NEW YORK ( TheStreet) -- Stocks in the homebuilder sector were mostly higher Tuesday morning, thanks to a better-than-expected report from the Commerce Department on home construction and building permits in August.

By volume, the most heavily-traded homebuilder stock out of the gate Tuesday morning was Lennar ( LEN - Get Report), which said Monday it returned to year-over-year profitability with third-quarter earnings of $30 million, or 16 cents per share, a reversal from a year-earlier loss of $171.6 million, or 97 cents. Results easily topped analysts' expectations for a profit of $7.1 million, or 5 cents per share.

Revenue rose 14.5% to a better-than-expected $825 million.

>>Lennar Beats on Return to Profitability

Lennar shares rose 1% in the first minutes of trading Tuesday.

By share price percentage gains, Comstock Homebuilding ( CHCI) led the sector higher in early trading, jumping 8.3%.

Hovnanian Enterprises ( HOV - Get Report), Standard Pacific ( SPF) and KB Home ( KBH) all rose more than 2%.

The SPDR S&P Homebuilders ( XHB - Get Report), an exchange-traded fund that tracks the sector, gained 0.7% ahead of the opening bell while the iShares Dow Jones US Home Construction ( ITB - Get Report) ETF rose 1%.

Shares of D.R. Horton ( DHI), PulteGroup ( PHM), Toll Brothers ( TOL - Get Report), M.D.C. Holdings ( MDC), Ryland ( RYL) and Meritage Homes ( MTH) were all higher by at least 1%.

Beazer Homes ( BZH - Get Report) gained 1.4%. The builder warned earlier this month it was no longer sure new-home orders in fiscal 2010 would be higher than fiscal 2009's level of 4,205 homes.

>> Beazer Homes: Hard Times Ahead

Beazer cited slower-than-anticipated improvements in new-home orders after the springtime expiration of federal tax credits for homebuyers. The company said prospective homebuyers continue to exercise caution in committing to a home purchase as general economic conditions still haven't showed enough improvement.

On Monday, the National Association of Home Builders reported its index of builder sentiment was flat month-over-month in September as still-high unemployment and high foreclosure rates continued to dissuade people from considering new-home purchases.

>> Homebuilder Sentiment Holds Steady .

The NAHB said its confidence index, which measures builder perceptions of current single-family home sales and sales expectations for the next six months, held steady with a reading of 13 in September, disappointing industry watchers who expected the index to edge up to a reading of 14. Any reading below 50 points indicates poor sentiment.

"In general, builders haven't seen any reason for improved optimism in market conditions over the past month," said NAHB Chairman Bob Jones. "If anything, consumer uncertainty has increased, and builders feel their hands are tied until potential home buyers feel more secure about the job market and economy."

Hesitancy among potential home buyers was a key driver of builders' low sentiment, according to the NAHB report.

"It also reflects the frustration that builders are feeling regarding the effects that foreclosed property sales are having on the new-homes market, with 87% of respondents reporting that their market has been negatively impacted by foreclosures," said NAHB Chief Economist David Crowe.

There were nearly 339,000 new foreclosures in August, according to RealtyTrac, bringing the nationwide number of foreclosed homes to 1.98 million.

The housing market saw sales ramp up in March and April as consumers rushed to take advantage of federal tax credit for homebuyers that offered as much as $8,000 for first-time homebuyers and $6,500 for repeat buyers. Following the expiration of those credits on April 30, the market saw a dramatic decline in demand for the month of May that spilled over into June and July. Lawmakers later extended the deadline to close on a home purchase and still qualify for the tax credit to Sept. 30.

>>We Need Another Homebuyer Tax Credit, Poll Says.

-- Written by Miriam Marcus Reimer in New York.

>To follow the writer on Twitter, go to http://twitter.com/miriamsmarket.

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