By coinnews 
00:00 Speaker A
Shares of homebuilder PulteGroup up over 5% this morning after the company reported a first quarter earnings beat and slightly lower than expected home sales revenue of $3.7 billion. While average home prices rose 6% to an average of $570,000, total homes sold fell 7% from the same time a year ago. PulteGroup crediting affordability challenges for home buyers as one of the reasons behind the decline. Here with more on the housing market and home builders, we’ve got Alex Barron. He’s the Housing Research Center president. Alex, great to speak with you. I want to zero in on that affordability challenge that we heard about from Pulte and that, of course, comes before any impact of tariffs. Where do you see affordability heading for home buyers over the course of the next year?
01:24 Alex Barron
Well, affordability has been challenged, you know, ever since the pandemic, first because home prices rose significantly when interest rates were low, and then when interest rates went up, uh, 2022 to 2024, that was kind of the the thing that really hurt most consumers. I’d say close to 80% of American households can no longer afford to buy even the cheapest entry level home. Where it goes from here is going to be dependent on where interest rates go. So if the Fed starts to cut interest rates, that will help. If they don’t, then I think in affordability will remain challenged. Most of the builders have guided to maintaining incentives really high, so obviously they don’t think any help is on the way.
02:52 Speaker A
And so how does that impact some of the backlogs? Because we we know for some of the new home builders, they’re just trying to make sure that as they’re increasing supply, it’s it’s at a level that’s still profitable for them, but also one that is not leading to further market deterioration and that has been a larger issue in the affordability crisis that we’ve seen play out.
03:34 Alex Barron
Well, you know, most of the builders were getting gross margins of close to 30% about three years ago. And if you were to back away most of the incentives they’re currently offering, to some degree they’re still close to that level of profitability. But longer term, um, gross margins have always been in the 18 to 22% range, which is kind of where they’re drifting to right now. And yet many builders are still significantly above like Pulte, I believe, is at 27, 26% range. So there’s still room for the builders to make plenty of money, even if they have to adjust pricing or offer higher incentives. They’re still making plenty of money.