PulteGroup, Inc. (NYSE:PHM) focusing on cost reduction and efficiency, Lennar Corporation (NYSE:LEN)
PulteGroup, Inc. (NYSE:PHM) is a homebuilder in the United States. The company is the constructor of new homes and a creator in active adult communities and the company aims pre-retired and retired boomers
The mortgage rates have been rising at a very fast rate. The 30-year fixed rate has risen from 3.93% a week ago to 4.46% currently. If the rates rise rapidly the demand rises since the homebuyers who are planning to buy a home would want to get a lower rate, and to avoid the rising higher rates they lock in at the current rates.
Rates below 6% are considered to be strong, and that benefits companies like PulteGroup. Homebuyers are currently at a historic low, the interest on student loan debt are at their highs, and is not expected to fall.
The existing home sales in May were at its three year high, while the sales were above expectations. The S&P Case-Schiller Home Price Index rose 12.1% YoY, the highest increase since March 2006.
The Home Affordability Index is quite high compared to its level in 2000-2005. With the current levels the rates are still affordable for some homebuyers.
PulteGroup has seen a rise in its sales over the past three years, and posted a gain in FY2012 after posting losses for many consecutive years. The company has also posted profit in the four quarters of total last five quarters.
The company has been focusing on cost reduction and becoming more efficient. The company was unable to improve on its net orders, and has also increased its labor and construction material costs.
If the industry performs the stock might yield decent returns. The shares of PulteGroup, and Lennar Corporation (NYSE:LEN) have risen since mid-2012, attributed to a rise in the new home construction activity in the U.S. housing market
The share fell 2.85% in its previous trading session to close at $18.06.