KB Home

What they do

KB Home builds homes in development communities, urban in-fill locations and mixed-use projects, using a Built to Order process where buyers select structural and design options. Its homebuilding operations produced 99.6% of total revenues in 2025. The remaining 0.4% comes from financial services, which offers insurance products and title services and, through the unconsolidated KBHS Home Loans joint venture, mortgage banking.

Revenue drivers

• Homebuilding operations — Generated 99.6% of 2025 total revenues from constructing and selling homes; second-quarter 2026 housing revenues were $1.11 billion on 2,395 homes delivered at a $461,900 average selling price.
• Built to Order homes — A differentiator where buyers personalize structural and design features; these homes represented 73% of second-quarter 2026 net orders and typically carry higher gross margins than inventory homes.
• Financial services — The smallest piece, at 0.4% of 2025 revenues, comprising insurance and title services plus mortgage-origination income earned indirectly through the KBHS joint venture.
• Geographic segments — Homebuilding is organized into four segments — West Coast, Southwest, Central and Southeast — across states including California, Arizona, Nevada, Colorado, Texas, Florida and North Carolina.

Recent performance

Second-quarter 2026 revenues fell 27% year over year to $1.11 billion, with homes delivered down 23% to 2,395 and average selling price down 5% to $461,900. Net income was $27.3 million and diluted earnings per share were $0.43, versus $107.9 million and $1.50 a year earlier. The housing gross profit margin was 15.2%, down from 19.3%, and homebuilding operating income margin was 2.5%, down from 8.6%. Net orders declined 4% to 3,317 and ending backlog fell 5% to 4,526 homes, though the cancellation rate improved to 12% from 16%. The company repurchased $75.0 million of common stock during the quarter.

Strategy

The stated core strategy is KB Edge, which aims to reach a top-five position in each served market based on homes delivered by expanding primarily within the existing geographic footprint. The company is shifting back toward a predominantly Built to Order model, targeting a 60% to 70% mix of delivered homes, and reported build-time improvements of 22% in the first quarter and 24% in the second quarter of 2026. It has kept a simplified sales approach with a transparent base price and limited concessions or incentives. KB Home also announced in 2025 its reentry into Atlanta, Georgia, but had not acquired land or begun selling homes there as of November 30, 2025.

Risks

• Affordability and mortgage rates — Persistent affordability pressures and elevated mortgage interest rates continued to weigh on buyer demand in the 2026 second quarter.
• Macroeconomic and geopolitical uncertainty — Rising inflation, macroeconomic uncertainty and geopolitical tensions, including the military conflict in the Middle East, softened buyer sentiment during the quarter.
• Margin compression — The housing gross profit margin fell to 15.2% in the 2026 second quarter from 19.3%, reflecting price reductions, higher relative land costs and reduced operating leverage.
• Delivery timing and backlog — The shift to Built to Order contributed to an anticipated temporary trough in first-half 2026 deliveries, with the time between sale and delivery inherently longer than for inventory homes.

Outlook

Management said the second-quarter progress sets the foundation for the rest of fiscal 2026 and projects sequentially higher delivery volumes and gross margins in each of the final two quarters. It expects the higher level of Built to Order sales to benefit homes delivered and housing gross profit margins in the third and fourth quarters, and believes the company will reach its 60% to 70% Built to Order delivery mix goal in the 2026 second half and beyond.