Housing Market Faces ‘Affordability Challenges' Entering Spring Selling Season, Homebuilder Says

Epoch Times

23-04-2025

Prospective homebuyers are increasingly facing 'affordability challenges' as housing sales and closings declined significantly across the United States in the first three months of 2025, one of the nation's largest homebuilders said on April 22, during its first quarter earnings call.
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'Whether it is the volatility in the stock market, concerns about tariff-induced inflation, fluctuation in interest rates, or the growing talk of recession, demand in April has been more volatile and less predictable day to day,' PulteGroup CEO Ryan Marshall said during the company's first-quarter
As the company geared up for the spring selling season in April, which is the most lucrative sales period for the industry, Marshall further warned that the Atlanta homebuilder is facing the same macro conditions as homebuyers. He said that a decline in overall consumer confidence also directly impacts housing sales and closings.
In the first quarter, Pulte's home sales totaled $3.7 billion, a decrease of 2 percent from a year earlier. Those sales included a 6 percent spike in the average price to $570,000, offset by a 7 percent decline in closing volume to 6,583 homes.
Net new orders for the first quarter totaled 7,765 homes valued at $4.5 billion. In the first quarter of 2024, PulteGroup generated net new orders of 8,379 homes valued at $4.7 billion. The company also reported a sales backlog of 11,335 homes totaling $7.2 billion across 961 communities, a three percent improvement year over year.
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Despite the difficult period, Marshall reiterated that the homebuilder's balanced operating model, disciplined underwriting, and financial strength, position it to navigate the current downturn and gain market share once demand returns. He noted there is still strong demand for new housing stock in all 45 markets across the country where PulteGroup operates.
'In a country that has a growing population that is already short several million housing units, it is reasonable to expect demand will be there in the future,' Marshall said.
Pulte posted strong first-quarter earnings of $523 million, or $2.57 per share, compared to net income of $663 million, or $3.10 per share, a year ago.Wall Street analysts had expected the homebuilder to report first-quarter earnings of $2.43 a share on revenue of $3.8 billion, according to FactSet.
Industrywide, PulteGroup's first quarter snapshot highlights the difficulty faced by homebuilders across the United States. Housing experts say prospective homebuyers are caught between a strong desire for homeownership and high selling prices that outstrip household budgets.
Last week, the nation's largest homebuilder, D.R. Horton Inc., also reported declining home sales and reduced interest from potential buyers. The Arlington, Texas-based company said home sales fell 15 percent to $7.7 billion in the second quarter of its fiscal year 2025, which ended on March 31, compared to $9.1 billion a year earlier. Home closings in the quarter dropped 15 percent to 19,276, down from 22,548 a year ago.
During the beginning of the critical spring selling season, net sales orders for D.R. Horton declined 15 percent to 22,437 homes at $8.4 billion. The company's sales order backlog of homes under contract decreased 21 percent to 14,164 homes at a value of $5.5 billion versus 17,873 homes at $7 billion in the first three months of 2024.
'We will continue to adjust our product offerings, sales incentives, and number of homes in inventory based on the level of demand for new homes in each of our local markets,' D.R. Horton CEO Paul Romanowski
For the quarter, D.R. Horton reported earnings of $810.4 million, or $2.58 per diluted share, down 27 percent from $1.2 billion, or $3.52 per diluted share, a year ago.
Analysts surveyed by FactSet had expected the Texas homebuilder to report quarterly earnings of $2.63 a share on about $8 billion in revenue.
Looking ahead, PulteGroup has set a full-year home delivery guidance of 29,000-30,000 homes, expecting a 3 to 5 percent increase in quarterly community count. However, the East Coast homebuilder did not offer a yearly financial outlook, saying it remained focused on high returns over the housing cycle, despite potential tariff impacts and market volatility.
At D.R. Horton, the company has revised its earlier full-year outlook due to microeconomic uncertainty. For 2025, the Texas homebuilder with 126 markets in 36 states now expects a range of $33.3 billion to $34.8 billion and home closings from 85,000 to 87,000 homes.
In his first quarter earnings preview of D.R. Horton, PulteGroup, and other national and regional homebuilders, Wedbush Securities analyst Jay McCanless told the Epoch Times, 'uncertainty reigns' in the housing market today. 'Our biggest unanswered questions are what impact will the tariffs have on jobs and how much consumer inflation, if any, will be spurred by the tariffs,' he said in a research note sent to The Epoch Times.
For the remainder of 2025, McCanless said profit margins for homebuilders may become more unstable as mortgage volatility pushes more homebuyers to the sidelines. He said the mortgage rate dip in the first quarter has been reversed as buyer affordability has lessened demand.
'If [interest] rates remain at current levels or higher, the consensus gross margin estimates for fiscal 2025 and potentially early 2026 may need to be reduced as rate buydown pressures could intensify,' McCanless said.
Despite the rocky road ahead for the housing market, PulteGroup's shares rose in the April 22 trading session on Wall Street. The company's shares closed up 8.36 percent at $100.89 on the New York Stock Exchange. However, the stock has decreased by more than 20 percent over the past 12 months.
D.R. Horton's shares closed up 3.48 percent, at $124.96. The stock is down nearly 13 percent over the past year.