The new home cancellation rate at D.R. Horton hit 23% last quarter, up from 20% a year ago. Signing a contract on a new house is supposed to be the finish line. For nearly one in four buyers of the nation’s biggest homebuilder, it was more of a warm-up lap.
The figure comes from the company’s fourth-quarter earnings release, which covers July through September 2026 and came out around October 29.
What the new home cancellation rate means
D.R. Horton defines the rate as cancelled sales orders divided by gross sales orders. In plain English, it’s the share of buyers who signed on the dotted line and then bailed. The quarter before this one was also 20%, according to the earnings call transcript. Now it’s 23%.
That three-point jump means roughly three more buyers out of every hundred are walking away. Walking away costs them, so they only do it when the math stops working.
The rest of the report points the same way. Net sales orders fell 7% to 18,619 homes, and their value dropped 9% to $6.6 billion. The average price on those orders was about $357,000, down 2% from a year earlier, according to Builder magazine’s breakdown.
Why homebuyer cancellations are climbing
Executive Chairman David Auld didn’t dance around it. “Housing market conditions became more challenging during the fourth quarter as rising mortgage rates, affordability constraints, and cautious consumer sentiment continued to pressure new-home demand,” he said.
Translation: monthly payments went up and nervous households got more nervous. Some decided a signed contract wasn’t worth the risk.
Homes closed slipped 2% to 22,915, and homebuilding pre-tax income fell 11% to $891 million.
D.R. Horton isn’t sitting still. It cut home starts to keep inventory in line with sales. It has also been adjusting prices and incentives community by community. And it leaned harder on mortgage rate buydowns, which means the builder pays to lower your rate, to keep buyers in the deal. Other builders are doing the same, and 43% of firms are now cutting prices as confidence hits a 14-year low.
Walk-aways hit 19.9% in Jacksonville but only 2.8% in San Francisco, so homebuyer cancellations vary wildly by city.
The bigger picture: builder cancellation rate and your wallet
D.R. Horton is the largest US homebuilder by volume, a title it has held since 2002. It operates in 128 markets across 38 states, and its homes generally sell for $200,000 to $700,000. When a company that size reports a rising builder cancellation rate, buyers should take notice.
Here’s the thing: a builder fighting for every sale has reasons to deal. Buyers with solid credit and a calm head may find more room to negotiate on price, upgrades or rate buydowns than they have had in a while.
The full-year picture is less dramatic. The fiscal 2026 cancellation rate was 19%, versus 18% the year before. The company still closed 84,202 homes for the year. It earned $2.9 billion and raised its quarterly dividend to $0.50 per share.
Demand isn’t falling off a cliff, but buyers are clearly looking for the exit.
What’s next for new-home contract cancellations
D.R. Horton guided to 79,000 to 84,000 closings for fiscal 2027. It also guided to $30 billion to $32 billion in revenue. And it expects first-quarter gross margin to dip to roughly 18%. Reporting on the call says soft demand and margin pressure are expected to continue. The company is also betting on efficiency, including its robot framing factory, to hold costs down.
So the question for the spring buying season is simple. If one in four contracts is already falling apart, how much further do rates have to move? And will builders start cutting prices instead of just rates?
