Sales at State’s Biggest Home Builder Up 22%

In another sign of the housing upturn in California, the state’s largest single-family home builder, Kaufman & Broad Home Corp., said Tuesday that its home sales increased to 790 in the first quarter ended Feb. 28 from 650 in the same quarter a year ago.

Analysts said the 22% increase in sales is strong evidence that the worst part of the yearlong housing slump is ending for Kaufman & Broad and many other housing developers, even though net income at the Los Angeles-based home builder plunged $10.7 million in the first quarter. The drop in net income occurred primarily because Kaufman & Broad was forced to slash prices to sell its homes.

“The numbers represent a further indication of a strong turnaround in the California housing market,” David V. Jackson, director of research for the Western Group investment house in Los Angeles, said of Kaufman & Broad’s home sales.

The upturn at Kaufman & Broad--a company that specializes in entry-level housing in the United States but also builds residential and commercial units in France--coincides with a report earlier this week from the California Assn. of Realtors that sales of existing homes in California rose 13.6% in February.

The improvement also appears to be a vindication of Kaufman & Broad’s strategy of targeting the low end of the housing market, where the interest in home buying now appears to be the strongest.

“First-time home buyers are going to lead us out of California’s housing recession,” predicted Bruce Karatz, president and chief executive of Kaufman & Broad. “This market segment has always been Kaufman & Broad’s bread and butter, and it’s an important reason for our sales improvement over the past three months.”

However, the biggest boost to Kaufman & Broad’s bottom line came in France, where revenue from commercial development--primarily in Paris--increased to $166.4 million in the first quarter of 1991 from $110.2 million the previous year.

Overall Kaufman & Broad reported slightly higher revenue of $318.9 million in the first quarter, compared to $316 million in the same period a year ago.

Net income, however, declined to $2.6 million from $13.3 million in the first quarter, indicating that luring consumers to buy homes is proving to be expensive.

Because of the sluggish housing market, Kaufman & Broad has had to offer many buyers low-cost mortgage financing and other incentives, and the improvement in home sales could drop if any of the 790 buyers fail to close escrow.