Bruce Karatz is chairman and CEO of KB Home, the country's fifth largest home builder. Karatz has taken KB from building homes in three states to 13. The largest builder in California, Texas, and Nevada, KB is also No. 1 in France. Karatz is married and has three children and three grandchildren. Other than family time, Karatz enjoys collecting contemporary art and taking a spin on his motorcycle. He spoke with Gene Randall in mid-December.

BB: You are the biggest home builder in three hot market states: California, Texas, and Nevada. Does KB Home take the biggest hit in those states if there is a downturn?

BK: I'd like to think that we, as well as other large builders, will fare better in a downturn than our smaller competitors.

BB: If sales numbers go down in ‘06, would your shareholders understand?

BK: I think our shareholders have high expectations. We do not intend for our earnings to be lower in ‘06 (than in ‘05).

BB: What are the biggest challenges as you partner KB with the Shaw Group of Louisiana to build new homes in that state's hurricane-hit areas.

BK: The biggest challenge is to find enough land ... to find large enough parcels that would be immediately available to permit construction.

BB: Single parents are among your fastest growing groups of customers. How do you attract them?

BK: The way to broaden the appeal to single parents—and singles, because I wouldn't just limit it to single parents—is to build an array of product that is found particularly attractive to that demographic, and to that end, one located in and around cities where all types of services are readily available ... security and a lifestyle that would permit a single person to return home and feel that he or she could have a life in and around that particular community where they live without getting in their car and driving somewhere.

Bruce Karatz—an avid contemporary art collector—with his Charles Hill piece. BB: As a prime supplier of homes for first-time buyers, is it sometimes difficult to serve those who may have little idea of what they want or need in a new home?

BK: First-time buyers are more demanding. They have very little experience in dealing with the product, so it puts a particular responsibility on us to explain homeownership, and to be very rigorous in whatever engagements we make to our customers, namely delivery dates on their homes.

BB: KB has a home design partnership with Martha Stewart. How will that enhance what you offer?

BK: Martha Stewart will offer a unique opportunity to buy a home that she has helped design and furnish, and I think we will see home buyers react favorably to the first KB Home-Martha Stewart community in Raleigh—and the many more that will be coming down the line from there.

BB: You've been vice chairman of Rand Corp. You're a trustee at USC. Do you think we do a good job educating young people in this country?

BK: I think education is one of the least successful areas in the United States and one that requires the most improvement. A lot of people feel similarly, and I am confident we are making progress.

BB: If you could take your family, your kids, grandkids—everybody—on a dream vacation, where would it be?

BK: Thinking of grandchildren and everything, I would say Sun Valley.

BB: You collect contemporary art. Which artists?

BK: I love Damien Hirst, Robert Rauschenberg, Cecily Brown, Joel Shapiro, and Tom Otterness.

BB: And the motorcycling?