Skip to main content

Workers frame a new home in a KB Home development

Matt York/Matt York/AP

U.S. home builder KB Home reported a deeper quarterly loss than Wall Street expected and its chief executive officer warned he does not expect meaningful improvement in the U.S. housing market in the near future.

The company's shares were down 8.6 per cent Friday, contributing to the fourth consecutive day of declines for the recently rallying U.S. home building sector, with investors realizing that a possible bottoming out of a market does not necessarily signal rapid recovery.

Unlike larger peer Lennar Corp. , which reported a deeper-than-expected quarterly loss Monday, but said it expected to return to profitability in 2010, Los Angeles-based KB Home said only that it had "more work to do" to begin earning money again.

Story continues below advertisement

"The precise timing of a housing recovery remains uncertain. We expect the early stages of a recovery will be uneven with some inevitable setbacks before reaching stability," said CEO Jeff Mezger on a conference call with analysts. "It will be difficult for the housing sector to build significant momentum as long as potential home buyers lack the job security needed for them to make a major purchase."

The news came on a day the U.S. government reported new-home sales rose at a weaker-than-expected pace and a day after a U.S. trade group reported an unexpected 2.7 per cent drop in existing home sales.

Friday's decline left the Standard & Poor's home builder index off about 16 per cent from last week's peak.

"It's not a straight line, it's going to be pretty difficult," said Eric Landry, an analyst at Morningstar in Chicago who follows the sector. "There's been a ton of job losses and job losses have a huge impact on housing."

Still, he noted that the company's 62 per cent rise in orders was a good sign for the business. Analysts attributed the rise to a renewed focus on lower-cost homes.

KB reported a third-quarter net loss of $66-million (U.S.), or 87 cents per share, less severe than the loss of $144.7-million, or $1.87 per share, recorded a year earlier.

The loss was deeper than the 73 cents-per-share loss Wall Street had braced for, according to Reuters Estimates.

Story continues below advertisement

Revenue came to $456.3-million, down 32.8 per cent from $679.1-million a year earlier.

KB Home expects to generate positive cash flow from operations this year and looks for fourth quarter results to be their best of the year, executives told analysts and investors on a conference call.

Home builder shares have been on a tear over the past three months, as the industry that was one of the first to be sucked into the worst U.S. economic downturn since the Great Depression starts to show signs of stabilization.

Report an error
Comments

The Globe invites you to share your views. Please stay on topic and be respectful to everyone. For more information on our commenting policies and how our community-based moderation works, please read our Community Guidelines and our Terms and Conditions.

We’ve made some technical updates to our commenting software. If you are experiencing any issues posting comments, simply log out and log back in.

Discussion loading… ✨

Combined Shape Created with Sketch.

Combined Shape Created with Sketch.

Thank you!

You are now subscribed to the newsletter at

You can unsubscribe from this newsletter or Globe promotions at any time by clicking the link at the bottom of the newsletter, or by emailing us at privacy@globeandmail.com.