(Reuters) - Lennar Corp LEN.N trumped estimates for quarterly profit and revenue on Tuesday as both home sales and prices charged by the United States' second largest homebuilder increased, pointing to solid underlying demand in the U.S. housing market.

FILE PHOTO: Newly constructed houses built by Lennar Corp are pictured in Leucadia, California March 18, 2015. REUTERS/Mike Blake/File Photo

Despite being affected by the recent hurricanes, the company confirmed that orders and home deliveries both rose in the quarter ended Aug. 31.

After the short-term impact from the storms, Chief Executive Stuart Miller said he expected to see increased demand for new homes.

Lennar’s shares, which have gained more than 20 percent this year, were up 3.3 percent in afternoon trading on Tuesday.

“Results were supported by strong demand for homes, low unemployment, favorable interest rates and increased consumer confidence which are all signs of a very healthy homebuilding market,” the company said.

“There continues to be a general sentiment that the business environment is positive and that the government’s pro-business stance will result at least in job security and possibly some tax relief as well,” Miller added on a conference call.

Lennar reported gross margins of 22.8 percent in the quarter, edging past its forecast of 21.75-22 percent.

“The strong margins and reiteration of hurricane impact will be considered a positive for the shares,” MKM Partners analyst Megan McGrath wrote in a note.

Orders, a key indicator of future revenue, rose 8.4 percent to 7,610 homes in the third quarter ended Aug. 31.

Lennar said deliveries of about 950 homes would be pushed into fiscal 2018 because of the hurricanes. Texas, Florida, Georgia and South Carolina accounted for about 40 percent of annual homebuilding revenue, Lennar said last month.

But the Florida-based builder said it still sold 7,598 homes in the quarter, compared with 6,779 homes a year earlier. The average selling price rose 3.6 percent to $375,000, the strongest growth in five quarters.

The homebuilder raised its fiscal 2017 average selling price forecast to $380,000-$385,000 from its previous forecast of $370,000-$375,000.

HIGHER COSTS LOOM

U.S. mortgage applications rose to the strongest in 10 months in mid-September but actual home sales have been hampered by factors ranging from the hurricanes to a shortage of labor and homes for sale.

Industry figures say Harvey and Irma could worsen the housing shortage by pulling more of construction output into rebuilding efforts and raising costs of materials.

Lennar said direct construction costs were up 4 percent, driven by an about 5 percent increase in the cost of labor and 3 percent in materials.

The homebuilder forecast full-year gross margin of 22 percent, compared with its previous forecast of 22-22.5 percent.

Net income attributable to Lennar shareholders rose to $249.2 million, or $1.06 per share, from $235.8 million, or $1.01 per share, a year earlier.

Analysts expected profit of $1.01 per share, according to Thomson Reuters I/B/E/S.

The company’s revenue rose 15.1 percent to $3.26 billion versus estimate of $3.24 billion, according to Thomson Reuters I/B/E/S.