KB Home, one of the nation’s largest home builders, on Wednesday cut its full-year profit forecast, citing a challenging housing market and a decline in new home orders.

The Los Angeles-based company now expects diluted earnings per share of $8-$8.50 for the full fiscal year, and anticipates earnings for the third quarter, which ended Aug. 31, to range from $1.85-$1.95 per diluted share.

Preliminary net orders for the third quarter were down 43 percent to 5,989 units compared to the previous year’s quarter. Higher cancellation rates in many of KB Home’s markets continue to adversely affect net orders, the company said in a statement.

Also, traffic to KB Home’s new home communities and gross unit orders each showed an 11 percent decline from last year.

“Our earnings expectations for the third quarter and full year reflect an increasingly challenging housing market, where the supply of new and resale home inventories has built up in recent months in markets that have experienced rapid price appreciation or substantial investor activity, or both, in the past few years,” said Bruce Karatz, chairman and CEO of KB Home.

Weaker-than-expected demand for new homes is “further intensifying” unfavorable housing market conditions, he said, but the company remains positive in its long-term outlook.

“For the near term, we are taking actions to increase construction efficiencies, reduce overhead, curtail land acquisitions and monetize non-strategic land positions, and remain focused on generating cash flows and reducing debt levels to further strengthen our balance sheet and provide for the repurchase of the company’s shares,” Karatz said.

Members of KB Home’s board of directors are continuing an internal review of the company’s stock option grants, but no conclusions have been reached, the company said Wednesday.

KB Home stock (NYSE: KBH) was trading at $40.74 a share this morning.

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