PulteGroup Beats Earnings Estimates in Q3

(Reuters) – U.S. homebuilder PulteGroup (NYSE:PHM) exceeded Wall Street estimates for third-quarter earnings on Tuesday, driven by a decrease in fixed mortgage rates that attracted hesitant buyers to the market amidst low housing supply.

With the popular 30-year fixed mortgage rates now approximately 6%, down from a high of 8% several months ago, buyer interest in the housing market has surged, increasing demand for new construction.

Homebuilders have benefited from a limited inventory of existing homes for sale, a trend that is likely to persist.

"Years of underbuilding have created a structural shortage of homes and correspondingly high home prices," said CEO Ryan Marshall, noting that the U.S. Federal Reserve's shift towards lowering rates will help address affordability concerns.

The Federal Reserve's 50-basis-point rate cut in September, along with expectations for future cuts and lower mortgage rates, has driven shares of homebuilders close to all-time highs in recent weeks.

PulteGroup, the third-largest U.S. homebuilder by sales, delivered 7,924 homes in the third quarter ending September 30—12% more than a year prior.

However, gross margins on home sales fell to 28.8%, down from last year's 29.5% due to high land and material costs, while the average selling price remained unchanged at $548,000 due to ongoing affordability issues.

Shares of the company rose 1.2% in premarket trading.

The company reported third-quarter revenue of $4.47 billion, surpassing analysts' average estimate of $4.26 billion, based on data compiled by LSEG. Its earnings increased by 16% to $3.35 per share from a year earlier, outperforming estimates of $3.11 per share.