<SEC-DOCUMENT>0000950123-11-030359.txt : 20111227
<SEC-HEADER>0000950123-11-030359.hdr.sgml : 20111226
<ACCEPTANCE-DATETIME>20110329204805
<PRIVATE-TO-PUBLIC>
ACCESSION NUMBER:		0000950123-11-030359
CONFORMED SUBMISSION TYPE:	CORRESP
PUBLIC DOCUMENT COUNT:		1
FILED AS OF DATE:		20110329

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			KB HOME
		CENTRAL INDEX KEY:			0000795266
		STANDARD INDUSTRIAL CLASSIFICATION:	OPERATIVE BUILDERS [1531]
		IRS NUMBER:				953666267
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			1130

	FILING VALUES:
		FORM TYPE:		CORRESP

	BUSINESS ADDRESS:	
		STREET 1:		10990 WILSHIRE BLVD
		CITY:			LOS ANGELES
		STATE:			CA
		ZIP:			90024
		BUSINESS PHONE:		3102314000

	MAIL ADDRESS:	
		STREET 1:		10990 WILSHIRE BLVD
		CITY:			LOS ANGELES
		STATE:			CA
		ZIP:			90024

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	KAUFMAN & BROAD HOME CORP
		DATE OF NAME CHANGE:	19920703
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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">KB HOME<BR>
10990 Wilshire Boulevard<BR>
Los Angeles, California 90024<BR>
March&nbsp;29, 2011
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">John Cash<BR>
Accounting Branch Chief<BR>
Division of Corporation Finance<BR>
United States Securities and Exchange Commission<BR>
100 F Street, NE<BR>
Washington, D.C. 20549-7010

</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">Re: &nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>KB Home<br>
Form 10-K for the fiscal year ended November&nbsp;30, 2010<br>
Filed January&nbsp;31, 2011<br>
File #1-9195</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Dear Mr.&nbsp;Cash:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">This letter responds to the comments of the staff (&#147;Staff&#148;) of the Division of Corporation Finance
of the Securities and Exchange Commission (the &#147;Commission&#148;) contained in your letter dated March
15, 2011 regarding the Form 10-K for the fiscal year ended November&nbsp;30, 2010 that we filed with the
Commission on January&nbsp;31, 2011 (the &#147;Form&nbsp;10-K&#148;), and our prior written response dated March&nbsp;8,
2011 to the Staff&#146;s comments on the Form 10-K that were contained in your letter dated February&nbsp;22,
2011.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Below we have reprinted the comments from the March&nbsp;15, 2011 letter in bold, followed by our
responses.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U><B>Form&nbsp;10-K for the fiscal year ended November&nbsp;30, 2010</B></U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U><B>MD&#038;A &#151; Critical Accounting Policies, page 50</B></U><br>
<U><B>Inventory Impairments and Land Option Contract Abandonments, page 51</B></U>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>1.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>We note your response to our prior comment four. It appears to us that the current
disclosure in your </B><B>Form 10-K</B><B> indicates that while each land parcel or community is assessed to
determine if indicators of potential impairment exist, a land parcel or community is only
evaluated for recoverability if such indicators do, in fact, exist. Therefore, please revise
your disclosures in future filings to clarify if each land parcel or community is evaluated
for recoverability. To the extent that you evaluate less than all of your land parcels and
communities, please disclose the number you evaluated as well as the number that were impaired
during each period.</B></TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Response</U>:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our future filings will reflect this comment.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U><B>Consolidated Financial Statements</B></U><br>
<U><B>Note 14. Commitments and Contingencies, page 80</B></U>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left"><B>2.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Based on your response to our prior comment six, please tell us what additional disclosures
you intend to provide in future filings for warranties related to defective drywall materials.
Also, please explain to us where and how you recorded the $8.3&nbsp;million revision to estimated
repair costs in 2010 and tell us how you intend to disclose this revision in future filings.</B></TD>
</TR>



</TABLE>
</DIV>
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</DIV>

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<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Response</U>:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In our Quarterly Report on Form 10-Q for the quarter ended February&nbsp;28, 2011 and in future filings
(as relevant), we will provide disclosure substantially as follows:
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The Company&#146;s overall warranty liability of $87.1&nbsp;million at February&nbsp;28, 2011 included $9.6
million for estimated remaining repair costs associated with 246 homes that have been identified
as containing or suspected of containing allegedly defective drywall material manufactured in
China. These homes are located in Florida and were primarily delivered in 2006 and 2007. The
Company&#146;s overall warranty liability of $94.0&nbsp;million at November&nbsp;30, 2010 included $11.3&nbsp;million
for the estimated remaining repair costs associated with 296 such identified affected homes. The
decrease in the liability for estimated repair costs associated with identified affected homes
during the three months ended February&nbsp;28, 2011 reflected the lower number of identified affected
homes with unresolved repairs at February&nbsp;28, 2011 compared to November&nbsp;30, 2010. During the
three months ended February&nbsp;28, 2011, repairs were resolved on 63 identified affected homes, and
the Company identified 13 additional affected homes. For these purposes, the Company considers
repairs for identified affected homes to be &#147;resolved&#148; when all repairs are complete and all
repair costs are fully paid. Repairs for identified affected homes are considered &#147;unresolved&#148;
if repairs are not complete and/or there are repair costs remaining to be paid.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">The drywall used in the construction of the Company&#146;s homes is purchased and installed by
subcontractors. The Company&#146;s subcontractors obtained drywall material from multiple domestic
and foreign sources through late 2008. In many cases, the origin of the drywall material
obtained before December&nbsp;2008 cannot be determined. As a result, the Company is unable to
readily identify the total number of homes that may contain the allegedly defective drywall
material manufactured in China. The Company has identified homes that contain or may contain
such drywall material primarily by responding to homeowner-initiated warranty claims or customer
service questions regarding such material or regarding conditions or items in a home that may be
affected by such material. Additionally, in certain communities where there has been a high
number of affected homes identified through the warranty/customer service process, the Company
has proactively undertaken community-wide reviews and identified more affected homes. The
Company expects to complete all such identified community-wide reviews by the end of May&nbsp;2011.
The Company&#146;s customer service personnel or, in some instances, third-party consultants handle
these matters. While the Company continues to respond to individual warranty/customer service
requests as they are made, the number of additional affected homes newly identified each quarter
has fallen significantly since the third quarter of 2009 to a nominal amount. As a result, and
based on the Company&#146;s experience to date of the nature of the problems caused by the allegedly
defective drywall material and the steps the Company has taken since late 2008 to direct its
subcontractors to obtain only domestically sourced drywall material, the Company anticipates that
after completion of the review process it will have identified substantially all potentially
affected homes.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">During the three months ended February&nbsp;28, 2011 and 2010, the Company paid $5.4&nbsp;million and $3.4
million, respectively, to repair identified affected homes, and estimated its additional repair
costs with respect to the identified affected homes to be $3.7&nbsp;million and $7.6&nbsp;million,
respectively. Since first identifying affected homes in 2009, the Company has identified a total
of 450 affected homes and has resolved repairs on 204 of those homes through February&nbsp;28, 2011.
As of February&nbsp;28, 2011, the Company has paid $32.2&nbsp;million of the total estimated repair costs
of $41.8&nbsp;million associated with the identified affected homes. Based on its analyses, the
Company determined that its overall warranty liability at each reporting date since August&nbsp;31,
2009 was sufficient with respect to the Company&#146;s then-estimated remaining repair
</DIV>

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</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">costs associated with identified affected homes and its overall warranty obligations on homes
delivered. As a result, the Company did not incur charges in its 2010 fiscal year or in the
three months ended February&nbsp;28, 2011 with respect to such repair costs.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">Depending on the number of additional affected homes identified, if any, and the actual costs the
Company incurs to complete the above-described review process and to repair identified affected
homes in future periods, including costs to provide affected homeowners with temporary housing,
the Company may revise the estimated amount of its liability with respect to this issue, which
could result in an increase or a decrease in the Company&#146;s overall warranty liability on homes
delivered.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">With regard to the Staff&#146;s comment as to where and how we recorded the $8.1&nbsp;million revision to
estimated repair costs in 2010, we did not accrue any additional amounts with respect to this
revision because, as noted above in our proposed disclosure, we determined that our overall
warranty liability in each quarter of our 2010 fiscal year was sufficient with respect to our
then-estimated remaining repair costs associated with identified affected homes and our overall
warranty obligations on homes delivered.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U><B>Note 15. Legal Matters, page 81</B></U>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" nowrap align="left"><B>3.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>We note your response to our prior comment seven and have the following additional comments:</B></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>(A)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Notwithstanding the fact that there was not a demand from the lenders under the
Springing Guaranty, please provide us a more specific and comprehensive discussion
regarding how you determined that a loss was not probable or estimable at November&nbsp;30,
2010. In this regard, please specifically discuss what consideration you gave to the fact
that you provided certain guarantees to the lenders and that they filed a Chapter&nbsp;11
involuntary bankruptcy petition against South Edge on December&nbsp;9, 2010.</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>(B)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Please provide us a more specific and comprehensive discussion regarding why you
assumed South Edge would pay off the Loans at a discount. In this regard, please provide
us more information regarding what discussions you or South Edge had with the lenders
regarding this potential outcome.</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>(C)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Please provide us your estimate of the fair value of the South Edge land at November
30, 2010 and 2009 and at February&nbsp;28, 2011.</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>(D)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>We note you had a reserve of approximately $122&nbsp;million relating to South Edge at
November&nbsp;30, 2010. We also note your disclosure on page 74 of your </B><B>Form 10-K</B><B> that there
were no impairment charges in 2010 related to your investments in unconsolidated joint
ventures. Please provide us a specific and comprehensive discussion regarding how you
determined that your potential obligation under the Springing Guaranty did not result in a
reduction of your investment in South Edge during 2010 and explain to us when and how you
recorded the reserve.</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>(E)</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Please provide us a specific and comprehensive discussion regarding your assessment
of the overall carrying value of South Edge and your obligations under the Springing
Guaranty, including amounts related to unpaid interest and attorney fees, at February&nbsp;28,
2011.</B></TD>
</TR>




</TABLE>
</DIV>
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</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Response</U>:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For clearer presentation, we have formatted our response with lettered paragraphs and have
substituted in the above comment corresponding letters for the bullets in the March&nbsp;15, 2011
letter.
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(A)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U>Consideration of Loss Under the Springing Guaranty</U>. By its terms, the Springing
Guaranty&#146;s obligations arise only after the occurrence of (a)&nbsp;an involuntary bankruptcy
proceeding or an involuntary bankruptcy petition filed against South Edge that is not
dismissed within 60&nbsp;days, or for which an order or decree approving or ordering any such
proceeding or petition is entered; or (b)&nbsp;a voluntary bankruptcy commenced by South Edge
(each, a &#147;South Edge Bankruptcy Event&#148;). Thus, we historically considered a probability of
loss with respect to the Springing Guaranty based on whether a South Edge Bankruptcy Event had
occurred or was probable. Prior to the December&nbsp;9, 2010 filing by certain lenders of a
Chapter&nbsp;11 involuntary bankruptcy petition against South Edge, we had determined that no South
Edge Bankruptcy Event had occurred or was probable. Therefore, we determined that a loss was
not probable at November&nbsp;30, 2010 with respect to the Springing Guaranty.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In preparing the Form 10-K, we considered the lenders&#146; December&nbsp;9, 2010 petition. After the
filing of the lenders&#146; petition, we believed that there were several well-founded legal
arguments against the entry of an order for relief on the petition, a belief informed by
analyses and advice we received from outside legal counsel to us and to South Edge. As
reflected in the court filings South Edge submitted against the lenders&#146; petition, these
arguments included the following: (a)&nbsp;the lenders had agreed that only the Administrative Agent
for the Loans had the right to realize upon the collateral securing the Loans and that for this
and other reasons, the lenders lacked standing to file their petition; (b)&nbsp;that the lenders had
failed to prove that they were undersecured; (c)&nbsp;that South Edge was regularly paying its debts
as they became due, other than to the lenders, and that the lenders had not proven that the
portion of unpaid debt potentially owed to them by South Edge was undisputed; (d)&nbsp;that the
petition was filed by the lenders in bad faith; and (e)&nbsp;that the court should abstain from
entering an order for relief. We therefore considered at the time we filed the Form 10-K on
January&nbsp;31, 2011 &#151; when the trial on the lenders&#146; petition was still in process and the
outcome was uncertain &#151; that it was not probable that an order for relief on the petition
would be entered.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>At the conclusion of the trial on the lenders&#146; petition on February&nbsp;3, 2011, the court entered
an order for relief. Until the court&#146;s decision, we did not consider it probable that it would
enter the order for relief. In fact, during the course of the trial it appeared to us that the
petitioning lenders had failed to prove their case. The lenders also had been unsuccessful in
a pretrial procedural hearing and had abandoned an effort to have an interim trustee appointed
for South Edge. These events, in addition to our observation of the course of the trial
itself, informed our view that the entry of an order for relief on the lenders&#146; petition was
not probable. We further note that in rendering its decision, the court stated that the
argument that the lenders lacked standing &#147;is strong, and I wrestled with it a lot&#148; (Reporter&#146;s
Transcript of February&nbsp;3, 2011 at 38:6-7), and that the lenders&#146; ability to prove that they
were undersecured by the statutorily-required amount was a &#147;closer question&#148; (<I>Id. </I>at 46:21).
South Edge&#146;s appeal of the court&#146;s decision also shows its belief in the merits of the
arguments against the entry of an order for relief on the lenders&#146; petition.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In summary, as we considered that it was not probable that an order for relief on the lenders&#146;
petition would be entered (<I>i.e.</I>, a South Edge Bankruptcy Event), we believed at the time we
filed the Form 10-K that a loss was not probable with respect to the Springing Guaranty. At
the time we filed the Form 10-K, we did consider such a loss to be reasonably possible,</TD>
</TR>

</TABLE>
</DIV>
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<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>however, and therefore we provided in the Form 10-K updated disclosure with respect to the
Springing Guaranty (including as to the potential impact of the lenders&#146; petition).</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>At November&nbsp;30, 2010 and up through the time of filing the Form 10-K, we also considered that
it was not probable that we would have any liability or obligation to repay the Loans under the
other guarantees we provided to the lenders in connection with the Loans &#151; a completion
guaranty and a limited guaranty. Unlike the Springing Guaranty, these other guarantees, which
are described in the Form 10-K, are not repayment guarantees. Our consideration was based on
the nature of these other guarantees and also on our belief that we have practical and
well-founded legal defenses to their potential enforcement, a belief informed by our own
experience and by analyses and advice received from outside legal counsel. We weighed our
potential obligations with respect to these other guarantees in our assessment of South Edge&#146;s
ability to repay the Loans at a discount, as further discussed below in paragraph (B).
However, because our potential obligations under them are not triggered or increased by a South
Edge Bankruptcy Event, the lenders&#146; petition did not impact our considerations with respect to
these other guarantees.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(B)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U>Discounted Pay Off of the Loans</U>. We assumed at November&nbsp;30, 2010 and up through the time
of filing the Form 10-K that the Loans would be paid off by South Edge at a discount, largely
because of the structure of the financing for the South Edge project and our experience in
renegotiating the financial arrangements for similar projects. The Loans are a direct
obligation solely of South Edge and are secured by the underlying real property for the
project and other South Edge assets. We and each of the parent companies of the other South
Edge members, together with each of their respective subsidiaries that serve as members of
South Edge, including our subsidiary KB HOME Nevada Inc., provided certain guarantees to the
lenders in connection with the Loans. We believed at November&nbsp;30, 2010 and up through the
time of filing the Form 10-K that there were practical and well-founded legal defenses to the
potential enforcement, if any, by the lenders of these guarantees (including with respect to
the Springing Guaranty), as discussed above in paragraph (A).</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In addition, in late 2010, we and other members of a separate joint venture that owned land in
southern Nevada had negotiated a very substantial discount on the debt owed by that joint
venture under a loan structure that was similar to the South Edge structure and with some
overlap of members and lenders. We also had knowledge that, in private transactions, interests
in the Loans had been sold at discounts to par, and we had been involved since 2008 in
periodic, though indefinite and unsuccessful, discussions with the lenders regarding the Loans,
as described below in paragraph (D). In consideration of all of these factors, we believed
that South Edge could pay off the Loans at a discount.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(C)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U>Estimate of Fair Value of South Edge Land</U>. As part of our assessments of the overall
carrying value of our investment in South Edge for recoverability, we have estimated on a per
acre basis the fair value of South Edge land that KB HOME Nevada Inc. may acquire from South
Edge (as discussed below in paragraph (D)). Our estimate of the fair value of this South Edge
land was $132,000 per acre and $138,000 per acre at November&nbsp;30, 2009 and 2010, respectively.
As further discussed below in paragraph (E), our estimate at February&nbsp;28, 2011 was $127,000
per acre.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(D)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U>Valuation of South Edge in 2010; Recording of Reserve</U>. As part of our quarterly
process described in our March&nbsp;8, 2011 response letter, we have assessed the overall carrying
value of our investment in South Edge for recoverability. Through this process, and based on
the considerations described below, we recorded inventory impairment charges in the third and
fourth quarters of 2007 and in the second and third quarters of 2008 to establish reserves
relating to the anticipated acquisition of land from South Edge. The remaining balance of these</TD>
</TR>

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    <TD width="1%" nowrap align="left">&nbsp;</TD>
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    <TD>reserves totaled approximately $122&nbsp;million at November&nbsp;30, 2010 after adjusting the carrying
value of our investment in South Edge at November&nbsp;30, 2009.</TD>
</TR>

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    <TD width="1%">&nbsp;</TD>
    <TD>Through the first quarter of 2008, our assessments considered that in accordance with land
option purchase contracts with South Edge, KB&nbsp;HOME Nevada Inc. and the other members of South
Edge would acquire land from South Edge at prices that were initially established when the
joint venture was formed in 2004, and amended upward in the second quarter of 2007. The land
option purchase contracts supported a determination that our investment in South Edge was
recoverable as the proceeds from land sales would be used by South Edge to repay the Loans and
equity investments in full. Our assessments also considered that KB&nbsp;HOME Nevada Inc. would
purchase land from South Edge, develop the land, and build and sell homes on the land. KB&nbsp;HOME
Nevada Inc. first purchased land from South Edge in the second quarter of 2007. The inventory
impairment charges we recorded in the third and fourth quarters of 2007 resulted from the
expected losses arising from the purchase price we believed KB&nbsp;HOME Nevada Inc. would pay to acquire land in the future
from South Edge, taking into account a decline in market prices for land and housing in
southern Nevada.</TD>
</TR>

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    <TD width="1%">&nbsp;</TD>
    <TD>By the second quarter of 2008, with local market conditions and land prices having further deteriorated,
the facts and circumstances surrounding South Edge and its financing had
changed significantly. In the second quarter of 2008, the lenders declined to process a draw
South Edge requested. Two of the South Edge members were indicating that they were in
financial distress, one of which later filed a voluntary bankruptcy petition, and the other
becoming subject to involuntary bankruptcy proceedings. In March&nbsp;2008, South Edge did not make
an interest payment on the Loans and, as a result, the Administrative Agent for the Loans sent
a notice of default to South Edge with respect to the Loans. Based on South Edge&#146;s default,
the lenders prevented a financially viable South Edge member from purchasing land from South
Edge by not releasing liens on the land in order to allow the purchase to be completed.</TD>
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    <TD>With the deterioration in local market conditions, the financial difficulties of two South Edge
members and the loan default, South Edge, KB&nbsp;HOME Nevada Inc., the other South Edge members and
each of the parent companies of the South Edge members, including us, began working with the
lenders in the second quarter of 2008 to reach a resolution regarding the Loans and the overall
South Edge project. This included, among other things, discussions of a possible pay
off of the Loans at a discount (as discussed above under paragraph (B)), and adjustments to the
timing of land purchases from South Edge by the South Edge members. Based on these discussions
with the lenders, in assessing the recoverability of our investment in South Edge from the
second quarter of 2008 through the fourth quarter of 2010, we considered that the South Edge
members would likely acquire land from South Edge at prices below those established under the
earlier land option purchase contracts and that South Edge would pay off the Loans at a
discount. In addition, given the facts and circumstances surrounding South Edge during this
period, our assessments considered that KB&nbsp;HOME Nevada Inc. would sell the land that it
acquired from South Edge to third parties without further development, rather than develop the
land and build and sell homes on the land. The inventory impairment charges we recorded in the
second and third quarters of 2008 reflected the expected losses resulting from the changed
facts and circumstances surrounding South Edge as well as prevailing local market conditions
with respect to land values.</TD>
</TR>

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    <TD>At November&nbsp;30, 2009, we determined that the fair value of the relevant South Edge land did not
support the recoverability of the overall carrying value of our investment in South Edge at
that date and, therefore, we reduced</TD>
</TR>

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    <TD>our investment to fair value. Following this reduction, we determined that the remaining balance
was recoverable based on our analyses in each quarter of 2010. With the February&nbsp;3, 2011 court
decision, however, we have determined that our remaining investment in South Edge is no longer
recoverable and have written off our investment in South Edge during the three months ended
February&nbsp;28, 2011, as discussed below in paragraph (E).</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(E)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U>Overall Carrying Value of South Edge and Springing Guaranty Obligations at February&nbsp;28,
2011</U>. As a result of the February&nbsp;3, 2011 court decision, we have determined that our investment in South Edge is no longer recoverable and have
recognized a charge of approximately $54&nbsp;million to write off the remaining amount of our
South Edge investment during the three months ended February&nbsp;28, 2011. Therefore, at February
28, 2011, we have assessed the overall carrying value of our investment in South Edge to be
zero.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
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    <TD width="1%">&nbsp;</TD>
    <TD>In view of the court decision, and although we believe there are potential offsets or defenses
to prevent or minimize its enforcement as set forth in our March&nbsp;8, 2011 response letter, we
now consider our obligation under the Springing Guaranty to be probable. Therefore, our
consolidated financial statements at February&nbsp;28, 2011 reflect an obligation of approximately
$212&nbsp;million, representing our estimate of the probable amount that we would pay
to the lenders, including amounts relating to unpaid
interest and attorneys&#146; fees, if we cannot offset or defend against the enforcement of the
Springing Guaranty. In paying this amount, we would assume
the lenders&#146; lien position with respect to our share of the South Edge land. Thus, our obligation relating to
the Springing Guaranty is partially offset by an amount equal to the estimated fair value of this South Edge
land and existing reserves, resulting in a charge of approximately $23&nbsp;million, which is in addition to the write off
of our investment in South Edge, during the three months ended February&nbsp;28, 2011.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
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    <TD>In determining our expected loss, we considered the
estimated fair value of our share of the South Edge land. We calculated the
estimated fair value of this South Edge land using a present value methodology and assuming
that KB&nbsp;HOME Nevada Inc. would develop the land, build and sell homes on most of the land,
and sell the remainder of the developed land. (Alternative strategies that we no longer view as probable
for this fair value estimate were selling all of the land without further development, and
abandoning the property.) This fair value estimate at February&nbsp;28, 2011 reflected judgments
and key assumptions concerning (a)&nbsp;housing market supply and demand conditions, including
estimates of average selling prices; (b)&nbsp;estimates of potential future home sales and
cancellation rates; (c)&nbsp;anticipated entitlements and development plan for the land; (d)
anticipated land development, construction and overhead costs to be incurred; and (e)&nbsp;a risk-free rate of return and an expected
risk premium. Taking into account the foregoing, including a decision to pursue
residential development at South Edge based on an anticipated revised development plan, our
South Edge land fair value estimate was $127,000 per acre at February&nbsp;28, 2011.</TD>
</TR>

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    <TD width="1%">&nbsp;</TD>
    <TD>The foregoing assessments at February&nbsp;28, 2011 involved our senior management in operational,
legal and financial areas who are familiar with South Edge and the market in which it is
located. In making the assessments, our senior management consulted with</TD>
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    <TD>outside legal counsel and with our independent registered public accounting firm and its
valuation experts. These assessments were made based on the facts known to us at the time
made, and though there continues to be uncertainty regarding the ultimate resolution of a
number of matters relating to South Edge, these assessments reflect what we believe is the most
probable outcome as of the date of this letter.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">* * *
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We acknowledge that:
</DIV>


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    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>We are responsible for the adequacy and accuracy of the disclosure in the filing;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
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    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Staff comments or changes to disclosure in response to Staff comments do not foreclose
the Commission from taking any action with respect to the filing; and</TD>
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<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="2%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>We may not assert Staff comments as a defense in any proceeding initiated by the
Commission or any person under the federal securities laws of the United States.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We believe this letter appropriately responds to each of the Staff&#146;s comments and questions. If
you have any further questions or comments, please do not hesitate to contact me at 310-231-4014,
Brian J. Woram, our Executive Vice President, General Counsel and Corporate Secretary, at
310-231-4040, or William R. Hollinger, our Senior Vice President and Chief Accounting Officer, at
310-231-4028.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Sincerely,
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">/S/ JEFF J. KAMINSKI
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Jeff J. Kaminski<br>
Executive Vice President and Chief Financial Officer
</DIV>


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    <TD width="1%" nowrap align="left">cc: &nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Tricia Armelin, Staff Accountant<br>
Anne McConnell, Senior Staff Accountant<br>
(U.S. Securities and Exchange Commission)<br><br>
Brian J. Woram, Executive Vice President, General Counsel and Corporate Secretary<br>
William R. Hollinger, Senior Vice President and Chief Accounting Officer<br>
(KB Home)</TD>
</TR>

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