KB Home turned in a better-than-expected earnings report today, for its third quarter. It beat Wall Street's expectations by two cents per share — $0.15 versus $0.13.
More importantly, the company, based on Los Angeles, anticipates a housing recovery in California finally moving off the affluent coasts and making it inland, to regions that were decimated by the financial crisis. The state doesn't have enough housing inventory to meet current demand, which is pushing up prices. We need to build new houses. And it's less costly to build those houses inland.
In a conference call with analysts Friday morning, KB Home chief executive Jeffrey Mezger said that while demand remained strong in the coastal markets of California -- places such as the Bay Area and Orange and Los Angeles counties -- the company was now experiencing strength in more inland markets as well.
“We are now seeing dramatically improved market conditions,” Mezger said. “It is simply a different market than it was six months ago in the inland areas.”
Mezger repeated several times that the company is now going “on offense” and will continue to aggressively acquire land.
“The housing market recovery is accelerating as inventory continues to decline and prices are now rising,” Mezger said. He said that California, in particular, was set to continue recovering and that the company was well positioned to take advantage of those improvements.
In my post this morning on the August California jobs numbers, I talked about economic uncertainty holding back a full-on housing rebound in the state — and with it a rebound in jobs for workers in construction and the building trades. KB Home may now be ready to say that this period of economic uncertainty is coming to an end.