Market Woes Hammer KB Home

Updated from 9:33 a.m. EDT

KB Home(KBH) continued the streak of disappointing homebuilder earnings, reporting an unexpected second-quarter loss due to very large land impairment charges.

The results underscored how homebuilders are muddling through unprofitable waters as housing inventories across the country put significant pressure on home prices.

KB Home reported a loss from continuing operations of $174.2 million, or $2.26 a share, for the quarter, compared with profit of $184.4 million, or $2.20 a share, a year earlier.

Analysts on average expected a profit of 7 cents a share in the quarter, according to Thomson Financial.

Results were dragged down by a hefty pretax land impairment charge of $308.2 million. KB Home CEO Jeffrey Mezger said pricing pressure intensified in many of KB Home's markets during the second quarter, compressing margins and forcing inventory impairment charges in certain communities.

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Revenues tumbled 36% to $1.141 billion. Unit deliveries dropped 36% to 4,776 homes, while the company's average selling price on homes sold fell 8% to $271,600.

New-home orders fell 3% in the second quarter from a year earlier, excluding the company's discontinued French operations, which were sold recently. This compares to an 18% drop in the first quarter and a 50% cut in the fourth quarter.

"Our second-quarter results reflect the current oversupply of new and resale housing inventory, a difficult situation compounded by aggressive competition and continued weak demand," Mezger said in a statement. "Housing affordability challenges and tighter credit conditions in the subprime and near-prime mortgage market have also exacerbated current market dynamics, keeping prospective buyers out of the market, slowing the absorption of excess supply and further delaying a housing market recovery."