
One of the nation’s largest home builders reported weaker than expected quarterly results and orders for future home sales, tempering the budding optimism that the housing market has been experiencing.
KB Home’s sales were down more than 8%, their shares are down too, with competitors’ shares slipping as well. The results for KB Home are partly due to strategic decisions that didn’t pan out for the builder. Recent data collected by the Commerce Department showed that sales of all new homes were weaker than expected in February. The data demonstrates a key difference between the markets for new homes compared to existing homes.
The market for existing homes has been boosted by investors who are purchasing distressed homes at bargain prices and renovating with the purpose of resale or renting. The new-home market, on the other hand, continues to struggle to compete on price against foreclosures and short sales. The market for new homes is way off from its peak, much more so than the existing-home market. The difference is investors.
KB Home, which is based in Los Angeles, reported a fiscal, first-quarter loss of over $45 million. Although this was an improvement from the more than $110 million loss it posted the year before, many industry watchers had expected much more progress toward profitability from the company.
The area of most concern, however, centers on orders. Instead of an increase in orders, which analysts see as an indicator of a builder’s future performance, they fell 8%, with the steepest declines seen in the Southwest.
We see that consumers are not in pace with builders. While builders are out purchasing land and preparing to sell homes, buyers are reluctant to close on homes. It’s this lack of consumer confidence that is negatively impacting builders.
Perhaps, some say, that KB’s issues are theirs only. Some of the decisions the company has made have kept them from making more progress toward returning to profitability. Some builders have made significant strides toward rebounding.
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KB Home’s Sales Slump 8%, Shares Drop









