KB Home is getting a surge of buyers in cheaper suburban areas after spending the past few years focusing on costlier locations, the builder's chief executive officer said.
An increase in purchases in the three months through May helped lift net income 63% from a year earlier to $15.6 million, or 17 cents a share, the Los Angeles-based company said in a statement Tuesday. The average estimate of nine analysts was for earnings of 14 cents a share, according to data compiled by Bloomberg.
Increasing prices in coastal markets and other expensive locales are pushing homebuyers to more-affordable locations that require longer commutes. The improving job market and wage growth at the lower-end of the income scale is also boosting demand for starter homes, said Jeffrey Mezger, KB Home's president and CEO.
"We are seeing strengthening demand in medium-priced suburbs, not just A-locations," Mezger said in a phone interview. "In California, sales were up 30% but the majority of the growth was from more inland areas."
The share of first-time buyers was at 52% in the fiscal second quarter, up from about 50% a year earlier, Mezger said.
The company's total revenue climbed 30% from a year earlier to $811 million, while deliveries jumped 30% 2,329 houses. The average selling price rose 2% to $346,700.
