Hovnanian's loss was well beyond analyst expectations of a loss of $1.52 share on revenue of about $392 million, according to analysts surveyed by Thomson Reuters.

The home-builder also reported the number of net contracts in the quarter declined 9% to 1,442 homes compared with the same period a year ago. For the fiscal year, the company said, net contracts were down 25% from last year.

J.P. Morgan analyst Michael Rehaut told MarketWatch that Hovnanian's 9% decline in net contracts was better than expected. Still, he questioned whether the company could maintain that demand through the end of the year given foreclosure pressures and the expiration of federal and California tax credits. The Golden State is one of about 20 states in which Hovnanian has active developments.

Home-building stocks as a group have done well in recent weeks, gaining 55% on average since the start of July. Hovnanian has gained more than 400% since bottoming out in March, when shares were trading well below $1 each. The company's share price dropped so low in part because the stock was oversold, but expectations that a building economic recovery will be a boon for home building also contributed to the run-up in building stocks.

Analysts, however, remain cautious that shares of Hovnanian, as well as other builders, can maintain their heady gains. Though the economy is slowly gathering steam it is still vulnerable to shocks. Moreover, home builders still have a number of factors weighing against them, including a glut of inventory and a slew of adjustable rate mortgages scheduled to reset in the remainder of this year and into next, which could flood the housing market with even more foreclosures and drive home prices -- and demand for new homes -- lower.