KB Home lowered its outlook for housing gross profit margin, as the company is seeing conditions in the housing industry continue to worsen.
The homebuilder said Tuesday it now expects annual gross profit margin to be 16.0% to 16.2%, down from its earlier guidance of 16.1% to 16.5%. It now expects housing revenue to be $4.9 billion to $5.1 billion, compared with its earlier range of $4.9 billion to $5.3 billion.
Its projection for annual home deliveries remained the same at 10,500 to 11,000 homes.
Conditions in the housing market have weakened since KB Home's June earnings report, Executive Chair Jeffrey Mezger said. High mortgage rates, pressure on housing affordability and geopolitical uncertainty are all weighing on the industry, he said.
In the fiscal third quarter, KB Home's revenue fell 20% to $1.3 billion, in line with what analysts forecasted. The number of homes delivered decreased 19% to 2,732, and net orders were down 12% to 2,604.
Profit decreased to $65.3 million, or $1.05 a share, from $109.8 million, or $1.61 a share, a year earlier.
The average selling price for KB Home houses decreased to $473,000 from $475,700. Ending backlog increased for the first time in four years, with the number of homes in the backlog up 2% to 4,398.
In the current fourth quarter, KB Home expects housing revenue of $1.45 billion to $1.65 billion, with 3,000 to 3,500 homes delivered. Analysts were anticipating $1.62 billion in housing sales and about 3,244 homes delivered.
Earlier this month, Lennar cut its home delivery target for the full year, citing interest rate pressure and worsening conditions in the housing market. Low consumer confidence, high home prices and the recently increased interest rate were all weighing on new home projections, the homebuilder said.
The Federal Reserve this month raised interest rates by a quarter of a percentage point, bringing the average daily mortgage rates above 7% for 30-year fixed rate loans. Economists expect the milestone of 7% to further spook buyers in an already stagnant market.