Homebuilder KB Homes Earnings Outlook in a Soft Property Market

Homebuilder KB Homes reports fiscal fourth quarter 2022 earnings after the market Wednesday. It has been a difficult time for home buyers and home builders alike with sliding home sales and affordability squeezed with high interest rates and inflation. Affordability remains the major issue; mortgage demand remains near its lowest level since 1997. Redfin reported pending home sales were down 32% year over year for the four-week period ending January 1. Real estate is experiencing record-low new listings. Analysts are expecting sales of $1.98 billion, up 7.4% sequentially and by 17.9% year over year.  What we are looking for is what KBH sees going forward with all the recession chatter.

Competitor Lennar Corporation reported better than expected Q4 earnings three weeks ago, however forecasted a slowdown in orders for new homes as higher mortgage rates have crushed affordability. LEN said new orders decreased 15% to 13,200 homes; new orders dollar value decreased 24% to $5.5 billion

kb home

KB Home NYSE: KBH Report Earnings After Close Wednesday

KB Homes Earnings Preview

Q4 2022 earnings release between 4:10 p.m. and 4:20 p.m. ET; conference call at 5 p.m. ET

  • Projected EPS: $2.87
  • Projected revenue: Projected revenue: $1.99 billion

KBH earnings come just two days before the two big mortgage lenders report earnings on Friday, Bank pf America and Wells Fargo which will give us, and the Fed a deeper understanding of the economy and the housing market.

Homebuilders Confidence Turns to Despair

US housing starts fell 0.5% month-over-month in November to a seasonally adjusted annual rate of 1.427 million units (consensus 1.395 million), single-unit starts fell even more, by 4.1% to 828,000. Total building permits declined much more than expected 11.2% month-over-month to a seasonally adjusted annual rate of 1.342 million (consensus 1.480 million), with permits for single-unit dwellings dropping by 7.1%. Affordability remains the major issue; mortgage demand remains near its lowest level since 1997.

Mortgage Market Weakness

November US existing home sales from the National Association of Realtors fell 7.7% month-over-month in November to a seasonally adjusted annual rate of 4.09 million (consensus 4.20 million) versus an unrevised 4.43 million in October.

That was the tenth straight month that existing home sales have fallen. Total sales in November were down 35.4% from a year ago. Median price growth has slowed meaningfully as higher mortgage rates and inflation has enforced affordability pressures. Total building permits declined much more than expected 11.2% month-over-month.

Lennar Corporation Q4 earnings

Big Mortgage Lenders Earnings

Source: KB Homes, TC

Disclosure: I do not hold any positions in the stocks mentioned_

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