D.R. Horton, Inc. (DHI) stock has dropped 10% since DHI released its first quarter fiscal 2025 financial results on January 21. D.R. Horton’s earnings outlook is fading as the housing market slows.

Wall Street, D.R. Horton, and many others are waiting for the conditions to change to help reignite the housing market and home-building industry.

The Basic Reasons Why DHI in Tuesday’s Bear of the Day

D.R. Horton has been the largest U.S. homebuilder by volume since the early 2000s. The Arlington, Texas-based company builds homes across 36 states and nearly 130 markets.

DHI’s various brands cater to different types of buyers at different stages of life and income brackets, with prices ranging from $200K to over $1 million. D.R. Horton also offers mortgage financing, title services, and more.

D.R. Horton posted a blockbuster stretch of growth between 2012 and 2022, including 21% revenue growth in 2022 and 37% in 2021. The housing market has cooled off substantially since then. Soaring home prices and higher mortgage rates could hold back demand for the foreseeable future.

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Prices and rates will likely have to come down a little bit more before home construction demand bounces back. DHI’s earnings outlook dropped following its Q1 FY25 release on January 21, with its FY25 estimate 7% lower and FY26’s consensus 8% off the pace. The recent downward revisions are part of D.R. Horton’s larger negative trend that began in the fall.

D.R. Horton’s negative EPS revisions earn the stock a Zacks Rank #5 (Strong Sell). DHI’s adjusted earnings are projected to slip 9% in FY25 on slightly lower sales.

Bottom Line on DHI Stock

DHI shares are down around 31% from their fall highs and investors might want to wait for some signs of life from D.R. Horton and the broader industry before they start buying.

Thankfully, D.R. Horton’s long-term outlook remains impressive. Millennials are driving the housing market, and home builders didn’t overbuild during the Covid boom, which means supply is still far below overall demand.

“The supply of homes at affordable price points is generally still limited, and demographics supporting housing demand remain favorable,” DHI Executive Chairman David Auld said in prepared remarks.

“Despite continued affordability challenges and competitive market conditions, incentives such as mortgage rate buydowns have helped to address affordability and spur demand. Additionally, given our focus on affordable product offerings, we have continued to start and sell more of our homes with smaller floor plans to meet homebuyer demand.”

Investors should keep D.R. Horton on their watchlists while looking elsewhere for stocks to buy now.

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