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Homebuilders Soar On Booming Prices, D.R. Horton Profit

Homebuilders logged a second straight day of robust gains Tuesday as D.R. Horton (DHI) topped sales and earnings estimates and a separate report showed continued strength in U.S. home prices.

D.R. Horton logged earnings of 36 cents a share for its fiscal Q1, which ended in December. That was up 80% from the prior year and 7 cents above consensus.

Revenue rose 33% to $1.6 billion, topping views for $1.45 billion. Homes closed climbed 19% to 6,188, while net sales orders rose 4% to 5,454 homes.

"Management indicated that housing market conditions continue to improve across most of D.R. Horton's operating markets, and that the company's weekly sales pace has accelerated in January," Citigroup analyst Will Randow noted in a report.

D.R. Horton shares rose 10% to a six-month high of 23.16 intraday before closing at 23.

IBD's Building-Residential/Commercial group rose 4.7% Tuesday. That follows Monday's 3.2% gain as NVR (NVR) easily topped earnings forecasts, offsetting a weaker-than-expected December new-home sales report.

NVR (NVR) shares rose 5% Tuesday after climbing 5% Monday.

Meanwhile, the November S&P/Case-Shiller home price index, released Tuesday, showed another strong gain in November. The 20-city composite rose 13.7% year-over-year, the best gain since February 2006.

David Blitzer, chairman of the index committee at S&P Dow Jones Indices, called November a "good month" for home prices despite a 0.1% unadjusted dip vs. October.

"Prices typically weaken as we move closer to the winter," he said. "Looking at the year-over-year returns, the Sun Belt continues to push ahead, with Atlanta, Las Vegas, Los Angeles, Miami, Phoenix, San Diego, San Francisco and Tampa taking eight of the top nine spots. Detroit continues to recover but remains the only city with prices below its 2000 level.

Higher prices also figured into D.R. Horton's Q1 results. The Fort Worth, Texas-based company, which is expanding from first-time buyers to include move-up homes, saw its average sales price rise 10% to $275,600.

The gain "reflected pricing power across most of our markets and increased demand from move-up buyers," said Chairman Donald Horton in a statement.

Mortgage rates have retreated in 2014 after reaching two-year highs at the end of last year.

JPMorgan analyst Michael Rehaut noted that D.R. Horton's sales in the East, South Central and Southeast regions rose 28%, 15% and 2% respectively. Those gains offset declines in the Midwest, West and Southwest.

D.R. Horton's Q1 results "represent only a modest positive," he said.

"We believe orders and margins were roughly in line with expectations, which we view as more important metrics regarding future trends," Rehaut said.

Four other builders are on tap this week. M/I Homes (MHO) reports Wednesday. PulteGroup (PHM), Beazer Homes (BZH) and Ryland (RYL) follow Thursday. Shares of all four rose.