Why PulteGroup stock keeps quietly lagging behind the broader S&P 500 this year

PulteGroup stock has continued to trail the broader S&P 500 as investors deal with a difficult U.S. housing market, weaker revenue, and pressure on homebuilding margins. The biggest issue is not simply that PHM has fallen, but that several factors are making it harder for the company to turn new orders into higher revenue and earnings.

PulteGroup’s second-quarter results show why the stock has faced pressure despite some positive operating numbers. The company increased new orders and backlog units, but home-sale revenue and earnings declined from a year earlier.

Why has PulteGroup stock been under pressure?

PulteGroup’s recent performance reflects a housing market where buyers remain cautious, and financing costs remain high. The company closed 6,997 homes in the second quarter, down 8% from the same period a year earlier, while home-sale revenue fell 11% to $3.8 billion.

The weaker revenue picture has become important because investors ultimately need to see sustained growth in sales and profits. PulteGroup’s earnings fell to $2.48 per share from $3.03 per share a year earlier, showing that stronger orders alone have not yet translated into stronger financial results.

The stock is also facing a difficult comparison with the broader market. While major stock indexes have continued to reflect strength in several areas of the U.S. economy, homebuilders remain exposed to mortgage rates, affordability, and consumer demand.

Zacks has also highlighted falling earnings and revenue expectations for PulteGroup ahead of its October earnings report. Its September analysis projected lower quarterly and full-year earnings, while noting that PHM was trading at a lower forward P/E than its industry average.

That valuation discount does not automatically remove the pressure on the stock. Investors can continue to assign a lower valuation to a company when they expect earnings, margins, or revenue to remain under pressure.

The more important question is therefore what is happening inside PulteGroup’s business. Its latest results point toward a combination of lower closings, weaker average selling prices, margin pressure, and a housing market that remains difficult for buyers.

Are higher mortgage rates making the problem worse?

Higher mortgage rates are becoming one of the clearest challenges for PulteGroup and other U.S. homebuilders. The average 30-year fixed mortgage rate reached 6.95% on September 17, its highest level since January 2025, according to Freddie Mac data reported by Reuters.

That matters because a higher mortgage rate increases the monthly cost of buying a home. Even households that qualify for a mortgage may decide to wait if the payment becomes too expensive compared with their income or existing housing costs.

The problem is occurring at a time when home prices are already creating affordability pressure. NAHB reported that the share of income needed by a median-income family to purchase a new home increased from 32% in the first quarter to 34% in the second quarter of 2026.

PulteGroup itself has pointed to strained affordability and volatile interest rates as factors weighing on housing demand. That means the company is dealing with an issue that is broader than its own operations and tied directly to the cost of financing a new home.

The broader housing data also show why investors may remain cautious. Pending home sales increased just 0.3% in August but were still down 4.7% from a year earlier, according to Reuters, showing that higher rates continue to limit housing activity.

For PulteGroup, the next few months could therefore depend heavily on whether mortgage rates ease or remain elevated. If financing costs stay high, builders may need to rely more heavily on incentives and pricing adjustments to keep buyers moving through the sales process.

Fun fact: PulteGroup, Inc. (PHM) is one of America’s largest homebuilders, headquartered in Atlanta, Georgia. It acquires and develops land for residential use and constructs and sells single-family detached homes, townhomes, condominiums, and duplexes.

Could incentives be hurting PulteGroup’s margins?

PulteGroup is not simply dealing with fewer buyers, because it is also trying to keep homes affordable enough to generate sales. The company’s second-quarter home-sale gross margin was 25%, down from 27% a year earlier, even though the margin improved by 60 basis points from the first quarter.

One reason incentives matter is that a builder can protect sales volume by helping buyers with financing or other purchase costs. Those measures can support demand, but they can also reduce the amount of revenue or profit the builder keeps from each home.

The wider industry is showing similar behavior. NAHB reported that 66% of builders were using sales incentives in September, up from 63% in August, while 38% of builders were cutting prices.

That creates an important issue for PulteGroup because investors are watching both sales volume and profitability. Selling more homes does not necessarily produce better results if the company has to offer larger incentives or accept lower prices to generate those sales.

PulteGroup’s average selling price also fell 3% year over year to $544,000 in the second quarter. Combined with an 8% decline in closings, that helped push home-sale revenue down even though new orders increased.

This helps explain why the stock can remain under pressure even when some operating indicators look encouraging. Investors may want evidence that PulteGroup can increase demand without giving away too much margin through incentives, discounts, or other buyer assistance.

Why are rising orders not translating into higher revenue?

PulteGroup’s order numbers provide one of the more interesting parts of the story because they do not move in the same direction as revenue. Net new orders increased 6% year over year to 7,536 homes in the second quarter, while order value increased 5% to $4.1 billion.

At the same time, home-sale revenue declined 11% because the company closed fewer homes and reported a lower average selling price. This difference shows why investors need to separate new orders from completed home sales when evaluating a homebuilder.

Orders represent future demand entering the company’s pipeline, while closings are what produce current home-sale revenue. A strong order number can therefore take time to appear in reported revenue, especially when construction schedules, buyer financing and cancellations affect the path from contract to closing.

PulteGroup ended the second quarter with a backlog of 10,966 homes, up 2% from the previous year. However, the value of that backlog was $6.8 billion, meaning the increase in units did not produce a similar increase in total backlog value.

That difference is worth watching because the mix and price of homes can affect future revenue. If orders grow mainly through lower-priced homes or require more incentives, unit growth alone may not provide the earnings improvement investors are looking for.

The October earnings report should offer more information about whether the order growth is continuing and how much of it is converting into closings. PulteGroup has scheduled its third-quarter results for October 22, making order pace, backlog value, average selling prices, and margins important figures to watch.

Fun fact: PulteGroup (PHM) ended the recent trading session at $117.55, demonstrating a -1.61% change from the preceding day’s closing price. 

Is the broader housing market also weighing on PHM?

PulteGroup is operating in a housing market that remains under pressure, so its stock performance cannot be viewed entirely as a company-specific issue. NAHB’s September Housing Market Index fell three points to 32, its lowest level since September 2025.

The decline was driven by weaker views of current and future sales conditions, while the index for prospective buyer traffic remained at 23. NAHB also reported that higher mortgage rates, labor shortages and rising material costs are weighing on builders.

Regional conditions are also uneven, which matters for a large builder such as PulteGroup. NAHB’s September three-month averages showed the South at 31, the West at 28, the Northeast at 39 and the Midwest at 44.

The broader construction data offer a similar mixed picture. Single-family housing starts rebounded 7.6% in August, but NAHB said single-family production remained down 4.7% year to date as builders continued facing higher costs, land shortages and labor constraints.

These conditions can make the market harder to navigate because builders must balance construction activity with the pace at which buyers are willing and able to purchase homes. Building too aggressively can increase inventory risk, while slowing production too much can limit future revenue.

PulteGroup has already been making adjustments to navigate these conditions, including balancing price and sales pace across communities. The company said in its second-quarter results that it was making tactical adjustments as it responded to volatile interest rates, strained affordability, and differences between markets.

What could investors watch next for PulteGroup?

The next major test for PulteGroup will be whether the company can maintain order growth while protecting margins. Its second-quarter results showed that orders and backlog were moving higher, but revenue, closings, average selling prices, and year-over-year gross margin were weaker.

Mortgage rates will be another important variable before the next earnings report. With the 30-year mortgage rate reaching 6.95% in September, buyers may continue to face affordability pressure unless rates move lower or household purchasing power improves.

PulteGroup also has financial strengths that should remain part of the discussion. The company repurchased $373 million of common shares during the second quarter, and its latest results showed that it was still generating significant earnings despite the difficult housing environment.

Those positives do not eliminate the challenges facing the business, but they provide important context when looking at the stock’s weakness. Investors can weigh the company’s cash generation, backlog and capital returns against falling margins, affordability pressure and uncertain housing demand.

The October 22 earnings report could therefore provide a clearer picture of whether the recent weakness is temporary or part of a longer adjustment in the homebuilding market. Key numbers to watch include new orders, cancellations, closings, average selling prices, incentives, gross margin, and management’s outlook for the rest of 2026.

For now, PulteGroup’s lag behind the S&P 500 appears tied to a combination of company results and a difficult housing environment rather than a single problem. The next stage of the story will depend on whether stronger orders can eventually produce stronger revenue and earnings without requiring PulteGroup to sacrifice too much margin to keep buyers engaged.

TL;DR

• PulteGroup stock has been pressured by weaker revenue, lower closings, and a decline in gross margin even as new orders increased in the second quarter.
• Mortgage rates have moved close to 7%, making new homes harder for many buyers to afford and creating another challenge for homebuilders.
• PulteGroup has been using incentives to support demand, but those incentives can put pressure on profit margins.
• The broader housing market is also showing signs of weakness, with builder confidence falling and buyer traffic remaining low.
• PulteGroup still has strengths, including a growing order backlog, strong cash levels, and significant share repurchases.
• Investors will likely focus on margins, orders, incentives, and housing demand when PulteGroup reports its third-quarter results on October 22.

This article was made with AI assistance and human editing.

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