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KB Home’s new CEO Rob McGibney will be one of our headline speakers at ResiDay 2026 on Friday, November 6th in NYC. There are still some tickets available. If you have any questions about ResiDay 2026, email [email protected].
To put the spotlight on KB Home ahead of ResiDay, we’re sharing a ResiClub PRO report we sent to our paying members following the homebuilder’s most recent earnings release in late September. This context will help set the stage for the questions we’ll ask Rob at ResiDay 2026.
When KB Home reported its Q2 results in June, management said the spring selling season was once again “soft”, as homebuilders, especially in the core homebuilding markets, continued to weather the housing market's passage through its post-Pandemic Housing Boom cyclical cooling window.
Three months later, the homebuilder says conditions have gotten even choppier even before the seasonally soft window set in.
On its September 22 earnings call, KB Home Executive Chairman Jeffrey Mezger said the housing market has weakened since June. He pointed to rising mortgage rates, geopolitical uncertainty, and building resale inventory in some markets. KB Home CEO Rob McGibney said their June sales held up, but sales softened in July and August, and net orders fell year-over-year.
Even so, KB Home's fiscal Q3 results met guidance across the board, and management kept its full-year delivery and housing revenue guidance intact. However, KB Home expects the weaker market to show up instead in its fourth quarter. The builder cut its Q4 average sales price outlook by about $20,000 (from roughly $500,000 to roughly $480,000), mostly because sales in its higher-priced Southern California markets have been slower than expected. It also lowered its Q4 gross margin guidance, citing broader pricing pressure, higher costs, and a less favorable mix.
"The housing market remains challenging, with conditions having weakened since our last earnings call in June. Affordability is under further pressure due to rising mortgage rates. Inflation remains persistently high, driven in part by fuel prices, which prompted the Federal Reserve to raise interest rates last week. These factors, as well as geopolitical uncertainty and broader economic headwinds, have resulted in consumers becoming more cautious about buying a home. In addition, resale inventory, which is our largest competitor, has increased to its highest levels in a decade, and we're seeing pricing starting to decline in more of our markets, adding to the tension in this environment."
In this ResiClub article, we highlight 8 other key takeaways from KB Home’s latest earnings and commentary.
1. KB Home’s margins compress to the lowest Q3 level since 2017
During the Pandemic Housing Boom, many publicly traded homebuilders achieved record profit margins as home prices soared and buyer demand ran red hot. Ever since the national housing demand boom fizzled out in the summer of 2022, many large homebuilders have reduced margin and made affordability/pricing adjustments where and when needed to maintain their sales pace or prevent a bigger sales pullback.
That includes KB Home, which reported a housing gross profit margin of 16.5% for Q3 2026. While that’s up from 15.2% in Q2 2026 and 15.3% in Q3 2026 as it leans into more Build-to-Order (BTO) and “increased operating leverage,” KB Home’s gross margin is still down year-over-year from 18.2% in Q3 2025.
Management now guides to a Q4 housing gross margin of 16.0% to 16.6% and a full-year fiscal 2026 gross margin of 16.0% to 16.2%.
2. KB Home CEO: We’re seeing more Texas resale ‘sellers capitulate a little bit more, and either prices come down or concessions going up’
“You hear a lot about Texas and the resale markets there. I think in Texas, the resale markets have generally been more of a pace story [inventory building and sitting longer] than a price [decline] story. But we are starting to see, I would say, the [Texas resale] sellers capitulate a little bit more, and either prices come down or concessions going up. I think ultimately it's good that we're starting to see that become more in balance and work through the resale [inventory] that's out there. I think in a lot of cases for the last couple of years, there have been a lot of listings on the market—depending on what part of the country you're in—but they're listed at really high prices. Probably not realistic. I would call them the ‘make me move type of price’, and I think we're starting to see maybe the sellers, the resale homeowners, get a little less patient with that and start to adjust. So overall, I would agree. You know, resale levels have generally come up. It's becoming more of a formidable competitor than it's been over the last several years. But it really is a market by market story.”
“You know, Florida is another one where you've got resale inventory. It [inventory] is still elevated in a lot of [Florida] markets, even though it's improved in places like Jacksonville. So you really have to look at the details and within a reasonable radius of each community that we have and what that resale competitive pool looks like, and we certainly have to stay tethered to that with our pricing because it has been and likely always will be one of the biggest competitors that we have out there for our product.”
3. KB Home’s average selling price is down -7.0% from 2022 peak
Unlike many giant homebuilders such as Meritage Homes—which has preferred to pull the mortgage rate buydown lever when making affordability adjustments this cycle—KB Home has chosen to rely more on outright price cuts. [Back in summer 2023, former KB Home CEO Jeffrey Mezger told me that this (i.e., outright price cuts) would be their strategy if any of their regional housing markets weakened further].
In Q3 2026, KB Home’s average sales price ($473,000) was -0.6% below Q3 2025 ($475,700) and -7.0% below its cycle peak in Q4 2022 ($510,400). KB Home has previously acknowledged cutting home prices over the past 24 months in Sun Belt markets such as Austin, San Antonio, Orlando, Jacksonville, and Denver.
KB Home had been expecting its average sales price [ASP] to increase back to $500,000 in Q4 2026, as its sales mix increased in higher-priced Southern California markets. However, sales have been weaker than expected there, so they’ve cut that Q4 outlook for average sales price to $480,000.
“The change in our outlook is principally driven by Southern California for two primary reasons. First, slower sales in the third quarter relative to our expectations have reduced the number of higher-priced Southern California homes we expect to close in the fourth quarter, weighing on our overall ASP. Second, the mix of Southern California communities delivering in the quarter has shifted from what we anticipated in June. Together, these factors account for roughly the $20,000 reduction in our projected fourth quarter ASP.”
4. KB Home is back to being a predominantly Built-to-Order builder—that shift is its margin defense plan
Late last year, KB Home said it wanted to shrink its spec business and return to mostly Built-to-Order (BTO) homes, where construction starts only after a buyer signs a contract and picks a floor plan and finishes. The shift was KB Home’s margin defense plan.
It got there sooner than planned. BTO homes made up 74% of its Q3 2026 deliveries, up from 60% in Q2 2026.
"A market like this one tests what a business model is built on. Our Built-to-Order model was designed to perform in exactly these conditions, and while we are not immune to the pressures in the operating environment, our approach did what it was supposed to do in the third quarter. It enabled us to sell before we build, know our costs before we commit capital to vertical construction, and keep our inventory risk low as demand softened."
The shift is visible on KB Home's balance sheet. Unsold inventory now makes up 26% of production, down from 41% a year ago. Finished unsold homes are 9% of production, down from 16%. KB Home also reported its first year-over-year increase in sold backlog in four years. Management said the gap between BTO margins and spec margins has held steady at about 4 percentage points, usually within a 3-to-5-point range. The flip side of hitting the BTO target early is that KB Home expects less additional margin lift from BTO mix in Q4.
5. KB Home’s home sales are down 11.7% year-over-year
KB Home’s net new orders by Q3 👇
Q3 2016 —> 2,508
Q3 2017 —> 2,608
Q3 2018 —> 2,685
Q3 2019 —> 3,325
Q3 2020 —> 4,214
Q3 2021 —> 4,085
Q3 2022 —> 2,040
Q3 2023 —> 3,097
Q3 2024 —> 3,085
Q3 2025 —> 2,950
Q3 2026 —> 2,604
6. KB Home: We’ve raised our bar on land deals
KB Home invested nearly $725 million in land acquisition and development in Q3 2026 and ended the quarter owning or controlling more than 61,000 lots, up from about 59,000 at the end of Q2 2026. McGibney said most of the jump in land spending went to development and fees on land KB Home already owned, not new purchases. He also said KB Home still targets a long-term gross margin of 22%, and that it has walked away from many land deals that no longer meet its return hurdles.
“That [22% gross margin] is still our target. Market conditions have been not exactly conducive to lifting margins lately. But as we're underwriting deals, we're sticking to our discipline there. Frankly, it's one of the reasons that we've walked from many of the deals that we've had under contract... because they just no longer met our return [hurdles]."
7. KB Home’s cancellation rate remains stable
8. KB Home build times are slowly coming back down
KB Home's Build-to-Order (BTO) homes took an average of 99 days from start to completion in Q3 2026. That's down from 100 days in Q2 and down from 122 days a year ago.
Management called this the builder’s best build-time performance in more than 10 years, and said it's a meaningful piece of the BTO value proposition—shrinking the time gap between buying a personalized new home and buying an existing resale home. Faster construction also lets the company sell BTO homes later into the year and still deliver them within the same calendar year.
Bonus charts
Where does KB Home actually build?
Pulling from the ResiClub Terminal—where we keep footprint data for America’s 25 largest homebuilders—we made the map below.
Here are some details on KB Home’s homebuyers👇
