PulteGroup’s Earnings Are Mixed. Lower Mortgage Rates Aren’t Driving Demand Right Now.

PulteGroup shares are up 13% this year, trailing the S&P 500 index which has gained 15% over the same period. (Paul Morris/Bloomberg)

Key Points

• PulteGroup’s third-quarter earnings of $2.96 per share on $4.4 billion revenue exceeded expectations, but home sale gross margin was 26.2%.
• New home orders totaled 6,638, a 6% decrease from the third quarter of 2024, largely meeting analyst estimates.
• Shares of PulteGroup fell in premarket trading, despite a 13% gain this year.

Investors hoping for a sign that lower mortgage rates were revitalizing the housing market didn’t find it in PulteGroup’s earnings.

Home construction company PulteGroup posted mixed quarterly results and offered cautious commentary on consumer demand early Tuesday, sending shares lower.

Third-quarter earnings came in at $2.96 a share on revenue of $4.4 billion, beating expectations of $2.89 a share on revenue of $4.3 billion, according to FactSet. Shares of the builder were about flat after initially opening lower following earnings.

“The buyer response to the decrease in interest rates was more muted than we experienced in other periods of rate declines,” PulteGroup President and CEO Ryan Marshall said on a Tuesday morning conference call.

Though lower mortgage rates are typically a positive for housing demand, “there is a clear offset if rates are coming down because the economy is slowing and people are worried about their jobs,” Marshall said. “I believe that is the scenario we are experiencing right now.”

Closely watched home sale gross margin was 26.2% in the quarter, lower than both the expected 26.4% and year-ago number of 28.8%. That decline was primarily due to higher incentive levels and lot costs, the company said.

For its fourth quarter, the company expects a gross margin between 25.5% and 26%, lower than the 26.2% analysts expected, according to FactSet.

New orders totaled 6,638 homes, largely in line with estimates of 6,660, but a 6% drop from the third quarter of 2024.

“We are encouraged to see that interest rates have moved lower, but continue to monitor buyer demand that has been impacted by weaker consumer confidence and ongoing affordability challenges,” Marshall said.

The builders’ earnings report gives investors context on the new home market that government data didn’t. September’s housing starts and permits data were expected last Friday, but weren’t published as government services remain scaled back during a lapse of funding.

Going into the earnings report, builders’ valuations reflected “some level of investor optimism regarding a potential turn in fundamentals occurring perhaps sooner than later (which we continue to view as premature),” J.P. Morgan analyst Michael Rehaut wrote in an Oct. 17 report.

Write to Shaina Mishkin at shaina.mishkin@dowjones.com