Home construction stocks and homebuilder ETFs shook off the broader market weakness and climbed Wednesday after Lennar Corp (NYSE: LEN) revealed better-than-expected quarterly results and pointed to robust demand ahead of the big spring selling season.
On Wednesday, the iShares U.S. Home Construction ETF (NYSEArca: ITB), the largest homebuilder-related ETF, jumped 2.8% and the equally weighted SPDR S&P Homebuilders ETF (NYSEArca: XHB) rose 1.7%.
Homebuilders strengthened after Lennar Corp revealed adjusted earnings of $1.11 per share, compared to expected 77 cents per share from analysts polled by Thomson Reuters, MarketWatch reports. Revenue increased 28% to $2.98 billion, compared to expectations of $2.65 billion.
“We continue to remain positive on the outlook of the housing industry in general,” CEO Stuart Miller said in prepared remarks. “Although interest rates have ticked up, unemployment remains low, the labor participation rate has been increasing, and wages have been moving modestly higher, though we think, even higher than the data the government captures. Feedback from our new home consultants indicates that our customer base feels confident in both job security and compensation levels in spite of the political noise that abounds.”
Homebuilder Orders Gain Traction
Orders, a key indicator of future revenue for homebuilders, also gained 30.4% to 8,456 homes in the quarter, Reuters reports.
Housing demand is being supported by a strong economy and an improving job market, despite higher raw material costs and shortage of labor.