Orders, an indicator of future revenue for homebuilders, rose to 8,477 homes, increasing in all regions except the U.S. Midwest, where they fell by one unit.

The housing recovery in the United States has been gaining traction, supported by a strengthening labor market.

U.S. homebuilder sentiment hit decade highs in July, August and September as traffic from potential buyers gained ground, according to data from the National Association of Home Builders.

The government's efforts to ease lending conditions for first-time buyers, who currently account for about a third of U.S. home sales, and interest rates at historic lows have also added to the positive sentiment.

Shares of D.R. Horton, which sells homes under the D.R. Horton, America's Builder, Express Homes and Emerald Homes brands, rose 2.5 percent in light premarket trading on Tuesday.

The company, whose homes are priced from $100,000 to over $1 million, said on Tuesday that its home sales rose 23 percent to 10,576 units in the quarter ended Sept. 30.

Its net income rose to $238.9 million, or 64 cents per share, including a non-cash tax benefit of $17.5 million and a pretax goodwill impairment charge of $9.8 million.

Excluding items, D.R. Horton earned 61 cents per share, missing the average analyst estimate of 62 cents, according to Thomson Reuters I/B/E/S.

Revenue rose 26.9 percent to $3.05 billion, beating analysts' expectations of $3.04 billion.

D.R. Horton shares were trading at $29.51 before the bell. Up to Monday's close, the stock had risen about 14 percent this year, while the Dow Jones U.S. Home Construction index <.DJUSHB> had risen about 5.7 percent.

(Reporting by Arunima Banerjee in Bengaluru; Editing by Kirti Pandey)