KB Home Sticks to Strategy Despite Rising Rates, Sees Slower Orders Ahead

KB Home isn't relying on mortgage rate buydowns like other builders despite rising rates. Instead, it focuses on customization and rate locks for buyers.
KB Home used buydowns sparingly, mainly for inventory homes closer to closing. Mortgage concessions stayed flat quarter-over-quarter.
KB Home's orders jumped 52% but missed expectations. It sees slower orders ahead in seasonally weaker Q4.
KB Home's core strategy caters to first-time and move-up buyers with smaller, more affordable homes.
Analysts remain bullish on homebuilders like KB Home despite choppy rates, citing tight resale market and resilient buyers.

yahoo.com

Relevant topic timeline:

9/2/2023

CEO of Fortune 1000 builder: U.S. housing market bottom should hold, but if it doesn't this key metric will warn us

KB Home CEO Jeffrey Mezger discusses the dramatic shifts in the housing market since the pandemic hit, the rebound in new home sales, and the strategies utilized by KB Home to maintain sales, including price cuts and buydowns. Mezger believes that the housing market has reached its bottom, but acknowledges that the metric to watch is inventory levels.

9/20/2023

KB Home Beats Q3 Estimates and Sees Housing Tailwinds Despite Rate Hikes

In this article, the stock mentioned is KB Home (NYSE:KBH). The author's recommendation is to buy and hold the stock. The author's core argument is that KB Home is well-positioned in the housing market, particularly because it serves first-time and second-time homebuyers, who represent a growing pool of potential buyers. The author also points out that KB Home has a strong balance sheet, generates significant cash flow, and has been reducing its debt and repurchasing shares. Key information and data provided in the article include: - KB Home's fiscal Q3 earnings, where it earned $1.80 on revenue of $1.59 billion, surpassing expectations by $0.38. - The decline in KB Home's earnings and margins due to a 14% decrease in revenues and declining average sales prices. - The decline in deliveries and sales prices, as well as the decline in homebuilding gross margins. - The increase in net new orders and the stabilization of the backlog, indicating steady demand. - The improvement in KB Home's balance sheet, reduction of debt, and focus on share repurchases. - The favorable macro environment for KB Home, with the rise in millennials becoming homebuyers, supply constraints, and a significant housing shortage. - The expectation of strong profits for the next few years and potential for double-digit returns. - The current valuation of KB Home's shares and the potential upside. Note: The article is an opinion piece by the author and not financial advice.

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Posted 9/21/2023, 7:16:14 PM