Shares of the nation's home builders, including Los Angeles-based Kaufman & Broad Home Corp., jumped Tuesday after Kaufman reported better-than-expected quarterly earnings amid surging demand for new housing.
Kaufman's stock soared nearly 16% after it reported second-quarter net income of $17.2 million--up more than 60% over the same three-month period last year. The jump in net income reflects higher sales, higher prices and a new corporate strategy that has fattened operating profit.
Another major home builder, Miami-based Lennar Corp., also reported strong second-quarter results Tuesday. Lennar, which has a major presence in Southern California, said its quarterly profit increased 59% to $25.6 million and that revenue rose 35% to $532.1 million.
Kaufman's quarterly results attracted the attention of investors, who bid up the shares of home builders across the board. On Tuesday, Kaufman shares jumped $4.44 to close at $31.63 in New York Stock Exchange trading.
Meanwhile, Dallas-based Centex Corp. jumped $2.25 to close at $39.38; Lennar rose $1.75 to $30.38; and Pulte Corp. of Bloomfield Hills, Mich., gained $1.44 to $29.94. All trade on the New York Stock Exchange.
Low mortgage rates, high consumer confidence, income growth and robust employment are keeping the market humming, analysts said.
Sales have been so heavy in California that Kaufman & Broad has run out of homes to sell in many developments, despite price hikes.
Kaufman's second-quarter revenue rose to $537.5 million from $415 million. During the quarter, the company completed the sale of 3,409 homes, up 38% from a year earlier. The average sales price of the homes it sold in California rose 4% to $215,800.
The Standard & Poor's home building index rose 15.68 points, or 8.85%, to 192.77. That was its biggest percentage gain since May 1995, when it rose 9.74%.
The rise came as Goldman, Sachs & Co. raised its ratings on several home builders, including Centex, Kaufman & Broad, Pulte and Columbia, Md.-based Ryland, citing better-than-expected earnings and low stock valuations. Goldman analyst Stephen Dobi said he expects interest rates, and the home mortgage rates that shadow them, to remain low because of Asia's weak economies. Low mortgage rates help boost sales by making homes affordable to more people.