Economic Trends - Home affordability is impacting everything [1] - Discussion of Warren Buffett's final notes [1] - Examination of Milton Friedman's recipe for economic policy success [1]

Housing Market & Affordability - The average age of a first-time home buyer is a record high of 40 years old [1] - A proposed 50-year fixed-rate mortgage could lower monthly payments by approximately $200, but could result in paying as much as double in interest [1][3] - With a 6% interest rate on a $400,000 home, using a 50-year mortgage instead of a 30-year mortgage could result in paying $320,000 more over the life of the mortgage [3][4] - The core issue is a housing supply problem, with not enough homes for the number of people who want to buy them [4] - Tariffs are making home building more expensive, exacerbating the affordability issue [2][6] Economic Proposals & Fiscal Policy - A proposal to give Americans $2,000 checks, funded by tariff revenue, is being considered [7] - $2,000 checks for every American would cost approximately $600 billion [9] - Tariff revenue is also supposed to be used to pay down debt and bail out farmers, creating a conflict in resource allocation [10] - The Supreme Court might strike down the tariffs, potentially requiring most of the tariff revenue to be refunded [11] - The administration is accused of quietly providing tax relief to private equity firms, crypto companies, foreign real estate investors, insurance providers, and multinational corporations [15] Voter Sentiment & Economic Discontent - Voters are deeply unhappy about the state of the economy [17] - People are frustrated about costs being higher today than they were 5 years ago, even if they are making more money [20] - Tariffs are considered a tax on the American people [21]

You don’t need socialism to solve home affordability.You just need to build more housing.It really is that simple. ...

Market Trends - Pending home sales show 0% growth in September, significantly missing the expected 120% growth [1] - Home affordability is at an all-time low due to high prices and mortgage rates [1] Mortgage Rates - Mortgage rates have decreased from over 8% to 630%, but remain insufficient to significantly improve affordability [1]

Financial Data and Key Metrics Changes - D.R. Horton reported consolidated pre-tax income of $1.2 billion on revenues of $9.7 billion for Q4 2025, with a pre-tax profit margin of 12.4% [7] - For the full year, consolidated pre-tax income was $4.7 billion, with a pre-tax profit margin of 13.8% [7] - Net income for Q4 was $905.3 million, or $3.04 per diluted share, on consolidated revenues of $9.7 billion [9] - The average closing sales price for Q4 was $365,600, down 1% sequentially and down 3% year-over-year [9] - The company generated $3.4 billion of cash from operations in fiscal 2025, representing 10% of total revenues [19] Business Line Data and Key Metrics Changes - Home sales revenues for Q4 were $8.5 billion on 23,368 homes closed [9] - Net sales orders in Q4 increased 5% year-over-year to 20,078 homes, with order value increasing 3% to $7.3 billion [10] - The gross profit margin on home sales revenues in Q4 was 20%, down 180 basis points sequentially [11] - Rental operations generated $81 million of pre-tax income on $805 million of revenues in Q4 [16] Market Data and Key Metrics Changes - The average number of active selling communities was up 1% sequentially and up 13% from the prior year [10] - The company’s home building lot position at year-end consisted of approximately 592,000 lots, with 25% owned and 75% controlled through purchase contracts [15] - Lot costs increased by 8% year-over-year on a per square foot basis [60] Company Strategy and Development Direction - D.R. Horton remains focused on capital efficiency to generate strong operating cash flows and deliver compelling returns to shareholders [8] - The company plans to tailor product offerings and sales incentives based on demand in each market to maximize returns [8] - The strategic relationship with Forestar is vital for the company’s returns-focused business model, with Forestar reporting revenues of $671 million in Q4 [17] Management's Comments on Operating Environment and Future Outlook - Management anticipates that new home demand will continue to be impacted by affordability constraints and cautious consumer sentiment [21] - For fiscal 2026, the company expects consolidated revenues of approximately $33.5 billion to $35 billion and homes closed to be in the range of 86,000 to 88,000 [21] - Management expressed a positive outlook for the housing market over the medium to long term, despite current volatility and uncertainty in the economy [23] Other Important Information - The company repurchased 4.6 million shares for $689 million in Q4 and 30.7 million shares for $4.3 billion for the full year [19] - D.R. Horton’s fiscal year-end stockholders' equity was $24.2 billion, down 4% from a year ago, but book value per share was up 5% to $82.15 [20] Q&A Session Summary Question: How to think about the transition from 20% gross margin in Q4 to 20%-20.5% in Q1? - Management indicated that the unusual impact from litigation costs is not expected to persist into Q1, and the baseline would reflect a more normal impact from warranty and litigation going forward [27] Question: Can you discuss the starts pace and how quickly it can ramp up? - Management acknowledged that starts were intentionally lower to align inventory and indicated confidence in ramping up starts to meet demand as needed [28] Question: What is the outlook for rental operations in Q1? - Management expects rental operations to be a bit softer in Q1, with a heavier delivery expected in the back half of the year [32] Question: Can you provide insight into the Southeast market performance? - Management noted that while some areas in Florida are struggling with inventory balance, overall demand in the Southeast remains choppy [74] Question: What are the expectations for lot costs moving forward? - Management indicated that lot costs are expected to remain sticky, with an 8% year-over-year increase noted [60]

Guidance and Market Conditions - Taylor Morrison modestly revised its 2025 closing guidance downward to a midpoint of 12,900 units, a reduction of approximately 100 units or about 1% [1][2] - The company maintained its margin guidance despite a choppy market environment, indicating confidence in pricing strategies in some areas [2] - Mortgage applications have decreased for four consecutive weeks, even with the 30-year fixed mortgage rate in the 63% range, suggesting a potential lag before the market responds to easier conditions [3] - Interest rates have decreased from nearly 7% a couple of months ago to just over 6%, which is expected to positively influence consumer confidence and buying activity [5] Affordability and Housing Supply - The industry is focused on delivering homes at prices affordable for first-time buyers, while macro factors significantly influence approximately 70% of the business [4] - Discussions with the administration are centered on addressing housing shortages and improving affordability, acknowledging the need for collaboration among stakeholders [7][8] - Builders are managing excess inventory thoughtfully, recognizing that the affordability issue requires a comprehensive solution involving multiple parties [8] - The industry is actively working to move inventory responsibly and as quickly as possible, despite mixed data on the number of lots owned and controlled, some of which are not yet entitled [10][11] Government Relations and Industry Challenges - The industry is engaging in productive conversations with the administration to address housing shortages and affordability [7] - Builders are working to balance delivering homes to consumers with pricing considerations [7] - The industry represents a relatively small part of the entire housing ecosystem, highlighting the complexity of the affordability issue [9] - The industry welcomes the administration's prioritization of housing affordability and is confident in making progress and creating new opportunities [11]

Market Analysis - The free market is the most effective mechanism for problem-solving [1] - Local housing regulations impede the free market, leading to decreased home affordability [2] Policy Recommendation - Deregulation and increased construction are recommended [3] - Market prices will adjust in response to deregulation and increased construction [4]

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Core Viewpoint - The Federal Reserve's potential actions to lower U.S. mortgage rates may not be beneficial and could lead to another boom-and-bust cycle in the housing market [1][2]. Group 1: Federal Reserve's Actions - Economists at Mizuho Securities express caution regarding the Federal Reserve's tools to artificially lower mortgage rates, emphasizing the risk of repeating past housing market mistakes [2][4]. - Current mortgage rates around 6.26% are not considered high historically, with the Federal Open Market Committee (FOMC) likely to be wary of using quantitative tools to depress long-term rates [4][5]. Group 2: Housing Market Dynamics - The issue of home affordability is more related to home prices than mortgage rates, indicating that simply lowering rates may not resolve the underlying problems in the housing market [5]. - The bond market has experienced "euphoria" due to expectations of lower rates, which has positively impacted the nearly $10 trillion market for government-backed mortgage bonds [5][6]. Group 3: Market Reactions - The recent rally in the mortgage bond market has led to a decrease in mortgage rates, prompting many borrowers to refinance, particularly into riskier adjustable-rate loans [6]. - Suggestions have been made, such as Pimco's recommendation for the Fed to reinvest proceeds from maturing mortgage bonds back into the sector to quickly reduce mortgage rates [6][7].

From the Desk of Anthony Pompliano0:00 Wall street’s Pessimist Has Finally Turned Bullish3:37 Home Affordability Is A Major Problem In America5:29 Tom Sosnoff Interview At The Independent Investor SummitEnjoy! https://t.co/aI5DIH9PK3 ...