KB Home Stock

KB Home operates as a homebuilding company in the U.S.

The company builds a variety of new homes, including attached and detached single-family residential homes, townhomes, and condominiums, designed primarily for first-time and first move-up, as well as second move-up and active adult, homebuyers. The company offers homes in development communities, at urban in-fill locations and as part of mixed-use projects. The company’s homebuilding operations represent the majority of its business, accounting for 99.5% of its total revenues in 2023. The company’s financial services operations, which accounted for the remaining 0.5% of its total revenues in 2023, offer various insurance products to its homebuyers in the markets where it builds homes and provides title services in certain of those markets. The company’s financial services operations also provide mortgage banking services, including residential consumer mortgage loan (mortgage loan) originations, to its homebuyers indirectly through KBHS Home Loans, LLC (KBHS), an unconsolidated joint venture between the company and a third party.

The company offers its customers a variety of homes with a standardized set of functions and features generally priced to be affordable for those with household incomes within a range of the local area’s median level, with the intention of being attainable for the largest demand segments.

The company markets its homes to prospective homebuyers and real estate brokers through a variety of media, and uses data analytics to target its advertising and measure its effectiveness and efficiency in terms of generating leads and orders.

The company’s product portfolio for customers ranges from smaller, higher density homes, with average selling prices typically suited for first-time homebuyers, to larger homes in premium locations with additional amenities and higher average selling prices that generally attract a first or second move-up homebuyer. The company also offers a variety of single-story floorplans that typically appeal to an active adult homebuyer age 55 and over.

Markets

Reflecting the geographic span of the company’s homebuilding business, the company has operations in the nine states and 47 major markets. It also operates in various submarkets within these major markets. The company may refer to these markets and submarkets collectively as its ‘served markets’. The company organizes its homebuilding operations into four segments — West Coast, Southwest, Central, and Southeast.

West Coast: California (Contra Costa County, Fresno, Hollister, Los Angeles, Madera, Modesto, Oakland, Orange County, Riverside, Roseville, Sacramento, Salinas, San Bernardino, San Diego, San Francisco, San Jose, Santa Rosa-Petaluma, Stockton, Vallejo, Ventura and Yuba City), Idaho (Boise), and Washington (Olympia and Seattle).

Southwest: Arizona (Phoenix and Tucson) and Nevada (Las Vegas).

Central: Colorado (Denver, Erie, Firestone and Loveland) and Texas (Austin, Dallas, Fort Worth, Houston and San Antonio).

Southeast: Florida (Fort Myers, Jacksonville, Lakeland, Melbourne, Orlando, Palm Coast, Sarasota and Tampa) and North Carolina (Charlotte, Durham-Chapel Hill and Raleigh).

The company’s homebuilding operating segments have been aggregated into four homebuilding reporting segments based primarily on similarities in economic and geographic characteristics, product types, regulatory environments, methods used to sell, and construct homes and land acquisition characteristics. The company also has one financial services reporting segment.

The company’s homebuilding reporting segments are engaged in the acquisition and development of land primarily for residential purposes and offer a wide variety of homes that are designed to appeal to first-time, first move-up, and active adult homebuyers. The company’s homebuilding operations generate most of their revenues from the delivery of completed homes to homebuyers. They also earn revenues from the sale of land.

The company’s financial services reporting segment earns revenues primarily from insurance commissions and from the provision of title services. The company offers mortgage banking services, including mortgage loan originations, to its homebuyers indirectly through KBHS, its unconsolidated joint venture with GR Alliance, a subsidiary of Guaranteed Rate, Inc. The company and GR Alliance each have a 50.0% ownership interest, with GR Alliance providing management oversight of KBHS’ operations.

Strategy

The company’s core business strategy, which it refers to as KB Edge, is to expand its scale primarily within its geographic footprint to achieve a top-five position in each of its served markets (based on homes delivered). KB Edge is a systematic, fact-based, and process-driven approach to homebuilding that is grounded in gaining a detailed understanding of consumers’ location and product preferences and product price-to-value perceptions.

The key components the company highlights as part of its brand identity are to offer homebuyers product designs that distinctively blend contemporary consumer-preferred elements, such as open floor plans, flexible living spaces, indoor/outdoor flow, and extra storage; quality construction standards; and advanced technological features and devices, as compared to some other new and resale homes; support healthier indoor environments; give the company’s homebuyers the ability to personalize their new home from floor plans to exterior styles, and from design choices to where they live in the community; offer its customers a variety of homes with a standardized set of functions and features generally priced to be affordable for those with household incomes within a range of the local area’s median level; and work closely with its customers throughout the homebuying process.

The company typically sells its homes through salaried and/or commissioned sales associate employees from sales offices located in or adjacent to furnished model homes in each community, or through outside brokers. The company also uses electronic sales capabilities and technology to give its customers a variety of convenient ways to shop for and purchase a new KB home, including among other things offering virtual home tours and online photo galleries for prospective homebuyers; providing access to interactive floor plans and homesite maps for their desired community; conducting virtual appointments and tours of the model homes and design studios; utilizing online tools to serve homebuyers where possible; organizing virtual events with the broker community to introduce new communities; presenting homebuyers with the ability to virtually see and walk through their home at various points during its construction and prior to closing; and arranging virtual or drive-through closings, where permitted.

Partnerships

The company’s dedicated team of sales counselors, design consultants, construction superintendents, and customer service representatives, as well as KBHS loan officers, work closely with its customers throughout the homebuying process.

Seasonality

The company’s performance is affected by seasonal demand trends for housing. Traditionally, there has been more consumer demand for home purchases and the company tends to generate more net orders in the spring and early summer months (corresponding to most of its second quarter (year ended November 30, 2023) and part of its third quarter) than at other times of the year. This ‘selling season’ demand results in the company’s typically delivering more homes and generating higher revenues from late summer through the fall months (corresponding to part of its third quarter and all of its fourth quarter). The combination of rapidly rising mortgage interest rates, elevated inflation and other macroeconomic and geopolitical concerns disrupted the company’s usual seasonal patterns in 2022, with its 2022 second half net orders negatively impacted by many prospective buyers electing to pause on their homebuying decision and a 2022 fourth quarter slowdown that was more pronounced than normal. Demand began to improve in the 2023 second quarter due to, among other things, constrained resale home inventory, favorable demographic trends, buyer interest in homes at the company’s price points and its selective implementation of targeted sales strategies, including pricing adjustments and other homebuyer concessions (particularly, mortgage-related concessions, such as interest rate buydown or lock programs) to help drive order activity and minimize cancellations.

History

The company was founded in 1957. The company was incorporated in 1981. It was formerly known as Kaufman and Broad Home Corporation and changed its name to KB Home in 2001.