ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is intended to promote an understanding of our financial condition, results of operations, liquidity and certain other factors that may affect future results. MD&A is provided as a supplement to, and should be read in conjunction with our consolidated financial statements and notes to those statements that appear elsewhere in this Form 10-K. This section discusses the results of operations for fiscal 2025 compared to 2024. For similar operating and financial data and discussion of our fiscal 2024 results compared to our fiscal 2023 results, refer to Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under Part II of our annual report on Form 10-K for the fiscal year ended September 30, 2024, which was filed with the SEC on November 19, 2024.
The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to any differences include, but are not limited to, those discussed under the caption “Forward-Looking Statements” and under Item 1A, “Risk Factors.”
Results of Operations — Overview
Fiscal 2025 Operating Results
In fiscal 2025, our number of homes closed and our home sales revenues decreased 5% and 7%, respectively, compared to the prior year, and our consolidated revenues decreased 7% to $34.3 billion compared to $36.8 billion. Our pre-tax income was $4.7 billion in fiscal 2025 compared to $6.3 billion in fiscal 2024, and our pre-tax operating margin was 13.8% compared to 17.1%. Net income was $3.6 billion in fiscal 2025 compared to $4.8 billion in fiscal 2024, and our diluted earnings per share were $11.57 compared to $14.34.
Consolidated net cash provided by operating activities was $3.4 billion in fiscal 2025 and $2.2 billion in fiscal 2024, and cash provided by our homebuilding operations was $3.4 billion in fiscal 2025 compared to $2.2 billion in fiscal 2024. In fiscal 2025, our return on equity (ROE) was 14.6% compared to 19.9% in fiscal 2024, and our return on assets (ROA) was 10.0% compared to 13.9%. ROE is calculated as net income attributable to D.R. Horton for the year divided by average stockholders’ equity, where average stockholders’ equity is the sum of ending stockholders’ equity balances for the trailing five quarters divided by five. ROA is calculated as net income attributable to D.R. Horton for the year divided by average consolidated assets, where average consolidated assets is the sum of total asset balances for the trailing five quarters divided by five.
During fiscal 2025, new home demand continued to be impacted by ongoing affordability constraints and cautious consumer sentiment. As a result, the value of our net sales orders and homebuilding revenues in fiscal 2025 decreased 6% and 7%, respectively, compared to fiscal 2024, and our home sales gross margin decreased to 21.5% as we increased sales incentives, such as buydowns of mortgage rates for our homebuyers. We strive to remain well positioned with affordable product offerings and a flexible lot supply and will continue to manage our home pricing, sales incentives and number of homes in inventory based on the level of demand in each of our local markets. We expect to maintain an elevated level of sales incentives to support demand and may increase them further, depending on market conditions and changes in mortgage interest rates.
We remain focused on our relationships with land developers across the country to maximize returns and capital efficiency . Within our homebuilding land and lot portfolio, lots controlled through purchase contracts represented 75% of the lots owned and controlled at September 30, 2025 compared to 76% at September 30, 2024. We continue to prioritize the purchase of finished lots from Forestar and other land developers when possible. During fiscal 2025, 65% of the homes we closed were on lots developed by either Forestar or a third party compared to 63% in fiscal 2024.
We believe our strong balance sheet and liquidity provide us with flexibility to operate effectively through changing economic conditions. We plan to generate strong cash flows from our operations and manage our product offerings, incentives, home pricing, sales pace and inventory levels to optimize the return on our inventory investments in each of our communities based on local housing market conditions.
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Strategy
Our operating strategy focuses on consistently enhancing long-term value to our shareholders by leveraging our financial and competitive positions to maximize the returns on our inventory investments and generate strong profits and cash flows from operations, while managing risk and maintaining financial flexibility to navigate changing economic conditions. Our strategy includes the following initiatives:
• Developing and retaining highly experienced and productive teams of personnel throughout our company that are aligned and focused on continuous improvement in our operational execution and financial performance.
• Maintaining a significant cash balance and strong overall liquidity position while controlling our level of debt.
• Allocating and actively managing our inventory investments across our operating markets to diversify our geographic risk.
• Offering new home communities that appeal to a broad range of entry-level, move-up, active adult and luxury homebuyers based on consumer demand in each market.
• Modifying product offerings, sales pace, home prices and incentives as necessary in each of our markets to meet consumer demand and maintain affordability.
• Delivering high quality homes and a positive experience to our customers both during and after the sale.
• Managing our inventory of homes under construction relative to demand in each of our markets, including starting construction on unsold homes to capture new home demand and actively controlling the number of unsold, completed homes in inventory.
• Investing in lots, land and land development in desirable markets, while controlling the level of land and lots we own in each market relative to the local new home demand.
• Controlling a significant portion of our land and finished lot position through purchase contracts and prioritizing the purchase of finished lots from Forestar and other land developers when possible.
• Controlling the cost of labor and goods provided by subcontractors and vendors.
• Improving the efficiency of our land development, construction, sales and other key operational activities.
• Controlling our selling, general and administrative (SG&A) expense infrastructure to match production levels.
• Ensuring that our financial services business provides high quality mortgage and title services to homebuyers efficiently and effectively.
• Investing in our rental operations to meet rental demand in high growth suburban markets and selling these properties profitably.
• Opportunistically evaluating potential acquisitions to enhance our operating platform.
We believe our operating strategy, which has produced positive results in recent years, will allow us to successfully operate through changing economic conditions and maintain our strong financial performance and competitive position. However, we cannot provide any assurance that the initiatives listed above will continue to be successful, and we may need to adjust parts of our strategy to meet future market conditions.
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Key Results
Key financial results as of and for our fiscal year ended September 30, 2025, as compared to fiscal 2024, were as follows:
Consolidated Results:
• Consolidated revenues decreased 7% to $34.3 billion compared to $36.8 billion.
• Consolidated pre-tax income decreased 25% to $4.7 billion compared to $6.3 billion.
• Consolidated pre-tax income was 13.8% of consolidated revenues compared to 17.1%.
• Income tax expense was $1.1 billion compared to $1.5 billion, and our effective tax rate was 23.6% compared to 23.5%.
• Net income attributable to D.R. Horton was $3.6 billion compared to $4.8 billion.
• Net income attributable to D.R. Horton per diluted share decreased 19% to $11.57 compared to $14.34.
• Net cash provided by operations was $3.4 billion compared to $2.2 billion.
• Stockholders’ equity was $24.2 billion compared to $25.3 billion.
• Book value per share increased to $82.15 compared to $78.12.
• Debt to total capital was 19.8% compared to 18.9%, and net debt to total capital was 11.0% compared to 5.2%.
Homebuilding:
• Homebuilding revenues decreased 7% to $31.5 billion compared to $34.0 billion.
• Homes closed decreased 5% to 84,863 homes, and the average closing price of those homes decreased 2% to $370,400.
• Net sales orders decreased 4% to 83,423 homes, and the value of net sales orders decreased 6% to $30.8 billion.
• Sales order backlog decreased 11% to 10,785 homes, and the value of sales order backlog decreased 14% to $4.1 billion.
• Home sales gross margin was 21.5% compared to 23.5%.
• Homebuilding SG&A expense was 8.3% of homebuilding revenues compared to 7.5%.
• Homebuilding pre-tax income was $4.1 billion compared to $5.5 billion.
• Homebuilding pre-tax income was 13.1% of homebuilding revenues compared to 16.1%.
• Net cash provided by homebuilding operations was $3.4 billion compared to $2.2 billion.
• Homebuilding cash and cash equivalents totaled $2.2 billion compared to $3.6 billion.
• Homebuilding inventories totaled $20.3 billion compared to $20.0 billion.
• Homes in inventory totaled 29,600 compared to 37,400.
• Owned lots totaled 147,000 compared to 152,500, and lots controlled through purchase contracts totaled 444,900 compared to 480,400.
• Homebuilding debt was $3.2 billion compared to $2.9 billion.
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Rental:
• Rental revenues were $1.6 billion compared to $1.7 billion.
• Rental pre-tax income was $170.0 million compared to $228.7 million.
• Rental inventory totaled $2.7 billion compared to $2.9 billion.
• Single-family rental homes closed totaled 3,460 compared to 3,970.
• Multi-family rental units closed totaled 2,947 compared to 2,202.
Forestar:
• Forestar’s revenues increased 10% to $1.7 billion compared to $1.5 billion. Revenues in fiscal 2025 and 2024 included $1.4 billion and $1.3 billion, respectively, of revenue from land and lot sales to our homebuilding segment.
• Forestar’s lots sold decreased 5% to 14,240 compared to 15,068. Lots sold to D.R. Horton totaled 11,751 compared to 13,267.
• Forestar’s revenue from tract acres sold increased to $103.5 million compared to $27.0 million, of which $91.2 million and $15.2 million, respectively, related to acreage sold to D.R. Horton.
• Forestar’s pre-tax income was $219.3 million compared to $270.1 million.
• Forestar’s pre-tax income was 13.2% of revenues compared to 17.9%.
• Forestar’s cash and cash equivalents totaled $379.2 million compared to $481.2 million.
• Forestar’s inventories totaled $2.6 billion compared to $2.3 billion.
• Forestar’s owned and controlled lots totaled 99,800 compared to 95,100. Of these lots, 40,400 were under contract to sell to or subject to a right of first offer with D.R. Horton compared to 37,700.
• Forestar’s debt was $802.8 million compared to $706.4 million.
• Forestar’s debt to total capital was 31.2% compared to 30.7%, and Forestar’s net debt to total capital was 19.3% compared to 12.4%.
Financial Services:
• Financial services revenues decreased 5% to $841.2 million compared to $882.5 million.
• Financial services pre-tax income was $278.7 million compared to $311.2 million.
• Financial services pre-tax income was 33.1% of financial services revenues compared to 35.3%.
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Results of Operations — Homebuilding
Our operating segments are our 92 homebuilding divisions, our rental operations, our majority-owned Forestar residential lot development operations, our financial services operations and our other business activities. The homebuilding operating segments are aggregated into six reporting segments. These reporting segments, which we also refer to as reporting regions, have homebuilding operations located in the following states:
Northwest:
Colorado, Oregon, Utah and Washington
Southwest:
Arizona, California, Hawaii, Nevada and New Mexico
South Central:
Arkansas, Oklahoma and Texas
Southeast:
Alabama, Florida, Louisiana and Mississippi
East:
Georgia, North Carolina, South Carolina and Tennessee
North:
Delaware, Illinois, Indiana, Iowa, Kansas, Kentucky, Maryland, Minnesota, Missouri, Nebraska, New Jersey, Ohio, Pennsylvania, Virginia, West Virginia and Wisconsin
The following tables and related discussion set forth key operating and financial data for our homebuilding operations by reporting segment as of and for the fiscal years ended September 30, 2025 and 2024.
Net Sales Orders (1)
Year Ended September 30,
Net Homes Sold
Value (In millions)
Average Selling Price
Change
Change
Change
Northwest
Southwest
South Central
Southeast
East
North
(1) Net sales orders represent the number and dollar value of new sales contracts executed with customers (gross sales orders), net of cancelled sales orders.
Sales Order Cancellations
Year Ended September 30,
Cancelled Sales Orders
Value (In millions)
Cancellation Rate (1)
Northwest
Southwest
South Central
Southeast
East
North
(1) Cancellation rate represents the number of cancelled sales orders divided by gross sales orders.
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Net Sales Orders
The value of net sales orders was $30.8 billion (83,423 homes) in fiscal 2025 compared to $32.7 billion (86,561 homes) in fiscal 2024. The decrease in value was primarily attributable to a 4% decrease in sales order volume, along with a 2% decrease in the average selling price.
In regions where sales order volume decreased, the markets contributing most to the decrease in fiscal 2025 were the Salt Lake City market in the Northwest, the Phoenix and California markets in the Southwest, the Dallas and Fort Worth markets in the South Central and the Florida markets (particularly Tampa and Jacksonville) in the Southeast. In regions where sales order volume increased, the markets contributing most to the increase were the North Carolina markets in the East and the New Jersey, Chicago and suburban Washington, D.C. markets in the North.
During fiscal 2025, new home demand continued to be impacted by ongoing affordability constraints and cautious consumer sentiment. We remain well positioned with affordable product offerings and a flexible lot supply and will continue to manage our home pricing, sales incentives and number of homes in inventory based on the level of new home demand in each of our local markets.
Sales Order Backlog
As of September 30,
Homes in Backlog
Value (In millions)
Average Selling Price
Change
Change
Change
Northwest
Southwest
South Central
Southeast
East
North
Sales Order Backlog
Sales order backlog represents homes under contract but not yet closed at the end of the period. Many of the contracts in our sales order backlog are subject to contingencies, including mortgage loan approval and buyers selling their existing homes, which can result in cancellations. A portion of the contracts in backlog will not result in closings due to cancellations.
Homes Closed and Revenue
Year Ended September 30,
Homes Closed
Home Sales Revenue (In millions)
Average Selling Price
Change
Change
Change
Northwest
Southwest
South Central
Southeast
East
North
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Home Sales Revenue
Revenues from home sales were $31.4 billion (84,863 homes closed) in fiscal 2025 compared to $33.9 billion (89,690 homes closed) in fiscal 2024. The decrease in revenues was primarily attributable to a 5% decrease in closings volume, along with a 2% decrease in the average selling price.
In regions where homes closed decreased, the markets contributing most were the Salt Lake City market in the Northwest, the Phoenix and California markets in the Southwest, the Dallas and Fort Worth markets in the South Central and the Florida markets (particularly Tampa and Jacksonville) in the Southeast. In regions where homes closed increased, the markets contributing most to the increase were the North Carolina markets in the East and the suburban Washington, D.C., Chicago and New Jersey markets in the North.
Homebuilding Operating Margin Analysis
Percentages of Related Revenues
Year Ended September 30,
Gross profit — home sales
Gross profit — land/lot sales and other
Inventory and land option charges
Gross profit — total homebuilding
Selling, general and administrative expense
Other (income) expense
Homebuilding pre-tax income
Home Sales Gross Profit
Gross profit from home sales decreased to $6.8 billion in fiscal 2025 from $8.0 billion in fiscal 2024 and decreased 200 basis points to 21.5% as a percentage of home sales revenues. The percentage decrease resulted from a decrease of 170 basis points due to the average cost of our homes closed increasing along with a decrease in the average selling price of those homes, 20 basis points due to an increase in warranty and construction defect costs and 10 basis points due to an increase in the amortization of capitalized interest.
We remain focused on managing the pricing, incentives and sales pace in each of our communities to optimize the returns on our inventory investments and adjust to local market conditions and new home demand. To adjust to changes in market conditions during recent years, we have used a higher level of incentives and reduced home prices and sizes of our home offerings where necessary to provide better affordability to homebuyers. We expect our incentive levels to stay elevated during fiscal 2026, the extent to which will depend on market conditions and changes in mortgage interest rates.
Land/Lot Sales and Other Revenues
Land/lot sales and other revenues from our homebuilding operations were $83.5 million and $58.2 million in fiscal 2025 and 2024, respectively. We continually evaluate our land and lot supply, and fluctuations in revenues and profitability from land sales occur based on how we manage our inventory levels in various markets. We generally purchase land and lots with the intent to build and sell homes on them. However, some of the land that we purchase includes commercially zoned parcels that we may sell to commercial developers. We may also sell residential lots or land parcels to manage our supply or for other strategic reasons. As of September 30, 2025, our homebuilding operations had $21.4 million of land held for sale that we expect to sell in the next twelve months.
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Inventory and Land Option Charges
At the end of each quarter, we review the performance and outlook for all of our communities and land inventories for indicators of potential impairment and perform detailed impairment evaluations and analyses when necessary. As a result of this review, there were $6.7 million of impairments recorded in our homebuilding segment during the three months ended September 30, 2025. During fiscal 2025, impairment charges related to our homebuilding segment totaled $29.9 million compared to $14.0 million in fiscal 2024.
As we manage our inventory investments across our operating markets to optimize returns and cash flows, we may modify our pricing and incentives, construction and development plans or land sale strategies in individual active communities and land held for development, which could result in the affected communities being evaluated for potential impairment. If the housing market or economic conditions are adversely affected for a prolonged period, we may be required to evaluate additional communities for potential impairment. These evaluations could result in impairment charges, which could be significant.
During fiscal 2025 and 2024, earnest money and pre-acquisition cost write-offs related to our homebuilding segment’s land purchase contracts that we have terminated or expect to terminate were $114.3 million and $54.9 million, respectively.
Selling, General and Administrative (SG&A) Expense
SG&A expense from homebuilding activities increased 3% to $2.62 billion in fiscal 2025 from $2.55 billion in fiscal 2024. As a percentage of homebuilding revenues, SG&A expense was 8.3% and 7.5% in fiscal 2025 and 2024, respectively, with the increase primarily due to the decrease in homebuilding revenues.
Employee compensation and related costs were $2.06 billion and $2.09 billion in fiscal 2025 and 2024, respectively, representing 79% and 82% of SG&A costs in those years. Our homebuilding operations employed 9,972 and 10,071 people at September 30, 2025 and 2024, respectively.
We attempt to control our homebuilding SG&A costs while ensuring that our infrastructure adequately supports our operations; however, we cannot make assurances that we will be able to maintain or improve upon the current SG&A expense as a percentage of revenues.
Interest Incurred
We capitalize interest costs incurred to inventory during active development and construction (active inventory). Capitalized interest is charged to cost of sales as the related inventory is delivered to the buyer. Interest incurred by our homebuilding operations increased 104% to $103.1 million in fiscal 2025 from $50.5 million in fiscal 2024, primarily due to an increase in the weighted average interest rate of homebuilding debt outstanding as well as a 33% increase in the average amount of that debt. Interest charged to cost of sales was 0.4% of homebuilding cost of sales (excluding inventory and land option charges) in both years.
Other Income
Other income, net of other expenses, included in our homebuilding operations was $101.7 million in fiscal 2025 compared to $107.6 million in fiscal 2024. Other income consists of interest income and various other types of ancillary income, gains, expenses and losses not directly associated with sales of homes, land and lots. The activities that result in this ancillary income are not significant, either individually or in the aggregate.
Business Acquisition
In October 2025, we acquired the homebuilding operations of SK Builders for approximately $80 million in cash. SK Builders operates in and around Greenville, South Carolina. The assets acquired included approximately 160 homes in inventory, 260 lots and a sales order backlog of 110 homes. We also obtained control of approximately 1,320 additional lots through land purchase contracts.
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Homebuilding Results by Reporting Region
Year Ended September 30,
Homebuilding
Revenues
Homebuilding
Pre-tax
Income (1)
Pre-tax Income as % of
Revenues
Homebuilding
Revenues
Homebuilding
Pre-tax
Income (1)
Pre-tax Income as % of
Revenues
(In millions)
Northwest
Southwest
South Central
Southeast
East
North
(1) Expenses maintained at the corporate level consist primarily of interest and property taxes, which are capitalized and amortized to cost of sales or expensed directly, and the expenses related to operating our corporate office. The amortization of capitalized interest and property taxes is allocated to each segment based on the segment’s cost of sales, while expenses associated with the corporate office are allocated to each segment based on the segment’s inventory balances.
Northwest Region — Homebuilding revenues decreased 3% in fiscal 2025 compared to fiscal 2024, due to a decrease in the number of homes closed, particularly in our Salt Lake City market. The region generated pre-tax income of $395.7 million in fiscal 2025 compared to $420.8 million in fiscal 2024. Gross profit from home sales as a percentage of home sales revenue (home sales gross profit percentage) was essentially flat in fiscal 2025 compared to fiscal 2024. As a percentage of homebuilding revenues, SG&A expenses increased by 50 basis points in fiscal 2025 compared to fiscal 2024, primarily due to an increase in employee compensation costs.
Southwest Region — Homebuilding revenues decreased 6% in fiscal 2025 compared to fiscal 2024, primarily due to a decrease in the number of homes closed, particularly in our Phoenix market. The region generated pre-tax income of $517.1 million in fiscal 2025 compared to $703.5 million in fiscal 2024. Home sales gross profit percentage decreased by 220 basis points in fiscal 2025 compared to fiscal 2024, primarily due to an increase in construction defect costs in our Phoenix and Hawaii markets and the average selling price of homes closed decreasing by more than the average cost of those homes. As a percentage of homebuilding revenues, SG&A expenses increased by 70 basis points in fiscal 2025 compared to fiscal 2024, primarily due to the decrease in homebuilding revenues.
South Central Region — Homebuilding revenues decreased 10% in fiscal 2025 compared to fiscal 2024, due to a decrease in the number of homes closed, particularly in our Fort Worth and Dallas markets, as well as a decrease in the average selling price of homes closed in most markets. The region generated pre-tax income of $964.6 million in fiscal 2025 compared to $1.3 billion in fiscal 2024. Home sales gross profit percentage decreased by 220 basis points in fiscal 2025 compared to fiscal 2024, primarily due to the average selling price of homes closed decreasing by more than the average cost of those homes. As a percentage of homebuilding revenues, SG&A expenses increased by 80 basis points in fiscal 2025 compared to fiscal 2024, primarily due to the decrease in homebuilding revenues.
Southeast Region — Homebuilding revenues decreased 21% in fiscal 2025 compared to fiscal 2024, primarily due to a decrease in the number of homes closed, particularly in our Florida markets. The region generated pre-tax income of $839.9 million in fiscal 2025 compared to $1.4 billion in fiscal 2024. Home sales gross profit percentage decreased by 270 basis points in fiscal 2025 compared to fiscal 2024, primarily due to the average selling price of homes closed decreasing by more than the average cost of those homes. As a percentage of homebuilding revenues, SG&A expenses increased by 130 basis points in fiscal 2025 compared to fiscal 2024 due to the decrease in homebuilding revenues.
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East Region — Homebuilding revenues increased 1% in fiscal 2025 compared to fiscal 2024, due to an increase in the number of homes closed, particularly in our North Carolina markets. The region generated pre-tax income of $834.0 million in fiscal 2025 compared to $1.1 billion in fiscal 2024. Home sales gross profit percentage decreased by 310 basis points in fiscal 2025 compared to fiscal 2024, primarily due to the average cost of homes closed increasing while the average selling price of those homes decreased. As a percentage of homebuilding revenues, SG&A expenses increased by 50 basis points in fiscal 2025 compared to fiscal 2024, primarily due to an increase in employee compensation costs.
North Region — Homebuilding revenues increased 15% in fiscal 2025 compared to fiscal 2024, primarily due to an increase in the number of homes closed, particularly in our Chicago, suburban Washington, D.C. and New Jersey markets. The region generated pre-tax income of $583.6 million in fiscal 2025 compared to $498.4 million in fiscal 2024. Home sales gross profit percentage increased by 70 basis points in fiscal 2025 compared to fiscal 2024, primarily due to the average selling price of homes closed increasing by more than the average cost of those homes. As a percentage of homebuilding revenues, SG&A expenses increased by 40 basis points in fiscal 2025 compared to fiscal 2024, primarily due to an increase in employee compensation costs.
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Homebuilding Inventories, Land and Lot Position and Homes in Inventory
We routinely enter into contracts to purchase land or developed residential lots at predetermined prices on a defined schedule commensurate with planned development or anticipated new home demand. At the time of purchase, the undeveloped land is generally vested with the rights to begin development or construction work, and we plan and coordinate the development of our land into residential lots for use in our homebuilding business. We manage our inventory of owned land and lots and homes under construction relative to demand in each of our markets, including starting construction on unsold homes to capture new home demand and actively controlling the number of unsold, completed homes in inventory.
Our homebuilding segment’s inventories at September 30, 2025 and 2024 are summarized as follows:
September 30, 2025
Construction in Progress and
Finished Homes
Residential Land/Lots Developed
and Under Development
Land Held
for Development
Land Held
for Sale
Total Inventory
(In millions)
Northwest
Southwest
South Central
Southeast
East
North
Corporate and unallocated (1)
September 30, 2024
Construction in Progress and
Finished Homes
Residential Land/Lots Developed
and Under Development
Land Held
for Development
Land Held
for Sale
Total Inventory
(In millions)
Northwest
Southwest
South Central
Southeast
East
North
Corporate and unallocated (1)
(1) Corporate and unallocated inventory consists primarily of capitalized interest and property taxes.
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Our land and lot position and homes in inventory at September 30, 2025 and 2024 are summarized as follows:
September 30, 2025
Land/Lots
Owned (1)
Lots Controlled Through
Land and Lot Purchase
Contracts (2)(3)
Total Land/Lots
Owned and
Controlled
Homes in
Inventory (4)
Northwest
Southwest
South Central
Southeast
East
North
September 30, 2024
Land/Lots
Owned (1)
Lots Controlled Through
Land and Lot Purchase
Contracts (2)(3)
Total Land/Lots
Owned and
Controlled
Homes in
Inventory (4)
Northwest
Southwest
South Central
Southeast
East
North
(1) Land/lots owned included approximately 78,400 and 64,400 owned lots that are fully developed and ready for home construction at September 30, 2025 and 2024, respectively.
(2) The total remaining purchase price of lots controlled through land and lot purchase contracts at September 30, 2025 and 2024 was $26.0 billion and $25.2 billion, respectively, secured by earnest money deposits of $2.3 billion and $2.2 billion, respectively. The total remaining purchase price of lots controlled through land and lot purchase contracts at September 30, 2025 and 2024 included $2.0 billion and $1.9 billion, respectively, related to lot purchase contracts with Forestar, secured by $200.2 million and $193.3 million, respectively, of earnest money.
(3) Lots controlled at September 30, 2025 included approximately 40,400 lots owned by Forestar, 22,800 of which our homebuilding divisions had under contract to purchase and 17,600 of which our homebuilding divisions had a right of first offer to purchase. Of these, approximately 10,100 lots were in our East region, 9,200 lots were in our Southeast region, 8,700 lots were in our South Central region, 6,900 lots were in our North region, 3,800 lots were in our Southwest region and 1,700 lots were in our Northwest region. Lots controlled at September 30, 2024 included approximately 37,700 lots owned by Forestar, 20,500 of which our homebuilding divisions had under contract to purchase and 17,200 of which our homebuilding divisions had a right of first offer to purchase.
(4) Approximately 19,600 and 25,700 of our homes in inventory were unsold at September 30, 2025 and 2024, respectively. At September 30, 2025, approximately 9,300 of our unsold homes were completed, of which approximately 800 homes had been completed for more than six months. At September 30, 2024, approximately 10,300 of our unsold homes were completed, of which approximately 1,100 homes had been completed for more than six months. Homes in inventory exclude approximately 2,700 and 2,400 model homes at September 30, 2025 and 2024, respectively.
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Results of Operations — Rental
Our rental segment consists of single-family and multi-family rental operations. The single-family rental operations construct and lease single-family homes within a community and market each community for a bulk sale of rental homes. The multi-family rental operations develop, construct, lease and sell residential rental properties, with a primary focus on constructing garden style apartment communities in high growth suburban markets. Single-family and multi-family rental property sales are recognized as revenues, and rental income is recognized as other income. The following tables provide further information regarding our rental operations as of and for the fiscal years ended September 30, 2025 and 2024.
Rental Homes/Units Closed and Revenue
Year Ended September 30,
Homes/Units Closed
Rental Revenue (In millions)
Average Selling Price
Change
Change
Change
Single-family
Multi-family
Year Ended September 30,
(In millions)
Revenues
Single-family rental
Multi-family rental and other
Total revenues
Cost of sales
Single-family rental
Multi-family rental and other
Inventory and land option charges
Total cost of sales
Selling, general and administrative expense
Other (income) expense
Income before income taxes
Rental Operating Margin Analysis
Percentages of Related Revenues
Year Ended September 30,
Gross profit — rental
Selling, general and administrative expense
Other (income) expense
Rental pre-tax income
Revenues from our rental operations decreased to $1.6 billion in fiscal 2025 from $1.7 billion in fiscal 2024, and pre-tax income decreased to $170.0 million from $228.7 million. The decline in rental revenues and pre-tax income was primarily due to a decrease in the number and average selling price of single-family rental homes closed, combined with lower gross margins on single-family home and multi-family unit closings.
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At September 30, 2025, our rental property inventory of $2.7 billion included $378.3 million of inventory related to our single-family rental operations and $2.3 billion of inventory related to our multi-family rental operations. At September 30, 2024, our rental property inventory of $2.9 billion included $800.3 million of inventory related to our single-family rental operations and $2.1 billion of inventory related to our multi-family rental operations. Single-family rental homes and lots and multi-family rental units at September 30, 2025 and 2024 consisted of the following:
Rental Inventory
September 30,
Single-family rental homes (1)
Single-family rental lots (2)
Multi-family rental units (3)
(1) Single-family rental homes at September 30, 2025 consist of 370 homes under construction and 1,050 completed homes compared to 340 homes under construction and 2,800 completed homes at September 30, 2024.
(2) Single-family rental lots at September 30, 2025 consist of 440 undeveloped lots and 710 finished lots compared to 910 undeveloped lots and 1,000 finished lots at September 30, 2024.
(3) Multi-family rental units at September 30, 2025 consist of 4,910 units under construction and 7,570 units that were substantially complete and in the lease-up phase compared to 7,900 units under construction and 4,060 units that were substantially complete at September 30, 2024.
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Results of Operations — Forestar
At September 30, 2025, we owned 62% of the outstanding shares of Forestar. Forestar is a publicly traded residential lot development company with operations in 64 markets across 23 states as of September 30, 2025. (See Note B to the accompanying financial statements for additional Forestar segment information.)
Results of operations for the Forestar segment for the fiscal years ended September 30, 2025 and 2024 were as follows:
Year Ended September 30,
(In millions)
Total revenues
Cost of land/lot sales and other
Inventory and land option charges
Total cost of sales
Selling, general and administrative expense
Other (income) expense
Income before income taxes
Forestar’s revenues are primarily derived from sales of single-family residential lots to local, regional and national homebuilders and land bankers for homebuilders. The following tables provide further information regarding Forestar’s revenues and lot position as of and for the fiscal years ended September 30, 2025 and 2024:
Year Ended September 30,
Lots Sold
Value (In millions)
Residential single-family lots sold
Lots sold to D.R. Horton
Total lots sold
Tract acres sold
Tract acres sold to D.R. Horton
Total tract acres sold
September 30,
Residential single-family lots in inventory and under contract
Lots owned
Lots controlled through land purchase contracts
Total lots owned and controlled
Owned lots under contract to sell to D.R. Horton
Owned lots under contract to customers other than D.R. Horton
Total owned lots under contract
Owned lots subject to right of first offer with D.R. Horton
Owned lots fully developed
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At September 30, 2025 and 2024, Forestar’s inventory, which includes land and lots developed, under development and held for development, totaled $2.6 billion and $2.3 billion, respectively.
Forestar’s inventory and land option charges consisted of $7.2 million and $4.1 million of earnest money and pre-acquisition cost write-offs in fiscal 2025 and 2024, respectively. No impairment charges were recorded in the current or prior year.
SG&A expense for fiscal 2025 and 2024 included charges of $7.3 million and $5.6 million, respectively, related to the shared services agreement between Forestar and D.R. Horton whereby D.R. Horton provides Forestar with certain administrative, compliance, operational and procurement services.
The decline in Forestar’s pre-tax income was primarily due to lower gross margins on lot sales and higher SG&A costs.
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Results of Operations — Financial Services
The following tables and related discussion set forth key operating and financial data for our financial services operations, comprising DHI Mortgage and our subsidiary title companies, for the fiscal years ended September 30, 2025 and 2024.
Year Ended September 30,
% Change
Number of first-lien loans originated or brokered by
DHI Mortgage for D.R. Horton homebuyers
Number of homes closed by D.R. Horton
Percentage of D.R. Horton homes financed by DHI Mortgage
Total number of loans originated or brokered by DHI Mortgage
Loans sold by DHI Mortgage to third parties
Year Ended September 30,
% Change
(In millions)
Loan origination and other fees
Gains on sale of mortgage loans and mortgage servicing rights
Servicing income
Total mortgage operations revenues
Title policy premiums
Total revenues
General and administrative expense
Other (income) expense
Financial services pre-tax income
Financial Services Operating Margin Analysis
Percentages of
Financial Services Revenues
Year Ended September 30,
General and administrative expense
Other (income) expense
Financial services pre-tax income
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Mortgage Loan Activity
DHI Mortgage’s primary focus is to originate loans for our homebuilding operations, and those loan originations account for substantially all of its total loan volume. In fiscal 2025, the volume of first-lien loans originated or brokered by DHI Mortgage for our homebuyers decreased 2%, primarily due to the 5% decrease in the number of homes closed by our homebuilding operations, partially offset by an increase in the percentage of homes closed for which DHI Mortgage handled our homebuyers’ financing. The percentage of homes closed for which DHI Mortgage handled our homebuyers’ financing was 81% in fiscal 2025, up from 78% in fiscal 2024. This increase reflects DHI Mortgage’s ongoing efforts to align their business with our homebuilding operations by offering competitive products and pricing.
The number of loans sold decreased 3% in fiscal 2025 compared to the prior year. Substantially all mortgage loans held for sale on September 30, 2025 were eligible for sale to Fannie Mae, Freddie Mac or Ginnie Mae. During fiscal 2025, approximately 71% of our mortgage loans were sold directly to Fannie Mae, Freddie Mac or into securities backed by Ginnie Mae, and 27% were sold to one other major financial entity. Changes in market conditions could result in a greater concentration of our mortgage sales in future periods to fewer financial entities and directly to Fannie Mae, Freddie Mac or Ginnie Mae, and we may need to make other adjustments to our mortgage operations.
Financial Services Revenues and Expenses
Total loan origination volume decreased 2% during fiscal 2025, and revenues from our mortgage operations decreased 4% to $655.3 million from $681.6 million in fiscal 2024. Revenues from our title operations decreased 7% to $185.9 million in fiscal 2025 from $200.9 million in fiscal 2024, due to a decrease in transactions closed through our title operations.
General and administrative (G&A) expense related to our financial services operations decreased 3% to $651.4 million in fiscal 2025 from $672.4 million in the prior year. As a percentage of financial services revenues, G&A expense was 77.4% in fiscal 2025 compared to 76.2% in the prior year. Fluctuations in financial services G&A expense as a percentage of revenues can occur because some components of revenue fluctuate differently than loan volumes, and some expenses are not directly related to mortgage loan volume or to changes in the amount of revenue earned. Our financial services operations employed 2,967 and 3,149 people at September 30, 2025 and 2024, respectively.
Other income, net of other expense, included in our financial services operations consists primarily of the interest income of our mortgage subsidiary. Other income decreased 12% to $88.9 million in fiscal 2025 from $101.1 million in the prior year, primarily due to a decrease in interest income on our loan origination volume.
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Results of Operations — Other Businesses
In addition to our homebuilding, rental, Forestar and financial services operations, we engage in other business activities through our subsidiaries. We conduct insurance-related operations, own water rights and other water-related assets and own non-residential real estate including ranch land and improvements. The pre-tax income of all of our subsidiaries engaged in other business activities was $35.9 million in fiscal 2025 compared to $73.4 million in fiscal 2024. The pre-tax income in fiscal 2024 includes other income of $27.9 million related to a sale of mineral rights.
Results of Operations — Consolidated
Income before Income Taxes
Pre-tax income was $4.7 billion in fiscal 2025 compared to $6.3 billion in fiscal 2024. In fiscal 2025, our homebuilding, rental, financial services and Forestar businesses generated pre-tax income of $4.1 billion, $170.0 million, $278.7 million and $219.3 million, respectively, compared to $5.5 billion, $228.7 million, $311.2 million and $270.1 million, respectively, in fiscal 2024.
Income Taxes
Our income tax expense was $1.1 billion and $1.5 billion in fiscal 2025 and 2024, respectively, and our effective tax rate was 23.6% and 23.5% in those years. The effective tax rates for both years include an expense for state income taxes and tax benefits related to stock-based compensation and federal energy efficient home tax credits.
Our deferred tax assets, net of deferred tax liabilities, were $59.1 million at September 30, 2025 compared to $182.4 million at September 30, 2024. We have a valuation allowance of $14.6 million and $14.9 million at September 30, 2025 and 2024, respectively, related to deferred tax assets for state net operating loss (NOL) and tax credit carryforwards that are expected to expire before being realized. We will continue to evaluate both the positive and negative evidence in determining the need for a valuation allowance with respect to our remaining state NOL and tax credit carryforwards. Any reversal of the valuation allowance in future periods will impact our effective tax rate.
On July 4, 2025, the One Big Beautiful Bill Act was signed into law (the new law). The new law terminates the energy efficient home tax credit for homes closing after June 30, 2026 and enacts certain other tax provisions that will impact our financial statements. The termination of the energy efficient home tax credit will result in a reduced tax benefit beginning in fiscal 2026. Our tax benefits related to the energy efficient home tax credit were $39.5 million and $70.4 million in fiscal 2025 and 2024, respectively. None of the other tax provisions enacted by the new law have a significant impact on our financial statements.
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Capital Resources and Liquidity
We have historically funded our operations with cash flows from operating activities, borrowings under bank credit facilities and the issuance of new debt securities. Our current levels of cash, borrowing capacity and balance sheet leverage provide us with the operational flexibility to adjust to changes in economic and market conditions.
We continue to invest in our homebuilding and rental inventories to expand our operations and consolidate market share. We are also returning capital to shareholders through repurchases of our common stock and dividend payments. We are maintaining significant homebuilding cash balances and liquidity to support the scale and level of activity in our business and to provide flexibility to adjust to changing market conditions and opportunities.
At September 30, 2025, we had outstanding notes payable with varying maturities totaling an aggregate principal amount of $6.0 billion. $1.6 billion was payable within 12 months, which includes $1.4 billion outstanding under our mortgage repurchase facilities. Future interest payments associated with our notes payable total $1.3 billion, of which $287.4 million is payable within 12 months.
At September 30, 2025, our ratio of debt to total capital (notes payable divided by stockholders’ equity plus notes payable) was 19.8% compared to 18.9% at September 30, 2024. Our net debt to total capital (notes payable net of cash divided by stockholders’ equity plus notes payable net of cash) was 11.0% at September 30, 2025 compared to 5.2% at September 30, 2024. Over the long term, we intend to maintain our ratio of debt to total capital around 20%.
At September 30, 2025, we had outstanding letters of credit of $282.3 million and surety bonds of $3.5 billion, issued by third parties to secure performance under various contracts. We expect that our performance obligations secured by these letters of credit and bonds will generally be completed in the ordinary course of business and in accordance with the applicable contractual terms. When we complete our performance obligations, the related letters of credit and bonds are generally released shortly thereafter, leaving us with no continuing obligations. We have no material third-party guarantees.
We regularly assess our projected capital requirements to fund growth in our business, repay debt obligations, pay dividends, repurchase our common stock and maintain sufficient cash and liquidity levels to support our other operational needs, and we regularly evaluate our opportunities to raise additional capital. D.R. Horton has an automatically effective universal shelf registration statement filed with the SEC in July 2024, registering debt and equity securities that may be issued from time to time in amounts to be determined. Forestar also has an effective shelf registration statement filed with the SEC in September 2024, registering $750 million of equity securities, of which $300 million is reserved for sales under its at-the-market equity offering (ATM) program that was entered into in November 2024. As market conditions permit, we may issue new debt or equity securities through the capital markets or obtain additional bank financing to fund our projected capital requirements or provide additional liquidity. We believe that our existing cash resources, revolving credit facilities, mortgage repurchase facilities and ability to access the capital markets or obtain additional bank financing will provide sufficient liquidity to fund our near-term working capital needs and debt obligations for the next 12 months and for the foreseeable future thereafter.
Capital Resources - Homebuilding
Cash and Cash Equivalents — At September 30, 2025, cash and cash equivalents of our homebuilding segment totaled $2.2 billion.
Bank Credit Facility — We have a senior unsecured homebuilding revolving credit facility that was amended in December 2024 to increase its capacity from $2.19 billion to $2.23 billion. The facility includes an uncommitted accordion feature that allows for an increase in its size to $3.0 billion, subject to certain conditions and availability of additional bank commitments. In June 2025, we utilized this accordion feature, increasing the facility’s size to $2.305 billion through an additional commitment. Of the total commitments, $2.04 billion mature on December 18, 2029, and $265 million mature on October 28, 2027. The facility also provides for the issuance of letters of credit with a sublimit equal to 100% of the total revolving credit commitments. Letters of credit issued under the facility reduce the available borrowing capacity. At September 30, 2025, there were no borrowings outstanding and $231.2 million of letters of credit issued under the revolving credit facility, resulting in available capacity of $2.07 billion.
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Our homebuilding revolving credit facility imposes restrictions on our operations and activities, including requiring the maintenance of a maximum allowable leverage ratio and a borrowing base restriction if our leverage ratio exceeds a certain level. These covenants are measured as defined in the credit agreement governing the facility and are reported to the lenders quarterly. A failure to comply with these financial covenants could allow the lending banks to terminate the availability of funds under the revolving credit facility or cause any outstanding borrowings to become due and payable prior to maturity. The credit agreement governing the facility imposes restrictions on the creation of secured debt and liens.
Public Unsecured Debt — At September 30, 2025, we had $3.0 billion principal amount of homebuilding senior notes outstanding that mature from October 2026 through October 2035. The indenture governing our senior notes imposes restrictions on the creation of secured debt and liens.
Issuances — In February 2025, we issued $700 million principal amount of 5.5% senior notes due October 15, 2035. The annual effective interest rate of these notes after giving effect to the amortization of the discount and financing costs is 5.6%. In May 2025, we issued $500 million principal amount of 4.85% senior notes due October 15, 2030. The annual effective interest rate of these notes after giving effect to the amortization of the discount and financing costs is 5.1%. Interest on our senior notes is payable semi-annually.
Redemptions — In October 2024, we repaid $500 million principal amount of our 2.5% senior notes at maturity. In September 2025, we redeemed $500 million principal amount of our 2.6% senior notes due October 15, 2025 for $505.9 million, which included $5.9 million of accrued and unpaid interest.
Compliance and Guarantors — At September 30, 2025, we were in compliance with all of the covenants, limitations and restrictions of our homebuilding revolving credit facility and public debt obligations. Our homebuilding revolving credit facility and homebuilding senior notes are guaranteed by D.R. Horton, Inc.’s significant wholly owned homebuilding subsidiaries.
Debt and Stock Repurchase Authorizations — In July 2024, our Board of Directors authorized the repurchase of up to $500 million of our debt securities. In April 2025, the Board authorized the repurchase of up to $5.0 billion of our common stock, replacing the previous authorization. During fiscal 2025, we repurchased 30.7 million shares at a total cost, including commissions and excise taxes, of $4.3 billion, of which $2.6 billion was repurchased under the previous authorization. At September 30, 2025, the full amount of the debt repurchase authorization was remaining, and $3.3 billion of the stock repurchase authorization was remaining. The debt and stock repurchase authorizations have no expiration date.
Capital Resources - Rental
During the past few years, we have made significant investments in our rental operations. The inventory in our rental segment totaled $2.7 billion and $2.9 billion at September 30, 2025 and 2024, respectively.
Cash and Cash Equivalents — At September 30, 2025, cash and cash equivalents of our rental segment totaled $140.8 million.
Bank Credit Facility — Our rental subsidiary, DRH Rental, has a $1.05 billion senior unsecured revolving credit facility with an uncommitted accordion feature that could increase the size of the facility to $2.0 billion, subject to certain conditions and availability of additional bank commitments. Availability under the rental revolving credit facility is subject to a borrowing base calculation based on the book value of DRH Rental’s real estate assets and unrestricted cash. The facility also provides for the issuance of letters of credit with a sublimit equal to the greater of $100 million and 50% of the total revolving credit commitments. The maturity date of the facility is October 10, 2027. At September 30, 2025, there were $600 million of borrowings outstanding at a 6.2% annual interest rate and no letters of credit issued under the facility, resulting in available capacity of $450 million.
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The rental revolving credit facility includes customary affirmative and negative covenants, events of default and financial covenants. The financial covenants require DRH Rental to maintain a minimum level of tangible net worth, a minimum level of liquidity and a maximum allowable leverage ratio. These covenants are measured as defined in the credit agreement governing the facility and are reported to the lenders quarterly. A failure to comply with these financial covenants could allow the lending banks to terminate the availability of funds under the revolving credit facility or cause any outstanding borrowings to become due and payable prior to maturity. At September 30, 2025, DRH Rental was in compliance with all of the covenants, limitations and restrictions of its revolving credit facility.
The rental revolving credit facility is guaranteed by DRH Rental’s wholly owned subsidiaries that are not immaterial subsidiaries and have not been designated as unrestricted subsidiaries. The rental revolving credit facility is not guaranteed by D.R. Horton, Inc. or any of the subsidiaries that guarantee the debt of our homebuilding, Forestar or financial services operations.
Capital Resources - Forestar
Forestar’s achievement of its long-term growth objectives will depend on its ability to obtain financing and generate sufficient cash flows from operations. As market conditions permit, Forestar may issue new debt or equity securities through the capital markets or obtain additional bank financing to provide capital for future growth and additional liquidity. At September 30, 2025, Forestar’s ratio of debt to total capital (notes payable divided by stockholders’ equity plus notes payable) was 31.2% compared to 30.7% at September 30, 2024. Forestar’s ratio of net debt to total capital (notes payable net of cash divided by stockholders’ equity plus notes payable net of cash) was 19.3% compared to 12.4% at September 30, 2024.
Cash and Cash Equivalents — At September 30, 2025, Forestar had cash and cash equivalents of $379.2 million.
Bank Credit Facility — As of September 30, 2025, Forestar had a senior unsecured revolving credit facility that was amended in December 2024 to increase its capacity from $410 million to $640 million and to raise the uncommitted accordion feature that could increase the size of the facility to $1.0 billion, subject to certain conditions and availability of additional bank commitments. The amendment also extended the maturity date of the facility. Of the total commitments, $575 million mature on December 18, 2029, and $65 million mature on October 28, 2026. In October 2025, Forestar utilized the accordion feature and increased the size of its revolving credit facility to $665 million through an additional $25 million commitment that matures on December 18, 2029. The facility also provides for the issuance of letters of credit with a sublimit equal to the greater of $100 million and 50% of the total revolving credit commitments. Borrowings under the revolving credit facility are subject to a borrowing base calculation based on the book value of Forestar’s real estate assets and unrestricted cash. Letters of credit issued under the facility reduce the available borrowing capacity. At September 30, 2025, there were no borrowings outstanding and $51.1 million of letters of credit issued under the revolving credit facility, resulting in available capacity of $588.9 million.
The Forestar revolving credit facility includes customary affirmative and negative covenants, events of default and financial covenants. The financial covenants require Forestar to maintain a minimum level of tangible net worth, a minimum level of liquidity and a maximum allowable leverage ratio. These covenants are measured as defined in the credit agreement governing the facility and are reported to the lenders quarterly. A failure to comply with these financial covenants could allow the lending banks to terminate the availability of funds under the revolving credit facility or cause any outstanding borrowings to become due and payable prior to maturity.
Unsecured Debt — As of September 30, 2025, Forestar had $800 million principal amount of senior notes issued pursuant to Rule 144A and Regulation S under the Securities Act of 1933, as amended, that mature from March 2028 through March 2033 and represent unsecured obligations of Forestar. In March 2025, Forestar issued $500 million principal amount of 6.5% senior notes due March 15, 2033, with interest payable semi-annually. The annual effective interest rate of these notes after giving effect to the amortization of financing costs is 6.7%. The net proceeds from this issuance were primarily used to fund Forestar’s tender offer to purchase any and all of its outstanding $400 million principal amount of 3.85% senior notes due 2026 (of which $329.4 million aggregate principal amount was tendered). The repurchase price of $333.4 million included accrued and unpaid interest of $4.2 million. In September 2025, Forestar redeemed the remaining $70.6 million principal amount of its 3.85% senior notes for $71.6 million, which included $1.0 million of accrued and unpaid interest. In fiscal 2025, Forestar recognized a $1.2 million loss on extinguishment of debt related to the repurchase and redemption of the notes.
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Compliance and Guarantors — At September 30, 2025, Forestar was in compliance with all of the covenants, limitations and restrictions of its revolving credit facility and senior note obligations. Forestar’s revolving credit facility and its senior notes are guaranteed by Forestar’s wholly owned subsidiaries that are not immaterial subsidiaries and have not been designated as unrestricted subsidiaries. They are not guaranteed by D.R. Horton, Inc. or any of the subsidiaries that guarantee the debt of our homebuilding, rental or financial services operations.
Debt Repurchase Authorization — In April 2020, Forestar’s Board of Directors authorized the repurchase of up to $30 million of Forestar’s debt securities. All of the $30 million authorization was remaining at September 30, 2025, and the authorization has no expiration date.
Issuance of Common Stock — During fiscal 2025, there were no shares issued under Forestar’s ATM program. At September 30, 2025, $750 million remained available for issuance under Forestar’s shelf registration statement, with $300 million reserved for sales under the ATM program.
Capital Resources - Financial Services
Cash and Cash Equivalents — At September 30, 2025, cash and cash equivalents of our financial services segment totaled $244.5 million.
Mortgage Repurchase Facilities — Our mortgage subsidiary, DHI Mortgage, has two mortgage repurchase facilities, one of which is committed and the other of which is uncommitted, that provide financing and liquidity to DHI Mortgage by facilitating purchase transactions in which DHI Mortgage transfers eligible loans to counterparties upon receipt of funds from the counterparties. DHI Mortgage then has the right and obligation to repurchase the loans upon their sale to third-party purchasers in the secondary market or within specified time frames in accordance with the terms of the mortgage repurchase facilities.
In May 2025, the committed mortgage repurchase facility was amended to reduce its capacity to $1.4 billion and extend its maturity date to May 6, 2026. The capacity of the facility can be increased to $2.0 billion subject to the availability of additional commitments. At September 30, 2025, DHI Mortgage had an obligation of $1.1 billion under the committed mortgage repurchase facility at a 5.8% annual interest rate.
At September 30, 2025, the uncommitted mortgage repurchase facility had a borrowing capacity of $500 million, of which DHI Mortgage had an obligation of $304.8 million at a 5.4% annual interest rate.
At September 30, 2025, $2.23 billion of mortgage loans held for sale with a collateral value of $2.19 billion were pledged under the committed mortgage repurchase facility, and $332.6 million of mortgage loans held for sale with a collateral value of $312.9 million were pledged under the uncommitted mortgage repurchase facility.
The facilities contain financial covenants as to the mortgage subsidiary’s minimum required tangible net worth, its maximum allowable indebtedness to tangible net worth ratio and its minimum required liquidity. At September 30, 2025, DHI Mortgage was in compliance with all of the conditions and covenants of the mortgage repurchase facilities.
The mortgage repurchase facilities are not guaranteed by D.R. Horton, Inc. or any of the subsidiaries that guarantee the debt of our homebuilding, rental or Forestar operations.
In the past, DHI Mortgage has been able to renew or extend its committed mortgage repurchase facility at a sufficient capacity and on satisfactory terms prior to its maturity and obtain temporary additional commitments through amendments to the facility during periods of higher-than-normal volumes of mortgages held for sale. The liquidity of our financial services business depends upon its continued ability to renew and extend the committed mortgage repurchase facility, utilize the uncommitted mortgage repurchase facility or obtain other additional financing in sufficient capacities.
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Operating Cash Flow Activities
In fiscal 2025, net cash provided by operating activities was $3.4 billion compared to $2.2 billion in fiscal 2024. Cash provided by operating activities in the current year primarily consisted of $3.4 billion, $173.2 million and $105.5 million of cash provided by our homebuilding, financial services and rental segments, partially offset by $197.7 million of cash used in our Forestar segment. The most significant source of cash provided by operating activities in both years was net income.
Cash provided by a decrease in construction in progress and finished home inventory was $1.2 billion in fiscal 2025 compared to $141.3 million in fiscal 2024, due to a decrease in our homes in inventory. Cash used to increase residential land and lots was $1.9 billion and $2.6 billion in fiscal 2025 and 2024, respectively.
Investing Cash Flow Activities
In fiscal 2025, net cash used in investing activities was $168.7 million compared to $190.6 million in fiscal 2024. In fiscal 2025, uses of cash included purchases of property and equipment totaling $137.4 million and the payment of $53.1 million related to a business acquisition in our South Central region. In fiscal 2024, uses of cash included purchases of property and equipment totaling $165.3 million.
Financing Cash Flow Activities
We expect the short-term financing needs of our operations will be funded with existing cash, cash generated from operations and borrowings under our credit facilities. Long-term financing needs for our operations may be funded with the issuance of senior unsecured debt securities or equity securities through the capital markets.
In fiscal 2025, net cash used in financing activities was $4.8 billion, consisting primarily of cash used to repurchase shares of our common stock of $4.3 billion, repayment of $1.0 billion principal amount of homebuilding senior notes, Forestar’s repayment of $400 million principal amount of senior notes, payment of cash dividends totaling $494.8 million and net payments on our rental revolving credit facility and mortgage repurchase facilities of $145 million and $125.5 million, respectively. These uses of cash were partially offset by note proceeds from our issuances of $700 million principal amount of 5.5% homebuilding senior notes and $500 million principal amount of 4.85% homebuilding senior notes and Forestar’s issuance of $500 million principal amount of 6.5% senior notes.
In fiscal 2024, net cash used in financing activities was $1.4 billion, consisting primarily of cash used to repurchase shares of our common stock of $1.8 billion, payment of cash dividends totaling $395.2 million and net payments on our mortgage repurchase facilities of $135.8 million. These uses of cash were partially offset by note proceeds from our issuance of $700 million principal amount of 5.0% homebuilding senior notes and net borrowings on our rental revolving credit facility of $345 million.
Our Board of Directors approved and we paid quarterly cash dividends of $0.40 per share in fiscal 2025 and $0.30 per share in fiscal 2024. In October 2025, our Board approved a quarterly cash dividend of $0.45 per share, payable on November 20, 2025 to stockholders of record on November 13, 2025. The declaration of future cash dividends is at the discretion of our Board and will depend upon, among other things, our future earnings, cash flows, capital requirements, financial condition and general business conditions.
Seasonality
Although significant changes in market conditions have impacted our seasonal patterns in the past and could do so again in the future, we generally close more homes and generate greater revenues and pre-tax income in the third and fourth quarters of our fiscal year. The seasonal nature of our business can also cause significant variations in the working capital requirements for our homebuilding, rental, lot development and financial services operations. As a result of seasonal activity, our quarterly results of operations and financial position at the end of a particular fiscal quarter are not necessarily representative of the balance of our fiscal year.
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Supplemental Guarantor Financial Information
As of September 30, 2025, D.R. Horton, Inc. had $3.0 billion principal amount of homebuilding senior notes outstanding due through October 2035 and no amounts outstanding on its homebuilding revolving credit facility.
All of the homebuilding senior notes and the homebuilding revolving credit facility are fully and unconditionally guaranteed, on a joint and several basis, by certain subsidiaries of D.R. Horton, Inc. (Guarantors or Guarantor Subsidiaries). Each of the Guarantor Subsidiaries is 100% owned, directly or indirectly, by D.R. Horton, Inc. Our subsidiaries associated with the single-family and multi-family rental operations, Forestar lot development operations, financial services operations and certain other subsidiaries do not guarantee the homebuilding senior notes or the homebuilding revolving credit facility (collectively, Non-Guarantor Subsidiaries). The guarantees are senior unsecured obligations of each Guarantor and rank equal with all existing and future senior debt of such Guarantor and senior to all subordinated debt of such Guarantor. The guarantees are effectively subordinated to any secured debt of such Guarantor to the extent of the value of the assets securing such debt. The guarantees will be structurally subordinated to indebtedness and other liabilities of Non-Guarantor Subsidiaries of the Guarantors.
The guarantees by a Guarantor Subsidiary will be automatically and unconditionally released and discharged upon: (1) the sale or other disposition of its common stock whereby it is no longer a subsidiary of ours; (2) the sale or other disposition of all or substantially all of its assets (other than to us or another Guarantor); (3) its merger or consolidation with an entity other than us or another Guarantor; or (4) its ceasing to guarantee any of our publicly traded debt securities and ceasing to guarantee any of our obligations under our homebuilding revolving credit facility.
The enforceability of the obligations of the Guarantor Subsidiaries under their guarantees may be subject to review under applicable federal or state laws relating to fraudulent conveyance or transfer, voidable preference and similar laws affecting the rights of creditors generally. In certain circumstances, a court could void the guarantees, subordinate amounts owing under the guarantees or order other relief detrimental to the holders of our guaranteed obligations. The indenture governing our homebuilding senior notes contains a “savings clause,” which limits the liability of each Guarantor on its guarantee to the maximum amount that such Guarantor can incur without risk that its guarantee will be subject to avoidance as a fraudulent transfer. This provision may not be effective to protect such guarantees from fraudulent transfer challenges or, if it does, it may reduce such Guarantor’s obligation such that the remaining amount due and collectible under the guarantees would not suffice, if necessary, to pay the notes in full when due.
The following tables present summarized financial information for D.R. Horton, Inc. and the Guarantor Subsidiaries on a combined basis after intercompany transactions and balances have been eliminated among D.R. Horton, Inc. and the Guarantor Subsidiaries, as well as their investment in, and equity in earnings from the Non-Guarantor Subsidiaries.
D.R. Horton, Inc. and Guarantor Subsidiaries
Summarized Balance Sheet Data
September 30, 2025
(In millions)
Assets
Cash
Inventories
Amount due from Non-Guarantor Subsidiaries
Total assets
Liabilities & Stockholders’ Equity
Notes payable
Total liabilities
Stockholders’ equity
Summarized Statement of Operations Data
Year Ended September 30, 2025
(In millions)
Revenues
Cost of sales
Selling, general and administrative expense
Income before income taxes
Net income
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Forward-Looking Statements
Some of the statements contained in this report, as well as in other materials we have filed or will file with the Securities and Exchange Commission, statements made by us in periodic press releases and oral statements we make to analysts, stockholders and the press in the course of presentations about us, may be construed as “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on management’s beliefs as well as assumptions made by, and information currently available to, management. These forward-looking statements typically include the words “anticipate,” “believe,” “consider,” “continue,” “could,” “estimate,” “expect,” “forecast,” “goal,” “intend,” “likely,” “may,” “outlook,” “plan,” “possible,” “potential,” “predict,” “projection,” “seek,” “should,” “strategy,” “target,” “will,” “would” or other words of similar meaning. Any or all of the forward-looking statements included in this report and in any other of our reports or public statements may not approximate actual experience, and the expectations derived from them may not be realized, due to risks, uncertainties and other factors. As a result, actual results may differ materially from the expectations or results we discuss in the forward-looking statements. These risks, uncertainties and other factors include, but are not limited to:
• the cyclical nature of the homebuilding, rental and lot development industries and changes in economic, real estate or other conditions;
• adverse developments affecting the capital markets and financial institutions, which could limit our ability to access capital, increase our cost of capital and impact our liquidity and capital resources;
• reductions in the availability of mortgage financing provided by government agencies, changes in government financing programs, a decrease in our ability to sell mortgage loans on attractive terms or an increase in mortgage interest rates;
• the risks associated with our land, lot and rental inventory;
• our ability to effect our growth strategies, acquisitions, investments or other strategic initiatives successfully;
• the impact of an inflationary, deflationary or higher interest rate environment;
• risks of acquiring land, building materials and skilled labor and challenges obtaining regulatory approvals;
• the effects of public health issues such as a major epidemic or pandemic on the economy and our businesses;
• the effects of weather conditions and natural disasters on our business and financial results;
• home warranty and construction defect claims;
• the effects of health and safety incidents;
• reductions in the availability of performance bonds;
• increases in the costs of owning a home;
• the effects of information technology failures, cybersecurity incidents, and the failure to satisfy privacy and data protection laws and regulations;
• the effects of governmental regulations and environmental matters on our land development and housing operations;
• the effects of changes in income tax and securities laws;
• the effects of governmental regulations on our financial services operations;
• the effects of competitive conditions within the industries in which we operate;
• our ability to manage and service our debt and comply with related debt covenants, restrictions and limitations;
• the effects of negative publicity;
• the effects of the loss of key personnel; and
• the effects of actions by activist stockholders.
We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. However, any further disclosures made on related subjects in subsequent reports on Forms 10-K, 10-Q and 8-K should be consulted. Additional information about issues that could lead to material changes in performance and risk factors that have the potential to affect us is contained in Item 1A, “Risk Factors” under Part I of this annual report on Form 10-K.
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Critical Accounting Policies and Estimates
General — A comprehensive enumeration of the significant accounting policies of D.R. Horton, Inc. and subsidiaries is presented in Note A to the accompanying financial statements as of September 30, 2025 and 2024, and for the years ended September 30, 2025, 2024 and 2023. Each of our accounting policies has been chosen based upon current authoritative literature that collectively comprises U.S. generally accepted accounting principles (GAAP). In instances where alternative methods of accounting are permissible under GAAP, we have chosen the method that most appropriately reflects the nature of our business, the results of our operations and our financial condition, and have consistently applied those methods over each of the periods presented in the financial statements. The Audit Committee of our Board of Directors has reviewed and approved the accounting policies selected.
We believe the following critical accounting policies describe the more significant judgments and estimates used in the preparation of our consolidated financial statements.
Revenue Recognition — We generally recognize homebuilding revenue and related profit at the time of the closing of a sale, when title to and possession of the property are transferred to the buyer. Our performance obligation, to deliver the agreed-upon home, is generally satisfied in less than one year from the original contract date. Proceeds from home closings held for our benefit at title companies are included in homebuilding cash and cash equivalents in the consolidated balance sheets.
When we execute sales contracts with our homebuyers, or when we require advance payment from homebuyers for custom changes, upgrades or options related to their homes, we record the cash deposits received as liabilities until the homes are closed or the contracts are cancelled. We either retain or refund to the homebuyer deposits on cancelled sales contracts, depending upon the applicable provisions of the contract or other circumstances.
Revenues associated with our mortgage operations primarily include net gains on the sale of mortgage loans and servicing rights. We typically elect the fair value option for our mortgage loan originations whereby mortgage loans held for sale are recorded at fair value based on either sale commitments or current market quotes and loan values are adjusted through revenues for subsequent changes in fair value until the loans are sold. Expected gains and losses from the sale of loans, adjusted for (i) estimated costs to complete and originate the loan and (ii) the estimated percentage of written loan commitments that will result in a closed mortgage loan, are included in the measurement of all written loan commitments that are accounted for at fair value through revenues at the time of commitment. We sell substantially all of the mortgages we originate and the related servicing rights to third-party purchasers. Interest income is earned from the date a mortgage loan is originated until the loan is sold.
Mortgage loans are sold with limited recourse provisions, which can result in repurchases of loans previously sold to investors or payments to reimburse investors for loan losses. Based on historical experience, analysis of the volume of mortgages we originated, discussions with our mortgage purchasers and current housing and credit market conditions, we estimate and record a loss reserve for mortgage loans held in portfolio and mortgage loans held for sale, as well as known and projected mortgage loan repurchase requests.
Inventories and Cost of Sales — Inventory includes the costs of direct land acquisition, land development and construction, capitalized interest, real estate taxes and direct overhead costs incurred during development and construction. Costs that we incur after projects or homes are substantially complete, such as utilities, maintenance and cleaning, are charged to SG&A expense as incurred. All indirect overhead costs, such as compensation of sales personnel, division and region management, and the costs of advertising and builder’s risk insurance are charged to SG&A expense as incurred.
Land and development costs are typically allocated to individual residential lots on a pro-rata basis, and the costs of residential lots are transferred to construction in progress when home construction begins. Home construction costs are specifically identified and recorded to individual homes. Cost of sales for homes closed includes the specific construction costs of each home and all applicable land acquisition, land development and related costs (both incurred and estimated to be incurred) allocated to each residential lot based upon the total number of homes expected to be closed in each community. Cost of sales for lots sold includes all applicable land acquisition, land development and related costs (both incurred and estimated to be incurred) allocated to each residential lot in the community. Any changes to the estimated total development costs after the initial home or lot closings in a community are generally allocated on a pro-rata basis to the remaining homes or lots in the community associated with the relevant development activity.
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When a home is closed, we generally have not paid all of the incurred costs necessary to complete the home. We record a liability and a corresponding charge to cost of sales for the amount estimated to ultimately be paid related to completed homes that have been closed. We compare our home construction budgets to actual recorded costs to determine the additional costs remaining to be paid on each closed home. We monitor the accrual by comparing actual costs incurred on closed homes in subsequent months to the amounts previously accrued. Although actual costs to be paid in the future on previously closed homes could differ from our current accruals, such differences have not been significant.
At the end of each quarter, we review the performance and outlook for all of our communities and land inventories for indicators of potential impairment. We generally review our inventory for impairment indicators at the community level, and the inventory within each community is categorized as land held for development, residential land and lots developed and under development, land held for sale, rental properties and construction in progress and finished homes, based on the stage of production or plans for future development or sale. A particular community often includes inventory in more than one category. In certain situations, inventory may be analyzed separately for impairment purposes based on its product type or future plans. In reviewing each of our communities, we determine if impairment indicators exist on inventory held and used by analyzing a variety of factors including, but not limited to, the following:
• gross margins on homes closed in recent months;
• projected gross margins on homes sold but not closed;
• projected gross margins based on community budgets;
• projected gross margins of rental property sales;
• trends in gross margins, average selling prices or cost of sales;
• sales absorption rates; and
• performance of other communities in nearby locations.
If indicators of impairment are present for a community, we perform an impairment evaluation of the community, which includes an analysis to determine if the undiscounted cash flows estimated to be generated by those assets are less than their carrying amounts. If so, impairment charges are recorded to cost of sales if the fair value of such assets is less than their carrying amounts. These estimates of cash flows are significantly impacted by community specific factors including estimates of the amounts and timing of future revenues and estimates of the amount of land development, materials and labor costs which, in turn, may be impacted by the following local market conditions:
• supply and availability of new and existing homes;
• location and desirability of our communities;
• variety of product types offered in the area;
• pricing and use of incentives by us and our competitors;
• alternative uses for our land or communities such as the sale of land, finished lots or home sites to third parties;
• amount of land and lots we own or control in a particular market or sub-market; and
• local economic and demographic trends.
For those assets deemed to be impaired, the impairment to be recognized is measured as the amount by which the carrying amount of the assets exceeds the fair value of the assets. Our determination of fair value is primarily based on discounting the estimated cash flows at a rate commensurate with the inherent risks associated with the assets and related estimated cash flow streams. When an impairment charge for a community is determined, the charge is then allocated to each lot in the community in the same manner as land and development costs are allocated to each lot. Impairment charges are also recorded on finished homes in substantially completed communities and completed rental properties when events or circumstances indicate that the carrying values are greater than the fair values less estimated costs to sell these homes.
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We rarely purchase land for resale. However, when we own land or communities under development that do not fit into our development and construction plans, and we determine that we will sell the asset, the project is accounted for as land held for sale if certain criteria are met. We record land held for sale at the lesser of its carrying value or fair value less estimated costs to sell. In performing the impairment evaluation for land held for sale, we consider several factors including, but not limited to, recent offers received to purchase the property, prices for land in recent comparable sales transactions and market analysis studies, which include the estimated price a willing buyer would pay for the land. If the estimated fair value less costs to sell an asset is less than the current carrying value, the asset is written down to its estimated fair value less costs to sell.
The key assumptions relating to inventory valuations are impacted by local market and economic conditions, and are inherently uncertain. Although our quarterly assessments reflect management’s best estimates, due to uncertainties in the estimation process, actual results could differ from such estimates.
Legal Claims and Insurance — We are named as a defendant in various claims, complaints and other legal actions in the ordinary course of business. At any point in time, we are managing several hundred individual claims related to construction defect matters, personal injury claims, employment matters, land development issues, contract disputes and other matters. We have established reserves for these contingencies based on the estimated costs of pending claims and the estimated costs of anticipated future claims related to previously closed homes. Approximately 98% and 97% of these reserves related to construction defect matters at September 30, 2025 and 2024, respectively.
Our reserves for construction defect claims include the estimated costs of both known claims and anticipated future claims. At September 30, 2025 and 2024, we had reserves for approximately 875 and 825 pending construction defect claims, respectively, and no individual existing claim was material to our financial statements. During fiscal 2025, we were notified of approximately 455 new construction defect claims and resolved 405 construction defect claims for a total cost of $57.2 million. We have closed a significant number of homes during recent years, and we may be subject to future construction defect claims on these homes. Although regulations vary from state to state, construction defect issues can generally be reported for up to ten years after the home has closed in many states in which we operate. Historical data and trends regarding the frequency of claims incurred and the costs to resolve claims relative to the types of products and markets where we operate are used to estimate the construction defect liabilities for both existing and anticipated future claims. These estimates are subject to ongoing revision as the circumstances of individual pending claims and historical data and trends change. Adjustments to estimated reserves are recorded in the accounting period in which the change in estimate occurs.
Historical trends in construction defect claims have been inconsistent, and we believe they may continue to fluctuate. We also believe that fluctuations in housing market conditions can affect the frequency and cost of construction defect claims. If the ultimate resolution of construction defect claims resulting from our home closings in prior years varies from current expectations, it could significantly change our estimates regarding the frequency and timing of claims incurred and the costs to resolve existing and anticipated future claims, which would impact the construction defect reserves in the future. If the frequency of claims incurred or costs of existing and future legal claims significantly exceed our current estimates, they will have a significant negative impact on our future earnings and liquidity.
We estimate and record receivables under the applicable insurance policies related to our estimated contingencies for known claims and anticipated future construction defect claims on previously closed homes and other legal claims and lawsuits incurred in the ordinary course of business when recovery is probable. However, because the self-insured retentions under these policies are significant, we anticipate we will largely be self-insured. Additionally, we may have the ability to recover a portion of our losses from our subcontractors and their insurance carriers when we have been named as an additional insured on their insurance policies.
The estimation of losses related to these reserves and the related estimates of recoveries from insurance policies are subject to a high degree of variability due to uncertainties such as trends in construction defect claims relative to our markets and the types of products built, claim frequency, claim settlement costs and patterns, insurance industry practices and legal interpretations, among others. Due to the high degree of judgment required in establishing reserves for these contingencies, actual future costs and recoveries from insurance could differ significantly from current estimated amounts. A 10% increase in the claim frequency and the average cost per claim used to estimate the reserves would result in an increase of approximately $198.4 million in our reserves and a $43.3 million increase in our insurance receivable, resulting in additional expense of $155.1 million. A 10% decrease in the claim frequency and the average cost per claim would result in a decrease of approximately $178.0 million in our reserves and a $40.5 million decrease in our insurance receivable, resulting in a reduction in expense of $137.5 million. For additional information regarding our legal claims reserves, see Note L, “Commitments and Contingencies,” to our consolidated financial statements included elsewhere in this report.
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Recent Accounting Pronouncements
In December 2023, the Financial Accounting Standards Board (FASB) issued ASU 2023-09, “Income Taxes - Improvements to Income Tax Disclosures,” which requires disclosure of disaggregated income taxes paid, prescribes standard categories for the components of the effective tax rate reconciliation and modifies other income tax related disclosures. The standard is effective for our annual periods beginning in fiscal 2026. We are currently evaluating the impact of this standard on our consolidated financial statements and related disclosures.
In November 2024, the FASB issued ASU 2024-03, “Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures,” which requires disclosure of certain costs and expenses on an interim and annual basis in the notes to the financial statements. The standard is effective for our annual periods beginning in fiscal 2028 and interim periods beginning in the first quarter of fiscal 2029, with early adoption permitted. We are currently evaluating the impact this standard will have on our disclosures.
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