Dive Brief:
- In a question-and-answer session with CBS News, KB Homes President and CEO Jeffrey Mezger said that while the skilled labor pool is tight, the biggest challenge for homebuilders is finding enough quality land.
- Mezger also told CBS the housing recovery is slow but improving, and that millennials are starting to buy homes. Mezger said KB Home's mix of sales is 50% first-time buyers, 15% move-down and 35% first and second move-ups.
- Mezger said he doesn’t believe mortgage rates will rise enough to affect sales and that he’s projecting continued improvement in revenue, margins and profit. Mezger also told CBS that KB Home's fourth quarter traffic, an indicator of future sales, was the highest it’s been since 2007.
Dive Insight:
"In the land-constrained areas where it's more desirable and more active," Mezger told CBS, "there's less land around. So you have a supply constraint in the more desirable areas, and you have a demand issue where the land is available in some cities."
Last week, the Commerce Department reported a 2.5% drop in housing starts in December, and the decline, in the face of increased construction employment, came as a surprise to industry experts.
Mezger said the pinch in labor has added approximately 10 to 13 days to the time it takes KB Home to build a house but that "it's a much nicer problem to have than 'Can we sell a house today?'"
