I have been reading the CA real estate blogs this weekend. I also uncovered a new article by Price-Waterhouse: 4 of the top 5 real estate markets in the U.S. for 2013 are KB's prime focus: SF Bay Area, San Jose Ca, Austin and Houston, TX.
There is about 40 days of inventory in the CA markets today. The LEAST price increases in the state were the Inland Empire (+12.56%); the greatest was San Francisco, San Jose and Sacramento (19%). These are all places where KB has a strong community focus. Inventory continues to go down; some agents say it's the least available inventory in decades.
ASPs nationally for new construction have risen 18% since October of 2011. These are stunning statistics. We are on track to hit a million housing starts (annualized) by Christmas at an average price of $255K. The retail value of those million starts adds $255BL to the construction industry, its owners, and to the banks that finance the loans.
DO NOT SELL. DO NOT LISTEN TO THE BEARS.
This is a once-in-a-generation real estate event that's beginning to look inexorable. Sometimes you just have to close your eyes and hold on. The ferocity of the builder rally in KB Home is going to shock analysts.
To keep your courage up in the face of the naysayers, print this chart up from the Federal Reserve bank of St. Louis and keep it front of your computer - Monthly supply of homes in the United States - FRED.
Your article is very bullish, but looking at the last quarterly report, new orders in the west were only up 12%, much less than new order growth reported by other builders of 25-30%. These companies are really impossible to analzye. Maybe KB doesn't have the desired locations? Those houses they building in Chino looked rather ugly to me.
KBH has too much debt to equity and has locked in interest of 7,5-9.5% on the majority of their debt. This is going to suck up too much of the profits, Also their margins are lower than some of the other builders, suggesting they didn't right down the value of their land holdings enough.
Except KB Homes was one of the only buidlers to not show an increase in new orders. Also take a look at management . They bought back nearly a billion worth of stock during the bubble and also bet the farm on now worthless land. Share holder equity declined to nearly nothing. So why invest with these guys?