Hovnanian Reports 4th Consecutive Loss
Red Bank, NJ, September 7, 2007--As economic reports continue to show a struggling housing market, earnings figures from another luxury homebuilder Thursday did nothing to contradict them.
Hovnanian Enterprises reported another loss in the third quarter, citing continuing problems of credit availability and high inventory.
The company also said it would slash prices on homes across the country beginning late next week to try to sell off excess inventory.
After paying preferred stock dividends, the company reported a loss of $80.5 million, or $1.27 per share, in the quarter that ended July 31. This compared to a profit $74.4 million, or $1.15 per share, in the same period a year ago.
Analysts surveyed by Thomson Financial were expecting Hovnanian to lose $0.99 per share in the quarter.
The company, which builds luxury homes in 18 states, including
In the quarter, Hovnanian incurred $108.6 million in pretax charges for write-offs of land deposits and markdowns in the value of land.
Revenue in the quarter dropped 27% to $1.13 billion from $1.55 billion a year ago.
Hovnanian reported a 355 cancellation rate for the quarter, compared with 33% for the same quarter in 2006.
Chief Executive Ara K. Hovnanian said conditions in most of the company's markets remain challenging.
"Credit tightening in the mortgage market has reduced the number of qualified home buyers, existing home inventory levels remain persistently high in many of our markets and buyer psychology has been negatively impacted by a steady stream of news related to falling housing prices, foreclosure rates, and mortgage availability," he said in a statement.
Hovnanian's sales results showed evidence of the continued housing slump as contracts for the third quarter declined 24.2% to 2,539. Hovnanian sold 3,179 completed homes, down 31.2% from 4,623 in the third quarter of last year.
To try to boost sales, the company is offering a nationwide three-day sale beginning Sept. 14. Hovnanian will offer deep discounts in each of its 449 communities.
Hovnanian also blamed the tightening of lending standards in the mortgage market beyond those made to subprime lenders.
"This is leading to a further reduction in the universe of qualified buyers for our homes," he said.