As volume falls, Pulte shrinks to 3 areas

NEW YORK (Reuters) - PulteGroup Inc (PHM.N), the second-largest U.S. homebuilder, is consolidating operations for the second time in less than a year in the face of another dip in demand.

Pulte is combining its western and central operating areas, leaving it with three, the company told Reuters. It had six operating areas after merging with rival Centex Corp in 2009, but cut that to four at the end of last year because it anticipated continued weak demand for new homes in 2011.

The move signals more softness in the housing market, said Jody Kahn of John Burns Real Estate Consulting, based in Irvine, California. Many homebuilders who hoped this spring would provide a seasonal bump in sales were disappointed they had to implement more of the layoffs and restructuring plans that have characterized the current downturn as it nears its fifth anniversary.

"Pulte's plans to reduce the number of regions means management expects a slow and bumpy summer," Kahn said.

After rising to a high of $8 per share on Tuesday, Pulte's shares fell as much as 3 percent on the news.

The consolidation is an ongoing effort by the company to become more efficient, said spokesman Travis Parman.

It will establish more direct lines of communication and help the company make changes faster, he said.

WEAK MARGINS

"Anything that helps improve gross margins will be cheered and welcomed by investors," said Citi analyst Josh Levin.

Pulte's margins -- 12.5 percent as a percentage of the first quarter's home sales -- are worse than its peers, he said.

Patrick Beirne, who had managed the central area, will now oversee both, spokesman Travis Parman said.

The area includes 14 states, including Hawaii, and the consolidation will also include the combination of some smaller units, called divisions, Parman said.

Pulte declined to comment on whether this change would trigger layoffs, as did the reduction of operating areas to four from six.

Last week, Beazer Homes USA Inc (BZH.N) announced the elimination of about 130 full-time positions to save about $20 million annually.

The biggest U.S. builder, D.R. Horton Inc (DHI.N), had 3,214 employees at the end of its 2010 fiscal year, down 63 percent from 2006.

New homes are facing tough competition from an excess of older homes and cut-rate foreclosures, the legacy of rampant risky lending and speculation during the boom years.

U.S. home prices fell in the first quarter at the fastest rate since late 2008, real estate data firm Zillow Inc said on Monday, suggesting a bottom will not be seen until 2012 at the earliest.

Pulte's shares closed down 0.3 percent at $7.77 per share on the New York Stock Exchange. Homebuilder shares were flat, according to the Dow Jones U.S. Home Construction Index .DJUSHB.

(Reporting by Helen Chernikoff; editing by Bernard Orr and Andre Grenon)