Builder stocks hit highs as housing gains continue

Homebuilder shares hit new highs as housing recovery gains momentum

Associated Press

BOSTON (AP) -- Shares of homebuilders climbed to new 52-week highs on Wednesday as evidence mounted that the housing market continues to improve, including a quarterly profit at Lennar Corp. that easily topped expectations.

Among the indicators was a report from Morgan Stanley Research analysts who increased their projection for U.S. home price appreciation this year to a 6 to 8 percent range from their earlier 4 to 6 percent forecast.

The analysts also estimated that home prices will rise a further 4 to 6 percent next year, and 3 to 5 percent in 2015.

Among the positive factors they cited are low mortgage rates and growing demand for housing fueled by an improving jobs market.

"The momentum in most metrics of housing activity is running well ahead of the pace we had expected," said analysts Vishwanath Tirupattur, James Egan and Jose Cambronero.

For example U.S. builders started houses and apartments in February at the fastest pace in 4 1/2 years, the Commerce Department said Tuesday. Building permits, a sign of future construction, also rose sharply last month.

On Wednesday Lennar said that its fiscal first quarter earnings more than tripled as new orders and deliveries continued to rise. Limited supply has helped push home prices higher, with the average sales price of homes in Lennar's backlog up 13 percent at quarter's end compared with the prior-year period. For the three months ended Feb. 28, Lennar earned $57.5 million, or 26 cents per share. Analysts predicted earnings of 16 cents per share, according to a FactSet poll.

Not all housing market indicators have been positive. Another report on Monday showed a decline in confidence among U.S. homebuilders this month because of concerns that increased demand for new homes is exceeding supplies of ready-to-build land, building materials and workers. The National Association of Home Builders/Wells Fargo builder sentiment index fell for the second month in a row, after rising for eight months through January.

But the positive trend of recent housing data helped send builders' stocks to new highs on Wednesday.

Toll Brothers Inc. led the group, rising $2, or 5.8 percent, to $36.51. Lennar gained $2, or 4.8 percent, to $43.42, after briefly hitting a 52-week high of $43.89 earlier in the session. That's the highest the stock has been since June 2007.

D.R. Horton Inc. rose $1.09, or 4.5 percent, to $25.40, after reaching a 52-week high of $25.56.

Here's how other builder stocks fared in afternoon trading:

PulteGroup Inc.: Up 49 cents, or 2.4 percent, to $21.31.

KB Home: Up 50 cents, or 2.4 percent, to $21.53.

Hovnanian Enterprises Inc.: Up 14 cents, or 2.3 percent, to $6.33.

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