Warren Buffett seemed to become a fan of homebuilders in his last couple of years as CEO of Berkshire Hathaway (BRK.A 0.47%) (BRK.B 0.34%). Berkshire's portfolio currently includes three homebuilder stocks: NVR (NVR +3.46%) and both publicly traded share classes of Lennar (LEN +2.47%) (LEN.B +2.69%).
There's one notable name missing from the list, though. Berkshire exited its position in D.R. Horton (DHI +3.21%) in the third quarter of 2025. I'm not sure why the conglomerate made this move, but it proved to be prescient. D.R. Horton's share price has tumbled since the end of Q3.
However, I think the sell-off presents a buying opportunity for long-term investors. Here are three reasons to buy this former Buffett stock on the dip.
NYSE: DHI
Key Data Points
1. An ongoing housing shortage
Perhaps the most important reason to buy D.R. Horton is the ongoing housing shortage. Goldman Sachs (GS +1.02%) estimates that another 3 million to 4 million additional homes are needed to bring supply and demand into balance.
The problem goes beyond a need for more houses, though. Housing affordability is also a huge issue. The good news on that front is that Redfin predicts that a recovery will begin in 2026. Granted, this recovery will be gradual and could take several years. But any signs of improvement should be positive for D.R. Horton and other homebuilders.
2. An unmatched ability to address the housing challenges
D.R. Horton arguably has an unmatched ability to address the housing challenges. The company has ranked as the largest homebuilder in the U.S. by volume for 24 years. It operates in 126 markets across 36 states. D.R. Horton targets families eager to move into a home: 63% of its customers are first-time homebuyers.
Image source: Getty Images.
Importantly, D.R. Horton also has industry-leading access to land and lots. It owns or controls more lots than any of the other top 10 homebuilders based on volume. At the end of 2025, the company controlled 445,000 lots and owned 145,500 lots.
3. A track record of solid performance
D.R. Horton's total returns have outperformed the S&P 500 (^GSPC +1.16%) over the last three-, five-, and 10-year periods. It ranks in the top quartile of S&P 500 stocks over the past 10 years.
The company's return on assets over the last 10 years ranks among the best in the S&P 500. Its return on equity is well above the S&P 500 median.
Additionally, D.R. Horton has reduced its number of outstanding shares by 20% over the last five years. The company increased its dividend by 125% during that period.
Past performance doesn't guarantee future success. However, it does reflect a management team that knows how to succeed.
