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LOS ANGELES – Hovnanian Enterprises Inc. said Wednesday its fiscal third-quarter loss narrowed versus the prior-year period as the homebuilder booked fewer land-related write-downs. But signed contracts on new homes tumbled 37 percent as demand slowed in the absence of homebuyer tax credits.
Management blamed the weak sales trends in the May-July quarter on flagging consumer confidence due to everything from the loss of the tax credit stimulus and weak job creation, to volatile stock market prices and the oil spill in the Gulf of Mexico.
"These factors combined to produce slower-than-expected sales throughout our third quarter," said Ara K. Hovnanian, the builder's chairman, president and chief executive.
The executive said July sales were modestly better than in June, while sales in August were significantly better than June's. But he noted the sales pace in July and August fell short of what it was in the same period last year.
"While far from a normal sales pace, we are hopeful that the stronger selling environment will continue into September and October," he said.
Hovnanian and other homebuilders enjoyed a bump in sales this spring as affordable prices, low mortgage rates and two federal tax credits lured homebuyers into the market. But since the tax credits expired at the end of April, the number of people looking to buy has dropped, even with the availability of the lowest mortgage rates in decades.
Sales of new U.S. homes dropped sharply in July to the slowest pace on records dating back to 1963. Sales rose in June, but it was the second-weakest month on record.
The weakening economic recovery, 9.5 percent unemployment, slow job growth and tight credit continue to keep many people from buying homes.
Hovnanian, which is based in Red Bank, N.J., said it lost $72.9 million, or 92 cents a share, in the three months ended July 31. That compares with a loss of $168.9 million, or $2.16 a share, in the prior-year period.
The company booked $49 million in pretax land-related charges, mostly on four developments in California and one in New Jersey. That's down from $101.1 million in same quarter last year.
Revenue fell to $380.6 million from $387.1 million the year before.
Analysts surveyed by Thomson Reuters were expecting a loss of 52 cents a share on revenue of about $386 million.
Shares slipped 9 cents to $3.59 in aftermarket trading after adding 27 cents, or 7.6 percent, to $3.68 during the regular session.
Excluding joint ventures, Hovnanian ended the quarter with 902 net contracts for new homes. Completed sales totaled 1,316, down slightly from 1,322 homes in the prior-year quarter.
Its home order cancellation rate for the quarter was 23 percent, unchanged versus a year ago.
Hovnanian has been buying up land and looking to open up more home communities as land prices have fallen. Homes built on recently purchased land can be sold for a higher profit.
The builder acquired options on 4,700 land parcels in 62 communities during the quarter.
Despite the slowing in demand, Hovnanian said construction on homes yet to be sold was up 6 percent at the end of the quarter versus the same period last year.
The builder has estimated 40 percent of its completed sales next year will be from more profitable homes built on recently acquired land.
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Online:
Hovnanian Enterprises Inc.: http://www.khov.com
