OVERVIEW The nation's housing recovery has been weaker than we previously anticipated, and appears to be tracking the more pessimistic of the economic scenarios that we laid out earlier in the year. KB Home reported a sharper-than-expected drop in new orders in its second quarter, despite its concentration in relatively healthier California housing markets and its focus on the more robust first-time homebuyer segment. We lowered our corporate credit rating on the Los Angeles-based homebuilder to 'B+' from 'BB-' because we now believe that profitability will remain weak into the company's 2011 fiscal year, as the recent drop in new orders will likely translate into fewer deliveries in future quarters. We revised our outlook to stable from negative to reflect
