US Real Estate Industry is on a Tailspin
The US real estate industry is on a tailspin. People are faltering on mortgage payments and banks are taking over the properties. Hence, foreclosures have become common. These foreclosed properties are now being put back on to the market for resale. First-time investors are snapping up these properties propelled by the Federal tax credit announced by the government.
Homes are being built also and KB Home is one of the builders of small and affordable homes. The company has carved out a niche in the segment and is in fact posing a competition to foreclosures. Its losses in the third quarter have come down as it received orders to build new homes. In fact, the company’s orders increased by 62 per cent from the previous year’s contracts. The company specializes in building Open Series homes that would cut down costs.
KB Home’s president and CEO, Jeff Mezger, says that the company’s main objective has been to restore profitability and as the third quarter results reflect the company is on the growth track. The company’s quarterly results are a reflection of the fact that the housing industry is recovering.
The sale of new homes has increased for the fifth consecutive month. Yet the figures are now no where near what they were in the peak season. It is still 70 per cent less than what it was in 2005. This has been a welcome trend for KB, which has been struggling to put a cap on losses through the downturn. Despite gains, KB’s balance sheet is still in the red. This has been the company’s 10th quarterly loss. Revenue has also seen a drop of 33 per cent. While in the previous year it was $681.6 million, it dropped to $458.5 million.
The sales too dropped – it sold 2,240 in the latest quarter. This is a 20 per cent fall from the previous year. The median selling price of homes too registered a decline. It fell by 15 per cent to $202,800. There’s a bright side of the picture though. It received many new orders for constructing homes and these totaled 2,158.
Mezger said that the increase is because of its new brand of houses known as Open Series. This brand will make up for half of its sales not only in the last half but also the first quarter of 2010. There is a good demand for homes in all the regions including Arizona and California.
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