Low interest rates and rising rents pushed home orders and prices higher for Lennar (LEN), which delivered much better than expected first-quarter earnings and sounded bullish going forward.
The No. 3 U.S. homebuilder believes housing is early in a multiyear rally that should continue even if historically low interest rates begin to climb, since rents would likely rise too.
"The comparisons even at those higher rates are going to be favorable," CEO Stuart Miller told analysts on a conference call. "People have to have a place to live.
Lennar earned 26 cents a share, according to Thomson Reuters, 11 cents more than analyst forecasts and 225% above last year. EPS was 15 cents without a tax benefit. Revenue rose 37% to $989.9 million, beating views for $898 million.
Backlog climbed 82% to 4,922 homes, or 105% to $1.5 billion.
Lennar shares rose 5% to 43.40 in the stock market Wednesday, the highest since mid-2007.
"Growth remains on a positive trajectory," Sterne Agee analyst Jay McCanless wrote in a client note. But he maintained his neutral rating on the stock, believing it's already fairly valued.
Overall though, housing continues to rebound from the market's near-collapse six years ago. Building during the downturn all but stopped, while existing-homes still aged, and new household formations continued, creating tight supply and rising demand, the company said.
Government data out Tuesday showed the pace of new-home construction continued to build in February. And permits for new homes surged to their highest level since 2008.
"This shortfall will have to be made up and the market is beginning to move in that direction," Miller said.
Home Orders Jump Credit is still tight, though Lennar said lenders have become more comfortable making loans in recent months.
Lennar took 4,055 orders for homes in the three months that ended Feb. 28, up 34% from a year earlier. Its cancellation rate declined slightly to 15%.
The average price of houses delivered in the quarter rose 9% to $269,000. The average price of homes in its backlog was up 13%.
Toll Bros. (TOL), the top U.S. luxury homebuilder, missed analysts' earnings forecasts last month. But it said pent-up demand was "colliding with limited supply," pushing up prices.
KB Home (KBH) reports Q1 results Thursday morning. Analysts see revenue climbing 41% to $359.8 million. It's expected to narrow its per-share loss to 22 cents from 57 cents last year.
Toll shares leapt 6% Wednesday. KB shares rose nearly 3%.
The National Association of Home Builders said Monday that its sentiment index fell in March. Miller said that likely reflects smaller private builders who couldn't bank cheap land during the bust, and are locked out at today's higher prices. Lennar spent nearly $500 million on land in its Q1, and says it has enough to keep it busy through 2014.
"We have excellent land position in a land-constrained market," Miller said.