Lennar looks to calm interest rate worries Lennar sought to calm investor anxieties that a rise in mortgage interest rates would hamper the real estate recovery, as the US homebuilder reported better than expected second-quarter revenues amid stronger orders and higher prices. After a month of market volatility that has taken its toll on the homebuilding sector, the Miami-based company's shares rose 3.3 per cent to $36.15 in early trading on Tuesday. Lennar has suffered losses of almost 20 per cent since May 22, when Federal Reserve chairman Ben Bernanke first indicated that the central bank might pull back on its bond-buying programme. "Against the backdrop of recent investor concerns over mortgage rate increases, we believe that our second-quarter results . . . continue to point towards a solid housing recovery," said Stuart Miller, chief executive. Affordability remains high and despite recent interest rate increases, we have seen very little impact on sales or pricing. Lennar reported a 53 per cent jump in revenues to $1.43bn for the three months ended May 31. However, earnings slumped 70 per cent to $137.4m, or 61 cents a share, compared with $452.7m, or $2.06 a share, a year earlier. The homebuilder was buoyed by a much larger tax gain in the year-ago period than the current quarter. Excluding the tax-related gain, profit was 43 cents a share. The company beat forecasts that had called for adjusted earnings of 33 cents on revenue of $1.33bn. Even so, some industry watchers remained cautious. Robert Wetenhall, analyst at RBC Capital Markets, said: "Lennar delivered another strong quarter, which is a testament to the strength of the housing recovery, but our biggest concern is that homebuilder equities are facing strong headwinds in the form of higher interest rates, which are having a negative impact on valuations. The sector is very sensitive. Although homebuilder stocks will struggle in the short term as "higher interest rates will reduce affordability, which in turn will moderate the slope of the recovery," Mr Wetenhall added, in the long term, better pricing practices and strong volume growth will provide gains. Low mortgage interest rates, an improving jobs market and rising consumer confidence have prompted more Americans to buy houses. Sales of new US homes climbed more than forecast in May to the highest level in almost five years. Purchases rose 2.1 per cent to an annualised pace of 476,000. The depletion of the existing stock of homes has driven new home construction that has boosted homebuilders. Lennar's home deliveries increased 39 per cent to 4,464 homes, while the cancellation rate was 14 per cent compared with 16 per cent a year ago. Orders jumped 27 per cent to 5,705 homes. The company's backlog - houses ordered but not yet finished and an indication of future business - grew 55 per cent to 6,163 homes. Lennar has been able to consistently charge more for its houses due to a shortage of single-family homes. The average selling price climbed 13 per cent to $283,000. Gross margin on home sales widened to 24.1 per cent from 22.5 per cent. Lennar's shares have gained almost 170 per cent since the housing market started to recover in October 2011. The company has diversified into a financial services provider as well as a land and apartment developer and an investor in distressed property.