Red Bank, NJ, May 4, 2007--Hovnanian Enterprises Inc. said Friday its fiscal second-quarter loss will be wider than previously forecast after selling fewer homes amid still-tepid demand in the housing market.
The company, which builds upscale houses in major markets like Florida, Arizona and California, expects to report a net loss of 45 cents to 50 cents per share. The preliminary forecast includes a projected charge of $15 million to $20 million to forfeit land deposits and write down the value of assets it no longer can develop for a profit.
Excluding the charges, Hovnanian sees the loss at 30 cents per share, wider than its April forecast of a loss of 5 cents to 20 cents per share. Analysts are looking for a loss of 16 cents per share, according to Thomson Financial.
Hovnanian delivered 3,196 homes in the quarter ended April 30, down 30 percent from the year-ago period. Net contracts, which remove cancellations from total orders, fell 21 percent to 3,116. The cancellation rate was 32 percent, down 4 percentage points from the first quarter.
"These contract results reflect a continued challenging operating environment in most of the company's markets," Hovnanian said in a statement.
The once-booming housing sector is still struggling to find its footing amid falling prices in most major markets, as buyers are reluctant to invest in a property that may lose value. Hovnanian, like many of its competitors, offer discounts to move inventory built during the sector's five-year bull run.
The company also blamed trouble in the market for loans to people with poor credit histories for depressing demand. "The adverse publicity surrounding the sub-prime market has further damaged home buyers' psychology," Hovnanian said.
