Pulte banks on build-to-order pivot as margins find a floor

The market-driven forces for greater homebuilder margins, sales pace and efficiency in 2026 take a variety of shapes, sizes, risks and opportunistic tactics. For PulteGroup, a key margin-enhancing strategy is leveraging improved build-cycles and a balanced sales pace to swell its mix of build-to-order (BTO) homes vs. speculative starts.

Pulte, the third-largest homebuilder according to HousingWire’s homebuilder rankings, has intentionally shifted more of its business away from spec builds and toward more profitable BTO sales, particularly for move-up and active adult buyers who value customization and tend to have discretionary wherewithal to buy despite rate and ASP friction that has stalled other sources of demand.

This strategy, which offers higher margins than spec builds, was already underway in Q1 and continued to gain momentum last quarter, according to Pulte’s Q2 earnings call held on Wednesday.

The strategic shift came as Pulte navigated a quarter that saw consumer activity thwarted by macroeconomic uncertainty, global tensions and interest-rate volatility. Despite those headwinds, orders increased across all buyer groups, margins remained resilient and units in backlog ticked up. However, results were mixed, as revenues fell 11.6% year over year and the average sales price also declined. 

A strategic shift to BTO

Pulte has already made substantial progress on plans at least a year in the making to shift the business back to its historic product mix of 60% BTO and 40% spec, a goal that the company expects to realize at some point next year. 

In the second quarter, the builder’s order mix was 45% BTO and 55% spec. According to Pulte President and CEO Ryan Marshall, year-to-date orders for build-to-order homes were up from just “39% during the same six-month period last year.” 

Another benchmark executives targeted is maintaining the number of finished specs per community between 1.0 and 1.5. Pulte is now in the middle of this range at 1.3 homes per community by the end of the quarter, a level that executives are satisfied with.

The company’s spec home sales peaked during Q3 2025, reaching about 60% of total orders. However, the builder has been progressively shifting away from its prior spec strategy for much of the last year. 

“Our decision to build more spec homes once supply chains collapsed and build cycles effectively doubled was the right one at the time, but we much prefer having a growing backlog of sold homes,” Marshall explained. 

At the end of 2024, Pulte had about 8,800 spec homes in production. This number fell to 7,200 specs at the end of 2025, and is now down to 6,600 specs in production as of the end of Q2. 

Pulte has also continued to emphasize its popular, higher-margin Del Webb active adult communities. The strategy appears to be gaining traction, with active adult orders rising 12% in the quarter, compared with 5% growth among first-time buyers and 4% growth among move-up buyers.

By the quarter’s end, active adult buyers accounted for 25% of net new orders, compared with 39% for first-time buyers and 36% for move-up. 

How pace plays into Pulte’s BTO shift

The shift to BTO was supported by a sharp decline in cycle times, which fell from 123 days a year ago to about 100 days as of Q2.

“Given our build cycle time is down to 100 working days, and even lower in many markets, we are now able to selectively use market rate buydowns to facilitate BTO sales,” Jim Ossowski, Executive VP and CFO, explained.

As Pulte moves toward a greater mix of BTO sales, executives expect starts to become more closely aligned with sales. That allows the builder to respond to real-time demand rather than build ahead of demand, as it did when longer cycle times required a larger spec inventory. With construction times now significantly reduced, the company can wait for a home to sell before starting construction, executives say.

Pulte has also strategically reduced starts to support the transition and protect margins. In the first half of 2026, the builder intentionally started fewer homes than it sold, with 15,570 net new orders compared with 14,378 starts. Many of the homes sold during the period came from existing spec inventory that Pulte was working to clear.

The strategy allows for greater flexibility when managing the pace of sales and starts, while reducing reliance on spec inventory. At the same time, the focus is on balancing sales pace with pricing and margin resiliency, rather than simply maximizing volume. 

Marshall said a community generally needs to sell at least two homes per month to achieve the economies of scale necessary for a production builder, though the optimal pace varies by community and depends on whether additional volume can be achieved without sacrificing price or profitability.

“We’ve been working to match starts with prior quarter sales as kind of the best linkage, with the caveat that we intentionally under-started the sales that we had in the first half because we had more spec inventory than we wanted. A lot of the sales that we had in the first half were specs that we wanted to get out of the system. As we continue to make this transition back to build to order, you’ll see a stronger linkage between what we’re selling and what we’re starting,” Marshall explained. 

Margins and incentives rebounded, but prices fell

Pulte’s earnings also reflected the competing pressures it is facing on pricing, incentives and margins. Home sale revenue fell 12% year over year, driven by an 8% decline in closings and a 3% decline in average sales price to $544,000. 

Ossowski claimed that the lower average sales price was primarily a result of product mix, with fewer closings coming from the Northeast and West, Pulte’s two highest-priced operating regions. However, the builder did benefit from a greater mix of closings in higher-margin Florida markets. 

This price pressure is reflective of a broader national trend. Nationally, the average price of a new home was essentially flat year over year as of May, when prices averaged $424,900, reflecting the affordability constraints facing buyers.

Despite the lower average selling price, Pulte’s gross margin improved to 25% in the second quarter, up 60 basis points sequentially, but falling 200 basis points year over year. 

Incentives as a percentage of total sales price also improved sequentially, falling 50 basis points to 10.4%. Marshall cautioned that incentives will likely remain elevated for some time, but he noted that incentive levels are notably lower among BTO orders. The shift toward BTO is therefore helping Pulte manage some of the pricing and incentive pressure. 

“I’m very pleased to see that our incentives came down 50 basis points in the quarter. They’re still high, even though they did come down. We’d expect, just given everything that the consumer’s dealing with and the affordability challenges, that we’ll remain in an elevated incentive environment,” Marshall acknowledged. 

Navigating cost pressures

Like many other public builders, Pulte continues to leverage its scale and negotiating power to reduce home construction costs, which fell 5% over the last year and 1% sequentially, to just under $75 per square foot. 

While the builder made progress on cost reductions, Marshall acknowledged that there are risks, including increases in lumber prices. With the war in Iran now reignited with no end in sight, rising oil prices are also a major concern. 

“Oil probably continues to be the one that I’m most nervous about just because of how much oil is in some pretty big-ticket items like land development,” Marshall said. “There are some real big dollars that go into land development, never mind the diesel fuel that goes into the tractors that are moving dirt around. Those are things that we’re really paying attention to that could have an impact on not just price per square foot house costs, but ultimately maybe developed land cost.”

Marshall also took note of the increased consolidation among suppliers, claiming that it has been a net positive for homebuilders so far. This is because larger distributors have gained greater scale and, in some cases, have been able to offer strategic benefits and improved efficiencies. Pulte is exploring deeper partnerships with some of those suppliers. 

“Net-net…at this point, I think it’s generally a positive,” Marshall said. “We hope that as far as it relates to us, that return can come from increased efficiencies as opposed to just forcing higher prices on us or their customers.”

Geographic strengths and weaknesses

Pulte saw year-over-year order growth in four of its five regions during Q2, with the Midwest, Southeast and Florida standing out as areas of strength. Demand was particularly strong in markets including Columbus, Cleveland, Chicago, Greenville and the Coastal Carolinas, while Florida rebounded with orders up 19% year over year. The company also observed early signs of improvement in Dallas and Houston, though executives cautioned that it is too soon to declare a broader recovery in the Lone Star State.

The West remained PulteGroup’s weakest region, with slower demand and more competition for buyers. California and the Pacific Northwest showed some improvement, but demand remained soft. 

How Pulte evaluates M&A opportunities

Marshall said that recent homebuilder M&A transactions exemplify “a growing recognition that scale, particularly local market scale, matters,” pointing to the improved access to land and labor that comes with scale. 

Marshall, who views M&A primarily as a way to accelerate scale in existing markets, said that Pulte is mainly interested in acquisitions in markets where it has recently expanded organically. The company evaluates potential deals first on strategic fit, including whether the target operates in the right markets, serves the right buyer groups and will increase profitability. However, most potential M&A deals aren’t a good fit. 

“Even if we’re able to answer the first question, which is the hardest, if you can get past that, sometimes the underwriting, the risk-adjusted underwriting doesn’t make sense,” Marshall said. “As a result, while the company reviews a steady stream of potential deals, it is relatively rare for a target to progress to the point where Pulte is seriously considering an offer.”

The builder hasn’t acquired a competitor in years. Previous acquisitions over the last decade include Nevada-based American West Homes in 2019 and Sun Belt builder John Wieland Homes and Neighborhoods in 2016.