How's KB Home’s Housing Recovery-Where Do You Live?

KB Home (NYSE:KBH)  just reported first quarter 2010 numbers. Data the company disclosed reveals a possible housing recovery. Yet there are wide geographic disparities in the state of the housing market with some areas still experiencing a correction.

First, let’s look at inventory pricing (primarily land and investments). KB took a non-cash charge of $13.4 million for the quarter. That is a 46% improvement over last year’s results of $24.7 million. The value of the company’s backlog was down 6.4%. Therefore, it seems that the decline in housing valuations has slowed significantly but has not stopped. A closer look shows a highly uneven distribution of average sale prices with the West Coast up 3% and all other regions showing significant declines (for an overall decline of 6%).

It is the net orders and home backlog data that give us the clues to a housing recovery. The Southwest and Central regions showed a 41% and 15% increase in net orders with the West Coast and Southeast down 7% and 13% (total company up 5%). Home backlog reported similar trends on a regional basis with the Southwest and Central regions up 25% and 24% and significant declines in the other regions (an overall increase 2.3%).

Is there is housing recovery happening? It depends on where you live. But we should not be surprised that the West Coast and Southeast are lagging the other two regions as they include markets that have had some of the most excessive valuations and may take the longest to correct. With company backlog up and new order strength in two regions we can slowly see the housing market improve. Right now, not in most places.

Steve Gear