We've all heard the saying "All Real Estate Is Local," but after just getting done with the KB Home (NYSE:KBH) conference call, I'm starting to have my doubts. The bullish words and phrases used throughout the call suggest a recovery that is widespread and national. Sure, there may be pockets of weakness here and there, but if KB Homes is correct, the recovery is in full swing and everywhere.
This point was truly driven home for me at the tail-end of the question and answer section of the call, last line of the last answer by CEO Jeffrey T. Mezger:
every city we're in has a similar recovery occurring, where there's a desirable area with no inventory, a lot of price movement upward, and then the recovery will ripple out to the other areas adjacent and so on and so on. So we're hard at it seeking growth opportunities in every one of the 33 cities we're in today
33 different cities across the country, each with its own unique demographic, economy, and culture are all seeing the same thing. This is not local. This is widespread. It's music to my ears to hear:
- "a lot of price movement upwards"
- "ripple to other areas adjacent"
- "and so on and so on"
Translation: the recovery is everywhere, and you can't escape it.
Consider this. Management used the word "accelerate" (or various forms of it) 15 times during the call in describing KB Home specifically and the housing market in general. Examples include:
- "housing recovery that is now accelerating"
- "markets now recovering at an accelerated pace"
- "The pace of the market recovery is accelerating, providing a tailwind to our actions"
- "these recoveries continue to mature and accelerate"
- "the orders did accelerate for the second half of the quarter"
I'm hard-pressed to find anything negative about housing in the call. Mezger does acknowledge though that this is to be expected:
As a result of this significant demand in place, just as in previous cycles, the market upturns are more dramatic here when the recovery takes hold.
Of course, KB Home could be wrong or something new and dramatic happens that upsets and changes the direction of the recovery, but there's no question at least at the moment that the recovery is fierce, widespread, and more robust than people think it is. The only question is how to invest in it. KBH may be an excellent place to start.