First-time buyer sales sink at Pulte
First-time buyers are bearing the brunt of challenging housing market conditions, major homebuilder Pulte Homes said in its third-quarter earnings report.
The firm, ranked third nationally in sales according to the trade publication Pro Builder, disclosed a 14% annual decline in first-time buyer home purchases. The report comes at a time when the market faces the impacts of economic and job uncertainty, tied to rising prices.
“Based on feedback from our sales associates, consumers remain engaged in the home buying process, but they are proceeding with caution amid concerns which I think range from economic weakness and job stability to stretched affordability,” CEO Ryan Marshall said Tuesday on an earnings call with Wall Street analysts.
At the same time, Pulte’s sales to active adult buyers increased.
The builder’s average home sale price rose nearly 3% to $564,000 in the third quarter compared to this time last year. That’s higher than the median single-family U.S. sale price of $385,000 in September, according to Homes.com data.
Pulte operates across 47 major markets and builds single-family homes and townhouses for first-time, move-up and active adult homebuyers.
Ongoing affordability and uncertainty — two themes that have been constant in the housing market conversation this year — weighed on Pulte’s revenue. That figure dropped by 17.45% in the third quarter compared to a year ago. Home purchase agreement cancellations increased by 2%.
“Lower interest rates are a positive for housing demand, but rates don't operate in a vacuum. There is a clear offset if rates are coming down because the economy is slowing and people are worried about their jobs,” said Marshall. “I believe that is the scenario we are experiencing right now.”
Revenue and gross margins are squeezed by sales incentives, a popular offering for homebuilders nationally as they try to sweeten deals for prospective buyers. Pulte reported incentives as part of total sales climbed in the third quarter to 8.9%, a nearly 2% increase compared to last year.
Incentives can include free upgrades, credits to a design studio and discounts on homes themselves. Nationally, 38% of homebuilders reported offering incentives in October, according to the National Association of Home Builders.
Lenders offer lowest mortgage rate in a year
Some mortgage lenders were offering the lowest rate in over a year on Tuesday.
By the end of the day, the 30-year, fixed-rate mortgage had settled at 6.17%. That's about 0.05 percentage points lower than Monday, according to Mortgage News Daily.
The change brought "the average lender ... right in line with 1-year lows and close enough to 3-year lows," Matthew Graham, chief operating officer of the data platform, wrote in a blog post.