DR Horton says supply chain problems, tight labor decrease home sales

DR Horton's net sales in fiscal fourth-quarter 2021 fell 33% as the largest US homebuilder faced building material shortages and a tight labor market, CFO Bill Wheat said Nov. 9.

"The value of those orders was $6 billion, down 17% from $7.3 billion in the prior year," Wheat said during the company's fiscal Q4 2021 earnings call. "A year ago, our fourth quarter net sales orders were up 81% due to the surge in housing demand during the first year of the pandemic when we had significantly more completed homes available to sell and prior to the supply chain challenges that arose in 2021."

CEO David Auld said housing market conditions remain robust, but supply chain and labor issues have prompted the company to keep selling homes later in construction cycles to ensure certainty of home closing dates for buyers.

"We expect to work through the supply chain challenges and ultimately increase our production capacity," Auld said.

Inputs to new homes includes polyvinyl chloride, a construction staple used to make pipes, window frames, vinyl siding and other products. Domestic PVC prices were last assessed Nov. 3 at 93.5-95.5 cents/lb ($2,061-$2,105/mt), an all-time high since S&P Global Platts began assessing the market in 2001.

US PVC supply has been tight since August 2020 because of extreme weather events on top of turnarounds and operational issues. US PVC exports have declined in 2021 as producers sought to supply a US housing construction boom that emerged in mid-2020 after coronavirus-related shutdowns eased.

While housing construction demand remains strong, DR Horton's results indicated that builder profits have been less than they could be with building materials held up in choked supply chains and a race for adequate construction crews.

Auld said the company increased home inventories in response to that demand, with 91,500 housing starts in fiscal 2021, up 21% from fiscal 2020. The company also ended the fiscal year with 47,800 homes in stock, up 26% from the year-ago period.

"Although we have not seen significant improvement in the supply chain yet, we expect the current constraints to ultimately moderate at some point in 2022," he said.

The company reported fiscal Q4 net income of $1.339 billion, up from $829 million in the year-ago quarter.