KB Home (KBH - Analyst Report) recently entered into an agreement with its current preferred mortgage lender, National Mortgage LLC to form a joint venture, Home Community Mortgage, LLC that will offer loans to KB Home’s customers.
National Mortgage LLC is a subsidiary of Nationstar Mortgage Holdings Inc. (NSM - Snapshot Report), one of the largest non-bank mortgage providers in the U.S, with a portfolio worth $425 billion. Nationstar Mortgage has been managing KB mortgage banking applications since May 2012. Nationstar Mortgage will continue to perform its existing functions till Home Community Mortgage begins operations in late fiscal 2013.
KB Home operates through its operational business model KBnxt, which begins construction only after a purchase agreement is executed and the consumers are given the flexibility to design their new homes. The new mortgage company will specifically cater to KB Home homebuyers and will smoothen out the financing process involved during home purchase, thus supporting the KBnxt business model.
KB Home has been delivering solid year-over-year top line growth during the past few quarters. Recently, the company announced preliminary quarter-to-date (QTD) net order for new homes for first quarter 2013. The number of new homes ordered was 750 as of Jan 18, 2013, up 54% from 488 in the year-ago period.
The strong results of the company have been driven by the housing market recovery. 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. By providing easier access to finance, the new joint venture deal is expected to further boost the company’s order growth.
KB Home carries a Zacks Rank #3 (Hold). Some other Zacks Rank #1 (Strong Buy) homebuilding companies that warrant a look include NVR Inc. (NVR - Snapshot Report), and MDC Holdings Inc. (MDC - Snapshot Report).