KB Home on Friday surprised Wall Street by reporting that its first quarter net loss had decreased 78 percent from a year ago as the homebuilder continued to cut costs, take fewer write-downs and promote its lower cost models.

The Los Angeles company reported a net loss of $58.1 million (-75 cents a share) for the quarter ended Feb. 28, compared with a net loss of nearly $268 million (-$3.47) a year earlier.

Revenue dropped 61 percent to $307 million as closings dropped 51 percent and the average price of homes that sold fell 15 percent. The company has been marketing a line of smaller, more affordable homes, known as the Open Series, to better compete with the foreclosures and previously owned homes still clogging the market.

Analysts surveyed by Thomson Reuters on average expected a loss of 81 cents a share on revenue of $348 million.

“Although we currently foresee no meaningful improvement in market conditions for the remainder of this year, we are confident that our intense customer focus and the many ongoing initiatives we have undertaken to adapt to today’s difficult housing environment will continue to differentiate KB Home from its competitors,” said Chief Executive Jeffrey Mezger in a statement.

Inventory and land-related write-downs dropped to $32.3 million from $224 million. The company’s gross margin, which excludes inventory write-downs, rose to 13 percent from 9 percent.

KB Home’s shares closed up 89 cents, or 6 percent, to $15.05 on the New York Stock Exchange.