KB Home Earnings: Door Will Swing Open To Reveal Homebuilding Industry's Health

Prominent homebuilder KB Home KBH is expected to issue its second quarter earnings on Wednesday after market close, here's what investors need to know about the numbers, home prices, and recent homebuilder sentiment.

By The Numbers: Analysts expect the Los Angeles, California-based homebuilder to issue quarterly earnings of $1.34 per share, marking a 42.24% drop from $2.32 per share reported in the same period last year, on revenues of $1.42 billion, a decrease of 17.44% from last year’s $1.72 billion.

Here’s what the analysts think about the stock.

Homebuilder Sentiment On The Rise: National Association of Home Builders (NAHB) data issued Monday showed a rebound in builder confidence for the first time in nearly a year.

The Wells Fargo & Co WFC housing market index rose to 55 in May from 50, marking the sixth consecutive month of improving sentiment and the first time it ticked above 50 since July 2022.

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NAHB Chairman Alicia Huey cited a lack of existing home inventory and gradual improvements in supply chains as contributing to the builders’ cautious optimism. However, Huey noted that challenges persist, particularly regarding access to builder and developer loans, which have become increasingly difficult to secure over the past year, likely impacting future lot supplies.

Despite challenges, home builder sentiment appears positive overall, reflecting increased foot traffic from homebuyers, limited competition from resale, and an improved supply chain.

Price Cuts And Incentives: HMI data from June shows that 25% of builders cut home prices to boost sales, a slight decrease from 27% in May and 30% in April.

After peaking at 36% in November 2022, home sales have been in a steady decline, with the average price reduction sitting at 7% in June, below the 8% rate seen in December 2022.

Around 56% of builders offered incentives to buyers in June, an increase from 54% in May, though less than the 62% reported in December of last year.

Housing Market Outlook: “Despite the modest uptick in home prices for the majority of 2023, high mortgage rates and a weakening economy could potentially trigger a downward trend in the latter part of the year, according to researchers at Capital Economics.

Capital Economics' June 9 report predicts a fall in home prices during the second half of 2023 due to dwindling demand. Case-Shiller data showed that home prices rose in February and March, following seven consecutive months of declines, driven by a resurgence in demand, which correlated with easing mortgage rates at the beginning of the year.

However, with mortgage rates approaching the two-decade highs seen in October of last year, demand is expected to be hampered again.

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