We have said it before. When DR Horton reports its quarterly earnings, what you’re looking at isn’t just the scoreboard of America’s biggest homebuilder.
You’re watching a business model that operates in a different environment – and with a different atmosphere – than almost every other home building business in the country. And when it does, the results go beyond its boundaries and the way it grows.
Horton’s effects reverberate throughout the affected markets, distorting the competitive landscape and suppressing the performance of insolvent operators—especially independent builders.
In Q1 2026, that dominance was on full display. While mortgage rates remain high and cost concerns persist, Horton’s volume engine powered ahead with 18,500 starts – up 27% quarter over quarter. Net sales orders increased 35% YOY to more than 19,400 homes, and closings increased 15% to 17,231 homes. As Trevor Allinson of Wolfe Research put it, “Horton sets the stage for population growth in 2027.”
But the real story is not the results. It’s the structural influence — on land, labor, materials, and money — that makes those results work. And that profit is exactly what challenges every other home builder in America to keep up.
Stimulators, margins and scale shock absorber
Horton’s management has been open about the tools they use to maintain speed in a high-stakes environment: big bonuses, aggressive mortgage purchases, and pressure on operating costs—all made possible by the company’s size.
“We increased our sales gains in the first quarter,” said CEO Paul Romanowski, “and we expect incentives to remain high in fiscal 2026, depending on demand, changes in mortgage interest rates, and overall market conditions.”
These incentives are especially critical in the FHA mortgage segment, where Horton excels in capturing first-time buyers priced out of the resale market. SVP Jessica Hansen admitted this bluntly:
“We’re already doing more to address cost-effectiveness than any other builder out there. […] We believe that we are the best-positioned builder to help when there is a need for pickup, especially for a first-time home buyer.”
For many companies, high compensation means eroded margins. At Horton, incentives are a tool that is used with precision – and absorbed in moderation as they compress the accordion of both fixed and variable costs to suit individual sales conditions.
COO Michael Murray explained the playbook:
“The cost of incentives that arose in the first quarter was a result of the interest rate lock when rates increased slightly. […] We accelerated the use of those incentives throughout the quarter.”
Despite these moves, Horton posted a gross margin on home sales of 20.4%, which would have been 20.0% without the one-time guarantee benefit. Despite expected pressure in Q2, this performance demonstrates Horton’s ability to flex its P&L to maintain volume without compromising control over profitability.
Pressing the supply chain of sticks and sticks
One of Horton’s greatest strengths is its ability to translate national scale into local advantage—especially in commodity costs. From lumber and concrete to labor and land, Horton can often find better prices, faster cycle times, and more responsive trade partners simply because of its volume.
This benefit is increasing as many independent builders struggle to find financing and maintain margins. Horton, on the other hand, is compressing its cost base:
“For the homes we closed in the first quarter, our average cycle time measured from home to home decreased by 2 weeks from a year ago,” Romanowski said. “Our improved cycle times enable us to hold fewer homes in inventory and turn our housing inventory more efficiently.”
Wolfe’s Allinson added context to this efficiency: “The management’s voice has been sustained continuously in the continuous improvement of the construction times, which benefits the specified turn and the documentation of the land.”
This quick turnaround allows Horton to reduce cash flow, increase absorption, and—importantly—put pressure on its salespeople to produce tighter schedules and tighter margins. Independent builders trying to match speed without that scale are increasingly left behind.
Worldly discipline and many achievements
While other builders are pulling back from land because of high management costs or financial uncertainty, Horton is expanding its future platform through Foredare, its partner land development arm.
“Of the homes we closed this quarter, 67% were developed by Forestar or a third party,” said COO Murray, “up from 65% in last year’s quarter.”
Controlling the land supply allows Horton to better manage costs and risk—and be more aggressive in cashing out when demand shows strength. The company’s strong balance sheet ($3.9B in cash and $22B in equity) gives it the option to keep fueling its machine while competitors stand still.
Wolfe’s analysis noted that this global trend, along with improving cycle times and lower construction costs, “could help restore gross margins over the course of FY26” even if incentives persist.
DR Horton competes in the field: risks for independent operators
The growing gap between Horton and independent competitors is not just an idea. It is visible in numbers.
“We started 18,500 homes in the December quarter,” said Romanowski. “And we expect our start in the second quarter to be higher than the first quarter.”
More is starting. More land. Quick build. Deep motives. And low cost.
It’s a good cycle for Horton—and a vicious one for its competitors in its markets, especially in the secondary and high-end markets where it grows.
“We continue to look for opportunities,” said Romanowski. “We are very focused on opportunities to leverage to increase our capacity in a specific market and/or market penetration.”
Each of those “tuck-ins” creates structural pain for small and mid-sized local players who are already in those markets. With Horton’s market-leading sales volume, it becomes the price-setter—and that sets everyone’s goals.
This is very important in today’s world financial situation. Many independent builders face personal guarantee requirements, high capital costs, and strict credit standards. Horton, with its liquidity and ability to pay cash, wins a lot of deals—and sets up the computers that lenders use to underwrite other builders’ land loans.
The net result: Horton’s strategic model is not only successful—it redefines the terms of competition, making it difficult for others to operate profitably or grow sustainably.
“One in seven new homes”
As of 2020, DR Horton has not only defended its market leadership position—it has widened the gap. In the five years following the initial shock of COVID, Horton entered more than 30 new American markets. Today, it makes up one in seven single-family homes sold in America.
And that’s not just a national rating – local dominance: the company ranks among the top five builders in 92% of the markets where it operates and holds the No. 1 out of 60 of them. As of Q3 2025, Horton is building to more than 2,250 active communities – a sharp increase from just under 2,000 last year – with plans to continue growing through 2026.
Weekly absorption per community is tracking at 3.2 homes, even amid consumer fatigue driven by affordability. Horton’s backlog value increased 36% year-over-year to $5.6 billion, and even as average sales prices held steady in the high $380Ks, its backlog of units increased 35% year-over-year. On every key measure—location, product mix, manufacturing capacity, cycle time, margin flexibility, and market share—Horton has turned its sheer size into a sustainable strategic advantage.
The Q1 results and Horton’s tone weren’t just strong—they were confident. The managers were very clear about the winds but did not give up on their speed. Incentives will remain high. Margins may dip slightly in Q2. But the machine continues—and is set to grow in FY26 and FY27.
For executives across the homebuilding industry—especially independent builders in Horton’s footsteps—the message is clear:
This is not just a solid home building business. It’s a bigger force, playing a different game, using a different system.
