Good day, everyone, and welcome to KB Homes first quarter earnings conference call. As a reminder, today’s conference call is being recorded and webcast on KB Home’s website at kbhome.com. KB Home’s discussion today may include certain projections and forward-looking statements regarding KB Home’s business, future actions and expected results. These are based on management’s assessment of the company’s current business and assumptions about future operating conditions which should not be considered guarantees of future performance. Please be aware that KB Homes actual results may differ from those that are expressed or implied by the projections and forward-looking statements that may be made today due to risks, assumptions, uncertainties and other risks and events outside of the company’s control, and that these differences may be material. Many of these risk factors are identified in the company’s periodic reports filed with the SEC, including the annual report on Form 10-K and the company urges you to read them. For opening remarks and introductions, I would now like to turn the call over to KB Home's President and Chief Executive Officer, Mr. Jeffrey Mezger. Please go ahead, sir.

Thank you. Good morning, everyone. Thank you for joining us today to discuss the financial results for our first quarter of 2007. With me this morning are Dom Cecere, our EVP and CFO; Bill Hollinger, our Senior Vice President and Chief Accounting Officer, and Kelly Masuda, our Senior Vice President of Investor Relations and Treasurer. From a macro perspective, the fundamental economic drivers for housing remain healthy, including favorable demographics, low interest rates, job growth and growth in personal income. At the same time, there continues to be an excess supply of unsold inventory, driven in part by a lack of affordability. The problems in the sub-prime lending market place are creating further challenges in assessing the state of the housing market and the near-term outlook. During these times, we remain focused on achieving all out operational excellence with our KBnxt business model, leveraging our core business strengths and disciplines as a build-to-order home builder offering choice and value to our customers. Now, let me share some of the financial highlights for the first quarter with you. Net orders for new homes were down 12% this quarter versus the first quarter of 2006. This compares to a year-over-year decline in orders of 38% in the fourth quarter and 43% in the third quarter of ’06. We entered the first quarter with 17,384 sold homes in backlog and we delivered 6,655 new homes during the quarter, down 16% from the first quarter of ’06, with 11% fewer active communities. The lower community counts were a strategic move to scale back community count growth and lower our investments in land and land development and in turn, generating free cash flow until the U.S. housing market begins to show some sign of stability. Housing gross margin in the first quarter was 17.7% of…

Thank you, Dom. Amid further tightening of guidelines for sub-prime mortgages, funding for sub-prime home loans that do not require a down-payment or proof of income will be difficult to find. While sub-prime is a small component of our sales activity, our mortgage partner, Country Wide, will still offer a wide variety of loans to qualified sub-prime borrowers who can document income and make the required down-payments. The leading economist for the NAR and at the University of California believe that the problem in the sub-prime market will likely be contained with a healthy job market providing a basis for moderate income growth. In 2006, approximately 13% of mortgages for a KB Home were financed with sub-prime loans compared to 20% nationally for all mortgage originations. KB Home does not hold any mortgage loans or have any risk for early payment defaults, a benefit derived from our mortgage joint venture, Country Wide KB Home Loans, which began making loans to home buyers in September of 2005. This great partnership allows us to focus on home building and leave the mortgage approval process to the experts. The primary risk we see from changes in sub-prime lending is the overall market risk of a potential slow-down in housing demand from buyers not being able to qualify under stricter underwriting standards, or the possibility of increased excess supply of unsold homes for a rise in foreclosures. I would point out that in our core markets, strong job growth and growth in personal income are the underpinnings for a healthier housing market, with foreclosures in these areas still occurring below the national average. There are still options for home-buyers who have little or no money for a down-payment or a blemished credit profile that have the income to qualify. These options include FHA and…

(Operator Instructions) Our first question comes from Margaret Whelan, UBS.

It’s actually Dave Goldberg on for Margaret. I was wondering if you guys could give us an idea on where you think free cash flow could be for ’07, what your expectations are there and what the priority is going to be between paying down debt and de-levering versus share repurchases moving forward?

Dom can answer that.

Hi, Dave. We have positioned ourselves very well for generating free cash flow, but free cash flow really comes in the second-half of the year when our deliveries pick up. But our investments that we have made in buying land and developing land are significantly below a year ago, and as soon as the next eight to ten weeks that we can determine the number of deliveries that we are going to have for the year, we will have a good feel for free cash flow, and exactly when the market is going to begin to stabilize will determine how much is used for share repurchase versus growth versus reducing debt.

Do you have a point that you are trying to get to on the debt? Is there a target debt-to-cap level?

Yes, our targeted debt-to-cap has continued to stay between 45% and 50% and we have been at the low-end of that range.

As a follow-up, I was wondering where margins were for homes that are currently in backlog and if you know what percent of buyers that are in backlog are using sub-prime financing?

That is two different questions, Dave. If you want to talk to margins, Dom.

The margins in backlog aren’t dissimilar than what we may have today. The question is will that be the margin when we close? It has gotten more stable so we cannot fully answer it, Dave. We are still seeing some pressure on margins, but we had 17.7% average margin in the first quarter and I do not think it is going to be down significantly but we do not know, we cannot peg exactly where it is going to be yet in Q2.

And in terms of the sub-prime exposure in the backlog?

As to that question, Dave, let me start with a few general comments because I know this will be a topic on the call. If you were to line up 50 mortgage bankers and 50 people from the investment community, you would not get a consensus on what a sub-prime loan is. Everybody has a different opinion so I can only share with you sub-prime relative to how we see it here at KB. As we stated, it was less than 15% in ’06. We expect obviously it will go down here from that level even in ’07. In our business model, with Country Wide, we start the home after the loan is approved. We gain the credit approval first and we do not feel that our backlog is at risk on the business that is with Country Wide. We are approaching right now a 70% retention rate with Country Wide, which is very solid, and we do not broker any loans out of the venture. So the 70% backlog with Country Wide is going to go through our normal process, get an approved loan and then we will build the home and close the home. On the 30% that is not with Country Wide, you can assume that it is roughly the 15% or less that we ran in ’06, so if there is any backlog at risk it would be the 15% of the 30% that is outside, so less than 5% of our backlog. We are comfortable our backlog is solid.

Our next question comes from Stephen Kim, Smith Barney Citigroup.

Thanks, guys. Thanks for that rundown on the sub-prime. I thought that was useful. When you guys talk about your SG&A, we have in our notes -- I think that this is something that we had gotten from you in February, that your expectation is somewhere around 12.7% for the year, basically flat with last year. The way that the first quarter came in made us wonder whether there was anything sort of unusual in that first quarter, maybe something related to stock option expense or something. Can you just address the SG&A for the year, whether you still feel that the 12.7% is a reasonable target and if there was anything unusual in the first quarter?

Stephen, the biggest change in the first quarter was an increase in advertising and an increase in sales incentives that drove it up 130, 140 basis points I think above the prior year. It is hard to say what SG&A is going to be for the year until I know my deliveries for the year, but we are continuing to have very tight controls in SG&A spending. I would say today that it is probably going to be up year over year but I do not think it is going to be up significantly, but it will be up.

And what about if there was anything unusual, what about -- you made a mention in your K about some $7 million or something like that in charges.

There was -- the $7 million that was in the K was in there, but the primary driver was really advertising and sales incentives, marketing costs.

Just a reminder, we ask our audience to limit it to two questions per line. Moving on, we will hear from Ivy Zelman, Credit Suisse.

Good morning, guys. The comments you made regarding your community count being down year over year and looking at pulling back on bringing new product to market, assuming you guys are being more prudent because you are not adding inventory to the market, obviously you couldn’t see that as a positive. On the other hand, there are costs of waiting to bring product to market, carry costs and those do compound. How long do you wait and watch those costs go up on the balance sheet because those costs are capitalized into inventory before you realize that it might make more sense to actually work through the inventory because unlike wine, land does not get better with age and that you could actually incur more impairments on land by not bringing it to market than you would otherwise? That is the first question. The second question relates to your backlog. How many loans in your backlog and overall in 2006 in backlog was Alt-A loans, and realizing if any of those loans are being reworked today because the programs at Country Wide have offered are now changing, i.e. Country Wide eliminated the 100% combined LTV and we have seen stated and no doc loans significantly get more expensive to do. Can you give us a framework to understanding alt away from sub-prime, your other exposures, and if you have seen any backlog that had to be cancelled because the programs were no longer available. Those are the two questions.

That was way more than two.

I had to talk fast before you cut me off, so --

Ivy, let me again go back to Alt-A. It is just like sub-prime. You cannot get a clear definition of what an Alt-A loan is. There is no question that the underwriting guidelines have tightened up where people will have to document their income, document the source of funds, much tighter than in the past. In sub-prime in particular, some of the 100% loans have gone away. From our point of view, the buyer has other options and in part, what drove all this activity was the fact that it was easy money. A lot of the 100% loans in California, the buyer had money in the bank. They just used it for other purposes. Any time these types of things go on, it settles out, it clears the market and people go back to buying homes, and underneath all of this there is a huge desire to be a homeowner. So people, if they need to scrape up 3% on an FHA loan or 5% or 10% on a conventional, they will find ways to save the money or borrow the money from a relative or get it from another source. If you look at our can rate, we have already shared that it has normalized. It is back to the levels it was at in ’05 and ’04, so we have not taken a hit to our backlog as a result of the change in the underwriting guidelines. Past that, Country Wide is a better spokesperson on this than we are, so I would rely on what they are telling you as far as what is changing and their view of the market versus ours because our backlog is solid and we are just building homes. As to the lot count side, most of it flows through in the ordinary course. We are managing it on a community-specific basis. I am not aware of a lot of communities, not very many at all, where we just put finished lots on the shelf. We are building through the finished lots. The key is that we are selling a home on the lot and then building it. We have shelved in a few very land-constrained markets the assets we have where it is dirt and non-developed, and the dirt component of the cost in a lot is much smaller than the improvements and the fees you pay when you start development. I do not know that I agree it never gets better with time because as the inventory gets in balance in the land-constrained markets, the raw land we shelve will absolutely have a lot of value.

Ivy, if I could just chip in on it because we had at one time 173,000 lots owned and controlled in the U.S. before we started taking these impairment charges. We are now down to just 103,000 lots owned and controlled, so we do not have a significant inventory exposure from a lot position. That is one of the things that is benefiting it. Land gets expensive when you turn it into a finished lot and open a new community, so expanding communities and finishing lots in a market that does not want the demand we think is more risky than just managing our inventory properly, realizing that we are trying to keep a three-and-a-half to four year supply of land ahead of us, and roughly half of it optioned.

Moving on, we will hear from Carl Reichardt with Wachovia Securities.

On the community count question, what is your sense for what you think it will be by year-end, what your average will be for the year, Dom?

We expect to average around 400 in 2007, which is down from 444 in 2006 in the U.S.

Okay, and then Jeff, in the release you made a comment about the current housing prices not fully reflecting moderating demand for new homes. I want to see if that is a foreshadowing in your mind that in order to return your sales rates to a more normal pace per store, you may need to come down harder on price or a price incentive combination than where you sit currently today, or whether or not that comment was more innocuous than that. I read it as an intent to get more aggressive.

It is more innocuous than that, Carl. I do not have that page of the release in front of me but I believe I was referring to the overall housing inventory and overall housing prices, not just new homes. Our concern is that many of the markets we operate in have a large overhang of resale inventory that has not cleared the market. Either people will take them off the market or they will adjust their prices to move the resale, if they can. With that kind of overhang, we have a concern that some of the markets we are in could get impacted. That is why we have come out a little more conservative in our commentary. We do see sales occurring as we are reporting but until we get through the selling season and see what happens with the inventory levels on resale, we are not ready to say that the markets have bottomed and the prices have stabilized. We think there will continue to be pressure on pricing for the next few quarters.

Our next question comes from Gregory Gieber, A.G. Edwards & Sons. Gregory Gieber - A.G. Edwards & Sons: Let me just follow-up on that previous question. If we do get a significant downward movement in house prices, given that your operating margins are seasonally low in the first quarter, were only 2.5%, could you give us just some qualitative sense of the risk that you might have to take more charges on various communities, were there to be a meaningful movement in price downwards?

If prices continue to erode, it would be more than likely you would have an impairment charge, obviously. The good news for us is that the last time we looked at impairment charges, we owned 173,000 lots, owned and controlled. We are now down to 103,000 lots owned and controlled, so our exposure is significantly lower than it was the last time. Also, the first time we took impairment charges, there were a lot of one-time items that we took to walk away from options and made some strategic decisions to sell off land that we do not have to go through this second time around. Now we are down to just traditional impairments that we might have, so while we have an exposure, we think we have one of the lowest exposures in the industry.

Greg, as you know, it is market specific and sub-market specific, so if the inventory overhang in Phoenix, for instance, were to drive the market prices down 5%, if we are in an A location, good sub-market, it may not even impact the price in that community. We just do not know. Gregory Gieber - A.G. Edwards & Sons: Just a follow-up to that and I have one other question, if you look at your land inventory, how much of it compared to a year ago would you call C quality land? Is that where most of your pruning has occurred, I would assume?

There has definitely been a slight quality locations in all the markets that we are in. I do not know that we track in on A versus B versus C. The options we abandoned in the fourth quarter probably were in the C markets and we would still be in the As and Bs that provide the return. I do not know if we track it that way.

I do not have it in front of me.

Moving on, we will hear from Dan Oppenheim, Banc of America.

This is Mike Wood. Can you talk about what you are seeing so far in March in terms of changes since either the first quarter or February in terms of year-over-year trends in traffic and net pricing?

No, we are only three weeks into the second quarter, so it is way too early to provide any color on the second quarter.

But in terms of March, could you give any color there?

No. It is too early.

You mentioned the discipline in the build-to-order. Can you just talk about your success there with all of the inventory homes that are being heavily discounted? Also, I heard from some private builders that some mortgage, some of the lenders were not willing to give commitments longer than 30 days. Are you seeing any of that and has that impacted your build-to-order model?

Let me give you a couple of responses, Mike. First off, I think it is a great testimony to our build-to-order model that we have the backlog and we are converting the backlog and delivering on the plan. It demonstrates the value that the consumer puts in having the ability to pick what goes in the home and customizing it for their needs. In the normal course of business, we will lock the interest rate as long as the buyer elects to. We have a great partnership with Country Wide. I cannot speak for the private builders but we have not heard any issue where the ability to lock loans has been challenged or the timeline has been reduced.

Again, in the fourth quarter, we converted 53% of our backlog to revenue. First quarter we converted 38%. In both quarters, our conversion of our backlog to revenues were over 30%, so actually everything seemed to be improving on that front. And again, 83% of the homes that we have under production are sold and in backlog with a qualified loan.

Our next question comes from Jim Wilson, JMP Securities.

I was wondering, can you give a little color on what you have been seeing in terms of pricing and sales at a more local level? I am thinking of California in particular, and then the Southeast as the other. So contrasting what the Bay area looks like to unit condition, sales, volume, pricing versus Orange County versus the -- and then maybe a little color on the Southeast, too. That would be my two questions.

Sure, Jim, I can answer that. In every market that we are in, as we have said, it is still unclear. There are no real trends emerging that we can pick up other than, as I have touched on, a flight to quality locations and a flight to value. Where you offer product that is at a price point that the median income in that sub-market can afford, that is near an employment center, you still sell very well. From a regional point of view, it is interesting. In Northern Cal, we are doing quite well in our San Jose business, which is primarily affordable for San Jose, product priced under $600,000 or $700,000. Northern Cal slowed down a little earlier than Southern Cal, and I think the fact that San Jose has firmed up for us is a good sign. Compare that and contrast that to the central valley or Sacramento, which remain difficult for us, I think that is a good illustration of the normal housing cycle where things get tight, people can buy homes a little closer in to work. San Jose firms up and then over time eventually the inventory will clear and prices reset in central valley and Sacramento, the more commuter markets will come back. In Southern Cal, we are having good success with communities that are first-time, first move up that are close in to the employment centers. It is a little softer in the more commute-oriented buyer. The longer drive is a little bit softer for us. Orange County, San Diego, we are not large players in either of those counties but there is still a lot of pressure on pricing. There is still a lot of inventory. We are not seeing them rebound. If you go over to the Southeast, it is actually holding fairly well in Charlotte, Raleigh, South Carolina for us. Atlanta is a little bit tougher. Drop down to Florida, we are doing well in Jacksonville. Orlando is holding for us. A little tougher in Tampa for us right now. We do not have a large position in the Treasure Coast or Fort Myers, and those two markets remain very difficult. So on a regional basis or an individual city, there are no clear trends yet.

Just to add to it, on the west coast our orders were up 5% in the first quarter. In the Southeast, they were flat year over year. Where we had a decline in orders were in the Central and Southwest, where we had a significant decline in the community counts.

Moving on, we will hear from Kenneth Zener with Merrill Lynch.

Good morning. I have a few questions. Regarding France’s contribution to your results, using the publicly stated results from KBSA, their gross margin in the fourth quarter was about 24%. Assuming a stable margin in the first quarter from your French operation, this implies about a 16% level in the U.S. versus your reported 17.7%. Can you comment on this and what France’s can rate was, which helped blend to the 31% level?

Well, we have a French operation that is doing very well and it is a nice balance for us. You are correct that the margins in the French business are higher than our margins. However, at the bottom line, we have to eliminate half their profit so it puts it a little bit more in balance, but at the margin level, you are correct. Then, on the cancellation rates, I believe -- let me just look in the U.S. Our cancellation rates in the U.S. were 34%, which by the way was very close to what we had in the ’03-04 timeframe, so not a significant difference. In France, it was 22%.

Okay, and can you discuss your concern that in the inventory markets where we track it, it seems that inventory growth is fastest in the sub-segments where the public builders are building. I think, Jeff, that this goes to your question about being close to the job centers. Can you comment on what you think this might mean, given that builders were building farther out not only in Riverside but in other markets, about the recovery rate that you might see relative to prior cycles when the existing inventory was not so high? Thank you very much.

I do not know that the inventory levels are necessarily higher than previous cycles. I think you will see the classic rebound, if you will, where the closer in markets will firm up first and then it will slowly work out to the more exterior markets once prices have reset. In land-constrained markets, where builders went much further out, that is probably where they are having the biggest challenges. It is also where it is easier to acquire lots on an option basis, and we abandoned a lot of those in the fourth quarter. I think you are seeing a normal cycle here that will emerge and each market will rebound at its own pace based on the inventory overhanging sales rates.

There is still a significant housing shortage in California. The issue was affordability, so when you get your price points more affordable, demand will pick up.

Our next question comes from Steven Fockens with Lehman Brothers.

Good morning. Just one question, guys; the investment in unconsolidated joint ventures went up about, looks like roughly $33 million, $34 million sequentially. Was that either some attractive places to put your cash or were those required contributions, or is there any color you can give on that?

It is spread across a lot of joint ventures but it was not anything significant in different markets. Over the long term, that number is coming down anyway.

So you think this one quarter is just maybe a little bit of an anomaly?

More of an anomaly, yes.

Thanks very much.

Moving on, we will hear from Michael Rehaut with JP Morgan.

Good morning. A couple of questions; first, land charges for the quarter, I assume as they were not broken out, they were minimal, but could you review if there were any on the options side or the write-off side?

I would say that our impairments and option write-offs were back to normal levels that we see in an ongoing business, so there was nothing significant.

So you’re saying less than $5 million, or -- ?

No, it is closer to $8 million.

And that is mostly the options, the option walk-aways or --

That was $4 million in options, $2 million in community impairments and $3 million in land sale impairments.

Great. Bigger picture, or a question on the quarter, with the margin decline from 4Q, I was wondering if you could try to give us an idea what the percent of closings were from cancelled resold homes? That certainly I would assume played into the lower margins, and what that compares to in terms of a normal percentage?

Mike, that is almost impossible to know, to be honest with you. You would have to go division by division and look at every house that closed and find out whether it was resold. We have not done that. We just track the fact that we have our cancellations back to normal levels, our backlog solid and we are in pretty good shape going into the second-half of the year. We will not see anywhere near the levels of cans and resells that we saw in the past.

Our next question comes from Joel Locker, FBN Securities.

Just on the backlog conversion I saw in France, that is about the only sector that did not pick up. I was wondering if you were having any kind of labor or material shortage over there.

Not really, Joel. The business model is a little different over there in that it is a lot more condos, which in France take 18 months to build. They will pre-sell the building and one of the differences in France that is kind of interesting, they actually -- the buyer takes title to the property when you start construction. So we convert the title and then build the home, but it may take 18 months to come through to delivery. So their backlog position is a little more extended time-wise than ours in the U.S.

To your point, France’s backlog conversion has declined, which means the U.S. was even significantly better than in the past. In the first quarter, it was 49%, which is a pretty significant conversion of our backlog. That is just a sign of our cycle times beginning to contract.

The second question; on your last call, you made a comment on possible margin expansion in the third and fourth quarter and I was wondering, with the recent comments about pricing pressure, if you still think that is a possibility.

It will be community specific, Joel. We actually have some communities today where we have been able to raise prices a little bit, but that is definitely in the minority. Our color was tied to opening new communities, retooling the different product lines, a lot of things that are yet to unfold. If the markets were to stabilize and we are able to execute on all that, at some point in time you will see margin expansion but I do not think we can peg it today to a third quarter or a fourth quarter.

We know our costs are coming down as we open new communities. What we do not know is we do not know what is going to happen with price in the next eight to ten weeks, and that is the unknown factor. When we know that, we will have a better feel for margins in the second-half. That is why we said at our second quarter conference call, we will give you a better outlook for the year.

Our next question comes from Larry Taylor, Credit Suisse.

I wonder if we can go back to the question of buyer/borrower demographic for you guys. I understand that there are different definitions out there but maybe we could just talk about some of the characteristics. I am wondering if you could comment on the percentage of buyers who funded with stated income or low doc loans who had 5% or less down, or who had FICOs at less than 620?

Larry, Country Wide does that. We do not track it because we are the home builder. We do know that in the first quarter, our average loan to value in the closings was 91%.

And our FICO scores on average were 700. That has not changed, by the way, for years.

So basically you guys are saying that you do not track some of the inputs to that, or split it into the strata to be able to look at, for example, how much is 5% or less down?

No, because we do not start the home until we have a loan approval.

And we do not take any risk on the mortgage because Country Wide approves it. If we ran a mortgage company, if we had our own mortgage company, we would have to track those. We don’t, so it is not a risk for us.

Our next question comes from William [Milner].

Thanks very much. Would you bring us up to date again on the market value of your French holding? I am curious. At the fourth quarter call, I think you suggested it was about $800 million.

I think it is trading at almost close to EUR 60, which would be close to $80, I guess. Multiply that by 10,922,000 shares, so that is probably close to $800 million, if not higher.

10,922,000 -- okay.

10,922,000. The price is $78. I don’t have a calculator in front of me, but it is north of $800 million, I think.

Right. You also indicated that 17% of your backlog is spec. Just refresh my memory; how does it get to that level, or is that any different than the past?

In normal times, William, we like to run at about 10% unsold, no more. Some of the specs occur if we have sold out a cul-de-sac and there is one lot left, we will start it just to complete the cul-de-sac. If you start a condo building, it is typically 50% pre-sold because the build time takes so long, so you have those types of things that drive it up to 10%. To get to 17%, we still have an overhang of some of the cans that occurred in the third and fourth quarter where we are having to resell the property. It is interesting in our business, the standing inventory sale is much harder for us than the dirt sale, as we call it, because our whole business model is focused on choice, value and sell a customer the lot and let them pick the features they want. But even at 17%, I believe it is by far the lowest in the industry right now.

Moving on, we will hear from Susan Berliner with Bear Stearns.

Good morning. Just a couple of questions; one is, can you clarify at all what your incentives as a percentage of the homes are?

Our incentives that we show in our financials are always between 1% and 2% of the home. We adjust base prices, so we do not do sales incentives.

Okay, and number two --

The best way to look at it is what happened to pricing year over year. Pricing year over year is down 8% in the U.S., so that is the best way to look at it.

Okay, thank you. Secondly, can you talk at all about the banks potentially tightening -- I think there is obviously some of your peers, they are struggling a little bit more than you guys. Are the banks focusing more, questioning you a lot on coverage? Are you concerned at all about potentially needing to get a waiver at year-end?

Sue, if you look at our most recent covenants, we had plenty of capacity. In fact, we have cleaned out our revolver and our coverage was 5.2 times at year end.

I do have a follow-up from Stephen Kim with Smith Barney Citigroup. Mr. Kim, your line is open. Please go ahead, sir.

My question is with respect to the interplay of existing homes on the market and new homes on the market. I was wondering if yourself or Jeff could comment on what you are seeing in your markets. You have expressed so far some reasonable concern about perhaps the existing home market needing to adjust prices downward because there is still a lot of inventory out there. But one of the things I didn’t really hear you say was perhaps an abatement of fire sale prices for specs that yourself and probably more your peers had as a result of the massive cancellations that we went through during the winter. My sense was that generally speaking, and getting to Mike Rehaut’s earlier question, that when you have a cancelled unit, it results in a significant erosion in the price and the margin. My sense is that your cancellation rate dropping is going to help this situation somewhat and that that is going to be somewhat of an offset to what goes on in the existing market. Can you comment on whether or not you think that might be a realistic offset of any consequence, or if you think that the existing home dynamic is far more significant?

I think you hit on a valid point, Steve. In most of the markets we are in, the significant concessions and discounts on the new home side from the third and fourth quarter have abated. Again, in most of the markets, the new home price has come down much more than the resale price and in fact is in equilibrium, where you have the more historical spread between new home and resale pricing. The concern is that resale pricing has been stickier. You now have this huge overhang of inventory that has to clear the market and if buyers do what they have to to move their product and resale prices were to drop again, new home pricing would have to follow to some degree, and that is what is unclear and is going to play out in the next few months. But you are absolutely right that the can rate has subsided in part because the discounting has slowed.

That is all the time we have for questions today. At this point, I will turn the call back over to our host for any additional or closing remarks.

Thank you, everyone, for joining us today for our first quarter 2007 earnings conference call. Have a great day and I hope to talk to all of you more in the future. Thank you.

Once again, this does conclude today’s conference call. Thank you for your participation and have a great day.