KB Home (KBH)

Dear KB Homes,

I have enough homes now. Thank you. You can stop building them.

Signed,
America

P.S. I can't afford these mortgages you gave me so I am going to stop making payments.

KB Homes earnings showed improvement year over year and quarter over quarter.... KB Homes is stealing marketshare and sales from bankrupt private builders... they will be one of the survivors.... public builders control only 20% of total homebuilding... KB Homes national market share is probably 1-2%..... you can't generate growth from that when all your competitors are going bankrupt?

Stagflation kills the buyers and the builders lose their customers.
Fraud in the first-time home buyer government assistance program may slow home sales in the low end part of the market.

This stock is heading lower, along with the entire housing sector. The market is nowhere near the bottom. I think that most experts who are calling a bottom now, remember the heady gains we just experienced in the housing market and want to be crowned geniuses for picking (guessing) a bottom in the market. These people must not realize that we saw 10 years of price appreciation in only a couple of years in many of these hot markets. We had an explosion of real estate speculators buying multiple houses with nothing down and taking interest only loans with the idea of selling the house basically as soon as they purchased it for more, a quick buck. Now the market is starting to drop, these people can not sell their houses for even as much as they paid and to top it off the rates on their interest only loans are increasing. Since these people can not pay for their multiple loans without selling properties, we will see an enormous rise in foreclosures (something that is already starting happen with 50% plus rises of foreclosures in some markets like Nevada and Florida.). In addition to all of this, builders, who swore that they had learned their lesson with every real estate boom and bust that we have ever had, promised that they were not overbuilding. A fact which I think anyone who lives in a major US city knows has not been the case, builders have overbuilt as much as at any other boom, if not more. With all of this bad news, you would think that real estate prices would have declined significantly, but they haven't. Many markets are down only a couple of percent, if they are down at all. They certainly have further to go down before they come back up.
For a few years it seemed impossible to go a day without hearing about real estate somewhere. Taxi drivers, 7-11 employees, people at bars and restaurants, everyone was talking about how buying real estate was the best way to make a quick buck, a sure fire investment. Real estate is not tech and historically has only grown a few percentage points a year, not the 20% we had seen recently and what people were now expecting. One thing that has become more compelling to investors about houses in relation to stocks, is that the margin requirements are next to nothing for real estate. You can buy hundreds of thousands or millions of dollars in real estate, with almost no real money. That drove a flock of young and greedy real estate speculators, who will continue to get crushed now in a down market they did not expect and will consequently drive prices further down with them.
On a further note, the PE ratios won't look so small with contracting earnings. Looking to forward PE ratios can be as important with lower PE, slower moving stocks, as with faster ones. Cyclical industries can change very quickly. It is the very reason why stocks like these real estate plays and airlines do not deserve a higher multiple even when times are good. I give this downward cycle at least another year.

Stock Screen

Too much inventory!!!
MTG crisis, poor economy...yes poor economy. Outside of the white collar world, blue collar workers get squeezed between gas and health care. Buying a home is not in the cards. The upper middle class seem to be about done 'house hopping' into the next higher level of debt and affluenza...and it's time to pay off their credit cards. So, no new house for them. What do the home builders do? The only thing they know how to do...build homes.

Shorting those homebuilders, just trying to keep up with everyone else.

Folks are still way too optimistic about the home builders. Prices are not accounting for risks to the downside from here and as much as the cheerleading HB CEOs throw out that they are seeing a bottom, most data continues to show weakness and in some cases still accelerating weakness.

Home builders are hurting. They have too much supply and not enough demand. However, KB homes is my main pick for underperforming, why, because they think they are bigger and better than all the homebuilders. And they may be, but what they don't realize is that because they are bigger they suffer more losses. I've been able to successfully play the KB short game. Once they get into the high 20's I short them, typically it falls in line with their conference call, where they announce another huge loss and then it drops a few bucks to the low 20's/high teen's where I cover. Repeat, repeat.

The housing bill is a huge deal. I don't think people realize how big.

This is a pure cyclical play. The homebuilders seem to peak and trough on a 3-5 year time horizon and I'm betting that most of the unfavorable news is out. As this is a speculative investment, I'm spreading my investment between LEN, BZH, CTX, DHI, PHM, KBH, HOV, and TOL...And not betting the farm.

Subprime worries blah, blah, blah. Certainly home sales are down but they're down from unprecedented levels in this country's history. A wall of worry is built into this sector and that's what drives markets higher. Technically there's a possible 10% downside, but looking out a year or so I see this in the 59-60 area. Certainly not beyond the realm of possibilities with a float that's 24% short and all those panicked buyers built in if something should turn positive.

The recent bounce was nothing more than stupidity brought on by the government bailout of citigroup and Obama's press talks. The downgrade will drop this stock in the coming weeks.

When the housing bubble bursts, housing stocks will be hurt badly.

Take a look, Interest rates are down. I just got an offer for more than 2% less than a rate I got 18 months ago. Inventory is disappearing due to the homebuilders slimming back. KBH has a good deal of room to go and something else going in their favor, in CA where the "bursting bubble" is (I am from there) much of their inventory is low, but their land options are still there, they are posied to move when they need to.

Exhibit A would be the fact that the average new home has been on the market for 12.9 months. Exhibit B is that we have about 2-3 years of existing home sales just to absorb the vacancies that exist. According to T2, about 6% of all homes built this decade are vacant.

Exhibit C is that the home builders themselves have too much debt and too much inventory relative to their thin equity cushions. The home builders are in the position of trying to hold up a bowling ball with a sheet of paper...in the rain.

Lastly, the home builder stocks are almost universally expensive on a price-to-book basis." (NVR, SPF and KBH have the highest )
- quoted from The Daily Reckoning newsletter 11/5/09

Much too high at these levels. Housing is far from bottom. The market is forgetting about the glut of foreclosures to come. Foreclosure takes up to 1 year in most states. Actions that began last year have not yet hit the already high inventory.

Who needs a new home when you can buy a perfectly good used home for next to nothing. In fact...who can even purchase a home when you can't get a loan? Underperform And How!

as much as i hate kb homes, the new martha stewart line is going to be a succuess in atlanta