KB Home on Thursday posted a wider-than-expected quarterly loss on write-downs for land values, and revenue fell 32 percent as the swelling supply of homes and tighter mortgage standards kept potential buyers on the sidelines.
The U.S. housing market has been in a steep decline for nearly two years, hounded by falling prices and sluggish demand.
At this time, we see no signs that the housing market is stabilizing and believe it will be some time before a recovery begins, KB Chief Executive Jeffrey Mezger said in a release.
Rising foreclosure rates are intensifying the problem of surplus inventory and will likely drive further home-price reductions, he added.
The company, the No. 5 U.S. home builder, reported a net loss of $35.6 million, or 46 cents per share, in the third quarter ended August 31, compared with a year-earlier profit of $153.2 million, or $1.90 per share.
The latest results include a $443 million gain from the sale of KB's 49 percent stake in its French unit, Kaufman & Broad SA.
The loss from continuing operations was $478.6 million, or $6.19 per share, due largely to pretax noncash charges of $690.1 million for writing down the value of land and $107.9 million from goodwill impairment.
Analysts expected the company to post a loss of 71 cents per share, according to Reuters Estimates. It said that figure compared with a loss of $5.24, a figure it calculated by excluding certain items and including others.
Earlier this week, Lennar Corp., the No. 2 U.S. home builder, posted a net loss of $513.9 million as land and impairment charges exceeded $800 million.
Los Angeles-based KB's revenue fell 32 percent to $1.54 billion. Housing revenue fell 33 percent to $1.53 billion as the number of sales closed dropped 28 percent to 5,699 and the average selling price declined to $267,700.
We expect housing industry conditions to continue to worsen through the end of the year and into 2008, said Mezger, repeating the forecast he told Reuters in July.
For the just-completed quarter, net orders for new homes, an indicator of future sales, were off 6 percent at 3,907.
I was kind of surprised to see that their orders were actually down compared to a really bad number last year, said Alex Barron, senior research analyst at Agency Trading Group.
The cancellation rate for the quarter was 50 percent, compared with the prior quarter's 34 percent, reflecting the troubles in the mortgage market, KB said.
A sharp rise in defaults on subprime mortgages, which go to borrowers with checkered credit histories, prompted lenders to tighten requirements, making it difficult for all but those with good credit to get a loan.
The U.S. Commerce Department reported on Thursday that sales of new single-family homes fell 8.3 percent in August from July to their slowest pace in more than seven years, but the number of new homes on the market declined 1.5 percent to 529,000. Days before, the department said home construction starts and permits in August fell to their lowest levels in 12 years.
KB Home shares were down 6 cents, or 0.3 percent, at $24.03 in morning New York Stock Exchange trading, while the benchmark Dow Jones U.S. Home Construction Index, was down 0.4 percent.
Year to date, KB stock is off 53 percent, in line with the index.
(Reporting by Ilaina Jonas)