PulteGroup 1Q loss deepens as fewer homes sold

AP News
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Posted: Apr 28, 2011 2:59 PM
PulteGroup 1Q loss deepens as fewer homes sold

The spring home-selling season got off to an encouraging start for PulteGroup Inc., even as its loss widened in the first three months of the year as the homebuilder sold fewer homes.

The company said Thursday net new home orders rose less than 1 percent versus the January-March quarter last year, when federal tax credits for homebuyers drove an industrywide surge in home sales.

While just a tiny bump, the increase in orders is notable, because it happened without the aid of the government tax incentive, which expired last April.

Rival builders Ryland Group Inc., Meritage Homes Corp. and M/I Homes Inc. each reported this week that new home orders declined in the same period. (To be fair, PulteGroup's new orders would have fallen 9 percent, had the company not tweaked its order reporting process.)

Management said that orders and customer traffic increased every month as the quarter progressed. It didn't provide details on how sales are faring this month, but said it is pleased with trends so far.

PulteGroup Chairman, President and CEO Richard Dugas said the quarter's sales trends reflect a modest home-selling season that's starting to develop.

"Overall, I'm very encouraged with how the year has started and the potential for sustainable gains as the year progresses," Dugas said.

Still, home closings, or completed sales, remained weak, falling 17 percent from a year earlier,. That helped keep the builder in the red.

Despite the encouraging order trends, Dugas anticipates home closings won't recover enough in the second quarter and the builder will post a modest loss.

The outlook is brighter for the second half of the year, when Dugas expects higher home closings will help the company turn a profit.

Sales tanked last summer after the homebuyer tax credit expired and remained weak through most of last year, which means PulteGroup and other builders should have easier sales benchmarks in the second half of this year.

Homebuilders like PulteGroup have been hoping for a pick-up in sales this spring after seeing sales of new homes plummet last year to the lowest level on records going back nearly 50 years.

This year, however, the industry doesn't have federal homebuyer tax credits to spur sales. And many would-be homebuyers remain deterred by high unemployment, strict lending standards and concerns that home values could drop further.

Nationwide, new home sales rose 11 percent in March from February, the government said earlier this month. It was the first monthly increase since December. But the pace remains far short of the level economists see as indicative of a healthy real estate market.

Homebuilders are a bellwether for the housing market and the economy. Each new home built creates, on average, the equivalent of three jobs for a year and generates about $90,000 in taxes paid to local and federal authorities, by some estimates.

PulteGroup, which is based in Bloomfield Hills, Mich., operates in 29 states and the District of Columbia. Its Del Webb brand is the nation's largest builder of communities for adults age 55 and over.

The company reported a net loss of $39.5 million, or 10 cents per share, in the January-March period versus a net loss of $12.5 million, or 3 cents per share, a year earlier. Analysts polled by FactSet expected a loss of 13 cents per share.

Revenue dropped 21 percent to $805.2 million, short of Wall Street's $819.4 million estimate.

Closings dropped 17 percent to 3,141 homes, and the average selling price fell 3 percent to $249,000.

Net new orders for homes grew to 4,345 homes from the prior-year quarter and climbed 43 percent from the last three months of 2010.

But Pulte's backlog at the end of the quarter fell to 5,188 homes from 6,456 homes in the same period last year.

Shares rose 24 cents, or 3 percent, to $8.22 in afternoon trading.