D.R. Horton’s April Sales Slide With Homebuyers Locked Down

(Bloomberg) -- D.R. Horton Inc. is taking a hit from the social-distancing guidelines that have been adopted across the U.S.

• The Texas-based homebuilder has seen more cancellations in recent weeks, with net sales of new homes down 11% so far in April compared to a year earlier, according to a statement on Tuesday. The company added that the results could get worse because “a significant number of sales contract cancellations typically occur in the final days of each month.”

Key Insights

• It wasn’t all bad news for the homebuilder, which said its net sales had improved in the most recent two weeks compared to the previous four. Chief Executive Officer David Auld added that the mood in the country is improving and that demand for homes is better than he expected. The results sent the company’s shares higher.
• With unemployment soaring and lending standards tightening, D.R. Horton could struggle to fuel growth. The company said its mortgage unit “experienced lower pricing and gain on sales” in late March and April due to “disruptions in the secondary mortgage market.” The company focuses on entry-level buyers, who are getting hit hard with the economy shut down.
• Homebuilders were doing well before the virus outbreak. Orders for new homes were up 20% in the second quarter, which ended March 31. Those results mostly came in before social-distancing guidelines were widely adopted, keeping potential buyers stuck inside and putting a virtual freeze on the industry.
• D.R. Horton pre-released some of its quarterly numbers earlier in April and withdrew its 2020 guidance, joining rivals in the industry that have cited the uncertainty surrounding the pandemic.

Market Reaction

• The stock jumped as much as 14% to $47.99 on Tuesday. The company’s shares had plunged 20% this year through the close of trading on Monday.

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