Hovnanian loss widens

From Dow Jones:

Home Builder Hovnanian Reports Quarterly Loss

Hovnanian Enterprises Inc. late Tuesday reported a widened fourth-quarter loss, as home builders continue in vain to search for a bottom in the residential housing market.

The Red Bank, N.J.-based company (HOV) said its net loss for the period ended in October increased to $466.6 million, or $7.42 a share, from $115.3 million, or $1.88 a share in the same period a year earlier. Meanwhile revenue fell to $ 1.39 billion, from $1.75 billion.

Hovnanian said it incurred a total of $383 million in pretax charges including land and intangible impairments. The company said similar charges in the same period a year earlier totaled $322 million.

Last month, when Hovnanian released preliminary fourth-quarter results, it said net contracts in the company’s fourth quarter dropped 10% from a year earlier, saying its October sales pace in most markets “significantly deteriorated” in relation to recent months.

Hovnanian delivered 19% fewer homes during the October quarter compared to the year-earlier period. The cancellation rate rose quarter-over-quarter to 40% of gross contracts, up from 35%.

Heading into Tuesday’s trading session, Hovnanian shares were down more than 76% so far this year, falling harder than the broader home-builder group. The housing downturn has been particularly cruel to builders like Hovnanian with significant operations in hard-hit Florida and California

Ara Hovnanian, the company’s CEO, at an investment conference last month said U.S. housing won’t likely get back to a “balanced marketplace” until 2010. Meanwhile, 2008 will be “another challenging year” and he was not looking for strong earnings from home builders.

“By the tail end of 2008 we should get some positive momentum in sales, setting up a recovery in 2009,” Hovnanian said. Home builders by then should return to profitability, although earnings will be more meager than the recent boom years, the CEO said.

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6 Responses to Hovnanian loss widens

  1. Mike T. says:

    HOV has an adult community being built on Rte 130N in Cinnaminson NJ, just started digging up dirt on that one. I’m betting that one never gets finished.

  2. kettle1 says:

    I want to respond to a comment by MR T from late last night…

    # MrT Says:
    December 18th, 2007 at 11:20 pm

    271 –

    the part i don’t get from the crashing dollar, $90 oil crowd is….

    which is it?..inflation or deflation

    If you expect inflation to continue to get worse and compound going forward..why wouldn’t you want a 30 yr fixed loan at 6%? pay back over time in depreciated dollars…seems like a no brainer.

    if deflation..i.e. houses will drop to 1999 levels etc etc……wouldn’t that mean dollars must be scarce..and foreigners would not be able to buy these assets either (strong dollar again)? and if oil was $20 a barrel in 1999..will oil and other commodities also be dropping to 1999 levels? and if this is all going to happen..why would the Fed and all central banks reduce the money supply so drastically?

    Im sure a collapse and deflationary depression such as that is possible..but if there was such a deflation..I would bet the last thing on your mind would be trying to close on a nice 4 bedroom house in Bergen county..would probably be a full scale world war raging or some other disruptive event.

    John, i would suggest that there is a good chance that we are looking at another bout of STAGFLATION. We are currently entering a period where many natural resources are being limited in supply, i.e oil, copper, water. I am not suggesting that we are out of, or running out of these materials. What i am saying is that they supply of these materials cannot meet the current rate of global growth. This is all tied into exponential growth rates and doubling times (if your not familiar with this look it up). A good example For example, in 2005 global oil usage was 31 BILLION barrels. from 1990 to 2000 the growth rate of global oil usage increased an average of 3% per year. This means that global oil consumption doubles every 23 years. Now add the rate at which countries like india and china are rapidly industrializing and the rapid growth of their consumer/middle class populations and you increase raw material demand even faster.

    So what i am saying is that the majority of our resource supplies are stressed or will be in the near future. Oil may bounce back down into the $70’s for a bit, but the intermediate and long term trends are only going up. Regarding inflation/deflation; we are headed into inflation (actually we are already well into it if you look at M3) but depending on how both the FED and global markets respond we could slip into deflation. Deflation is not very likely though, as the FED considers deflation its #1 enemy because most of the methods it uses to try and control the economy are ineffective in deflationary periods. So this means that the FED is going to inflate the dollar like a helium balloon and employment is poised to slow. if employment drops, we are going to enter stagflation ( once again there are good arguments that we are already entering stagflation, albeit the very early stages).

    Oh and to answer your actual question. I would not buy a house now even though the dollar is being inflated because, housing is poised to drop by 15-30% over the next 4-6 years. The dollar is not likely to decrease as fast and can be hedged against. So instead of going upside down on a mortgage, i place my down payment into something like a mix of gold/swiss francs/general commodities ( this would be a method for a moderate to high risk tolerant individual in my opinion). in 3-4 years as the dollar and housing has sunk and my investments have risen, i pull the money out which is now worth noticeably more in real dollars and o buy a house!

    note i do not know how to add , do not take my investment advise

  3. mikeinwaiting says:

    Ara Hovnanian on CNBC this morn.The problem is buyer psychology,Yea sure.

  4. Ron says:

    Yeah, land values always rise since they’re not making anymore of it.

  5. bruiser says:

    Anyone else think that the homebuilders would be able to sell more houses if they built smaller, more affordable homes? You don’t see smallish houses being built any more, if you do not count the “active adult” communities.

  6. AAG says:

    Sellers that still have there homes priced back in 2005 aren’t selling, period. The sellers that are pricing there homes to today’s market are the ones selling especially if it’s new construction. Deals are being made out there, big time. It’s a great time to buy and the smart sellers are selling and the smart buyers are buying.

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