Hovnanian Posts Loss
As Home Sales Fall
by Judy Lam
From The Wall Street Journal Online
June 04, 2007
Hovnanian Enterprises Inc. reported a fiscal-second-quarter loss and said the subprime-market problems exacerbated the effect of the housing-market slump.
The Red Bank, N.J., home builder said the housing market weakened in the latter part of the quarter ended April 30 and the slower conditions continued into May. Lower prices offered to buyers to close homes during the quarter also led to a further reduction in margins and a net loss for the quarter.
"We are frustrated to report that the housing market has continued to slip further in many locations in terms of both sales pace and sales prices," said Chief Executive Ara K. Hovnanian.
Hovnanian's results included $34.4 million in pretax land-related charges. Many companies have been taking charges for real-estate holdings that have declined in value and from options to buy other land from which they have walked away.
In early May, Hovnanian warned of a wider-than-expected loss. The home builder said negative publicity surrounding the subprime market has further damaged home buyers' confidence, resulting in decreased demand and leading to continued use of sales incentives.
Excluding unconsolidated joint ventures, the company delivered 3,150 homes during the quarter, a 31% decrease from a year earlier. Net contracts declined 21% to 3,116, while contract backlog as of April 30 was 7,766 homes, down 33% from a year ago.
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