NEW YORK, NY--(Marketwire -06/29/12)- The U.S. housing market continues to show signs of a long awaited recovery. On Wednesday shares of home builders rallied as Lennar's earnings beat analysts' estimates, and pending home sales in the U.S. rose. "Evidence from the field suggests that the 'for sale' housing market has, in fact, bottomed and that we have commenced a slow and steady recovery process," Lennar CEO Stuart Miller said in the company's earnings release. Five Star Equities examines the outlook for companies in the Residential Construction Industry and provides equity research on Lennar Corporation (LEN) and Hovnanian Enterprises, Inc. (HOV).
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The index of pending home sales in May surged 5.9 percent to 101.1, the highest level in two years, according to data from the National Association of Realtors. A report from the U.S. Commerce Department earlier this week showed that sales of new single-family homes jumped 7.6 percent in May, also a two-year high. New home sales rose to an annual rate of 369,000 last month from 343,000. According to analysts surveyed by MarketWatch sales were expected to be at an annual rate of 348,000.
"This improvement adds to the recent flow of good news on the housing sector, reinforcing our view that this beleaguered sector is finally on the mend," Millan Mulraine, a senior U.S. strategist at TD Securities, said in an email to clients.
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Shares of Lennar jumped nearly 5 percent after the company reported second quarter 2012 profits of $452.7 million and revenues of $930.2 million. Revenues were forecasted to be $886 million according to analysts surveyed by Thomas Reuters. "Evidence from the field suggests that the 'for sale' housing market has, in fact, bottomed and that we have commenced a slow and steady recovery process," said Chief Executive Stuart Miller.
Hovnanian Enterprises also reported strong second quarter results earlier this month. Net income was $1.8 million during the second quarter, compared with an after-tax net loss of $72.7 million, during the second quarter of 2011. The second quarter profit broke a streak of eight consecutive loses. Shares of the company have soared nearly 50 percent in the last month.
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