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KB Home: We're cutting home prices in Austin, San Antonio, Orlando, and Jacksonville
KB Home Chief Operating Officer Robert McGibney: "We've seen resale inventory start to climb back up [in some markets]. It [resale inventory] is become a bigger competitor."
Lance Lambert
September 26, 2024
During KB Home’s earnings call on Tuesday, an analyst asked if the giant homebuilder, ranked No. 545 on the Fortune 1000, has seen any changes in regional housing markets in Florida and Texas, where active inventory for sale has risen considerably over the past year.
KB Home Chief Operating Officer Robert McGibney acknowledged that some communities in Florida and Texas have shifted, and in order to meet the market and demand there, they’ve recently cut home prices in parts of Austin, San Antonio, Orlando, and Jacksonville.
“It really is market by market. I look at a division like Jacksonville, where the resale inventory, it's about 5.5 months of supply now, which is approaching the longer-term historical average, and it's up more than two months year-over-year. So there is more pressure there from resales. And I think that was a factor in Orlando, [it] is similar, [and in] some of the [other] Florida markets that we've got. So as we looked at the moves that we needed to make to lift our sales pace, those were some of the areas that we did lower prices in. And we've seen that those have been fairly effective and sales have bounced back in August.
Texas, I would say, is similar, really different if you go from Austin to San Antonio as far as buyer profile. And price point. But both of those markets, too, we've seen resale inventory start to climb back up. It [resale inventory] is become a bigger competitor, and we've taken a similar approach there. We've taken steps to find the market. Some of that included lowering prices in certain communities. And then again, saw it come back, and we're pleased with where things headed in August, with sales improving each week of the month and continuing on into September. As we look at early September, we are also seeing really strong activity on our leads and traffic. So it gives us good optimism here as we look through the fourth quarter.”
The fact that KB Home just cut home prices in markets like Austin, San Antonio, Orlando, and Jacksonville to attract buyers shouldn’t come as a surprise to ResiClub readers—especially our ResiClub PRO readers—given we’ve closely documented the softening and weakening in those areas around the Gulf.
Those four markets—Austin, San Antonio, Orlando, and Jacksonville—are among the few metro area housing markets where active inventory for sale has returned back to pre-pandemic levels. Heading into 2024, ResiClub identified that calculation as the key metric to watch in order to understand which local markets were likely to see falling home prices this year.
In August 2024, Austin’s metro area housing market had active housing inventory for sale that was +37% above pre-pandemic levels in August 2019 and +206% above the frenzy of the Pandemic Housing Boom in August 2021.
In August 2024, San Antonio’s metro area housing market had active housing inventory for sale that was +25% above pre-pandemic levels in August 2019 and +165% above the frenzy of the Pandemic Housing Boom in August 2021.
In August 2024, Jacksonville’s metro area housing market had active housing inventory for sale that was +6% above pre-pandemic levels in August 2019 and +189% above the frenzy of the Pandemic Housing Boom in August 2021.
In August 2024, Orlando’s metro area housing market had active housing inventory for sale that was +21% above pre-pandemic levels in August 2019 and +182% above the frenzy of the Pandemic Housing Boom in August 2021.
While metro area markets like Austin and Orlando have returned to pre-pandemic levels for active inventory, most markets, in particular in the Northeast and Midwest, still remain below pre-pandemic levels.
ResiClub PRO members (paid tier) can access our latest inventory report for +800 metros and +3,000 counties here, and our latest home price report for +800 metros and +3,000 counties here.
Overall, KB Home's net new orders in Q3 2024 (3,085) were essentially flat compared to Q3 2023 (3,097).
“We experienced variability in demand across the quarter, with softening in late June through July, as buyers continued to evaluate elevated mortgage interest rates, and general economic concerns were rising. As rates moderated in August, our net orders improved. We are encouraged by this strengthening in demand for our affordably priced personalized homes, and the ongoing positive trend we are experiencing so far in our 2024 fourth quarter,” Jeffrey Mezger, CEO of KB Home, wrote in their Tuesday press release.
While KB Home’s gross margin continues to gradually compress after soaring during the Pandemic Housing Boom, it has yet to fully revert back to pre-pandemic levels.
Q3 2018 —> 19.09%
Q3 2019 —> 19.38%
Q3 2020 —> 21.34%
Q3 2021 —> 22.52%
Q3 2022 —> 27.04%
Q3 2023 —> 22.05%
Q3 2024 —> 21.26%
6.21% —> The average 30-year fixed mortgage rate today, as tracked by Mortgage News Daily
242 bps —> The “spread” today between the 30-year fixed mortgage rate and the 10-year Treasury yield
7.50% —> The average 30-year fixed mortgage rate on the same day last year (September 26, 2023)