Dive Brief:
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Homebuilder KB Home will sell 20 parcels containing more than 2,000 lots that company officials said are no longer in line with its business objectives, The Wall Street Journal reported.
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The company will take an inventory hit worth $30 million to $40 million on its fourth-quarter financials because of the move, which continues its efforts to reduce inactive inventory.
- Most of the parcels are in the Southwestern U.S.
Dive Insight:
KB Home, the nation's sixth-largest homebuilder by revenue based on data kept by Builder magazine, announced its intention to sell the parcels at its annual investor conference held earlier this week in Los Angeles.
Company chairman and CEO Jeff Mezger noted in his remarks that the parcels either: exceed near-term requirements, don't justify incremental investment, are located outside of markets the company serves or don't allow for the construction of the company's primary product offerings.
The company has cut its inactive inventory by $160 million from the first quarter of 2015 to the third quarter of 2016, valuing its total inventory at $3.6 billion as of Aug. 31, 2016. It owned or controlled 46,636 lots nationwide as of Aug. 31, 2016, with 18% of those in the Southwest compared to 24% on the West Coast, 40% in the Central region, and 18% in the Southeast.
Mezger said the company plans to target "prime growth submarkets" with a two- to- three-year supply of land and lots per community. The company is aiming for revenues of $5 billion-plus by 2019.
KB Home has long focused on first-time, entry-level buyers as well as the move-up category, and will continued to do so, according to Mezger. That group comprises roughly 33% of home sales today, Realtor.com Chief Economist Jonathan Smoke, told Construction Dive, adding that he expects it to take them three years to reach their pre-recession share of 40% of all home sales.
Markets in which first-time buyers, most of which are eyeing entry-level properties, take at least a 40% share of new sales include Crestview-Fort Walton Beach-Destin, FL, Pittsburgh, PA, and Provo-Orem, UT, according to Smoke.