Thursday, September 27, 2007

KB Home: No signs the market is stabilizing

Good morning. News item from Reuters via CNBC: KB Home reports a third-quarter loss and says it sees "no signs that the housing market is stabilizing. "KB Home Thursday posted a fiscal third quarter loss, as the U.S. home market suffered a deepening decline in demand, a swelling supply of homes for sale and tighter standards in the mortgage market."

From the press release: Jeffrey Mezger, president and chief executive officer: "The oversupply of unsold new and resale homes and downward pressure on new home values has worsened in many of our markets as tighter lending standards, low affordability and greater buyer caution suppress demand, while higher foreclosure activity combined with heightened builder and investor efforts to monetize their real estate investments boost supply. The negative impact of these conditions on our selling prices and gross margins prompted us to take substantial write-downs of inventory and goodwill in the third quarter. At this time, we see no signs that the housing market is stabilizing and believe it will be some time before a recovery begins."

More: "We expect housing industry conditions to continue to worsen through the end of the year and into 2008," said Mezger. "Rising foreclosure rates are intensifying the problem of surplus inventory and will likely drive further home price reductions."

Our take: Considering that it comes from a company that sells homes, this is a pretty negative assessment across the board: the market is weak and growing weaker; prices are falling but homes are still unaffordable to many potential buyers.

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