GOOD MORNING. | | THE LEAD | KB Home is one of the five largest homebuilders in the United States. It builds in 47 markets across nine states. When it reports earnings, it is not just telling you about one company — it is telling you something important about the state of the housing market, buyer confidence, and the broader economy. | This week's report was not encouraging. | KB Home reported total revenues of $1.08 billion for its first quarter of fiscal 2026, a 23% decrease on a year-over-year basis. The company delivered 2,370 homes in the quarter. EPS came in at $0.52 per diluted share, below the consensus estimate of $0.55. | Gross margin fell to 15.3%, down 490 basis points year over year. KB Home also cut its outlook for the second quarter and full-year 2026, calling for lower revenue, deliveries, and housing revenue than previously expected. | | | | | | | $1 quadrillion would be enough to send a check for $2.8 million to every man, woman, and child in America. | That's how big this opportunity is. | This is set to be the biggest AI IPO in history… | And you could claim a stake today… | Before the company goes public… | Starting with just $500. |
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| For the full year 2026, management guided for housing revenues between $4.8 billion and $5.5 billion, based on 10,000 to 11,500 deliveries. That compares to prior guidance of $5.10 billion to $6.10 billion and 11,000 to 12,500 deliveries. In plain terms, the company is now expecting to build and sell meaningfully fewer homes this year than it thought just a few months ago. | The reasons are not hard to understand. Management cited "a variety of challenges over the past two years" and said the conflict in the Middle East that began at the end of February "has added another layer of uncertainty." They said net orders in the first quarter were below the level needed to hold prior full-year delivery guidance. | CEO Rob McGibney said buyers are "taking more time to make decisions," a dynamic that is slowing sales velocity even in markets where underlying housing demand remains strong. The company pointed directly to macro conditions, including geopolitical instability and higher energy costs, as factors weighing on consumer confidence. | A typical home is mathematically unaffordable for the vast majority of U.S. counties in 2026. KB Home's guidance cut is a tacit admission that the lock-in effect is more powerful than the industry's ability to build its way out of the problem through incentives alone. The "lock-in effect" refers to the millions of existing homeowners who bought or refinanced at 3% mortgage rates and have no financial incentive to sell and take on a new mortgage at today's rates above 6.5%. | The 1-year stock performance shows KBH down approximately 10% year-over-year, including a 5% tumble following the March 2026 earnings miss and broader concerns about high mortgage rates averaging 6.8% in early 2026. |
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| For retirees, this story touches several pressure points. If you own a home, reduced builder activity supports existing home values by keeping overall supply tight. If you were hoping to downsize and use home equity to fund retirement, the softness in buyer demand and elevated mortgage rates could affect how quickly and at what price you can sell. And if your adult children or grandchildren are trying to buy their first home, the combination of high prices and 6.8% mortgage rates is a serious barrier. The housing market will not loosen meaningfully until mortgage rates fall — and mortgage rates will not fall meaningfully until the Fed cuts rates — and the Fed will not cut rates until inflation comes down. | | | THE NUMBER THAT MATTERS | 23% | KB Home's Revenue Fell | That is how much KB Home's revenue fell year over year in the first quarter of fiscal 2026, one of the sharpest year-over-year contractions in recent memory for the company. A single company's bad quarter is not always meaningful. But KB Home's report is consistent with what other large builders have signaled: demand is fragile, buyer confidence is weak, and affordability is at a historic low. The average buyer who closed on a KB Home in the quarter had a FICO score of 743, a household income of $133,000, and put down 16%, or roughly $72,000. These are not marginal buyers struggling with credit. These are solidly qualified, middle-to-upper-middle class Americans who are still finding the market difficult. When buyers at that income and credit level are pulling back, it tells you how broad the affordability problem really is. |
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| | | WHAT WE'RE WATCHING THIS WEEK | | INFLATION DATA | MORTGAGES: The 30-Year Rate Just Had Its Biggest Weekly Jump in 11 Months | The interest rate on the most popular U.S. home loan surged by the most in 11 months last week, according to Reuters. The 30-year fixed mortgage rate is now averaging above 6.8%, according to multiple industry sources. That level is not historically extreme, but combined with home prices that have risen sharply since 2020, it pushes monthly payments well beyond what most moderate-income buyers can comfortably afford. The math is straightforward: a $400,000 home with 20% down at 6.8% costs about $2,085 per month in principal and interest alone. At 3%, that same loan cost $1,349. That $736 monthly difference is why so many potential buyers are sitting on the sidelines. Relief requires lower rates, and lower rates require lower inflation. | | SMART MONEY SIGNAL | GOLD: The Metal Reversed Course and Rallied 3.5% on Wednesday | Gold futures rallied 3% on Wednesday on renewed optimism that central banks will eventually be able to cut rates if oil prices ease without impacting inflation. That was gold's best single day in several weeks, reversing a painful stretch that saw the metal drop more than 10% in a week. Gold has been caught in a confusing crossfire: the war that sent investors seeking safety also sent oil higher, which kept rates elevated, which made income-paying assets more attractive than gold. Wednesday's oil pullback and ceasefire optimism flipped that logic, at least for a day. For retirees holding gold as an inflation hedge, the week illustrated a useful lesson: gold's behavior in any given environment depends heavily on interest rates, not just fear. When rates fall, gold tends to benefit — and when rates stay high, even wartime uncertainty may not be enough to hold it up. | | WORTH KNOWING | ECONOMY: Weekly Jobless Claims Due This Morning | The Labor Department releases weekly initial jobless claims this morning, Thursday March 26. This report tracks the number of Americans who filed for first-time unemployment benefits in the prior week. It is one of the most timely signals available about the health of the job market. In the context of the Gallup survey released earlier this week — which found more Americans struggling than thriving for the first time on record — this week's number carries extra weight. Economists will be watching to see whether the energy shock and broader uncertainty from the war are beginning to show up in layoffs. Any reading above 230,000 would suggest the labor market is starting to feel genuine strain. The report typically comes out at 8:30 a.m. Eastern. | | | | | KB Home's sharp revenue decline and guidance cut this week confirm what many Americans already feel: the housing market is under serious pressure from high mortgage rates, weak buyer confidence, and an economy dealing with multiple headwinds at once. Until the Federal Reserve cuts rates, mortgage costs stay elevated, builders keep pulling back, and the dream of homeownership stays out of reach for millions. For retirees, the housing market's health affects home values, retirement funding plans, and the financial futures of younger family members. This is a story worth watching carefully as we move through the spring selling season. |
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