PulteGroup sees more demand from home buyers as mortgage rates decrease

PulteGroup Inc. executives said on the company's fourth-quarter 2022 earnings call that demand from home buyers recently improved as rates on mortgages declined.

"Despite the higher rate environment dominating the national conversation, we saw buyer demand improve as the fourth quarter progressed and can confirm this strength continued through the month of January," President and CEO Ryan Marshall said on the call.

"Based on feedback from our sales offices, buyers have been responding to the decline in mortgage rates," Marshall added.

During the fourth quarter of 2022, PulteGroup logged net new orders of 3,964 homes, 41% lower year over year. For full year 2022, new orders dropped about 27% from 2021.

"The softer demand we've experienced [was] a result of consumers priced out of the market by higher prices and higher mortgage rates, along with those individuals who have moved to the sidelines given market uncertainties and risks," Marshall said.

In 2023, the company expects to close approximately 25,000 homes. "Based on our production pipeline, we currently expect to deliver between 5,400 and 5,700 homes in the first quarter of the year," CFO Robert O'Shaughnessy said.

Marshall emphasized that the company is going to run operations in a "tougher operating environment." The homebuilder declined to provide financial guidance for full year 2023, citing the high uncertainty of market dynamics.

"We're currently seeing buyers respond to lower rates and better pricing, but what happens as Fed actions weaken the employment picture is uncertain," Marshall said.