KB Home Sees Return of First-Time Homebuyers in Cheaper Suburbs

  • Builder says quarterly earnings jumped 63% from prior year
  • Demand strengthening in California’s inland areas, CEO says

KB Home is getting a surge of buyers in cheaper suburban areas after spending the past few years focusing on costlier locations, the builder’s chief executive officer said.

An increase in purchases in the three months through May helped lift net income 63 percent from a year earlier to $15.6 million, or 17 cents a share, the Los Angeles-based company said in a statement Tuesday. The average estimate of nine analysts was for earnings of 14 cents a share, according to data compiled by Bloomberg.

Increasing prices in coastal markets and other expensive locales are pushing homebuyers to more-affordable locations that require longer commutes. The improving job market and wage growth at the lower-end of the income scale is also boosting demand for starter homes, said Jeffrey Mezger, KB Home’s president and CEO.

“We are seeing strengthening demand in medium-priced suburbs, not just A-locations,” Mezger said in a phone interview. “In California, sales were up 30 percent but the majority of the growth was from more inland areas.”

The share of first-time buyers was at 52 percent in the fiscal second quarter, up from about 50 percent a year earlier, Mezger said.

The company’s total revenue climbed 30 percent from a year earlier to $811.1 million, while deliveries jumped 30 percent 2,329 houses. The average selling price rose 2 percent to $346,700.

Lennar Corp., the second largest U.S. homebuilder, reported fiscal second-quarter earnings on Tuesday that beat analysts estimates. Net income was $218.5 million, or 95 cents a share, compared with $183 million, or 79 cents, a year earlier. Lennar delivered 6,724 homes in the quarter, up 12 percent, while the average selling price climbed 4 percent to $362,000.

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