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D.R. Horton: So Much for the Power of Positive Thinking

If wishing could make it so, homebuilder D.R. Horton Inc. would be hammering its way to untold riches. In the spring of 2006, even as the storm clouds were beginning to gather in the housing market, “America’s Builder” was insisting that strong growth lay ahead. It simply didn’t brace itself properly for the troubles that were coming.

Here’s an excerpt from an article I wrote for the Apr. 3, 2006, edition of BusinessWeek, followed by an excerpt from a company news release today.


Horton, already No. 1 in homes sold, is aiming for close to 15% annual unit growth. The ethic is bred in the bone at Horton, which has had rising revenues and profits every quarter since it was founded by Chairman Donald Ray Horton in 1978. Donald J. Tomnitz, Horton’s CEO, says he’s expecting lots of demand from baby boomers, immigrants, and “echo boomers.” But even if that demand doesn’t materialize, the company aims to grow by grabbing business with aggressive incentives or, as a last resort, price cuts. … “Some people accuse us of being cocky, which, if you know us, we’re not. We’re very conservative people,” says Tomnitz.

Today’s news release:

D.R. Horton, Inc. (NYSE:DHI), America’s Builder, the largest homebuilder in the United States, Tuesday (July 10, 2007), reported net sales orders for the third quarter ended June 30, 2007 of 8,559 homes ($2.0 billion), compared to 14,316 homes ($3.8 billion) for the same quarter of fiscal year 2006. … The Company’s cancellation rate (sales orders cancelled divided by gross sales orders) for the third quarter of fiscal 2007 was 38%. … Donald R. Horton, Chairman of the Board, said, “Market conditions for new home sales declined in our June quarter as inventory levels of both new and existing homes remained high, and we expect the housing environment to remain challenging. … we will realize significant asset impairments which will result in a loss for both the quarter and the nine months ended June 30, 2007.”

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