Builder KB Home says cancellations rising

updated 5:24 p.m. ET Feb. 14, 2006

LOS ANGELES - KB Home said the number of canceled home orders rose in the first two months of the year while net orders for new homes fell — a trend that could force the company to adjust revenue projections if it continues.

KB’s warning, made in a filing with the Securities and Exchange Commission on Friday, comes on the heels of Horsham, Pa.-based homebuilder Toll Brothers Inc.’s announcement that new orders for its houses fell by 21 percent in the first quarter and home deliveries this year would be weaker than expected.

KB Home started fiscal year 2006 with a seven-month backlog of new home orders with a projected revenue value of $6.76 billion, the company said in the filing.

“Based on our backlog, we expect revenue growth for the first half of fiscal year 2006 to be consistent with the growth rates we have experienced over the last several years,” the company said.

Last year, KB Home generated sales of $9.44 billion, a 34 percent increase over 2004.

But management pointed to a U.S. Census Bureau report showing single-family housing starts in December were about 12 percent lower than in the previous month and roughly 8 percent less than in December 2004.

The median sales price for new homes fell about 3 percent in December over the same month in 2004, according to the same report.

“If the current trends do not improve, we may be required to moderate our revenue guidance for fiscal year 2006,” the company said, adding that it’s still too early in the year to tell.

The National Association of Realtors has said it expects existing home sales in 2006 to fall by 4.7 percent to 6.74 million. New home sales are projected to fall 8.5 percent to 1.17 million units.

Shares of KB Home rose $1.07, or 1.6 percent, to close at $67.02 Monday on the New York Stock Exchange.

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