* Second quarter earnings 11 cents per share vs estimated 5
* Q2 orders jump 32 pct, revenue up 15 pct
By Michelle Conlin and A. and Ananthalakshmi
July 26 PulteGroup Inc on Thursday
posted a quarterly profit that beat market expectations and
reported a sharp jump in new orders as home buyers took
advantage of affordability and rock-bottom interest rates.
Pulte, the nation's second-largest homebuilder, said it saw
new orders jump 32 percent to 5,578 units in the second quarter.
New home orders are a bellwether for builders. Analysts
consider the metric an indicator of the housing market's
"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 have risen 60 percent in the past year,
mirroring an industry-wide rally that has put the homebuilders
on their way towards having their 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, which has had losses in six of the last eight
quarters, has been on a cost-cutting campaign, reengineering
construction practices down to the joists and studs to reduce
It has also benefited from capturing more "move-up" buyers,
a group 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 prices by eight percent, to an average
Still, Pulte's results come at a time when the housing
market's performance has been anything but linear.
The market has struggled, in stop-and-go fashion, to gain
sustained strength. This week saw yet another batch of seemingly
In June, the Commerce Dept. reported that new U.S. home
sales tumbled 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. homebuilder sentiment surged in
July to notch its biggest jump in nearly a decade, the National
Association of Home Builders said last week.
Many analysts have called the worst housing depression since
the Great Depression over. But a minority cohort has cautioned
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 and the fact that nearly
half of homeowners are effectively stranded in their houses
either having negative equity or less than the 20 percent equity
required to move in to a new home.
To help counter those pressures, Pulte is leveraging the
fact that it is now cheaper to own than it is to rent in
virtually every major city.
It has deployed 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 new,
$100,000 starter home, whose all-in payment of $775 a month is
specifically designed to undercut nearby rental rates.
Pulte posted a 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, for the quarter ended June 30, 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.