With the slow down in housing starts and new home sales, you would think that bankruptcy for the biggest builders in the country would be right around the corner. However, believe it or not, KB Homes is still a profitable company with a reduction in sales by 19 percent.

One thing that the large builders have learned to do is scale their labor. Why do we see so many immigrants, legal or illegal, on a job site? Because new home builders work with subcontractors to get things built. When slowdowns occur, they just send out less work. The labor costs in these companies is not high so the expenses are ones of financing, raw materials, and top level labor.

So even as the market for new housing slows down, the larger builders are fairly insulated from too much pain and will most likely survive till the market is ready to take off again.

Net income in the first quarter was $27.5 million, or 34 cents a share, down from %173.3 million, or $2.01 a share, in the year-ago period. Revenue was $1.77 billion, down from $2.19 billion in the year-ago period.

The company delivered 6,655 homes at an average selling price of $261,400 in the quarter, compared to 7,905 homes at an average selling price of $276,200 in the first quarter of 2006.
First quarter net orders were down 12 percent in the quarter with most of the decline in the Southwest and Central regions. Backlog at Feb. 28, 2007, totaled 18,406 units, down from 26,536 in the year-ago period. The company’s cancellation rate was at a “historically normal rate” of 31 percent in the quarter, down from 53 and 48 percent in the third and fourth quarters of 2006, the company said. via Los Angeles Business

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4. Pulte Homes Says New Home Sales Will Increase When Foreclosures Slow Down