KB Home (NYSE: KBH) shares dropped after the nation's largest homebuilder announced that its losses widened in the second quarter. Weaker sales and falling home prices led to a 55 percent drop in revenues as the company also booked charges related to the lower value of unsold homes, joint venture deals and land option contracts.

KB Home reported a net loss of $255.9 million, or $3.30 per share, compared to a loss of $148.7 million during the same time a year ago. Meanwhile, revenues plunged to $639.1 million from $1.41 billion a year ago, driven down by lower housing and land sale revenues.

"Despite substantially lower home prices, relatively low interest rates and an abundance of choices, potential new home buyers remain reluctant to purchase a home," Mezger said in a statement. "But as housing affordability continues to improve, we expect todays hesitant buyers to become a healthy source of demand for new homes, fueling the eventual housing market recovery."

The problem is so large at this point that some rental rates are higher than mortgage rates for like-kind properties! Still, people prefer to pay rent instead in order to avoid paying money on a property that is going to decline in value. This simply emotional fear has been causing a very real decline as inventories continue to rise.

Foreclosures have risen substantially over the past few months, and very few buyers are stepping in to purchase houses on the cheap. This environment of high supply and low demand has forced down prices for simple economic reasons. The problems won't be resolved either until buyers start to step in and purchase inventory.

When will buyers step in? That's the million dollar question for home buyers and companies like KB Home alike...

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