Homebuilder KB Home reported a deeper quarterly loss than Wall Street expected, and its chief executive warned he does not expect meaningful improvement in the U.S. housing market in the near future.

Its shares fell 8 percent on Friday, contributing to the fourth consecutive day of declines for the recently rallying U.S. homebuilding sector, with investors realizing that a possible bottoming out of a market does not necessarily signal rapid recovery.

Unlike larger peer Lennar Corp , which on Monday also reported a deeper-than-expected quarterly loss but said it expected to return to profitability in 2010, Los Angeles-based KB Home said only that it had more work to do to begin earning money again.

It will likely be some time before we see meaningful improvement in the economic conditions that are essential to our industry's future growth, said CEO Jeff Mezger.

The news came on a day the U.S. government reported new-home sales rose at a weaker-than-expected pace and a day after a U.S. trade group reported an unexpected 2.7 percent drop in existing home sales.

Friday's decline left the Standard & Poor's homebuilder index <.GSPHOME> off 16 percent from last week's peak.

It's not a straight line, it's going to be pretty difficult, said Eric Landry, an analyst at Morningstar in Chicago who follows the sector. There's been a ton of job losses and job losses have a huge impact on housing.

Still, he noted that the company's 62 percent rise in orders was a good sign for the business. Analysts attributed the rise to a renewed focus on lower-cost homes.

LOSS NARROWER THAN LAST YEAR

KB reported a third-quarter net loss of $66 million, or 87 cents per share, less severe than the loss of $144.7 million, or $1.87 per share, recorded a year earlier.

The loss was deeper than the 73 cents-per-share loss Wall Street had braced for, according to Reuters Estimates.

Revenue came to $456.3 million, down 32.8 percent from $679.1 million a year earlier.

Homebuilder shares have been on a tear over the past three months, as the industry that was one of the first to be sucked into the worst U.S. economic downturn since the Great Depression starts to show signs of stabilization.

KB shares were down $1.45 to $17.08 on the New York Stock Exchange.

So far this year, they are have gained about 38 percent, trailing the 41 percent rise of the Standard & Poor's homebuilder index <.GSPHOME>.

(Reporting by Scott Malone, editing by Gerald E. McCormick, Dave Zimmerman)

New york city