KB Home 2Q13 Earnings Call Notes

posted in: Notes | 0

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. The quotes are generally pieces of information that I find interesting or helpful to understanding the company, industry or economy and are not meant to provide summaries of the full content of the call. Other posts in this series can be found by clicking here. Full transcripts can be found at Seeking Alpha.

“let me address the recent concerns many have raised regarding the recent uptick in mortgage rates and its potential impact on housing. In my view, there is no question that housing dynamics are significantly better than they were a year ago. At the same time, in my view, we are still in the early innings of a recovery that is continuing to accelerate. The positive factors underpinning the current housing recovery remain fully in place and will continue to drive favorable market fundamentals.

There is substantial pent-up demand driven by population growth, job growth, an increase in household formation and record affordability. At the same time, in most areas of the country, there is a shortage of supply and monthly mortgage payments for a typical home are lower than rent; further reinforcing the appeal of homeownership. Despite the recent rise in rates, affordability is still at extraordinary levels, and demand is significantly outpacing supply in every market we serve. Anecdotally, we are hearing from the sales floor that the uptick in rates has actually created an increased sense of urgency, as buyers don’t want to miss out on this incredible opportunity.

Having said all of this, if you get past the pure economics of interest rates and payments, I have always maintained that consumer confidence is far more important to home sales than interest rates are. The desire to live in the American dream is strong, and if a consumer feels good about their personal situation, they will always work through any obstacles and find a way to become a homeowner. With job growth accelerating and consumer confidence hitting a 5-year high last month, I expect the housing recovery will continue with solid advance, especially in the attractive submarkets that we serve.”

“I think with all the noise that you’re reading in the media and the press and everything else on interest rates and what it’s doing, in my opinion, at least in the short term, I think it’s going to create more urgency; and buyers that want to get to the table and get to the closing table quicker. ”

“I’d say, that it is nowhere near more normal underwriting standards today…If the economy continues to expand like it is, I think you’ll see the banks loosen up. And if sort of rates go up a little bit but underwriting loosens up a bit, I think you’ll see similar demand, if not more.”