(Reuters) - No. 3 U.S. homebuilder Lennar Corp (LEN.N) reported a first-quarter profit well above market expectations as lower interest rates and rising rents encouraged consumers to buy new homes, sending its shares up as much as 5 percent.
The housing market in the United States has been recovering steadily after falling into a deep rut six years ago, encouraging builders to undertake new projects.
Groundbreaking to build U.S. homes rose in February and new permits for construction climbed to the highest level since 2008, a sign the housing market recovery is gathering steam.
Lennar President Rick Beckwitt said on a conference call that the company was seeing a strong start to the spring selling season, compared to the previous year.
The spring selling season is to homebuilders what Christmas is to retailers. February is the first official month of the spring selling season.
The company also said it has acquired enough land to meet projected sales until 2014, and expects to spend about $500 million per quarter on new acquisitions focused on 2015 and beyond.
Low home inventories and fewer competing homebuilders have created a supply crunch, driving up prices for new homes, the company said.
Rival D.R. Horton Inc (DHI.N) said in January that new home inventory in the United States were at its lowest levels in five or six years.
Lennar reported a 28 percent spike in home sale closings and a 13 percent rise in average sale prices, pushing revenue up 37 percent to $989.9 million.
Backlog at the end of the quarter was worth $1.5 billion as new orders rose 34 percent to 4,055 homes.
Lennar's net income rose nearly three-fold to $57.5 million, or 26 cents per share, in the quarter ended February 28, from $15 million, or 8 cents per share, a year earlier.
Analysts on average expected earnings of 15 cents per share on revenue of $898.4 million, according to Thomson Reuters I/B/E/S.
Lennar said labor and material costs rose 4 percent in the first-quarter. However, it said it expects rising home prices to offset higher costs.
Lennar said earlier this year that it planned to venture into the apartment rental market to take advantage of a supply crunch.
Miami-based Lennar's shares, which have more than doubled in value since the beginning of 2012, were up 5 percent at $43.41 on Wednesday afternoon on the New York Stock Exchange.
Reporting by Tej Sapru and A.Ananthalakshmi in Bangalore; Editing by Saumyadeb Chakrabarty and Roshni Menon