KB Home’s Rob McGibney raised land spending 40% to $722 million as profit fell
KB Home put more money into land while net income dropped to $65.3 million and revenue in two regions fell by about a third, which gives buyers and lot sellers different openings.
By Katia Clara · · 3 min read
KB Home CEO Rob McGibney’s team invested $722.3 million in land and land development in the fiscal third quarter, 40% more than a year earlier [1]. Over the same three months, net income fell to $65.3 million from $109.8 million and revenue dropped 20% to $1.30 billion [1].
Executive Chairman Jeffrey Mezger said rates had led “many prospective buyers to be more cautious” [1]. Deliveries fell 19% to 2,732 homes, and housing gross margin came in at 16.5%, down from 18.2% [1].
KB Home spent more on land while its lot count shrank
Lots owned or under contract fell 5% to 61,581, and about 60% of them are owned [1]. Homebuilding notes payable reached $2.11 billion at Aug. 31, up from $1.69 billion in November [2].
McGibney said KB is “returning to a predominantly Built to Order business,” and those homes made up nearly three-quarters of deliveries [1]. KB repurchased 0.9 million shares for $50.0 million in the quarter and has $725.0 million left under its authorization [1].
The Southwest and Central regions lost about a third of their revenue
KB Home’s 10-Q breaks housing revenue out by region [2]. We calculate declines of about 34% in both the Southwest and Central regions, 19% in the Southeast and 7% on the West Coast, which brought in $620 million of the $1.29 billion total [2].
KB Home opened more communities and sold fewer homes in each
Net orders dropped 12% to 2,604 even though the company ended the quarter with 277 communities, 5% more than a year earlier [1]. Each community averaged 3.1 net orders a month, down from 3.8 [1].
| KB Home, fiscal Q3 | 2025 | 2026 |
|---|---|---|
| Net orders | 2,950 | 2,604 |
| Cancellation rate, share of gross orders | 17% | 18% |
| Net orders per community per month | 3.8 | 3.1 |
| Average selling price | $475,700 | $473,000 |
| Housing gross margin | 18.2% | 16.5% |
| Net income | $109.8 million | $65.3 million |
| Backlog, homes | 4,333 | 4,398 |
How to use this
For land and lot sellers
- Pitch finished or nearly finished lots to KB now. It raised land spending 40% to $722.3 million while its lot count fell 5% [1], which suggests it is paying to replace the lots it builds on.
- Ask for a firm purchase schedule tied to community openings. KB guided to 270 to 275 communities at the end of the fourth quarter, below the 277 it had at Aug. 31 [1].
For buyers of new homes
- Ask how long the builder holds your price and your rate while a built-to-order home goes up. On KB’s average price of $473,000 with 10% down, we calculate principal and interest at about $2,901 a month at Freddie Mac’s 7.24% average [1][3], and a one-point drop in rate cuts that by about $283.
- Find out which homes are available because an earlier buyer canceled. KB’s cancellation rate was 18% of gross orders last quarter [1], so ask for the original buyer’s upgrades to be included at no charge.
- Use the regional gap as a reason to ask for more in the slower markets. Southwest housing revenue fell to $222 million from $336 million [2].
For investors and lenders
- Check overhead against volume. SG&A rose to 11.3% of housing revenue from 10.0% [1], and fourth-quarter guidance is 10.3% to 10.9% of revenue [1].
- Compare buybacks with borrowing. KB repurchased $50.0 million of stock in the quarter [1], while homebuilding notes payable rose by about $416 million since November [2].
This is market commentary, not investment advice.
Sources
- [1]KB Home, KB Home reports 2026 third quarter results (SEC Form 8-K, Exhibit 99.1), Sep 22, 2026.
- [2]KB Home, Quarterly report for the period ended Aug. 31, 2026 (SEC Form 10-Q), Oct 8, 2026.
- [3]Freddie Mac, Primary Mortgage Market Survey, week of Oct. 29, 2026, Oct 29, 2026.
