Builder KB Home Reenters Mid-Atlantic Region

KB Home (KBH) is resuming home construction in its mid-Atlantic region, which includes Maryland and Virginia, nearly two years after stopping - a sign the company thinks the battered sector is improving.

KB Home, the nation's fifth-largest builder by annual closings, said it will primarily build its "Open Series," a smaller and more-affordable product designed to compete with lower-priced foreclosures.

Los Angeles-based KB Home - which announced its mid-Atlantic entry at the housing market's height - also operates across hard-hit Florida and in the Carolinas, and so the move bolsters its Eastern-seaboard presence, it said in a statement. Standard & Poor's Equity Research said the move confirms that the Northeast and Mid-Atlantic markets may have stronger outlooks than the Sunbelt or Midwest markets that were overbuilt during the boom.

"We view diversification by KBH away from the troubled Sunbelt markets as a positive, but KBH is starting with no market share against established builders with strong brands," analyst Kenneth Leon noted.

During the downturn, numerous builders stopped expanding and pulled out of weaker markets. But builders have become more optimistic by the market's recent improvement, aided by falling home prices, low mortgage rates and a federal tax credit of up to $8,000 for qualified first-time buyers who close before Dec. 1. Luxury builder Toll Brothers Inc. (TOL) entered Houston, while NVR Inc. (NVR) is touting homes in Orlando, Fla.

Shares of KB Home recently traded up 3.1%, compared with a gain of 3.8% for the Dow Jones US Home Construction Index.

-By Dawn Wotapka, Dow Jones Newswires; 212-416-2193; [e-mail]