A million-dollar home may not sound especially extravagant anymore, at least not in markets where average home prices flirt with seven figures. But while that kind of listing price might feel like the norm, the monthly payment on a $1 million mortgage can still deliver serious sticker shock. Interest rates, down payment sizes, loan types, taxes, insurance, and fees all stack up fast, and the difference between “affordable on paper” and “comfortable to live with” is often thousands of dollars a month. St ...

Financial Data and Key Metrics Changes - The company reported consolidated pre-tax income of $798 million on revenues of $6.9 billion, with a pre-tax profit margin of 11.6% [5] - Earnings per diluted share were $2.03, down from $2.61 in the prior year quarter [9] - Net income for the quarter was $595 million, with home sales revenues of $6.5 billion from 17,818 homes closed, compared to $7.1 billion from 19,059 homes closed in the prior year quarter [9][10] - The gross profit margin on home sales revenues was 20.4%, up 40 basis points sequentially [11] Business Line Data and Key Metrics Changes - Net sales orders increased by 3% year-over-year to 18,300 homes, while order value remained unchanged at $6.7 billion [10] - The average price of net sales orders was $364,000, flat sequentially and down 2% from the prior year quarter [10] - The company started 18,500 homes in the December quarter, up 27% sequentially [14] Market Data and Key Metrics Changes - 64% of the mortgage company's closings were to first-time home buyers [8] - The average closing price for the quarter was $365,500, which is approximately $135,000 lower than the average sales price of new homes in the U.S. [9] Company Strategy and Development Direction - The company is focused on capital efficiency to generate strong operating cash flows and deliver returns to shareholders, having returned $4.4 billion through repurchases and dividends over the past 12 months [7] - The strategy includes tailoring product offerings and sales incentives based on demand in each market to maximize returns [8] - The company aims to maintain a balanced approach to growth, focusing on community count and market share while managing margins [90] Management's Comments on Operating Environment and Future Outlook - Management noted that new home demand is impacted by affordability constraints and cautious consumer sentiment, but they are responding with discipline [5] - The company expects consolidated revenues for the second quarter to be in the range of $7.3 billion to $7.8 billion, with homes closed expected to be between 19,700 and 20,200 [21] - Management expressed confidence in their positioning for the spring selling season, noting that lower mortgage rates have spurred some activity [40][94] Other Important Information - The company generated $3.6 billion of cash from operations over the past 12 months and has a strong balance sheet with low leverage [7][19] - The company’s capital allocation strategy is disciplined, with plans for $2.5 billion in common stock repurchases and around $500 million in dividend payments for the year [18][21] Q&A Session Summary Question: Inquiry about SG&A expenses - Management stated that SG&A expenses were slightly down year-over-year in absolute dollars, but the ratio increased due to lower closings [25] Question: Community count growth expectations - Management expects community count growth to continue but may drift down to mid-single to high-single digit range [31] Question: Impact of lower mortgage rates on demand - Management noted that lower rates have historically spurred activity in sales offices, but it is too early to determine the full impact [50] Question: Warranty costs and their impact on gross margins - Management indicated that warranty recovery was unexpected but beneficial, and they expect warranty costs to normalize going forward [56] Question: Land market conditions - Management observed that while there hasn't been significant capitulation in the raw land market, there have been rational conversations with land developers [46] Question: Balance between volume and margin - Management emphasized a balanced approach, focusing on maximizing returns while responding to market conditions [90]

Financial Data and Key Metrics Changes - D.R. Horton reported consolidated pre-tax income of $798 million on revenues of $6.9 billion, with a pre-tax profit margin of 11.6% for Q1 2026 [4] - Earnings per diluted share decreased to $2.03 from $2.61 in the prior year quarter, with net income of $595 million [7] - Home sales revenues were $6.5 billion from 17,818 homes closed, down from $7.1 billion from 19,059 homes closed in the prior year quarter [7][8] - The average closing price for homes was $365,500, flat sequentially but down 3% year over year [8] Business Line Data and Key Metrics Changes - Net sales orders increased by 3% year over year to 18,300 homes, while order value remained unchanged at $6.7 billion [10] - The gross profit margin on home sales revenues was 20.4%, up 40 basis points sequentially, primarily due to a recovery of prior-period warranty costs [11] - Home building SG&A expenses decreased by 1% year over year, but as a percentage of revenues, it increased to 9.7% from 8.9% in the prior year quarter [12] Market Data and Key Metrics Changes - 64% of mortgage company closings were to first-time home buyers, indicating a focus on affordable housing [6] - The average number of active selling communities increased by 2% sequentially and 12% year over year [10] - The company ended the quarter with 30,400 homes in inventory, of which 20,000 were unsold [14] Company Strategy and Development Direction - D.R. Horton is focused on capital efficiency to generate strong operating cash flows and deliver returns to shareholders, with $3.6 billion generated from operations over the past 12 months [5] - The company aims to tailor product offerings and sales incentives based on demand in each market to maximize returns [6] - The strategy includes managing investments in lots, land, and development based on current market conditions, with a focus on relationships with land developers [15] Management's Comments on Operating Environment and Future Outlook - Management noted that new home demand is impacted by affordability constraints and cautious consumer sentiment, but they are responding with discipline [4] - The company expects consolidated revenues for Q2 2026 to be in the range of $7.3-$7.8 billion and homes closed to be between 19,700-20,200 [24] - For the full year, the company anticipates consolidated revenues of approximately $33.5-$35 billion and homes closed to be in the range of 86,000-88,000 [25] Other Important Information - D.R. Horton repurchased 4.4 million shares for $670 million and paid cash dividends of $0.45 per share, totaling $132 million [21] - The company has a strong balance sheet with $6.6 billion of consolidated liquidity and plans to maintain leverage around 20% over the long term [22] Q&A Session Summary Question: Inquiry about SG&A expenses - Management stated that SG&A was in line with expectations and attributed the increase to lower closings, but they expect it to stabilize over the year [28][29] Question: Capital allocation and cash flow expectations - Management confirmed that cash flow expectations remain reasonable, with a target of over $3 billion for the year [32] Question: Community count growth and future expectations - Management expects community count growth to continue but may drift down to mid-single to high-single digit range [35] Question: Warranty costs impact on gross margin - Management indicated that warranty recovery was unexpected but beneficial, and they expect warranty costs to normalize going forward [59][61] Question: Demand trends and inventory levels - Management noted that demand remains strong despite low job growth, and inventory levels are more balanced compared to the previous year [97][91]

Core Insights - Many homebuyers make the mistake of submitting only one mortgage application, which can lead to significant financial losses [1] - High mortgage rates have persisted since the pandemic, with the average 30-year fixed-rate mortgage remaining above 6% since 2022 [2] - Home prices have dramatically increased since the pandemic, with the average home price rising from $246,326 in early 2020 to $359,241 by November 2025 [3] Mortgage Rate Trends - The average 30-year fixed mortgage rate is projected to drop to 5.9% by the end of 2026, but rates will likely remain high compared to pre-pandemic levels [2][3] - A 2023 Freddie Mac study indicates that the variability in mortgage rates offered to buyers has increased since 2010, with significant dispersion noted in 2022 [5] Home Affordability and Market Conditions - Home affordability has improved recently due to a dip in mortgage rates and better inventory, yet many Americans still face overall cost-of-living challenges [4] - The increase in rate dispersion means consumers with similar profiles may receive a wide range of mortgage rates, highlighting the importance of shopping around for the best deal [6]

Core Viewpoint - President Donald Trump's proposal for a 50-year mortgage aims to make home ownership more affordable, but it raises questions about the long-term financial implications for buyers [1][2]. Group 1: Financial Implications of a 50-Year Mortgage - A 50-year mortgage could significantly lower monthly payments, making it easier for home buyers to enter the market, especially as home values remain high [4][5]. - For a home priced at $400,000 with a 20% down payment, the monthly payment on a 30-year mortgage would be $2,339, while a 50-year mortgage would reduce it to $2,112, saving approximately $227 per month [7]. - However, the total payments over the life of a 50-year mortgage would amount to $1,267,200, which is $425,160 more than a 30-year mortgage totaling $842,040 [6]. Group 2: Interest Costs - A 50-year mortgage results in total interest payments that could reach approximately 225% of the total home price, which is more than double the interest paid on a 30-year mortgage [8].

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Core Viewpoint - The White House is considering a 50-year mortgage to address the home affordability crisis, but this proposal has faced criticism for not addressing fundamental issues in the housing market, such as supply shortages and high interest rates [1][8]. Mortgage Structure and Financial Implications - A 50-year mortgage would lower monthly payments compared to a 30-year mortgage, with an example showing a payment of $2,022 for a 50-year mortgage versus $2,288 for a 30-year mortgage based on an average home price of $415,200 and a 10% down payment [4][5]. - However, borrowers would pay approximately $389,000 more in interest over the life of a 50-year mortgage compared to a 30-year mortgage, significantly slowing equity accumulation [6][7]. Housing Market Challenges - The introduction of a 50-year mortgage does not address the critical issue of housing supply, which remains a significant barrier to affordability [8]. - Rising costs of construction materials and labor shortages, exacerbated by tariffs and immigration policies, further complicate the housing supply situation [9]. Demographic Considerations - The average age of first-time homebuyers is around 40 years, making a 50-year mortgage challenging to underwrite, as it would extend the loan term beyond the average life expectancy of 79 years [12][13]. Legislative and Regulatory Context - Current regulations under the Dodd-Frank Act prevent Fannie Mae and Freddie Mac from insuring mortgages longer than 30 years, meaning a 50-year mortgage would be classified as a "non-qualifying mortgage," complicating its marketability [17].

Core Viewpoint - The Trump administration is exploring a 50-year mortgage option to enhance home affordability, which could lower monthly payments but may have significant trade-offs regarding equity and interest costs [2][4]. Mortgage Structure and Impact - A 50-year mortgage could reduce monthly payments from $2,056 on a 30-year loan to $1,823, saving homeowners $233 monthly based on a median home price of $415,200 and a 20% down payment at a 6.3% interest rate [3]. - Homeowners would build equity more slowly due to smaller principal payments, and the total interest paid would increase by 40% compared to shorter-term loans [4]. Regulatory Considerations - Currently, a 50-year mortgage does not qualify under the Dodd-Frank Act, which protects investors if loans default. Changes to this policy could take up to a year and require congressional approval [5]. - Fannie Mae and Freddie Mac could potentially create a secondary market for 50-year mortgages, but lenders may be hesitant to originate these loans without qualified mortgage policy changes [6]. Market Dynamics - The average rate for a 50-year mortgage is expected to be higher than that of a 30-year mortgage due to lack of investor demand and absence of a secondary market for such loans [9][10]. - The proposed mortgage structure may resemble an interest-only loan, as few homeowners are likely to retain a property for 50 years, and home price appreciation has been declining [10]. Affordability Challenges - Experts argue that the 50-year mortgage is not the optimal solution for housing affordability, suggesting that reversing tariff-induced inflation would be more effective [11]. - The future of Fannie Mae and Freddie Mac may hinge on their continued government conservatorship, which could complicate the introduction of a 50-year mortgage product [12][13]. Housing Supply Issues - The Trump administration has identified a significant undersupply of approximately 4 million homes, impacting affordability, and is urging builders to increase housing supply despite builders citing high costs as a barrier [14][15].

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Housing Affordability - Interest rate cuts are a good start to tackling home affordability issues [1] - More housing supply is needed to bring prices down [1] Housing Supply - Local city councils need to deregulate to enable more housing construction [1]