Kaufman & Broad’s Profit Quadruples in 4th Quarter

Aided by plummeting mortgage interest rates, Los Angeles-based home builder Kaufman & Broad Home Corp. reported sharply higher earnings in the fourth quarter. Full-year earnings were lower.

California’s largest builder of single-family homes said its profit nearly quadrupled to $13.3 million for the quarter ended Nov. 30, 1991, from $3.2 million during the same period in 1990. Revenue of $317.8 million was down 15% from $375.2 million in the fourth quarter of 1990 because of lower commercial real estate income from operations in France, the company said.

For the year, earnings declined to $26.5 million from $39.9 million in 1990, while revenue was off 11% to $1.22 billion from $1.37 billion in 1990.

President and Chief Executive Bruce Karatz said the company’s quarterly profit rose as a result of brisk sales and stabilizing home prices. The improvement more than offset the decline in profitability in housing and commercial development activities in France.

A dramatic slump in home buying in the first three quarters of last year forced the company to slash prices and cut profit margins to attract buyers. The demand was so sluggish in early 1991 that Kaufman & Broad at one point cut prices on new homes to as low as $76,990 in a state where the average price in 1990 hovered around $200,000.

With the Federal Reserve Board slashing key lending rates throughout 1991, Kaufman & Broad and other home builders found that by the end of the year they were able to hold the line on further housing price cuts.

During the fourth quarter, Kaufman & Broad’s new-home orders in California rose 41% as first-time buyers took advantage of lower mortgage interest rates and lower prices. The company said the average price of its new homes decreased to $178,900 from $185,400 in 1990.

Earnings, D7