(Reuters) - PulteGroup Inc said on Tuesday it expects homebuyers to return to the market after slowing demand in the second half of 2018, spurred by lower prices across its portfolio and easing mortgage rates.
The company topped analysts’ estimates for quarterly profit and new orders, sending its shares 3 percent higher to a nine-month high of $31.10 in morning trade.
The No.3 U.S. homebuilder said it saw a significant increase in consumer traffic into its communities, pointing to the overall health of the housing industry.
Pulte’s focus on lower-priced, first-time buyer lots coupled with the recent decline in mortgage rates could solve some affordability challenges homebuyers face, Chief Executive Officer Ryan Marshall said on a post-earnings conference call with analysts.
“Real opportunity lies in lowering house costs, not just for first-time buyers, but across our entire planned portfolio.”
Average price for homes sold rose merely 2 percent to $421,000 in the quarter, further evidence that home prices are not appreciating quickly. The average selling price rose 10 percent in the year-ago quarter.
Morningstar analyst Brian Bernard said the average selling price for new orders was up almost 1 percent, indicating Pulte was not being overly aggressive on incentives and is managing price and pace for the best margins.
Sales of new U.S. single-family homes surged to a near 1-1/2-year high in March, boosted by lower mortgage rates and house prices.
The 30-year fixed mortgage rate has dropped by about 80 basis points since November, according to mortgage finance agency Freddie Mac, following a recent decision by the Federal Reserve to suspend its three-year monetary policy tightening campaign.
Lower borrowing costs and strengthening wage growth have improved affordability, while land and labor shortages have made it difficult for builders to ramp up construction of relatively low-cost homes.
The company sold 4,635 homes in the quarter ended March 31, showing a marginal growth of 0.2 percent or 9 units from a year earlier. Its quarterly orders of 6,463 units beat the average analyst estimate of 6,257 units.
“We are optimistic that 2019 can turn out to be a good year for the housing industry with demand supported by strong jobs and historic lows on unemployment,” Marshall said.
However, management did not give full-year forecast, but said it would announce it at the end of the second quarter.
Net income fell 2.3 percent to $166.8 million, or 59 cents per share, in the quarter.
Total revenue rose 1.4 percent to $1.99 billion.
Analysts on average had expected the homebuilder to post a profit of 47 cents per share on a revenue of $1.93 billion.
Reporting by Sanjana Shivdas in Bengaluru; Editing by James Emmanuel