By Ananta Agarwal
(Reuters) -Homebuilder D.R. Horton Inc raised its forecast for full-year revenue on Thursday, as tight supply of existing homes in the United States pushed buyers to opt for newly constructed houses.
U.S. homeowners who had secured below 5% 30-year fixed mortgage rates during an era of cheap debt remain unwilling to list their homes and upgrade to a new house at a time when the rates are hovering at about 7% for months.
The ‘rate lock-in’ that some homeowners are enjoying has limited existing home supply in the United States and forced buyers to turn to new constructions.
Homebuilders are benefiting from the tailwind, even at a time when high home prices have hit affordability.
D.R. Horton, which largely caters to entry-level buyers looking for affordable price points, was able to raise the average selling price per home by 2% to $380,400 in the second quarter on solid demand.
Shares of the largest U.S. homebuilder rose nearly 4% to $151.30 after D.R. Horton forecast fiscal 2024 revenue in the range of $36.7 billion to $37.7 billion, up from $36.0 billion to $37.3 billion previously.
The Texas, Arlington-based builder also sees full-year home deliveries in the range of 89,000 homes to 91,000 homes, compared with 87,000 homes to 90,000 homes it had previously expected.
The company, however, expects that incentives such as mortgage rate buydowns will “remain near their elevated levels today” given the “instability and stickiness” in the popular 30-year fixed rate, which has remained at a two-decade high.
Despite giving incentives to customers, the company’s second-quarter home sales gross margins, among the most watched metrics by investors, and net income beat analysts’ average estimates.