UPDATE 3-KB Home resumes building in mid-Atlantic region

* Says to resume construction in Maryland, Virginia

* Washington, D.C., market "healing" - KB executive

* Stock up 3.4 pct (Adds detail on Washington area, competitors)

NEW YORK, Sept 16 (Reuters) - KB Home (KBH.N) said on Wednesday it would resume construction in areas of the U.S. East Coast where it had curtailed activity during the housing downturn.

The company said it was resuming its homebuilding operations in the mid-Atlantic region, including Maryland and Virginia, in part because they adjoin a strong Washington D.C. market.

"The sales pace has gone up, the listings have gone down, and the pricing has stabilized and even gone up," said KB regional president Vince DePorre, whose area covers the entire U.S. Southeast, including Florida.

"The market is healing," he said.

KB suspended operations in the Washington, D.C., area in late 2007 to preserve cash, but never left the market, calling the move a pause, rather than a pull-out.

It has not disclosed the number of homes it will build, but DePorre said KB was reactivating sales in five communities in the near term.

"We'll bring additional communities on as the land opportunities make sense to us," he said.

A community can range from about 85 townhomes in an urban setting to about 150 single-family homes in a subdivision. Many of the homes will be built-to-order under the company's Open Series program, which allows buyers to choose lots, floor plans and other options.

For more on KB's Open Series, click on [ID:nN06462139]

The company's shares were up 65 cents or 3.3 percent at $20.47 in afternoon trading on the New York Stock Exchange.

WASHINGTON D.C.-AREA STRENGTH

Recent housing data have confirmed improving conditions in the Washington D.C. area, according to analysts at Raymond James.

Washington-area sales rose 4 percent last month, marking the 13th consecutive month of improving year-over-year sales, while the number of for-sale listings is down to the lowest level since February 2007. In Virginia's Prince William County, median prices rose for the first time since June 2006.

Public builders with the biggest market share in the Washington D.C. area are NVR Inc (NVR.N), Toll Brothers Inc. (TOL.N) and Hovnanian Enterprises Inc. (HOV.N), according to Raymond James.

The region has relatively better employment trends, but a large backlog of bank-owned or foreclosed homes remains an area of concern, the analysts said in a research note this week.

"These distressed homes appear to be re-entering the market at very manageable levels currently, any surge in bank owned home liquidations could quickly unravel many of these recent positive trends, both in the D.C. area and nationally," according to Raymond James. (Reporting by Nick Zieminski; Editing by Lisa Von Ahn, Gunna Dickson and Bernard Orr)