Too Soon To Gauge Effect of Rising Mortgage Rates on Home Prices (LEN) (PHM) (TOL)

This morning Lennar (NYSE: LEN) reported Q2 results that topped estimates. This helped lift shares homebuilder stocks, including PulteGroup, Inc. (NYSE: PHM) and Toll Brothers Inc. (NYSE: TOL). Above consensus results from Case-Shiller's price index in April, along with strong may new home sales, helped support shares. Despite these positives, it is too soon to dismiss the potential impact of rising mortgage rates, thinks Wells Fargo's Adam Rudiger.

"While LEN's order growth rate slowed somewhat, relative to the previous 5 quarters, the moderation was expected," said Rudiger.

"Management noted that recent mortgage rate increases have had 'very little impact on sales or pricing.' While we don't expect that recent mortgage rate increases will derail the housing recovery, we believe it is too early to dismiss the risks of rising mortgage rates, based upon LEN's results, as the 30-year fixed rate mortgage (according to bankrate.com) averaged 3.62% during LEN's second quarter (May), well below the 4.51% average rate as of yesterday, June 24," cautioned the analyst.

Wells Fargo has a Market Perform rating on Lennar.

For an analyst ratings summary and ratings history on Lennar (NYSE: LEN) click here. For more ratings news on Lennar click here.

Shares of Lennar closed at $34.99 yesterday.

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