KB Home 2nd-quarter loss narrows
The homebuyer tax credit party is over and the hangover may be just beginning.
KB Home on Friday became the latest homebuilder to report a sharp drop in new home orders in the three months ended in May as federal tax incentives aimed at spurring home sales expired.
The builder’s orders plunged 23 percent versus the same quarter last year. On Thursday, rival Lennar Corp. reported a 10 percent drop in orders, with the slide taking place entirely in the weeks after the tax credits expired on April 30.
The weak orders highlight concerns over whether the housing market recovery, already hampered by high unemployment and foreclosures, could stall in the absence of government help.
In addition to disappointing orders, KB reported a smaller quarterly loss but it missed Wall Street expectations. KB Home shares fell 96 cents, or almost 8 percent, to $11.26 in afternoon trading.
Chief Executive Jeffrey Mezger said homebuyers who missed the tax credit deadline appear to have put their plans to buy a home on hold for awhile. He declined to say how orders are faring this month.
“It’s still too early in the third quarter to determine where demand will go from here,” Mezger said. “In the short term, the market is bouncing along the bottom, but it is only a matter of when -- not if -- things are going to improve.”
Lennar, based in Miami, said a day earlier that its orders in June are running as much as 25 percent below a year ago, but noted demand appears to be improving.
Low mortgage interest rates and homebuyer tax credits helped support sales and home orders for KB and other builders this spring. But the tax credits -- $8,000 for first-time home buyers and up to $6,500 for current homeowners -- ended in April, pulling sales that would normally have taken place in May or June ahead to March and April.
Nationally, sales of new homes collapsed in May, sinking 33 percent to the lowest level on record.
Because many homebuyers stepped up their plans to buy a home to qualify for the tax incentives, that’s made it harder to predict how sales might unfold this year.
As a result, Mezger said the company’s may have to extend its outlook for when it will turn a profit, possibly beyond this year.
Homebuyers who purchased a home by April 30 have until June 30 to close on their deals. That means KB will see a surge in delivered homes in its fiscal third quarter ended in August.
KB Home, based in Los Angeles, has operations in 10 states and is one of the nation’s largest builders.
The company said its net loss was $30.7 million, or 40 cents per share, for the three months ended May 31. That compares to a loss of $83.6 million, or $1.03 per share, in the prior-year period.
A year ago, the company recorded $49.5 million in asset impairment and land option contract abandonment charges. There were no such charges in the latest quarter.
Analysts polled by Thomson Reuters were expecting a smaller loss of 30 cents a share.
Revenue fell 3 percent to $374.1 million from $384.5 million a year ago. Analysts predicted revenue of $373 million.
The builder reported 2,244 net home orders, down from 2,910 a year earlier. Still, they rose 17 percent sequentially from the prior quarter.
Mezger said the sequential improvement in net orders bodes well for the company’s ability to generate revenue in the future.
Homes delivered edged up 1 percent to 1,782, the first rise in fourteen quarters. The average selling price fell 4 percent compared to a year ago, to $207,900.
The company expects its full-year home deliveries to range between 8,000 and 8,500 homes.
