KB Home nar­rows quar­terly loss

But or­ders for new dwellings plum­met, in­di­cat­ing de­mand will re­main weak.

Los Angeles Times - - Business - Ale­jan­dro Lazo ale­jan­dro.lazo@latimes.com

KB Home nar­rowed its loss con­sid­er­ably in its fis­cal third quar­ter, the Los An­ge­les builder said Fri­day, as it de­liv­ered more homes at a higher price than dur­ing the year-ear­lier pe­riod and cut its costs. But or­ders for new dwellings plum­meted, in­di­cat­ing that de­mand for new homes will re­main on shaky ground as long as the job mar­ket is weak.

A sep­a­rate govern­ment re­port Fri­day un­der­scored the dif­fi­cul­ties for the newhome mar­ket, with sales of newly built U.S. homes un­changed in Au­gust af­ter hit­ting a record low in July.

“The hous­ing mar­ket is now de­pen­dent on the re­cov­ery rather than lead­ing the re­cov­ery, which is usu­ally its po­si­tion in the eco­nomic cy­cle,” said David Crowe, chief econ­o­mist for the Na­tional Assn. of Home Builders. “So, as a re­sult, I don’t be­lieve we are go­ing to have sig­nif­i­cant growth for the rest of the year.”

KB Home’s re­sults for the three months ended Aug. 31 cap­tured a pe­riod in which home sales were still ben­e­fit­ing from a tax-credit-fu­eled boost. The builder said its loss nar­rowed to $1.4 mil­lion, or 2 cents a share, com­pared with a loss of $66 mil­lion, or 87 cents, in the third quar­ter of 2009.

“Sales con­tinue to be im­pacted by the soft econ­omy, sus­tained un­em­ploy­ment and lack of con­sumer con­fi­dence,” KB Home Chief Ex­ec­u­tive Jef­frey Mezger told an­a­lysts in a con­fer­ence call Fri­day. “I do feel we are now bump­ing along the bot­tom, but do not ex­pect sig­nif­i­cant im­prove­ment in hous­ing dy­nam­ics un­til the econ­omy is on firmer ground.”

KB Home’s rev­enue rose to $501 mil­lion in the quar­ter, up 9.3% com­pared with the year-ear­lier pe­riod. The com­pany in­creased its av­er­age U.S. sales price for a home 5.6% to $214,000 and, in the West, in­creased that av­er­age price 14.9% to $352,000.

Per­haps the weak­est part of the com­pany’s re­port was its net or­ders, which de­clined 39% from the year-ear­lier pe­riod to 1,314.

“Unit or­ders were a dis­as­ter,” Stephen East, an an­a­lyst with Ti­con­deroga Se­cu­ri­ties, wrote in a re­search note.

KB Home shares rose 40 cents, or 3.4%, to $12.11 on Fri­day. The firm’s im­proved fi­nan­cial per­for­mance fol­lowed a re­port by Mi­ami home builder Len­nar Corp. that it had re­turned to prof­itabil­ity in the third quar­ter.

De­spite those ac­counts from the pub­licly traded builders, econ­o­mists re­mained pes­simistic. Crowe said he ex­pected 2010 to be worse for builders than 2009 was — a re­ver­sal from his pre­vi­ous fore­casts.

In Au­gust, new sin­gle­fam­ily dwellings sold at a sea­son­ally ad­justed an­nual pace of 288,000 units, the Com­merce Depart­ment said Fri­day. That es­ti­mate was flat com­pared with July’s pace, which re­mained a record low even af­ter the govern­ment re­vised its fig­ures higher for that month. The re­ported Au­gust pace was 28.9% be­low Au­gust 2009.

The sea­son­ally ad­justed es­ti­mate of new houses for sale at the end of Au­gust was 206,000, rep­re­sent­ing a sup­ply of 8.6 months at the cur­rent sales rate.

Don Bartletti

UN­DER CON­STRUC­TION: A KB Home hous­ing devel­op­ment in Corona. Home sales ben­e­fited from a tax-credit-fu­eled boost dur­ing the firm’s lat­est quar­ter.

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