Lennar Corporation (NYSE:LEN), PulteGroup, Inc. (PHM): Why Investing in These 2 Homebuilders Is a Good Idea

Expansion for future benefits

KB Home (NYSE:KBH) has been acquiring land in San Antonio over the last two years. On June 12, 2013, it announced to acquire approximately 200 acres of land in this market. It will build a community named CrossCreek in San Antonio comprising of 600 homes. This community will open in two phases, with first phase opening by the end of 2013 and the second phase by the early 2014. The company will offer 12 different home designs. This vast variety of designs will boost demand, which will increase the company’s home revenue. KB Home anticipates a revenue upsurge from $1.5 billion in 2012 to $2.1 billion in 2013 followed by $2.5 billion in 2014.

U.S. market recovery is growing the demand for residential properties. Therefore, the company is constructing 184 new communities this year and 209 in 2014. The average selling price in these communities will be between $285,000 and $290,000. This will contribute towards the company’s total revenue; Analysts expects its revenue to increase from $1.5 billion in 2012 to $2.1 billion in 2013 followed by $2.5 billion in 2015.

Bottom line

Both Lennar Corporation (NYSE:LEN) and KB Home (NYSE:KBH) are adopting various strategies to capitalize on the rising demand for homes in the U.S. This will lead towards more revenue for each company. The companies are moving towards high population areas to take the advantage of the shortage of supply. In addition, rising cost concerns are forcing the companies towards various cost cutting initiatives that are leading towards higher margins. I recommend a buy for both stocks.

Shweta Dubey has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

The article Why Investing in These 2 Homebuilders Is a Good Idea originally appeared on Fool.com.

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