KB Home (NYSE: KBH) is showing that the housing mess isn’t over.  No one was expecting anything great, but the beatings are continuing.  Revenue fell 56% to $681.6 million, and housing revenues were down 51% to $688.3 million.  The homebuilder’s loss in the third quarter rose more than four-fold to a loss of $144.7 million or $1.87 per share.

There was a  51% decrease in homes delivered to 2,788from 5,699, and a 10% decrease in the average selling price, to$239,700 from $267,700.  Land sale revenues in the third quarter was $10.8 million, also lower than the $14.7 million a year earlier.  These houses are targeted at middle America.

• Here is the smoking gun for no turnaround in sight for the sector.  President &CEO Jeffrey Mezger said, "…it is too early to assess whether thefederal government’s proposed interventions will be effective. … Market fundamentals appear unlikely to improvesignificantly in the near term, as foreclosures continue to rise,housing inventory overhang remains at historically high levels andmortgages have become more difficult to obtain."

About the only good news here is that its cash balance is upsharply to $942.5 million versus. $645.9 million a year earlier,and its debt balance was $1.88 billion compared with. $2.16 billion.  In August, it reduced its credit facility to $800 millionfrom $1.3 billion.

At least all those unemployed home construction workers can do repairwork around Houston and Galveston for the next few months.  KB sharesare down over 6% at $19.75 pre-market.  Its 52-week trading range is$13.16 to $30.59, but its peak in 2005 and 2006 was just over $80.00.

Jon C. Ogg
September 26, 2008

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