Home Builder Hovnanian
Warns of Weak Results

Hovnanian Enterprises on Friday warned of a wider-than-expected loss as the home builder struggles with jitters in the subprime-mortgage market and a decline in building contracts.

The Red Bank, N.J., company expects a second-quarter loss, excluding the effect of land-related charges, of 30 cents a share, wider than its prior forecast of a loss of 5 cents to 20 cents.

Hovnanian expects to incur about $15 million to $20 million of second-quarter pretax charges related to land impairment and write-offs of predevelopment costs and land deposits.

After the effect of these charges, the company expects to report a second-quarter loss of 45 cents to 50 cents a share.

"The adverse publicity surrounding the sub-prime market has further damaged home buyers' psychology, resulting in decreased demand and leading to continued use of sales incentives," Hovnanian said.

"As a result of this challenging operating environment, consolidated net contracts in March and April" fell 30% from a year earlier, compared with a 3% year-over-year increase in February, the company said.

Hovnanian shares fell 20 cents to $24.37 on Friday morning.

The company expects to finalize and release results for the second quarter ended April 30 after the close of trading on May 31.

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