D.R. Horton, Inc. (DHI Quick QuoteDHI - Free Report) , the nation’s largest homebuilder by volume, has been on a remarkable run in recent months. Its shares have surged more than 48% over the past three months, dramatically outpacing the 31.6% rise in the Zacks Building Products - Home Builders industry and comfortably ahead of the broader Zacks Construction sector’s performance and the S&P 500, as shown below.

The stock trades roughly 9% below its 52-week high of $199.85 but well above its low of $110.44, reflecting strong momentum amid a challenging housing backdrop.   DHI shares have surpassed several peers, with Lennar (LEN Quick QuoteLEN - Free Report) , NVR, Inc. (NVR Quick QuoteNVR - Free Report) , and Toll Brothers (TOL Quick QuoteTOL - Free Report) advancing 28.6%, 191%, and 34.5%, respectively, over the same period.

The stock’s strength reflects a combination of robust earnings, strong backlog trends and investor optimism around the broader housing cycle. In the fiscal third quarter of 2025, D.R. Horton once again demonstrated resilience, with revenues and orders rising even as affordability challenges linger in the housing market. The company’s ability to consistently deliver positive surprises has supported the rally, and momentum has built further as institutional investors rotated back into housing stocks amid signs of improving demand (read more: D.R. Horton Q3 Earnings & Revenues Top, Home Closings Down Y/Y).

DHI’s 3-Month Share Performance

Image Source: Zacks Investment Research

After such a steep climb, does the stock still hold investment appeal, or is caution warranted?

DHI’s Driving Factors Behind the Rally

D.R. Horton continues to benefit from its scale and geographic diversification, operating across 36 states with a wide community base. The company closed over 23,000 homes in the fiscal third quarter, showing resilience in a tough market. Its broad product mix, including smaller and more affordable homes, positions it well to capture demand from first-time buyers, who accounted for 64% of closings this quarter. The firm’s incentive-backed financing options, such as FHA loans with attractive rate buydowns, have also been effective in sustaining sales momentum despite affordability pressures.

Another key driver is capital efficiency. The company generated $2.9 billion in operating cash flow over the past year and maintained strong returns on assets and equity. Efficient inventory management and faster construction cycle times—improved by nearly two weeks compared to last year—enable quicker turnover and stronger cash conversion. D.R. Horton also leverages its majority-owned lot development arm, Forestar, which provides a steady pipeline of finished lots and supports its leading market share. Rental operations and financial services, particularly DHI Mortgage, add complementary earnings streams and reinforce its integrated business model.

Finally, a solid balance sheet and disciplined capital allocation underpin growth. With $5.5 billion in liquidity, low leverage, and consistent share repurchases, the company has the flexibility to weather economic cycles while rewarding shareholders.

Importantly, management raised its fiscal 2025 share repurchase target to $4.2–$4.4 billion, having already bought back $3.6 billion year to date, reducing outstanding shares by 9%. This underscores confidence in the long-term outlook.

Estimate Revision Trend for D.R. Horton Stock

Analyst sentiment has improved in recent months. Over the past 60 days, DHI’s EPS estimate for fiscal 2025 rose to $11.76 from $11.42, while the fiscal 2026 EPS estimate increased to $12.05 from $12.03. The revised figures still imply an 18% earnings decline in fiscal 2025, but a 2.5% rebound in 2026.

Revenues are projected to fall 7.6% year over year in fiscal 2025 before growing 1.5% in 2026. These trends suggest a transitional year ahead, with margin pressures and slower absorption weighing on performance before a modest recovery takes hold.

Image Source: Zacks Investment Research

Key Challenges Ahead for D.R. Horton

Revenues and EPS for fiscal 2025 are projected to decline 7.6% and 18%, respectively, reflecting pressure from affordability constraints, higher incentive spending, and slower absorption rates. Gross margins are expected to dip to 21–21.5% in the fiscal fourth quarter as incentives rise to stimulate traffic.

Affordability remains a central concern: average selling prices are edging lower, and management acknowledged that incentive levels are elevated and may increase further depending on mortgage rates. Incentive-heavy sales risk compressing profitability even if volumes remain steady.

Meanwhile, lot costs are expected to continue rising mid-single digits over the next 12 months, and tariff-driven material cost risks (such as Canadian lumber duties) could pressure construction expenses.

DHI Stock’s Premium Valuation Versus Industry Peers

D.R. Horton’s valuation reflects investor optimism but leaves less margin for error. The stock trades at a forward 12-month P/E ratio of 15.1x, above the industry average of 13.3x. This multiple also sits at the top of the company’s five-year range of 3.5x to 15.1x, well above the median of 9.4x. DHI trades at a premium to some industry peers like Lennar (14.69X) and Toll Brothers (10.52X), but its multiple remains below that of NVR, which is valued at 20.11X.

Such a premium highlights investor confidence in D.R. Horton’s scale, balance sheet strength, and ability to navigate a volatile housing cycle. However, with fiscal 2025 earnings expected to decline, multiple expansion from here may be limited unless profitability stabilizes sooner than expected.

DHI’s P/E Ratio (Forward 12-Month) vs. Industry

Image Source: Zacks Investment Research

Latest Housing Market Scenario

According to the recent July 2025 report, the U.S. homebuilding landscape reflected both momentum and moderation. The Commerce Department’s Census Bureau reported on Aug. 19 that single-family housing starts, which make up the majority of homebuilding, rose 2.8% last month to an annualized pace of 939,000 units. Meanwhile, permits for future single-family construction inched up 0.5% to 870,000 units, ending a four-month decline.

At the same time, sales of newly built homes softened, dipping 0.6% in July 2025, with demand tempered by affordability pressures and elevated inventories. Prices for new homes eased, indicating that builders are adjusting to market conditions and offering more competitive options. Again, in July 2025, U.S. existing home sales rose 2% to a seasonally adjusted annual rate of 4.01 million units, according to the National Association of Realtors (NAR), a significant increase that surprised analysts due to improving affordability and a slight decrease in mortgage rates. 

Meanwhile, 30-year fixed mortgage rates have continued to ease, slipping to 6.5% for the week ended Sept. 4—the lowest level since October 2024—boosting confidence among both prospective buyers and existing homeowners. The decline in rates has expanded refinancing opportunities, with refinance applications climbing to nearly 47% of total mortgage activity, the highest share since last October, according to Freddie Mac.

Overall, the homebuilding sector pointed to an environment of steady construction, cautious demand, and a shift toward greater balance between supply and affordability.

Is the DHI Stock Still a Buy?

At current levels, DHI stock appears fairly valued relative to its growth outlook. The rally has already priced in much of the company’s operational resilience and robust capital returns. While the long-term fundamentals — scale, geographic reach, and balance sheet strength — remain intact, near-term headwinds tied to affordability, incentives, and pricing could limit upside in fiscal 2025.

For fiscal 2026, analysts expect a modest rebound with 2.5% EPS growth and 1.5% revenue improvement, aided by stabilization in housing demand and easing cost pressures. But until then, the path may be uneven, with profitability constrained by competitive dynamics and rate volatility.

For investors with existing positions, the stock remains a hold, supported by solid fundamentals and shareholder returns. But new buyers may want to wait for a pullback or clearer signs of margin stabilization. Reflecting this balanced view, D.R. Horton carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.