According to HousingWire, PulteGroup, one of the country's largest homebuilders, is making a deliberate shift toward build-to-order homes instead of speculative builds. The company is doing this to protect its profit margins and become more efficient. In the second quarter, about 45 percent of the homes Pulte sold were build-to-order, up from 39 percent during the same period last year. The company is aiming to eventually reach its historical mix of 60 percent build-to-order and 40 percent speculative homes, which it expects to achieve sometime next year.
The strategy is working because build-to-order homes generate better margins than spec homes, and they appeal to certain types of buyers who value customization. Pulte is seeing particular strength in its active adult communities under the Del Webb brand, where orders grew 12 percent in the quarter. The builder has also made real progress on reducing the time it takes to build a home, bringing construction cycles down from 123 days a year ago to about 100 days now. This faster pace means Pulte can wait for a customer to purchase before breaking ground rather than building ahead of demand.
The company made the original decision to increase spec homes during the pandemic when supply chains broke down and building times doubled. But now that construction is much faster, that strategy no longer makes sense. Pulte is actively reducing its inventory of spec homes in production, bringing it down from about 8,800 homes at the end of 2024 to just 6,600 by the end of this quarter. The builder is carefully balancing its sales pace with margins rather than simply chasing higher volume numbers.
Despite challenging market conditions including economic uncertainty and interest rate volatility, Pulte's second quarter showed some encouraging signs. The company's gross margin improved to 25 percent, and incentives as a percentage of sales price declined. However, revenues fell 11.6 percent year over year and the average sales price dropped to about 544,000 dollars, primarily because fewer homes sold in the company's highest-priced regions in the Northeast and West.
The shift toward build-to-order is also helping Pulte manage pricing pressure better than if it remained heavily dependent on specs. The builder deliberately started fewer homes than it sold during the first half of the year, relying instead on existing spec inventory to fulfill some orders. This gives the company more flexibility to respond to what customers actually want rather than guessing at demand months in advance.
What I am seeing locally in the Bay Area and East Bay is that this shift in the national market reflects something real and important for our clients. When builders move away from spec inventory and toward build-to-order, it generally means fewer homes sitting on the market, which can support pricing and reduce the pressure for heavy incentives. For buyers, it might mean longer waits but potentially less negotiating room on the final price. For sellers, it signals that builders are taking a more disciplined approach to managing supply, which could be stabilizing for the overall market as we move through the rest of the year.
