Pulte's home sales forecast points to strong housing market

(Reuters) - PulteGroup Inc PHM.N joined bigger rival Lennar Corp in raising its home sales forecast for the year, underscoring homebuyers' optimism around an improving economy despite rising interest rates.

Shares of the No.3 U.S. homebuilder rose as much as 6.4 percent to as Pulte said it now expected to sell 22,500 to 23,500 homes this year, compared with its previous estimate of 22,0000 to 23,000.

Buyer demand continues to benefit from the strength of the underlying economy, a good jobs market with low unemployment, sustained high consumer confidence and support of demographics, Chief Executive Ryan Marshall said on an post-earnings call.

“It seems that buyers were not deterred by the volatility in rates,” Marshall added.

Lennar LEN.N, which reported higher revenue and profit earlier this month, had said the recently enacted U.S. tax reform was also adding to the momentum.

The U.S. housing market is still recovering from the long-term damage of the subprime crash a decade ago, but many homebuilders are now fighting rising costs and labor shortages, rather than problems with demand.

Pulte, which mainly sells single-family homes, also forecast its average price in the range of $405,000 to $420,000 for the year, up from $400,000 to $415,000 estimated previously.

Orders, an indication of future revenue for homebuilders, rose 12.2 percent to 6,875 homes in the quarter ended March 31.

The United States’ third largest homebuilder, which mainly sells single-family houses, said average prices rose to $413,000 in the first quarter from $375,000 a year earlier, while it sold 4,626 homes compared to 4,225 in the equivalent quarter of 2017.

Pulte’s gross margins were 23.6 percent, up from 23.2 percent a year earlier.

The company’s net income soared 87 percent to $170.8 million, or 59 cents per share, beating the average analyst estimate of a profit of 45 cents per share, according to Thomson Reuters I/B/E/S.

Revenue jumped 20.9 percent to $1.97 billion.

Reporting by Sanjana Shivdas in Bengaluru; Editing by Maju Samuel and Anil D’Silva