KB Home KBH, one of the nation's largest home builders, reported a larger second-quarter loss Friday, as weak sales and falling home prices led to a 55% drop in revenue.
The company also booked charges to lower the value of unsold homes, joint venture deals and land option contracts.
Its shares tumbled nearly 6% in morning trading.
The company reported a loss of $255.9 million, or $3.30 per share, for the three months ended May 31. A year ago, it lost $148.7 million, or $1.93 per share.
The latest results included a $176.5 million charge to cut the value of its unsold homes and to abandon some land option contracts.
Revenue plunged to $639.1 million from $1.41 billion in the year-ago period. The decline was driven by lower housing and land sale revenues, the builder said.
Analysts surveyed by Thomson Financial were expecting KB to post a loss of 94 cents per share on revenue of $691.3 million. The earnings estimates typically exclude one-time items.
CEO Jeffrey Mezger said weak demand for new homes and falling home prices forced the company to book additional impairment charges during the quarter, hurting the company's operating results.
"Despite substantially lower home prices, relatively low interest rates and an abundance of choices, potential new home buyers remain reluctant to purchase a home," Mezger said in a statement. "But as housing affordability continues to improve, we expect today
Homebuilders are struggling to sell their homes at a time when many buyers remain reluctant to enter the market because they expect home prices to keep falling. Builders have responded by stepping up incentives and discounts, shrinking their profits.
The average selling price of KB's homes tumbled 17% during the quarter to $226,600.
Lennar, another large homebuilder, said Thursday its losses shrank to $120.9 million, or 76 cents per share. Its revenue fell 61% to $1.13 billion.
Sales of new, single-family homes were down 2.5% in May, although sales of previously owned homes, which make up the vast majority of homes for sale, nudged up 2%.
But housing prices continue to fall precipitously. Data released this week by Standard & Poor's/Case-Shiller showed home prices fell at the sharpest rates ever in April.
One measure closely watched by builders is the rate of cancelations for home orders. Several builders, including Hovnanian Enterprises, Toll Brothers, and Lennar, have reported lower cancellation rates in their most recently completed quarter.
KB Home, which builds homes to order and has operations in nine states, said its cancellation rate also improved in the second quarter. It rate was 27%, down from 34% in the year-ago period and 53% in the first quarter.
Still, weaker demand for new homes translated into a sharp decline in the builder's new orders during the quarter. They fell 42% to 4,200 versus a year ago. However, it is nearly triple the 1,449 net orders generated by the builder in the first quarter of this year.
As of May 31, KB's backlog, or homes under contract yet to be delivered, stood at 6,233 units, down 54% from the close of the same quarter last year.
Unit deliveries, meanwhile, fell 41% to 2,810 from 4,776 in the year-ago period, mostly due to a 37% reduction in the number of communities with homes for sale as KB has sought to scale back its inventory of homes on the market.