KB Home Says Housing Demand Has ‘Improved Significantly’ as Rates Moderate
In its recent quarterly earnings report, KB Home (KBH) indicated a noteworthy surge in homebuyer demand, attributing it to a substantial moderation in mortgage rates. This signals a robust beginning for the US housing market in 2024. Jeffrey Mezger, the president and CEO of KB Home, shared during a conference call with analysts this week, “Demand has experienced a significant boost as interest rates have decreased since the conclusion of our fiscal year.”
According to Yahoo News, during the fourth quarter, KB Home said offered its built-to-order model buyers a rate buy down program and about 60% of their orders included some form of a mortgage concession.
“[As] a result, there is a higher degree of confidence, both for buyers and for us, of the likelihood of closing, even if rates continue to rise,” COO Robert McGibney said on the call with analysts.
The recent drop in rates boosted the builder’s net orders in the first five weeks of the first quarter of its fiscal year to 904 homes, more than double the 403 net orders logged in the comparable period of the prior year. The rise in December’s orders was “unusual” due to the winter months being a slower season for sales, Mezger noted on the call.
“To us, this speaks to the pent-up demand for home ownership,” Mezger added.
During the company’s fiscal fourth quarter, which wrapped up on Nov. 30, 2023, the company saw net orders tally 1,909, up 176% from the prior year. Wall Street analysts had expected net orders to come in closer to 2,470 homes, according to Bloomberg data.
