Pulte Homes Inc. on Friday became the latest major homebuilder to lower its full-year earnings outlook as the housing market continues to cool. Its shares tumbled more than 5 percent to a new 52-week low.
Pulte cut its full-year outlook after both Hovnanian Enterprises Inc. and Toll Brothers Inc. lowered their forecasts within the past month.
All three companies cited large dips in new orders and jumps in cancellation rates in the second quarter on top of rising interest rates and larger inventories.
Pulte, which operates in 27 states, reported preliminary new orders dropped about 29 percent in April and May from last year to 6,447 units from 9,128 units.
Toll Brothers, a luxury homebuilder operating in 21 states, had a 29 percent second-quarter drop in signed contracts and Hovnanian, which builds mostly in the Northeast, California and the Washington, D.C. area, had about a 19 percent drop in net contracts.
“Buyer demand through April and May has been below expectations,” Richard J. Dugas Jr., Pulte’s president and chief executive, said in a statement.
Home prices should start to dip as companies offer incentives and discounts and investors, who bought up many homes during the boom, sell their assets, said Rick Murray, an analyst from Raymond James & Associates.
“I think it’s safe to say the housing boom is over,” Murray said.
Bloomfield Hills-based Pulte, which operates in 27 states and is the largest builder of active-adult communities for people 55 and older, now projects earnings between 85 cents and 95 cents for the current second quarter, and $4.70 to $5 per share for the full year. In April, the company had forecast 2006 earnings between $6 and $6.25 per share.
Cancellation rates for the two months stood at 27.4 percent, up from 14.8 percent in the year-ago period.
Based on the slower sales pace, Pulte forecast unit settlements for the year will range from 44,000 to 46,000 homes. New orders fell in every part of the country except the central region, which had 1,169 units, up from 1,492 last year.
The National Association of Home Builders expects home sales this year to fall to 2004 levels, which were surpassed only by those in 2005.
This year “might still end up being the second best year ever,” said Michael Carliner, an economist with the association. Much of the impact from fewer orders shouldn’t show up in this year’s earnings, he said.