Shares of KB Home (NYSE: KBH) were up over 1% on Friday. The stock has gained 19% over the past three months. The company saw revenue and earnings decline in the third quarter of 2025 but the results were better than expectations. The homebuilder anticipates a rise in demand for home ownership driven by the recent drop in mortgage rates.
Q3 results
In the third quarter of 2025, KB Home’s revenues decreased 7% year-over-year to $1.62 billion. Earnings per share fell 21% to $1.61. Despite the declines, both the top and bottom line numbers came above expectations.
Business performance
In Q3, KB Home saw a 7% decrease in homes delivered to 3,393. Net orders declined 4% to 2,950. Average selling price dipped slightly to $475,700. The company ended the quarter with a backlog of 4,333 homes with an ending backlog value of $1.99 billion.
KBH believes the long-term outlook for the housing market is favorable. The company saw demand pick up through the third quarter. It believes the decline in mortgage rates could lead to a rise in demand for homeownership.
KB Home’s sales approach involves offering a transparent price to drive sales instead of providing incentives because it believes this makes the process of buying homes easier and straightforward. In Q3, pricing in its communities remained stable and it believes its communities are well-positioned in terms of affordability.
In the fourth quarter of 2025, KBH plans to emphasize built-to-order homes in its sales approach while also selling through its inventory. It aims to return to its historical range of 70% built-to-order homes from the current level of 50%. The growth in built-to-order mix is expected to help drive gross margin expansion as these homes generate a gross margin that is higher by 250-500 basis points compared to its inventory homes.
Outlook
For the fourth quarter of 2025, KB Home forecasts housing revenues to range between $1.6-1.7 billion. Average selling price is expected to be $465,000-475,000. Housing gross margin is expected to be 18.0-18.4% in Q4 2025.