Home builder KB Home (NYSE:KBH) really nailed down fantastic first-quarter results. Revenue increased 21% and net income skyrocketed 65% from the same quarter last year. So, what's the investment case for KB Home?

Let's start with the backlog, being homes started but not yet completed or delivered. At $5.8 billion, it went through the roof -- up 58% from last year's first quarter. To put that number in perspective, consider that the quarter's sales were $1.6 billion. So, the backlog is equal to 3.5 times the latest quarter's sales. That means the foundation for fiscal 2005 sales is already set, provided the company is able to complete these projects over the course of the year.

KB Home also moved its earnings estimate to a better neighborhood -- upping it $1.25 to $15.75 a share. That's up 38% from fiscal 2004 earnings and works out to a rock-bottom low 7.4 times forward (2005) earnings.

All of this success has not gone unnoticed. The stock is up 52% from where it was a year ago. But let's see this rose garden for the thorns in the year-over-year comparisons.

Construction pretax income soared 71.3% and is 99.9% of income. Mortgage banking, which was 1.8% of pretax income in 2004, is dropped to being almost nothing and may become a drag on earnings in the future.

Growth in the Southeast -- where the backlog dollar value is up 131% -- may come from two trends. Higher prices are certainly good if they bring added earnings power; investors should be wary of the inflation's prospective influence. But the replacement housing market is strong after last year's hurricanes; this may represent a one-time event, not KB Home's business strength.

KB Home also has significant operations in France. French units on back order are up 61% and represent 17.3% of the total dollar value of the backlog. Investors considering this stock need to also consider the future of the French economy, as we might expect that some backlogged projects wouldn't be completed if the economy heads south.

Of course, the biggest concern is U.S. interest rates. They are headed up, and there is little debate that they fueled a housing boom that was felt all the way to the local Home Depot (NYSE:HD) and Lowe's (NYSE:LOW) superstore.

But when you look at the market multiple of around nine times earnings afforded D.R. Horton (NYSE:DHI) and Pulte Homes (NYSE:PHM) -- which also have trailing annual sales growth above 20% -- it seems that investors aren't willing to build the stock multiples too high amid cyclical concerns in housing.

Look at this five-year chart and see that KB Home investors have enjoyed oversized returns. While it is too early to call a top to the housing boom, it is not too late to see the trend in interest rates and home prices, which are rising well above inflation rates.

Investors beware. While KB Home is nailing strong earnings growth and selling at a low multiple to earnings, buying into the late phases of a housing boom might spell trouble, since KB Home's earnings stream is inextricably tied to such macroeconomic factors.

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Fool contributor W.D. Crotty owns shares in Home Depot. Click here to see The Motley Fool's disclosure policy .