Housing is hot again.

It was a sign of renewed investor enthusiasm last week when real-estate-information firm Trulia Inc.’s TRLA -4.04% share price rose more than 40% on Thursday following its initial public offering. So was the surge Friday in KB Home KBH +16.40% shares after KB reported an unexpected quarterly profit. Although home prices turned the corner just this past spring, shares of home builders have more than tripled on average since their 2009 nadir.

Next up is Lennar Corp., LEN +2.49% which is slated to report fiscal third-quarter earnings Monday. Analysts expect earnings of 28 cents a share for the period ending in August, up sharply from 11 cents a year earlier.

For a while this spring it was possible to debate whether the long-awaited turn had come in house prices, as some measures turned positive while the widely followed S&P/Case-Shiller Home Price Index lagged behind. Now that measure, due Tuesday, is pointing up as well, although its originator, Robert Shiller, says he isn’t convinced we have hit the bottom yet.

In any case, there is cause for at least short-term cheer, particularly for home builders that rallied after last week’s housing-starts data. Single-family housing starts rose at the quickest pace since April 2010—a period artificially boosted by a tax credit for first-time home buyers. Lennar’s share price broke above $37 Friday for the first time since June 2007, ending at $38. Is it deserved? In its last reported quarter, the company sold 3,222 houses, up 20% year on year. But in 2006 it sold nearly 50,000 in a year. Even though its operating margin nearly doubled to 9.2% in the second quarter, that is still shy of the mid-to-low teens Lennar enjoyed in its heyday.

Bloomberg NewsKB Home shares surge Friday after the company reported an unexpected quarterly profit.

In a way, that is encouraging, because there should be more upside even with the stock trading at nearly 27 times 2013 earnings estimates. Housing starts have slumped mightily since their peak, and pent-up demand is significant. Between 1992 and 2007, single-family starts averaged nearly 1.3 million a year, while they averaged just 500,000 the following four years. The Fed’s recent steps to further boost housing by buying mortgage-backed securities bode well, too.

While not home-free, home builders have given investors some grounds to justify recent gains.

By Spencer Jakab

COURTESY OF YOUR NUMBER ONE ARCADIA REAL ESTATE AGENT