Business Overview
Taylor Morrison Home Corporation (NYSE: TMHC) is a U.S. homebuilder operating across key high-growth markets, with a focus on entry-level, move-up, and resort lifestyle communities. The company generates revenue primarily from home closings, lot sales, and land transactions, supported by its financial services segment, which provides mortgage and title services to homebuyers.
Financial Performance
For the fourth quarter ended December 31, 2025, home closings declined year over year as affordability pressures and higher mortgage rates weighed on demand. Net homebuilding revenue decreased compared with the prior-year quarter, reflecting lower average selling prices and moderated volume. Gross margin contracted year over year, driven by pricing adjustments and higher incentive levels to support sales pace.
Net income for the quarter declined compared with the same period last year. Earnings per diluted share were lower year over year, reflecting the combined impact of reduced revenue and narrower gross margins. Operating income also moderated as selling and marketing expenses remained elevated relative to revenue.
For the full year 2025, home closings were below the prior-year level, and net homebuilding revenue declined year over year. Gross margin for the full year compressed compared with 2024, reflecting continued affordability challenges and selective pricing actions. Net income for the year decreased compared with the prior year, though the company remained profitable and generated positive operating cash flow.
Operating Metrics
At quarter end, total homes in backlog declined compared with the prior-year period, both in units and dollar value. Average selling price in backlog was lower year over year, reflecting mix and pricing dynamics. Net sales orders in the quarter improved sequentially but remained below prior-year levels on a year-over-year basis.
The company’s community count increased modestly compared with the prior year, supporting long-term growth positioning. Cancellation rates remained within management’s targeted range, though higher than historical averages, reflecting market volatility. The company ended the year with a controlled land position designed to support future community openings while maintaining capital discipline.
Key Developments
During the quarter, Taylor Morrison continued to prioritize balance sheet strength and liquidity management. The company reduced outstanding debt and maintained a strong cash position at year-end. Management reiterated its commitment to a capital-light land strategy, emphasizing optioned and controlled lots over owned land where appropriate.
The company also continued investments in build-to-rent and lifestyle community offerings, seeking diversification across buyer segments. Operational initiatives focused on construction cycle time improvements and cost controls to mitigate margin pressure.
Risks and Constraints
Affordability remains a key constraint, driven by mortgage rate volatility and elevated home prices. Incentive levels and pricing adjustments continue to affect gross margins. Supply-chain normalization has improved, but cost pressures persist in certain labor and material categories. Demand sensitivity to interest rates remains a primary external risk factor.
Outlook / Guidance
Management expects 2026 home closings to be broadly in line with or modestly above 2025 levels, supported by community growth. Gross margin is expected to remain under pressure in the near term due to competitive pricing and incentive activity. Capital allocation priorities include debt reduction, land investment discipline, and selective share repurchases.
Performance Summary
Taylor Morrison reported lower fourth-quarter revenue and earnings compared with the prior year, reflecting softer demand and margin compression. Despite these headwinds, the company maintained profitability, strengthened its balance sheet, and positioned its community pipeline for longer-term growth.