For the three months through December, purchase contracts were up 35% from the same period a year earlier, according to a statement Tuesday, but fell short of what analysts had estimated. The shares were down 9% to $143.50 at 10:44 a.m. New York time, the biggest intraday decline since June 2020.

As the quarter began, 30-year mortgage rates in the US were climbing toward a two-decade high of around 8%, a surge that cut into buying power for would-be homebuyers. Arlington, Texas-based D.R. Horton and other builders lured customers by offering rate buy-downs and price discounts that helped make purchases more affordable.

In the quarter, 80% of D.R. Horton's mortgage customers used the rate buy-down incentive, the company said on a call with analysts.

"We have increased our use of incentives, and reduced home prices and sizes of our home offerings were necessary to provide better affordability to homebuyers based on current market conditions, mortgage rates and continued affordability challenges," Chief Financial Officer Bill Wheat said on the call. "We expect our incentive levels to remain elevated in the near term."

Mortgage rates are down significantly from their recent highs as the US housing market's key spring selling season approaches. As D.R. Horton builds most of its homes "on spec" — meaning before specific buyers are lined up — it's well-positioned to get ahead of demand.

The company slightly increased its forecast for sales in its full fiscal year, to 87,000 to 90,000 homes, up from its prediction in November of 86,000 to 89,000 closings. Analysts including Michael Dahl of RBC Capital Markets expected better. 

"Net, F1Q results fell short with the new FY'24 guide doing little to show conviction around meaningful demand improvement following this latest decline in rates," Dahl wrote in a note to clients. That "could provide a reality check for the group after the robust rally."