KB Home Q3 2026 Revenue Falls 20% as Margins Narrow

KB Home (NYSE: KBH) reported a 20% year-over-year decline in fiscal third-quarter 2026 housing revenue as fewer home deliveries and continued pricing pressure weighed on profitability. Although the homebuilder ended the quarter with modestly higher backlog value and a larger community base, its operating and gross margins contracted substantially from a year earlier.

Housing revenue fell to $1.29 billion from $1.61 billion, reflecting a 19% decline in deliveries to 2,732 homes and a 1% decrease in the average selling price to $473,000. Total revenue was $1.30 billion.

Homebuilding operating income dropped to $67.1 million from $131.2 million. The reported homebuilding operating margin narrowed to 5.2% from 8.1%, while the margin excluding inventory-related charges declined to 5.4% from 8.8%.

The reported housing gross profit margin was 16.5%, compared with 18.2% in the prior-year quarter. Excluding inventory-related charges, the margin fell to 16.8% from 18.9%, primarily because of continued pricing pressure, higher relative land costs and reduced operating leverage, according to the presentation.

Selling, general and administrative expenses increased to 11.3% of housing revenue from 10.0%. KB Home attributed the higher ratio mainly to reduced operating leverage, partly offset by lower costs associated with certain performance-based employee compensation plans and a reduction in personnel.

Pretax income totaled $81.2 million, including a $3.5 million gain from the sale of an equity investment in a privately held technology company and $7.4 million of financial-services pretax income. Net income was $65.3 million, or $1.05 per diluted share.

Orders decline, but backlog value edges higher

Net orders decreased 12% to 2,604 homes, while net order value fell 8% to $1.21 billion. Monthly absorption declined to 3.1 net orders per community from 3.8 a year earlier.

The lower sales pace came despite an expanded community base. Average community count rose 8% to 279, and ending community count increased 5% to 277.

Backlog finished the quarter at 4,398 homes, up 2% year over year, while backlog value increased 3% to $2.05 billion. The higher backlog provides visibility into future deliveries and revenue, although the presentation did not provide a quantitative delivery or earnings outlook.

California remained KB Home’s largest market, generating $475.5 million, or 37%, of third-quarter homebuilding revenue. Florida accounted for 14%, while Arizona and Texas each contributed 11%. The company operates in 50 markets across 10 states.

KB Home continued to emphasize its Built to Order model, under which buyers select their floor plan, lot, square footage, elevation and finishes. About 64% of its communities offer plans below 1,600 square feet, which the company said allows it to provide lower starting prices without compromising gross margin percentages. First-time buyers represented 50% of third-quarter deliveries, while first move-up buyers accounted for 22%.

Liquidity and capital returns

KB Home had total liquidity of $942.4 million as of Aug. 31, including $159.0 million of cash and cash equivalents and $783.4 million of available capacity under its unsecured revolving credit facility. The company had $415.0 million of borrowings outstanding on the revolver, and its debt-to-capital ratio was 35.7%.

The next scheduled debt maturity is $300 million of 6.875% senior notes due in June 2027. A $360 million term loan matures in November 2029, while the $1.2 billion revolving credit facility matures in November 2030.

During the quarter, KB Home repurchased 900,000 shares for $50.0 million. Year-to-date repurchases totaled $175 million, covering 3.1 million shares. Stockholders’ equity stood at $3.80 billion, and book value per share increased 4% to $62.56.

The company continues to invest in land positions intended to support future growth while returning capital to shareholders. Since the second quarter of 2021, KB Home has returned more than $2.1 billion through share repurchases and dividends and has repurchased more than one-third of its outstanding shares.

Risks remain centered on affordability and costs

The presentation identified interest rates, mortgage availability, inflation, consumer confidence and homebuyer affordability as significant uncertainties. Other risks include material and trade costs, tariffs and supply-chain disruptions, land and inventory-related charges, debt obligations, mortgage-lender performance and the company’s ability to execute its business strategy.

KB Home also noted potential costs related to relocating its corporate headquarters from Los Angeles to Tempe, Arizona, in 2027. Its results could additionally be affected by information-technology failures, data-security breaches and geopolitical or regulatory developments outside the company’s control.