* Q2 earnings 11 cents/shr vs estimated 5 cents
* Q2 orders jump 32 pct, revenue up 15 pct
By Michelle Conlin and A. Ananthalakshmi
July 26 PulteGroup Inc on Thursday
posted quarterly profit that beat market expectations and
reported a sharp jump in new orders as home buyers took
advantage of record affordability and rock-bottom interest
Pulte, the nation's second largest home builder, said new
orders jumped 32 percent to 5,578 units in the second quarter.
New home orders are a bellwether for builders, and analysts
view it as an indicator of the housing market's momentum.
Net income topped expectations by 6 cents per share while
revenue jumped 15 percent in the quarter.
"With each passing quarter, we grow more confident that new
home demand has found its footing and is moving along a path
toward a gradual recovery," said Pulte Chief Executive Richard
Pulte's shares were up 14 percent to $11.43 on the Nasdaq in
Over the past year, the shares have risen 60 percent,
mirroring an industrywide rally that has the sector on track for
its best year ever. The Standard & Poor's homebuilder index
is up 42 percent this year.
Last month, Pulte's biggest rival, Lennar Corp also
reported a rise in new orders for a fifth straight quarter.
Pulte CEO Dugas attributed the surge in new sales in large
part to one thing: the artificially low inventory of the kinds
of homes that consumers want to buy versus those that are in
distressed conditions or in the wrong locations.
"We are still selling a preposterously low number of homes
relative to historical trends," Dugas said on an earnings call
with Wall Street analysts.
Interest rates, which have been falling for years, have
never been this low for this long. The current rate on a
30-year, fixed mortgage is at a record low of 3.55 percent.
The strong results are markedly different from the
hand-to-mouth environment in the company's recent past. Pulte
posted losses in six of the last eight quarters.
The company has been re-engineering construction processes
to build homes more quickly and cheaply.
It has also boosted margins by moving away from homes loaded
with lots of built-in options, and instead enabling consumers to
Pulte has also focused on capturing more "move-up" buyers, a
more profitable demographic for whom financing is often easier
to secure than for first-time home buyers.
Sales to those looking to trade up to new homes enabled the
company to increase its home prices by 8 percent, to an average
Still, Pulte's results came at a time when the housing
market's performance has been anything but linear, struggling in
stop-and-go fashion to gain sustained strength.
This week saw yet another batch of seemingly contradictory
The Commerce Department reported Wednesday that new U.S.
home sales tumbled in June to their lowest level in more than a
year and prices resumed their downward slide.
Applications for loans to buy new homes have also fallen.
On the other hand, U.S. home builder sentiment surged in
July to notch its biggest jump in nearly a decade, the National
Association of Home Builders said last week.
Many analysts say the worst housing slump since the Great
Depression is over. But a minority of them caution that the
housing market is still at risk of moving sideways, or
stumbling, for years to come.
They point to structural shifts that will weigh heavily on
the market for the indefinite future, including record levels of
student debt, 15 years of flat incomes nearly one-half of
homeowners effectively being stranded in their homes either
having negative equity or less than the 20 percent equity
required to move in to a new residence.
To help counter those pressures and lure more first-time
buyers, Pulte notes it is now cheaper to own than it is to rent
in virtually every major city.
It is using a marketing campaign to convince renters who
don't think they can afford to own, that they actually can.
In markets like San Antonio, Pulte introduced a $100,000
starter home, whose all-in payment of $775 a month is
specifically designed to undercut nearby rental rates.
Dugas cautioned that in order for the housing market's
stability to continue through the second half of this year, a
stronger economy is needed.
"For housing to take a big leg up, we are going to need job
growth," Dugas said.
Pulte posted second-quarter net income of $42 million, or 11
cents per share, compared with a net loss of $55 million, or 15
cents per share, a year ago.
Revenue jumped about 15 percent to $1.07 billion.
Analysts expected a profit of 5 cents per share on revenue
of $1.11 billion, according to Thomson Reuters I/B/E/S.
(Michelle Conlin and A. Ananthalakshmi; editing by Alden
Bentley and Jeffrey Benkoe)