(Reuters) - U.S. homebuilder PulteGroup Inc PHM.N forecast full-year home sales above Wall Street estimates on Tuesday, pointing to strong first-time buyer demand amid lower mortgage rates and easing prices, sending its shares up as much as 5%.
The company, like its rivals, is expanding its entry-level business to sharpen its focus on more affordable homes that target first-time buyers.
Prices for first-time homes fell 8% to $342,000 in the fourth quarter, the company said, with entry level buyers accounting for 32% of all purchases.
“We are optimistic that a good macroeconomic backdrop and better affordability should keep buyer interest high in the year ahead,” Chief Executive Officer Ryan Marshall said on a post-earnings call with analysts.
The company expects to sell between 25,500 and 26,250 homes in 2020, above the average analyst estimate of 24,885.
“Orders and gross margins would likely also benefit from looser lending standards, and we believe that this opportunity will drive multiple expansion across the group,” Evercore analyst Stephen Kim said in a pre-earnings note.
Larger rival D.R. Horton Inc DHI.N raised the upper end of its full-year 2020 home sales forecast and topped estimates for quarterly profit on Monday.
U.S. homebuilding surged to a 13-year high in December, suggesting the housing market recovery was back on track, and could help support the longest economic expansion on record.
Home sales at Pulte rose to 6,822 homes in the fourth quarter from 6,709 a year earlier, as average price dipped marginally to $429,000. Orders, an indicator of future demand, jumped 33.4%.
Pulte said it sold more homes in California, its second largest market, with prices also improving in the region. Deliveries in its western region, which includes California, accounted for 20% of homes sold in 2019.
Excluding items, the company earned $1.14 per share, above analysts’ average estimate of $1.09, according to IBES data from Refinitiv.
Total revenue rose marginally to $3.02 billion, beating analyst estimates of $2.98 billion.
Shares of the company were up 5.4% at $46.71.
Reporting by Sanjana Shivdas in Bengaluru; Editing by Vinay Dwivedi and Sriraj Kalluvila
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