PulteGroup Inc., the No.2 U.S. homebuilder, booked fewer orders for new homes in the third quarter as demand was hurt by a rise in mortgage rates and the threat of a debt default by the U.S. government.
The shortage of ready-to-develop land has also affected PulteGroup and D.R. Horton Inc., the largest U.S. homebuilder, more than their peers.
PulteGroup raised prices of its homes as it slows its sales pace and increases spending on land.
The company said on Thursday it spent $918 million in land and development in the first nine months of the year and has set aside another $1.6 billion for 2014.
Lennar Corp. and Toll Brothers Inc. have the strongest land bank among large U.S. homebuilders since they bought cheap land through the economic downturn of 2008.
PulteGroup felt the pinch from slowing demand due to higher home prices, a rapid rise in mortgage rates, and political and economic uncertainty, Chief Executive Richard Dugas Jr. said.
While the company was able to raise its average selling price by 11 percent, orders — a key indicator for builders, who do not book revenue until they finish a house — fell 17 percent to 3,781 homes in the third quarter.
Net profit rose to $2.28 billion, or $5.87 per share, from $116.6 million, or 30 cents per share, a year earlier.
The results include the reversal of a deferred tax asset valuation allowance of $2.1 billion, or $5.42 per share.
Excluding this reversal, PulteGroup earned 45 cents per share in the quarter ended Sept. 30.
Home sale revenue rose 21 percent to $1.49 billion.
PulteGroup shares closed at $16.68 on the New York Stock Exchange on Wednesday.
They have lost 27 percent of their value since interest rates started to rise in May, while the Dow Jones US Home Construction index has lost 18 percent.
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