D.R. Horton, Inc. operates as the homebuilding company in the United States. The company constructs and sells homes through its operating divisions in 125 markets across 36 states.
The company’s business operations consist of homebuilding, rental, a majority-owned residential lot development company, financial services and other activities. The company’s homebuilding operations generate most of their revenues from the sale of completed homes and to a lesser extent from the sale of land and lots...
D.R. Horton, Inc. operates as the homebuilding company in the United States. The company constructs and sells homes through its operating divisions in 125 markets across 36 states.
The company’s business operations consist of homebuilding, rental, a majority-owned residential lot development company, financial services and other activities. The company’s homebuilding operations generate most of their revenues from the sale of completed homes and to a lesser extent from the sale of land and lots. Approximately 87% of the company’s home sales revenue in fiscal 2024 was generated from the sale of single-family detached homes, with the remainder from the sale of attached homes, such as townhomes, duplexes and triplexes. The company’s product offerings include a broad range of homes for entry-level, move-up, active adult and luxury buyers. The company’s homes generally range in size from 1,000 to 4,000 square feet and in price from $200,000 to more than $1,000,000. For the year ended September 30, 2024, the company’s homebuilding operations closed 89,690 homes.
The company’s rental segment consists of single-family and multi-family rental operations. The single-family rental operations construct and lease single-family homes within a community and then generally market each community for a bulk sale of rental homes. The multi-family rental operations develop, construct, lease and sell residential rental properties, the majority of which are apartment communities. For the year ended September 30, 2024, the company’s rental operations closed 3,970 single-family rental homes and 2,202 multi-family rental units.
As of September 30, 2024, the company owned 62% of the outstanding shares of Forestar Group Inc. (Forestar). Forestar operates across many of the company’s homebuilding operating markets and is a key part of its homebuilding strategy to maintain relationships with land developers and to control a large portion of its land and lot position through land purchase contracts. For the year ended September 30, 2024, Forestar sold 15,068 lots to homebuilders, including 13,267 lots sold to D.R. Horton.
The company’s financial services operations provide mortgage financing and title agency services to homebuyers in many of its homebuilding markets. DHI Mortgage, its wholly-owned subsidiary, provides mortgage financing services primarily to its homebuyers and sells substantially all of the mortgages it originates and the related servicing rights to third-party purchasers after origination. For the year ended September 30, 2024, DHI Mortgage originated or brokered 70,693 mortgage loans. The company’s wholly-owned subsidiary title companies serve as title insurance agents by providing title insurance policies, examination, underwriting and closing services primarily to its homebuilding customers.
In addition to its homebuilding, rental, Forestar and financial services operations, the company engages in other business activities through its subsidiaries. The company conducts insurance-related operations, own water rights and other water-related assets and own non-residential real estate including ranch land and improvements.
Operating Structure and Processes
Homebuilding Markets
The company’s homebuilding business operates in 125 markets across 36 states, which provides it with geographic diversification in its homebuilding inventory investments and its sources of revenues and earnings.
The company conducts its homebuilding operations in the geographic regions, states and markets listed below. The company’s homebuilding operating divisions are aggregated into six reporting segments, also referred to as reporting regions.
Decentralized Homebuilding Operations
The company views homebuilding as a local business; therefore, most of its direct homebuilding activities are decentralized to provide flexibility to its local managers in making operational decisions. The company’s local management teams, who are familiar with local market conditions, have the best information to make many decisions regarding their operations. At September 30, 2024, the company had 88 separate homebuilding operating divisions, many of which operate in more than one market area. The company’s division presidents receive performance-based compensation if they achieve targeted financial and operating metrics related to their operating divisions. Following is a summary of the company’s homebuilding activities that are decentralized in its local operating divisions and the control and oversight functions that are centralized in its regional and corporate offices.
Operating Division Responsibilities
Each homebuilding operating division is responsible for site selection; negotiating lot purchase, land acquisition and related contracts; obtaining all necessary land development and home construction approvals; selecting subcontractors and ensuring their work meets its contracted scopes; selecting building and architectural plans; planning and managing home construction schedules; determining the pricing for each house plan and options in a given community; developing and implementing local marketing and sales plans; coordinating all interactions with customers and real estate brokers during the sales, construction and home closing processes; and ensuring the quality and timeliness of post-closing service and warranty repairs provided to customers.
Centralized Controls
The company centralizes many important risk elements of its homebuilding business through its regional and corporate offices. The company has separate homebuilding regional offices, which generally consist of a region president, a chief financial officer, legal counsel and other operational and office support staff. Each of the company’s region presidents and their management teams are responsible for oversight of the operations of a number of homebuilding operating divisions, including review and approval of division business plans and budgets; review and approval of all land and lot acquisition contracts; review of all business and financial analysis for potential land and lot inventory investments; oversight of land and home inventory levels; monitoring division financial and operating performance; and review of major personnel decisions and division incentive compensation plans.
The company’s corporate executives and corporate office departments are responsible for establishing its operational policies and internal control standards and for monitoring compliance with established policies and controls throughout its operations. The corporate office also has primary responsibility for direct management of certain key risk elements and initiatives through the following centralized functions: financing; cash management; allocation of capital; issuance and monitoring of inventory investment guidelines; approval and funding of land and lot acquisitions; monitoring and analysis of profitability, returns, costs and inventory levels; risk and litigation management; environmental assessments of land and lot acquisitions; technology systems to support management of operations, marketing and financial information, including preventing, monitoring and reporting of cybersecurity issues; accounting and management reporting; income taxes; internal audit; public reporting and investor and media relations; administration of payroll and employee benefits; negotiation of national purchasing contracts; administration, reporting and monitoring of customer surveys and resolutions of issues; and approval of major personnel decisions and management incentive compensation plans.
Land/Lot Acquisition and Inventory Management
The company acquires land for use in its operations after it has completed due diligence and generally after it has obtained the rights (known as entitlements) to begin development or construction work resulting in an acceptable number of residential lots. Before the company acquires lots or tracts of land, it completes a feasibility study, which includes soil tests, independent environmental studies, other engineering work and financial analysis. The company also evaluates the status of necessary zoning and other governmental entitlements required to develop and use the property for home construction.
The company also enters into land/lot contracts, in which it obtains the right, but generally not the obligation, to buy land or lots at predetermined prices on a defined schedule commensurate with anticipated home closings or planned development. These contracts generally are non-recourse, which limits the company’s financial exposure to its earnest money deposited into escrow under the terms of the contract and any pre-acquisition due diligence costs it incurs. This enables the company to control land and lot positions with limited capital investment, which substantially reduces the risks associated with land ownership.
The company attempts to mitigate its exposure to real estate inventory risks by controlling its level of inventory investment and managing its supply of land/lots owned and controlled through purchase contracts to match the expected housing demand in each of its operating markets; monitoring local market and demographic trends, housing preferences and related economic developments, including the identification of desirable housing submarkets based on the quality of local schools, new job opportunities, local growth initiatives and personal income trends; utilizing land/lot purchase contracts and seeking to acquire developed lots which are substantially ready for home construction, where possible; and monitoring and managing the number of speculative homes (homes under construction without an executed sales contract) built in each subdivision.
Land Development and Home Construction
Substantially all of the company’s land development and home construction work is performed by subcontractors. Subcontractors typically are selected after a competitive bidding process and is retained for a specific subdivision or series of house plans pursuant to a contract that obligates the subcontractor to complete the scope of work at an agreed-upon price. The company employs land development and construction personnel to monitor construction activities, participate in major building decisions, coordinate the activities of subcontractors and suppliers, review the work of subcontractors for monitor compliance with zoning and building codes. In addition, the company’s construction personnel interact with its homebuyers during the construction process and instruct buyers on post-closing home maintenance.
The company’s home designs are selected or prepared in each of its markets to appeal to local homebuyers’ expectations for affordability, home size and features, and its local management teams adjust product offerings to meet buyer demand as necessary. In some communities, the company offers optional interior and exterior features to homebuyers for an additional charge.
Generally, the construction materials used in the company’s operations have been readily available from numerous sources, and it has contracts exceeding one year with certain suppliers of building materials that are cancelable at its option. Construction time for the company’s homes depends on the availability of labor, materials and supplies, the weather, the size of the home and other factors. The company completed the construction of most homes in two to five months in fiscal 2024.
Marketing and Sales
The company primarily uses the D.R. Horton brand name to market and sell its homes. The company offers various floor plans and product types with a primary focus on the first time and first time move-up homebuyer, which account for the majority of its home closings. The company also offers entry-level homes for buyers focused on affordability, higher-end move-up and luxury homes and homes for active adult buyers seeking a low-maintenance lifestyle.
The company markets and sells its homes primarily through commissioned employees, and the majority of its home closings also involve an independent real estate broker. The company typically conducts home sales from sales offices located in furnished model homes in each subdivision. The company trains and informs its sales personnel regarding construction schedules and marketing and advertising plans.
The company markets its homes and communities to prospective homebuyers and real estate brokers digitally, through email, search engine marketing, social media and company website and other real estate websites. The company also uses billboards, radio, television and print media and advertising locally as necessary. The company attempts to position its subdivisions in locations that are desirable to potential homebuyers and convenient to or visible from local traffic patterns. Model homes play an important role in the company’s marketing efforts, and it strives to create an attractive atmosphere in its model homes.
The company also builds speculative homes in essentially all of its communities. These homes enhance the company’s marketing and sales efforts to prospective homebuyers who are renters or who are relocating to these markets and require a home within a short time frame, as well as to independent brokers who represent these homebuyers. The company determines its speculative homes strategy in each market based on local market factors, such as new job growth and relocations, housing demand and supply, seasonality, current sales contract cancellation trends and its past experience in the market. The company attempts to maintain a level of speculative home inventory in each community based on its current and planned sales pace, and it monitors and adjusts speculative home inventory on an ongoing basis.
Sales Contracts
The company’s sales contracts require an earnest money deposit which varies in amount across its markets and communities. Additionally, customers are generally required to pay additional deposits if they select options or upgrade features for their homes. The company’s sales contracts include a financing contingency which permits customers to cancel and receive a refund of their deposit if they cannot obtain mortgage financing at prevailing or specified interest rates within a defined period. The company’s contracts may include other contingencies, such as the sale of the customer’s existing home.
Customer Service and Quality Control
The company’s homebuilding operating divisions are responsible for pre-closing quality control inspections and responding to customers’ post-closing needs. The company typically provides its homebuyers with a ten-year limited warranty for major defects in structural elements, such as framing components and foundation systems, a two-year limited warranty on major mechanical systems and a one-year limited warranty on other construction components. The subcontractors who perform the actual construction also provide the company with warranties on workmanship and are expected to respond to it and the homeowner in a timely manner. In addition, some of its suppliers provide manufacturer’s warranties on specified products installed in the home.
Rental Properties
The company’s single-family rental operations construct and lease single-family homes within a community and then generally market each community for a bulk sale of rental homes. The company sold 3,970 single-family rental homes in fiscal 2024. The company’s multi-family rental operations develop, construct, lease and sell residential rental properties. The company primarily focuses on constructing garden style apartment communities in high growth suburban markets. The company sold 2,202 multi-family rental units in fiscal 2024.
Forestar Residential Lot Development Operations
The company owns approximately 62% of the outstanding shares of Forestar, a publicly traded residential lot development company with operations in 59 markets across 24 states as of September 30, 2024. Forestar is a key part of the company’s homebuilding strategy to maintain relationships with land developers and to control a large portion of its land and lot position through land purchase contracts. Forestar is investing in land acquisition and development to expand its residential lot development business across a geographically diversified national platform and consolidate market share in the fragmented U.S. lot development industry. The company’s homebuilding operations acquire finished lots from Forestar in accordance with the master supply agreement between the two companies. A shared services agreement is in place whereby the company provides Forestar certain administrative, compliance, operational and procurement services. As the controlling shareholder, the company has significant influence in guiding the strategic direction and operations of Forestar.
Customer Mortgage Financing
The company provides mortgage financing services primarily to purchasers of its homes in the majority of its homebuilding markets through DHI Mortgage, its wholly-owned subsidiary. DHI Mortgage assists in the sales transaction by coordinating the mortgage application, mortgage commitment and home closing processes to facilitate a timely and efficient experience for its homebuyers. During the year ended September 30, 2024, DHI Mortgage provided mortgage financing services for 78% of the homes closed by the company’s homebuilding operations, and those loans accounted for virtually all of DHI Mortgage’s total loan volume. The company’s homebuilding divisions may also work with additional mortgage lenders that offer a range of mortgage financing programs to its homebuyers.
To limit the risks associated with its mortgage operations, DHI Mortgage originates loan products that the company can be sold to third-party purchasers of mortgage loans, the majority of which are eligible for sale to Federal National Mortgage Association (Fannie Mae), Federal Home Loan Mortgage Corporation (Freddie Mac) or Government National Mortgage Association (Ginnie Mae). DHI Mortgage sells substantially all of the loans and the related servicing rights to third-party purchasers after origination with limited recourse provisions. DHI Mortgage centralizes most of its control and oversight functions, including those related to loan underwriting, quality control, regulatory compliance, secondary marketing of loans, hedging activities, accounting and financial reporting.
Title Services
Through its subsidiary title companies, the company serves as a title insurance agent in many of its homebuilding markets by providing title insurance policies, examination, underwriting and closing services primarily to its homebuilding customers.
Governmental Regulations and Environmental Matters
The company’s homes are inspected by local authorities where required, and homes eligible for insurance or guarantees provided by the Federal Housing Administration (FHA) and the U.S. Department of Veteran Affairs (VA) are subject to inspection by them.
The company’s mortgage company must comply with extensive state and federal laws and regulations, which are administered by numerous agencies, including the Consumer Financial Protection Bureau, Federal Housing Finance Agency, U.S. Department of Housing and Urban Development, FHA, VA, USDA, Fannie Mae, Freddie Mac and Ginnie Mae. These laws and regulations include many compliance requirements, including licensing, consumer disclosures, fair lending and real estate settlement procedures.
Seasonality
Although significant changes in market conditions have impacted the company’s seasonal patterns in the past and could do so again in the future, it generally closes more homes in its homebuilding operations and generate greater revenues and pre-tax income in the third and fourth quarters of its fiscal year. As a result of seasonal activity, the company’s quarterly results of operations and financial position at the end of a particular fiscal quarter are not necessarily representative of the balance of its fiscal year (year ended September 30 , 2024).
History
D.R. Horton, Inc. was founded in 1978. The company was incorporated in 1991.
