""As we anticipated on our last call, we did expect to lean in more heavily to the offering of 3.99% [mortgage rate buydown]," said Jessica Hansen, D.R. Horton's senior vice president of investor relations. "That is something that we've been doing, and we saw the mortgage rate in our backlog come down. It's actually below 5% today coming into this quarter.""
""The most attractive monthly payment we can put them in is with a lower rate," said CEO Paul Romanowski. "It's a benefit to the homeowner over time in terms of paying down more of their principal." The strategy has come at a cost: incentive spending-including mortgage rate buydowns. The company's gross margin on home sales fell to 20% in Q4 2025, down from 23.6% in Q4 2024 and well below the 26.9% in Q4 2021."
"Indeed, increased incentive spending accounted for 61% of D.R. Horton's recent margin compression in Q4, while higher litigation costs made up another 33%. The incentives appear to be working. Net new orders rose 5% year-over-year in Q4 to 20,078-up from 19,035 a year earlier-demonstrating D.R. Horton's ability to maintain sales momentum despite affordability headwinds. However, its backlog continues to shrink as the builder intentionally slows housing starts to better align inventory levels and capitalize on easing construction costs."
D.R. Horton is increasing mortgage rate buydowns, with 73% of fiscal Q4 2025 homebuyers receiving a buydown, up from 72% the prior quarter. The builder leaned into offering a 3.99% buydown, lowering backlog mortgage rates to below 5%. Lower monthly payments appeal to many first-time buyers. Incentive spending, including buydowns, contributed heavily to margin compression; gross margin on home sales fell to 20% in Q4 2025 from 23.6% a year earlier and 26.9% in Q4 2021. Incentives accounted for 61% of recent margin compression and litigation costs 33%. Net new orders rose 5% year-over-year to 20,078, while backlog shrank as starts were slowed to align inventory and benefit from easing construction costs.
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