* Second quarter earnings 11 cents per share vs estimated 5 cents
* Q2 orders jump 32 pct, revenue up 15 pct
By Michelle Conlin and A. and Ananthalakshmi
July 26 (Reuters) - 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 momentum.
“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 Dugas Jr.
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 spending.
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 $268,000.
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 contradictory reports.
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.