Housing: DR Horton raises 2024 outlook amid supply slowdown

DR Horton (DHI) shares are popping higher in Thursday's pre-market session — carrying into the market open — after blowing past fiscal second-quarter earnings estimates. The homebuilder boasted revenue of $9.11 billion and adjusted gains of $3.52 per share, raising its full-year outlook despite supply slowdowns.

Yahoo Finance's Seana Smith and Brad Smith highlight how homebuilder stocks such as DR Horton are managing under elevated interest rates and mortgage rates, including home prices' influence on the broader US real estate market.

For more expert insight and the latest market action, click here to watch this full episode of Morning Brief.

This post was written by Luke Carberry Mogan.

Video transcript

SEANA SMITH: All right. Let's take a look at the housing sector. And with that, D.R. Horton, it's a trending ticker on Yahoo! Finance today. Earnings blowing past expectations for the second quarter, raising its full-year revenue forecast as a slowdown in housing supply boosted sales for the home builder. You're looking at gains of just about 5%.

Brad, you and I have talked about this time and time again. Just the fact that new home sales, or new-- home builders is almost the only game in town for those who are still out there trying to buy a home, given the fact that existing homes people are not moving. We talk time and time again about the lock-in effect driven by higher rates, driven by the fact that we've seen a massive move to the upside in home prices.

So people who own homes are not selling their homes. Those that want to buy don't have the inventory that we have historically seen in terms of selection. So, the pressure is really on home builders trying to keep up with that demand. And I think that's really the critical question here for analysts about what exactly that is going to look like here and the ability of these home builders to try everything they can to keep up with demand, especially in the face of this higher interest rate environment.

BRAD SMITH: Yeah. Whenever I see some of these earnings reports-- and we've talked about this in the past, too-- I always do a Command F or Control F, if you're on Microsoft system for backlog. And the company's sales order backlog of homes under contract decreased 7% to 17,873 homes, and 5% in value to $7 billion.

You compare that to what that was last year, the same quarter last year, $7.4 billion. So what does that tell you about this health of the broader home buying market? Well, that tells you that they're not-- to your point, as many people that are willing or gung ho to enter into the market, unless they see some type of pricing mechanism be more favorable for them. Where the seller of these homes or the builder of these homes, especially the new ones, is more malleable on where they're able to counteract some of the mortgage prices with the price of the actual home as well, and that they're selling for.

And so that is something that I think D.R. Horton, Toll Brothers, Lennar-- we're going to continue to hear from all of them and how they're enacting some of that pricing mechanism too.