* Reports higher third-quarter gross margins
* Average selling price rises 11 pct
* Sets aside $1.6 billion to invest in land in 2014
* Shares rise as much as 7 pct
By Mridhula Raghavan and Sagarika Jaisinghani
Oct 24 (Reuters) - PulteGroup Inc, the No. 2 U.S.homebuilder, said a slowdown in new home orders would be"short-lived" as Americans return to the market after a periodof economic uncertainty.
PulteGroup also reported fatter margins and higher sellingprices for the third quarter. Its shares rose as much as 7percent on Thursday, pulling up the Dow Jones Home Constructionindex by 3 percent.
"The slowdown (in orders) will ultimately prove to beshort-lived within a sustained, multi-year housing recovery,"Chief Executive Richard Dugas said in a statement.
Mortgage rates began rising in May and touched a two-yearhigh in July after the Federal Reserve started talking abouteasing the stimulus put in place during the crisis.
Already put off by higher rates, some would-be home buyersdeferred big purchases in September given the potential of aU.S. government shutdown and a debt default.
The ongoing threat of a debt default is expected to hurthousing demand in the current quarter, before easing in 2014,according to analysts.
PulteGroup's orders - a key indicator for builders, who donot book revenue until they finish a house - fell 17 percent to3,781 homes in the third quarter ended Sept. 30.
The company's orders have also suffered this year due to ashortage of land on which to build, putting it at a disadvantageto builders that built up their land banks through the lasteconomic crisis.
PulteGroup expects to nearly double its spending on land anddevelopment to $1.4 billion this year, and will increase theamount to $1.6 billion in 2014.
The company, along with No. 1 U.S. homebuilder D.R. HortonInc, is building up its land bank to catch up withLennar Corp and Toll Brothers Inc, which havethe strongest land banks among the large U.S. homebuilders.
PulteGroup's gross margins expanded to 20.9 percent in thethird quarter from 17.0 percent a year earlier. The averageselling price of its homes rose 11 percent to $310,000.
"What we do like about the story is really the gross margincontrol," Williams Financial Group analyst David Williams said.
Net profit rose to $2.28 billion, or $5.87 per share, from$116.6 million, or 30 cents per share, a year earlier.
The results include the reversal of a deferred tax assetvaluation allowance of $2.1 billion, or $5.42 per share.
Excluding this reversal, PulteGroup earned 45 cents pershare in the quarter ended Sept. 30.
Home sale revenue rose 21 percent to $1.49 billion.
Shares of the company were up 5 percent at $17.55 in latemorning trade on the New York Stock Exchange.