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What changed in KB HOME's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of KB HOME's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+436 added−464 removedSource: 10-K (2025-01-24) vs 10-K (2024-01-19)

Top changes in KB HOME's 2024 10-K

436 paragraphs added · 464 removed · 358 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

101 edited+24 added−41 removed74 unchanged
Biggest changeThe following table presents the number of inventory lots we owned, in various stages of development, or controlled under land option contracts or other similar contracts by homebuilding reporting segment as of November 30, 2023 and 2022: Homes Under Construction Land Under Development Land Under Option (a) Total Land Owned or Under Option 2023 2022 2023 2022 2023 2022 2023 2022 West Coast 2,343 1,882 9,784 11,787 6,093 5,633 18,220 19,302 Southwest 1,567 1,937 4,365 5,975 1,085 929 7,017 8,841 Central 2,156 3,659 10,981 12,256 4,191 8,086 17,328 24,001 Southeast 1,569 1,929 8,035 8,630 3,807 6,092 13,411 16,651 Total 7,635 9,407 33,165 38,648 15,176 20,740 55,976 68,795 (a) Land under option as of November 30, 2023 and 2022 includes 6,260 and 5,543 lots, respectively, under land option contracts or other similar contracts where the associated deposits were refundable at our discretion. 7 The following charts present the percentage of inventory lots we owned or controlled under land option contracts or other similar contracts by homebuilding reporting segment and the percentage of total lots we owned and had under option as of November 30, 2023: Home Construction and Deliveries.
Biggest changeThe following table presents the number of inventory lots we owned, in various stages of development, or controlled under land option contracts or other similar contracts by homebuilding reporting segment as of November 30, 2024 and 2023 : Homes Under Construction Land Under Development Land Under Option (a) Total Land Owned or Under Option 2024 2023 2024 2023 2024 2023 2024 2023 West Coast 2,286 2,343 10,794 9,784 10,876 6,093 23,956 18,220 Southwest 1,303 1,567 4,078 4,365 7,736 1,085 13,117 7,017 Central 1,575 2,156 9,866 10,981 9,615 4,191 21,056 17,328 Southeast 1,360 1,569 7,600 8,035 9,614 3,807 18,574 13,411 Total 6,524 7,635 32,338 33,165 37,841 15,176 76,703 55,976 (a) Land under option as of November 30, 2024 and 2023 includes 18,923 and 6,260 lots, respectively, under land option contracts or other similar contracts where the associated deposits were refundable at our discretion.
Water Conservation . As a homebuilder operating in some of the most water-challenged regions of the country, we also prioritize water conservation. We provide water-saving features in our homes that reduce our homeowners’ bills and may help to mitigate strain on local communities’ water resources.
As a homebuilder operating in some of the most water-challenged regions of the country, we also prioritize water conservation. We provide water-saving features in our homes that reduce our homeowners’ bills and may help to mitigate strain on local communities’ water resources.
With our Built to Order® homebuying process, we provide each of our homebuyers with a highly personalized experience where they can make a wide range of structural and design choices for their future new home, as discussed further below under “Customer Obsession.” We believe this highly interactive, “customer-first” experience that puts our homebuyers firmly in control of designing the home they want based on what they value and how they want to live, at a price they can afford, gives us a meaningful and distinct competitive advantage over other homebuilders and resale and rental homes.
With our Built to Order ® homebuying process, we provide each of our homebuyers with a highly personalized experience where they can make a wide range of structural and design choices for their future new home, as discussed further below under “ Customer Obsession .” We believe this highly interactive, “customer-first” experience that puts our homebuyers firmly in control of designing the home they want based on what they value and how they want to live, at a price they can afford, gives us a meaningful and distinct competitive advantage over other homebuilders and resale and rental homes.
Our community development process varies based on, among 6 other things, the extent and speed of required government approvals and utility service activations, the overall size of a particular community, the scope of necessary site preparation activities, the type of product(s) that will be offered, weather conditions, time of year, promotional marketing results, the availability of construction resources, consumer demand, local and general economic and housing market conditions, and other factors.
Our community development process varies based on, among other things, the extent and speed of required government approvals and utility service activations, the overall size of a particular community, the scope of necessary site preparation activities, the type of product(s) that will be offered, weather conditions, time of year, promotional marketing results, the availability of construction resources, consumer demand, local and general economic and housing market conditions, and other factors.
Our KB Cares philanthropic program has four key focus areas: shelter, community, sustainability/environment and construction skills/employment. KB Cares helps to build strong social ties by, among other things, providing our employees a means of giving back to the areas in which we operate through efforts ranging from assisting people in challenging circumstances to educating the next generation.
Our KB Cares philanthropic program has four key focus areas: shelter, community, sustainability/environment and construction skills/employment. KB Cares helps to build strong 14 social ties by, among other things, providing our employees a means of giving back to the areas in which we operate through efforts ranging from assisting people in challenging circumstances to educating the next generation.
Information about our KB Home 10-year Limited Warranty program is provided in Note 17 – Commitments and Contingencies in the Notes to Consolidated Financial Statements in this report. 4 We believe our approach differentiates us in the homebuilding industry and, along with our company culture that sustains it, enhances customer satisfaction.
Information about our KB Home 10-year Limited Warranty program is provided in Note 17 – Commitments and Contingencies in the Notes to Consolidated Financial Statements in this report. We believe our approach differentiates us in the homebuilding industry and, along with our company culture that sustains it, enhances customer satisfaction.
Segment States Major Market(s) West Coast California Contra Costa County, Fresno, Hollister, Los Angeles, Madera, Modesto, Oakland, Orange County, Riverside, Roseville, Sacramento, Salinas, San Bernardino, San Diego, San Francisco, San Jose, Santa Rosa-Petaluma, Stockton, Vallejo, Ventura and Yuba City Idaho Boise Washington Olympia and Seattle Southwest Arizona Phoenix and Tucson Nevada Las Vegas Central Colorado Denver, Erie, Firestone and Loveland Texas Austin, Dallas, Fort Worth, Houston and San Antonio Southeast Florida Fort Myers, Jacksonville, Lakeland, Melbourne, Orlando, Palm Coast, Sarasota and Tampa North Carolina Charlotte, Durham-Chapel Hill and Raleigh Business Strategy Overview .
Segment States Major Market(s) West Coast California Contra Costa County, Fresno, Hollister, Los Angeles, Madera, Modesto, Oakland, Orange County, Riverside, Roseville, Sacramento, Salinas, San Bernardino, San Diego, San Francisco, San Jose, Santa Rosa-Petaluma, Stockton, Vallejo, Ventura and Yuba City Idaho Boise Washington Bremerton, Olympia and Seattle Southwest Arizona Phoenix and Tucson Nevada Las Vegas Central Colorado Denver, Erie, Firestone and Loveland Texas Austin, Dallas, Fort Worth, Houston and San Antonio Southeast Florida Fort Myers, Jacksonville, Lakeland, Melbourne, Orlando, Palm Coast, Sarasota and Tampa North Carolina Charlotte, Durham-Chapel Hill, Fayetteville and Raleigh Business Strategy Overview .
We have established an Environmental Management System (“EMS”), through which we focus on continually improving the energy efficiency of our homes so, among things, there are less greenhouse gas (“GHG”) emissions associated with their use over their multi-decade life cycle.
We have established an Environmental Management System (“EMS”), through which we focus on continually improving the energy efficiency of our homes so, among other things, there are less greenhouse gas (“GHG”) emissions associated with their use over their multi-decade life cycle.
Our Supplier Code of Conduct also encourages our suppliers to operate in an efficient and environmentally responsible manner, conserve natural resources and minimize waste and the use of environmentally harmful materials. Corporate Governance Practices .
Our Supplier Code of Conduct also encourages our suppliers to operate in an efficient and environmentally responsible manner, conserve natural resources and minimize waste and the use of environmentally harmful materials. Corporate Governance .
These factors in each of our served markets will affect the costs we incur and the time it takes to locate, acquire rights to and develop land, open communities for sales, and market and build homes; the size of our homes; our selling prices (including the contribution from homebuyers’ purchases of design options and upgrades); the pace at which we sell and deliver homes; the rate at which communities are sold out; and our housing gross profits and housing gross profit margins.
These factors in each of our served markets will affect the costs we incur and the time it takes to locate, acquire rights to and develop land, open communities for sales, and market and build homes; the size of our homes; our selling prices (including the contribution from homebuyers’ purchases of design choices and options); the pace at which we sell and deliver homes; the rate at which communities are sold out; and our housing gross profits and housing gross profit margins.
Our board of directors maintains a robust governance framework and leading practices to oversee the management of our business and, among other things, oversees our sustainability initiatives as part of our overall 14 business strategy.
Our board of directors maintains a robust governance framework and leading practices to oversee the management of our business and, among other things, oversees our sustainability initiatives as part of our overall business strategy.
With our Built to Order approach, our customers have the opportunity to select their lot location within a community, floor plan, elevation and structural options, each of which may be at a premium added to a home’s selling price, and to personalize their homes beyond our base offerings by adding numerous design options and upgrades available in our KB Home Design Studios.
With our Built to Order approach, our customers have the opportunity to select their lot location within a community, floor plan, elevation and structural options, each of which may be at a premium added to a home’s selling price, and to personalize their homes beyond our base offerings by adding numerous design choices and options available in our KB Home Design Studios .
A liability for environmental remediation and other environmental costs is accrued when we consider it probable that a liability has been incurred and the amount of loss can be reasonably estimated. However, environmental costs and accruals were not material to our operations, cash flows or financial position in 2023, 2022 or 2021.
A liability for environmental remediation and other environmental costs is accrued when we consider it probable that a liability has been incurred and the amount of loss can be reasonably estimated. However, environmental costs and accruals were not material to our operations, cash flows or financial position in 2024 , 2023 or 2022 .
As noted above under “Human Capital Resources,” w e are also one of the founding partners of the Building Talent Foundation, whose mission is to advance the education, training and career progression of young people and people from underrepresented groups as skilled technical workers and business owners in residential construction.
As noted above under “ Human Capital Resources ,” w e are also one of the founding partners of the Building Talent Foundation, whose mission is to advance the education, training and career progression of young people and people from underrepresented groups as skilled technical workers and business owners in residential construction.
According to the EPA, WaterSense labeled products use at least 20% percent less water compared to products that are not WaterSense labeled. We were also the first national homebuilder to implement in 2021 the new WaterSense Labeled Homes Program, Version 2, under which homes are to be at least 30% more water efficient than a typical new home.
According to the EPA, WaterSense labeled products use at least 20% less water compared to products that are not WaterSense labeled. In 2021, we were also the first national homebuilder to implement the new WaterSense Labeled Homes Program, Version 2, under which homes are to be at least 30% more water efficient than a 13 typical new home.
The content available on or through our primary website at www.kbhome.com, our investor relations website, including our sustainability reports, Human Rights Statement, Supplier Code of Conduct and other ESG-related policies, or social media outlets and other evolving communication technologies is not incorporated by reference in this report or in any other filing we make with the SEC, and our references to such content are intended to be inactive textual or oral references only.
The content available on or through our primary website at www.kbhome.com, our investor relations website, including our sustainability reports, Human Rights Statement, Supplier Code of Conduct and other governance policies, or social media outlets and other evolving communication technologies is not incorporated by reference in this report or in any other filing we make with the SEC , and our references to such content are intended to be inactive textual or oral references only.
Available Information Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, beneficial ownership reports on Forms 3, 4 and 5 and proxy statements, as well as all amendments to those reports are available free of charge through our investor relations website at investor.kbhome.com, as soon as reasonably practicable after such reports are electronically filed with, or furnished to, the Securities and Exchange Commission (“SEC”).
Available Information Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, beneficial ownership reports on Forms 3, 4 and 5 and proxy statements, as well as all amendments to those reports are available free of charge through our investor relations website at investor.kbhome.com, as soon as reasonably practicable after such reports are electronically filed with, or furnished to, the Securities and Exchange Commission (“ SEC ”).
Our corporate management and support personnel develop and oversee the implementation of company-wide strategic initiatives, our overall operational policies and internal control standards, and perform various centralized functions, including architecture; purchasing and national contracts; treasury and cash management; land acquisition approval; risk and litigation management; accounting and financial reporting; internal audit and compliance activities; information technology (“IT”) systems; marketing; and investor and media relations.
Our corporate management and support personnel develop and oversee the implementation of company-wide strategic initiatives, our overall operational policies and internal control standards, and perform various centralized functions, including architecture; purchasing and national contracts; treasury and cash management; land acquisition approval; risk and litigation management; accounting and financial reporting; internal audit and compliance activities; information technology (“IT”) systems; human resources strategy; marketing; and investor and media relations.
Our financial services operations also provide mortgage banking services, including residential consumer mortgage loan (“mortgage loan”) originations, to our homebuyers indirectly through KBHS Home Loans, LLC (“KBHS”), an unconsolidated joint venture between us and a third party.
Our financial services operations also provide mortgage banking services, including residential consumer mortgage loan (“mortgage loan”) originations, to our homebuyers indirectly through KBHS Home Loans, LLC (“ KBHS ”), an unconsolidated joint venture between us and a third party.
Our core business strategy, which we refer to as KB Edge, is to expand our scale primarily within our current geographic footprint to achieve a top-five position in each of our served markets (based on homes delivered).
Our core business strategy, which we refer to as KB Edge , is to expand our operations primarily within our current geographic footprint to achieve a top-five position in each of our served markets (based on homes delivered).
Each certified home is estimated by the EPA to produce approximately 3,287 pounds (1.5 metric tons) per year less GHG emissions than a typical home. Based on our energy use analysis, our homes currently save our homeowners an estimated average of $1,400 annually on utility bills compared to typical resale homes. GHG Emission Goal .
Each certified home is estimated by the EPA to produce approximately 3,287 pounds (1.5 metric tons) per year less GHG emissions than a typical new home . Based on our energy use analysis, our homes currently save our homeowners an estimated average of $1,400 annually on utility bills compared to typical resale homes.
Since 2014, we have partnered with IBACOS®, a nationally recognized expert in home construction quality and performance, to conduct annual jobsite safety reviews. Our commitment to the communities we serve is not solely about the homes we build, as we strive to also make social contributions that intersect with the nature of our business.
Since 2014, we have partnered with IBACOS®, a nationally recognized expert in home construction quality and performance, to conduct annual jobsite safety reviews. Our commitment to the communities we serve is not solely about the homes we build, as we strive to also make wider community contributions that intersect with the nature of our business.
In addition, we find our homebuyers can have a strong emotional attachment to our products when they create a personalized home with the features and finishes they select. • Land . We seek to manage our working capital and reduce our operating risks by primarily acquiring entitled land parcels within attractive submarkets identified by our market research.
In addition, we find our homebuyers build a strong emotional attachment to our products when they create a personalized home with the features and finishes they select. • Land . We seek to manage our working capital and reduce our operating risks by primarily acquiring entitled land parcels within attractive submarkets identified by our market research.
Historically, our community development process has typically ranged from 12 to 24 months in our West Coast homebuilding reporting segment, with a somewhat shorter duration in our other homebuilding reporting segments.
Historically, our community development process has typically ranged from 10 to 24 months in our West Coast homebuilding reporting segment, with a somewhat shorter duration in our other homebuilding reporting segments.
Our cancellation rates and the factors affecting such rates are further discussed below under both Item 1A – Risk Factors and Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations in this report. 8 The following charts present our ending backlog (number of homes and value) by homebuilding reporting segment as of November 30, 2022 and 2023: Competition, Seasonality, Delivery Mix and Other Factors Competition.
Our cancellation rates and the factors affecting such rates are further discussed below under both Item 1A – Risk Factors and Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations in this report. 9 The following charts present our ending backlog ( number of homes and value ) by homebuilding reporting segment as of November 30, 2023 and 2024 : Competition, Seasonality, Delivery Mix and Other Factors Competition.
We do this by calibrating home sales rates and selling prices at each of our communities to improve profitability; focusing on controlling direct construction costs; increasing inventory turns to the extent practical; balancing pace, price and construction starts at each community to optimize our return on each inventory asset within its market context; structuring land acquisitions to minimize upfront costs where possible, as discussed below under “Community Development and Land Inventory Management”; and deploying excess cash flow from operations to help fuel additional revenue growth or reduce debt, among other steps.
We do this by calibrating home sales rates and selling prices at each of our communities to improve profitability; focusing on controlling direct construction costs; increasing inventory turns to the extent practical; balancing pace, price and construction starts at each community to optimize even-flow production and our return on each inventory asset within its market context; structuring land acquisitions to minimize upfront costs where possible, as discussed below under “ Community Development and Land Inventory Management ”; and deploying excess cash flow from operations to help fuel additional revenue growth or reduce debt, among other steps.
In 2024, we intend to continue to invest in and develop land positions within attractive submarkets and selectively acquire or control additional land that meets our investment return standards.
In 2025, we intend to continue to invest in and develop land positions within attractive submarkets and selectively acquire or control additional land that meets our investment return standards.
Built on Relationships also encapsulates the importance of customer, as discussed above, and other key relationships – with suppliers, trade contractors, land sellers and municipalities – to the success of our business. The key components we highlight as part of our brand identity include: • Innovative Design .
Built on Relationships also encapsulates the importance of customer, as discussed above, and other key relationships – with suppliers, trade contractors, land sellers and municipalities – to the success of our business. The key components we highlight as part of our brand identity include: • Partnership .
Backlog Our “backlog” consists of homes that are under a purchase contract but have not yet been delivered to a homebuyer.
Backlog Our “backlog” consists of homes that are under a sales contract but have not yet been delivered to a homebuyer.
We can provide no assurance whether or to what extent typical seasonal performance trends will occur in 2024, or at all.
We can provide no assurance whether or to what extent typical seasonal performance trends will occur in 2025, or at all.
Our design studios, generally centrally located within our served markets, are a key component of our Built to Order process, with the mix of design options and upgrades we offer at each studio primarily based on the preferences identified by our market survey and purchase frequency data, as discussed further below under “Customer Obsession.” We utilize a centralized internal architectural group that designs homes to meet or exceed customers’ price-to-value expectations while being as efficient as possible to construct.
Our design studios, generally centrally located within our served markets, are a key component of our Built to Order process, with the mix of design choices and options we offer at each studio primarily based on the preferences identified by our market survey and purchase frequency data, as discussed further below under “ Customer Obsession .” We utilize a centralized internal architectural group that designs homes to meet or exceed customers’ price-to-value expectations while being as cost-effective as possible to construct.
KB Edge is a systematic, fact-based and process-driven approach to homebuilding that is grounded in gaining a detailed understanding of consumers’ location and product preferences and product price-to-value perceptions. KB Edge consists of the following key principles with respect to customers, land, products and operations: 2 • Customers .
KB Edge is a systematic, fact-based and process-driven approach to homebuilding that is grounded in gaining a detailed understanding of consumers’ location and product preferences and product price-to-value perceptions. 3 KB Edge consists of the following key principles with respect to customers, land, products and production: • Customers .
To help learn and improve our customer experience, we schedule follow up visits with our customers 30 days after they move in, as well as three, six, 10 and 18 months later, to hear about their experience in their new home and to address any concerns they may have, including warranty claims.
To help learn and improve our customer experience, we schedule follow-up visits with our customers 1 0 days and 30 day s after they move in, as well as six, 10 and 18 months later , to hear about their experience in their new home and to address any concerns they may have, including warranty claims.
Outside of land, the principal raw materials used in our production process are concrete and forest products. Other primary materials used in home construction include drywall, and plumbing and electrical items. We source all of our building materials from third parties and, to the extent feasible, select products with sustainability certifications or attributes.
Outside of land, the principal raw materials used in our production process are concrete and forest products. Other primary materials used in home construction include drywall, and plumbing and electrical items. We source our building materials, many of which are domestically produced, from third parties and , to the extent feasible, select products with sustainability certifications or attributes.
We expect these upward cost trends to continue in 2024, particularly if and as there is greater competition for these resources across a disrupted global supply chain. Seasonality. Our performance is affected by seasonal demand trends for housing.
We expect these upward cost trends may continue in 2025 , particularly if and as there is greater competition for these resources across a disrupted global supply chain. Seasonality. Our performance is affected by seasonal demand trends for housing.
We have a goal to reduce the estimated GHG emissions (metric tons per year) produced through the use of our average home built in 2025 by 0.5 metric tons per year, or 8%, from the estimated 6 metric tons per year average for a KB home built in 2020.
In 2020, we set a goal to lower the estimated GHG emissions (metric tons per year) produced through the use of our average home built in 2025 by 0.5 metric tons per year, or 8%, from the estimated 6 metric tons per year average for a KB home built in 2020.
First Quarter Second Quarter Third Quarter Fourth Quarter Net Orders 2023 19 % 36 % 28 % 17 % 2022 39 % 36 % 19 % 6 % 2021 26 % 27 % 25 % 22 % Homes Delivered 2023 21 % 28 % 25 % 26 % 2022 21 % 25 % 26 % 28 % 2021 21 % 26 % 26 % 27 % Housing Revenues 2023 22 % 27 % 25 % 26 % 2022 20 % 25 % 27 % 28 % 2021 20 % 25 % 26 % 29 % Delivery Mix and Other Factors.
First Quarter Second Quarter Third Quarter Fourth Quarter Net Orders 2024 25 % 30 % 24 % 21 % 2023 19 % 36 % 28 % 17 % 2022 39 % 36 % 19 % 6 % Homes Delivered 2024 21 % 25 % 26 % 28 % 2023 21 % 28 % 25 % 26 % 2022 21 % 25 % 26 % 28 % Housing Revenues 2024 21 % 25 % 25 % 29 % 2023 22 % 27 % 25 % 26 % 2022 20 % 25 % 27 % 28 % Delivery Mix and Other Factors.
More information concerning our corporate governance can be found in our Proxy Statement for the 2024 Annual Meeting of Stockholders (“2024 Proxy Statement”). Government Regulations and Environmental Matters Our operations are subject to myriad legal and regulatory requirements concerning land development (including governmental permits, taxes, assessments and fees), the homebuilding process, employment conditions and worksite health and safety.
More information concerning our corporate governance can be found in our Proxy Statement for the 2025 Annual Meeting of Stockholders (“ 2025 Proxy Statement ”). 15 Government Regulations and Environmental Matters Our operations are subject to myriad legal and regulatory requirements concerning land development (including governmental permits, taxes, assessments and fees), the homebuilding process, employment conditions and worksite health and safety.
We also use electronic sales capabilities and technology to give our customers a variety of convenient ways to shop for and purchase a new KB home, including, among other things: • Offering virtual home tours and online photo galleries for prospective homebuyers; • Providing access to interactive floor plans and homesite maps for their desired community; • Conducting virtual appointments and tours of the model homes and design studios; • Utilizing online tools to serve homebuyers where possible; • Organizing virtual events with the broker community to introduce new communities; • Presenting homebuyers with the ability to virtually see and walk through their home at various points during its construction and prior to closing; and • Arranging virtual or drive-through closings, where permitted.
We also use electronic sales capabilities and technology to give our customers a variety of convenient ways to shop for and purchase a new KB home, including, among other things: • Offering virtual home tours and online photo galleries for prospective homebuyers; • Providing access to interactive floor plans and homesite maps for their desired community; • Conducting virtual appointments and tours of the model homes and design studios; • Utilizing online tools to serve homebuyers where possible; and • Presenting homebuyers with the ability to virtually see and walk through their home at various points during its construction and prior to closing.
Our homebuilding operations represent the majority of our business, accounting for 99.5% of our total revenues in 2023. Our financial services operations, which accounted for the remaining .5% of our total revenues in 2023, offer various insurance products to our homebuyers in the markets where we build homes and provide title services in certain of those markets.
Our homebuilding operations represent the majority of our business, accounting for 99.6% of our total revenues in 2024 . Our financial services operations, which accounted for the remaining .4% of our total revenues in 2024 , offer various insurance products to our homebuyers in the markets where we build homes and provide title services in certain of those markets.
To date, we have built over 21,800 WaterSense labeled and Water Smart homes, which we believe is more than any other homebuilder, and installed over 1.1 million WaterSense labeled fixtures, collectively helping to save an estimated 1.7 billion gallons of water per year based on calculations derived from WaterSense program and supplier data.
To date, we have built over 26,000 WaterSense labeled and Water Smart homes, which we believe is more than any other homebuilder, and installed over 1.2 million WaterSense labeled fixtures, collectively helping to save an estimated 2.1 billion gallons of water per year based on calculations derived from WaterSense program and supplier data.
This is the 13th consecutive year we have been recognized for our achievements in constructing water-efficient homes; • Newsweek’s 2024 list of America’s Most Responsible Companies – We were once again named by Newsweek as one of America’s most responsible companies, the only homebuilder to make this distinguished list four years in a row.
This is the 14th consecutive year we have been recognized for our achievements in constructing water-efficient homes; • Newsweek’s 2025 list of America’s Most Responsible Companies – We were once again named by Newsweek as one of America’s most responsible companies, the only homebuilder to make this distinguished list five years in a row.
As to homebuyers, we primarily compete with other homebuilders on the basis of selling price, community location and amenities, availability of financing options, home designs, reputation, home construction cycle time, and the design options and upgrades that can be included in a home.
As to homebuyers, we primarily compete with other homebuilders on the basis of selling price, community location and amenities, availability of financing options, home designs, reputation, build time, and the design choices and options that can be included in a home.
We support each person or family, whether it is their first time or they have already been homeowners, with a dedicated community team of sales counselors, design consultants, construction supervisors and other personnel.
We support each person or family, whether it is their first time or they have already been homeowners, with a dedicated community team of sales counselors, design consultants, customer service representatives, construction superintendents and other personnel.
Our homebuyers can visit our KB Home Design Studios, where they get both advice and the opportunity to select from a broad range of included features, design options and upgrades that will help personalize their home.
Our homebuyers can visit our KB Home Design Studios , where they get both advice and the opportunity to select from a broad range of inc luded features, design choices and options that will help personalize their home.
These advisors, who have a broad and diverse set of personal and professional perspectives, experiences and expertise, help us shape our sustainability priorities and reporting, as well as our approach to stakeholder engagement. Environmental Practices .
These advisors, who have a broad and diverse set of personal and professional perspectives, experiences and expertise, help us shape our sustainability priorities and reporting, as well as our approach to stakeholder engagement. Energy Efficiency Commitment .
Two directors are liaisons to management on ESG matters. • Our board monitors cybersecurity risks and related evolving physical, electronic and other protection strategies and initiatives. • Boards should have a strong, independent leadership structure. • Our board has a strong independent lead director with significant responsibilities and authority. • Only independent directors serve on board committees. • Boards should adopt structures and practices that enhance their effectiveness. • Directors have extensive and relevant experience and skills. • 91% of directors are independent; 45% are women or racial or ethnic minorities. • The average tenure of our board members is seven years, with five new directors having joined since 2021, promoting its refreshment. • Boards should develop management incentive structures that are aligned with the long-term strategy of the company. • We take stockholder feedback into account in our executive compensation program, as discussed in our 2024 Proxy Statement. • Management compensation is designed to encourage the achievement of our long-term strategic goals. • All unvested employee equity awards made since 2017 require double-trigger vesting in a change in control.
Two directors are liaisons to management on sustainability-related matters. • Boards should have a strong, independent leadership structure. • Our board has a strong independent lead director with significant responsibilities and authority. • Only independent directors serve on board committees. • Boards should adopt structures and practices that enhance their effectiveness. • Directors have extensive and relevant experience and skills. • 90% of directors are independent; 50% are women or racial or ethnic minorities. • The average tenure of our board members is approximately seven years, with five of the directors on the Board having joined since 2021, promoting its refreshment. • Boards should develop management incentive structures that are aligned with the long-term strategy of the company. • We take stockholder feedback into account in our executive compensation program, as discussed in our 2025 Proxy Statement. • Management compensation is designed to encourage the achievement of our long-term strategic goals. • All unvested employee equity awards made since 2017 require double-trigger vesting in a change in control.
We have been recognized with major national awards for our leading sustainability practices, including: • 2023 ENERGY STAR Partner of the Year – Sustained Excellence Award – This was our 13th consecutive award for demonstrating leadership in building highly energy-efficient homes; • 2023 ENERGY STAR Market Leader Awards – We set a new industry record by earning an unprecedented 29 awards, more than any other homebuilder; 13 • 2023 WaterSense Sustained Excellence Award – We were once again the only national homebuilder to receive this honor in 2023, which is the highest level of recognition given by the EPA WaterSense program.
We have been recognized with major national awards for our consistent leadership and commitment, including: • 2024 ENERGY STAR Partner of the Year – Sustained Excellence Award – This was our 14th consecutive award for demonstrating leadership in building highly energy-efficient homes; • 2024 ENERGY STAR Market Leader Awards – We set a new industry record by earning an unprecedented 30 awards, more than any other homebuilder; • 2024 WaterSense Sustained Excellence Award – We were once again the only national homebuilder to receive this honor in 2024, which is the highest level of recognition given by the EPA WaterSense program.
The following charts present homebuilding revenues, net income and diluted earnings per share for the years ended November 30, 2019, 2021 and 2023, and book value per share as of November 30, 2019, 2021 and 2023: 1 Markets Reflecting the geographic span of our homebuilding business, we have operations in the nine states and 47 major markets presented below.
The following charts present homebuilding revenues, net income and diluted earnings per share for the years ended November 30, and book value per share as of November 30 : 2 Markets Reflecting the geographic scale of our homebuilding business, we have operations in the nine states and 49 major markets presented below.
Item 1. BUSINESS General KB Home is one of the largest and most recognized homebuilding companies in the U.S. We have been building homes for more than 65 years, with over 680,000 homes built since our founding in 1957.
Item 1. BUSINESS General KB Home is one of the largest and most trusted homebuilders in the U.S. We have been building homes for more than 65 years, with nearly 700,000 homes built since our founding in 1957.
We also offer a variety of single-story floorplans that typically appeal to an active adult homebuyer age 55 and over. For more than a decade, first-time and first move-up homebuyers have accounted for an average of over 75% of our annual deliveries; in 2023, these homebuyers accounted for 74% of our deliveries, as shown in the following chart: Operational Structure.
We also offer a variety of single-story floorplans that typically appeal to an active adult homebuyer age 55 and over. For more than a decade, first-time and first move-up homebuyers have accounted for an average of over 75% of our annual deliveries.
Our benchmark for measuring the achievement of this goal is the Home Energy Rating System (HERS®) Index, as each HERS Index score point reduction equates to a 1% improvement in energy efficiency relative to a standard new home and potentially creates less GHG emissions by an average of 0.1 metric tons (as calculated based on the states in which we operate).
We use the Home Energy Rating System (HERS®) Index to measure our progress, as each point reduction in the HERS Index equates to a 1% improvement in energy efficiency relative to a standard new home and potentially produces an average of 0.1 metric tons less GHG emissions (as calculated based on the states in which we operate).
We also incorporate energy-efficient features into our product designs to help lower our homebuyers’ total cost of homeownership and reduce our homes’ impact on the environment, as discussed below under “Environmental, Social and Governance.” • Operations . In addition to differentiating us from other high-production homebuilders, our Built to Order process helps drive low-cost production.
We also incorporate energy-efficient and water-saving f eatures into our product designs to help lower our homebuyers’ total cost of homeownership and reduce our homes’ impact on the environment. • Production . In addition to differentiating us from other high-production homebuilders, our Built to Order process helps drive low-cost production.
Our land investment is sensitive to and will shift with local or national housing market environments or broader economic conditions, generally increasing when we are experiencing or expecting strong growth and decreasing when we are experiencing or expecting slower growth. Though we evaluate new markets to enter, our primary focus is on our existing geographic footprint.
Our land investment is sensitive to and will shift with local or national housing market environments or broader economic conditions, generally increasing when we are experiencing or expecting strong growth and decreasing when we are experiencing or expecting slower growth.
We offer our customers a variety of homes with a standardized set of functions and features generally priced to be affordable for those with household incomes within a range of the local area’s median level.
Our homes are engineered to be highly energy and water efficient, as discussed further below. • Affordability . We offer our customers a variety of homes with a standardized set of functions and features generally priced to be affordable for those with household incomes within a range of the local area’s median level.
Generally, we target having roughly 65% to 70% Built to Order homes in production, with the remainder consisting of homes started without a corresponding buyer and partially constructed homes where the initial buyer cancelled their home sales contract with us.
Generally, 60% to 70% of our homes delivered are Built to Order , with the remainder consisting of homes started without a corresponding buyer and partially constructed homes where the initial buyer cancelled their home sales contract with us.
Therefore, we strive to create an engaging environment that offers our employees satisfying work, with meaningful opportunities for career growth and development, rewarding short- and long-term compensation programs that are aligned with achieving our business goals, employee home purchase and referral programs, and employment milestone service awards.
We strive to create an engaging environment that offers fulfilling work, meaningful career growth and development opportunities, and rewarding short- and long-term compensation programs aligned with our business objectives. We also provide employee home purchase and product and service referral programs, as well as awards for employment service milestones.
As part of the decision-making process for approving a land purchase, we review extensive information about a proposed project, including past use; assessment of environmentally sensitive areas and areas that may be suitable for parks, trails, and open space preservation areas; assessment of site development required, including any work needed to comply with storm water regulations; proximity to major employment and retail centers; and site design and product (home designs and specifications) plans that are, among other things, consistent with our focus on building highly energy- and water-efficient homes, as discussed below under “Environmental, Social and Governance.” We generally seek to structure our land acquisition and land development activities to minimize, or defer the timing of, expenditures in order to reduce both the market risks associated with holding land and our working capital and financial commitments, including interest and other carrying costs.
As part of the decision-making process for approving a land purchase, we review extensive information about a proposed project, including past use; assessment of environmentally sensitive areas and areas that may be suitable for parks, trails, and open space preservation; assessment of site development required, including any work needed to comply with storm water regulations; proximity to major employment and retail centers; and site design and product (home designs and specifications) plans that are, among other things, consistent with our focus on building highly energy- and water-efficient homes.
To enhance the simplicity and efficiency of our products and processes, our architectural group has developed a core series of high-frequency, flexible floor plans and elevations that we can offer across many of our served markets.
To enhance the simplicity and efficiency of our products and processes, our architectural group has developed a core series of high-frequency, flexible floor plans and elevations that we can offer across many of our served markets, which it periodically updates to incorporate value- engineering enhancements, regulatory requirements and/or evolving consumer tastes.
We may also invest in land that requires us to repurpose and re-entitle the property for residential use, such as urban in-fill developments.
However, depending on market conditions and available opportunities, we may acquire undeveloped and/or unentitled land. We may also invest in land that requires us to repurpose and re-entitle the property for residential use, such as urban in-fill developments.
As discussed above under “Business Strategy,” we generally commence construction of a home after we have a signed purchase contract with a homebuyer and have obtained preliminary credit approval or other evidence of the homebuyer’s financial ability to purchase the home. Other than model homes, our inventories typically do not consist of a significant number of completed unsold homes.
As discussed above under “ Business Strategy ,” we generally commence construction of a home after we have a signed sales contract with a homebuyer and have obtained preliminary credit approval or other evidence of the homebuyer’s financial ability to purchase the home.
We, or outside general contractors we may engage, contract with a variety of independent contractors, who are typically locally based, to perform all land development and home construction work through these independent contractors’ own employees or subcontractors. We do not self-perform any land development or home construction work.
Our typical cycle time from home sale to delivery has historically ranged from six to seven months. We, or outside general contractors we may engage, contract with a variety of independent contractors, who are typically locally based, to perform all land development and home construction work through these independent contractors’ own employees or subcontractors.
With most of the energy consumption during a home’s multi-decade life occurring after we deliver the home to the customer, our products’ energy efficiency is a key part of our efforts to help minimize a home’s impact on the environment, including the GHG and other carbon emissions produced, from its day-to-day use. ENERGY STAR Commitment .
With most of the energy consumption during a home’s life occurring after it is delivered to the customer, our products’ energy efficiency is a key part of our efforts to help minimize a home’s impact on the environment from its day-to-day use.
In markets experiencing extensive construction activity, including areas recovering from earthquakes, wildfires, hurricanes, flooding or other natural disasters, there can be craft and skilled trade shortages that limit independent contractors’ ability to supply construction services, which in turn tends to drive up our costs and/or extend our production schedules.
In markets experiencing extensive construction activity, including areas recovering from earthquakes, wildfires (which is expected to be the case in the Los Angeles County area due to the unprecedented wildfires it experienced in January 2025) , hurricanes (such as the hurricanes that made landfall in the Southeast United States in September and October 2024), flooding or other natural disasters, there can be craft and skilled trade shortages that limit independent contractors’ ability to supply construction services, which in turn tends to drive up our costs and/or extend our production schedules.
ENERGY STAR is a voluntary U.S. Environmental Protection Agency (“EPA”) and Department of Energy program that seeks to help consumers, businesses and industry save money and protect the environment through the adoption of energy-efficient products and practices.
Environmental Protection Agency (“ EPA”) estimates that fewer than 12% of new homes nationwide meet ENERGY STAR certification standards. ENERGY STAR is a voluntary EPA and Department of Energy program that seeks to help consumers, businesses and industry save money and protect the environment through the adoption of energy-efficient products and practices.
In our communities, we typically offer four to 15 home design choices. We also generally build one to three model homes at each community so that prospective homebuyers can preview the various products available. Depending on the community, we may offer premium lots containing more square footage, better views and/or location benefits.
We generally build one to three model homes at each community so that prospective homebuyers can preview the various products available. Depending on the community, we may offer premium lots containing more square footage, better views and/or location benefits. Some of our communities consist of multiple-story structures that encompass several attached condominium-style units. 7 Land Acquisition and Land Development.
These include starting construction on a certain number of homes in a community before corresponding purchase contracts are signed with homebuyers to more quickly meet customer delivery expectations and generate revenues, particularly in markets with low resale home inventory, as we saw during 2023.
There have been and may in future periods be circumstances where we deviate from certain of the above principles, such as starting construction on a certain number of homes in a community before corresponding sales contracts are signed with homebuyers to more quickly meet customer delivery expectations and generate revenues, particularly in markets with low resale home inventory.
In addition, in many of our communities, we can readily introduce smaller square footage floor plans to enable more customers to select and design a personalized home within their budget.
In addition, in many of our communities, we can readily introduce smaller square footage floor plans to enable more customers to select and design a personalized home within their budget. Our ENERGY STAR ® certified homes can provide long- term significant savings on utility bills, compared to typical resale homes and new homes that are not ENERGY STAR certified.
This reduces our inventory risk, promotes construction efficiencies, enhances our relationships with independent contractors and other business partners, and provides us with greater visibility and predictability on future deliveries. There have been and may in future periods be circumstances where we deviate from certain of the above principles.
This reduces our inventory risk, promotes construction efficiencies, enhances our relationships with independent contractors and other business partners, and provides us with greater visibility and predictability on future deliveries.
To help advance our employees’ personal growth and drive consistent execution of our business strategy, including our customer obsession philosophy, we provide training opportunities that align with team members’ responsibilities over the arc of their careers with us.
To promote our employees ’ professional growth and help drive the consistent execution of our business strategy, including our customer obsession philosophy, we offer training opportunities tailored to team members ’ responsibilities throughout their careers with us.
By comparison, the EPA estimates only about 10% of all new homes in the U.S. were ENERGY STAR certified in the past three years. According to the EPA, ENERGY STAR certified new homes achieve a 20% energy-efficiency improvement on average compared to new homes built to local code, and even more compared to resale homes without certification.
According to the EPA, ENERGY STAR certified new homes achieve on average up to 20% energy-efficiency improvement compared to new homes built to local code, and even more compared to resale homes without certification.
Also, we are subject to federal, state and local rules that can require us to undertake extensive measures to prevent or minimize discharges of stormwater and other materials from our communities, and to protect wetlands and other designated areas. 15 As part of our due diligence process for land acquisitions, we often use third-party environmental consultants to investigate potential environmental risks, and we require disclosures, representations and warranties from land sellers regarding environmental risks.
Also, we are subject to federal, state and local rules that can require us to undertake extensive measures to prevent or minimize discharges of stormwater and other materials from our communities, and to protect wetlands and other designated areas.
Therefore, we expect to attain our GHG emissions goal if we lower our national average HERS Index score by five points, from 50 in 2020 to a target of 45 for 2025. For comparison, a typical resale home today has a HERS Index score of 130. Solar and Clean Energy .
Accordingly, our goal was to lower our national average HERS Index score by five points, from 50 for 2020 to 45 for 2025. We achieved a HERS Index score of 45 in 2024, a year earlier than we targeted. For comparison, a typical resale home today has a HERS Index score of 130 . Water Conservation .
We believe the conditions we experienced in 2023 will generally persist next year, as discussed below under “Outlook.” Although they vary significantly in size and complexity, our single-family residential home communities typically consist of 50 to 150 lots per product line, with lots ranging in size from 1,800 to 11,000 square feet.
Although they vary significantly in size and complexity, our single-family residential home communities typically consist of 50 to 150 lots per product line , with lots ranging in size from 2,000 to 11,000 square feet . In our communities, we typically offer four to 15 home design choices .
This review process is overseen by the management development and compensation committee of our board of directors, the members of which have significant experience and insight into human capital management, talent development and executive compensation across a variety of organizational structures, as well as strong backgrounds in executive leadership. Employee Safety and Wellness.
The management development and compensation committee of our board of directors, composed of members with broad expertise and insight into human capital management, talent development and executive compensation across various organizational structures, as well as solid backgrounds in executive leadership, oversees this review process. Inclusion.
This recognition is based on our industry-leading environmental and social practices; • Newsweek’s 2023 list of America’s Most Trustworthy Companies – This is the second consecutive year we have received this recognition, which is based on three main public pillars: customer trust, investor trust and employee trust; • USA Today’s 2023 List of America’s Climate Leaders – We were the highest-ranked homebuilder on the inaugural list, in consideration of, among other things, our annualized reductions in emission intensity and carbon disclosure rating; and • Fortune’s 2023 Change the World List – We were the first and only homebuilder on the list, which recognizes companies that have created a positive impact on society through activities such as sustainability that are part of their core business strategies.
This recognition is based on our industry-leading environmental and social practices; • Newsweek’s 2024 list of America’s Most Trustworthy Companies – This is the third consecutive year we have received this recognition, which is based on three main public pillars: customer trust, investor trust and employee trust; • USA Today’s 2024 List of America’s Climate Leaders – We were the highest-ranked homebuilder and ranked in the top five percent of all companies, in consideration of, among other things, our annualized reductions in emission intensity and carbon disclosure rating; • Time Magazine’s 2024 America’s Best Midsize Companies – We were the only national homebuilder to receive this distinction on this inaugural list, which evaluates employee satisfaction, revenue growth and sustainability transparency; and • Forbes’ 2024 America’s Best Midsize Employers – We were recognized for a third time, the only national homebuilder to receive this distinction.
We give our homebuyers the ability to personalize their new home from floor plans to exterior styles, and from design choices to where they live in the community. Additionally, at our KB Home Design Studios, our homebuyers have the opportunity to select from a broad range of included features, design options and upgrades. • Affordability .
Additionally, at our KB Home Design Studios , our homebuyers have the opportunity to select from a broad range of included features, design choices and options. • Innovative Design .
These independent contractors also supply some of the building materials required for such production activities.
We do not self-perform any land development or home construction work. These independent contractors also supply some of the building materials required for such production activities.
We are proud of the high levels of satisfaction our homebuyers have reported to us and outside survey firms. In 2023, we continued to be one of the highest-ranked national homebuilders for customer satisfaction in third-party surveys, which we believe reflects the effective dedication we have to our homebuyers. Promotional Marketing Strategy.
In 2024, we continued to be one of the highest-ranked national homebuilders for customer satisfaction in 5 third-party surveys and, based on long-running buyer surveys conducted by an outside organization we have engaged, achieved the highest level of customer satisfaction in our histor y , which we believe reflects the effective dedication we have to our homebuyers. Promotional Marketing Strategy.
When we acquire land, we generally focus on parcels with lots that are entitled for residential construction and are either physically developed to start home construction (referred to as “finished lots”) or partially finished. However, depending on market conditions and available opportunities, we may acquire undeveloped and/or unentitled land.
We continuously evaluate land acquisition opportunities against our investment return standards, while balancing competing needs for financial strength, liquidity and land inventory for future growth. When we acquire land, we generally focus on parcels with lots that are entitled for residential construction and are either physically developed to start home construction (referred to as “finished lots”) or partially finished.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeSubject to future guidance, regulation or legislation, we may not be able to realize Section 45L tax credits for our homes, even if they attain ENERGY STAR 22 certification, at the same level as in prior years or we may incur additional costs to build homes that can qualify.
Biggest changeSubject to future guidance, regulation or legislation, we have opted to build homes in many of our markets beginning in 2025 to an alternate version of ENERGY STAR under which our homes delivered will continue to be highly energy efficient and qualify for ENERGY STAR certification but not qualify for Section 45L tax credits, as we believe the additional costs necessary for some of our homes to satisfy the higher Section 45L standards outweigh the possible benefits from meeting them for both our business and our buyers.
Also, if a rating agency downgrades our credit rating or outlook, external financing may be difficult and costly for us to obtain. 18 ◦ Noncompliance with our Credit Facility, Term Loan and senior notes covenants may restrict our ability to borrow; accelerate repayment of our debt, which may not be feasible for us; or cause our lenders to impose significant fees or cease lending to us. ◦ As described in Note 15 – Notes Payable in the Notes to Consolidated Financial Statements in this report, if a change of control or fundamental change occurs before our senior notes mature, we may need to offer to purchase certain of them.
Also, if a rating agency downgrades our credit rating or outlook, external financing may be difficult and costly for us to obtain. ◦ Noncompliance with our Credit Facility , Term Loan and senior notes covenants may restrict our ability to borrow; accelerate repayment of our debt, which may not be feasible for us; or cause our lenders to impose significant fees or cease lending to us. ◦ As described in Note 15 – Notes Payable in the Notes to Consolidated Financial Statements in this report, if a change of control or fundamental change occurs before our senior notes mature, we may need to offer to purchase certain of them.
While, to date, we have not had a significant cybersecurity breach or attack 23 that had a material impact on our business or consolidated financial statements, there can be no assurance our efforts to maintain the security and integrity of these systems will be effective or that attempted security breaches, cyber-attack, data theft or disruptions would not occur in the future, be successful or damaging.
While, to date, we have not had a significant cybersecurity breach or attack that had a material impact on our business or consolidated financial statements, there can be no assurance our efforts to maintain the security and integrity of these systems will be effective or that attempted security breaches, cyber-attack, data theft or disruptions would not occur in the future, be successful or damaging.
An extended downturn in the U.S. housing market could result in an oversupply of new home and resale inventory and greater foreclosure activity, which would further impair our ability to sell homes at the same volume, prices and margins as in prior periods. 16 • Reduced employment levels and job and wage growth .
An extended downturn in the U.S. housing market could result in an oversupply of new home and resale inventory and greater foreclosure activity, which would further impair our ability to sell homes at the same volume, prices and margins as in prior periods. • Reduced employment levels and job and wage growth .
If federal or state laws are changed to eliminate or reduce the income tax benefits associated with homeownership, such as personal tax deductions for mortgage loan interest costs and real estate taxes, the after-tax cost of homeownership could measurably increase and diminish consumer interest in buying a home, as could increases in personal income tax rates.
If federal or state laws are changed to eliminate or reduce the income tax benefits associated with homeownership, such as personal tax deductions for mortgage interest costs and real estate taxes, the after-tax cost of homeownership could measurably increase and diminish consumer interest in buying a home, as could increases in personal income tax rates.
We may also record charges to reflect our then-current claims experience, including the actual costs incurred. Home warranty and other construction defect issues may also generate negative publicity, including on social media and the internet, that detracts from our reputation and efforts to sell homes. Tax-Related Risks .
We may also record charges to reflect our then-current claims experience, including the actual costs incurred. Home warranty and other construction defect issues may also generate negative publicity, including on social media and the internet, that detracts from our reputation and efforts to sell homes. 22 Tax-Related Risks .
These risks, and other factors outside of our control, could also create or increase volatility in our common stock’s market price. The order in which we discuss the risks below should not be taken as any indication of their relative importance, likelihood or impact. Consumer Demand Risks.
These risks, and other factors outside of our control, could also create or increase volatility in our common stock’s market price. The order in which we discuss the risks below should not be taken as any indication of their relative importance, likelihood or impact. 16 Consumer Demand Risks.
However, as was the case in recent years, this pattern may not continue in the future at all or to the same degree as in the past. 17 • Inflation . Since 2021, product and labor costs and general inflation in the economy have increased and remained elevated compared to the prior decade.
However, as was the case in recent years, this pattern may not continue in the future at all or to the same degree as in the past. • Inflation . Since 2021, product and labor costs and general inflation in the economy have increased and remained elevated compared to the prior decade.
Also, California’s highly regulated and litigious business environment has made the state an increasingly difficult place for us to operate. This includes implementing regulations under the state’s Global Warming Solutions Act of 2006 (AB32) intended to lower GHG emissions.
Also, California’s highly regulated and litigious business environment has made the state an increasingly difficult place for us to operate. This includes implementing regulations under the state’s Global Warming Solutions Act of 2006 intended to lower GHG emissions.
Reflecting the housing market slowdown in the 2022 second half and 2023 first quarter, we and other homebuilders reduced land acquisition spending during the period. With market conditions having improved since the 2023 first quarter, we and other homebuilders have increased land investments, pressuring availability and pricing.
Reflecting the housing market slowdown in the 2022 second half and 2023 first quarter, we and other homebuilders reduced land acquisition spending during the period. With market conditions having improved since the 2023 first quarter, we and other homebuilders have measurably increased land investments, pressuring availability and pricing.
While employment has mostly grown since mid-2020, it may rise more slowly or decline in 2024. If it does, our core first-time and first move-up homebuyer segments could be particularly affected, impacting us more severely than homebuilders targeting a different buyer demographic. • Lower population growth, household formations or other unfavorable demographic changes .
While employment has mostly grown since mid-2020, it may rise more slowly or decline in 2025. If it does, our core first-time and first move-up homebuyer segments could be particularly affected, impacting us more severely than homebuilders targeting a different buyer demographic. • Lower population growth, household formations or other unfavorable demographic changes .
Further, we expect that as concerns about climate change and other environmental issues continue to increase, homebuilders will be required to comply with new and extensive laws and regulations, including recently enacted climate disclosure laws in California as well as any climate-related disclosure rules ultimately adopted by the SEC, each of which we anticipate will result in additional significant compliance costs.
Further, we expect that as concerns about climate change and other environmental issues continue to increase, homebuilders will be required to comply with new and extensive laws and regulations, including recently enacted climate disclosure laws in California as well as any climate-related disclosure rules that may be adopted by the SEC , each of which we anticipate will result in additional significant compliance costs.
Our strategies, and any related initiatives or actions, and any changes thereto, may not be successful in achieving our goals or generate any growth, earnings or returns, particularly in the highly volatile business environment of the past few years and as may occur in 2024, due to significant inflation, interest rate and financial market volatility, or political or social distress.
Our strategies, and any related initiatives or actions, and any changes thereto, may not be successful in achieving our goals or generate any growth, earnings or returns, particularly in the highly volatile business environment of the past few years and as may occur in 2025, due to significant inflation, interest rate and financial market volatility, or political or social distress.
For these defenses, we rely on a combination of artificial intelligence, machine learning computer network monitoring, malware and antivirus resources, firewall and intrusion detection systems, vendor cloud service defenses, internet address and content filtering monitoring software that secures against known malicious websites and potential data exfiltration, and a variety of cyber intelligence threat monitoring sources that provide ongoing updates, all provided from third parties that we believe, but cannot guarantee, are capable of performing the protective service for which we have engaged them.
For these defenses, we rely on a combination of artificial intelligence, machine learning computer network monitoring, malware and antivirus resources, firewall systems, vendor cloud service defenses, internet address and content filtering monitoring software that secures against known malicious websites and potential data exfiltration, and a variety of cyber intelligence threat monitoring sources that provide ongoing updates, all provided from third 23 parties that we believe, but cannot guarantee, are capable of performing the protective service for which we have engaged them.
These efforts have and could further significantly increase our land acquisition and development costs and, along with competition from other homebuilders and investors for available developable land, limit our California operations’ growth, while making new homes less affordable to potential buyers in the state, including as a result of its public utilities commission’s decision to significantly reduce net metering payments to homeowners for the rooftop solar power they export to the grid from systems installed. 20 Climate Risk .
These efforts have and could further significantly increase our land acquisition and development costs and, along with competition from other homebuilders and investors for available developable land, limit our California operations’ growth, while making new homes less affordable to potential buyers in the state, including as a result of its public utilities commission’s decision to significantly reduce net metering payments to homeowners for the rooftop solar power they export to the grid from systems installed.
Though practically available technology and resources allow us only to make certain estimates, and not definitive measurements, of the effectiveness and overall impact of our longstanding and broad-based environmental sustainability initiatives described above under “Environmental Practices,” we feel these initiatives and their evolution over time represent 21 how we can best address climate change risks in the context of our business, industry and the wider, and rapidly changing, economic, social and political environment.
Though practically available technology and resources allow us only to make certain estimates, and not definitive measurements, of the effectiveness and overall impact of our longstanding and broad-based environmental sustainability initiatives described above under “ Sustainability Principles and Practices ,” we feel these initiatives and their evolution over time represent how we can best address climate change risks in the context of our business, industry and the wider, and rapidly changing, economic, social and political environment.
In turn, we experienced rising land and construction costs, particularly for building materials and construction service providers’ rates, warranty repair costs, and compensation and benefit expenses to attract and retain talent. These trends are expected to continue to an extent in 2024, though they may worsen compared to prior years.
In turn, we experienced rising land and construction costs, particularly for building materials and construction service providers’ rates, warranty repair costs, and compensation and benefit expenses to attract and retain talent. These trends are expected to continue to an extent in 2025, though they may worsen compared to prior years.
In addition, our business could be negatively affected if our net orders, homes delivered or backlog-to-homes delivered conversion rate fall; if often-volatile building materials prices or construction services costs increase, which has been the trend over the past few years; or if our community openings are delayed due to, among other things, prolonged development from supply chain disruptions, construction services shortages or otherwise, our strategic adjustments, or protracted government approvals or utility service activations from staff or resource cuts or reallocations for public safety priorities ( e.g ., earthquakes, wildfires, flooding, hurricanes or other natural disasters). • Trade disputes and defective materials .
In addition, our business could be negatively affected if our net orders, homes delivered or backlog-to-homes delivered conversion rate fall; if often-volatile building materials prices or construction services costs increase, which has been the trend over the past few years; or if our community openings are delayed due to, among other things, prolonged development from supply chain disruptions, construction services shortages or otherwise, our strategic adjustments, or protracted government approvals or utility service activations from staff or resource cuts or reallocations for public safety priorities ( e.g ., earthquakes, wildfires, flooding, hurricanes or other natural disasters).
Whether we increase, decrease or maintain our current pace of land spend, we expect to continue to face competition for desirable land in our served markets in 2024 and beyond, limiting our ability to profitably develop communities and sell homes on such land. • Supply chain and construction services shortages .
Whether we increase, decrease or maintain our current pace of land spend, we expect to continue to face competition for desirable land in our served markets in 2025 and beyond, limiting our ability to profitably develop communities and sell homes on such land. • Supply chain and construction services shortages .
We expect to meet our needs with existing cash, future operational cash flow, our Credit Facility and unsecured letter of credit facility with certain financial institutions (“LOC Facility”), or outside sources, including loans that are specifically obtained for, or secured by, particular communities or other inventory assets, which we refer to as “project financing.” However, outside financing may be unavailable, costly and/or considerably dilute stockholders.
We expect to meet our needs with existing cash, future operational cash flow, our Credit Facility and unsecured letter of credit facility with certain financial institutions (“ LOC Facility ”), or outside sources, including loans that are specifically obtained for, or secured by, particular communities or other inventory assets, which we refer to as “project financing.” However, outside financing may be unavailable, costly and/ or considerably dilute stockholders.
In addition, to the extent we expand our disclosures on our sustainability initiatives in line with certain private reporting frameworks and investor requests, or the proposed SEC rules mentioned above, if adopted, our failure to report accurately or achieve progress on our metrics on a timely basis, or at all, could adversely affect our reputation, business, financial performance and growth.
In addition, to the extent we expand our disclosures on our sustainability initiatives in line with certain private reporting frameworks and investor requests, or the proposed SEC rules mentioned above, if adopted, our failure to report accurately or achieve progress on our metrics on a timely basis, or at all, could adversely affect our r eputation, business, financial performance and growth.
While we attempt to pass on increases in our costs through increased selling prices, including for design options and upgrades, market forces and buyer affordability constraints can limit our ability to do so.
While we attempt to pass on increases in our costs through increased selling prices, including for design choices and options, market forces and buyer affordability constraints can limit our ability to do so.
While our years of experience in sustainable homebuilding, as discussed above under “Environmental Practices,” and ability to leverage economies of scale may give us an advantage over other homebuilders in managing these absorbed costs, they may be substantial for us.
While our years of experience in sustainable homebuilding, as discussed above under “ Sustainability Principles and Practices ,” and ability to leverage economies of scale may give us an advantage over other homebuilders in managing these absorbed costs, they may be substantial for us.
In addition, volatility in buyer demand in 2022 and 2023 increased competitive pressures for our business and is expected to continue into the next fiscal year. • Seasonality .
In addition, volatility in buyer demand since 2022 increased competitive pressures for our business and is expected to continue into the next fiscal year. • Seasonality .
As discussed above under “Strategy Risks,” and below under “Legal and Compliance Risks,” international, federal, state and local authorities and legislative bodies have issued, implemented or proposed regulations, penalties, standards or guidance intended to restrict, moderate or promote activities consistent with resource conservation, GHG emission reduction, environmental protection or other climate-related objectives.
As discussed above under “ Strategy Risks ,” and below under “ Legal and Compliance Risks ,” international, federal, state and local authorities and legislative bodies have issued, implemented or proposed regulations, penalties, standards or guidance intended to restrict, moderate or promote activities consistent with resource conservation, GHG emission reduction, environmental protection or other climate-related objectives.
In prior years, we have recognized federal tax credits from our building energy-efficient new homes. In some periods, these tax credits were not available because Congress had not renewed the program. The 2022 Inflation Reduction Act (“IRA”) extended this federal tax credit under Internal Revenue Code Section 45L (“Section 45L”) to 2032.
In prior years, we have recognized federal tax credits from our building energy-efficient new homes. In some periods, these tax credits were not available because Congress had not renewed the program. The 2022 Inflation Reduction Act (“ IRA ”) extended this federal tax credit under Internal Revenue Code Section 45L (“ Section 45L ”) to 2032.
However, our, GR Alliance’s and our service providers’ measures may be inadequate and possibly have operational or security vulnerabilities that could go undetected for some period of time.
However, our, GR Alliance ’s and our service providers’ measures may be inadequate and possibly have operational or security vulnerabilities that could go undetected for some period of time.
Due to our dependence on the performance of independent suppliers and contractors to provide products and materials and carry out our homebuilding activities, and the associated risks described above under “Inflation,” “Supply chain and construction services shortages” and “Poor contractor availability and performance,” as well as inherent uncertainties, including obtaining recoveries from responsible parties and/or their or our insurers, our recorded warranty and other liabilities may be inadequate to address future claims, which, among other things, could require us to record charges to increase such liabilities.
Due to our dependence on the performance of independent suppliers and contractors to provide products and materials and carry out our homebuilding activities, and the associated risks described above under “ Inflation ,” “ Supply chain and construction services shortages ” and “ Poor contractor availability and performance ,” as well as inherent uncertainties, including obtaining recoveries from responsible parties and/or their or our insurers, our recorded warranty and other liabilities may be inadequate to address future claims, which, among other things, could require us to record charges to increase such liabilities.
Inflation has also tempered consumer demand for homes, disrupted credit and lending markets and may increase our financing costs, as borrowings, if any, under our unsecured revolving credit facility with various banks (“Credit Facility”) and our senior unsecured term loan with the lenders party thereto (“Term Loan”) typically accrue interest at a variable rate based on short-term Secured Overnight Financing Rate (“SOFR”).
Inflation has also tempered consumer demand for homes, disrupted credit and lending markets and may increase our financing costs, as borrowings, if any, under our unsecured revolving credit facility with various banks (“ Credit Facility ”) and our senior unsecured term loan with the lenders party thereto (“ Term Loan ”) typically accrue interest at a variable rate based on short-term Secured Overnight Financing Rate (“ SOFR ”).
Both California laws require initial disclosures in 2026. California also enacted a third climate-disclosure law that requires entities that operate in the state and make net zero emissions claims, carbon-neutral claims or significant GHG reduction claims to disclose, starting in 2024, information about those claims and the purchase or use of voluntary carbon offsets used to achieve those claims.
California also enacted a third climate-disclosure law that requires entities that operate in the state and make net zero emissions claims, carbon- neutral claims or significant GHG reduction claims to disclose, starting in 2024 , information about those claims and the purchase or use of voluntary carbon offsets used to achieve those claims.
In October 2023, California enacted the Climate Corporate Data Accountability Act (SB-253), which mandates the disclosure of GHG emissions, including Scope 1, Scope 2 and Scope 3 emissions; and the Climate-Related Financial Risk Act (SB-261), which mandates the disclosure of climate-related financial risks, and measures adopted to reduce and adapt to such risks.
In October 2023, California enacted the Climate Corporate Data Accountability Act (“SB-253”), which mandates the disclosure of GHG emissions, including Scope 1, Scope 2 and Scope 3 emissions; and the Climate-Related Financial Risk Act (“SB-261”), which mandates the disclosure of climate-related financial risks, and measures adopted to reduce and adapt to such risks.
Experiencing or addressing the various physical, regulatory and adaptation/transition risks from climate change may significantly reduce our revenues and profitability, or cause us to generate losses.
Experiencing or addressing the various risks from climate change may significantly reduce our revenues and profitability, or cause us to generate losses.
While we have health and safety protocols in place for our construction sites and take steps to safeguard our administrative functions, including our IT resources, as described below under “Information Technology and Information Security Risks,” we can provide no assurance that we or our suppliers or trade partners can successfully operate in areas experiencing a significant weather event or natural disaster, and we or they may be more impacted and take longer, and with higher costs, to resume operations in an affected location than other homebuilders or businesses, depending on the nature of the event or other circumstances.
While we have health and safety protocols in place for our construction sites and take steps to safeguard our administrative functions, including our IT resources, as described below under “ Information Technology and Information Security Risks ,” we can provide no assurance that we or our suppliers or trade partners can successfully operate in areas experiencing frequent or persistent adverse climate-related conditions, and we or they may be more impacted and take longer, and with higher costs, to resume operations in an affected location than other homebuilders or businesses, depending on the nature of the conditions or other circumstances.
During 2022 and 2023, insurance companies exited, or significantly reduced homeowner insurance policies, in areas that have experienced, or are thought to be at risk of experiencing, significant wildfires, hurricanes, flooding or other natural disasters, such as in California and Florida.
Since 2022, insurance companies have discontinued, or significantly reduced, underwriting new homeowner insurance policies in areas that have experienced, or are thought to be at risk of experiencing, significant wildfires, hurricanes, flooding or other natural disasters, such as in California and Florida.
In addition, these conditions, along with heightened competition from other homebuilders and sellers and landlords of existing homes, as discussed below, may lead us to reduce our home selling prices or offer other concessions to attract or retain buyers, which we did selectively in 2023 (particularly, mortgage-related concessions such as interest rate buydown or lock programs), and expect to continue doing in 2024 to varying degrees, negatively affecting our revenues and margins.
In addition, these conditions, along with heightened competition from other homebuilders and sellers and landlords of existing homes, as discussed below, may lead us to reduce our home selling prices or offer other concessions to attract or retain buyers, which we did selectively in 2024 and 2023 (particularly, mortgage-related concessions such as interest rate buydowns), and expect to continue doing in 2025 to varying degrees, negatively affecting our revenues and margins and, to the extent the concessions we offer are not sufficient to attract and retain buyers, our net orders.
Such constraints, cost pressures and delays have increased our costs, reduced our revenues in particular reporting periods, and in some instances, led to home sales contract cancellations or lower customer satisfaction, and these trends could continue into 2024.
Such constraints, cost pressures and delays have increased our costs, reduced our revenues in certain reporting periods, particularly in 2022 and 2023, and in some instances, led to home sales contract cancellations or lower customer satisfaction. These trends could continue into 2025.
Adverse conditions in our served markets or nationally could be caused or worsened by factors outside of our control, including slow or negative economic growth, sustained elevated mortgage loan interest rates and inflation, and various other macroeconomic as well as geopolitical concerns, such as military conflicts in Ukraine and the Middle East, the 2024 U.S. presidential and other elections and the federal government’s functional stability.
Adverse conditions in our served markets or nationally could be caused or worsened by factors outside of our control, including slow or negative economic growth, sustained elevated mortgage interest rates and inflation, and various other macroeconomic as well as geopolitical concerns, such as military conflicts in Ukraine and the Middle East, and the U.S. federal government’s financial and regulatory stability with the recent presidential election and change of administration.
In addition, as large-scale wildfires and flooding due to such conditions in California, as well as hurricanes, heavy rains and other climate change-driven natural disasters in other of our served markets, become more frequent and intense, as discussed below under “Climate Risk,” we may experience greater disruption to our land development and homebuilding activities, delaying orders and home deliveries, among other impacts.
In addition, as large-scale wildfires and flooding, as well as hurricanes, heavy rains and other climate change-driven natural disasters in our served markets become more frequent and intense, as discussed below under “ Climate Risk ,” we may experience greater disruption to our land development and homebuilding activities, delaying orders and homes delivered, among other impacts.
Compliance with those directed at or otherwise affecting our business or our suppliers’ (or their suppliers’) operations, products or services, could increase our costs, such as with California’s requirement that all new homes have solar power systems and agency requirements for all-electric readiness and plans to potentially eliminate natural gas appliances in new homes built in the state by 2026; delay or complicate home construction, for example, due to a need to reformulate or redesign building materials or components, or source updated or upgraded items or equipment, or specially trained or certified independent contractors, in limited or restricted supply, which has been a challenge for us in certain cases in the past few years, such as with paint, garage doors, insulation, electrical materials, cabinets, HVAC equipment and water heaters that have been out of stock and delayed home construction or required us to install or use temporary or permanent substitutes due to the supply chain disruptions we have experienced; or diminish consumer interest in homes mandated to include or omit certain features, amenities or appliances, particularly if home prices increase as a result.
Compliance with those directed at or otherwise affecting our business or our suppliers’ (or their suppliers’) operations, products or services, could increase our costs, such as with California’s requirement that all new homes have solar power systems and agency requirements for all-electric readiness and plans to potentially eliminate natural gas appliances in new homes built in the state by 2026; delay or complicate home construction, for example, due to a need to reformulate or redesign building materials or components, or source updated or upgraded items or equipment, or specially trained or certified independent contractors, in limited or restricted supply, which has been a challenge for us in certain cases in the past few years, such as with paint, garage doors, insulation, electrical materials, cabinets, HVAC equipment and water heaters that have been out of stock and delayed home construction or required us to install or use temporary or permanent substitutes due to the supply chain disruptions we have experienced; or diminish consumer interest in homes mandated to include or omit certain features, amenities or appliances, particularly if home prices increase as a result. 21 Adapting to or transitioning from the use of certain items or methods in home construction, or adjusting the products we offer to our buyers, whether due to climate-related governmental rules affecting home construction or our supply chain, market dynamics or consumer preferences, can negatively affect our costs and profitability, production operations in affected markets and customer satisfaction during the transition period, which could be prolonged.
Such severe weather events can delay home construction, increase construction costs, reduce the availability of building materials, and damage roads and/or cause transportation delays that stress our supply chain and negatively impact the demand for new homes in affected areas, as well as slow down or otherwise impair the ability of utilities and local government agencies to provide approvals and service to new communities.
Such severe weather events, including impacts from the unprecedented wildfires in the Los Angeles County area in January 2025, could delay home construction, increase construction costs, reduce the availability of building materials, and damage roads and/or cause transportation delays that stress our supply chain and negatively impact the demand for new homes in affected areas, as well as slow down or otherwise impair the ability of utilities and local government agencies to provide approvals and service to new communities.
While the historically low level of resale home inventory reduced the competition from sellers of resale homes in 2023, we can provide no assurance that this favorable factor will continue to the same degree, or at all, in 2024.
While the historically low level of resale home inventory reduced the competition from sellers of resale homes in 2023 and 2024, resale inventory levels rose in our served markets in the 2024 second half and we can provide no assurance that this favorable factor will continue to the same degree, or at all, in 2025.
For example, California, our largest market, has historically experienced, and is projected to continue to experience, climate-related events at an increasing frequency including drought, water scarcity, heat waves, wildfires and resultant air quality impacts and power shutoffs associated with wildfire prevention.
For example, California, our largest market, has historically experienced, and is projected to continue to experience, climate-related events at an increasing frequency including drought, water scarcity, heat waves, wildfires (such as the unprecedented wildfires in the Los Angeles County area in January 2025), and resultant air quality impacts and power shutoffs associated with wildfire prevention.
In an effort to manage our construction cycle times and deliver homes to our homebuyers, we, among other things, expanded our supplier base and added new construction service providers; worked with our national suppliers to get products and materials, or available temporary or permanent substitutes, delivered, including communicating in real-time with them; ordered items in advance of starting homes; implemented construction process workarounds; simplified our design options and upgrades; paced lot releases to align with our production capacity; and balanced pace, price and construction starts to enhance margins.
In an effort to manage our build times and deliver homes to our 18 homebuyers, we, among other things, expanded our supplier base and added new construction service providers; worked with our national suppliers to get products and materials; ordered items in advance of starting homes; implemented construction process workarounds; simplified our design choices and options; paced lot releases to align with our production capacity; and balanced pace, price and construction starts to enhance margins.
We believe these challenging conditions may persist to a certain degree into and potentially throughout 2024, as discussed below under “Outlook.” We may also face increased home warranty and construction defect claims associated with replacing or servicing substitute products or materials used in some instances to address supply shortages in certain served markets or communities. • Insufficient financial resources .
Although we have achieved meaningful sequential improvement in our build times since the 2023 second quarter, we believe these challenging conditions may persist to a certain degree into and potentially throughout 2025, as discussed below under “Outlook.” We may also face increased home warranty and construction defect claims associated with replacing or servicing substitute products or materials used in some instances to address supply shortages in certain served markets or communities. • Insufficient financial resources .
If such disputes continue or recalls occur, our costs and supply chain disruptions, as described above, could increase further. 19 • Poor contractor availability and performance . Independent contractors perform essentially all of our land development and home construction work.
In addition, shortages or rising prices of building materials may ensue from manufacturing defects, resulting in recalls of materials. If such disputes continue or recalls occur, our costs and supply chain disruptions, as described above, could increase further. • Poor contractor availability and performance . Independent contractors perform essentially all of our land development and home construction work.
We may also incur higher costs, or experience sourcing or supply chain disruptions that result in extended times to build our homes, as compared to other homebuilders due to our commitment to sustainability, as discussed above under “Environmental, Social and Governance.” However, we expect there could be an unfavorable reputational impact if we do not maintain our sustainability programs, including if we decide not to construct homes that are designed to be ENERGY STAR certified or are otherwise as energy efficient as those we currently build; fail to achieve ENERGY STAR certification or any other voluntarily elected or mandatory energy-efficiency standard for our homes, which has occurred in a few instances in recent years; or if we fail to meet our sustainability objectives, including our GHG emissions-related goals.
However, we expect there could be an unfavorable reputational impact if we do not maintain our sustainability programs, including if we decide not to construct homes that are designed to be ENERGY STAR certified or are otherwise as energy efficient as those we currently build; fail to achieve ENERGY STAR certification or any other voluntarily elected or mandatory energy-efficiency standard for our homes, which has occurred in a few instances in recent years; or if we fail to meet our sustainability objectives.
If GR Alliance, which oversees KBHS’ operations, or KBHS is found to have violated regulations, or mortgage investors demand KBHS repurchase mortgage loans it has sold to them, or cover their losses, for claimed contract breaches, KBHS could face significant liabilities, which, if they exceed its reserves, could result in our recognizing losses on our KBHS equity interest. 24 Our financial results may be materially affected by the adoption of new or amended financial accounting standards, and regulatory or outside auditor guidance or interpretations.
If GR Alliance , which oversees KBHS ’ operations, or KBHS is found to have violated regulations, or mortgage investors demand KBHS repurchase mortgage loans it has sold to them, or cover their losses, for claimed contract breaches, KBHS could face significant liabilities, which, if they exceed its reserves, could result in our recognizing losses on our KBHS equity interest.
As discussed above under Item 1 – Business in this report, our operations are subject to myriad legal and regulatory requirements, which can delay our operational activities, raise our costs and/or prohibit or restrict homebuilding in some areas. These requirements often provide broad discretion to government authorities, and they could be interpreted or revised in ways unfavorable to us.
Legal and Compliance Risks . As discussed above under Item 1 – Business in this report, our operations are subject to myriad legal and regulatory requirements, which can delay our operational activities, raise our costs and/or prohibit or restrict homebuilding in some areas.
In addition, homeowners who purchased their home with a relatively low mortgage interest rate, as was generally the case from mid-2020 to mid-2022, may be reluctant to move given the sharp rate increases in 2022 and 2023.
In addition, homeowners who purchased their home with a relatively low mortgage interest rate, as was generally the case from mid-2020 to mid-2022, may be reluctant to move given the current higher interest rate levels. With housing affordability at historically low levels, these conditions are expected to remain, and may worsen, in 2025.
We depend on third-party lenders, including GR Alliance Ventures, LLC (“GR Alliance”), a subsidiary of Guaranteed Rate, Inc. and our third-party partner in KBHS, to provide mortgage loans to our homebuyers, unlike homebuilders with a wholly-owned mortgage lender. These lenders may be unable or unwilling to complete, timely or at all, the loan originations they start for our homebuyers.
We depend on third-party lenders, including GR Alliance Ventures, LLC (“ GR Alliance ”), a subsidiary of Guaranteed Rate, Inc. and our third-party partner in KBHS , to provide mortgage loans to our homebuyers, unlike homebuilders with a wholly-owned mortgage lender.
Federal Reserve’s focus on moderating inflation and investors’ concerns about the federal government’s debt level, credit standards are tightened, appraisals for our homes are lowered or mortgage loan programs are curtailed, potential buyers of our homes may not be able to obtain necessary mortgage financing to be able to purchase a home from us.
If mortgage interest rates increase, credit standards are tightened, appraisals for our homes are lowered or mortgage loan programs are curtailed, potential buyers of our homes may not be able to obtain necessary mortgage financing to be able to purchase a home from us.
At the same time, the legislation newly tied qualifying for the Section 45L tax credit on and after January 1, 2023 to new homes achieving ENERGY STAR certification. In late September 2023, the Internal Revenue Service (“IRS”) issued guidance setting a higher qualifying ENERGY STAR version for single-family homes built in California than for any other state.
At the same time, the legislation newly tied qualifying for the Section 45L tax credit on and after January 1, 2023 to new homes achieving ENERGY STAR certification. Internal Revenue Service (“IRS”) guidance set a qualifying ENERGY STAR version that makes it more costly to satisfy the Section 45L requirements.
Poorly performing lenders can significantly delay home closings, disrupting our production schedules and delivery forecasts, or cause home sales contract cancellations. If GR Alliance or KBHS perform poorly and our customers use another lender, the income from and value of our KBHS equity interest would decline. • Adverse tax law changes .
In addition, if GR Alliance or KBHS perform poorly and our customers use another lender, the income from and value of our KBHS equity interest would decline. • Adverse tax law changes .
In 2022, the California Air Resources Board adopted a plan to eliminate installing natural gas appliances in new homes built in 2026 and beyond. In addition, the state’s energy commission issued new energy efficiency standards requiring all new residences to be electric-ready for heating, cooling, cooking, clothes drying and water heating systems.
In addition, the state’s energy commission issued new energy efficiency standards requiring all new 20 residences to be electric-ready for heating, cooling, cooking, clothes drying and water heating systems.
If potential homebuyers are unable to obtain affordable homeowner insurance coverage, they may not be able to or decide not to pursue purchasing a home or may cancel a home sales contract with us. • Poor lender performance .
If potential homebuyers are unable to obtain affordable homeowner insurance coverage, which became more widespread during 2024 and is expected to be exacerbated by the unprecedented wildfires in the Los Angeles County area in January 2025, they may not be able to or decide not to pursue purchasing a home or may cancel a home sales contract with us. • Poor lender performance .
However, our industry and the U.S. economy have experienced since mid-2020 labor shortages, supply chain constraints and rising and volatile raw material prices and availability, particularly related to building materials and appliances, such as with paint, garage doors, insulation, electrical materials, cabinets, HVAC equipment and water heaters, as well as delays with respect to state and municipal construction permitting, inspections and utility processes.
Our business relies on a network of suppliers and trade partners to source materials and services to build homes. However, our industry and the U.S. economy have experienced since mid-2020 labor shortages, supply chain constraints and rising and volatile raw material prices and availability, as well as delays with respect to state and municipal construction permitting, inspections and utility processes.
The combination of sharply higher mortgage interest rates since early 2022, several years of rising housing prices, volatility across financial markets, elevated inflation and various other macroeconomic and geopolitical concerns have weighed on consumer budgets and confidence.
The combination of elevated mortgage interest rates since early 2022, several years of rising housing prices, volatility across financial markets, persistent inflation and various other macroeconomic and geopolitical concerns have weighed on consumer budgets and confidence throughout 2024 and may continue to do so in 2025, including due to the change in U.S. presidential administrations in January and potential attendant regulatory instability.
The European Union and state governments, notably California and Nevada, have enacted or enhanced data privacy regulations, and other governments are considering establishing similar or stronger protections. These regulations impose certain obligations for securing, and potentially removing, specified personal information in our systems, and for apprising individuals of the information we have collected about them.
These regulations impose certain obligations for securing, and potentially removing, specified personal information in our systems, and for apprising individuals of the information we have collected about them.
GHG emissions are driving global climate change that is expected to have various impacts on our operations, ranging from more frequent extreme weather events to extensive governmental policy developments and shifts in consumer preferences, which have the potential individually or collectively to significantly disrupt our business as well as negatively affect our suppliers, independent contractors and customers.
While there is considerable debate over its drivers and magnitude, and about the physical, regulatory and/or technical/scientific mitigation or adaptation measures, if any, that should be implemented, global climate change and responses to it present potential risks to our operations, ranging from more frequent extreme weather events to extensive governmental policy developments and shifts in consumer preferences, which could individually or collectively significantly disrupt our business as well as negatively affect our suppliers, independent contractors and customers.
Our senior IT executives also periodically update the audit and compliance committee of our board of directors on our cybersecurity practices and risks, most recently in January 2024. A reporting process has been established, and periodically tested and refined with the assistance of outside experts, to escalate notice within our organization of and coordinate our response to IT security events.
A reporting process has been established, and periodically tested and refined with the assistance of outside experts, to escalate notice within our organization of and coordinate our response to IT security events. Depending on the severity of an event, our incident reporting process includes informing as early as practicable our senior corporate management and members of our board of directors.
It might also be alleged that California law and regulations impose other liabilities upon us with respect to the employees of our trade partners.
It might also be alleged that California law and regulations impose other liabilities upon us with respect to the employees of our trade partners. Further efforts in California or elsewhere to impose such external labor-related obligations on us could create substantial exposure for us in situations beyond our control. Strategy Risks .
These provisions may limit a stockholder’s ability to bring a claim in their favored forum. At the same time, if a court were to allow for an alternative forum, or we waive the provision’s application, for a particular matter, we may incur additional costs associated with resolving an otherwise relevant action in another jurisdiction(s).
At the same time, if a court were to allow for an alternative forum, or we waive the provision’s application, for a particular matter, we may incur additional costs associated with resolving an otherwise relevant action in another jurisdiction(s). 24 The European Union and state governments, notably California and Nevada, have enacted or enhanced data privacy regulations, and other governments are considering establishing similar or stronger protections.
The costs to comply, or associated with any noncompliance, are, or can be, significant and variable from period to period.
These requirements often provide broad discretion to government authorities, and they could be interpreted or revised in ways unfavorable to us. The costs to comply, or associated with any noncompliance, are, or can be, significant and variable from period to period.
Military conflicts and other attacks in the Middle East region, including in or near shipping channels, may have a similar impact on the cost and availability of raw or finished building materials and components. In addition, shortages or rising prices of building materials may ensue from manufacturing defects, resulting in recalls of materials.
Military conflicts and other attacks in the Middle East region, including in or near shipping channels, may have a similar impact on the cost and availability of raw or 19 finished building materials and components. Further, the new U.S. presidential administration has promoted plans to raise tariffs and pursue other trade policies intended to restrict imports.
The Term Loan will mature on August 25, 2026 or earlier under certain circumstances. The Credit Facility will mature on February 18, 2027.
The Term Loan will mature on August 25, 2026 or earlier under certain circumstances. The Credit Facility will mature on February 18, 2027 . Our next senior note maturity is our $300.0 million in aggregate principal amount of 6.875% senior notes due June 15, 2027 (“ 6.875% Senior Notes due 2027 ”). • Decreased land inventory value .
With housing affordability at an all-time low in July 2023, these conditions are expected to remain, and possibly worsen, in 2024. • Tightened availability or affordability of mortgage loans and homeowner insurance coverage . Most of our buyers need a mortgage loan to purchase their home.
Beyond negatively impacting demand, these conditions may require us to continue providing, or to increase, concessions like those described above to stimulate net orders, adversely affecting our revenues and margins. • Tightened availability or affordability of mortgage loans and homeowner insurance coverage . Most of our buyers need a mortgage loan to purchase their home.
Removed
If mortgage loan interest rates further increase, which they did in 2022 and 2023, reflecting the U.S.
Added
These lenders may be unable or unwilling to 17 complete, timely or at all, the loan originations they start for our homebuyers, including if adequate homeowner insurance is not available. Poorly or non-performing lenders can significantly delay home closings, disrupting our production schedules and delivery forecasts, or cause home sales contract cancellations.
Removed
Our business relies on a network of suppliers and trade partners to source materials and services to build homes.
Added
Though the extent is uncertain as of the date of this report, given the scope of the unprecedented wildfires in the Los Angeles County area in January 2025, we expect the recovery efforts to create some of these types of disruptions in the Southern California region during the year and beyond. • Trade disputes and defective materials .
Removed
Although we achieved a meaningful sequential improvement in our construction cycle times in 2023, they remain extended relative to our historical average, and we continue to experience delays in opening communities and delivering homes.
Added
We may also incur higher costs, or experience sourcing or supply chain disruptions that result in extended times to build our homes, as compared to other homebuilders due to our commitment to sustainability.
Removed
Our next senior note maturity is our $300.0 million in aggregate principal amount of 6.875% senior notes due June 15, 2027 (“6.875% Senior Notes due 2027”). ◦ We may not have access to financial resources if there is a failure of the banks or other financial institutions where we have placed cash and cash equivalent deposits or the banks or other financial institutions, or any substitute or additional banks or financial institutions, participating in our Credit Facility or LOC Facility.
Added
Though the extent is uncertain and none of our communities or operations have been directly affected as of the date of this report, given the scope of the unprecedented wildfires in the Los Angeles County area in January 2025, we may experience some disruption in our homebuilding activities, and potentially with our orders and homes delivered, in the Southern California region during the year and beyond .
Removed
Under our Credit Facility, non-defaulting lenders are not obligated to cover or acquire a defaulting lender’s respective commitment to fund loans or to issue letters of credit, and may not issue additional letters of credit if we do not enter into arrangements to address the risk with respect to the defaulting lender (which may include cash collateral).
Added
We also face an uncertain solar power system provider environment largely due to changes in California net metering regulations that created significant instability in the solar power industry, with several providers going out of business or entering bankruptcy.
Removed
If the non-defaulting lenders are unable or unwilling to cover or acquire a defaulting lender’s respective commitment, potentially due to other demands they face under other credit instruments to which they are party, or because of regulatory restrictions, among other factors, we may not be able to access the Credit Facility’s full borrowing or letter of credit capacity to support our business needs.
Added
This has disrupted the supply and installation of solar power systems, causing delays in system completions and permissions to operate and, in turn, home deliveries. In 2022, the California Air Resources Board adopted a plan to eliminate installing natural gas appliances in new homes built in 2026 and beyond.
Removed
Similarly, if the applicable lender fails to meet its commitment to provide payment guarantees for us under the LOC Facility, we may not be able to access its full issuance capacity to carry out important operational processes.
Added
While the state enacted SB-219 in September 2024 that amends certain aspects of SB-253 and SB-261, California law currently requires initial disclosures in 2026.

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Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

3 edited+1 added−0 removed0 unchanged
Biggest changeMezger 68 Chairman, President and Chief Executive Officer (a) 2016 30 Jeff J. Kaminski 62 Executive Vice President and Chief Financial Officer 2010 13 Robert V. McGibney 49 Executive Vice President and Chief Operating Officer 2022 23 Executive Vice President and Co-Chief Operating Officer 2021-2022 Regional President 2018-2021 Albert Z.
Biggest changeMezger 69 Chairman and Chief Executive Officer (a) 2024 31 Chairman, President and Chief Executive Officer 2016- 2024 Jeff J. Kaminski 63 Executive Vice President and Chief Financial Officer 2010 14 Robert V.
Item 4. MINE SAFETY DISCLOSURES Not applicable. Information about our Executive Officers The following table presents certain information regarding our executive officers as of December 31, 2023: Name Age Present Position Year Assumed Present Position Years at KB Home Other Positions and Other Business Experience within the Last Five Years From – To Jeffrey T.
Item 4. MINE SAFETY DISCLOSURES Not applicable. 26 Information about our Executive Officers The following table presents certain information regarding our executive officers as of December 31, 2024 : Name Age Present Position Year Assumed Present Position Years at KB Home Other Positions and Other Business Experience within the Last Five Years From – To Jeffrey T.
Praw 75 Executive Vice President, Real Estate and Business Development 2011 27 Brian J. Woram 63 Executive Vice President and General Counsel 2010 13 (a) Mr. Mezger has served as a director since 2006. There is no family relationship between any of our executive officers or between any of our executive officers and any of our directors. PART II
Mezger has served as a director since 2006. There is no family relationship between any of our executive officers or between any of our executive officers and any of our directors. PART II
Added
McGibney 50 President and Chief Operating Officer 2024 24 Executive Vice President and Chief Operating Officer 2022- 2024 Executive Vice President and Co-Chief Operating Officer 2021- 2022 Regional President 2018- 2021 Albert Z. Praw 76 Executive Vice President, Real Estate and Business Development 2011 28 Brian J. Woram 64 Executive Vice President and General Counsel 2010 14 (a) Mr.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

9 edited+2 added−0 removed0 unchanged
Biggest changeAll dollar amounts presented in the table above and in this report related to our share repurchases and our share repurchase authorizations exclude such excise taxes, to the extent applicable, unless otherwise indicated. 26 Stock Performance Graph The following graph compares the five-year cumulative total return of KB Home common stock, the S&P 500 Index and the Dow Jones US Home Construction Index for the periods ended November 30: Comparison of Five-Year Cumulative Total Return Among KB Home, S&P 500 Index and Dow Jones US Home Construction Index 2018 2019 2020 2021 2022 2023 KB Home $ 100 $ 167 $ 172 $ 198 $ 158 $ 267 S&P 500 Index 100 116 136 174 158 180 Dow Jones US Home Construction Index 100 146 179 238 202 316 The above graph is based on the KB Home common stock and index prices calculated as of the last trading day before December 1 of the year-end periods presented.
Biggest changeStock Performance Graph The following graph compares the five-year cumulative total return of KB Home common stock, the S&P 500 Index and the Dow Jones US Home Construction Index for the periods ended November 30: Comparison of Five-Year Cumulative Total Return Among KB Home, S&P 500 Index and Dow Jones US Home Construction Index 2019 2020 2021 2022 2023 2024 KB Home $ 100 $ 103 $ 119 $ 95 $ 160 $ 257 S&P 500 Index 100 117 150 136 155 208 Dow Jones US Home Construction Index 100 122 163 138 217 306 The above graph is based on the KB Home common stock and index prices calculated as of the last trading day before December 1 of the year-end periods presented.
Total return assumes $100 invested at market close on November 30, 2018 in KB Home common stock, the S&P 500 Index and the Dow Jones US Home Construction Index, including reinvestment of dividends. Item 6. [RESERVED]
Total return assumes $100 invested at market close on November 30, 2019 in KB Home common stock, the S&P 500 Index and the Dow Jones US Home Construction Index, including reinvestment of dividends. Item 6. [RESERVED]
The closing price of KB Home common stock on the New York Stock Exchange was $52.10 per share on November 30, 2023 and $31.39 per share on November 30, 2022. The performance of our common stock as presented above reflects past performance only and is not indicative of future performance.
The closing price of KB Home common stock on the New York Stock Exchange was $82.74 per share on November 30, 2024 and $52.10 per share on November 30, 2023 . The performance of our common stock as presented above reflects past performance only and is not indicative of future performance.
On March 21, 2023, our board of directors authorized us to repurchase up to $500.0 million of our outstanding common stock, replacing the prior board of directors authorization, which had $75.0 million remaining, as further discussed in Note 19 – Stockholders’ Equity in the Notes to Consolidated Financial Statements in this report.
On April 18, 2024, our board of directors authorized us to repurchase up to $1.00 billion of our outstanding common stock, replacing the prior board of directors authorization, which had $113.6 million remaining, as further discussed in Note 19 – Stockholders’ Equity in the Notes to Consolidated Financial Statements in this report.
The IRA imposed a nondeductible 1% excise tax on the net value of certain stock repurchases made after December 31, 2022.
These transactions are not considered 27 repurchases under the board of directors authorization. The IRA imposed a nondeductible 1% excise tax on the net value of certain stock repurchases made after December 31, 2022.
The following table summarizes our purchases of our own equity securities during the three months ended November 30, 2023 (dollars in thousands, except per share amounts): Period Total Number of Shares Purchased Average Price Paid per Share Dollar Value of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares That May Yet be Purchased Under the Plans or Programs September 1-30 — $ — $ — $ 325,412 October 1-31 2,761,544 42.00 115,989 209,423 November 1-30 916,875 50.02 45,861 163,562 Total 3,678,419 $ 45.08 $ 161,850 As of November 30, 2022, we were authorized to repurchase up to $150.0 million of our outstanding common stock under a share repurchase program approved by our board of directors in April 2022.
The following table summarizes our purchases of our own equity securities during the three months ended November 30, 2024 (dollars in thousands, except per share amounts): Period Total Number of Shares Purchased Average Price Paid per Share Dollar Value of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares That May Yet be Purchased Under the Plans or Programs September 1-30 — $ — $ — $ 800,000 October 1-31 834,996 69.46 58,000 742,000 November 1-30 529,307 79.35 42,000 700,000 Total 1,364,303 $ 73.30 $ 100,000 As of November 30, 2023 , we were authorized to repurchase up to $ 163.6 million of our outstanding common stock under a share repurchase program approved by our board of directors in March 2023.
MARKET FOR REGISTRANT ’ S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock is traded on the New York Stock Exchange under the ticker symbol “KBH.” As of December 31, 2023, there were 542 holders of record of our common stock. 25 Information regarding the shares of our common stock that may be issued under our equity compensation plans is provided below under Item 12 – Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters in this report.
Item 5. MARKET FOR REGISTRANT ’ S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock is traded on the New York Stock Exchange under the ticker symbol “KBH.” As of December 31, 2024, there were 506 holders of record of our common stock.
During the three months ended November 30, 2023, we also purchased certain previously issued shares delivered to us by employees to satisfy withholding taxes on the vesting of restricted stock awards. These transactions are not considered repurchases under the board of directors authorization.
As of November 30, 2024 , we were authorized to repurchase up to $700.0 million of our outstanding common stock. During the three months ended November 30, 2024 , we also purchased certain previously issued shares delivered to us by employees to satisfy withholding taxes on the vesting of restricted stock awards.
In the 2023 fourth quarter, we purchased 3,584,795 shares of our common stock pursuant to this authorization at a total cost of $161.8 million, bringing our total repurchases in 2023 to 9,244,437 shares at a total cost of $411.4 million. As of November 30, 2023, we were authorized to repurchase up to $163.6 million of our outstanding common stock.
In the 2024 fourth quarter, we purchased 1,264,484 shares of our common stock pursuant to this authorization at a total cost of $100.0 million , bringing our total repurchases in 2024 to 4,725,181 shares at a total cost of $350.0 million .
Added
Information regarding the shares of our common stock that may be issued under our equity compensation plans is provided below under Item 12 – Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters in this report.
Added
All dollar amounts presented in the table above and in this report related to our share repurchases and our share repurchase authorizations exclude such excise taxes, to the extent applicable, unless otherwise indicated.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

176 edited+39 added−48 removed129 unchanged
Biggest changeThe most important risk factors that could cause our actual performance and future events and actions to differ materially from such forward-looking statements include, but are not limited to, the following: • general economic, employment and business conditions; • population growth, household formations and demographic trends; • conditions in the capital, credit and financial markets; • our ability to access external financing sources and raise capital through the issuance of common stock, debt or other securities, and/or project financing, on favorable terms; • the execution of any securities repurchases pursuant to our board of directors’ authorization; • material and trade costs and availability, including building materials and appliances, and delays related to state and municipal construction, permitting, inspection and utility processes, which have been disrupted by key equipment shortages; • consumer and producer price inflation; • changes in interest rates, including those set by the Federal Reserve, which the Federal Reserve has increased sharply over the past year and may further increase to moderate inflation, and those available in the capital markets or from financial institutions and other lenders, and applicable to mortgage loans; • our debt level, including our ratio of debt to capital, and our ability to adjust our debt level and maturity schedule; • our compliance with the terms of the Credit Facility and the Term Loan; • the ability and willingness of the applicable lenders and financial institutions, or any substitute or additional lenders and financial institutions, to meet their commitments or fund borrowings, extend credit or provide payment guarantees to or for us under the Credit Facility or LOC Facility; • volatility in the market price of our common stock; • home selling prices, including our homes’ selling prices, being unaffordable relative to consumer incomes; 53 • weak or declining consumer confidence, either generally or specifically with respect to purchasing homes; • competition from other sellers of new and resale homes; • weather events, significant natural disasters and other climate and environmental factors, such as a lack of adequate water supply to permit new home communities in certain areas; • any failure of lawmakers to agree on a budget or appropriation legislation to fund the federal government’s operations (also known as a government shutdown), and financial markets’ and businesses’ reactions to any such failure; • government actions, policies, programs and regulations directed at or affecting the housing market (including the tax benefits associated with purchasing and owning a home, and the standards, fees and size limits applicable to the purchase or insuring of mortgage loans by government-sponsored enterprises and government agencies), the homebuilding industry, or construction activities; • changes in existing tax laws or enacted corporate income tax rates, including those resulting from regulatory guidance and interpretations issued with respect thereto, such as the IRS’ recent guidance regarding heightened qualification requirements for federal tax credits for building energy-efficient homes; • changes in U.S. trade policies, including the imposition of tariffs and duties on homebuilding materials and products, and related trade disputes with and retaliatory measures taken by other countries; • disruptions in world and regional trade flows, economic activity and supply chains due to the military conflicts and other attacks in the Middle East region and in Ukraine, including those stemming from wide-ranging sanctions the U.S. and other countries have imposed or may further impose on Russian business sectors, financial organizations, individuals and raw materials, the impact of which may, among other things, increase our operational costs, create and/or exacerbate building materials and appliance shortages and/or reduce our revenues and earnings; • the adoption of new or amended financial accounting standards and the guidance and/or interpretations with respect thereto; • the availability and cost of land in desirable areas and our ability to timely and efficiently develop acquired land parcels and open new home communities; • impairment, land option contract abandonment or other inventory-related charges, including any stemming from decreases in the value of our land assets; • our warranty claims experience with respect to homes previously delivered and actual warranty costs incurred; • costs and/or charges arising from regulatory compliance requirements or from legal, arbitral or regulatory proceedings, investigations, claims or settlements, including unfavorable outcomes in any such matters resulting in actual or potential monetary damage awards, penalties, fines or other direct or indirect payments, or injunctions, consent decrees or other voluntary or involuntary restrictions or adjustments to our business operations or practices that are beyond our current expectations and/or accruals; • our ability to use/realize the net deferred tax assets we have generated; • our ability to successfully implement our current and planned strategies and initiatives related to our product, geographic and market positioning, gaining share and scale in our served markets and in entering into new markets; • our operational and investment concentration in markets in California; • consumer interest in our new home communities and products, particularly from first-time homebuyers and higher-income consumers; • our ability to generate orders and convert our backlog of orders to home deliveries and revenues, particularly in key markets in California; • our ability to successfully implement our business strategies and achieve any associated financial and operational targets and objectives, including those discussed in this report or in any of our other public filings, presentations or disclosures; • income tax expense volatility associated with stock-based compensation; 54 • the ability of our homebuyers to obtain homeowners and flood insurance policies, and/or typical or lender-required policies for other hazards or events, for their homes, which may depend on the ability and willingness of insurers or government-funded or -sponsored programs to offer coverage at an affordable price or at all; • the ability of our homebuyers to obtain residential mortgage loans and mortgage banking services, which may depend on the ability and willingness of lenders and financial institutions to offer such loans and services to our homebuyers; • the performance of mortgage lenders to our homebuyers; • the performance of KBHS; • the ability and willingness of lenders and financial institutions to extend credit facilities to KBHS to fund its originated mortgage loans; • information technology failures and data security breaches; • an epidemic, pandemic or significant seasonal or other disease outbreak, and the control response measures that international, federal, state and local governments, agencies, law enforcement and/or health authorities implement to address it, which may precipitate or exacerbate one or more of the above-mentioned and/or other risks, and significantly disrupt or prevent us from operating our business in the ordinary course for an extended period; • widespread protests and/or civil unrest, whether due to political events, social movements or other reasons; and • other events outside of our control.
Biggest changeThe most important risk factors that could cause our actual performance and future events and actions to differ materially from such forward-looking statements include, but are not limited to, the following: • general economic, employment and business conditions; • population growth, household formations and demographic trends; • conditions in the capital, credit and financial markets; • our ability to access external financing sources and raise capital through the issuance of common stock, debt or other securities, and/or project financing, on favorable terms; • the execution of any securities repurchases pursuant to our board of directors’ authorization; • material and trade costs and availability, including the greater costs associated with achieving current and expected higher standards for ENERGY STAR certified homes, and delays related to state and municipal construction, permitting, inspection and utility processes, which have been disrupted by key equipment shortages; • consumer and producer price inflation; • changes in interest rates, including those set by the Federal Reserve, which the Federal Reserve may increase to moderate inflation, as it did in 2022 and 2023 , and those available in the capital markets or from financial institutions and other lenders, and applicable to mortgage loans; • our debt level, including our ratio of debt to capital, and our ability to adjust our debt level and maturity schedule; • our compliance with the terms of the Credit Facility and the Term Loan ; • the ability and willingness of the applicable lenders and financial institutions, or any substitute or additional lenders and financial institutions, to meet their commitments or fund borrowings, extend credit or provide payment guarantees to or for us under the Credit Facility or LOC Facility ; • volatility in the market price of our common stock; • home selling prices, including our homes’ selling prices, being unaffordable relative to consumer incomes; 53 • weak or declining consumer confidence, either generally or specifically with respect to purchasing homes; • competition from other sellers of new and resale homes; • weather events, significant natural disasters and other climate and environmental factors, such as a lack of adequate water supply to permit new home communities in certain areas, and the unprecedented wildfires in the Los Angeles County area in January 2025; • any failure of lawmakers to agree on a budget or appropriation legislation to fund the federal government’s operations (also known as a government shutdown), and financial markets’ and businesses’ reactions to any such failure; • potential regulatory instability associated with the upcoming change in the U.S. presidential administrations; • government actions, policies, programs and regulations directed at or affecting the housing market (including the tax benefits associated with purchasing and owning a home, and the standards, fees and size limits applicable to the purchase or insuring of mortgage loans by government-sponsored enterprises and government agencies), the homebuilding industry, or construction activities; • changes in existing tax laws or enacted corporate income tax rates, including those resulting from regulatory guidance and interpretations issued with respect thereto, such as IRS guidance regarding heightened qualification requirements for federal tax credits for building energy-efficient homes; • changes in U.S. trade policies, including the imposition of tariffs and duties on homebuilding materials and products, and related trade disputes with and retaliatory measures taken by other countries; • disruptions in world and regional trade flows, economic activity and supply chains due to the military conflict and other attacks in the Middle East region and military conflict in Ukraine, including those stemming from wide-ranging sanctions the U.S. and other countries have imposed or may further impose on Russian business sectors, financial organizations, individuals and raw materials, the impact of which may, among other things, increase our operational costs, exacerbate building materials and appliance shortages and/or reduce our revenues and earnings; • the adoption of new or amended financial accounting standards and the guidance and/or interpretations with respect thereto; • the availability and cost of land in desirable areas and our ability to timely and efficiently develop acquired land parcels and open new home communities; • impairment, land option contract abandonment or other inventory-related charges, including any stemming from decreases in the value of our land assets; • our warranty claims experience with respect to homes previously delivered and actual warranty costs incurred; • costs and/or charges arising from regulatory compliance requirements or from legal, arbitral or regulatory proceedings, investigations, claims or settlements, including unfavorable outcomes in any such matters resulting in actual or potential monetary damage awards, penalties, fines or other direct or indirect payments, or injunctions, consent decrees or other voluntary or involuntary restrictions or adjustments to our business operations or practices that are beyond our current expectations and/or accruals; • our ability to use/realize the net deferred tax assets we have generated; • our ability to successfully implement our current and planned strategies and initiatives related to our product, geographic and market positioning, gaining share and scale in our served markets, through, among other things, our making substantial investments in land and land development, which, in some cases, involves putting significant capital over several years into large projects in one location, and in entering into new markets; • our operational and investment concentration in markets in California; • consumer interest in our new home communities and products, particularly from first-time homebuyers and higher- income consumers; • our ability to generate orders and convert our backlog of orders to home deliveries and revenues, particularly in key markets in California; 54 • our ability to successfully implement our business strategies and achieve any associated financial and operational targets and objectives, including those discussed in this report or in any of our other public filings, presentations or disclosures; • income tax expense volatility associated with stock-based compensation; • the ability of our homebuyers to obtain homeowners and flood insurance policies, and/or typical or lender-required policies for other hazards or events, for their homes, which may depend on the ability and willingness of insurers or government-funded or -sponsored programs to offer coverage at an affordable price or at all; • the ability of our homebuyers to obtain residential mortgage loans and mortgage banking services, which may depend on the ability and willingness of lenders and financial institutions to offer such loans and services to our homebuyers; • the performance of mortgage lenders to our homebuyers; • the performance of KBHS ; • the ability and willingness of lenders and financial institutions to extend credit facilities to KBHS to fund its originated mortgage loans; • information technology failures and data security breaches; • an epidemic, pandemic or significant seasonal or other disease outbreak, and the control response measures that international, federal, state and local governments, agencies, law enforcement and/or health authorities implement to address it, which may precipitate or exacerbate one or more of the above-mentioned and/or other risks, and significantly disrupt or prevent us from operating our business in the ordinary course for an extended period; • widespread protests and/or civil unrest, whether due to political events, social movements or other reasons; and • other events outside of our control.
Impairment indicators are assessed separately for each community or land parcel on a quarterly basis and include, but are not limited to, the following: significant decreases in net orders, average selling prices, volume of homes delivered, gross profit margins on homes delivered or projected gross profit margins on homes in backlog or future deliveries; significant increases in budgeted land development and home construction 46 costs or cancellation rates; or projected losses on expected future land sales.
Impairment indicators are assessed separately for each community or land parcel on a quarterly basis and include, but are not limited to, the following: significant decreases in net orders, average selling prices, volume of homes delivered, gross profit margins on homes delivered or projected gross profit 46 margins on homes in backlog or future deliveries; significant increases in budgeted land development and home construction costs or cancellation rates; or projected losses on expected future land sales.
The financial covenant requirements under the Credit Facility and the Term Loan are set forth below: • Consolidated tangible net worth – We must maintain a consolidated tangible net worth at the end of any fiscal quarter greater than or equal to the sum of (a) $2.09 billion, plus (b) an amount equal to 50% of the aggregate of the cumulative consolidated net income for each fiscal quarter commencing after November 30, 2021 and ending as of the last day of such fiscal quarter (though there is no reduction if there is a consolidated net loss in any fiscal quarter), plus (c) an amount equal to 50% of the cumulative net proceeds we receive from the issuance of our capital stock after November 30, 2021. • Leverage Ratio – We must also maintain a Leverage Ratio of less than or equal to .60 at the end of each fiscal quarter.
The financial covenant requirements under the Credit Facility and the Term Loan are set forth below: 42 • Consolidated tangible net worth – We must maintain a consolidated tangible net worth at the end of any fiscal quarter greater than or equal to the sum of (a) $2.09 billion, plus (b) an amount equal to 50% of the aggregate of the cumulative consolidated net income for each fiscal quarter commencing after November 30, 2021 and ending as of the last day of such fiscal quarter (though there is no reduction if there is a consolidated net loss in any fiscal quarter), plus (c) an amount equal to 50% of the cumulative net proceeds we receive from the issuance of our capital stock after November 30, 2021. • Leverage Ratio – We must also maintain a Leverage Ratio of less than or equal to .60 at the end of each fiscal quarter.
Assessments are made separately for each optioned land parcel on a 47 quarterly basis and are affected by the following factors relative to the market in which the asset is located, among others: current and/or anticipated net orders, average selling prices and volume of homes delivered; estimated land development and home construction costs; and projected profitability on expected future housing or land sales.
Assessments are made separately for each optioned land parcel on a quarterly basis and are affected by the following factors relative to the market in which the asset is located, among others: current and/or anticipated net orders, average selling prices and volume of homes delivered; estimated land development and home construction costs; and projected profitability on expected future housing or land sales.
The fair value of such real estate assets is generally based on bona fide letters of intent from outside parties, executed sales contracts, broker quotes or similar information. Our inventory controlled under land option contracts and other similar contracts is assessed to determine whether it continues to meet our investment return standards.
The fair value of such real estate assets is generally based on bona fide letters of intent from outside parties, executed sales contracts, broker quotes or similar information. 47 Our inventory controlled under land option contracts and other similar contracts is assessed to determine whether it continues to meet our investment return standards.
In the 2023 second, third and fourth quarters, we repurchased 7,278,995 shares of our common stock on the open market pursuant to this authorization at a total cost of $336.4 million, bringing our total repurchases for the year ended November 30, 2023 to 9,244,437 shares of common stock at a total cost of approximately $411.4 million.
In the 2023 second, third and fourth quarters, we repurchased 7,278,995 shares of our common stock on the open market pursuant to this authorization at a total cost of $336.4 million , bringing our total repurchases for the year ended November 30, 2023 to 9,244,437 shares of common stock at a total cost of $411.4 million .
In assessing our overall warranty liability at a reporting date, we evaluate the costs for warranty-related items on a combined basis for all of our previously delivered homes that are under our limited warranty program. Our primary assumption in estimating the amounts we accrue for warranty costs is that historical claims experience is a strong indicator of future claims experience.
In assessing our overall warranty liability at a reporting date, we evaluate the costs for warranty-related items on a combined basis for all of our previously delivered homes that are under our limited warranty program. 48 Our primary assumption in estimating the amounts we accrue for warranty costs is that historical claims experience is a strong indicator of future claims experience.
The inventory impairment charges in 2022 and 2021 reflected our decisions to make changes in our operational strategies aimed at more quickly monetizing our investment in certain communities, mainly by accelerating the overall pace for selling, building and delivering homes therein, including communities on land previously held for future development.
The inventory impairment charges in 2022 reflected our decisions to make changes in our operational strategies aimed at more quickly monetizing our investment in certain communities, mainly by accelerating the overall pace for selling, building and delivering homes therein, including communities on land previously held for future development.
The potential extent and effect of these factors on our business is highly uncertain, unpredictable and outside our control, and our past performance, including in 2023, should not be considered indicative of our future results on any metric or set of metrics, including, but not limited to, our net orders, backlog, revenues and returns. 52 FORWARD-LOOKING STATEMENTS Investors are cautioned that certain statements contained in this report, as well as some statements by us in periodic press releases and other public disclosures and some oral statements by us to securities analysts, stockholders and others during presentations, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Act”).
The potential extent and effect of these factors on our business is highly uncertain, unpredictable and outside our control, and our past performance, including in 2024, should not be considered indicative of our future results on any metric or set of metrics, including, but not limited to, our net orders, backlog, revenues and returns. 52 FORWARD-LOOKING STATEMENTS Investors are cautioned that certain statements contained in this report, as well as some statements by us in periodic press releases and other public disclosures and some oral statements by us to securities analysts, stockholders and others during presentations, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Act”).
We also believe investors will find adjusted housing gross profit margin relevant and useful because it represents a profitability measure that may be compared to a prior period without regard to variability of housing inventory impairment and land option contract abandonment charges.
We also believe investors will find adjusted housing gross profit margin relevant and useful because it represents a profitability measure that may be compared to a prior 38 period without regard to variability of housing inventory impairment and land option contract abandonment charges.
Our compliance with these financial covenants is measured by calculations and metrics that are specifically defined or described by the terms of the Credit Facility and the Term Loan and can differ in certain respects from 42 comparable GAAP or other commonly used terms.
Our compliance with these financial covenants is measured by calculations and metrics that are specifically defined or described by the terms of the Credit Facility and the Term Loan and can differ in certain respects from comparable GAAP or other commonly used terms.
The 45 following are accounting policies that we believe are critical because of the significance of the activity to which they relate or because they require the use of significant estimates, judgments and/or other assumptions in their application. Homebuilding Revenue Recognition.
The following are accounting policies that we believe are critical because of the significance of the activity to which they relate or because they require the use of significant estimates, judgments and/or other assumptions in their application. Homebuilding Revenue Recognition.
We estimate the costs that may be incurred under each limited warranty and record a liability in the amount of such costs at the time the revenue associated with the sale of each 48 home is recognized.
We estimate the costs that may be incurred under each limited warranty and record a liability in the amount of such costs at the time the revenue associated with the sale of each home is recognized.
In addition, changes in the frequency and severity of reported claims and the estimates to resolve claims can impact the trends and assumptions used in the actuarial analysis, which could be material to our consolidated financial statements.
In addition, changes in the frequency and severity of reported claims 49 and the estimates to resolve claims can impact the trends and assumptions used in the actuarial analysis, which could be material to our consolidated financial statements.
We have not made any material changes in the methodology used to establish our accrued warranty liability during 2023, 2022 and 2021. Our accrued warranty liability is presented on a gross basis for all years without consideration of recoveries and amounts we have paid on behalf of and expect to recover from other parties, if any.
We have not made any material changes in the methodology used to establish our accrued warranty liability during 2024 , 2023 and 2022. Our accrued warranty liability is presented on a gross basis for all years without consideration of recoveries and amounts we have paid on behalf of and expect to recover from other parties, if any.
Further information regarding our income taxes is provided in Note 14 – Income Taxes in the Notes to Consolidated Financial Statements in this report. NON-GAAP FINANCIAL MEASURES This report contains information about our adjusted housing gross profit margin, which is not calculated in accordance with generally accepted accounting principles (“GAAP”).
Further information regarding our income taxes is provided in Note 14 – Income Taxes in the Notes to Consolidated Financial Statements in this report. NON-GAAP FINANCIAL MEASURES This report contains information about our adjusted housing gross profit margin, which is not calculated in accordance with generally accepted accounting principles (“ GAAP ”).
Inflation may also increase our financing costs, as borrowings under our Credit Facility, if any, and Term Loan typically accrue interest at a variable rate based on SOFR. We expect the inflationary pressures on our business to continue in 2024.
Inflation may also increase our financing costs, as borrowings under our Credit Facility , if any, and Term Loan typically accrue interest at a variable rate based on SOFR . We expect the inflationary pressures on our business to continue in 2025.
All interest incurred during 2023 and 2022 was capitalized as the average amount of our inventory qualifying for interest capitalization was higher than our average debt level for each period. As a result, we had no interest expense for 2023 or 2022.
All interest incurred during 2024 and 2023 was capitalized as the average amount of our inventory qualifying for interest capitalization was higher than our average debt level for each period. As a result, we had no interest expense for 2024 or 2023 .
While we expect our land acquisition activity to increase in 2024 as compared to 2023, our investments in land and land development in the future will depend significantly on market conditions and available opportunities that meet our investment return standards.
While we expect our land acquisition activity to increase in 2025 as compared to 2024 , our investments in land and land development in the future will depend significantly on market conditions and available opportunities that meet our investment return standards.
Under current accounting standards, we expect volatility in our income tax expense in future periods, the magnitude of which will depend on, among other factors, the price of our common stock and the timing and volume of stock-based compensation award activity, such as employee exercises of stock options and the vesting of restricted stock awards and performance-based restricted stock units (each, a “PSU”).
Under current accounting standards, we expect volatility in our income tax expense in future periods, the magnitude of which will depend on, among other factors, the price of our common stock and the timing and volume of stock-based compensation award activity, such as employee exercises of stock options and the vesting of restricted stock awards and performance-based restricted stock units (each, a “ PSU ”).
While we attempt to pass on increases in our costs through increased home selling prices, including for design options and upgrades, market forces and buyer affordability constraints can limit our ability to do so.
While we attempt to pass on increases in our costs through increased home selling prices, including for design choices and options, market forces and buyer affordability constraints can limit our ability to do so.
Item 7. MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Our discussion and analysis below is focused on our 2023 and 2022 financial results, including comparisons of our year-over-year performance between these years.
Item 7. MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Our discussion and analysis below is focused on our 2024 and 2023 financial results, including comparisons of our year- over-year performance between these years.
Based on our financial position as of November 30, 2023, and our business forecast for 2024 as discussed below under “Outlook,” we have no material concerns related to our liquidity.
Based on our financial position as of November 30, 2024 , and our business forecast for 2025 as discussed below under “Outlook,” we have no material concerns related to our liquidity.
Our other subsidiaries, including all of our subsidiaries associated with our financial services operations, do not guarantee any such indebtedness (collectively, “Non-Guarantor Subsidiaries”), although we may cause a Non-Guarantor Subsidiary to become a Guarantor Subsidiary if we believe it to be in our or the relevant subsidiary’s best interest.
Our other subsidiaries, including all of our subsidiaries associated with our financial services operations, do not guarantee any such indebtedness (collectively, “ Non-Guarantor Subsidiaries ”), although we may cause a Non-Guarantor Subsidiary to become a Guarantor Subsidiary if we believe it to be in our or the relevant subsidiary’s best interest.
While it is difficult to determine a precise timeframe for any particular inventory asset, based on current market conditions and expected delivery timelines, we estimate our inventory assets’ remaining operating lives to range generally from one year to in excess of 10 years and expect to realize, on an overall basis, the majority of our inventory balance as of November 30, 2023 within five years.
While it is difficult to determine a precise timeframe for any particular inventory asset, based on current market conditions and expected delivery timelines, we estimate our inventory assets’ remaining operating lives to range generally from one year to 10 years and expect to realize, on an overall basis, the majority of our inventory balance as of November 30, 2024 within five years.
A 10% change in the historical warranty rates used to estimate our accrued warranty liability would not result in a material change in our accrual. Self-Insurance. We maintain, and require the majority of our independent contractors to maintain, general liability insurance (including construction defect and bodily injury coverage) and workers’ compensation insurance.
A 10% change in the historical warranty rates used to estimate our accrued warranty liability would not result in a material change in our accrual. Self-Insurance. W e maintain, and require the majority of our independent contractors to maintain, general liability insurance (including construction defect and bodily injury coverage) and workers’ compensation insurance.
Although adjustments to the accrual rates are generally infrequent, they may be necessary when actual warranty expenditures have increased or decreased on a sustained basis, as was the case in recent years when we reduced our warranty accrual rates to reflect favorable trends in our warranty expenditures.
Although adjustments to the accrual rates are generally infrequent, they may be necessary when actual warranty expenditures have increased or decreased on a sustained basis , as was the case in recent years when we revised our warranty accrual rates to reflect trends in our warranty expenditures .
In 2024, we intend to continue to invest in and develop land positions within attractive submarkets and selectively acquire or control additional land that meets our investment standards.
In 2025, we intend to continue to invest in and develop land positions within attractive submarkets and selectively acquire or control additional land that meets our investment standards.
In 2024, we expect to use or redeploy our cash resources or cash borrowings under the Credit Facility to support our business within the context of prevailing market conditions.
In 2025, we expect to use or redeploy our cash resources or cash borrowings under the Credit Facility to support our business within the context of prevailing market conditions.
In addition, with our Built to Order model, the selling prices of individual homes within a community may vary due to differing lot sizes and locations, home square footage, product premiums and the design studio options and upgrades buyers select in the community.
In addition, with our Built to Order model, the selling prices of individual homes within a community may vary due to differing lot sizes and locations, home square footage, product premiums and the design choices and options buyers select.
As discussed in Note 17 – Commitments and Contingencies in the Notes to Consolidated Financial Statements in this report, we had $1.32 billion and $1.27 billion of performance bonds outstanding at November 30, 2023 and 2022, respectively. Unsecured Revolving Credit Facility . We have a $1.09 billion Credit Facility that will mature on February 18, 2027.
As discussed in Note 17 – Commitments and Contingencies in the Notes to Consolidated Financial Statements in this report, we had $1.33 billion and $1.32 billion of performance bonds outstanding at November 30, 2024 and 2023 , respectively. Unsecured Revolving Credit Facility . We have a $1.09 billion Credit Facility that will mature on February 18, 2027 .
Under the terms of the Credit Facility and the Term Loan, we are required, among other things, to maintain compliance with various covenants, including financial covenants regarding our consolidated tangible net worth, consolidated leverage ratio (“Leverage Ratio”), and either a consolidated interest coverage ratio (“Interest Coverage Ratio”) or minimum liquidity level, each as defined therein.
Under the terms of the Credit Facility and the Term Loan , we are required, among other things, to maintain compliance with various covenants, including financial covenants regarding our consolidated tangible net worth, consolidated leverage ratio (“ Leverage Ratio ”), and either a consolidated interest coverage ratio (“ Interest Coverage Ratio ”) or minimum liquidity level, each as defined therein.
Our use of such concessions in 2024 will depend on, among other things, market dynamics, including mortgage interest rates and overall housing affordability, as well as community-specific considerations, including the size and construction stage of the backlog, net order pace and lots remaining available for sale.
Our use of homebuyer concessions in 2025 will depend on, among other things, market dynamics, including mortgage interest rates and overall housing affordability, as well as community-specific considerations, including the size and construction stage of the backlog, net order pace and lots remaining available for sale.
Housing and land inventories are stated at cost, unless the carrying value is determined not to be recoverable, in which case the affected inventories are written down to fair value or fair value less associated costs to sell.
H ousing and land inventories are stated at cost, unless the carrying value is determined not to be recoverable, in which case the affected inventories are written down to fair value or fair value less associated costs to sell.
The financial results of our homebuilding reporting segments for 2023 were negatively impacted to varying degrees by homebuyer concessions we selectively extended to buyers in conjunction with our targeted sales strategies, as well as product and geographic mix shifts of homes delivered.
The financial results of our homebuilding reporting segments for 2024 and 2023 were impacted to varying degrees by homebuyer concessions we selectively extended to buyers in conjunction with our targeted sales strategies, as well as product and geographic mix shifts of homes delivered. West Coast .
Approximately $9.0 million of these inventory-related obligations are payable within 12 months. However, TIFE assessment obligations are paid by us only to the extent we do not deliver homes on applicable lots before the related TIFE obligations mature. Investments in Land and Land Development.
Approximately $11.6 million of these inventory- related obligations are payable within 12 months. However, TIFE assessment obligations are paid by us only to the extent we do not deliver homes on applicable lots before the related TIFE obligations mature. Investments in Land and Land Development.
We have outstanding variable-rate borrowings under the Term Loan, and outstanding fixed-rate senior notes and mortgages and land contracts due to land sellers and other loans with varying maturities. As of November 30, 2023, our notes payable had an aggregate principal amount of $1.70 billion, with $3.4 million payable within 12 months.
We have outstanding variable-rate borrowings under the Term Loan , and outstanding fixed-rate senior notes and mortgages and land contracts due to land sellers and other loans with varying maturities. As of November 30, 2024 , our notes payable had an aggregate principal amount of $1.70 billion , with $.5 million payable within 12 months.
In 2023, our uses of cash included stock repurchases totaling $411.4 million, net repayments under the Credit Facility of $150.0 million, dividend payments on our common stock of $56.8 million, tax payments associated with stock-based compensation awards of $14.2 million and payments on mortgages and land contracts due to land sellers and other loans of $3.8 million.
In 2023 , net cash was used for stock repurchases totaling $411.4 million , net repayments under the Credit Facility of $150.0 million , dividend payments on our common stock of $56.8 million , tax payments associated with stock-based compensation awards of $14.2 million , and payments on mortgages and land contracts due to land sellers and other loans of $3.8 million .
Our obligations to pay principal and interest on the senior notes and borrowings, if any, under the Credit Facility and the Term Loan are guaranteed on a joint and several basis by certain of our subsidiaries (“Guarantor Subsidiaries”), which are listed on Exhibit 22.
Our obligations to pay principal and interest on the senior notes and borrowings, if any, under the Credit Facility and the Term Loan are guaranteed on a joint and several basis by certain of our subsidiaries (“ Guarantor Subsidiaries ”), which are listed on Exhibit 22.
Our net cash provided by operating activities in 2023 mainly reflected net income of $590.2 million and a net decrease in inventories of $426.8 million, partly offset by a net decrease in accounts payable, accrued expenses and other liabilities of $62.2 million and a net increase in receivables of $12.9 million.
Net cash provided by operating activities in 2023 primarily reflected net income of $590.2 million and a net decrease in inventories of $426.8 million , partly offset by a net decrease in accounts payable, accrued expenses and other liabilities of $62.2 million and a net increase in receivables of $12.9 million . Investing Activities .
Discussion and analysis of our 2021 fiscal year specifically, as well as the year-over-year comparison of our 2022 financial performance to 2021, are located under Part II, Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended November 30, 2022, filed with the SEC on January 20, 2023, which is available on our investor relations website at investor.kbhome.com and the SEC website at www.sec.gov. 27 RESULTS OF OPERATIONS Overview.
Discussion and analysis of our 2022 fiscal year specifically, as well as the year- over-year comparison of our 2023 financial performance to 2022 , are located under Part II, Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended 28 November 30, 2023 , filed with the SEC on January 19, 2024, which is available on our investor relations website at investor.kbhome.com and the SEC website at www.sec.gov.
Our lots controlled under land option contracts and other similar contracts as a percentage of total lots was 27% at November 30, 2023, compared to 30% at November 30, 2022.
Our lots controlled under land option contracts and other similar contracts as a percentage of total lots was 49% at November 30, 2024 , compared to 27% at November 30, 2023 .
Additionally, we have $63.5 million of deposits and pre-acquisition costs at November 30, 2023 related to land option contracts and other similar contracts. If there are events that lead to moderate or significant decreases in new home prices, we could elect to cancel several such contracts, resulting in the write-off of the related deposits and pre-acquisition costs.
Additionally, we have $116.2 million of deposits and pre-acquisition costs at November 30, 2024 related to land option contracts and other similar contracts. If there are events that lead to moderate or significant decreases in new home prices, we could elect to cancel several such contracts, resulting in the write-off of the related deposits and pre-acquisition costs.
We believe the carrying value of our inventory balance as of November 30, 2023 is recoverable.
We believe the carrying value of our inventory balance as of November 30, 2024 is recoverable.
While we made strategic investments in land and land development in each of our homebuilding reporting segments during 2023 and 2022, approximately 56% and 50%, respectively, of these investments for each year were made in our West Coast homebuilding reporting segment.
While we made strategic investments in land and land development in each of our homebuilding reporting segments during 2024 and 2023 , approximately 58% and 56% , respectively, of these investments for each year were made in our West Coast homebuilding reporting segment.
In 2023 and 2022, homebuilding operating income included total inventory-related charges of $11.4 million and $37.3 million, respectively, as discussed in Note 7 – Inventory Impairments and Land Option Contract Abandonments in the Notes to Consolidated Financial Statements in this report.
In 2024 and 2023 , homebuilding operating income included total inventory-related charges of $4.6 million and $11.4 million , respectively, as discussed in Note 7 – Inventory Impairments and Land Option Contract Abandonments in the Notes to Consolidated Financial Statements in this report.
At November 30, 2023, we had outstanding mortgages and land contracts due to land sellers and other loans payable in connection with such financing of $3.8 million, secured primarily by the underlying property, which had an aggregate carrying value of $30.5 million. Senior Unsecured Term Loan.
At November 30, 2024 , we had outstanding mortgages and land contracts due to land sellers and other loans payable in connection with such financing of $3.1 million , secured primarily by the underlying property, which had an aggregate carrying value of $14.1 million . Senior Unsecured Term Loan.
In 2023, our net cash used in investing activities included $35.5 million for net purchases of property and equipment and $27.7 million for contributions to unconsolidated joint ventures. These uses of cash were partially offset by a $5.1 million return of investments in unconsolidated joint ventures.
In 2023 , our uses of cash included $35.5 million for net purchases of property and equipment and $27.7 million for contributions to unconsolidated joint ventures. These uses of cash were partly offset by a $5.1 million return of investments in unconsolidated joint ventures. Financing Activities .
As of November 30, 2023, one of our unconsolidated joint ventures had borrowings outstanding under a revolving line of credit with a third-party lender and secured by the underlying property and related project assets. None of our other unconsolidated joint ventures had outstanding debt at November 30, 2023. Credit Ratings. Our credit ratings are periodically reviewed by rating agencies.
As of November 30, 2024 , one of our unconsolidated joint ventures had borrowings outstanding under a term loan with a third-party lender and secured by the underlying property and related project assets. None of our other unconsolidated joint ventures had outstanding debt at November 30, 2024 . Credit Ratings. Our credit ratings are periodically reviewed by rating agencies.
Each community or land parcel in our owned inventory is assessed to determine if indicators of potential impairment exist.
E ach community or land parcel in our owned inventory is assessed to determine if indicators of potential impairment exist.
The following table presents information regarding inventory impairment and land option contract abandonment charges included in construction and land costs in our consolidated statements of operations (dollars in thousands): Years Ended November 30, 2023 2022 2021 Inventory impairments: Number of communities or land parcels written down to fair value — 4 2 Pre-impairment carrying value of communities or land parcels written down to fair value $ — $ 65,372 $ 27,923 Inventory impairment charges — (24,077) (9,903) Post-impairment fair value $ — $ 41,295 $ 18,020 Land option contract abandonments charges $ 11,424 $ 13,224 $ 2,050 There were no inventory impairment charges in 2023.
The following table presents information regarding inventory impairment and land option contract abandonment charges included in construction and land costs in our consolidated statements of operations (dollars in thousands): Years Ended November 30, 2024 2023 2022 Inventory impairments: Number of communities or land parcels written down to fair value — — 4 Pre-impairment carrying value of communities or land parcels written down to fair value $ — $ — $ 65,372 Inventory impairment charges — — (24,077) Post-impairment fair value $ — $ — $ 41,295 Land option contract abandonments charges $ 4,597 $ 11,424 $ 13,224 There were no inventory impairment charges in 2024 or 2023 .
As of November 30, 2023, we had no cash borrowings and $6.7 million of letters of credit outstanding under the Credit Facility. The Credit Facility is further described in Note 15 – Notes Payable in the Notes to Consolidated Financial Statements in this report.
As of November 30, 2024 , we had no cash borrowings and $8.3 million of letters of credit outstanding under the Credit Facility . The Credit Facility is further described in Note 15 – Notes Payable in the Notes to Consolidated Financial Statements in this report.
Future interest payments associated with the Term Loan and our senior notes, together with the unused commitment fee associated with our Credit Facility, totaled $522.2 million as of November 30, 2023, with $102.1 million payable within 12 months. The Term Loan will mature on August 25, 2026.
Future interest payments associated with the Term Loan and our senior notes, together with the unused commitment fee associated 40 with our Credit Facility , totaled $421.7 million as of November 30, 2024 , with $102.1 million payable within 12 months. The Term Loan will mature on August 25, 2026 .
A 10% increase in the claim frequency and the average cost per claim used to estimate the self-insurance liability would result in increases of approximately $28.6 million in our liability and approximately $9.9 million in our receivable as of November 30, 2023, and additional expense of approximately $18.7 million for 2023.
A 10% increase in the claim frequency and the average cost per claim used to estimate the self-insurance liability would result in increases of approximately $28.7 million in our liability and approximately $9.3 million in our receivable as of November 30, 2024 , and additional expense of approximately $19.4 million for 2024 .
A 10% decrease in the claim frequency and the average cost per claim used to estimate the self-insurance liability would result in decreases of approximately $25.8 million in our liability and approximately $7.6 million in our receivable as of November 30, 2023, and a reduction to expense of approximately $18.2 million for 2023.
A 10% decrease in the claim frequency and the average cost per claim used to estimate the self-insurance liability would result in decreases of approximately $25.8 million in our liability and approximately $6.8 million in our receivable as of November 30, 2024 , and a reduction to expense of approximately $19.0 million for 2024 .
We have operating leases for certain property and equipment with an expected term at the commencement date of more than 12 months. As of November 30, 2023, the future minimum payments required under these leases totaled $28.6 million, with $11.9 million payable within 12 months.
We have operating leases for certain property and equipment with an expected term at the commencement date of more than 12 months. As of November 30, 2024 , the future minimum payments required under these leases totaled $22.3 million , with $10.6 million payable within 12 months.
As of November 30, 2023, we had inventory-related obligations totaling $41.5 million, comprised of liabilities for inventory not owned associated with financing arrangements as discussed in Note 8 – Variable 40 Interest Entities in the Notes to Consolidated Financial Statements in this report, as well as liabilities for fixed or determinable amounts associated with tax increment financing entity (“TIFE”) assessments.
As of November 30, 2024 , we had inventory-related obligations totaling $44.4 million , comprised of liabilities for inventory not owned associated with financing arrangements as discussed in Note 8 – Variable Interest Entities in the Notes to Consolidated Financial Statements in this report, as well as liabilities for fixed or determinable amounts associated with tax increment financing entity (“ TIFE ”) assessments.
Further information regarding our interest incurred and capitalized is provided in Note 6 – Inventories in the Notes to Consolidated Financial Statements in this report. Equity in Loss of Unconsolidated Joint Ventures . Our equity in loss of unconsolidated joint ventures was nominal for both 2023 and 2022.
Further information regarding our interest incurred and capitalized is provided in Note 6 – Inventories in the Notes to Consolidated Financial Statements in this report. Equity in Income (Loss) of Unconsolidated Joint Ventures .
Approximately 26% of our total investments in land and land development in 2023 were related to land acquisitions, compared to approximately 34% in 2022.
Approximately 44% of our total investments in land and land development in 2024 were related to land acquisitions, compared to approximately 26% in 2023 .
Cash equivalents included in the total increased to $508.2 million at November 30, 2023 from $15.8 million at November 30, 2022, and were mainly invested in interest-bearing bank deposit accounts and money market funds. We had no cash borrowings outstanding under the Credit Facility as of November 30, 2023.
Cash equivalents included in the total were $385.1 million at November 30, 2024 and $508.2 million at November 30, 2023 , and were mainly invested in interest-bearing bank deposit accounts and money market funds . We had no cash borrowings outstanding under the Credit Facility as of November 30, 2024 .
The following table reconciles our housing gross profit margin calculated in accordance with GAAP to the non-GAAP financial measure of our adjusted housing gross profit margin (dollars in thousands): Years Ended November 30, 2023 2022 2021 Housing revenues $ 6,370,421 $ 6,880,362 $ 5,694,668 Housing construction and land costs (5,020,783) (5,210,802) (4,466,053) Housing gross profits 1,349,638 1,669,560 1,228,615 Add: Inventory-related charges (a) 11,424 34,760 11,953 Adjusted housing gross profits $ 1,361,062 $ 1,704,320 $ 1,240,568 Housing gross profit margin as a percentage of housing revenues 21.2 % 24.3 % 21.6 % Adjusted housing gross profit margin as a percentage of housing revenues 21.4 % 24.8 % 21.8 % (a) Represents inventory impairment and land option contract abandonment charges associated with housing operations.
The following table reconciles our housing gross profit margin calculated in accordance with GAAP to the non- GAAP financial measure of our adjusted housing gross profit margin (dollars in thousands): Years Ended November 30, 2024 2023 2022 Housing revenues $ 6,898,667 $ 6,370,421 $ 6,880,362 Housing construction and land costs (5,449,382) (5,020,783) (5,210,802) Housing gross profits 1,449,285 1,349,638 1,669,560 Add: Inventory-related charges (a) 4,597 11,424 34,760 Adjusted housing gross profits $ 1,453,882 $ 1,361,062 $ 1,704,320 Housing gross profit margin as a percentage of housing revenues 21.0 % 21.2 % 24.3 % Adjusted housing gross profit margin as a percentage of housing revenues 21.1 % 21.4 % 24.8 % (a) Represents inventory impairment and land option contract abandonment charges associated with housing operations.
The cash used was partially offset by $8.9 million of issuances of common stock under employee stock plans.
The cash used was partially offset by $10.4 million of issuances of common stock under employee stock plans.
Housing gross profits for 2023 and 2022 included inventory-related charges associated with housing operations of $11.4 million and $34.8 million, respectively.
Housing gross profits for 2024 and 2023 included inventory-related charges associated with housing operations of $4.6 million and $11.4 million , respectively.
Revenues are generated from our homebuilding and financial services operations.
RESULTS OF OPERATIONS Overview . Revenues are generated from our homebuilding and financial services operations.
The ratio of debt to capital is calculated by dividing notes payable by capital (notes payable plus stockholders’ equity). LOC Facility . We maintain an LOC Facility to obtain letters of credit from time to time in the ordinary course of operating our business. Under the LOC Facility, we may issue up to $75.0 million of letters of credit.
The ratio of debt to capital is calculated by dividing notes payable by capital (notes payable plus stockholders’ equity). LOC Facility . We maintain a LOC Facility to obtain letters of credit from time to time in the ordinary course of operating our business.
Shelf Registration Statement. On July 10, 2023, we filed an automatically effective universal shelf registration statement (“2023 Shelf Registration”) with the SEC. As with our prior shelf registration statements, the 2023 Shelf Registration registers the offering of securities that we may issue from time to time in amounts to be determined.
Shelf Registration Statement. We have an automatically effective universal shelf registration statement that was filed with the SEC on July 10, 2023 (“ 2023 Shelf Registration ”). The 2023 Shelf Registration registers the offering of securities that we may issue from time to time in amounts to be determined.
The difference between each homebuilding reporting segment’s operating income (loss) and pretax income (loss) is generally due to the equity in income (loss) of unconsolidated joint ventures, which is also presented in Note 2 – Segment Information in the Notes to Consolidated Financial Statements in this report, and/or interest income and expense. 33 In addition to the results of our homebuilding reporting segments presented below, our consolidated homebuilding operating income includes the results of Corporate and other, a non-operating segment described in Note 2 – Segment Information in the Notes to Consolidated Financial Statements in this report.
The difference between each homebuilding reporting segment’s operating income (loss) and pretax income (loss) is generally due to the equity in income (loss) of unconsolidated joint ventures, which is also presented in Note 2 – Segment Information in the Notes to Consolidated Financial Statements in this report, and/or interest income and expense.
Interest income, which is generated from short-term investments, increased to $13.8 million in 2023, compared to $.7 million in 2022 due to our higher average balance of cash equivalents and a higher average interest rate in 2023.
In 2023 , interest income and other was comprised solely of interest income. Interest income, which is generated from short-term investments, increased to $19.6 million in 2024 , compared to $13.8 million in 2023 due to our higher average balance of cash equivalents and a higher average interest rate in 2024 .
As a percentage of revenues, operating income decreased from 2022 primarily due to a 170 basis-point decline in the housing gross profit margin to 22.9% that mainly reflected higher construction costs, product and geographic mix shifts of homes delivered and increased homebuyer concessions, partly offset by decreased inventory-related charges and improved operating leverage from higher housing revenues.
As a percentage of revenues, operating income decreased from 2023 primarily due to a 210 basis-point decline in the housing gross profit margin to 20.8% that mainly reflected higher relative construction and land costs, and product and geographic mix shifts of homes delivered, partly offset by a decrease in inventory-related charges and improved operating leverage from higher housing revenues .
The following table summarizes the financial covenants and other requirements under the Credit Facility and the Term Loan, and our actual levels or ratios (as applicable) with respect to those covenants and other requirements, in each case as of November 30, 2023: Financial Covenants and Other Requirements Covenant Requirement Actual Consolidated tangible net worth > $ 2.80 billion $ 3.77 billion Leverage Ratio .600 .312 Interest Coverage Ratio (a) > 1.500 9.810 Minimum liquidity (a) > $ 93.3 million $ 727.1 million Investments in joint ventures and Non-Guarantor Subsidiaries $ 858.4 million $ 336.4 million Borrowing base in excess of borrowing base indebtedness (as defined) n/a $ 2.79 billion (a) Under the terms of the Credit Facility and the Term Loan, we are required to maintain either a minimum Interest Coverage Ratio or a minimum level of liquidity.
The following table summarizes the financial covenants and other requirements under the Credit Facility and the Term Loan , and our actual levels or ratios (as applicable) with respect to those covenants and other requirements, in each case as of November 30, 2024 : Financial Covenants and Other Requirements Covenant Requirement Actual Consolidated tangible net worth > $ 3.13 billion $ 4.02 billion Leverage Ratio .600 .298 Interest Coverage Ratio (a) > 1.500 11.501 Minimum liquidity (a) > $ 86.1 million $ 598.0 million Investments in joint ventures and Non-Guarantor Subsidiaries $ 908.7 million $ 413.6 million Borrowing base in excess of borrowing base indebtedness (as defined) n/a $ 2.87 billion (a) Under the terms of the Credit Facility and the Term Loan , we are required to maintain either a minimum Interest Coverage Ratio or a minimum level of liquidity.
Based on our assessment, we may also make adjustments to our previously recorded accrued warranty liability. Such adjustments are recorded in the period in which the change in estimate occurs. In 2023, we made adjustments to increase our accrued warranty liability by $4.0 million. In 2021, we made adjustments to reduce our accrued warranty liability by $4.0 million.
Based on our assessment, we may also make adjustments to our previously recorded accrued warranty liability. Such adjustments are recorded in the period in which the change in estimate occurs. In 2023, we made an adjustment to increase our accrued warranty liability by $4.0 million . There were no such adjustments during 2024 and 2022 .
We generated $10.7 million of land sale revenues in 2023, compared to no such revenues in 2022.
We generated $3.6 million of land sale revenues in 2024 , compared to $10.7 million of such revenues in 2023 .
The housing gross profit margin decline was primarily driven by pricing adjustments and other homebuyer concessions, higher relative construction costs, product and geographic mix shifts of homes delivered and reduced operating leverage from lower housing revenues, partly offset by a decrease in inventory-related charges and lower relative amortization of previously capitalized interest.
The year-over-year decline in the housing gross profit margin was mainly driven by higher relative construction and land costs, product and geographic mix shifts of homes delivered, and reduced operating leverage from lower housing revenues, partly offset by a decrease in amortization of previously capitalized interest.
The following table presents a summary of net cash provided by (used in) our operating, investing and financing activities (in thousands): Years Ended November 30, 2023 2022 2021 Net cash provided by (used in): Operating activities $ 1,082,699 $ 183,418 $ (37,296) Investing activities (58,062) (71,773) (38,084) Financing activities (627,493) (73,583) (315,013) Net increase (decrease) in cash and cash equivalents $ 397,144 $ 38,062 $ (390,393) Operating Activities .
The following table presents a summary of net cash provided by (used in) our operating, investing and financing activities (in thousands): Years Ended November 30, 2024 2023 2022 Net cash provided by (used in): Operating activities $ 362,722 $ 1,082,699 $ 183,418 Investing activities (50,119) (58,062) (71,773) Financing activities (440,752) (627,493) (73,583) Net increase (decrease) in cash and cash equivalents $ (128,149) $ 397,144 $ 38,062 Operating Activities .
Our board of directors approved an increase in the quarterly cash dividend on our common stock to $.20 per share in the 2023 third quarter, and declared quarterly dividends at the new higher rate for the third and fourth quarters of 2023. In 2022, our board of directors declared four quarterly cash dividends of $.15 per share.
Our board of directors approved a $.05 per share increase in the quarterly cash dividend on our common stock to $.25 per share in the 2024 second quarter, and declared quarterly dividends at the new higher rate for the 2024 second, third and fourth quarters.
Quarterly cash dividends declared during the years ended November 30, 2023 and 2022 totaled $.70 and $.60 per share of common stock, respectively. All dividends declared during 2023 and 2022 were also paid during those years.
Quarterly cash dividends declared and paid during the years ended November 30, 2024 and 2023 totaled $.95 per share and $.70 per share of common stock, respectively.
Homebuilding revenues of $6.38 billion for 2023 were down 7% from the prior year due to a decrease in housing revenues, partly offset by an increase in land sale revenues. In 2023, housing revenues were down 7% from the previous year, due to decreases of 4% in both the number of homes delivered and their overall average selling price.
Homebuilding revenues of $6.90 billion for 2024 grew 8% from the prior year due to an increase in housing revenues, partly offset by a decrease in land sale revenues. In 2024 , housing revenues grew 8% from the previous year, reflecting a 7% increase in the number of homes delivered and a slight increase in their overall average selling price.
FINANCIAL SERVICES REPORTING SEGMENT The following table presents a summary of selected financial and operational data for our financial services reporting segment (dollars in thousands): Years Ended November 30, 2023 2022 2021 Revenues $ 29,523 $ 23,414 $ 19,901 Expenses (5,726) (5,762) (5,055) Equity in income of unconsolidated joint ventures 15,697 20,799 23,589 Pretax income $ 39,494 $ 38,451 $ 38,435 Total originations (a): Loans 9,167 8,402 9,225 Principal $ 3,630,734 $ 3,335,837 $ 3,252,054 Percentage of homebuyers using KBHS 83 % 71 % 76 % Average FICO score 736 734 729 Loans sold (a): Loans sold to GR Alliance 9,017 7,563 7,706 Principal $ 3,588,618 $ 3,026,290 $ 2,744,685 Loans sold to other third parties 347 861 1,293 Principal $ 123,258 $ 287,436 $ 420,119 36 Years Ended November 30, 2023 2022 2021 Mortgage loan origination mix (a): Conventional/non-conventional loans 59 % 67 % 61 % FHA loans 27 % 20 % 26 % Other government loans 14 % 13 % 13 % Loan type (a): Fixed 92 % 98 % 99 % ARM 8 % 2 % 1 % (a) Loan originations and sales occurred within KBHS.
FINANCIAL SERVICES REPORTING SEGMENT The following table presents a summary of selected financial and operational data for our financial services reporting segment (dollars in thousands): Years Ended November 30, 2024 2023 2022 Revenues $ 27,847 $ 29,523 $ 23,414 Expenses (6,133) (5,726) (5,762) Equity in income of unconsolidated joint ventures 27,176 15,697 20,799 Pretax income $ 48,890 $ 39,494 $ 38,451 Total originations (a): Loans 10,241 9,167 8,402 Principal $ 4,109,025 $ 3,630,734 $ 3,335,837 Percentage of homebuyers using KBHS 87 % 83 % 71 % Average FICO score 743 736 734 36 Years Ended November 30, 2024 2023 2022 Loans sold (a): Loans sold to GR Alliance 9,240 9,017 7,563 Principal $ 3,682,769 $ 3,588,618 $ 3,026,290 Loans sold to other third parties 1,121 347 861 Principal $ 469,207 $ 123,258 $ 287,436 Mortgage loan origination mix (a): Conventional/non-conventional loans 53 % 59 % 67 % FHA loans 35 % 27 % 20 % Other government loans 12 % 14 % 13 % Loan type (a): Fixed 84 % 92 % 98 % ARM 16 % 8 % 2 % (a) Loan originations and sales occurred within KBHS .
Revenues. Our financial services reporting segment, which includes the operations of KB HOME Mortgage Company, generates revenues primarily from insurance commissions and title services. The year-over-year growth in our financial services revenues for 2023 reflected increases in both title services revenues and insurance commissions. Pretax income.
Revenues. Our financial services reporting segment, which includes the operations of KB HOME Mortgage Company, generates revenues primarily from insurance commissions and title services. In 2024 , financial services revenues declined 6% year over year due to decreases in both insurance commissions and title services revenues. Pretax income.
Corporate and other had operating losses of $142.6 million in 2023, $145.3 million in 2022 and $148.9 million in 2021.
Corporate and other had operating losses of $149.0 million in 2024 , $142.6 million in 2023 and $145.3 million in 2022 .

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

3 edited+0 added−0 removed7 unchanged
Biggest changeBased upon the amount of variable rate debt outstanding at November 30, 2023, and holding the variable rate debt balance constant, each 100 basis-point increase in the interest rate would increase the interest we incur by approximately $3.6 million per year. 55 As of November 30, 2022 and for the Years Ending November 30, Fair Value at November 30, 2022 2023 2024 2025 2026 2027 Thereafter Total Fixed Rate $ — $ — $ — $ — $ 300,000 $ 1,040,000 $ 1,340,000 $ 1,205,875 Weighted Average Effective Interest Rate — % — % — % — % 7.1 % 5.5 % 5.9 % Variable Rate (b) $ — $ — $ — $ 360,000 $ 150,000 $ — $ 510,000 $ 510,000 Weighted Average Effective Interest Rate — % — % — % 5.6 % 5.1 % — % 5.4 % (b) The interest rates for our variable rate debt, which was comprised of borrowings outstanding under the Credit Facility and the Term Loan, represents the weighted average interest rates in effect at November 30, 2022.
Biggest changeBased upon the amount of variable rate debt outstanding at November 30, 2024 , and holding the variable rate debt balance constant, each 100 basis-point increase in the interest rate would increase the interest we incur by approximately $3.6 million per year. 55 As of November 30, 2023 and for the Years Ending November 30, Fair Value at November 30, 2023 2024 2025 2026 2027 2028 Thereafter Total Fixed Rate $ — $ — $ — $ 300,000 $ — $ 1,040,000 $ 1,340,000 $ 1,260,725 Weighted Average Effective Interest Rate — % — % — % 7.1 % — % 5.5 % 5.9 % Variable Rate (b) $ — $ — $ 360,000 $ — $ — $ — $ 360,000 $ 360,000 Weighted Average Effective Interest Rate — % — % 6.8 % — % — % — % 6.8 % (b) The interest rate for our variable rate debt, which was solely comprised of the Term Loan , represents the weighted average interest rate in effect at November 30, 2023 .
Best efforts forward sale commitments allow KBHS to agree on the sales price of the underlying loans that will be realized upon their sale into the secondary market. KBHS does not engage in speculative or trading derivative activities. KBHS’ entire loan portfolio is held for sale and subject to best efforts forward sale commitments.
Best efforts forward sale commitments allow KBHS to agree on the sales price of the underlying loans that will be realized upon their sale into the secondary market. KBHS does not engage in speculative or trading derivative activities. KBHS ’ entire loan portfolio is held for sale and subject to best efforts forward sale commitments.
The following tables present principal cash flows by scheduled maturity, weighted average effective interest rates and the estimated fair value of our debt obligations as of November 30, 2023 and 2022 (dollars in thousands): As of November 30, 2023 and for the Years Ending November 30, Fair Value at November 30, 2023 2024 2025 2026 2027 2028 Thereafter Total Fixed Rate $ — $ — $ — $ 300,000 $ — $ 1,040,000 $ 1,340,000 $ 1,260,725 Weighted Average Effective Interest Rate — % — % — % 7.1 % — % 5.5 % 5.9 % Variable Rate (a) $ — $ — $ 360,000 $ — $ — $ — $ 360,000 $ 360,000 Weighted Average Effective Interest Rate — % — % 6.8 % — % — % — % 6.8 % (a) The interest rate for our variable rate debt, which is solely comprised of the Term Loan, represents the weighted average interest rate in effect at November 30, 2023.
The following tables present principal cash flows by scheduled maturity, weighted average effective interest rates and the estimated fair value of our debt obligations as of November 30, 2024 and 2023 (dollars in thousands): As of November 30, 2024 and for the Years Ending November 30, Fair Value at November 30, 2024 2025 2026 2027 2028 2029 Thereafter Total Fixed Rate $ — $ — $ 300,000 $ — $ 300,000 $ 740,000 $ 1,340,000 $ 1,309,700 Weighted Average Effective Interest Rate — % — % 7.1 % — % 5.0 % 5.7 % 5.9 % Variable Rate (a) $ — $ 360,000 $ — $ — $ — $ — $ 360,000 $ 360,000 Weighted Average Effective Interest Rate — % 6.0 % — % — % — % — % 6.0 % (a) The interest rate for our variable rate debt, which was solely comprised of the Term Loan , represents the weighted average interest rate in effect at November 30, 2024 .

Other KBH 10-K year-over-year comparisons