KB Home posted a wider-than-expected quarterly loss on Tuesday as prices and demand for its houses sagged and expenses climbed.

The top-five U.S. builder, whose shares fell over 4 percent, said its loss narrowed to $54.7 million, or 71 cents per share, for the first quarter ended February 28, from $58.1 million, or 75 cents per share, a year earlier.

Analysts on average had expected a loss of 42 cents per share, according to Thomson Reuters I/B/E/S.

Revenue slumped 14 percent to $264 million and selling, general and administrative expenses rose 18 percent to $72.2 million, reducing earnings by 9 cents per share, UBS analyst David Goldberg wrote in a note to clients.

But Chief Executive Jeff Mezger said the company is positioned to make a profit in the second half of the year as higher-margin homes on cheaper land make up an increasingly bigger percentage of its sales.

The challenge now is to grow the community count, Mezger said. KB has designated $600 million to buy land.

In the past 6 months, as some housing markets have stabilized and government supports like the homebuyer tax credit have bolstered demand, KB and its rivals have reversed their downturn-era strategy of selling land inventory and hoarding the proceeds.

Homebuilders have jumped back into the land market, even to the point of running up prices and creating shortages of finished lots -- already improved with infrastructure such as sewers -- in the most desirable locations.

KB's orders rose 5 percent to 1,913, but some analysts had expected more, despite a tough comparison with the year-earlier period, when orders rose 26 percent.

Credit Suisse analyst Dan Oppenheim had forecast net order growth of 42 percent, while J.P. Morgan analyst Michael Rehaut and UBS' Goldberg had expected 10 percent.

Although we believe KB's build-to-order focus and unique product will result in better profitability over the long term, it remains unclear how the company will fare over the next few months, Goldberg said.

KB has slashed home sizes and prices and launched a new brand, the Open Series, designed to offer a relatively high degree of customization and to compete with foreclosures on price.

But building to order makes it difficult to have homes ready on short notice, which builders need as the federal homebuyer tax credit nears its expiration on April 30.

The strategic disadvantage associated with its lack of available homes could make it difficult for the company to achieve its target of making a profit in the second half of the year, Goldberg said.

Based in Los Angeles, KB operates in 10 states and 30 markets.

In the fourth quarter of 2009, the company posted its first profit in almost three years due to a tax benefit generated after the extension of a federal law allowing companies to apply losses to prior income.

Rival top-five builder Lennar Corp , also helped by that tax benefit, posted a profit in its most recent quarter. It is scheduled to report first-quarter earnings on Wednesday.

KB shares were down 74 cents or 4.2 percent to $16.70 in afternoon trading on the New York Stock Exchange. The company's shares were lagging its peers as measured by the Dow Jones U.S. Home Construction Index <.DJUSHB>, which was down 0.8 percent on news that sales of existing homes fell slightly in February, down 0.6 percent to 5.02 million.

(Reporting by Helen Chernikoff, editing by Gerald E. McCormick, Lisa Von Ahn and John Wallace)

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