Atlanta-based PulteGroup on Tuesday reported net income of $882 million for the last quarter of 2022, up 33% from the same period a year earlier.
Revenues during the quarter were $2.6 billion, 19% higher than during the same three months of 2021 — news that sent shares of company stock to their highest level in more than a year during afternoon trading. The company, the nation’s third-largest homebuilder, finished the year with $15.9 billion in revenues.
Chief Executive Ryan Marshall said the business was coping with “a rapidly evolving housing market,” citing the year-long campaign of the Federal Reserve to raise interest rates in an attempt to chill inflation.
The Fed’s efforts have meant higher mortgage rates, which chased many buyers out of the market. The Fed’s rate-setting committee is meeting this week and most experts are expecting another, if more modest, hike.
Yet mortgage rates do not always parallel short-term rates, and the mortgage rate for homebuyers dipped toward the end of last year.
“From October through December, we’ve seen strong month-to-month growth and we’ve seen that continue into January,” Marshall told The Atlanta Journal-Constitution. “We think it’s reflective of the feeling that interest rates have gotten better.”
That might have helped builders: the number of new homes sold in December rose from November, while the resales of existing homes continued to decline, according to the U.S. Census Bureau and the National Association of Realtors.
PulteGroup’s higher revenues were fueled partly by the increase in the number of sales at year’s end, but also by a 17% jump in the average price of a home sold. Still, to fight the rate hikes, the company in many markets offered incentives, discounts and a 4.25% mortgage rate though an in-house mortgage company.
PulteGroup’s closings — the final step in the purchase of a home — during the quarter were up 3%, while the profit margin on average also grew. Absent further spikes in interest rates or a harsh recession, prospects are good — partly because of “a demographic tailwind,” Marshall said.
“The peak of the millennials are about age 30,” he said. “While they have generally delayed getting married and having kids, they have a high desire for homeownership.”
Pulte reports 4% of its business is in in metro Atlanta. It has 6,100 employees, including 475 in Georgia.
Shares of Pulte stock closed the trading day at $56.89 a share, its highest level in more than a year.
Ken Leon, research director at CFRA, said he rated PulteGroup, a “hold.” An increase in value is likely, but with the housing market slowing, investors in the coming year should expect only a modest rise in Pulte share prices, he said.
PulteGroup, fourth quarter 2022, compared with year earlier
Revenues: up 19%
Net income: up 33%
Largest U.S. homebuilders, headquarters
1. D.R. Horton (Arlington, Texas)
2. Lennar Corp. (Miami, Florida)
3. PulteGroup (Atlanta, Georgia)
4. NVR (Reston, Virginia)
5. Taylor Morrison (Scottsdale, Arizona)
Average mortgage rates
Year ago: 3.55% (Jan. 26, 2022)
Year high: 7.08% (Nov. 10, 2022)
Recent: 6.13% (Jan. 26, 2023)
Sources: Sources: PulteGroup, BuilderOnline.com, U.S. Census Bureau, National Association of Realtors
