KB Home stock rises after beating Q2 earnings estimates

Shares of KB Home (KBH) are rising after the company beat earnings estimates on the top and bottom lines and raised its housing revenue guidance.

Yahoo Finance's Dani Romero reports more on the company's second quarter earnings and what they reveal about the state of the housing market.

For more expert insight and the latest market action, click here to watch this full episode of Catalysts.

This post was written by Melanie Riehl

Video Transcript

Kb Home shares there in the Green.

After the company, the earnings estimates on the top and bottom lines, you're looking at a stock that's up a little bit over four and a quarter percent nearing 4.5% here.

The company raising the lower end of its housing revenue guidance as well.

Y finances.

Danny Romero joins me with more.

Danny, I know you cover the housing space for us.

Tell me what stuck out to you in this earnings.

The new home market is the winner here and KB Home really reported an impressive second quarter earnings.

Now there are some takeaways from what KB revealed in its earnings about the state of the housing market.

And so that's really kind of crucial here.

Mortgage rates are still to blame.

They are the problem in the housing market especially as we are waiting for this recovery to materialize, which is pushing a lot of buyers to the sidelines.

Now, with that in mind, incentives are not going away.

So the popular mortgage incentive has been the mortgage rate buy downs.

That's when the builder upfronts the cost to lower the rate on the loan that has been a very popular incentive for entry level buyers.

And KB home is specifically geared towards entry level buyers.

They also revealed a little bit about their customers.

So who is actually buying these homes?

It is buyers who make 100 and $30,000 a year.

And that really stood out to me that it really sits on that higher end when it comes to the income spectrum.

And they're also putting about 70 grand as a down payment.

So that was a little bit of revealing a little bit of the who is the customer right now buying a home?

Now, the other thing is mortgage rates have pulled back.

So does that mean that this home builder or more home builders were also pulled back on incentives which has been squeezing some of the gross margins across all home builders, KB Home revealed that they could see some pull back in incentives.

Um Now that all is dependent on mortgage rates, of course, but again, remember the interesting part of all of this is that if, if mortgage rates do come back, it could spark some competition in the resale market.

And what does that mean for home builders and KB home pretty much said we're not worried about the competition here.

We, you know, if, if there is more supply that gets added to the resale market, we are good and we are in a good standing here and we know that we will still be able to take the market share of the buyers that are interested in the housing market.

So that really did reveal to me that the new home market is still a winner here.