(Reuters) - Homebuilder PulteGroup Inc (PHM.N) raised its full-year forecast for home sales on Tuesday, after it posted a better-than-expected quarterly profit as lower mortgage rates boosted demand.
The housing market has perked up in recent months after the Federal Reserve’s interest rate cuts pushed down mortgage rates from last year’s multi-year highs.
“Given a broadly favorable macroeconomic backdrop and expectations for interest rates to remain low, we see the opportunity for housing demand to continue moving higher over time,” Chief Executive Officer Ryan Marshall said.
The 30-year fixed mortgage rate has dropped more than 125 basis points since last November’s peak to an average of 3.69%, according to data from mortgage finance agency Freddie Mac.
Marshall added that he expects a modest expansion in purchase of homes by first-time buyers through 2020 and beyond.
Pulte now expects home sales of between 23,000 and 23,200 homes for 2019, up from a previous forecast of 22,300 to 22,800 homes. It sold 6,186 homes in the quarter, 2.6% higher than last year.
However, the U.S. homebuilder cautioned that affordability, though improved, was still an issue in particular markets and buyer segments. Average sales price fell marginally to $426,000 in the quarter.
Orders, an indicator of future revenue, rose 12.7% to 6,031 units in the period.
The company’s net income fell 5.7% to $273.1 million, or 99 cents per share, in the quarter ended Sept. 30. Total revenue rose 2.3% to $2.71 billion.
Excluding items, the company earned $1.01 per share, above analysts’ estimates of 92 cents per share, according to IBES data from Refinitiv.
Shares of the company were little changed, but are up about 47% this year, outpacing a 45.3% increase in the broader PHLX Housing Index .HGX.
Reporting by Sanjana Shivdas and Ashwini Raj in Bengaluru; Editing by Aditya Soni