* Average selling prices rise 10 pct
* D.R. Horton shares rise 9 pct, PulteGroup 4 pct
* Horton's orders rise 57 pct from preceding quarter (Adds details, background; updates shares)
By Sagarika Jaisinghani
April 24 D.R. Horton Inc and PulteGroup Inc, the two biggest U.S. homebuilders, said a tight supply of homes is helping them to raise prices, suggesting that the market is regaining strength ahead of the crucial spring selling season.
Spring sales are to the real estate market what holiday season sales are to retailers, and the industry is hoping home buyers will return in force after a bleak winter and as mortgage rates stabilize.
A dwindling number of existing homes for resale and a scarcity of ready-to-build land is allowing U.S. homebuilders to hike their prices.
D.R. Horton's shares rose as much as 9 percent on Thursday, while PulteGroup's stock gained as much as 4 percent after the companies reported a 10 percent rise in average selling price for the first three months of the year.
With prices ranging between $100,000 and $1 million, D.R. Horton primarily targets first-time buyers, the group considered most sensitive to interest rates.
PulteGroup focuses on buyers trading up for the first time, as well as first-time buyers.
Fixed 30-year mortgage rates averaged 4.49 percent last week, the Mortgage Bankers Association said, down from a high of 4.80 in September - another indication that demand could pick up after weak sales in March.
The run-up in prices, coupled with the unusually cold winter and the higher rates, pushed sales of new U.S. single-family homes in March to their lowest level in eight months, according to Commerce Department data.
D.R. Horton's orders rose 9 percent in the quarter compared with a year earlier and 57 percent from the preceding quarter.
PulteGroup's orders fell 6 percent from a year earlier, but analysts said that did not reflect weakness in the wider housing market.
The company is slowing the pace of new-home building to focus on raising prices and improving margins.
RBC Capital Markets analyst Robert Wettenhall said in a note this week he expected PulteGroup's orders to fall 14 percent in the latest quarter.
D.R. Horton's revenue from home sales, excluding land sales, rose 22.7 percent to $1.68 billion. Net income rose to $131.0 million, or 38 cents per share, from $111.0 million, or 32 cents per share, a year earlier.
PulteGroup's net income dropped to $74.8 million, or 19 cents per share, from $81.8 million, or 21 cents per share, in the same quarter of 2013. Home sales revenue fell 1 percent to $1.09 billion.
D.R. Horton's shares, which had fallen about 4 percent this year up to Wednesday, were up 7.6 percent at $22.98 in midday trading on the New York Stock Exchange.
PulteGroup's shares, which had dropped 9 percent since the start of the year, were up 2 percent at $18.94.
The Dow Jones U.S. Home Construction index had fallen about 6 percent up to Wednesday's close. (Reporting by Sagarika Jaisinghani in Bangalore; Editing by Saumyadeb Chakrabarty and Ted Kerr)