KB Home declined 1.4% to $47.91 after the home builder lowered its margin outlook as housing conditions worsen. 

Rising mortgage rates, persistent inflation, and a decade-high level of resale housing inventory have increasingly pressured net orders and caused home buyers to display heightened caution.

Revenue in the fiscal third quarter ending in August declined 20% to $1.3 billion from $1.6 billion, net income plunged to $65.3 million from $109.8 million, and diluted earnings per share dropped to 85 cents from $1.61 a year ago. 

Homes delivered increased 19% to 2,732 units, and the average selling price declined to 473,000 from $475,000 a year ago. 

Net new orders in the quarter increased 12% to 2,604 units, driving the ending backlog higher for the first time in four years. Unit home backlog increased 2% to 4,398, and backlog value increased 3% to $2.05 billion.  

The combined pressure of rising resale supply, higher land/direct costs, and targeted local price adjustments caused KB Home's housing gross profit margin to compress to 16.5%, down from 18.2% a year ago.

The company guided its home deliveries in the fiscal fourth quarter to range between 3,000 and 3,500, housing revenue to fall between $1.45 billion and $1.65 billion, and housing gross margin to ease between 16.0% and 16.6% assuming no inventory-related charges.   

The home builder narrowed its full-year sales guidance and lowered its fiscal fourth quarter outlook, dialing back its anticipated average selling price to approximately $480,000 from $500,000 and lowering expected gross margins due to weaker demand and regional mix pressures.

The executive, during a call with investors, detailed persistent margin headwinds stemming from rising material inflation, fuel surcharges, and escalating local fees. 

Furthermore, resale housing inventory has reached its highest level in a decade, forcing more aggressive builder pricing concessions and threatening near-term volume growth.