KB Home: Homebuyers risk finding themselves 'upside-down' if they overpay for builder incentives

“I believe that there are customers [of other homebuilders] that are overpaying for the home to effectively get an incentive. So they're tied into this higher price that they're gonna be stuck with forever until they sell that home. They may potentially be upside down when they try to sell that home versus a clean, simple, transparent way of selling—the value of what we offer.”

“The actions we began to take late in our 2025 first quarter, evaluating base pricing in every community relative to local market conditions, then repositioning our communities with a focus on offering the most compelling value, led to strong net orders in March. However, our net orders declined in April and May, which did not follow the typical spring trajectory. As a result, even though our average community count was in line with our projection, and our cancellation rate was fairly steady, our monthly absorption pace per community was 4.5 net orders compared to 5.5 in last year's second quarter. While our net order pace was below our internal goal, we believe it ranks high among the large production homebuilders.”

“The story continues to be very local and very dynamic. And I would say that all of the markets we operate in experienced some level of softening at some point during the quarter.”

“Markets that I would say where we're still seeing relatively strong demand and sales performance would be Las Vegas, the Inland Empire, the North Bay in Northern California, Texas markets like Houston and San Antonio, and Tampa as well.

And by contrast, some of the markets that are facing some more significant headwinds recently are like Sacramento and Seattle. They've slowed down a little bit, and we've had to do a little more there with price relative to some of the others. Markets like Austin and Colorado, Jacksonville, Orlando, and Florida [have been weaker too]. Places where resale supply has increased and starts putting pressure on pricing and creating more competition and just more choices for buyers. But, you know, it is very local, very specific, [we] can't put a market condition on an entire state or even an entire market in most cases, it's community by community.”

“We lost a certain buyer [this spring]. We have our teams that they're gonna know that by community, and they're gonna know where some of their prospects that were an interested may have gone. But we do know in the markets where you've seen resale inventory or resale supply get back to norms or above those norms of six or seven months of supply. Those resales become a more formidable competitor than they were to us back when we would measure months of supply in terms of weeks instead of months. And on the flip side, most of the markets where resale supply has stayed fairly suppressed and limited, we're tending to see better results there.”

“Homes that we started in May came in at the lowest cost per square foot year to date, as our divisions are continuing to drive better performance on cost. Our costs, including lumber, are protected for almost all of our third-quarter starts under the terms of our supply contracts. Our national purchasing team, working with our divisions, has done an excellent job holding off tariff-related cost increases, with only two minor price increases to date.”