America’s leading homebuilder PulteGroup Inc. posted a third quarter loss of $995 million, a huge loss compared to the $361 million loss the same quarter last year. Experts surmise that the 2009 acquisition of Centex led to the huge loss. Though the almost billion dollar loss is quite sizable, Wall Street analysts expected worse.
Through the purchase of Centex, Pulte acquired its primary rival. However, it also acquired the subprime mortgages, debt and bad investments of the company. Reports of Pulte’s loss come at a time when the American housing market is at the lowest it’s been in years and leading financial institutions have their hands full with the mortgage foreclosure crisis. While the other leading home builders posted debts in the third quarter, none of their losses came close to meeting Pulte’s. The company revealed that it will cut costs by $100 million in 2011.
A ray of light in the third quarter postings was Meritage Homes Corporation, who reported earnings of $1.2 million. "Over the last few years many builders have moved their product offerings down the price-spectrum, believing there is less opportunity in the move-up market at this time," said Steven J. Hilton, chairman and chief executive officer of Meritage Homes in a statement. "While we also pursued this strategy, recently we have had good success acquiring close-in move-up lots in 'A' locations, which other builders may have passed up. Due to our low acquisition price and construction costs, we are currently able to sell homes in those communities at dramatically lower prices than were available just a few years ago, offering tremendous value and opportunity to home buyers."
Source: Reuters, Meritage Homes