KB Home Expands Built-to-Order Strategy Amid Ongoing Housing Affordability Challenges

KB Home reported lower second-quarter results as affordability pressures continued to weigh on homebuyer demand, while the builder expanded its built-to-order strategy and pointed to improving operational performance.

“Our return to a predominantly built-to-order business model continued to gain momentum, with these homes representing 73.0% of our net orders in the quarter, progress that we believe supports stronger, more sustainable performance over time and across market cycles,” Executive Chairman Jeffrey Mezger said. “We produced solid second-quarter results that met or exceeded the mid-point of our key guidance ranges.”

The Los Angeles-based homebuilder reported net income of $27.3 million, or $0.43 per share, down from $107.9 million a year earlier. Revenue declined 27.0% to $1.11 billion as home deliveries fell 23.0% to 2,395 units. The average selling price decreased to $461,900, reflecting continued pricing pressure and affordability constraints.

Profitability also weakened during the quarter. Housing gross margin declined to 15.2% from 19.3% a year earlier, while the operating margin fell to 2.5%, primarily due to price reductions, higher land costs, and lower operating leverage.

Management highlighted several operational positives, including faster build times, the opening of 35 new communities, and continued progress toward a predominantly built-to-order business model. The company also maintained financial flexibility by moderating land investment, reducing its lot position, and continuing share repurchases.

“The progress in our second quarter sets the foundation for the remainder of fiscal 2026, with sequentially higher delivery volumes and gross margins projected for each of the final two quarters. We remain committed to increasing shareholder value through improved performance, as well as our continued focus on operational excellence, strong financial flexibility, and ongoing balanced approach to capital allocation,” Mezger added.