4 housing markets where giant builder KB Home is cutting home prices

Want more housing market stories from Lance Lambert’s ResiClub in your inbox? Subscribe to the ResiClub newsletter. During KB Home’s recent earnings call, an analyst asked if the giant homebuilder has seen any changes in regional housing markets in Florida and Texas, where active inventory for sale has risen considerably over the past year. KB Home chief operating officer Robert McGibney acknowledged that some communities in Florida and Texas have shifted, and in order to meet the market and demand there, the company recently cut home prices in parts of Austin and San Antonio, as well as in Orlando and Jacksonville. “It really is market by market,” said McGibney. “As we looked at the moves that we needed to make to lift our sales pace, those were some of the areas that we did lower prices in. And we’ve seen that those have been fairly effective, and sales have bounced back in August.” Those four markets—Austin, San Antonio, Orlando, and Jacksonville—are among the few metro area housing markets where active inventory for sale has returned back to pre-pandemic levels. In August 2024, Austin’s metro area housing market had active housing inventory for sale that was 37% above pre-pandemic levels in August 2019, and 206% above the frenzy of the pandemic housing boom in August 2021. Similarly, active housing inventory for sale San Antonio’s metro area housing market in August 2024 was 25% above inventory levels in August 2019 and 165% above August 2021. You can see the same thing in Jacksonville. In August 2024, the active housing inventory for sale in that metro area housing market was 6% above the pre-pandemic levels of August 2019. And it was 189% above where it was during the pandemic housing boom in August 2021. You can see the same trend happening in the Orlando housing market. In August 2024, active housing inventory for sale that was 21% above where it was back in August 2019 before the pandemic. And inventory is 182% above where it was in August 2021. That said, the housing market looks very different in other parts of the country. Although metro area markets like Austin and Orlando have returned to pre-pandemic levels for active inventory, most markets, in particular in the Northeast and Midwest, still remain below pre-pandemic levels. Overall, KB Home's net new orders in Q3 2024 (3,085) were essentially flat compared to Q3 2023 (3,097). "We experienced variability in demand across the quarter, with softening in late June through July, as buyers continued to evaluate elevated mortgage interest rates, and general economic concerns were rising," wrote Jeffrey Mezger, CEO of KB Home, in the company's press release. "As rates moderated in August, our net orders improved. We are encouraged by this strengthening in demand for our affordable personalized homes, and the ongoing positive trend we are experiencing so far in our 2024 fourth quarter." While KB Home’s gross margin (21.26% in Q3 2024) continues to gradually compress after soaring during the pandemic housing boom, it has yet to fully revert to pre-pandemic levels. Q3 2018: 19.09% Q3 2019: 19.38% Q3 2020: 21.34% Q3 2021: 22.52% Q3 2022: 27.04% Q3 2023: 22.05% Q3 2024: 21.26%