Sector Snap: Homebuilders
NEW YORK (AP) — A strong third-quarter report from KB Home provided the latest tailwind for the housing sector Friday whose fortunes, after a string of surprising economic reports, appear to be turning.
For KB Home reported net income of $3.3 million, reversing a loss of $9.6 million for the same period a year ago.
KB Home is seeing orders for new homes rise and it is completing more construction projects. Company shares jumped 14 percent, hitting levels not seen since early 2011.
CEO Jeffrey Mezger also tweaked optimism about the year ahead, saying Friday that the housing recovery is building momentum across the U.S. as inventory levels drop and home prices climb.
However, KB Home's great quarter follows other hints at an industry on the mend.
On Wednesday, a pair of reports, one from the government and the other from an industry group, revealed a jump in sales of previously occupied homes and further gains in home construction.
Sales of previously occupied homes rose 7.8 percent in August from July to a seasonally adjusted annual rate of 4.82 million, the National Association of Realtors reported. And U.S. builders broke ground on 2.3 percent more homes and apartments in August than July, according to the Commerce Department.
The annual rate of construction rose to a seasonally adjusted 750,000, driven the best rate of single-family home construction since April 2010.
Mortgage rates are part of the reason. On Thursday mortgage buyer Freddie Mac said that the average rate on the 30-year loan declined to 3.49 percent from 3.55 percent last week. That matched the lowest rate since long-term mortgages began in the 1950s.
The average on the 15-year fixed mortgage, a popular refinancing option, plunged to 2.77 percent, a record low.
In afternoon trading, KB Home shares rose $1.83, or 14 percent, to $14.94. Elsewhere in the sector, Standard Pacific Corp. rose 35 cents, or 4.7 percent, to $7.81; PulteGroup Inc. rose 63 cents, or 3.8 percent, to $17.35; Ryland Group Inc. added $1.10, or 3.4 percent, to $33.71; and MDC Holdings rose $1.11, or 2.8 percent, to $40.72.
Investors will have additional glimpses at the health of the market next week. Case-Shiller releases its 20-city index Tuesday and on Wednesday, the Commerce Department reports on new home sales. Pending home sales come out the following day.