NEW YORK ( TheStreet) -- The housing recovery remains mixed, but some home builders have managed to thrive in an unpredictable market.
Data released Tuesday by the Commerce Department showed just how uneven the housing market's recovery is. July housing starts inched up 0.2% from the previous month, while building permits plunged 16.3%. Still, when compared to a year earlier, the numbers pointed to a generally healthy housing market, said Danielle Hale, director of housing statistics for the National Association of Realtors.
Housing starts were up 10.1% from July 2014, the highest level since October 2007 with improving jobs numbers and increasing home prices and mortgage rates that are trending upward.
"With job growth providing additional income for households -- there's been decent household formation," Hale said, in a phone interview with TheStreet. "Folks are out in the housing market. The demand is there. If the builders supply it, it will get picked up in the market."
Here are three home builder stocks that have been rallying lately and are likely to post further gains despite the unpredictable housing market.
Miami-based Lennar (LEN) - Get Report is trading at fresh eight-year highs in Tuesday's session. And with its strong presence in states that are undergoing a housing market rebound like Florida, Arizona, Texas and California, it is well positioned to benefit from ongoing housing market recovery.
Lennar, up 24% so far this year, provides refinancing and mortgage services and has said it plans to invest about $5 billion into more multifamily projects in different areas of the country, officially forming a new joint venture Lennar Multifamily Venture in July for that purpose.
The joint venture gives Lennar $1.1 billion in equity commitments in this first step toward this strategy, which focuses on entry-level buyers who economists say hold substantial pent-up demand.
"Over the past four years, fueled by the strength of our senior management team, we quietly built this business into the nation's fifth largest apartment developer," CEO Stuart Miller said in a statement.
D.R. Horton (DHI) - Get Report stock, upgraded to buy from neutral by UBS analysts last week, shows no signs of slowing. Shares are up 2.8% in Tuesday's session, marking fresh nine-year highs at $32.15, as it soars 27% from the start of the year.
The Texas-based homebuilder, hailed by analysts for aggressively selling inventory to generate strong returns, is anchored in the south, where homebuilding starts increased 7.7% in July, vs. losses in the northeast and west. In the Midwest, where D.R. Horton has little exposure, it incurred gains of 27.5% in housing starts.
The majority of D.R. Horton's home sales are single-family detached homes, an area that is performing strong according to today's housing starts data, Hale said.
D.R. Horton is beefing up its presence in the Pacific Northwest, where it invested $72 million in April to buy Pacific Ridge Homes in Seattle. That deal gave D.R. Horton 350 lots and 90 homes to sell in the region. In May, D.R. Horton received a green light to build an 11,750-home community in West Oahu, Hawaii, giving it ample inventory to absorb growing housing demand.
Like Lennar, PulteGroup (PHM) - Get Report is poised to benefit from the pent-up demand of first-time homebuyers, many of whom are Millennials holding off homebuying under financial pressure from student loans, as well as babyboomers with changing lifestyles.
The Atlanta-based homebuilder also targets active adult customers and move-up buyers, who have more flexibility to buy regardless of how high mortgage rates go. Pulte just opened its first active adult community in the Phoenix area late last month of 72 homes.
"As boomers continue to work longer, the goal is to provide more options," said Rebecca Lundberg, vice president of sales in PulteGroup's Arizona division, in a statement.
PulteGroup is up 2.3% Tuesday. And though it's only up 2% since January, it has risen 16.5% in the past year.
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.