Los Angeles, CA, September 18, 2002 – KB Home (NYSE: KBH), one of the largest homebuilders in the United States and France, today announced record financial results for its third quarter ended August 31, 2002. Highlights include:

• Net orders for the quarter of 6,320 units were up 10% over the 5,729 units in the third quarter of 2001 with all geographic regions posting year-over-year volume gains. At August 31, 2002, backlog value stood at $2.64 billion, the highest level for any third quarter in the Company’s history, increasing 13% from August 31, 2001.

• The Company’s total revenues reached $1.29 billion for the third quarter, up nearly 5% from the $1.24 billion posted in the third quarter of 2001. Third quarter deliveries totaled 6,500 units versus 6,552 units delivered in the third quarter of 2001.

• Total pretax income jumped nearly 37% to $125.2 million in the third quarter of 2002 from $91.5 million in the year-earlier quarter. The Company’s pretax margin as a percent of revenues rose 230 basis points to 9.7% for the third quarter of 2002 from 7.4% for the same quarter of 2001.

• Net income increased 39% to a new third quarter record of $83.9 million from $60.4 million in the third quarter of 2001. Diluted earnings per share rose approximately 23% to $1.95 in the third quarter of 2002 from $1.58 in 2001 and exceeded consensus estimates of $1.67. The growth in third quarter earnings per share was tempered by an increase of approximately 13% in the average number of diluted shares outstanding.

• The Company’s ratio of debt to total capital improved to 51.0% at August 31, 2002 from 53.4% at August 31, 2001. No amounts were outstanding under the Company’s revolving credit facility as of August 31, 2002, leaving $644 million of borrowing capacity available.

• During the third quarter, the Company repurchased 2.0 million shares of its common stock at an aggregate price of $97.6 million. The Company repurchased a total of 4.0 million shares, or approximately 9% of its common stock in fiscal year 2002, at an aggregate price of $190.8 million.

“Our third quarter results were outstanding as our margins improved substantially and drove a 39% increase in net income,” said Bruce Karatz, chairman and chief executive officer. “We set new third quarter earnings records despite our revenue growth being impacted by fewer active communities earlier this year. We expect our community openings in the fourth quarter to boost our order growth for the remainder of 2002. With our community count expected to ramp up to about 400 active communities in the fourth quarter and our margins anticipated to continue to improve, we expect a strong finish for the year.”

Unit deliveries for the third quarter of 2002 totaled 6,500 versus 6,552 units in the same quarter of 2001, reflecting fewer active communities. Housing revenues rose nearly 8% to $1.25 billion from $1.16 billion in the year-earlier quarter primarily due to the Company’s average selling price increasing approximately 8% to $193,100 for the third quarter of 2002 from $179,500 for the same quarter of 2001.

Construction pretax income for the third quarter increased approximately 32% to $108.6 million in 2002 from $82.0 million in the year-earlier quarter as a direct result of a significant improvement in operating margin. The Company’s housing gross margin rose 140 basis points to 21.4% for the three months ended August 31, 2002 from 20.0% for the same period of 2001. This increase reflects operating efficiencies derived from KBnxt as well as price increases in selected markets.

Pretax income from the Company’s mortgage banking operations rose nearly 76% in the third quarter of 2002 to $16.6 million from $9.5 million in 2001. The tremendous growth was driven by an increase in average loan size, an increase in the retention rate to 90%, and a more favorable interest rate spread.

“We continue to focus on improving profitability and returns on our invested capital,” Karatz said. “During the third quarter, in addition to investing in new communities to support our growth objectives, we used cash to repurchase two million shares of our stock. We believe buying back our stock is an excellent use of our financial resources and confirms the confidence we have in our long-term outlook. Our average diluted shares outstanding of 43.1 million for the third quarter of 2002 decreased from 45.2 million in the second quarter of 2002 due to our substantial buyback activity. In the fourth quarter, we expect the benefits from our stock repurchases to become even more evident in our share count and diluted EPS as we will have moved beyond the anniversary of the Feline Prides conversion."

Backlog value at the end of the third quarter was approximately $2.64 billion, up 13% compared to a backlog value of $2.34 billion at August 31, 2001. The Company had approximately six months of deliveries in backlog on August 31, 2002, reinforcing its financial projections for 2002 and the first quarter of 2003.

“We were pleased with the solid year-over-year increase in our third quarter net orders and the strength exhibited by each of our geographic regions,” said Karatz. “We expect this trend to continue into the fourth quarter due to the planned new community openings and the easier comparison due to the lower net order levels in 2001 following the September 11th tragedy. With a strong backlog entering the fourth quarter, we believe we are on track to meet our delivery goals for 2002.”

For the nine months ended August 31, 2002, unit deliveries totaled 17,633, up approximately 4% from 16,985 for the same period of 2001. The Company’s total revenues for the first nine months of 2002 totaled $3.35 billion, up approximately 7% from $3.12 billion for the same period of 2001. Net income for the nine months ended August 31, 2002 was $190.6 million, up nearly 52% from $125.7 million for the first nine months of 2001. Earnings per diluted share for the nine months ending August 31, 2002 was $4.29, up approximately 28% from $3.36 for the prior year.

“Our strong nine-month results and continued positive outlook for the fourth quarter have prompted us to raise our earnings per share estimate for the year to $6.75 from our previous forecast of $6.50. Against a backdrop of healthy demand, favorable demographic trends, and supply constraints, we believe our KBnxt strategy will take us to another year of record EPS,” Karatz said.

The Conference Call on Third Quarter 2002 Earnings will be broadcast live TODAY at 9:30 AM Pacific Daylight Time, 12:30 PM Eastern Daylight Time. To listen, please go to the Investor Relations section of the Company’s Web site at www.kbhome.com.

KB Home is one of America’s premier homebuilders with domestic operating divisions in the following regions and states: West Coast-- California; Southwest-- Arizona, Nevada and New Mexico; and Central—Colorado, Texas and Florida. Kaufman & Broad S.A., the Company’s majority-owned subsidiary, is one of the largest homebuilders in France. In fiscal 2001, the Company delivered 24,868 homes in the United States and France. It also operates KB Home Mortgage Company, a full-service mortgage company for the convenience of its buyers. Founded in 1957, KB Home is a Fortune 500 company listed on the New York Stock Exchange under the ticker symbol “KBH.” For more information about any of KB Home’s new home communities, call 1-888-34-HOMES or visit the Company's web site at www.kbhome.com.

Except for the historical information contained herein, certain matters discussed in this press release are “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995, including any statements concerning future financial performance, business and prospects, and future Company actions and their expected results. These forward-looking statements are subject to risks, uncertainties and assumptions including, but not limited to, the continued impact of terrorist activities and U.S. response, accelerating recessionary trends and other adverse changes in general economic conditions, material prices, labor costs, interest rates, the secondary market for loans, consumer confidence, competition, currency exchange rates (insofar as they affect the Company’s operations in France), environmental factors, government regulations affecting the Company’s operations, the availability and cost of land in desirable areas, unanticipated violations of Company policy, unanticipated legal proceedings, and conditions in the capital, credit and homebuilding markets. See the Company’s Annual Report on Form 10-K and its Annual Report to Shareholders for the year ended November 30, 2001 and its other filings for a further discussion of these and other risks and uncertainties applicable to the Company’s business.

KB HOME
CONSOLIDATED STATEMENTS OF INCOME
For the Nine Months and Three Months Ended August 31, 2002 and 2001
(In Thousands, Except Per Share Amounts - Unaudited)

KB HOME CONSOLIDATED BALANCE SHEETS (In Thousands - Unaudited)

KB HOME SUPPLEMENTAL INFORMATION
For the Nine Months and Three Months Ended August 31, 2002 and 2001 (Unaudited)

FOR RELEASE, Wednesday, September 18, 2002
For Further Information Contact:
Clem Teng, Investor Relations - (310) 231-4033 or cteng@kbhome.com
Debra Hotaling, Media Contact - (310) 231-4015 or dhotaling@kbhome.com