Tomahawk, WI 9/25/2013 (BasicsMedia) – If you are in the U.S and in need of condominiums, townhomes as well as single-family residential units, the company to talk to would be KB Home (NYSE:KBH), which has a market cap of around $1.49 billion. It has a number of operating divisions through which it builds and sells its homes to clients. It also operates financial services meant to help potential homeowners in terms of get the right financing assistance for any homebuilding and homeownership project they might have planned. The company hasn’t enjoyed new home orders for a while. Why?

 Why Are New Home Orders Falling?

 The fact that the company hasn’t seen orders for new homes rise the way it would have hoped, has been bad news for shareholders and the rest of the industry. The same fate has also befallen other industry giants such as Lennar Corporation. This has been attributed to the rising prices or costs of new homes, regardless of whether one intends to buy or build one. The higher and increasing interest rates are not doing anyone much favor as well and are cited as contributing factors to the reduction in the demand for new homes, which has thus eaten into KBH’s revenue.

 What has emerged is that the new home orders are currently on a slow growth. While housing hasn’t had the best of times since the financial crisis of 2008, there had been some hopes that the situation would have changed by 2013. The current situation facing the mortgages industry has seen some banks embark on job cuts so as to ensure they don’t continue losing money unnecessarily and remain in business. KBH’s quarterly results aren’t very bad, but it’s just that it could have been much better were it not for the slow growth in new home orders.

 New home orders, as reported by KBH in its quarterly results, amounted to around 1,736 as at the end of August 31, 2013. This was much lower than what analyst had been expecting. I was one of the analysts who had predicted that this would grow by around 10% from what the company reported for the same quarter in 2012. The reduction in new home orders as reported by KBH regarding its own business was 8.6%. However, it was not al bad news for KBH. The company managed to report an increase in revenue of 29% to settle at $549 million.

 KBH focuses on Investing in Quality Locations

 It is worth pointing out that KBH appears to be focused on new locations which offer good returns. The company is almost being selective in where its home building services are offered and this is one factor which was responsible fro the improved revenue as well as profits which it reported. The economic uncertainties in the country are also responsible for the reduced new home orders while the ever increasing prices for homes haven’t helped the situation in any way. Unless these external factors change, the company’s financial results may not improve by much.

 The average price for a new home has gone up. This has been necessitated by the market forces thus forcing companies such as Lennar and KBH to increase their prices. While KBH now charges $299,100 for a new home, Lennar requires its clients to part with an average of $291,000 for the same.

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