Lennar profit beats as housing market shows steady recovery

Time to buy homebuilders?

Lennar, the No. 2 U.S. homebuilder, reported higher-than-expected quarterly profit and revenue and said the housing market continued to make a "slow and steady recovery."

An improving job market and attractive mortgage rates continue to fuel demand for housing in the United States, helping homebuilders such as Lennar and PulteGroup.

U.S. home prices are set to rise almost 5 percent next year, despite the prospect of several interest rate increases, according to the latest Reuters poll.

The U.S. Federal Reserve raised interest rates last week and signaled a faster pace of increases in 2017.

President-elect Donald Trump's promises of tax cuts, infrastructure spending and deregulation have raised expectations that the economy is set for stronger growth.

"With the anticipation of a new President focusing on accelerating economic growth, we believe that our fortified balance sheet, our diversified business model and our refined product offerings, will continue to hold us in good stead in a high-growth economy, despite the potential of moderately rising interest rates over the next several years," Chief Executive Stuart Miller said in a statement on Monday.

Lennar, whose shares were up 2.6 percent in premarket trading, is the first homebuilder to report since the Fed raised interest rates by a quarter of a percentage point last week.

A sign advertising available homes is posted at a housing development in Dublin, California.
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Data in the past few months has pointed to strength in the housing industry. Permits for future construction of single-family homes — the biggest segment of the market — rose to a nine-year high in November, Commerce Department data showed on Friday.

D.R. Horton Inc, the biggest U.S. homebuilder, reported in November a 19.2 percent jump in fourth-quarter revenue, helped by higher home sales and prices, and said it expected its home sales for fiscal 2017 to rise 8 percent to 13 percent.

Orders, a key indicator of future revenue for homebuilders, rose 9 percent in the fourth quarter ended Nov. 30, Lennar said.

The Florida-based builder, which mainly caters to buyers looking for a second home, sold 8,228 homes during the quarter, compared with 7,657 last year. The average sales price increased 2.6 percent to $358,000.

Lennar said in September it would buy fellow Florida-based homebuilder WCI Communities for about $643 million, boosting its land bank in one of the fastest improving housing markets in the United States.

Lennar's net income attributable to shareholders rose to $313.5 million, or $1.34 per share, in the quarter from $281.6 million, or $1.21 per share, a year earlier.

Revenue rose 14.6 percent to $3.38 billion.

Analysts on average had expected the company to earn $1.29 per share on revenue of $3.30 billion, according to Thomson Reuters I/B/E/S.

Up to Friday's close, shares of the company had fallen 11.2 percent this year.