Stocks of major U.S. homebuilders rose Wednesday after Lennar Corp. reported a 20 percent increase in home orders in the fourth quarter.
The Standard & Poor's 1500 Homebuilding index, which includes 11 companies, rose 4.3 percent during late Wednesday trading.
Miami-based Lennar, the country's third-largest homebuilder by revenue, said home orders increased to 3,027 homes in the fourth quarter ending Nov. 30, up from 2,520 from the previous year, beating analysts' forecasts.
The stronger demand suggested that the housing market is recovering. New home sales make up less than one fifth of the market, but are a driver for economic growth.
As I look ahead to 2012, I am cautiously optimistic we have seen a bottom formed and we will start to see a market recovery, said Stuart Miller, CEO of Lennar, in an earnings call on Wednesday.
Net income in the fourth quarter was $30.3 million, or 16 cents per share, down from $32 million and 17 cents per share in the previous year.
Lennar's revenue was up 11 percent to $952.7 million from $860.1 milllion, beating analysts' expectation of $874.6 million.
Net income for 2011 was $92.2 million, or 48 cents per share, up from $95.3 million, or 51 cents per share, in 2010.
Lennar's Rialto Investments division, which invests in distressed properties, had revenue double to $46.5 million from $19.7 million in the previous year.
Shares of Lennar were up 7.18 percent to $22.25 during late Wednesday trading.
Other homebuilders also saw gains. Hovnanian Enterprises was up 18.23 percent to $2.40 per share, KB Home was up 11.95 percent to $8.62 per share, D.R. Horton, Inc. was up 4.82 percent to $14.13 per share and M/I Homes, Inc. was up 10.3 percent to $10.92 per share.
However, Goldman Sachs analyst Joshua Pollard wrote on Tuesday that investors should remain wary of the housing industry.
With homebuilding stocks outperforming the market by 3,500 basis points in the last three months, we would wait for a pullback or a clearer picture that housing is healing quicker than it currently is, wrote Pollard, although he raised the outlook for homebuilders PulteGroup and Toll Brothers.