J.W. ELPHINSTONEPulte Homes Inc. lost $361.4 million in the third quarter, but with the acquisition of Centex Corp., the homebuilder's new orders increased by more than a third. Pulte completed its purchase of Centex in August, turning the Bloomfield Hills, Mich.-based company into the nation's largest builder. The deal gave Pulte more communities with cheaply priced homes for first-time buyers, as well as desirable land in Texas and the Carolinas. By combining their operations, Pulte now expects to save $440 million annually ¿ $90 million more than when the deal was announced last spring. "The rationale (behind the merger) has only grown more compelling in the months since the announcement," said Richard Dugas, Pulte's president, chairman and CEO. Dugas, however, cautioned the market remains "choppy and fragile." Sales also softened in September as families are less likely to move during fall and winter, and because a temporary tax credit for first-time buyers is set to expire this month. Congress is considering extending the credit of up to $8,000 through March, and gradually phasing it out over the rest of next year. One proposed bill in the Senate would give homebuyers until the end of April to sign contracts and still qualify. The bill would also give a $6,500 tax credit for buyers who have owned their home for at least five of the past eight years.
Such a generous tax credit would likely give homebuilders a boost, but there's concern that the current incentive has already tapped into demand builders would have seen over the next few months. "I question, especially if mortgage rates start going up, what's going to be the real impact on housing sales," said Fox-Pitt Kelton analyst Robert Stevenson. Pulte lost $1.15 a share during the three months ended in September. The company offered no combined figures for the third quarter last year, when Pulte lost $280.4 million, or $1.11 a share. Earnings were hurt by $86.7 million in costs related to the Centex acquisition. Revenue dropped to $1.1 billion from $1.6 billion the year. Analysts polled by Thomson Reuters were expecting a loss of 64 cents a share on revenue of about $1.2 billion. While the results were difficult to compare, investors liked the trends and extra savings. Shares of Pulte rose almost 5 percent, or 47 cents a share to $9.70 in afternoon trading.
New home orders, including Centex's operations, climbed 35 percent to 4,048 homes versus 3,008 a year ago. Buyers have been attracted by low mortgage rates and lower prices. Pulte's average home price fell by 10 percent from a year ago to $253,000. The builder said orders were noticeably weaker in the Southwest, as many buyers in Las Vegas and Phoenix are choosing deeply discounted foreclosed properties rather than new homes. Demand was modest in Florida and stable in California early in the quarter, then began to wane. The addition of Centex helped Pulte boost orders from Virginia to Massachusetts. Pulte also noted demand was good in Georgia and South Carolina markets, and management said it expects will be strong for years to come. In addition, orders improved in Michigan and were stable in most other Midwest markets, except Cleveland. During the quarter, Pulte created the position of chief marketing officer to develop a unified strategy for its stable of brands it now has, including Del Webb, DiVosta and Fox & Jacobs. Pulte also took steps to pay down some $1.7 billion in debt. The builder doesn't have any major debt repayments before 2013, and expects to end the year with $2 billion in cash.
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