KB Home (KBH)

Management Discussion

• Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations
• Housing market conditions were generally favorable during the six months ended May 31, 2022, with solid demand and home price appreciation, reflecting a limited supply of new and resale inventory, and steady employment and wage growth. However, during the 2022 second quarter, the pace of sales across the homebuilding industry moderated from the levels experienced over the previous 18 months, stemming from a sharp increase in mortgage interest rates in the quarter, significant inflation in the broader economy, the substantial rise in home prices, and stock market volatility. These macro-economic trends have pressured housing affordability and negatively impacted homebuyer sentiment.
• The value of our net orders for the 2022 second quarter increased 4% from the year-earlier quarter due to a 15% increase in their overall average selling price, partly offset by a 9% decline in net orders. The decrease in net orders reflected a moderation in our monthly net orders per community to 6.2 from 7.0, partly offset by a 3% increase in our average community count due to new community openings. Considerable demand for our homes enabled us to lift selling prices in the vast majority of our communities during the 2022 second quarter and, in combination with our focus on balancing pace, price and construction starts at each community, helped us to enhance our returns, offset in part by the impact of significant persistent supply chain challenges and higher construction costs, as described further below.