Improving market conditions and strong demand contributed to a strong start to 2024 for KB Home, highlighted by a significant year-over-year increase in net orders during the first quarter.
“This positive momentum in demand has continued in our 2024 second quarter to date, and we believe we are well-positioned to capitalize on it given our commitment to offering all home buyers the ability to personalize their home, our well-designed products, and attractive price points, as well as our expanding community count,” chairman and CEO Jeffrey Mezger said.
Mezger said KB Home’s backlog, improved build times, and planned new community openings gives the home builder confidence it can achieve its objectives for the full fiscal year.
KB Home ended the first quarter with a total of 5,796 homes in backlog, with a value of $2.79 billion, both up 5% sequentially from the fourth quarter.
The builder reported community count increased 2% on a sequential basis to 240.
President and chief operating officer Robert McGibney said KB Home’s cycle time was 30% shorter in the first quarter than the prior-year quarter. The builder believes it can return to its historical build times of between four to five months in 2024.
“[Improving cycle time] will improve our inventory turns and increase the population of homes available for delivery, as well as further enhance our built-to-order sales approach, as personalized homes with quicker delivery dates are even more compelling to home buyers,” McGibney said during the KB Home first quarter earnings call.
Net orders in the first quarter, ended Feb. 29, increased 55% to 3,323, driven by improved demand and lower cancellation rates (14% in the first quarter of 2024 compared to 36% in 2023). KB Home reported a monthly net order pace per community of 4.6 in the quarter compared to 2.8 in the prior-year period.
“[Net order growth] was achieved while we held mortgage concessions steady and implemented a modest level of price increases in most of our communities,” Mezger said. “We have continued to experience strong sales since the start of our second quarter and believe we are well-positioned to respond to this buyer demand given our products and price points, as well as planned new community openings in the first half of this year.”
McGibney said approximately 60% of orders in the quarter had some form of mortgage concession, including rate locks. Assuming market conditions and demand remains strong, McGibney said KB Home expects “to be in a position to lower these types of incentives as the spring selling season progresses.”
KB Home delivered 3,037 homes in the first quarter, a 9% increase compared to 2023, for an average selling price of $480,100. Revenues increased 6% year over year to $1.47 billion. The builder reported profits of $138.7 million, or $1.76 per share, increases of 10% and 21%, respectively, on a year-over-year basis.
“With a healthy balance sheet and strong cash flow, we continue to prioritize investing in land acquisition and development, as well as returning capital to our stockholders,” Mezger said. “In the 2024 first quarter, we increased our investments in land and development and continued to repurchase our common stock.”
Mezger said KB Home invested $590 million in land acquisition and development, a 60% increase year over year and the highest quarterly investment since 2022. KB Home had approximately 55,500 lots owned or controlled at the end of the quarter. Of the builder’s 40,100 owned lots, over 17,000 lots are finished and KB Home has 7,000 homes in production.
