KB Home narrows quarterly loss
But orders for new dwellings plummet, indicating demand will remain weak.
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.
UNDER CONSTRUCTION: A KB Home housing development in Corona. Home sales benefited from a tax-credit-fueled boost during the firm’s latest quarter.