KB Home returns to 3Q profit, surprises Street

The results surprised Wall Street and the company's stock rose more than 5 percent in morning trading to their highest level in a year and a half.

President and CEO Jeffrey Mezger said in a statement on Friday that the housing recovery is building momentum across the U.S. as inventory levels drop and home prices climb.

Homebuilders are a bellwether for the housing market and the economy. While new homes represent less than one-fifth of the total housing market, construction of houses has a major impact on the economy.

Part of the reason consumers are getting back into the housing market is because of historically low rates. On Thursday mortgage buyer Freddie Mac said that the average rate on the 30-year loan declined to 3.49 percent from 3.55 percent last week. That matched the lowest rate since long-term mortgages began in the 1950s.

The average on the 15-year fixed mortgage, a popular refinancing option, plunged to 2.77 percent, a record low.

This followed the announcement last week by the Federal Reserve that it plans to spend $40 billion a month to buy mortgage bonds for as long as it thinks necessary to make home buying more affordable.

For the three months ended Aug. 31, KB Home which builds homes to order, reported net income of $3.3 million, or 4 cents per share. That compares with a loss of $9.6 million, or 13 cents per share, a year earlier.