UPDATE 2-D.R. Horton results underline pick-up in housing demand

* 1st-quarter orders rise 4 pct to 5,454 homes

* Net income jumps 86 pct to $123.2 mln

* Revenue rises 33 pct to $1.64 bln

* Average sales price increases 10 pct

* Shares rise as much as 5 pct premarket

(Adds background, updates shares)

Jan 28 (Reuters) - D.R. Horton Inc, the largest U.S. homebuilder, reported a rise in orders for the quarter ended December and said its sales pace picked up this month as stabilizing mortgage rates and signs of an economic recovery spur housing demand.

D.R. Horton's shares rose as much as 5 percent in premarket trading after the company also reported an 86 percent jump in profit for the first quarter, aided by higher selling prices.

The company, which caters to first-time home buyers, said its average sales price rose 10 percent to $275,600 in the quarter, indicating that the company may not have to resort to heavy discounts to promote sales.

D.R. Horton warned in November that it could step up discounting if demand did not pick up by the spring selling season - traditionally the strongest period for U.S. homebuilders.

"Housing market conditions continue to improve across most of our operating markets and our weekly sales pace has accelerated in January," Chairman Donald R. Horton said in a statement on Tuesday.

Orders booked by D.R. Horton increased to 5,454 homes in the first quarter - seasonally the slowest selling period for U.S. homebuilders. Orders had fallen 2 percent in the preceding quarter.

Demand is likely coming back as U.S. homebuyers adjust to higher mortgage rates, which have somewhat stabilized after spiking in July.

D.R. Horton has lagged some peers in the housing market recovery due to weaker land assets. It took a bigger hit when demand slowed over the summer.

Orders at No. 3 builder Lennar Corp and largest luxury builder Toll Brothers Inc stayed strong through the recent slowdown as they have a wider presence in city centers thanks to their strategy of buying land through the economic downturn of 2008-2010.

D.R. Horton's net income almost doubled to $123.2 million, or 36 cents per share, in the quarter ended Dec. 31 from $66.3 million, or 20 cents per share, a year earlier.

Revenue rose 33 percent to $1.64 billion.

D.R. Horton shares have dropped 1.7 percent in the past 12 months while the Dow Jones Home Construction index, fell about 7 percent.

The company's shares were up at $21.70 before the bell on Tuesday after closing at $20.94 on the New York Stock Exchange on Monday.

(Reporting by Sagarika Jaisinghani in Bangalore; Editing by Don Sebastian)