KB Home's (KBH) Order Increase May Represent Another 'Green Shoot'

Another "green shoot" in the housing market? Say it ain't so! Today, KB Home (NYSE: KBH) reported that net orders for new homes in the first quarter increased 26%, the company's first year-over-year increase since 2005. The company had notable strength in its Central division. In addition, the cancellation rate improved to 28% from 46% in the fourth quarter of 2008.

It wasn't all rosy for KB Home, as revenue sank 61% year-over-year and the company is still losing money. Also orders still fell in California by 15% despite dramatic price cuts. While things still look pretty bad for the company, there are clear signs of stabilization. The data may be more important on a macro level.

Earlier in the week we put together a report on all the "green shoots" we've noticed recently. "Green shoots" is a phrase Fed Chairman Ben Bernanke coined in a recent TV interview describing signs of an economic recovery.

Many of the shoots noted were housing related. If things are actually stabilizing in housing this would be major positive, as many of the bank's problems stem from the legacy assets on their books tied to residential mortgages. If housing just stops falling investors might get an appetite for the securities again. Stabilizing the housing market would also help make the government's Public-Private partnership a great success, as investors will be happy to use the easy-leverage being provided by the feds to buy some of the loans and securities.

Shares of KB Home are 5% higher today. Broadly, the homebuilding sector is down 2.8% as represnted by the SPDR S&P Homebuilders ETF (NYSE: XHB).

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