KBH Builds New Homes in San Diego

One of the leading homebuilding companies in the U.S., KB Home ( KBH - Analyst Report ) recently started construction of model homes at Rancho Santalina, a community in San Marcos, San Diego. The model homes are expected to be ready for consumers by mid February.

Owing to its operational business model KBnxt, KB Home always begins construction only after a purchase agreement is executed. Therefore, consumers buying KB homes get the liberty to plan their homes according to their preference.

They will be able to choose from two types of floor plans, the Vistas and the Haciendas. Both the collections feature 6 bedrooms, at least 3 and a half baths, large kitchens with built in islands and covered patios

The rising demand for new homes has led to a favorable situation in the housing market, where inventory levels are dropping and prices are moving up. As such most home building companies are constructing increased number of new homes in order to maintain the required level of inventory to meet the growing demand.

KB Home intends to open more than 120 communities in 2013, with more communities scheduled to come up in the later half of the year. As such, the community count is expected to increase by at least 15% to 20% by the end of next year. The company expects profitability for fiscal 2013.

With housing market recovery gaining momentum, KB Home believes its strategic initiatives including overhead reduction, margin expansion, and land investments in higher-priced, better-located communities; and increasing backlog will help it achieve profitability in the upcoming quarters. Though we have faith in KB Home’s strategic initiatives, we believe that it may take time to achieve sustainable profitability as the housing market recovery process is erratic and uneven.

We currently have a Neutral recommendation on KB Home. Both KB Home and its peer Lennar Corporation ( LEN - Analyst Report ) carry a Zacks Rank #3 (Hold).