Builder KB Home said home sales were down 37 percent during the second quarter from a year ago, to 1,761 units, with the average price declining 5 percent to $216,200.

But the Los Angeles-based homebuilder managed to slash inventory by 39 percent from a year ago, to 3,804 homes, while paring losses to $78.4 million, down from $256 million in the second quarter of 2008.

Inventory on hand at the end of May represented future revenue of about $796.9 million, or about $209,500 per home. Net orders, while down 31 percent from a year ago, grew 59 percent from the previous quarter, to 2,910.

Sales and prices were down the most in the Southwest region, while West was the company’s healthiest market, KB Home said in a regulatory filing.

Homes delivered decreased 6 percent in the West, 55 percent in the Southwest, 39 percent in the Central region and 47 percent in the Southeast. The average selling price declined 4 percent in the West, 23 percent in the Southwest, 8 percent in the Central region and 15 percent in the Southeast.

KB Home’s financial services operations, which include its interest in a mortgage banking joint venture, generated pretax income of $4.4 million, up 45 percent from a year ago. The increase was driven by expense reductions, and higher margins on the origination and sale of more government-insured loans.

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