PulteGroup, Inc. announced financial results for its third quarter ended September 30, 2019. For the quarter, the Company reported net income of $273 million, or $0.99 per share. Adjusted net income for the period was $280 million, or $1.01 per share, after excluding a $9 million pre-tax warranty charge taken in the quarter related to a closed-out community. Reported prior year net income was $290 million, or $1.01 per share.

“Improving demand dynamics continued throughout the quarter, as lower interest rates and improved affordability had a positive impact on buyer interest,” said Ryan Marshall, PulteGroup President and CEO. “The 13% gain in orders that we realized in the third quarter reflects this improved demand environment, particularly among first-time buyers where orders were up 39% over last year.”

“Given a broadly favorable macroeconomic backdrop and expectations for interest rates to remain low, we see the opportunity for housing demand to continue moving higher over time,” added Marshall. “Within this environment, our strong balance sheet and outstanding local market operations have the Company well positioned to grow our business while continuing to deliver high returns on equity and invested capital.”

Third Quarter Results

Home sale revenues for the third quarter increased 3% over the prior year to $2.6 billion. The higher revenues for the period reflect a 3% increase in closings to 6,186 homes. The average price of homes closed was $426,000, which is consistent with the prior year.

The Company’s reported home sale gross margin for the third quarter was 23.1%. The Company’s third quarter adjusted home sale gross margin, which excludes the $9 million pre-tax warranty charge, was 23.4%. Homebuilding SG&A expense for the quarter was $271 million, or 10.3% of home sale revenues, compared with $253 million, or 9.8% of home sale revenues, in the prior year.

Net new orders for the third quarter increased 13% over the prior year to 6,031 homes. The value of third quarter net new orders was $2.5 billion, which is an increase of 11% over the prior year. In the third quarter, the Company operated out of 865 communities which is an increase of 4% over the comparable prior year period.

Unit backlog at the end of the quarter totaled 11,638 homes, which is up 4% over the third quarter of last year. Backlog value for the third quarter was $5.0 billion, which is an increase of 2% over the third quarter of 2018.

Third quarter pretax income for the Company's financial services operations increased 64% over the prior year to $32 million. The higher pretax income was driven by an increase in mortgage origination volumes associated with growth in the Company’s homebuilding operations and higher capture rates, coupled with improved margins in our mortgage operations resulting from the declining rate environment. Mortgage capture rate for the quarter was 84%, up from 75% last year.

During the quarter, the Company repurchased 4.1 million common shares for $136 million, or an average price of $32.93 per share. For the first nine months of 2019, the Company repurchased a total of 7.7 million common shares for $244 million, or an average price of $31.86 per share.

PulteGroup ended the quarter with a debt-to-total capital ratio of 34.6%, which is down from 38.6% at the end of 2018.