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Earnings Preview: PulteGroup


LOS ANGELES (AP) â¿¿ Homebuilder PulteGroup Inc. reports second-quarter results before the stock market opens Wednesday.

WHAT TO WATCH FOR: A surge in revenue fueled by completed sales as homebuyers raced to close on their purchase before the end of June to qualify for federal tax credits. Word on how order trends are holding up now that the government incentives have expired.

Low mortgage interest rates and tax credits helped support sales and home orders for PulteGroup and other builders this spring. But sales have slowed since the tax incentives ended on April 30.

Sales of new homes rose almost 24 percent in June after collapsing in May, but the increase was the second-slowest pace on record. In addition, the number of buyers who signed contracts to purchase homes fell in June.

The weak home order trends on top of stubbornly high unemployment, sluggish economic growth and the prospect of more foreclosures have raised concerns the housing market recovery could stumble.

Like other builders, PulteGroup is expected to post favorable results thanks to the homebuyer rally created by the homebuyer tax credit deadline. The company's acquisition last year of Centex Corp. helped bolster its roster of communities with homes catering to first-time homebuyers.

The tax credits pulled home sales that normally might have occurred this summer into the spring, so investors will be keen to find out what the company has to say about order trends since June.

Rival builder D.R. Horton Inc. said Tuesday its new home orders fell sharply in May after the tax credits expired, but improved modestly in June and July.

WHY IT MATTERS: Homebuilders are a bellwether for the housing market and the economy. Each new home built creates, on average, the equivalent of three jobs for a year and generates about $90,000 in taxes paid to local and federal authorities, by some estimates.

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