CORRECTED - UPDATE 3-KB Home reports worse-than-expected loss

* Q4 shr loss $3.96 per share

* Q4 revenue down 56 pct to $919 mln

* Shares flat (Corrects to show that 25 percent of communities are offering or preparing to offer new product, not already offering)

NEW YORK, Jan 9 (Reuters) - KB Home posted a worse-than-expected quarterly loss, sending its shares lower, but an upward revision to its cash generation forecast and some positive commentary helped the stock pare much of its losses.

The No. 5 U.S. homebuilder said its net loss narrowed to $307.3 million, or $3.96 per share, in the fourth quarter ended on Nov. 30, from $772.7 million, or $9.99 per share, a year earlier.

Wall Street had anticipated a loss of $1.51 per share, according to Reuters Estimates. Total revenue fell 56 percent to $919 million.

But during its conference call, the Los Angeles-based company upgraded its cash flow forecast for 2009 to positive from neutral, at which its shares began to reverse course.

The U.S. housing downturn, now entering its fourth year, has left builders doing what they can to survive: cutting jobs and dividends, leaving markets, and selling homes and land even at a loss to generate cash and manage debt.

KB generated $311.1 million in cash from operations during the quarter, which UBS analyst David Goldberg called "impressive" in a note to clients. The company ended the year with $1.25 billion of cash and equivalents.

Excluding the impact of losses KB Home must acknowledge as its land declines in value, it achieved positive income from operations for the first time in five quarters, Chief Executive Jeffrey Mezger said.

"We continue to believe the company has sufficient liquidity to withstand the downturn," wrote UBS's Goldberg, who rates KB's shares "neutral."

The company carries $1.94 billion in debt, and its proportion of debt to capital rose to 70 percent at the end of fiscal 2008 from 54 percent a year earlier.

Risky lending practices that helped fuel the U.S. housing boom of 2002-2006 also triggered the subsequent bust and credit crisis that has spread around the world.

While the industry continues to groan under oversupply, foreclosures, plunging prices and stricter lending standards, it is also being affected by broader economic problems.

"Escalating unemployment is now the biggest housing problem," analyst Robert Stevenson of Fox-Pitt Kelton recently wrote.

On Friday, the U.S. Labor Department said the country lost 524,000 jobs in December, pushing the national unemployment rate to 7.2 percent, the highest level in almost 16 years.