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California and the West

Waning Home Sales Take Further Toll on the Industry

Countrywide may cut thousands of jobs. KB's revenue growth slows in its latest quarter.

September 22, 2006|E. Scott Reckard and Annette Haddad | Times Staff Writers

The weakening housing market continued to take its toll on the industry Thursday as mortgage lender Countrywide Financial Corp. disclosed the possibility of thousands of layoffs and builder KB Home reported slowing revenue growth.

Calabasas-based Countrywide said it would reduce its general and administrative staff by 5% to 10%, with the exact numbers to be decided in coming months.

The mortgage sales staff and employees who support sales directly will not be affected, said spokesman Rick Simon, adding that a few layoffs already had occurred.

The retrenchment follows a long hiring spree at Countrywide, where monthly loan production peaked at $53 billion in August 2005 and was down to $40 billion last month.

The company employs about 56,000 people, up from 34,000 at the beginning of 2004.

Excluding sales-related workers, the number of jobs eligible for elimination would be below 50,000 -- so with no more than 10% of jobs to be cut, the number of positions eliminated would be "certainly less than 5,000, and we would hope considerably less," Simon said.

Countrywide has about 13,000 employees in Southern California, including salespeople at call centers. Its other major employment centers are in the Dallas area, with 10,400 employees, and the Tempe-Chandler area of Arizona, with more than 5,000 workers, Simon said.

Countrywide shares fell 22 cents to $35.10.

Separately, Westwood-based KB said it was releasing only limited financial results for its fiscal third quarter because of an internal probe of its stock option practices. Other companies caught up in the growing option controversy have had to restate earnings after similar investigations.

KB said revenue rose 6% to $2.67 billion in the period ended Aug. 31. Analysts polled by Thomson Financial had expected revenue to come in at $2.61 billion. A year earlier, revenue soared 44% from the same period in 2004.

KB Home also said home orders in its U.S. and French markets plunged 43% from last year's third quarter. On the West Coast, orders plummeted 58%.

Chief Executive Bruce Karatz said the results "reflect the challenging operating environment for the home building industry." Increasing price competition among builders affected sales and orders.

"We do not expect conditions to improve significantly in the foreseeable future," Karatz said in a statement.

KB issued its results after the stock market closed. Its stock fell $1.33 to $43.05 in regular trading, then slipped to $42.68 in after-hours trading.

annette.haddad@latimes.com

scott.reckard@latimes.com

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