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KB's Solution: The Open Series

A new business model solution for building production homes

By Bill Lurz, Senior Editor, Business
May 4, 2009
Professional Builder

David Goldberg’s suggested solution for a new business model — higher densities, lower fees and smaller homes — may not work for every public builder, but Los Angeles-based KB Home has a head start with The Open Series, an ambitious new product line the firm projects will make up half its deliveries by year-end. KB claims the houses can be built much faster than previous products yet carry better margins.

Already, President Jeff Mezger reports The Open Series is selling better than previous products in every community where it’s come on stream. The homes are smaller, and because of stringent value engineering, priced to compete with resale homes and foreclosures.

They are based on KB survey research of Generation Y that shows the new generation of entry buyers prefers wide open living spaces, with only bedrooms and bathrooms behind walls. Another element gives KB compelling value to sell against foreclosures. The homes flex to deliver the bedroom counts buyers want, and all the houses are built to Energy Star standards, so they deliver energy efficiency and low operating costs as well as the eco-friendly fuzzies Gen-Ys say they value.

KB dropped to No. 8 this year because Mezger is shrinking the firm and taking it back to its roots, abandoning markets and product lines outside its core competencies, to return to the entry market that used to be its trademark. It just might work.

© 2009, Reed Business Information, a division of Reed Elsevier Inc. All Rights Reserved.

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