KB Homes reported that net orders for the fourth quarter were flat compared to a year ago. Actual homes delivered to buyers fell 4% from a year ago while average prices rose 11%. KB Homes’ cancellation rate ticked up to 36% in 2013 compared to 35% a year ago. With yesterday’s FOMC taper and the subsequent bump in mortgage rates, that cancellation rate could push even higher. The stock is down today because housing cheerleaders are coming to grips with what I’ve been talking about for several weeks. Home buyers are tapping out, and affordability is likely to cause some softness in 2014. The big push from investors which has been supporting the housing market is already tapering off, so now many housing markets are going to have to sustain themselves with real owner-occupant purchases. The 4-week average of the mortgage purchase application index is now about 11% below where it was a year ago. It remains to be seen whether the market capable of holding up when left to its own devices. Our latest November sales report in Houston confirmed that the housing market has indeed run a little ahead of fundamentals.
Read KB Homes’ Fourth Quarter and Full Year Results