Hovnanian 3-Day Sale a Success

Red Bank, NJ, September 18, 2007--Home builder Hovnanian, which held a nationwide three-day sale to lower its inventory of unsold homes, said on Monday the weekend event was a success, sending its shares up as much as 5.5%.

The company reported more than 2,100 gross sales, including about 1,700 contracts and more than 400 sales deposits. In some communities, sales staff were only able to take deposits because of time constraints, Hovnanian said.

Hovnanian, facing a prolonged housing slump, held the sale in the 19 states it serves, including California, New Jersey, Texas, North Carolina and Virginia. The "Deal of the Century" sale effectively cut prices on homes by about $100,000 and also offered extra appliances and upgrades to entice buyers.

"We think the 'Deal of Century' sales event is good for Hovnanian as it will help to generate short-term cash flow," Bank of America Equity Research analyst Daniel Oppenheim wrote in a research note.

"However, competitors are likely to respond with even bigger discounts, so deals for home buyers are likely to get even better over time," he wrote.

Oppenheim said he expects Hovnanian's lower prices to trigger more industrywide write-downs on inventory and land holdings, given the value of price declines.

The results of the weekend sale exceeded the company's expectations and proved that many U.S. home buyers are waiting on the sidelines for more attractive prices, Chief Executive Ara Hovnanian said in a statement.

"(The sale) gave potential home buyers the confidence they needed to make a long-term decision," he said.

The sale will likely enable Hovnanian, the sixth largest U.S. home builder, to reduce the number of unsold completed homes, Oppenheim said. At the end of the July, Hovnanian had 2,792 of the so-called "spec homes," and was likely to have been most aggressive on pricing them, he added. 

"Now comes the challenge -- selling homes before construction starts," Oppenheim wrote.