Write-down drives KB Home to $268M loss in first quarter
KB Home, one of the nation's biggest residential homebuilders, posted a loss of more than $268 million in its first quarter as a worsening housing market forced the company to take a large write-down.
Jeffrey Mezger, KB Home's president and chief executive, said a growing supply of unsold new and existing homes on the market, tight mortgage lending and industrywide discounting drove down sale prices and compressed margins during the quarter.
That forced the builder to take impairment charges and walk away from land option contracts.
"Until prices stabilize and consumer confidence returns, we believe inventory levels will remain significantly out of balance with demand," Mezger said. "We do not anticipate meaningful improvement in these conditions in the near term, as it is likely to take some time for the market to absorb the current excess housing supply and for consumer confidence to improve."
Mezger did note that recent figures from the National Association of Realtors showing that the median price of a resale home declined 8.2% last month boded well for the company.
"Our biggest competitor is the resale market, and a drop in price of this magnitude could clear the overhang of inventory more quickly and lead to price stability earlier rather than later," Mezger said.
For the quarter ended Feb. 29, the Los Angeles-based company posted a loss of $268.2 million, or $3.47 per share, compared with a profit of $27.6 million, or 34 cents, a year earlier.
The latest period included a charge of $223.9 million in write-downs related to falling home prices.
Revenue tumbled 43% to $794.2 million from $1.39 billion last year.
Analysts surveyed by Thomson Financial were looking for a loss of $1.17 per share on revenue of $805.7 million. The earnings estimates typically exclude one-time items.
Earlier this week, the Commerce Department reported new home sales in February hit a 13-year low. Another big homebuilder, Lennar Corp., reported a fourth-quarter loss earlier this week.
KB Home builds homes to order and has operations in nine states.
Like other builders, it has suffered as many buyers wait for prices to drop further or struggle to qualify for mortgages that now carry tighter standards. Rising mortgage defaults and foreclosures have also helped weaken sales, forcing KB and other builders to lower prices, squeezing their profit margins.
