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Homebuilder KB Home (NYSE:KBH) reported a better-than-expected loss for its second quarter Friday morning. Though KB is not quite as large as competitor Lennar (NYSE:LEN), which reported earlier this week, we think its results reflect an improving-or at least bottoming-housing market.

The firm lost $0.31 per share for the quarter versus the $0.33 analysts were expecting. Revenues were pretty much in-line with expectations, growing 11% compared to the same quarter a year ago, to $303 million. Average selling prices grew 9% year-over-year, and home deliveries increased 2%. The firm produced positive operating cash flow of just over $10 million for the second quarter and saw its backlog units increase 22%. Its backlog value increased a whopping 38%.

Average selling prices of homes in the Southwest and West Coast were strong, though the Central and Southeast were weak on a year-over-year basis. West Coast average prices grew 32% in the second quarter compared to the same period last year, suggesting KB is effectively focusing on more profitable developments. Though pricing was weaker in the Central and Southeast regions, we aren't particularly worried. Both regions appear to be weak from a macro-level, so we don't think it's a KB-specific issue. Further, the challenged Southeast region only fell 0.5%, which we think is fairly immaterial. Since the Central region is KB's largest, we think any price strengthening will provide the firm with better-than-expected upside.

At current levels, we think shares of the homebuilder are fairly valued (click here for our valuation reports). Though we think the sector's fundamentals have improved significantly in recent quarters, we aren't particularly excited by any name in the space.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Source: KB Home's Results Consistent With Lennar's: New Housing Improving

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