Lennar, the nation's largest homebuilder, said its orders surged nearly 20% in its most recent quarter because of a shortage of houses around the country as higher interest rates cause owners to hold off on moving.

The Miami-based company said revenue rose 10% to $8.8 billion in the quarter ended May 31, while earnings climbed 9% to $954 million. Orders totaled 21,293, while completions increased 15% to 19,690.

"The macroeconomic environment remained relatively consistent with employment remaining strong, housing supply remaining chronically short due to production deficits over a decade and demand strength driven by strong household formation," Executive Chairman Stuart Miller said in a statement.

Lennar's results underscore the market snapshot offered last month by another major homebuilder, Toll Brothers, in reporting its earnings for the quarter ended April 30. The latest results by Lennar that run through May show that strong housing demand is holding up through the spring as executives for both companies expressed optimism that enough buyers would remain motivated through the rest of the year.

Not all signs of demand are positive. Builder confidence in the new single-family house market dropped in May, but some of the biggest publicly traded builders remain bullish, even with the higher mortgage rates.

The supply of existing residences for sale is constrained because homeowners are reluctant to move and give up historically low mortgage rates obtained during the COVID-19 pandemic. With the market for existing houses sales essentially frozen by this so-called lock-in effect, demand for new single-family units is higher.

Buyers are also responding to builder incentives, such as mortgage rate "buy-downs," that sellers of existing houses can't offer. When a builder buys down a mortgage rate, it uses profits from sales to lower the interest rate paid by the buyer.

"A majority of builders are still doing buy-downs," Brad Hunter, a Florida housing consultant, told CoStar News last month. "Of course, it cuts into their bottom lines, but those already were very strong so they have room to shave off a little bit of their profit margins."

Mortgage rates have hovered near 7% in recent weeks. Mortgage giant Freddie Mac reported that the average rate fell to 6.95% in the week ended June 13, down from 6.99% the previous week but higher than the comparable week this time last year when it stood at 6.69%.

The higher borrowing costs mean that Lennar is "using pricing, incentives, marketing spend and margin adjustment to enable consistent sales volume in a fluctuating interest rate environment," Miller said.

In Toll Brothers' fiscal second quarter, the Fort Washington, Pennsylvania-based company generated $2.65 billion in sales, an increase from $2.49 billion in the same period last year.

Toll completed 2,641 houses at an average price of about $1 million, a 6% increase in completions from a year ago. Both categories were second-quarter records and helped generate earnings of $4.55 per diluted share, up 60%, the company said.

Lennar, founded in 1954, targets first-time, move-up and 55-and-over buyers. The company topped all U.S. homebuilders last year with $32.4 billion in revenue, according to Builder magazine.