Real Estate

PulteGroup ‘encouraged’ by spring home buying


PulteGroup on Tuesday added to the chorus of US homebuilders offering upbeat projections of a resurgent US housing market this year, lifting shares of the company to levels not seen in nine months.

Homebuilders hit a rough patch in 2018 as they grappled with rising costs and a shortage of buildable lots, while elevated prices and a sharp uptick in mortgage rates kept budget-conscious home shoppers on the sidelines. But sentiment within the industry has improved heading into the key spring selling season, aided by the Federal Reserve’s about-face on interest rate rises that lowered borrowing costs for prospective buyers.

PulteGroup cheered investors with expectations to deliver 5,400 to 5,700 homes in the second quarter. With a midpoint of 5,550, the company’s forecast range surpassed analysts’ average estimate of 5,464 units, according to Refinitiv.

The Atlanta-based builder also sees average selling prices of $430,000 to $435,000, higher than Wall Street’s estimate of $424,080.

Chief executive Ryan Marshall said in a statement that buyers have been “steadily” returning to the market following a slowdown in demand during the second half of 2018. The rebound coincided with a decline in mortgage rates, as well as continued strength in the US economy, he noted.

“We are experiencing a very typical seasonal upswing and are generally encouraged by the level of buyer activity that we are seeing,” Mr Marshall added on an earnings call. “Further, with a strong economic backdrop and the recent decline in mortgage rates, there is every reason to believe that 2019 can be another good year for the housing industry.”

Traffic increased throughout the last quarter with more consumers visiting PulteGroup’s communities each month as the period progressed, he said.

Shares of PulteGroup jumped 3.3 per cent to $31.22, putting the stock on track to close at its best mark since July 2018.

Homebuilder stocks were higher across the board on Tuesday, with the S&P Composite 1500 homebuilding index up 1.8 per cent and also pacing toward a nine-month high, as sentiment improved on PulteGroup’s results and new home sales that reached their strongest level since November 2017.

PulteGroup’s first-quarter revenue grew 1.4 per cent to nearly $2bn as it closed on 4,635 homes, up slightly year-over-year. Average prices were up 2 per cent at $421,000. Net new orders of 6,463 homes were better than expected, topping analysts’ forecast of 6,358 in a FactSet poll.

The company earned $167m in net income, or 59 cents a share, that compared with $171m, or 59 cents a share. Per-share earnings easily beat the 47 cents expected by analysts.

PulteGroup’s focus on building more lower-priced homes for first-time buyers, coupled with the mortgage rate drop, “can help solve some of the affordability challenges that today’s homebuyers are facing”, according to Mr Marshall. He said the company’s “real opportunity” lies in lowering costs for buyers across all price ranges.



READ SOURCE

Leave a Reply

This website uses cookies. By continuing to use this site, you accept our use of cookies.