NVR's Q2 2025 Filing: Squeezed Margins & Cooling Demand

NVR, Inc., one of the nation's largest homebuilders operating under well-known brands like Ryan Homes and NVHomes, recently released its financial results for the second quarter of 2025. Digging into the company's latest 10-Q filing allows us to understand its performance during a complex period for the housing market. Let's break down the income statement to see where the money came from and where it went in the first half of the year.

To better visualize the flow of NVR's finances for the first six months of 2025, the following chart illustrates how revenue from its two main segments—Homebuilding and Mortgage Banking—is converted into net income after accounting for all costs and expenses.

As the chart shows, the overwhelming majority of NVR's business comes from its homebuilding operations, which are geographically divided into four segments: Mid Atlantic, North East, Mid East, and South East.

The Story of Squeezed Margins

At first glance, NVR's performance appears stable. Homebuilding revenues for the first six months of 2025 were $4.9 billion, a slight increase from $4.83 billion in the same period of 2024. However, the real story lies in the company's profitability.

The Gross Profit Margin, which measures the profit left after accounting for the direct costs of building and selling homes, declined from 24.0% in the first half of 2024 to 21.7% in 2025. This indicates that rising costs for materials and labor are eating into profits. A closer look reveals this pressure is not uniform across all regions:

• South East: This segment, which includes high-growth states like Florida, North Carolina, and South Carolina, saw its gross margin fall significantly from 23.3% to 19.2%.
• Mid Atlantic: The company's largest segment by revenue also experienced a margin drop from 25.2% to 23.8%.

This margin compression is the primary reason why, despite similar revenues, NVR's homebuilding income fell from $930 million in the first half of 2024 to $787 million in 2025.

Are There Headwinds Ahead?

The report also offers some forward-looking indicators that suggest a potential cooling of demand.

• New Orders: The number of new homes ordered by customers fell by 11.5% in the first half of the year, from 12,116 units in 2024 to 10,724 units in 2025.
• Cancellation Rate: The rate at which customers cancelled their new home orders increased from 13.0% to 16.0% year-over-year. This may reflect consumer sensitivity to fluctuating mortgage rates and broader economic uncertainty.
• Backlog: The company's backlog—homes sold but not yet closed—stood at 10,069 units at the end of June 2025, down from 11,597 units a year prior. A shrinking backlog could signal lower revenues in future quarters if new order trends don't reverse.

Returning Value to Shareholders

Despite the market challenges, NVR continues its long-standing practice of returning capital to its shareholders. The cash flow statement reveals the company spent over $1.05 billion on share repurchases in the first six months of 2025. This aggressive buyback activity, supported by a new $750 million repurchase authorization in May 2025, signals strong confidence from management in the company's long-term value.

In conclusion, NVR's mid-year filing paints a picture of a resilient company navigating a challenging environment. While revenues have held steady, declining profit margins and slowing new orders highlight the pressures facing the entire homebuilding sector. The company's ability to manage its construction costs and adapt to a more discerning consumer will be critical for maintaining its financial strength in the months ahead.