UPDATE 3-D.R. Horton expects strong spring home-selling season

Tue Jan 28, 2014 11:27am EST

* 1st-quarter orders rise 4 pct to 5,454 homes

* Net income jumps 86 pct to $123.2 mln

* Revenue rises 33 pct to $1.64 bln

* Average sales price increases 10 pct

* Shares rise as much as 10 pct (Adds CEO quote, analyst comment; updates shares)

By Sagarika Jaisinghani

Jan 28 (Reuters) - Homebuilder D.R. Horton Inc's sales pace picked up in January ahead of what it said would be a "very strong" spring selling season as Americans become more comfortable with higher mortgage rates in a stabilizing U.S. economy.

The largest U.S. homebuilder's shares rose as much as 10 percent after higher selling prices boosted its profit by 86 percent in the first quarter, making it the most profitable first quarter since 2006.

The company, which caters mostly to first-time home buyers, said its average sales price rose 10 percent to $275,600 in the quarter, indicating that the company may not have to resort to heavy discounts to promote sales.

D.R. Horton warned in November that it could step up discounting if demand did not pick up by the spring selling season - traditionally the strongest period for U.S. homebuilders.

"January sales are accelerating into the spring and we have a supply of spec homes available to meet that demand," Chief Executive Donald Tomnitz said on a conference call with analysts.

Spec homes, or speculative homes, are houses a company builds in expectation of future demand. D.R. Horton has one of the strongest inventories of spec homes among U.S. homebuilders.

Orders booked by D.R. Horton increased to 5,454 homes in the first quarter ended Dec. 31 - seasonally the slowest selling period for U.S. homebuilders.

The fact that orders didn't dip again after falling 2 percent in the preceding quarter was encouraging, Morningstar Inc analyst James Krapfel said.

"Potential homebuyers are getting more comfortable with the higher interest rate environment and returning to buying homes," he said.

U.S. consumer confidence rose in January as consumers grew more optimistic about both business conditions and the job market, according to a private sector report released on Tuesday.

The Dow Jones Home Construction index was up 5 percent on Tuesday morning.

GROWING INVENTORY

D.R. Horton has lagged some peers in the housing market recovery due to weaker land assets. It took a bigger hit when demand slowed over the summer.

Orders at No. 3 builder Lennar Corp and largest luxury builder Toll Brothers Inc stayed strong through the recent slowdown as they have a wider presence in city centers thanks to their strategy of buying land through the economic downturn of 2008-2010.

But Tomnitz said the company was better prepared to handle growing demand in the spring selling season.

D.R. Horton had 16,800 homes in inventory as of Dec. 31 of which 9,300 were speculative homes. Its average community count for the quarter was up 13 percent from a year earlier.

D.R. Horton's net income almost doubled to $123.2 million, or 36 cents per share from $66.3 million, or 20 cents per share, a year earlier.

Revenue rose 33 percent to $1.64 billion.

The company's shares were up at $23.06 on Tuesday morning on the New York Stock Exchange. (Additional reporting by Aman Shah in Bangalore; Editing by Don Sebastian)