The pain never stops at Hovnanian Enterprises Inc. (NYSE: HOV), the big home builder. The company delivered 3,969 homes during its fourth quarter, a decrease, excluding home deliveries from unconsolidated joint ventures in both periods, of 19% from the same quarter a year ago.
Cancellations for the fiscal 2007 fourth quarter were 40% of gross contracts, compared with the cancellation rate of 35% for both the third quarter of 2007 and the fourth quarter of 2006. The primary reason for the increase in the company's cancellation rate is the tightening of mortgage underwriting standards.
Hovnanian still faces the question that all of the public home builders face: Can it take a downturn that extends well into 2008 without major restructuring or debt defaults? The company's shares trade for just above $10. They have a 52-week high of almost $39.
If the first quarter is bad, the stock may not have found a bottom.
Douglas A. McIntyre is an editor at 247wallst.com.
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Reader Comments (Page 1 of 1)
11-07-2007 @ 6:03AM
Mike said...
There are still fundamental problems in the lending industry. The mortgage brokers can peddle their hand picked appraisals to any lender and find money for their deal. I looked at an appraisal for a pending new home sales contract for $650,000 with a $695,000 appraisal for a 3,600 SF pool home in Orlando. The builder's inhouse mtg brokerage will handle the first mortgage and they are shopping a large second mtg. How much is it really worth lending on? The comps given to the appraiser by the builder in the upper $600,000's that closed in May-July 2007 (contracts from 2006) or true market driven pricing near a builder spec home in same subdivision w/pool 3,100 SF for $502,000 sold July 2007? The appraisal is off by $145,000; the contract is $100,000 too high. No one is telling the Buyers what is the real market. Next deal...