DR Horton Inc Profiil
D.R. Horton, Inc. operates as a homebuilding company in the United States.
The company constructs and sells homes through its operating divisions in 106 markets across 33 states, primarily under the names of D.R. Horton, America’s Builder, Emerald Homes, Express Homes and Freedom Homes.
The company’s product offerings include a broad range of homes for entry-level, move-up, active adult and luxury buyers. Its homes generally range in size from 1,000 to more than 4,000 square feet. For the year ended September 30, 2022 (fiscal 2022), the company’s homebuilding operations closed 82,744 homes.
The company’s business operations consist of homebuilding, a majority-owned residential lot development company, financial services, rental and other activities. Its 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 91% of the company’s home sales revenue in fiscal 2022 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.
As of September 30, 2022, the company owned 63% of Forestar Group Inc.’s (Forestar’s) outstanding common stock.
The company’s financial services operations provide mortgage financing and title agency services to homebuyers in many of its homebuilding markets. DHI Mortgage, the company’s 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. 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 homebuyers.
The company’s rental segment consists of multi-family and single-family rental operations. The multi-family rental operations develop, construct, lease and sell residential rental properties. The single-family rental operations primarily construct and lease single-family homes within a community and then market each community for a bulk sale of rental homes.
In addition to the company’s homebuilding, Forestar, financial services and rental operations, the company engages in other business activities through its subsidiaries. The company conducts insurance-related operations, owns water rights and other water-related assets, owns non-residential real estate (including ranch land and improvements), and owns and operates energy-related assets.
Homebuilding Markets
The company’s homebuilding business operates in 106 markets across 33 states, which provides the company with geographic diversification in its homebuilding inventory investments and its sources of revenues and earnings.
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. As of September 30, 2022, the company had 78 separate homebuilding operating divisions, many of which operate in more than one market area.
Land/Lot Acquisition and Inventory Management
The company acquires land for use in its homebuilding and rental 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.
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.
The company directly acquires almost all of its land and lot positions. It is a party to a small number of joint ventures.
Land Development and Home Construction
Substantially all of the company’s land development and home construction work is performed by subcontractors. The company employs land development managers and construction superintendents to monitor land development and home construction activities, participate in major building decisions, coordinate the activities of subcontractors and suppliers, review the work of subcontractors for quality and cost controls and monitor compliance with zoning and building codes. In addition, the company’s construction superintendents interact with its homebuyers during the construction process and instruct buyers on post-closing home maintenance.
Marketing and Sales
The company primarily uses the D.R. Horton, Emerald Homes, Express Homes and Freedom Homes brand names to market and sell its homes. The company’s D.R. Horton branded communities are the core of its business and account for the majority of its home closings, focusing primarily on the first time and first time move-up homebuyer. The company’s Emerald branded communities appeal to buyers in search of higher-end move-up and luxury homes. The company’s Express branded communities primarily accommodate entry-level buyers who are focused on affordability. The company’s Freedom Homes brand offers homes at affordable price points to 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, and the company generally does not offer its model homes for sale until the completion of a subdivision. The company’s sales personnel assist prospective homebuyers by providing floor plans and price information, demonstrating the features and layouts of its homes and assisting with the selection of options, when available. 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 the company website and other real estate websites, in addition to print media and advertisement. The company also uses billboards, radio, television and print advertising locally as necessary.
The company also builds speculative homes in most of its communities. These homes enhance its 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.
Rental Properties
The company’s multi-family rental operations develop, construct, lease and sell residential properties that produce rental income. The company primarily focuses on constructing garden style multi-family rental communities, typically accommodating 200 to 400 dwelling units in high growth suburban markets. The company sold 775 multi-family rental units in fiscal 2022. The company’s single-family rental operations construct and lease single-family homes within a community and then market each community for a bulk sale of rental homes. The company sold 774 single-family rental homes in fiscal 2022.
Forestar Residential Lot Development Operations
Forestar is a residential lot development company with operations in 53 markets across 21 states as of September 30, 2022. Forestar is a component of the company’s homebuilding strategy to enhance operational efficiency and returns by expanding relationships with land developers and increasing the portion of its land and lot position controlled 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 principally to purchasers of its homes in the majority of its homebuilding markets through DHI Mortgage, the company’s 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, 2022, DHI Mortgage provided mortgage financing services for approximately 69% of the company’s total homes closed, and approximately 98% of DHI Mortgage’s loan volume related to homes closed by the company’s homebuilding operations. Most of the company’s homebuilding divisions also work with additional mortgage lenders that offer a range of mortgage financing programs to the company’s homebuyers.
To limit the risks associated with the company’s mortgage operations, DHI Mortgage originates loan products that can be sold to third-party purchasers of mortgage loans, the majority of which are 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). 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 the company’s subsidiary title companies, the company serves as a title insurance agent in selected markets by providing title insurance policies, examination, underwriting and closing services primarily to the company’s 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, the U.S. Department of Housing and Urban Development, FHA, VA, the United States Department of Agriculture (USDA), Fannie Mae, Freddie Mac and Ginnie Mae.
Seasonality
The company generally closes more homes and generates greater revenues and pre-tax income in the third and fourth quarters of its fiscal year (year ended September 2022). 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.
History
D.R. Horton, Inc. was founded in 1978. The company was incorporated in 1991.
