KB Home Reports 20% Revenue Decline in Third Quarter, Plans Headquarters Relocation

KB Home reported a significant decline in financial performance for the third quarter and nine months ended August 31, 2026, as reflected in its latest 10-Q filing. Total revenues for the third quarter were $1.297 billion, a decrease of 20% from $1.620 billion in the same period last year. For the nine months, revenues fell 23% to $3.487 billion from $4.542 billion. The company's net income also dropped sharply, with third-quarter net income at $65.3 million, down 41% from $109.8 million a year earlier, and nine-month net income at $126.1 million, down 61% from $327.3 million.

The decline in revenues and profitability was attributed to challenging housing market conditions, including rising mortgage interest rates and increased resale home inventory, which pressured affordability and led to cautious buyer behavior. KB Home experienced a 12% decrease in net orders year-over-year, totaling 2,604 for the third quarter, while the average selling price of homes increased slightly to $463,600. The company’s backlog value rose 3% year-over-year to approximately $2.05 billion, marking the first increase in four years, which the company views as a positive indicator for future deliveries.

Operationally, KB Home's homebuilding segment reported a 20% decrease in revenues to $1.292 billion for the third quarter, driven by a 19% decline in the number of homes delivered. The company’s housing gross profit margin also fell to 16.5%, down from 18.2% in the prior year, primarily due to pricing pressures and higher land costs. Selling, general, and administrative expenses as a percentage of housing revenues increased to 11.3%, reflecting reduced operating leverage from lower revenues.

In terms of strategic developments, KB Home announced plans to relocate its corporate headquarters from Los Angeles to Tempe, Arizona, aiming to centralize operations and reduce costs. The relocation is expected to incur costs between $8 million and $12 million, with a significant portion anticipated to be spent through 2027. The company also continued its share repurchase program, buying back 3.1 million shares at a cost of $175 million during the nine months ended August 31, 2026.

Looking ahead, KB Home anticipates continued challenges in the housing market due to high mortgage rates and inflation. The company expects its housing gross profit margin to decline sequentially in the fourth quarter and has adjusted its full-year projections accordingly. Despite these challenges, KB Home remains focused on its Built to Order strategy and plans to invest in land and development to support future growth, with a goal of maintaining a backlog of predominantly Built to Order homes.