Housing starts: KB Home reports $60M Q1 earnings, but COVID-19 uncertainty looms
For the first quarter ending February 29, 2020, KB Home reported a net income of $59.7 million, up 99% compared to a year ago, which includes $5.8 million generated by its mortgage banking joint venture, KBHS Home Loans, LLC (KBHS).
Year-over-year earnings per share more than doubled to $.63. KB Home’s revenues increased 33% to $1.08 Billion, “the highest revenues for any first quarter since 2007,” the company said, reflecting strong demand fueled by years of inventory shortages.
Higher income from its mortgage banking joint venture KBHS helped the company’s financial services operations generate pretax income of $5.8 million, up from $2.5 million. KBHS originated 71% of the residential mortgage loans the company’s homebuyers obtained to finance their home purchase, compared to 64% in 2019.
Homebuilding operating income increased 92% to $60.2 million. Net orders increased 31% to the highest first-quarter level in 13 years, KBH said; also net order value increased 35% to $1.38 billion in all four regions the company operates.
“While our performance in the first quarter was strong, with underlying market conditions that were robust, these results preceded the COVID-19 pandemic… Our principal focus today is the concern for the health and welfare of our employees, customers and business partners, and their families,” said Jeffrey Mezger, Chairman, President and Chief Executive Officer. “We are now taking actions to adjust our business in this period of uncertainty.”
Given its strong balance sheet, over $1.2 billion in liquidity and Built-to-Order model, Mezger said, KB Home has the means to mitigate inventory risk by aligning business demand and adjusting the company sales pace. KB Home is diligently managing operations “with a focus on being both prudent and strategic with our cash resources.”
The company is also taking steps to curtail land acquisition and development until circumstances become more stable, he added. “We have a long-tenured, hands-on team that is experienced in navigating changing market conditions, which will help guide our actions in this challenging environment.”
NAR: February home sales up and demand expected to hold, despite COVID-19
February home sales were up, says NAR (the National Association of Realtors), and its chief economist says prices should hold, despite the COVID-19 pandemic.
Existing-home sales, completed transactions that include single-family homes, townhomes, condominiums and co-ops, rose 6.5% from January to an adjusted annual rate of 5.77 million in February, according to the Realtor association.
For eight consecutive months, overall year-over-year sales were up, increasing 7.2% from February 2019. Of the four major regions, only the Northeast reported a drop in sales, while other areas saw increases, including sizable sales gains in the West.
The median existing-home price for all housing types was $270,100, up 8.0% from $250,100 in February 2019. The increase marked 96 straight months of year-over-year gains.
“February’s sales of over 5 million homes were the strongest since February 2007,” said Lawrence Yun, NAR’s chief economist, primarily due to the low mortgage rates “and the steady release of a sizable pent-up housing demand.”
Single-family home sales increased 7.3% from a year ago. The median existing single-family home price was $272,400 in February, up 8.1% from February 2019. Existing condominium and co-op sales also were 7.1% higher than a year ago, while the median price increased 7% from a year ago to $249,900.
First-time buyers represented 32% of sales in February, compared to 33% in February 2019.
Total housing inventory totaled 1.47 million units, up 5% from January, but down 1.63 million or 9.8% from February 2019. Realtor.com’s Market Hotness Index shows 47% of homes sold in February 2020 were on the market for less than a month.
However encouraging, February’s home sales do not reflect the current turmoil in the stock market or the significant COVID-19 outbreak hit to the economy, Yun said. “These figures show that housing was on a positive trajectory, but the coronavirus has undoubtedly slowed buyer traffic and it is difficult to predict what short-term effects the pandemic will have on future sales.”
While offering a definitive forecast is extremely difficult, Yun added, “Once the social-distancing and quarantine measures are relaxed, we should see this temporary pause evaporate, and will have potential buyers return with the same enthusiasm.”
Home prices will hold on well, he said. “Unlike the stock market, home prices are not expected to drop because of the on-going housing shortage and due to homes getting delisted during this time of crisis.”
Hows and whys of healthy eating when stuck at home
COVID-19 conditions create the perfect storm for unhealthy living, but they don’t have to. With quarantines, 24-hour a day news, and working in cramped quarters with family members, skipping that workout or having an extra muffin can seem like a good way to soothe your stress. But we all know where that can lead in the longer term.
Let’s face it. One trip to the grocery store reminds us we’re in some pretty uncertain times right now. It might feel only natural to start panic buying pasta, rice, flour, canned goods and frozen foods. But stocking up primarily on staples with long shelf lives, says nutritionist and fitness coach Cheryl Engels is not the healthiest approach when you’re stuck at home.
While it is important to have healthy grains, particularly legumes, “and snacks like dried fruits, seeds and nuts,” she says, people still need to focus on eating fresh foods when possible. More than any others they “give us the energy and the strength we need to stay physically and mentally fit.” Ah, right. Let’s all remember that mentally fit part.
Three key vitamins C, D and B need be present in our diet, she says. Boston-based Spartan Race Inc. Foods reminds us that high in vitamin C, such as oranges, lemons, kiwi, peppers, and tomatoes, are particularly important immunity boosters that help our body stay strong. Vitamin D regulates bone-building calcium, but it might be missing, since many of us are spending a lot more time indoors. You can supplement with fatty fish, like tuna and salmon, fortified dairy products like cheese and different milks, as well as mushrooms, which are the only plant source of vitamin D.
Vegans and vegetarians should also make sure to eat foods with high vitamin B content, Engles says. Most people easily obtain B vitamins from meat, but you can get them from legumes, whole grains, dark green vegetables and citrus fruits.
The old rule is, when indoors eat less, exercise more and resist snacks, Engels says, “Stress eating will affect your mood as well as your physical energy and ability to resist infection.”
To minimize the urge, maintain structured eating habits, she recommends. “Have a normal breakfast, a lunch, and a dinner, and keep snacks like fruit or nuts on hand to have in-between.” It is vital to be prudent with food and to incorporate at least two half-hours of exercise per day.
Amilda is a journalist and branding consultant interested in how entrepreneurs turn brilliant ideas into products and services that advance business acumen and improve people’s lives in unprecedented ways. She has covered mortgage finance for over 15 years.