Another big loss at KB Home
Part of the problem is slumping revenue -- sales dropped by almost a billion dollars, to $2.07 billion from $3.01 billion. Average selling prices slumped 12% YOY, while deliveries fell 22%. KB Home also posted pre-tax charges of $403.4 million to account for impairments of inventory and the abandonment of land option contracts. That's up from $343.3 million in such charges a year earlier.
Meanwhile, the firm took a charge of $514 million stemming from deferred tax assets. Basically, the company is saying it may not be able to utilize some portion of these tax benefits because it's not going to be profitable enough to do so. General Motors recorded a huge charge for a similar reason in November.
Commenting on the quarter, CEO Jeffrey Mezger said:
“The challenging market conditions we experienced through the first three quarters of 2007 continued during the fourth quarter. Several factors weighed on the entire housing industry this year, including a persistent oversupply of new and resale homes available for sale, increased foreclosure activity, heightened competition for home sales, reduced home affordability, turmoil in the mortgage and credit markets, and decreased consumer confidence in purchasing homes.”
So what about the future? Well, net orders came in at 2,574 units in the quarter -- down 32% from year-ago levels. Orders fell in every geographic region, with especially sharp drops in the Central (-42.9%) and Southeast (-40.2%). The cancellation rate was a whopping 58%, up from 50% a year earlier. Other builders have also reported elevated cancellation rates. That means the new home sales stats from the Census Bureau, which do not account for cancellations, are likely overstating sales.