KB earnings rise 21 percent

Thursday, Jan. 10, 2002 | 10:59 a.m.

SUN STAFF AND WIRE REPORTS

KB Home, the third largest U.S. home builder by homes sold and the largest in Las Vegas, today said its fiscal fourth quarter earnings rose a better-than-expected 21 percent as low mortgage rates boosted home sales.

KB closed on 3,027 homes in 2001 and 765 homes in the fourth quarter in the Las Vegas area, where its biggest competitor is Pulte Home Corp., which last year bought Del Webb Corp.

Net income rose to $88.5 million, or $2.03 a share, for the three months ended Nov. 30, from $73.4 million, or $2.00, a year earlier, the company said. The per share earnings reflect an increase in shares outstanding. Revenue rose 17 percent to $1.45 billion.

The 30-year mortgage rate averaged 1.13 percentage point lower in the three months than a year earlier, helping push U.S. new home sales to a record in 2001, according to the National Association of Realtors.

Dennis Smith, owner and president of Las Vegas-based Home Builders Research, said low interest rates helped spur local home sales as well, though he said rising home prices also played a role in the high number of closings in 2001.

"(New home) prices went up about 10 percent during 2001," Smith said, "and people are trying to get into homes now before prices get too high."

Smith said interest rates on home loans are likely to begin rising in the near future, and that, combined with a dwindling supply of home sites, will soften home sales for both the overall market and KB Home, he said.

"Interest rates will be one factor that will affect home sales this year, but there are also going to be quite a few builders -- including KB Home -- that will have problems replenishing sold-out lots. It's difficult to find lots and land."

In addition, the national recession will hinder local home sales, though Smith said closings in the Las Vegas market should remain higher than those in other cities.

"The new home industry in Las Vegas will have much better numbers than most national metropolitan areas, because as long as we have positive job growth, we'll sell houses."

Smith said he expects KB Home to retain its No. 1 status in the Valley in 2002, though with fewer sales.

"They'll still be the No. 1 builder by a large margin, but they'll have a hard time matching 3,000 sales. They may sell 2,500 homes instead of 3,000. That will have nothing to do with demand -- it'll be because they can't find enough lots to satisfy demand. It's a supply issue.

"It's not a crisis for them -- the same problems they face, other builders face," Smith said.

KB Home, which changed its name from Kaufman & Broad Corp. last year, was expected to earn $1.82 a share, according to a survey of analysts by Thomson Financial/First Call.

KB's home sales rose 10 percent in the quarter, to 7,814 homes, including 1,320 homes in France, where its Kaufman & Broad S.A. unit is one of the largest builders.

The Sun's Jennifer Robison and Bloomberg News contributed to this report