Tuesday, 06 November 2007 05:00

Credibiliy is still the key, Mr. Hovnanian

If you remember, I had a rather poignant critique of Hovnanian's Deal of the Century, and their financial results for the last quarter. As a quick recap, Hovnanian's CEO said that they have "gross" sold (whatever the hell that means) XXX so many houses and the price slashing event was so successful, blah, blah, blah. I was quite skeptical, to say the least. Don't get me wrong, I do not want to belittle a family business that is on the ropes. Far be it from that, I am proud of family businesses - BUT, credibility is the key here. You lose credibility if you reliably spout BS, especially the sort of BS that is easily discernible. That is the case we have here. This is contrasted by Toll's CEO, who is much more pessimistic, at least publicly, than HOV's CEO - despite the fact that his company is in a much better financial position. It appears as if TOL's CEO is a class act. I have nothing against any of these guys, but you really do need to be careful of the hype and hyperbole when you want serious financial types to take you, well,,, seriously! There is no need for me to comment further. Simply read the news piece that describes the press release below.

Upscale U.S. home builder Hovnanian Enterprises Inc (HOV)) said on Tuesday fourth-quarter net contracts and home deliveries fell, while cancellations rose amid the housing market's decline.

The company also said the sales pace in October in most of its markets "significantly deteriorated" when compared with recent months, but shares rose 1.8 percent as the company also moved to shore up its balance sheet.

Tighter credit standards brought on by defaults in the subprime mortgage market, a glut of homes for sale and buyer concern about economic weakness have home builders scrambling to strengthen their balance sheets to weather the market decline, which began more than 18 months ago.

Hovnanian said preliminary fourth-quarter results showed net contracts fell 10 percent to 2,781 homes, while deliveries slid 19 percent to 3,969 homes.

The figures for both exclude home deliveries from unconsolidated joint ventures.

The Red Bank, New Jersey-based company said cancellations for the quarter that ended Oct. 31, were 40 percent of gross contracts, up from 35 percent in the previous quarter as well as the year-ago quarter.

Hovnanian blamed the higher cancellation rate on the inability of some customers to obtain loans due to the tightening of mortgage underwriting standards.

Last modified on Tuesday, 06 November 2007 05:00