D.R. Horton: Large, diversified, decentralized
D.R. Horton (DHI) is one of the largest homebuilding companies in the US. It’s geographically diversified, with operating divisions in 27 states and 78 metropolitan markets. The company markets new construction under the names D.R. Horton, America’s Builder, Emerald Homes, Express Homes, and Breland Homes.
Background on the company
D.R. Horton’s price points cover a wide range of housing markets, from $100,000 to $1 million, and sizes from 1,000 square feet to 4,000 square feet. In 2014, the company’s average selling price was close to $279,700, which puts D.R. Horton at the lower end of the range. Its best competitor would be a company such as PulteGroup (PHM), not a luxury builder such as Toll Brothers (TOL).
D.R. Horton also operates a financial arm, which provides mortgage financing and ancillary services such as title agency services. The company doesn’t maintain mortgage exposure on its balance sheet. It immediately sells the loans to third parties. Also, most of the company’s loans are agencies—Ginnie Mae and Freddie Mac. Financial services account for about 3% of D.R. Horton’s revenues.
Public service specials
One of the company’s big promotions is the Main Street Stars program. Through this program, D.R. Horton offers special incentives or options on new homes to people who operate in some sort of public-service capacity. For example, people in the military, law enforcement, emergency services, healthcare, or education may be offered a special deal on a new home in one of the company’s communities.
D.R. Horton began building in Texas. Its geographic exposure now extends from Texas to the Southeast and Mid-Atlantic and through the West Coast and Southwest. The company has minimal exposure in the upper Midwest and Northeast.
D.R. Horton generally prefers to use land-option contracts to control land as a way to minimize risk. Homebuilding is generally performed by subcontractors selected via a competitive bidding process.