Homebuilder D.R. Horton expects home prices to cool as demand tapers

By Kannaki Deka

Nov 9 (Reuters) - U.S. homebuilder D.R. Horton Inc on Wednesday forecast first-quarter revenue below estimates and said it expects home prices to decline next year as a spike in mortgage rates and inflation dampen demand.

After a long spell of rapid surges in home prices through most of last year, due to tight supply, they slowed in August from the record pace reached in March. Some economists expect price growth to slow significantly by the end of the year.

Borrowings have become less affordable for customers as mortgage rates more than doubled since the beginning of the year, following the U.S. Federal Reserve's aggressive monetary policy tightening to curb decades-high inflation.

Rival Lennar Corp has also warned of a potential hit to sales from rising interest rates, and reported a decline in new orders in its latest quarter compared to a year earlier.

Shares of D.R. Horton were up 6.6% at $78.10 as the top U.S. homebuilder was able to limit its net order decline compared to peers, according to Barclays analyst Matthew Bouley.

"Limited sequential declines in net order ASP (average selling price) suggest that DHI is successfully navigating price/pace as housing demand weakens," Citi analysts said in a note.

D.R. Horton said it expects revenue for the first quarter of fiscal 2023 to be between $6 billion and $6.8 billion, the midpoint of which is below analysts' expectations of $6.6 billion, according to Refinitiv data.

Net sales order is expected to be down 25% to 35% from a year earlier.

For the fourth-quarter, the company missed estimates for revenue and profit.

Real estate broker Redfin Corp became the latest to take a hit from the downturn in the housing market. It said on Wednesday it will cut around 862 jobs and wind down its home-flipping business in response to the macroeconomic conditions.

(Reporting by Kannaki Deka in Bengaluru; Editing by Shinjini Ganguli)