KB Home Sees Demand Surge Among Millennial, 'Boomerang' Buyers

Greater consumer confidence about the economy is generating increased foot traffic at model homes and the largest backlog of sales orders since 2007, according to executives at builder KB Home.

That should position the Los Angeles-based builder for a strong spring selling season. KB Home has a backlog of 4,000 sales orders. It generally takes around 90 days to build and deliver a home to a buyer.

"We anticipate demand will be boosted by the large millennial population that will be purchasing more homes in 2016 as well as the so-called boomerang buyers who lost their homes in the downturn but are now returning," CEO Jeffrey Mezger said during a conference call to discuss the results of the company's fiscal fourth quarter that ended Nov. 30.

KB Home delivered 8,196 homes in 2015, which is largest number of homes it sold, built and delivered since 2009. The average selling price reached an all-time high of $354,800 last year.

"Traffic in our communities was the highest we have seen in the fourth quarter since 2007, indicating strong interest in our product offerings and locations," Mezger said.

The spring selling seasons starts early for KB Home since most of its 247 communities are located in the southern half of the U.S., stretching from California through Texas to the Carolinas. Mezger noted that sales in fourth quarter were off in Houston, but that was covered by higher sales in Austin, Texas, and Denver.

Despite the possibility of more interest rate hikes by the Federal Reserve, the homebuilder contends it should not have a significant impact on home sales. "While mortgage rates are expected to rise in 2016, in most markets buying a home will continue to be a more attractive and affordable alternative to renting," Mezger told analysts and investors during the conference call.

KB Home and Nationstar Mortgage have a joint venture called Home Community Mortgage, which originates mortgages for the builder's home buyers.

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