June 12 (Bloomberg) -- Billionaire investor Edward Lampert bought KB Home and Centex Corp. shares in the first quarter as U.S. homebuilders fell to a five-year low in the housing slump.

Lampert's ESL Investments Inc. hedge fund purchased 747,500 shares of Centex, the fourth-largest builder, according to a May 15 filing with the U.S. Securities and Exchange Commission. The shares are valued at $10.8 million at today's closing price. The fund also acquired 605,000 shares of KB Home as of March 31, the fifth-largest, valued at $11.2 million.

In January, a Standard & Poor's measure of U.S. homebuilders tumbled to the lowest since December 2002 as prices fell and banks cut financing. The index then rallied 57 percent, hitting a high for this year on April 3 on expectations Federal Reserve interest rate cuts would boost demand. Since then, the index has fallen 31 percent.

``When they got dirt cheap in January maybe he started to nibble a little bit,'' said Eric Landry, a homebuilding analyst at Morningstar in Chicago. ``It'll be interesting to see what he's going to do now that the stocks have fallen back.''

Stricter lending standards, falling home prices and rising foreclosures have led the Standard & Poor's Supercomposite Homebuilding Index to fall 51 percent in the past 12 months.

Mortgage Stakes

Lampert, the chairman of Sears Holding Corp., is also investing in mortgage-related companies.

ESL acquired 3.93 million shares, or 1.4 percent, of CIT Group Inc., the commercial lender that that tapped emergency credit lines this year when cash ran short. His fund owns 1.41 million shares, or 2.6 percent, of PHH Corp., the New Jersey- based mortgage and auto-leasing company.

ESL added 6.08 million shares of Home Depot Inc., the world's largest home-improvement retailer, in the first quarter. Atlanta-based Home Depot said last month first-quarter profit fell 66 percent, and Chief Financial Officer Carol Tome said full-year earnings may be at the low end of its forecast.

Los Angeles-based KB Home rose 58 cents, or 3.3 percent, to $18.45 in New York Stock Exchange composite trading. It's down 57 percent in past 12 months.

Dallas-based Centex gained 48 cents, or 3.4 percent, to $14.44. It's down 67 percent in the past year.

The SEC filings were made by RBS Partners LP, the Lampert affiliate that reports the fund's positions.

To contact the reporters on this story: Heather Burke in New York at hburke2@bloomberg.net; Brian Louis in Chicago at blouis1@bloomberg.net.,

Last Updated: June 12, 2008 16:21 EDT