DR Hortons reports 40% CRASH in Earnings (Home Builder Stock Bubble)

DR Horton, America's largest home builder, just reported a massive 40% crash in earnings over the last year. With a corresponding 44% decline in their sales order backlog for homebuyers.

This is a signal that the 2023 Housing Downturn is getting worse. However, Housing Market and Stock Bulls on Wall Street viewed DR Horton's earnings as a positive sign. And the stock price increased to record highs today.

That's because we're in a Stock Market Bubble right now driven by mania where fundamentals are disconnected from the economic reality that Wall Street companies face. In particular, DR Horton's Market Cap is now trading at over 5x their Sales Order Backlog. Which is nearly double the 20-year average multiple.

Suggesting that Wall Street is pricing in a big increase in home sales for DR Horton and Home Builders overall. Likely back to 2021 levels. That's the only way that DR Horton's current stock valuation makes sense.

Trouble is - the fundamental indicators on the Housing Market do not show any real signs of recovery. Mortgage Applications to buy a house are near the lowest level in 30 years. Existing Home Sales are also near record low. The only signs of life the 2023 Housing Market has are 1) a shortage of new seller listings and 2) Wall Street investors misinterpreting DR Horton's earnings report as a positive.

To be fair - DR Horton did have a better quarter than expected for new sales. And their revenues were flat year over year. However, that's driven by the fact that DR Horton is giving homebuyers below market mortgage rates to complete transactions. Right now that 30-year fixed Mortgage is 6.7%. But DR Horton and other Home Builders are offering rates of 5.25%-5.50%. They do this through Mortgage Rate buydowns. Which cost them money. Which is why their earnings went down.

Builders are still struggling mightily on the West Coast of the US Housing Market. Sales in San Francisco, Sacramento, Salt Lake City, and Austin are still down 40-50% YoY. Whereas new home sales in metros like Charlotte, Tampa, Baltimore, and Dallas are recovering.
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