KB Home's well-designed entry-level homes compete effectively with discounted existing homes in certain markets. New community openings could boost the company's revenue, though they'll require increased capital expenditures. Large accumulated losses have eroded shareholder equity and contributed to high leverage. Off-balance-sheet obligations and discretionary land investments could constrain currently adequate liquidity. Our ratings on KB Home reflect large accumulated losses in recent years that eroded shareholder equity and contributed to the homebuilder's current highly leveraged financial profile. Our fair business risk assessment reflects our view that KB Homes' solid market position in certain key metropolitan areas and its well-designed entry level homes are long-term competitive advantages. However, we expect that the company's narrow focus on the currently credit-constrained first-time homebuyer
