remain well positioned with affordable product offerings and a flexible lot supply and will continue to manage our home pricing, sales incentives and number of homes in inventory based on the level of new home demand in each of our local markets.
Sales Order Backlog
As of December 31,
Homes in Backlog Value (In millions) Average Selling Price
2025 2024 %
Change 		2025 2024 %
Change 		2025 2024 %
Change
Northwest 404 498 (19) % $ 219.0 $ 284.8 (23) % $ 542,100 $ 571,900 (5) %
Southwest 1,166 1,053 11 % 562.6 533.1 6 % 482,500 506,300 (5) %
South Central 2,738 2,577 6 % 841.2 837.9 - % 307,200 325,100 (6) %
Southeast 2,259 2,486 (9) % 786.8 898.2 (12) % 348,300 361,300 (4) %
East 2,686 2,612 3 % 968.6 943.2 3 % 360,600 361,100 - %
North 2,123 1,777 19 % 935.3 801.8 17 % 440,600 451,200 (2) %
11,376 11,003 3 % $ 4,313.5 $ 4,299.0 - % $ 379,200 $ 390,700 (3) %
Sales Order Backlog
Sales order backlog represents homes under contract but not yet closed at the end of the period. Many of the contracts in our sales order backlog are subject to contingencies, including mortgage loan approval and buyers selling their existing homes, which can result in cancellations. A portion of the contracts in backlog will not result in closings due to cancellations.
Homes Closed and Home Sales Revenue
Three Months Ended December 31,
Homes Closed Value (In millions) Average Selling Price
2025 2024 %
Change 		2025 2024 %
Change 		2025 2024 %
Change
Northwest 995 1,056 (6) % $ 546.4 $ 533.1 2 % $ 549,100 $ 504,800 9 %
Southwest 1,891 2,335 (19) % 889.9 1,140.0 (22) % 470,600 488,200 (4) %
South Central 4,628 4,736 (2) % 1,389.3 1,486.4 (7) % 300,200 313,900 (4) %
Southeast 4,383 5,031 (13) % 1,452.3 1,739.2 (16) % 331,300 345,700 (4) %
East 3,614 3,719 (3) % 1,250.3 1,308.5 (4) % 346,000 351,800 (2) %
North 2,307 2,182 6 % 984.5 938.8 5 % 426,700 430,200 (1) %
17,818 19,059 (7) % $ 6,512.7 $ 7,146.0 (9) % $ 365,500 $ 374,900 (3) %
Home Sales Revenue
Revenues from home sales were $6.5 billion (17,818 homes closed) for the three months ended December 31, 2025 compared to $7.1 billion (19,059 homes closed) in the prior year period. The decrease in revenues was attributable to a 7% decrease in closings volume, along with a 3% decrease in the average selling price.
In regions where homes closed decreased, the markets contributing most to the decrease were the Salt Lake City market in the Northwest, the Las Vegas and California markets in the Southwest, the Houston market in the South Central, the Florida markets (particularly Jacksonville and Tampa) in the Southeast and the Knoxville and Myrtle Beach markets in the East. The Pittsburgh market contributed most to the increase in the North.
Homebuilding Operating Margin Analysis
Percentages of Related Revenues
Three Months Ended
December 31,
2025 2024
Gross profit - home sales 20.4 % 22.7 %
Gross profit - land/lot sales and other 17.3 % 34.9 %
Inventory and land option charges (0.2) % (0.2) %
Gross profit - total homebuilding 20.3 % 22.6 %
Selling, general and administrative expense 9.7 % 8.9 %
Other (income) expense (0.3) % (0.4) %
Homebuilding pre-tax income 10.8 % 14.1 %
Home Sales Gross Profit
Gross profit from home sales decreased to $1.3 billion in the three months ended December 31, 2025 from $1.6 billion in the prior year period and decreased 230 basis points to 20.4% as a percentage of home sales revenues. The percentage decrease resulted from a decrease of 280 basis points due to the average cost of our homes closed increasing along with a decrease in the average selling price of those homes and 10 basis points due to an increase in the amortization of capitalized interest. These decreases were partially offset by an increase of 60 basis points due to the recovery of prior period warranty costs, as well as a decrease in warranty and construction defect costs incurred.
We remain focused on managing the pricing, incentives and sales pace in each of our communities to optimize the returns on our inventory investments and adjust to local market conditions and new home demand. To adjust to changes in market conditions during recent years, we have used a higher level of incentives and reduced home prices and sizes of our home offerings where necessary to provide better affordability to homebuyers. We expect our incentive levels to stay elevated during fiscal 2026, the extent to which will depend on market conditions and changes in mortgage interest rates.
Land/Lot Sales and Other Revenues
Land/lot sales and other revenues from our homebuilding operations were $16.2 million and $21.2 million in the three months ended December 31, 2025 and 2024, respectively. We continually evaluate our land and lot supply, and fluctuations in revenues and profitability from land sales occur based on how we manage our inventory levels in various markets. We generally purchase land and lots with the intent to build and sell homes on them. However, some of the land that we purchase includes commercially zoned parcels that we may sell to commercial developers. We may also sell residential lots or land parcels to manage our supply or for other strategic reasons. As of December 31, 2025, our homebuilding operations had $26.4 million of land held for sale that we expect to sell in the next twelve months.
Inventory and Land Option Charges
At the end of each quarter, we review the performance and outlook for all of our communities and land inventories for indicators of potential impairment and perform detailed impairment evaluations and analyses when necessary. As a result of this review, there were no impairments recorded in our homebuilding segment during the three months ended December 31, 2025 compared to $2.0 million in the prior year quarter.
As we manage our inventory investments across our operating markets to optimize returns and cash flows, we may modify our pricing and incentives, construction and development plans or land sale strategies in individual active communities and land held for development, which could result in the affected communities being evaluated for potential impairment. If the housing market or economic conditions are adversely affected for a prolonged period, we may be required to evaluate additional communities for potential impairment. These evaluations could result in impairment charges, which could be significant.
During the three months ended December 31, 2025, earnest money and pre-acquisition cost write-offs related to our homebuilding segment's land purchase contracts that we have terminated or expect to terminate were $10.2 million compared to $9.8 million in the prior year period.
Selling, General and Administrative (SG&A) Expense
Homebuilding SG&A expense decreased 1% to $632.5 million in the three months ended December 31, 2025 from $636.6 million in the prior year period. As a percentage of homebuilding revenues, SG&A expense increased to 9.7% in the three months ended December 31, 2025 from 8.9% in the prior year period, due to the decrease in homebuilding revenues.
Employee compensation and related costs were $474.8 million and $493.1 million in the three months ended December 31, 2025 and 2024, respectively, representing 75% and 77% of SG&A costs in those periods. Our homebuilding operations employed 9,723 and 10,168 people at December 31, 2025 and 2024, respectively.
We attempt to control our homebuilding SG&A costs while ensuring that our infrastructure adequately supports our operations; however, we cannot make assurances that we will be able to maintain or improve upon the current SG&A expense as a percentage of revenues.
Interest Incurred
We capitalize interest costs incurred to inventory during active development and construction (active inventory). Capitalized interest is charged to cost of sales as the related inventory is delivered to the buyer. Interest incurred by our homebuilding operations increased 68% to $30.0 million in the three months ended December 31, 2025 compared to $17.9 million in the prior year period. The increase was primarily due to an increase in the weighted average interest rate of homebuilding debt outstanding as well as a 26% increase in the average amount of that debt. Interest charged to cost of sales was 0.5% of homebuilding cost of sales (excluding inventory and land option charges) in the three months ended December 31, 2025 compared to 0.4% in the prior year period.
Other Income
Other income, net of other expenses, included in our homebuilding operations was $17.2 million in the three months ended December 31, 2025 compared to $29.9 million in the prior year period. Other income consists of interest income and various other types of ancillary income, gains, expenses and losses not directly associated with sales of homes, land and lots. The activities that result in this ancillary income are not significant, either individually or in the aggregate.
Business Acquisition
In October 2025, we acquired the homebuilding operations of SK Builders for approximately $80 million in cash. SK Builders operates in and around Greenville, South Carolina. The assets acquired included approximately 160 homes in inventory, 260 lots and a sales order backlog of 110 homes. Through the acquisition, we also obtained control of approximately 1,320 additional lots through land purchase contracts.
Homebuilding Results by Reporting Region
Three Months Ended December 31,
2025 2024
Homebuilding
Revenues 		Homebuilding
Pre-tax
Income (1) 		Pre-tax Income as % of
Revenues 		Homebuilding
Revenues 		Homebuilding
Pre-tax
Income (1) 		Pre-tax Income as % of
Revenues
(In millions)
Northwest $ 546.7 $ 59.3 10.8 % $ 533.2 $ 76.2 14.3 %
Southwest 894.7 88.6 9.9 % 1,140.1 168.4 14.8 %
South Central 1,389.5 173.4 12.5 % 1,486.9 221.3 14.9 %
Southeast 1,458.0 143.4 9.8 % 1,749.8 222.8 12.7 %
East 1,250.5 123.5 9.9 % 1,314.5 194.4 14.8 %
North 989.5 119.9 12.1 % 942.7 129.8 13.8 %
$ 6,528.9 $ 708.1 10.8 % $ 7,167.2 $ 1,012.9 14.1 %
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(1)Expenses maintained at the corporate level consist primarily of interest and property taxes, which are capitalized and amortized to cost of sales or expensed directly, and the expenses related to operating our corporate office. The amortization of capitalized interest and property taxes is allocated to each segment based on the segment's cost of sales, while expenses associated with the corporate office are allocated to each segment based on the segment's inventory balances.
Northwest Region- Homebuilding revenues increased 3% in the three months ended December 31, 2025 compared to the prior year period due to increases in the average selling price of homes closed in our Salt Lake City and Seattle markets. The region generated pre-tax income of $59.3 million in the three months ended December 31, 2025 compared to $76.2 million in the prior year period. Gross profit from home sales as a percentage of home sales revenue (home sales gross profit percentage) decreased by 350 basis points in the three months ended December 31, 2025 compared to the prior year period. The decrease was primarily due to the average cost of homes closed increasing by more than the average selling price of those homes. As a percentage of homebuilding revenues, SG&A expenses decreased by 30 basis points in the three months ended December 31, 2025 compared to the prior year period, primarily due to the increase in homebuilding revenues.
Southwest Region- Homebuilding revenues decreased 22% in the three months ended December 31, 2025 compared to the prior year period, primarily due to a decrease in the number of homes closed, particularly in our Las Vegas and California markets. The region generated pre-tax income of $88.6 million in the three months ended December 31, 2025 compared to $168.4 million in the prior year period. Home sales gross profit percentage decreased by 340 basis points in the three months ended December 31, 2025 compared to the prior year period. The decrease was primarily due to the average selling price of homes closed decreasing while the average cost of those homes increased slightly. As a percentage of homebuilding revenues, SG&A expenses increased by 140 basis points in the three months ended December 31, 2025 compared to the prior year period, primarily due to the decrease in homebuilding revenues.
South Central Region- Homebuilding revenues decreased 7% in the three months ended December 31, 2025 compared to the prior year period, primarily due to a decrease in the average selling price of homes closed in the majority of the region's markets. The region generated pre-tax income of $173.4 million in the three months ended December 31, 2025 compared to $221.3 million in the prior year period. Home sales gross profit percentage decreased by 140 basis points in the three months ended December 31, 2025 compared to the prior year period, primarily due to the average selling price of homes closed decreasing by more than the average cost of those homes, partially offset by a recovery of prior period warranty costs in our San Antonio market. As a percentage of homebuilding revenues, SG&A expenses increased by 70 basis points in the three months ended December 31, 2025 compared to the prior year period, primarily due to the decrease in homebuilding revenues.
Southeast Region- Homebuilding revenues decreased 17% in the three months ended December 31, 2025 compared to the prior year period, primarily due to a decrease in the number of homes closed, particularly in our Jacksonville and Tampa markets. The region generated pre-tax income of $143.4 million in the three months ended December 31, 2025 compared to $222.8 million in the prior year period. Home sales gross profit percentage decreased by 180 basis points in the three months ended December 31, 2025 compared to the prior year period, primarily due to the average selling price of homes closed decreasing by more than the average cost of those homes. As a percentage of homebuilding revenues, SG&A expenses increased by 110 basis points in the three months ended December 31, 2025 compared to the prior year period, primarily due to the decrease in homebuilding revenues.
East Region- Homebuilding revenues decreased 5% in the three months ended December 31, 2025 compared to the prior year period, primarily due to a decrease in the number of homes closed, particularly in our Knoxville and Myrtle Beach markets. The region generated pre-tax income of $123.5 million in the three months ended December 31, 2025 compared to $194.4 million in the prior year period. Home sales gross profit percentage decreased by 360 basis points in the three months ended December 31, 2025 compared to the prior year period, primarily due to the average cost of homes closed increasing while the average selling price of those homes decreased slightly. As a percentage of homebuilding revenues, SG&A expenses increased by 100 basis points in the three months ended December 31, 2025 compared to the prior year period, primarily due to the decrease in homebuilding revenues.
North Region- Homebuilding revenues increased 5% in the three months ended December 31, 2025 compared to the prior year period, primarily due to an increase in the number of homes closed, particularly in our Pittsburgh market. The region generated pre-tax income of $119.9 million in the three months ended December 31, 2025 compared to $129.8 million in the prior year period. Home sales gross profit percentage decreased by 130 basis points in the three months ended December 31, 2025 compared to the prior year period, primarily due to the average cost of homes closed increasing, while the average selling price of those homes decreased slightly. As a percentage of homebuilding revenues, SG&A expenses increased by 10 basis points in the three months ended December 31, 2025 compared to the prior year period.
HOMEBUILDING INVENTORIES, LAND AND LOT POSITION AND HOMES IN INVENTORY
We routinely enter into contracts to purchase land or developed residential lots at predetermined prices on a defined schedule commensurate with planned development or anticipated new home demand. At the time of purchase, the undeveloped land is generally vested with the rights to begin development or construction work, and we plan and coordinate the development of our land into residential lots for use in our homebuilding business. We manage our inventory of owned land and lots and homes under construction relative to demand in each of our markets, including starting construction on unsold homes to capture new home demand and actively controlling the number of unsold, completed homes in inventory.
Our homebuilding segment's inventories at December 31, 2025 and September 30, 2025 are summarized as follows:
December 31, 2025
Construction in Progress and
Finished Homes 		Residential Land/Lots
Developed and Under
Development 		Land Held
for Development 		Land Held
for Sale 		Total Inventory
(In millions)
Northwest $ 601.2 $ 1,254.8 $ 16.4 $ 3.0 $ 1,875.4
Southwest 984.7 2,038.9 8.6 7.7 3,039.9
South Central 1,457.6 2,367.1 0.3 5.6 3,830.6
Southeast 1,470.8 2,505.7 12.6 9.6 3,998.7
East 1,512.4 2,945.5 - - 4,457.9
North 1,217.4 1,476.7 - 0.2 2,694.3
Corporate and unallocated (1)
128.4 213.4 0.5 0.3 342.6
$ 7,372.5 $ 12,802.1 $ 38.4 $ 26.4 $ 20,239.4
September 30, 2025
Construction in Progress and
Finished Homes 		Residential Land/Lots
Developed and Under
Development 		Land Held
for Development 		Land Held
for Sale 		Total Inventory
(In millions)
Northwest $ 647.4 $ 1,225.3 $ 16.2 $ 2.9 $ 1,891.8
Southwest 1,003.8 2,047.1 8.7 8.9 3,068.5
South Central 1,643.0 2,288.6 0.3 - 3,931.9
Southeast 1,537.8 2,502.3 12.6 9.1 4,061.8
East 1,561.4 2,836.3 - - 4,397.7
North 1,222.8 1,414.6 - 0.2 2,637.6
Corporate and unallocated (1)
127.5 198.9 0.5 0.3 327.2
$ 7,743.7 $ 12,513.1 $ 38.3 $ 21.4 $ 20,316.5
__________
(1)Corporate and unallocated inventory consists primarily of capitalized interest and property taxes.
Our land and lot position and homes in inventory at December 31, 2025 and September 30, 2025 are summarized as follows:
December 31, 2025
Land/Lots
Owned (1) 		Lots Controlled
Through
Land and Lot
Purchase
Contracts (2)(3) 		Total
Land/Lots
Owned and
Controlled 		Homes
in
Inventory (4)
Northwest 11,900 17,700 29,600 1,700
Southwest 19,200 29,600 48,800 3,300
South Central 35,400 113,400 148,800 7,600
Southeast 30,900 110,400 141,300 6,500
East 31,600 112,900 144,500 6,600
North 16,500 61,000 77,500 4,700
145,500 445,000 590,500 30,400
25 % 75 % 100 %
September 30, 2025
Land/Lots
Owned (1) 		Lots Controlled
Through
Land and Lot
Purchase
Contracts (2)(3) 		Total
Land/Lots
Owned and
Controlled 		Homes
in
Inventory (4)
Northwest 12,200 17,100 29,300 1,700
Southwest 19,600 31,200 50,800 3,200
South Central 35,900 111,900 147,800 7,700
Southeast 31,500 113,600 145,100 6,300
East 31,500 111,100 142,600 6,300
North 16,300 60,000 76,300 4,400
147,000 444,900 591,900 29,600
25 % 75 % 100 %
___________________
(1)Land/lots owned included approximately 81,200 and 78,400 owned lots that are fully developed and ready for home construction at December 31, 2025 and September 30, 2025, respectively.
(2)The total remaining purchase price of lots controlled through land and lot purchase contracts at December 31, 2025 and September 30, 2025 was $26.7 billion and $26.0 billion, respectively, secured by earnest money deposits of $2.4 billion and $2.3 billion, respectively. The total remaining purchase price of lots controlled through land and lot purchase contracts at both December 31, 2025 and September 30, 2025 included $2.0 billion related to lot purchase contracts with Forestar, secured by $203.8 million and $200.2 million, respectively, of earnest money.
(3)Lots controlled at December 31, 2025 included approximately 40,700 lots owned by Forestar, 22,600 of which our homebuilding divisions had under contract to purchase and 18,100 of which our homebuilding divisions had a right of first offer to purchase. Of these, approximately 10,400 lots were in our East region, 9,300 lots were in our Southeast region, 9,000 lots were in our South Central region, 6,800 lots were in our North region, 3,400 lots were in our Southwest region and 1,800 lots were in our Northwest region. Lots controlled at September 30, 2025 included approximately 40,400 lots owned by Forestar, 22,800 of which our homebuilding divisions had under contract to purchase and 17,600 of which our homebuilding divisions had a right of first offer to purchase.
(4)Approximately 20,000 and 19,600 of our homes in inventory were unsold at December 31, 2025 and September 30, 2025, respectively. At December 31, 2025, approximately 7,300 of our unsold homes were completed, of which approximately 900 homes had been completed for more than six months. At September 30, 2025, approximately 9,300 of our unsold homes were completed, of which approximately 800 homes had been completed for more than six months. Homes in inventory exclude approximately 2,700 model homes at both December 31, 2025 and September 30, 2025.
RESULTS OF OPERATIONS - RENTAL
Our rental segment consists of single-family and multi-family rental operations. Single-family rental operations construct homes within single-family rental (build-to-rent) communities, and then either sell homes to an investor as they are completed or lease the homes and market the entire community for a bulk sale. Multi-family rental operations develop, construct, lease and sell residential rental properties, with a primary focus on constructing garden style apartment communities in high growth suburban markets. Single-family and multi-family rental property sales are recognized as revenues, and rental income is recognized as other income. The following tables provide further information regarding our rental operations as of and for the three months ended December 31, 2025 and 2024.
Rental Homes/Units Closed and Revenue
Three Months Ended December 31,
Homes/Units Closed Rental Revenue (In millions) Average Selling Price
2025 2024 %
Change 		2025 2024 %
Change 		2025 2024 %
Change
Single-family 397 311 28 % $ 109.5 $ 88.1 24 % 275,800 283,300 (3) %
Multi-family - 504 N/A - 129.7 N/A - 257,300 N/A
397 815 (51) % $ 109.5 $ 217.8 (50) % 275,800 267,200 3 %
Three Months Ended
December 31,
2025 2024
(In millions)
Revenues
Single-family rental $ 109.5 $ 88.1
Multi-family rental and other - 129.7
Total revenues 109.5 217.8
Cost of sales
Single-family rental 92.5 73.4
Multi-family rental and other 0.4 106.0
Inventory and land option charges - 3.6
Total cost of sales 92.9 183.0
Selling, general and administrative expense 46.9 46.4
Other (income) expense (30.5) (23.5)
Income before income taxes $ 0.2 $ 11.9
Rental Operating Margin Analysis
Percentages of Rental Revenues
Three Months Ended
December 31,
2025 2024
Gross profit - rental 15.2 % 16.0 %
Selling, general and administrative expense 42.8 % 21.3 %
Other (income) expense (27.9) % (10.8) %
Rental pre-tax income 0.2 % 5.5 %
Revenues from our rental operations decreased to $109.5 million during the three months ended December 31, 2025 from $217.8 million in the prior year period, and pre-tax income decreased to $0.2 million from $11.9 million. The decline in pre-tax income was due to a decrease in multi-family revenues in the current quarter due to no units closed.
At December 31, 2025, our rental property inventory of $2.9 billion included $355.8 million of single-family rental inventory and $2.5 billion of multi-family rental inventory. At September 30, 2025, our rental property inventory of $2.7 billion included $378.3 million of single-family rental inventory and $2.3 billion of multi-family rental inventory. Single-family rental homes and lots and multi-family rental units at December 31, 2025 and September 30, 2025 consisted of the following:
Rental Inventory
December 31,
2025 		September 30,
2025
Single-family rental homes (1) 1,330 1,420
Single-family rental lots (2) 1,300 1,150
Multi-family rental units (3) 12,480 12,480
__________
(1)Single-family rental homes at December 31, 2025 consist of 380 homes under construction and 950 completed homes compared to 370 homes under construction and 1,050 completed homes at September 30, 2025.
(2)Single-family rental lots at December 31, 2025 consist of 440 undeveloped lots and 860 finished lots compared to 440 undeveloped lots and 710 finished lots at September 30, 2025.
(3)Multi-family rental units at December 31, 2025 consist of 3,530 units under construction and 8,950 units that were substantially complete and in the lease-up phase compared to 4,910 units under construction and 7,570 units that were substantially complete at September 30, 2025.
RESULTS OF OPERATIONS - FORESTAR
At December 31, 2025, we owned 62% of the outstanding shares of Forestar. Forestar is a publicly traded residential lot development company with operations in 64 markets across 23 states as of December 31, 2025. (See Note B to the accompanying financial statements for additional Forestar segment information.)
Results of operations for the Forestar segment for the three months ended December 31, 2025 and 2024 were as follows:
Three Months Ended
December 31,
2025 2024
(In millions)
Total revenues $ 273.0 $ 250.4
Cost of land/lot sales and other 217.2 194.2
Inventory and land option charges 0.8 1.2
Total cost of sales 218.0 195.4
Selling, general and administrative expense 36.5 36.0
Other (income) expense (2.3) (2.9)
Income before income taxes $ 20.8 $ 21.9
Forestar's revenues are primarily derived from sales of single-family residential lots to local, regional and national homebuilders and land bankers for homebuilders. The following tables provide further information regarding Forestar's revenues for the three months ended December 31, 2025 and 2024 and lot position as of December 31, 2025 and September 30, 2025:
Three Months Ended December 31,
Lots Sold Value (In millions)
2025 2024 2025 2024
Residential lots sold
Lots sold to D.R. Horton 1,627 2,112 $ 183.7 $ 218.6
Total lots sold 1,944 2,333 $ 235.2 $ 247.4
Tract acres sold
Tract acres sold to D.R. Horton - - $ - $ -
Total tract acres sold 193 - $ 29.3 $ -
December 31,
2025 		September 30,
2025
Residential lots in inventory and under contract
Lots owned 65,600 65,100
Lots controlled through land purchase contracts 35,400 34,700
Total lots owned and controlled 101,000 99,800
Owned lots under contract to sell to D.R. Horton 22,600 22,800
Owned lots under contract to customers other than D.R. Horton 1,500 1,000
Total owned lots under contract 24,100 23,800
Owned lots subject to right of first offer with D.R. Horton 18,100 17,600
Owned lots fully developed 10,400 8,900
At December 31, 2025 and September 30, 2025, Forestar's inventory, which includes land and lots developed, under development and held for development, totaled $2.9 billion and $2.6 billion, respectively.
Forestar's inventory and land option charges consisted of $0.8 million and $1.2 million of earnest money and pre-acquisition cost write-offs in the three months ended December 31, 2025 and 2024, respectively. No impairment charges were recorded in either period.
SG&A expense for both the three months ended December 31, 2025 and 2024 included charges of $1.8 million related to the shared services agreement between Forestar and D.R. Horton whereby D.R. Horton provides Forestar with certain administrative, compliance, operational and procurement services.
RESULTS OF OPERATIONS - FINANCIAL SERVICES
The following tables and related discussion set forth key operating and financial data for our financial services operations, comprising DHI Mortgage and our subsidiary title companies, for the three months ended December 31, 2025 and 2024.
Three Months Ended December 31,
2025 2024 % Change
Number of first-lien loans originated or brokered by DHI Mortgage for D.R. Horton homebuyers 14,031 15,041 (7) %
Number of homes closed by D.R. Horton 17,818 19,059 (7) %
Percentage of D.R. Horton homes financed by DHI Mortgage 79 % 79 %
Total number of loans originated or brokered by DHI Mortgage 14,126 15,124 (7) %
Loans sold by DHI Mortgage to third parties 15,964 16,896 (6) %
Three Months Ended December 31,
2025 2024 % Change
(In millions)
Loan origination and other fees $ 17.7 $ 19.1 (7) %
Gains on sale of mortgage loans and mortgage servicing rights 124.1 120.1 3 %
Servicing income 1.9 0.5 280 %
Total mortgage operations revenues 143.7 139.7 3 %
Title policy premiums 40.9 42.6 (4) %
Total revenues 184.6 182.3 1 %
General and administrative expense 145.0 154.2 (6) %
Other (income) expense (18.4) (20.5) (10) %
Financial services pre-tax income $ 58.0 $ 48.6 19 %
Financial Services Operating Margin Analysis
Percentages of
Financial Services Revenues
Three Months Ended
December 31,
2025 2024
General and administrative expense 78.5 % 84.6 %
Other (income) expense (10.0) % (11.2) %
Financial services pre-tax income 31.4 % 26.7 %
Mortgage Loan Activity
DHI Mortgage's primary focus is to originate loans for our homebuilding operations, and those loan originations account for substantially all of its total loan volume. In the three months ended December 31, 2025, the volume of first-lien loans originated or brokered by DHI Mortgage for our homebuyers decreased 7%, due to the 7% decrease in the number of homes closed by our homebuilding operations. The percentage of homes closed for which DHI Mortgage handled our homebuyers' financing was 79% in the three months ended December 31, 2025 and 2024. This reflects DHI Mortgage's ongoing efforts to align their business with our homebuilding operations by offering competitive products and pricing.
The number of loans sold decreased 6% in the three months ended December 31, 2025 compared to the prior year period. Substantially all mortgage loans held for sale on December 31, 2025 were eligible for sale to the Federal National Mortgage Association (Fannie Mae), the Federal Home Loan Mortgage Corporation (Freddie Mac) or the Government National Mortgage Association (Ginnie Mae). During the three months ended December 31, 2025, approximately 68% of our mortgage loans were sold directly to Fannie Mae, Freddie Mac or into securities backed by Ginnie Mae, and 22% were sold to one other major financial entity. Changes in market conditions could result in a greater concentration of our mortgage sales in future periods to fewer financial entities and directly to Fannie Mae, Freddie Mac or Ginnie Mae, and we may need to make other adjustments to our mortgage operations.
Financial Services Revenues and Expenses
Total loan origination volume decreased 7% in the three months ended December 31, 2025, while revenues from our mortgage operations increased 3% to $143.7 million from $139.7 million in the prior year period. Revenues from our title operations decreased 4% to $40.9 million in the three months ended December 31, 2025 from $42.6 million in the prior year period, primarily due to a decrease in transactions closed through our title operations.
General and administrative (G&A) expense related to our financial services operations decreased 6% to $145.0 million in the three months ended December 31, 2025 from $154.2 million in the prior year period. As a percentage of financial services revenues, G&A expense was 78.5% in the three months ended December 31, 2025 compared to 84.6% in the prior year period. Fluctuations in financial services G&A expense as a percentage of revenues can occur because some components of revenue fluctuate differently than loan volumes, and some expenses are not directly related to mortgage loan volume or to changes in the amount of revenue earned. Our financial services operations employed 2,894 and 3,114 people at December 31, 2025 and 2024, respectively.
Other income, net of other expense, included in our financial services operations consists primarily of the interest income of our mortgage subsidiary. Other income decreased 10% to $18.4 million in the three months ended December 31, 2025 from $20.5 million in the prior year period, primarily due to a decrease in interest income on our loan origination volume.
RESULTS OF OPERATIONS - OTHER BUSINESSES
In addition to our homebuilding, rental, Forestar and financial services operations, we engage in other business activities through our subsidiaries. We conduct insurance-related operations, own water rights and other water-related assets and own non-residential real estate including ranch land and improvements. The pre-tax income of all of our subsidiaries engaged in other business activities was $8.2 million in the three months ended December 31, 2025 compared to $11.5 million in the prior year period.
RESULTS OF OPERATIONS - CONSOLIDATED
Income before Income Taxes
Pre-tax income for the three months ended December 31, 2025 was $798.1 million compared to $1.1 billion in the prior year period. The decrease was primarily due to a decrease in the pre-tax income of our homebuilding operations.
Income Taxes
Our income tax expense for the three months ended December 31, 2025 and 2024 was $196.7 million and $258.0 million, respectively. Our effective tax rate was 24.6% for the three months ended December 31, 2025 compared to 23.2% in the prior year period. The effective tax rates for both periods include an expense for state income taxes and tax benefits related to federal energy efficient home tax credits. The effective tax rate for the three months ended December 31, 2024 also includes a tax benefit related to stock-based compensation.
Our deferred tax assets, net of deferred tax liabilities, were $39.6 million at December 31, 2025 compared to $59.1 million at September 30, 2025. We have a valuation allowance of $14.6 million at December 31, 2025 and September 30, 2025 related to deferred tax assets for state net operating loss (NOL) and tax credit carryforwards that are expected to expire before being realized. We will continue to evaluate both the positive and negative evidence in determining the need for a valuation allowance with respect to our remaining state NOL and tax credit carryforwards. Any reversal of the valuation allowance in future periods will impact our effective tax rate.
CAPITAL RESOURCES AND LIQUIDITY
We have historically funded our operations with cash flows from operating activities, borrowings under bank credit facilities and the issuance of new debt securities. Our current levels of cash, borrowing capacity and balance sheet leverage provide us with the operational flexibility to adjust to changes in economic and market conditions.
We continue to invest in our homebuilding and rental inventories to expand our operations and consolidate market share. We are also returning capital to shareholders through repurchases of our common stock and dividend payments. We are maintaining significant homebuilding cash balances and liquidity to support the scale and level of activity in our business and to provide flexibility to adjust to changing market conditions and opportunities.
At December 31, 2025, we had outstanding notes payable with varying maturities totaling an aggregate principal amount of $5.6 billion. $1.6 billion was payable within 12 months, which includes $829.0 million outstanding under our mortgage repurchase facilities and $600 million principal amount of 1.3% homebuilding senior notes maturing in October 2026.
At December 31, 2025, our ratio of debt to total capital (notes payable divided by stockholders' equity plus notes payable) was 18.8% compared to 19.8% at September 30, 2025 and 17.0% at December 31, 2024. Our net debt to total capital (notes payable net of cash divided by stockholders' equity plus notes payable net of cash) was 11.2% at December 31, 2025 compared to 11.0% at September 30, 2025 and 7.6% at December 31, 2024. Over the long term, we intend to maintain our ratio of debt to total capital around 20%.
At December 31, 2025, we had outstanding letters of credit of $281.8 million and surety bonds of $3.3 billion issued by third parties to secure performance under various contracts. We expect that our performance obligations secured by these letters of credit and bonds will generally be completed in the ordinary course of business and in accordance with the applicable contractual terms. When we complete our performance obligations, the related letters of credit and bonds are generally released shortly thereafter, leaving us with no continuing obligations. We have no material third-party guarantees.
We regularly assess our projected capital requirements to fund growth in our business, repay debt obligations, pay dividends, repurchase our common stock and maintain sufficient cash and liquidity levels to support our other operational needs, and we regularly evaluate our opportunities to raise additional capital. D.R. Horton has an automatically effective universal shelf registration statement filed with the Securities and Exchange Commission (SEC) in July 2024, registering debt and equity securities that may be issued from time to time in amounts to be determined. Forestar also has an effective shelf registration statement filed with the SEC in September 2024, registering $750 million of equity securities, of which $300 million is reserved for sales under its at-the-market equity offering (ATM) program that was entered into in November 2024. As market conditions permit, we may issue new debt or equity securities through the capital markets or obtain additional bank financing to fund our projected capital requirements or provide additional liquidity. We believe that our existing cash resources, revolving credit facilities, mortgage repurchase facilities and ability to access the capital markets or obtain additional bank financing will provide sufficient liquidity to fund our near-term working capital needs and debt obligations for the next 12 months and for the foreseeable future thereafter.
Capital Resources - Homebuilding
Cash and Cash Equivalents- At December 31, 2025, cash and cash equivalents of our homebuilding segment totaled $1.9 billion.
Bank Credit Facility- We have a $2.305 billion senior unsecured homebuilding revolving credit facility with an uncommitted accordion feature that allows for an increase in its size to $3.0 billion, subject to certain conditions and availability of additional bank commitments. Of the total commitments, $2.04 billion matures on December 18, 2029, and $265 million matures on October 28, 2027. The facility also provides for the issuance of letters of credit with a sublimit equal to 100% of the total revolving credit commitments. Letters of credit issued under the facility reduce the available borrowing capacity. At December 31, 2025, there were no borrowings outstanding and $224.4 million of letters of credit issued under the revolving credit facility, resulting in available capacity of $2.08 billion.
Our homebuilding revolving credit facility imposes restrictions on our operations and activities, including requiring the maintenance of a maximum allowable leverage ratio and a borrowing base restriction if our leverage ratio exceeds a certain level. These covenants are measured as defined in the credit agreement governing the facility and are reported to the lenders quarterly. A failure to comply with these financial covenants could allow the lending banks to terminate the availability of funds under the revolving credit facility or cause any outstanding borrowings to become due and payable prior to maturity. The credit agreement governing the facility imposes restrictions on the creation of secured debt and liens.
Public Unsecured Debt- At December 31, 2025, we had $3.0 billion principal amount of homebuilding senior notes outstanding that mature from October 2026 through October 2035. The indenture governing our senior notes imposes restrictions on the creation of secured debt and liens.
Compliance and Guarantors - At December 31, 2025, we were in compliance with all of the covenants, limitations and restrictions of our homebuilding revolving credit facility and public debt obligations. Our homebuilding revolving credit facility and homebuilding senior notes are guaranteed by D.R. Horton, Inc.'s significant wholly owned homebuilding subsidiaries.
Debt and Stock Repurchase Authorizations - In July 2024, our Board of Directors authorized the repurchase of up to $500 million of our debt securities. In April 2025, the Board authorized the repurchase of up to $5.0 billion of our common stock, replacing the previous authorization. During the three months ended December 31, 2025, we repurchased 4.4 million shares at a total cost including commissions and excise taxes of $669.7 million. At December 31, 2025, the full amount of the debt repurchase authorization was remaining, and $2.6 billion of the stock repurchase authorization was remaining. The debt and stock repurchase authorizations have no expiration date.
Capital Resources - Rental
During the past few years, we have made significant investments in our rental operations. The inventory in our rental segment totaled $2.9 billion at December 31, 2025 compared to $2.7 billion at September 30, 2025 and $3.0 billion at December 31, 2024.
Cash and Cash Equivalents- At December 31, 2025, cash and cash equivalents of our rental segment totaled $123.1 million.
Bank Credit Facility- Our rental subsidiary, DRH Rental, has a $1.05 billion senior unsecured revolving credit facility with an uncommitted accordion feature that could increase the size of the facility to $2.0 billion, subject to certain conditions and availability of additional bank commitments. Availability under the rental revolving credit facility is subject to a borrowing base calculation based on the book value of DRH Rental's real estate assets and unrestricted cash. The facility also provides for the issuance of letters of credit with a sublimit equal to the greater of $100 million and 50% of the total revolving credit commitments. The maturity date of the facility is October 10, 2027. At December 31, 2025, there were $760 million of borrowings outstanding at a 5.5% annual interest rate and no letters of credit issued under the facility, resulting in available capacity of $290 million.
The rental revolving credit facility includes customary affirmative and negative covenants, events of default and financial covenants. The financial covenants require DRH Rental to maintain a minimum level of tangible net worth, a minimum level of liquidity and a maximum allowable leverage ratio. These covenants are measured as defined in the credit agreement governing the facility and are reported to the lenders quarterly. A failure to comply with these financial covenants could allow the lending banks to terminate the availability of funds under the revolving credit facility or cause any outstanding borrowings to become due and payable prior to maturity.
Compliance and Guarantors - At December 31, 2025, DRH Rental was in compliance with all of the covenants, limitations and restrictions of its revolving credit facility. The rental revolving credit facility is guaranteed by DRH Rental's wholly owned subsidiaries that are not immaterial subsidiaries and have not been designated as unrestricted subsidiaries. The rental revolving credit facility is not guaranteed by D.R. Horton, Inc. or any of the subsidiaries that guarantee the debt of our homebuilding, Forestar or financial services operations.
Capital Resources - Forestar
Forestar's achievement of its long-term growth objectives will depend on its ability to obtain financing and generate sufficient cash flows from operations. As market conditions permit, Forestar may issue new debt or equity securities through the capital markets or obtain additional bank financing to provide capital for future growth and additional liquidity. At December 31, 2025, Forestar's ratio of debt to total capital (notes payable divided by stockholders' equity plus notes payable) was 30.8% compared to 31.2% at September 30, 2025 and 33.3% at December 31, 2024. Forestar's ratio of net debt to total capital (notes payable net of cash divided by stockholders' equity plus notes payable net of cash) was 24.6% compared to 19.3% at September 30, 2025 and 29.5% at December 31, 2024.
Cash and Cash Equivalents- At December 31, 2025, Forestar had cash and cash equivalents of $211.7 million.
Bank Credit Facility- Forestar has a $665 million senior unsecured revolving credit facility with an uncommitted accordion feature that could increase the size of the facility to $1.0 billion, subject to certain conditions and availability of additional bank commitments. Of the total commitments, $600 million matures on December 18, 2029, and $65 million matures on October 28, 2026. The facility also provides for the issuance of letters of credit with a sublimit equal to the greater of $100 million and 50% of the total revolving credit commitments. Borrowings under the revolving credit facility are subject to a borrowing base calculation based on the book value of Forestar's real estate assets and unrestricted cash. Letters of credit issued under the facility reduce the available borrowing capacity. At December 31, 2025, there were no borrowings outstanding and $57.4 million of letters of credit issued under the revolving credit facility, resulting in available capacity of $607.6 million.
The Forestar revolving credit facility includes customary affirmative and negative covenants, events of default and financial covenants. The financial covenants require Forestar to maintain a minimum level of tangible net worth, a minimum level of liquidity and a maximum allowable leverage ratio. These covenants are measured as defined in the credit agreement governing the facility and are reported to the lenders quarterly. A failure to comply with these financial covenants could allow the lending banks to terminate the availability of funds under the revolving credit facility or cause any outstanding borrowings to become due and payable prior to maturity.
Unsecured Debt- As of December 31, 2025, Forestar had $800 million principal amount of senior notes issued pursuant to Rule 144A and Regulation S under the Securities Act of 1933, as amended, that mature from March 2028 through March 2033 and represent unsecured obligations of Forestar.
Compliance and Guarantors - At December 31, 2025, Forestar was in compliance with all of the covenants, limitations and restrictions of its revolving credit facility and senior note obligations. Forestar's revolving credit facility and its senior notes are guaranteed by Forestar's wholly owned subsidiaries that are not immaterial subsidiaries and have not been designated as unrestricted subsidiaries. They are not guaranteed by D.R. Horton, Inc. or any of the subsidiaries that guarantee the debt of our homebuilding, rental or financial services operations.
Debt Repurchase Authorization- In April 2020, Forestar's Board of Directors authorized the repurchase of up to $30 million of Forestar's debt securities. All of the $30 million authorization was remaining at December 31, 2025, and the authorization has no expiration date.
Issuance of Common Stock- During the three months ended December 31, 2025, there were no shares issued under Forestar's ATM program. At December 31, 2025, $750 million remained available for issuance under Forestar's shelf registration statement, with $300 million reserved for sales under the ATM program.
Capital Resources - Financial Services
Cash and Cash Equivalents- At December 31, 2025, cash and cash equivalents of our financial services segment totaled $228.8 million.
Mortgage Repurchase Facilities- Our mortgage subsidiary, DHI Mortgage, has two mortgage repurchase facilities, one of which is committed and the other of which is uncommitted, that provide financing and liquidity to DHI Mortgage by facilitating purchase transactions in which DHI Mortgage transfers eligible loans to counterparties upon receipt of funds from the counterparties. DHI Mortgage then has the right and obligation to repurchase the loans upon their sale to third-party purchasers in the secondary market or within specified time frames in accordance with the terms of the mortgage repurchase facilities.
The committed mortgage repurchase facility has a total capacity of $1.4 billion and a maturity date of May 6, 2026. The capacity of the facility can be increased to $2.0 billion subject to the availability of additional commitments. At December 31, 2025, DHI Mortgage had an obligation of $768.1 million under the committed mortgage repurchase facility at a 5.4% annual interest rate.
At December 31, 2025, the uncommitted mortgage repurchase facility had a borrowing capacity of $500 million, of which DHI Mortgage had an obligation of $60.9 million at a 5.0% annual interest rate.
At December 31, 2025, $1.87 billion of mortgage loans held for sale with a collateral value of $1.83 billion were pledged under the committed mortgage repurchase facility, and $75.6 million of mortgage loans held for sale with a collateral value of $73.0 million were pledged under the uncommitted mortgage repurchase facility.
The mortgage repurchase facilities contain financial covenants as to the mortgage subsidiary's minimum required tangible net worth, its maximum allowable indebtedness to tangible net worth ratio and its minimum required liquidity.
In the past, DHI Mortgage has been able to renew or extend its committed mortgage repurchase facility at a sufficient capacity and on satisfactory terms prior to its maturity and obtain temporary additional commitments through amendments to the facility during periods of higher-than-normal volumes of mortgages held for sale. The liquidity of our financial services business depends upon its continued ability to renew and extend the committed mortgage repurchase facility, utilize the uncommitted mortgage repurchase facility or obtain other additional financing in sufficient capacities.
Compliance and Guarantors - At December 31, 2025, DHI Mortgage was in compliance with all of the conditions and covenants of the mortgage repurchase facilities. The mortgage repurchase facilities are not guaranteed by D.R. Horton, Inc. or any of the subsidiaries that guarantee the debt of our homebuilding, rental or Forestar operations.
Operating Cash Flow Activities
In the three months ended December 31, 2025, net cash provided by operating activities was $854.0 million compared to $646.7 million in the prior year period. Cash provided by operating activities in the current year period primarily consisted of $731.5 million and $497.7 million of cash provided by our financial services and homebuilding segments, respectively, partially offset by $197.0 million and $157.0 million of cash used in our rental and Forestar segments, respectively.
Cash provided by a decrease in construction in progress and finished home inventory was $398.8 million in the current year period, primarily reflecting a decrease in our completed homes in inventory in the current period. Cash used to increase residential land and lots was $489.1 million in the current year period compared to $1.2 billion in the prior year period.
Investing Cash Flow Activities
In the three months ended December 31, 2025, net cash used in investing activities was $116.2 million compared to $57.1 million in the prior year period. In the current year period, uses of cash included the payment of $82.1 million related to a business acquisition and purchases of property and equipment totaling $27.4 million. In the prior year period, uses of cash included the payment of $51.0 million related to a business acquisition and purchases of property and equipment totaling $13.3 million.
Financing Cash Flow Activities
We expect the short-term financing needs of our operations will be funded with existing cash, cash generated from operations and borrowings under our credit facilities. Long-term financing needs for our operations may be funded with the issuance of senior unsecured debt securities or equity securities through the capital markets.
During the three months ended December 31, 2025, net cash used in financing activities was $1.2 billion, consisting primarily of cash used to repurchase shares of our common stock of $649.2 million, net payments on our mortgage repurchase facilities of $579.3 million and payment of cash dividends totaling $131.5 million. These uses of cash were partially offset by net borrowings on our rental revolving credit facility of $160 million.
During the three months ended December 31, 2024, net cash used in financing activities was $2.1 billion, consisting primarily of cash used to repurchase shares of our common stock of $1.1 billion, net payments on our mortgage repurchase facilities of $746.9 million, repayment of $500 million principal amount of our 2.5% homebuilding senior notes at maturity and payment of cash dividends totaling $128.5 million. These uses of cash were partially offset by net borrowings on our rental revolving credit facility of $305 million and on Forestar's revolving credit facility of $100 million.
During the three months ended December 31, 2025, our Board of Directors approved a quarterly cash dividend of $0.45 per share totaling $131.5 million, which was paid on November 20, 2025 to stockholders of record on November 13, 2025. Cash dividends of $0.40 per share were approved and paid in each quarter of fiscal 2025. In January 2026, our Board of Directors approved a quarterly cash dividend of $0.45 per share, payable on February 12, 2026 to stockholders of record on February 5, 2026. The declaration of future cash dividends is at the discretion of our Board of Directors and will depend upon, among other things, our future earnings, cash flows, capital requirements, financial condition and general business conditions.
SUPPLEMENTAL GUARANTOR FINANCIAL INFORMATION
As of December 31, 2025, D.R. Horton, Inc. had $3.0 billion principal amount of homebuilding senior notes outstanding due through October 2035 and no amounts outstanding on its homebuilding revolving credit facility.
All of the homebuilding senior notes and the homebuilding revolving credit facility are fully and unconditionally guaranteed, on a joint and several basis, by certain subsidiaries of D.R. Horton, Inc. (Guarantors or Guarantor Subsidiaries). Each of the Guarantor Subsidiaries is 100% owned, directly or indirectly, by D.R. Horton, Inc. Our subsidiaries associated with the single-family and multi-family rental operations, Forestar lot development operations, financial services operations and certain other subsidiaries do not guarantee the homebuilding senior notes or the homebuilding revolving credit facility (collectively, Non-Guarantor Subsidiaries). The guarantees are senior unsecured obligations of each Guarantor and rank equal with all existing and future senior debt of such Guarantor and senior to all subordinated debt of such Guarantor. The guarantees are effectively subordinated to any secured debt of such Guarantor to the extent of the value of the assets securing such debt. The guarantees will be structurally subordinated to indebtedness and other liabilities of Non-Guarantor Subsidiaries of the Guarantors.
The guarantees by a Guarantor Subsidiary will be automatically and unconditionally released and discharged upon: (1) the sale or other disposition of its common stock whereby it is no longer a subsidiary of ours; (2) the sale or other disposition of all or substantially all of its assets (other than to us or another Guarantor); (3) its merger or consolidation with an entity other than us or another Guarantor; or (4) its ceasing to guarantee any of our publicly traded debt securities and ceasing to guarantee any of our obligations under our homebuilding revolving credit facility.
The enforceability of the obligations of the Guarantor Subsidiaries under their guarantees may be subject to review under applicable federal or state laws relating to fraudulent conveyance or transfer, voidable preference and similar laws affecting the rights of creditors generally. In certain circumstances, a court could void the guarantees, subordinate amounts owing under the guarantees or order other relief detrimental to the holders of our guaranteed obligations. The indenture governing our homebuilding senior notes contains a "savings clause," which limits the liability of each Guarantor on its guarantee to the maximum amount that such Guarantor can incur without risk that its guarantee will be subject to avoidance as a fraudulent transfer. This provision may not be effective to protect such guarantees from fraudulent transfer challenges or, if it does, it may reduce such Guarantor's obligation such that the remaining amount due and collectible under the guarantees would not suffice, if necessary, to pay the notes in full when due.
The following tables present summarized financial information for D.R. Horton, Inc. and the Guarantor Subsidiaries on a combined basis after intercompany transactions and balances have been eliminated among D.R. Horton, Inc. and the Guarantor Subsidiaries, as well as their investment in, and equity in earnings from the Non-Guarantor Subsidiaries.
D.R. Horton, Inc. and Guarantor Subsidiaries
Summarized Balance Sheet Data December 31, 2025 September 30, 2025
(In millions)
Assets
Cash
$ 1,848.4 $ 2,140.3
Inventories
20,241.9 20,321.9
Amount due from Non-Guarantor Subsidiaries
1,441.4 1,540.0
Total assets
27,703.4 28,108.0
Liabilities & Stockholders' Equity
Notes payable
$ 3,165.1 $ 3,154.4
Total liabilities
7,032.4 7,196.2
Stockholders' equity
20,671.0 20,911.8
Summarized Statement of Operations Data Three Months Ended
December 31, 2025 		Year Ended
September 30, 2025
(In millions)
Revenues $ 6,468.2 $ 31,271.6
Cost of sales 5,156.9 24,646.7
Selling, general and administrative expense 616.3 2,565.9
Income before income taxes 710.8 4,130.0
Net income 535.2 3,154.8
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
As disclosed in our annual report on Form 10-K for the fiscal year ended September 30, 2025, our most critical accounting policies relate to revenue recognition, inventories and cost of sales, and legal claims and insurance. Since September 30, 2025, there have been no significant changes to those critical accounting policies.
As disclosed in our critical accounting policies in our Form 10-K for the fiscal year ended September 30, 2025, our reserves for construction defect claims include the estimated costs of both known claims and anticipated future claims. At December 31, 2025 and September 30, 2025, we had reserves for approximately 855 and 875 pending construction defect claims, respectively, and no individual existing claim was material to our financial statements. During the three months ended December 31, 2025, we were notified of approximately 95 new construction defect claims and resolved 115 construction defect claims for a total cost of $40.9 million. At December 31, 2024 and September 30, 2024, we had reserves for approximately 880 and 825 pending construction defect claims, respectively, and no individual existing claim was material to our financial statements. During the three months ended December 31, 2024, we were notified of approximately 120 new construction defect claims and resolved 65 construction defect claims for a total cost of $5.8 million.
SEASONALITY
Although significant changes in market conditions have impacted our seasonal patterns in the past and could do so again in the future, we generally close more homes and generate greater revenues and pre-tax income in the third and fourth quarters of our fiscal year. The seasonal nature of our business can also cause significant variations in the working capital requirements for our homebuilding, rental, lot development and financial services operations. As a result of seasonal activity, our quarterly results of operations and financial position at the end of a particular fiscal quarter are not necessarily representative of the balance of our fiscal year.
Forward-Looking Statements
Some of the statements contained in this report, as well as in other materials we have filed or will file with the SEC, statements made by us in periodic press releases and oral statements we make to analysts, stockholders and the press in the course of presentations about us, may be construed as "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on management's beliefs as well as assumptions made by, and information currently available to, management. These forward-looking statements typically include the words "anticipate," "believe," "consider," "continue," "could," "estimate," "expect," "forecast," "goal," "intend," "likely," "may," "outlook," "plan," "possible," "potential," "predict," "projection," "seek," "should," "strategy," "target," "will," "would" or other words of similar meaning. Any or all of the forward-looking statements included in this report and in any other of our reports or public statements may not approximate actual experience, and the expectations derived from them may not be realized, due to risks, uncertainties and other factors. As a result, actual results may differ materially from the expectations or results we discuss in the forward-looking statements. These risks, uncertainties and other factors include, but are not limited to:
•the cyclical nature of the homebuilding, rental and lot development industries and changes in economic, real estate or other conditions;
•adverse developments affecting the capital markets and financial institutions, which could limit our ability to access capital, increase our cost of capital and impact our liquidity and capital resources;
•reductions in the availability of mortgage financing provided by government agencies, changes in government financing programs, a decrease in our ability to sell mortgage loans on attractive terms or an increase in mortgage interest rates;
•the risks associated with our land, lot and rental inventory;
•our ability to effect our growth strategies, acquisitions, investments or other strategic initiatives successfully;
•the impact of an inflationary, deflationary or higher interest rate environment;
•risks of acquiring land, building materials and skilled labor and challenges obtaining regulatory approvals;
•the effects of public health issues such as a major epidemic or pandemic on the economy and our businesses;
•the effects of weather conditions and natural disasters on our business and financial results;
•home warranty and construction defect claims;
•the effects of health and safety incidents;
•reductions in the availability of performance bonds;
•increases in the costs of owning a home;
•the effects of information technology failures, cybersecurity incidents, and the failure to satisfy privacy and data protection laws and regulations;
•the effects of governmental regulations and environmental matters on our land development and housing operations;
•the effects of changes in income tax and securities laws;
•the effects of governmental regulations on our financial services operations;
•the effects of competitive conditions within the industries in which we operate;
•our ability to manage and service our debt and comply with related debt covenants, restrictions and limitations;
•the effects of negative publicity;
•the effects of the loss of key personnel; and
•the effects of actions by activist stockholders.
We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. However, any further disclosures made on related subjects in subsequent reports on Forms 10-K, 10-Q and 8-K should be consulted. Additional information about issues that could lead to material changes in performance and risk factors that have the potential to affect us is contained in our annual report on Form 10-K for the fiscal year ended September 30, 2025, including the section entitled "Risk Factors," which is filed with the SEC.
D.R. Horton Inc. published this content on January 22, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on January 22, 2026 at 20:01 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]