(Reuters) - Homebuilder Lennar Corp (LEN.N) posted a sharp jump in new orders and said it was seeing real signs of recovery in the housing market, reassuring investors who had turned jittery after a recent string of bad news.
An unexpected fall in pending U.S. home sales in February suggested a pause in the tentative housing market recovery and a weak start to the spring selling season. Weak quarterly results from smaller rival KB Home (KBH.N) last week had also dampened hopes.
Shares of Lennar -- the third largest U.S. homebuilder -- rose as much as 7 percent on Tuesday to touch their highest in four-and-a-half years. Stocks of other homebuilders were also trading up.
"The housing market and the overall economy are stabilizing and a very real trend is beginning to take shape," Lennar's Chief Executive Officer Stuart Miller said on a conference call with analysts.
Miami-based Lennar's first-quarter new orders jumped 33 percent to 3,022 homes in the December-February period.
CEO Miller said Lennar has been able to increase prices and reduce sales incentives in some of its communities.
Lennar's orders have been increasing for four straight quarters as low interest rates and home prices have helped improve Americans' sentiments towards owning a home.
Homebuilder sentiment in March was the highest level since June 2007. And the S&P homebuilding sub-industry index .GSPHOME has doubled in value since October.
Permits for U.S. homebuilding neared a 3-1/2 year high in February reinforcing views that home building would add to economic growth this year for the first time since 2005.
However, CEO Miller warned that the recovery process would not be smooth.
"The stabilization process after a full seven year decline in housing is rocky and erratic and is certainly not yet broad-based," Miller said.
He said recovery will emanate from the most desirable markets and spread slowly outward over the next few years.
Last week KB Home had also warned that the recovery would not be across the board.
Recovery in the housing market is far from complete as a glut of unsold homes continue to pull down prices. U.S. single-family home prices were unchanged in January, a closely watched survey said on Tuesday, suggesting the battered housing market continues to crawl along the bottom.
Lennar, which also provides mortgage financing and invests in distressed real estate, said first-quarter profit was $15 million, or 8 cents a share, down from $27.4 million, or 14 cents a share, a year ago.
Analysts expected earnings of 4 cents a share, according to Thomson Reuters I/B/E/S.
Lennar shares were up 5 percent at $27.79 on Tuesday on the New York Stock Exchange.
(Reporting by A. Ananthalakshmi in Bangalore; Editing by Supriya Kurane)