Another homebuilder is feeling the pain today as KB Home (NYSE: KBH) becomes the latest homebuilder to disappoint this morning. The stock has managed to bounce back to around break even 30 minutes into the trading session after starting sharply in the red. At one point, shares traded down as low as $39.75 but have bounced back to $40.42 down $0.01.The company announced this morning that in its second quarter it lost $174.2 million, or $2.26 a share. Wall Street had been expecting the company to show a 7 cent per share profit, and analysts polled by Thomson Financial had estimates ranging from a loss of $1.46 a share to a $0.46 per share profit.
The company blamed its poor quarter on three ongoing market conditions:
- Current oversupply of new and resale housing inventory
- A difficult situation compounded by aggressive competition
- Continued weak demand
Sadly for KB Home and its competitors, the above three problems that are weighing on their businesses do not seem to be nearing an end, and things could get much worse as the year progresses. On Tuesday, one of the country's largest homebuilders, Lennar Corp. (NYSE: LEN) also announced that it had swung to a loss in the recent quarter.
It is definitely a tough time out there in the housing market. Sellers are finding it very hard to sell their homes, and homebuilders are feeling the pinch of tighter loaning standards and sky high mortgage defaults. As I have said before, the only real silver lining to the current situation is that for buyers in the market things could not be looking better, and each month the house of their dreams is getting just a little bit more affordable.
Michael Fowlkes has worked as a stock trader for seven years and spent the last two years working as an analyst for the online investment advisory service Investor's Observer
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