The S&P Supercomposite Homebuilding Index gained as much as 2.7 percent to the highest since Sept. 19, with Lennar jumping 4 percent and KB Home surging 5.5 percent. PulteGroup added 3.7 percent and Toll Brothers Inc. rose 3.3 percent.
Lennar’s “solid” orders were “another sign of improving housing demand,” Zelman Associates wrote in a note to clients. Lennar reported new orders of 10,463 homes, a 24 percent increase, versus the company’s prior view of 9,700 to 10,000. Analysts had expected 10,100, according to the average two estimates compiled by Bloomberg.
Falling mortgage rates are also helping builders’ earnings and stock-price prospects. On Tuesday, JPMorgan (NYSE:JPM) said investor optimism about lower interest rates was likely priming them to overlook any possible disappointments in KB Home and Lennar’s results. A lower 10-year Treasury yield “heals all wounds,” analyst Michael Rehaut wrote in a note. On Wednesday morning, Treasuries resumed their rally, with yields down about 3 basis points to 2.395 percent.
Mortgage rates fell and home prices moderated, “providing a catalyst for the new home market to correct itself,” Lennar Executive Chairman Stuart Miller said in a statement. Lennar is due to host a conference call at 11 a.m. New York time.
On Tuesday, KB Home Chief Executive Jeffrey Mezger said his company is “encouraged by improving market conditions,” which should help boost revenues in the second half of this year. Orders of 2,675 topped an estimate of 2,663.
(Updates share trading in the second paragraph, adds second chart.)
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