Pulte CEO Says Recovery Depends on Pace of Repo Homes

Homebuilder Pulte Homes Inc. was able to reduce its losses in the first three months of this year, but its CEO said Pulte cannot sustain its loss reduction if the number of repo homes continues to rise.

Richard J. Dugas Jr., CEO and president of Pulte Homes, said on Wednesday in a conference call that he is seeing some positive signs for a recovery in the housing sector, such as record low mortgage rates and affordable house prices, but he is still concerned about the rising number of repo homes in many areas of the country, which are pushing down prices.

Pulte Homes narrowed its first quarter net loss to $514.8 million, representing a $2.02 per share loss, from the $696.1 million loss in last year’s first quarter. Share loss in last year’s first quarter was $2.75 per share.

The homebuilder added that $410.2 million was used to pay inventory and land-related charges.

Total revenues in the first quarter declined by 59 percent to $587.4 million, compared to its $1.4 billion revenues in last year’s first quarter.

Dugas pointed out that the home building industry and the housing market are still fighting job losses, rising number of repo homes, lack of affordable credit and falling home prices.

The CEO said his firm survives by focusing on managing cash, controlling inventory and overhead costs and restoring the company’s profitability. Pulte had cash reserves of $1.75 billion as of March 31.

During the first quarter, sales of homes fell by 55 percent to 2,147 houses, with the average sales price declining by 11 percent to $263,000, as foreclosed homes continue to push down prices.

One of the positive developments in the company is that it has lowered its speculative home inventory by 32 percent from the inventory level in last year’s fourth quarter. New orders also jumped by 71 percent from the level of orders in last year’s fourth quarter.

However, if compared to last year’s first quarter, Pulte’s new home orders declined by 44 percent to 3,022 units.

The previously announced merger with Centex, expected to create the largest U.S. homebuilder, will be completed in the second half of the year, according to Dugas.

Dugas cited Centex as Pulte Homes’ right partner during these hard times. The merged enterprise will be stronger to fight the challenges caused by repo homes.