(Reuters) – U.S. homebuilder PulteGroup beat Wall Street estimates for third-quarter earnings on Tuesday, as declining fixed mortgage rates lured in skittish buyers to the market, while historically low housing supply kept demand strong.
With the popular 30-year fixed mortgage rates now down at about 6%, compared with a high of 8% a few months ago, more buyers are returning to the housing market, further boosting demand for new construction.
Homebuilders had already been benefiting from a shortage of existing homes on sale, a trend that is set to continue.
“Years of underbuilding has created a structural shortage of homes and correspondingly high home prices,” said CEO Ryan Marshall, adding that the U.S. Federal Reserve’s pivot to lowering rates will address affordability issues.
The U.S. Federal Reserve’s 50-basis-point rate cut in September, expectations of further cuts and the corresponding easing in mortgage rates have spurred shares of homebuilders to near all-time highs in recent weeks.
PulteGroup, the third-largest U.S. homebuilder by sales, delivered 7,924 homes in the third quarter ended Sept. 30, 12% more than a year earlier.
However, home sales gross margins came at 28.8%, below last year’s 29.5% as land and material costs remained elevated, while the average selling price was flat at $548,000 due to affordability issues.
Shares of the company were up 1.2% in premarket trading.
The company posted third-quarter revenue of $4.47 billion, above analysts’ average estimate of $4.26 billion, according to data compiled by LSEG.
Its earnings rose 16% to $3.35 per share from a year earlier, beating estimates of $3.11 per share.
(Reporting by Ananta Agarwal in Bengaluru; Editing by Shinjini Ganguli)