Facing softening market conditions, KB Home experienced declines in deliveries, revenue, and orders on a year-over-year basis in the builder’s fiscal second quarter, ended May 31.
Despite the declines, the company noted improvements in lowering build times and reducing direct construction costs in the period. The No. 7 company on the 2025 Builder 100 list noted build times decreased by 20% on a year-over-year basis to 140 days overall. Lower build times provide the company with a more compelling selling proposition for buyers of built-to-order homes relative to the 60 days it typically takes to complete a spec or existing home purchase. Additionally, KB Home lowered direct costs by 3.2% compared to the second quarter of 2024, offsetting the impact of price reductions and increases in land costs.
Quarter By the Numbers
- Home sales revenue declined to $1.53 billion in the second quarter from $1.71 billion in the prior-year period.
- KB Home delivered 3,120 homes in the period, down 11% from the second quarter of 2024. The average selling price for KB Home increased slightly to $488,700, though some markets experienced price reductions in the period.
- Net orders decreased 13% year-over-year to 3,460 homes with a cancellation rate of 16%, up from 13% in the second quarter of 2024.
- Second quarter net profit decreased 36% to $107.9 million while profit per share decreased 30% to $1.50.
What They’re Saying
“The actions we began to take late in our 2025 first quarter, evaluating base pricing in every community relative to local market conditions, then repositioning our communities with a focus on offering the most compelling value, led to strong net orders in March. However, our net orders declined in April and May, which did not follow the typical spring trajectory. As a result, even though our average community count was in line with our projection and our cancellation rate was fairly steady, our monthly absorption pace per community was 4.5 net orders compared to 5.5 in last year’s second quarter.” — Jeffrey Mezger, chairman and CEO
“When resale inventory was lower over the past few years, we started more speculative homes, which shifted our business away from our historical mix of between 70 to 75% built-to-order. As we continue to sell through our inventory, our goal is to steer our business back to this historical range of built-to-order homes over time. It is our core competency and a key differentiator from a competitive standpoint, setting us apart from the other large production home builders.” — Mezger
“Our strategy focuses on delivering the most compelling value, improving affordability with transparency. Rather than relying on incentives, we focused on adjusting base pricing… [In April] we proactively adjusted base prices in our underperforming communities to remain aligned with local market dynamics, including rising resale inventory and softening home prices in some markets. Despite these actions, demand weakened. We believe this was due not only to the lack of consumer confidence but also to due to mortgage interest rates, which edged up in early April and remained high and variable for the balance of the quarter.” — Robert McGibney, president and chief operating officer
