KB Home Shares Popped: What You Need to Know

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of homebuilder KB Home (NYS: KBH) were surging today, gaining as much as 20% in intraday trading after competitor Lennar (NYS: LEN) announced a positive earnings surprise.

So what: "Good news" and "homebuilders" are two things that don't seem to go together these days. But that's exactly why just a glimmer of good news from Lennar was able to send KB Home shares spiking. Though Lennar's profit fell nearly 6% for the fourth quarter, revenue rose 11% and the average sales price rose slightly.

Now what: Is this a good sign for the sector? Sure it is. But I'm not convinced that the reaction from KB's shares is warranted. The housing market still has a long road ahead before homebuilders are out of the woods, so I can't see myself rushing to buy after a single data point -- particularly when it's a data point that's not even from KB.

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