Investing.com -- Homebuilder PulteGroup (NYSE:PHM) posted better-than-anticipated profits in the third quarter as demand grew for its properties and prices were driven higher by a shortage in existing homes.
With the popular 30-year fixed mortgage rate recently hovering at elevated levels, many US homeowners who locked in more favorable borrowing costs during a time of cheaper debt have decided to stay put rather than buy a new house at a higher interest rate.
The supply of existing homes has subsequently remained depressed, forcing prospective buyers to consider new builds despite an uptick in prices.
Homebuilders like PulteGroup have been a key beneficiary of the trend. In the quarter ended on Sept. 30, the company reported net income of $698 million, an uptick of 9.3% compared to the year-ago period.
The figure translated to diluted earnings per share of $3.35, topping Bloomberg consensus estimates. Total revenue, meanwhile, climbed by 11.8% to $4.48 billion, also above expectations.
Fueling the returns was a 12% jump in the number of home sales completed to 7,924 units, while the average selling price was "effectively unchanged" versus the prior year at $548,000. The value of PulteGroup's net new orders came in at $3.9 billion, or 3% uptick over the prior year.
In a statement, PulteGroup Chief Executive Officer Ryan Marshall said the Federal Reserve's decision to slash interest rates by an outsized 50 basis points in September -- and projections for further cuts this year -- should provide "a powerful tool in helping to address the affordabliity challenge faced by today's homebuyers."
Marshall added the business is "well-positioned to deliver a record year of earnings."
Shares in PulteGroup rose by more than 1% in premarket US trading on Tuesday. They have jumped by more than 42% so far this year.