The ratings on KB Home reflect deteriorating macroeconomic conditions that will further pressure the company's already challenged key housing markets. Consumer confidence remains low and mortgage lending continues to be tight, contributing to stubbornly high inventory levels. These conditions will further stress KB Home's already weak profitability and credit metrics and could hurt its currently sound liquidity. Additionally, relative to its rated peers, the company has one of the largest exposures to joint ventures—some of which carry repayment and completion guarantees that could be a future drain on cash. The ratings remain supported, however, by the company's current sizable cash position and sufficient credit facility availability, as well as a build-to-order model that limits the aggregate level of speculative inventory.
