KB Home is one of the nation’s largest homebuilders and has been building quality homes for families for more than 50 years. We construct and sell homes through our operating divisions across the United States under the name KB Home. Unless the context indicates otherwise, the terms “the Company,” “we,” “our” and “us” used in this report refer to KB Home, a Delaware corporation, and its predecessors and subsidiaries.

Beginning in 1957 and continuing until 1986, our business was conducted by various subsidiaries of Kaufman and Broad, Inc. (“KBI”) and its predecessors. In 1986, KBI transferred all of its homebuilding and mortgage banking operations to us. Shortly after the transfer, we completed an initial public offering of 8% of our common stock and began operating under the name Kaufman and Broad Home Corporation. In 1989, we were spun-off from KBI, which then changed its name to Broad Inc., and we became an independent public company, operating primarily in California and France. In 2001, we changed our name to KB Home. Today, having sold our French operations in 2007, we operate a homebuilding and financial services business serving homebuyers in markets nationwide.

Our homebuilding operations, which are divided into four geographically defined segments for reporting purposes, offer a variety of homes designed primarily for first-time, firstmove-up and active adult buyers,homebuyers, including attached and detached single-family homes, townhomes and condominiums. We offer homes in development communities, at urban in-fill locations and as part of mixed-use projects. We use the term “home” to refer to a single-family residence, whether it is a single-family home or other type of residential property, and we use the term “community” to refer to a single development in which homes are constructed as part of an integrated plan.

Through our homebuilding segments, we delivered 7,346 homes at an average selling price of $214,500 during the year ended November 30, 2010, compared to 8,488 homes delivered at an average selling price of $207,100 during the year ended November 30, 2009, compared to 12,438 homes delivered at an average selling price of $236,400 during the year ended November 30, 2008.2009. Our homebuilding operations represent most of our business, accounting for 99.5% of our total revenues in 20092010 and 99.6% of our total revenues in 2008.2009.

Our financial services operations offer mortgage banking, title and insurance services to our homebuyers. MortgageThey also offer mortgage banking services are offered to our homebuyers indirectly through KB HomeKBA Mortgage, LLC (“KB HomeKBA Mortgage”), a joint venture between us and CWB Venture Management Corporation,with a subsidiary of Bank of America, N.A. Our financial services operations accounted for .5% of our total revenues in 20092010 and .4% of our total revenues in 2008.2009.

In 2009,2010, we generated total revenues of $1.59 billion and a net loss of $69.4 million, compared to total revenues of $1.82 billion and a net loss of $101.8 million compared to total revenues of $3.03 billion and a net loss of $976.1 million in 2008.2009. Our financial results for 20092010 and 20082009 reflect challenging operating conditions that have persisted in the homebuilding industry to varying degrees since a general housing market downturn began in 2006,mid-2006, as well as our strategic actions in response to these conditionssince the downturn began to align our operations with diminished home sales activitythese conditions and to maintain a strong balance sheet.financial position.

Our principal executive offices are located at 10990 Wilshire Boulevard, Los Angeles, California 90024. The telephone number of our corporate headquarters is(310) 231-4000 and our website address is http://kbhome.com. Our Spanish-language website is http://kbcasa.com. In addition, location and community information is available at (888)KB-HOMES.

Reflecting the wide geographic reach of our homebuilding business, as of the date of this report, we operateour principal operations are in the 10nine states and 30 major markets shownpresented below. For reporting purposes, we organize our homebuilding operations into four segments — West Coast, Southwest, Central and Southeast.

Segment Operating Information.  The following table presents specificcertain operating information for our homebuilding reporting segments for the years ended November 30, 2010, 2009 2008 and 2007:2008:

Unconsolidated Joint Ventures.  The above table does not include homes delivered from unconsolidated joint ventures in which we participate. These unconsolidated joint ventures acquire and develop land and, in some cases, build and deliver homes on developed land. Our unconsolidated joint ventures delivered 102 homes in 2010, 141 homes in 2009 and 262 homes in 2008 and 127 homes in 2007.2008.

GenerallyTo varying degrees since mid-2006, many housing markets across the United States, including those we serve, have experienced a severe and extended downturn. To varying degrees, these markets have sufferedprolonged downturn compared to the period from 2000 through 2005 due to a persistent oversupply of new, resale and foreclosed homes available for sale driving selling prices steadily lower and intensifying competition among homebuilders, individual home sellers, investorsweak consumer demand for housing. Since 2008, a generally poor economic and lenders vying for buyers. At the same time, housing demand has fallen sharply due to general economic weakness, rising unemployment, declining consumer confidence, reducedemployment environment as well as turbulence in financial and credit availability and tightened mortgage lending standards.markets have worsened these conditions. Although housing affordability has improved recentlybeen at historically high levels in the past few years due to lower selling prices and relatively low residential consumer mortgage interest rates, and homebuyer tax credit incentives, the negative supply and demand factors described above continue to constrain overall home sales activity.dynamics for the homebuilding industry during the present housing downturn have severely constrained our net orders, revenues and profitability.

We believe that there may be further volatility in housing markets will likely remain weak in 20102011 and that our business and the homebuilding industry is likely towill experience a prolonged and uneven transitionresults before a sustained recovery takes hold. At this time, we cannot predict when such a recovery might occur. Based on this view, we intend to continue to executefocus on achieving three primary integrated strategic initiativesgoals:

In 2010, building on the sound financial position and the operational re-positioning we achieved over the prior four years and seeing a number of attractive opportunities becoming available, we implemented a targeted land acquisition initiative to further our primary strategic goals. Under this initiative, we concentrated on acquiring ownership or control of well-priced developed land parcels that met our investment and marketing standards and were located within or near our existing markets. This tactical shift was designed to help us restore and maintain our homebuilding operations’ profitability — currently, our highest priority — by increasing our future revenues through a larger inventory base from which we can sell our higher-margin and well-received new product. It was also designed to help us maintain athree-to-four year supply of developed or developable land. While the inventory and active community count reductions and other land portfolio and operational adjustments we made in prior years and into 2010 have allowedhad a negative effect on our backlog and homes delivered on ayear-over-year basis, we anticipate that our land investment activities in 2010 and recent and planned new community openings will improve such comparisons in 2011. As a result, we believe that our land acquisition initiative and the other actions we have taken in pursuing our primary strategic goals in the present housing downturn have established a solid foundation for us to weather nearly four years of challengingeventually achieve long-term future growth and profitability as and to the extent housing markets improve.

While market conditions stabilizein 2011 will determine the degree to which we acquire or dispose of land assets in managing our inventory, the pace with which we open new home communities, and strengthenthe manner in which we pursue and refine the execution of our financial condition, and position our businessprimary integrated strategic goals, we will continue to return to profitability and to capitalize on potential future growth opportunities. These initiatives are founded onoperate in accordance with the principles of our core operational business model, KBnxt.

KBnxt Operational Business Model.  Our KBnxt operational business model, first implemented in 1997, seeks to generate greater operating efficiencies and return on investment through a disciplined, fact-based and process-driven approach to homebuilding that is founded on a constant and systematic assessment of consumer preferences and market opportunities. We believe our KBnxt operational business model sets us apart from other homebuilders. The key principles of our KBnxt operational business model include:

OurThrough its disciplines and standards, our KBnxt operational business model is designed to help us build and maintain a leading position in our existing markets; opportunistically expand our business into attractive new markets;markets near our existing operations; exit investments that no longer meet our return standards or marketing strategy;standards; calibrate our product designs to consumer preferences; and achieve lower costs and economies of scale in acquiring and developing land, purchasing building materials, subcontracting trade labor, and providing home design and product options to customers.

Our expansion into a new market and our withdrawal from an existing market or submarket depends in each instance on our assessment of the market’s viability and our ability to develop sustainable operations.and/or sustain operations at a level that meets our investment standards. Similar considerations apply to potential asset acquisitions or dispositions in our existing markets.

StrategicOperational Objectives.  Guided by the disciplines of our KBnxt operational business model, our primary strategicprincipal operational objectives during the present housing downturn include:

A tangible reflection ofExemplifying how we have implemented our strategic and operational objectives is theour ongoing nationwide rollout ofThe Open Series^TM product designs, which began in late 2008. In addition to meeting homebuyer design sensibilities and affordability needs,The Open Seriesproduct line has been value-engineered to reduce production costs and construction cycle times, while adhering to our quality standards and using materials and construction methodstechniques that reflect our commitment to more environmentally sustainableconscious homebuilding practices.methods.Value-engineering encompasses measures such as simplifying the location and installation of internal plumbing and electrical systems, using prefabricated wall panels, flooring systems, roof trusses and other building components, and generally employing cost-minimizingconstruction techniques that minimize costs and efficiency maximizing construction techniques.maximize efficiencies. It also includes working continuously with our trade partners and materials suppliers to reduce direct construction costs.costs and construction cycle times. All of these actions have allowed us to achieve faster returns and higher gross margins from our inventory compared to our previous product designs, supporting strong cash flow generation and progress toward our profitability goal.

Marketing Strategy.  During 2010, we continued to focus our marketing efforts on first-time,move-up and active adult homebuyers. These homebuyers historically have been our core customers and it is among these groups that we see the greatest potential for future home sales. Our marketing activity is focused onefforts are directed at differentiating the KB Home brand from resale homes and from homes sold through foreclosures, short sales and by other builders.homebuilders. We believe that our Built to Order^TM message and approach generate a high perceived value for our products and our company among consumers and are unique amonglarge-production homebuilders. Built to Order emphasizes that we partner with our homebuyers to create a home built to their individual preferences in home design, layout, square footage and homesite location, and to personalize their home’s interiorhome with features and amenities that meet their needs and interests. Built to Order serves as the consumer face of core elements of our KBnxt operational business model and ensures that our marketing strategy and advertising campaigns are closely aligned with our overall operational focus.

Our KB Home Studios are integral to the Built to Order experience we provide. These showrooms, which are generally located close to our communities, allow our homebuyers to select from thousands of product and design options that are available for purchase as part of the original construction of their homes. The coordinated efforts of our sales representatives and KB Home Studio consultants are intended to provide high levels of customer satisfaction and lead to enhanced customer retention and referrals.

We further differentiate the KB Home brand with ourMy Home. My Earth.^TM  environmental initiative, publicly launched in 2008.My Home. My Earth.embodiesWe have made a dedicated effort to further differentiate ourselves from other homebuilders and sellers of existing homes through our ongoing commitment to become a leading environmentally friendly national company. We werecompany in environmental sustainability. This commitment, organized under ourMy Home. My Earth. initiative, stems from growing sensitivities regarding and regulatory attention to the first national homebuilder to commit to installing exclusively ENERGY STAR^TM appliances in allpotential impact the construction and use of our new homes can have on the environment, including on global average temperatures and associated climate change, and from our homebuyers’ interest in reducing this impact in the most cost-effective way possible. This commitment also stems from our primary strategic goal to maintain a strong balance sheet by minimizing expenses, waste and inefficiencies in our operations. Through ourMy Home. My Earth.programs:

Although they vary significantly, our communities typically consist of 50 to 250 lots ranging in size from 1,000 to 13,50013,000 square feet. In our communities, we typically offer from three to 15 home designs for homebuyers to choose from. We also build an average of two to four model homes at each community so that prospective buyers can preview various home designs. Depending on the community, we may offer premium lots containing more square footage, better views or location benefits.

Land Acquisition and Land Development.  We continuously evaluate land acquisition opportunities as they arise against our internal investment standards and marketing strategy,standards, balancing competing needs for financial strength and land inventory for future growth. When we acquire and develop land, we do so consistent with our KBnxt operational business model, which focusesfocus on land parcels containing fewer than 250 lots that are fully entitled for residential construction and are either physically developed to start home construction (referred to as “finished lots”) or partially finished. Acquiring finished or partially finished lots enables us to construct and deliver homes shortly after the land is acquired with minimal additional development expenditures. ThisWe believe this is a more efficient way to use our working capital and reduces the operating

We currently own or control enough land to meet our forecasted production goals for approximately the next three to four years.goals. As discussed above, we have recently sold some of our land and abandoned options to purchase land in order to balance our holdings with current and forecastedhowever, depending on market conditions andwe may continue to acquire land assets in 2011 or we may sell additionalcertain land or land interests in 2010.interests. In 2010, our land sales generated $6.3 million of revenues and $.3 million of losses, including $.3 million of impairments. In 2009, our land sales generated $58.3 million of revenues and $47.9 million of losses, including $10.5 million of impairments. In 2008, our land sales generated $82.9 million of revenues and $82.8 million of losses, including $86.2 million of impairments. Our land option contract abandonments resulted in pretax, noncash charges of $10.1 million in 2010 and $47.3 million in 2009 and $40.9 million in 2008.2009.

The principal raw materials used in the construction of our homes are concrete and forest products. In addition, we use a variety of other construction materials in the homebuilding process, including sheetrock and plumbing and electrical items. We attempt to enhance the efficiency of our operations by usingpre-made, standardized materials that are commercially available on competitive terms from a variety of sources. In addition, our centralized and/or regionalized purchasing of certain building materials, appliances and fixtures allows us to benefit from large quantity purchase discounts and, in some cases, manufacturer or supplier rebates. When possible, we arrange for bulk purchases of these products at favorable prices from manufacturers and suppliers.

Our homebuyers may obtain mortgage financing from any qualified lender. KB Homelending institution of their choice. KBA Mortgage representatives on site at our communities offer to arrange mortgage financing for prospective homebuyers through the joint venture. We believe that the ability of KB HomeKBA Mortgage to offer customers an extensivea variety of financing options on competitive terms as a part of the on-site sales process helps to complete sales. KB HomeKBA Mortgage originated loans for 84%82% of our customers who obtained mortgage financing in 20092010 and 80%84% in 2008.

We employ a trained staff of land acquisition specialists, architects, planners, engineers, construction supervisors, marketing and sales personnel, and finance and accounting personnel, supplemented as necessary by outside consultants, who guide the development of our communities from their conception through the marketing and delivery of completed homes.

At December 31, 2009,2010, we had approximately 1,4001,300 full-time employees, compared to approximately 1,6001,400 at December 31, 2008.2009. None of our employees are represented by a collective bargaining agreement.

During 2009,2010, operating conditions in most U.S. housing markets remained difficult, reflecting the impact of the housing market downturn that began in 2006 and the weak economy as discussed above under the heading “Strategy.” We believe the heightened competition for homebuyers stemming from these conditions will continue in 2010,2011, if not intensify.

We do not generally finance the development of our communities with project financing. By “project financing,” we mean proceeds of loans specifically obtained for, or secured by, particular communities. Instead, our operations have historically been funded by results of operations, public debt and equity financing, and borrowings under ouran unsecured revolving credit facility with various banksfinancial institutions (the “Credit Facility”). In 2009,2010, however, anticipating that we didwould not need to borrow any funds under the Credit Facility andbefore its scheduled maturity in November 2010, we do not anticipate doing so in 2010.voluntarily terminated the Credit Facility effective March 31, 2010 to eliminate the costs of maintaining it.

As part of our due diligence process for all land acquisitions, we often use third-party environmental consultants to investigate potential environmental risks and we require disclosures and representations and warranties from land sellers of environmental risks. Despite these precautions,efforts, there can be no assurance that we will avoid material liabilities relating to the existence or removal of toxic wastes, site restoration, monitoring or other environmental matters affecting properties currently or previously owned or controlled by us. No estimate of any potential liabilities can be made although we may, from time to time, purchase property that requires us to incur environmental clean-up costs after appropriate due diligence, including, but not limited to, using detailed investigations performed by environmental consultants. In such instances, we take steps prior to acquisition to gain reasonable assurance as to the precise scope of work required and the costs associated with removal, site restoration and/or monitoring. To the extent contamination or other environmental issues have occurred in the past, we will attempt to recover restoration costs from third parties, such as the generators of hazardous waste, land sellers or others in the prior chain of title and/or their insurers. Based on these practices, we anticipate that it is unlikely that environmental clean-up costs will have a material effect on our future consolidated financial position or results of operations. We have not been notified by any governmental agency of any claim that any of the properties owned or formerly owned by us are identified by the U.S. Environmental Protection Agency (“EPA”)EPA as being a “Superfund” clean-up site requiring remediation, which could have a material effect on our future consolidated financial position or results of operations. Costs associated with the use of environmental consultants are not material to our consolidated financial position or results of operations.

We file annual, quarterly and current reports, proxy statements and other information with the Securities and Exchange Commission (“SEC”). We make our public SEC filings available, at no cost, through our websitehttp://kbhome.com, as soon as reasonably practicable after the report is electronically filed with, or furnished to, the SEC. We will also provide these reports in electronic or paper format free of charge upon request made to our investor relations department at investorrelations@kbhome.com or at our principal executive offices. Our SEC filings are also available to the public over the Internet at the SEC’s website at http://sec.gov. The public may also read and copy any document we file at the SEC’s public reference room located at 100 F Street N.E., Washington, D.C. 20549. Please call the SEC at1-800-SEC-0330 for further information on the operation of the public reference room.

Reflecting the impact of this difficult operating environment, we, like many other homebuilders, have experienced to varying degrees since the housing market downturn began, declines in net orders, decreases in the average selling price of new homes we have sold and delivered and reduced revenues and margins relative to prior years,the period from 2000 through 2005, and we have generated operating losses. Though we have seen some improvementimproved our operating margins and narrowed our net loss in net orders2010 compared to 2009, and margins in 2009,housing affordability is currently at historically high levels overall, we can provide no assurances that the homebuilding marketindustry or our business will improve substantially or at all in the near future.2011. If economic conditions, employment, personal income growth and employmentconsumer confidence remain weak and residential consumer mortgage loan foreclosures, delinquencies and short sales continue rising in 2010,future periods, there would likely be a corresponding adverse effect on our business and our results of operations, including, but not limited to, the number of homes delivered andwe deliver, the amount of revenues we generate.generate and our ability to achieve or maintain profitability.

In recent years,Since 2008, the residential consumer mortgage lending and mortgage finance industries have experienced significant instability due to, among other things, relatively high rates of delinquencies, defaults and foreclosures on homeresidential consumer mortgage loans and a resulting decline in their market value particularly subprime and adjustable-ratethe market value of securities backed by such loans. The delinquencies, defaults and foreclosures have been driven in part by persistent poor economic and employment conditions, which have negatively affected borrowers’ incomes, and by a decline in the values of many existing homes in various markets below the principal balance of the residential consumer mortgage loans secured by such homes. A number of providers, purchasers and insurers of residential consumer mortgage loans and residential consumer mortgage-backed securities have gone out of business or exited the market. In light of these developments,market, and lenders, investors, regulators and others have questioned the oversight and the adequacy of lending standards and other credit requirements for several residential consumer mortgage loan programs made available to borrowers in recent years. Thisyears, including programs offered or supported by the Federal Housing Administration (“FHA”), the Veterans Administration (“VA”) and the federal government sponsored enterprises, the Federal National Mortgage Association (also known as “Fannie Mae”) and the Federal Home Loan Mortgage Corporation (also known as “Freddie Mac”). Compared to prior periods, this has led to reduced investor demand for residential consumer mortgage loans and residential consumer mortgage-backed securities, tightened credit requirements, reduced liquidity and availability of residential consumer mortgage loan products (particularly subprime and nonconforming loans), and increased down payment requirements and credit risk premiums related to home purchases. It has also led to enhanced regulatory and regulatorylegislative actions, including greaterand government purchases programs focused on modifying the principal balances, interest ratesand/or insurance payment terms of existing residential consumer mortgage loans and mortgage-backed securities. Deteriorationpreventing residential consumer mortgage loan foreclosures, which have achieved somewhat mixed results.

The reduction in credit quality among subprime, adjustable-rate and other nonconforming loans has caused most lenders to stop offering such loan products. Fewerthe availability of residential consumer mortgage loan products and providers and tighter residential consumer mortgage loan qualifications in turn, makeand down payment requirements have made it more difficult for some categories of

Many of our homebuyers obtain financing for their home purchases from KB Home Mortgage.our KBA Mortgage joint venture. Our partner, a Bank of America, N.A. subsidiary, provides the loan products that the joint venture offers to our homebuyers. If, due to higher costs, reduced liquidity, heightened risk retention obligationsand/or new operating restrictions or regulatory reforms related to or arising from compliance with the Dodd-Frank Act, residential consumer mortgage loan put-back demands or internal or external reviews of its residential consumer mortgage loan foreclosure processes, or other factors or business decisions, our partner refuses or is unable to make loan products available to the joint venture to provide to our homebuyers, our home sales and our homebuilding and financial services results of operations may be adversely affected. For instance, in the fourth quarter of 2010, stricter lending standards led to an increase in our cancellation rate compared to the fourth quarter of 2009. The degree to which this more cautious approach to providing loans to our homebuyers continues into 2011 is unclear, and we can provide no assurance that the trend of tighter residential consumer mortgage lending standards will slow or reverse in the foreseeable future.