Shares of home-builder Hovnanian Enterprises Inc. (NYSE: HOV) fell sharply in trading Thursday, a day after the company reported a bigger loss than Wall Street had anticipated. By early afternoon, shares of the New Jersey-based company had fallen more than 13% to just over $4 a share.

In reporting its fiscal third quarter earnings Wednesday, Hovnanian said it lost $168.9 million, or $2.16 a share, in the three months ending July 31. That compares with a loss of $202.5 million, or $2.67 a share, in the year-earlier period. Revenue fell 45% to $387.1 million. The company noted its latest quarterly results included $105.7 million in pretax charges to reflect the declining value of land and other assets.

The U.S. housing sector has registered another ignominious statistic. Home prices in a 20-city sample plunged 14.4% in March 2008 (PDF), on a year-over-year basis, according to the S&P / Case-Shiller U.S. National Home Price survey released Tuesday. Meanwhile, prices in a 10-city survey plummeted 15.3%.

It was the largest decline in the survey's 20-year history, Case-Shiller said.

Economists surveyed by Bloomberg News had expected home prices in the Case-Shiller 20-city survey to decline 14.2% in March 2008 on a year-over-year basis.

The areas with the largest percentage declines were: Las Vegas, -25.9%; Miami, -24.6%, and Phoenix, -23.0%. Only one city in the survey -- Charlotte, N.C. -- appreciated, with prices there rising just a scant 0.8%.

Percentage price changes in other major U.S. cities were as follows: New York, -7.4%, Los Angeles, -21.7%, Chicago, -10.0%, Boston, -5.9%, San Francisco, -20.2%, Washington, D.C., -14.7%, Miami, -24.6%, and Seattle, -4.4%.

Economic Analysis: Another horrible U.S. housing sector statistic, and the sector remains in deep recession. Economists differ regarding whether the U.S. housing sector has bottomed: some see a housing recovery as early as Q4 2008, while others say it won't start until mid-2009. In either event, it's going to be a while before new home builders can resume typical building schedules and get out there and make some money -- a fact that suggests U.S. home prices are likely to continue to decline for at least the next two quarters, and probably longer.

Readers of this space know that the investment bias is toward large-cap companies with demonstrated business models and a competitive advantage in established markets, preferably with a favorable global trend for support. But every once in while an exception is made for a non-conforming but innovative and promising company, and along these lines Gafisa S.A. looks attractive.

Gafisa S.A. (NYSE: GFA) constructs residential buildings in middle/upper income areas in 35 markets in Brazil. Analysts like Gafisa's huge inventory of land, construction in progress, and finished units, all of which will serve to increase earnings, moving forward.

Further, outstanding mortgage loans in Brazil are only 2% of GDP. That means there's room for the nation's mortgage-based home buyer segment to expand. Meanwhile, lower interest rates in Brazil are providing a tailwind for the nascent, local mortgage market. The First Call F2007/F2008 EPS consensus estimates for GFA are $1.38/$4.18. (Note: Only 1 estimate each year.)

New homes sales fell by 9% in November 2007 to a seasonally-adjusted annual rate of 647,000 -- a 12-year low -- the U.S. Commerce Department announced Friday (pdf). The November 2007 statistic represents the lowest figure since April 1995.

Analysts had expected new home sales to decline to a seasonally-adjusted annual rate of about 720,000 units in November 2007.

For the past 12 months, U.S. new home sales declined 34.4%. Sales in the Midwest fell the most, 38.7%, followed by a drop in the South of 34.3%, a slump in the West of 33.8% and finally a decline of 28.1% Northeast.

The median sales price of new houses sold in November 2007 was $239,100, or down 0.4% in the past 12 months, while the average sales price was $293,300, or up 0.5% from November 2006.

Furniture Brands-(NYSE:FBN) markets residential furniture through Broyhill Furniture, Lane Furniture, Thomasville Furniture and HDM Furniture. FBN is recently up $3.30 to $13.44 after Samson Holding reported a 14.9% stake in FBN. Samson has indicated it may seek to acquire control of the company. FBN reported June 2007 quarterly total revenue of $535 million. FBN will host an investor day on 10/23 in New York City. FBN October option implied volatility of 54 is above its 26-week average of 35 according to Track Data, suggesting larger price risk.

USG-(NYSE: USG), a manufacturer and distributor of building materials, is recently up $.57 to $38.14 on renewed & unconfirmed takeover chatter. Unconfirmed chatter is circulating today that a consortium of four of the largest Chinese construction companies wants to acquire a 24% stake in USG. China Overseas Land is one of the names mentioned in the consortium. Warren Buffet is an owner of approximately 19% of USG. USG October 40 calls have traded 72 times on transaction volume of 2,103 contracts above its open interest of 2,013 contracts. USG October option implied volatility of 42 is above its 26-week average of 32 according to Track Data suggesting larger price risk.
Daily options Update is provided by Stock Specialist Paul Foster of theflyonthewall.com.

Home improvement chain Lowe's Cos. (NYSE: LOW) is moving sharply higher in today's premarket following the release of strong second quarter earnings. Boosted by higher revenues, the North Carolina company reported a 9% jump in quarterly profits.

The company earnings of 67 cents per share, a nice upside surprise from the 61 cents analysts had expected. This was all the bulls needed to push the stock higher. So far this morning, shares of Lowe's are up 6.1%, looking to open up $1.63.

Not surprisingly, the company did have one weakness, and that was sales from stores open a year or more, which was directly related to the slowdown in the housing market. Analysts had factored that in already, and the actual decline was "only" 2.6%.

On today's STOP TRADING segment on CNBC, Jim Cramer said that Union Pacific Corporation (NYSE: UNP) is great because it is up after lowering guidance and shows how bullish the market is for secular growth stories like this. Cramer thinks railroads are in an oligopoly and is still going higher. He thinks they have pricing power where the truckers do not. On The Home Depot, Inc. (NYSE:HD), today was the first day that they have been a real buyer of the stock and this was the first day they have been a buyer. He thinks they can follow the stock up and the new management will want to keep buying per their buyback plan.

The truth is that it would be easy to come out and slam either of these since we had nearly ten Cramerless days (that may be a new term). But in a bull market, the tape speaks for itself. Even homebuilder stocks did well today, and the only person that is actually positive on homebuilders would be a man named Pangloss. Union Pacific is more than surprising that it is up like this. Home Depot is also finally coming into its own after the Dark Ages, and is actually within $1.60 of a 52-week high. Once again, you could make the argument against these but you'd be fighting the hell out of the tape.

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

In a recent interview, CFO Joel Rassman of Toll Brothers (NYSE: TOL), the luxury home builder active in 50 U.S. markets, argued that the housing market is influenced much more by consumer confidence and less by specific economic policies such as interest rate changes by the Federal Reserve. Without making personal political statements, Mr. Rassman argued that the housing market will pick up when consumers feel more inspired by their government, feel more confident in the government's policies and its ability to get things done. Mr. Rassman stated that the average housing market slump is generally about 18 months in duration. Consumer confidence dropped dramatically after Hurricane Katrina due to the government's perceived inability to deal with that situation. Mr. Rassman places less importance on the federal budget deficit and mortgage interest rates.

CFO Rassman tried to make the case that the current slump in the housing market is different from previous slumps. The current slump is due to an oversupply of housing rather than job losses, higher interest rates or a slowing economy. He forecast that the housing market will pick up in the spring, right about 18 months after the slump began. Housing stock investors may well share Mr. Rassman's guarded optimism. Just before Toll Brothers released 1Q 2007 figures, investors bid up Toll Brothers options to several dollars above the price of the stock, indicating they think the stock, currently trading at $29.48, will go higher.

Toll Brothers 1Q 2007 figures were, as expected, not good. 1Q 2007 net income was $54.3 million, one-third of 1Q 2006 record net income of $163.9 million. 1Q 2007 total revenues were just over $1 billion, down 19% from 1Q 2006. The number of signed contracts in 1Q 2007 was down 14% from 1Q 2006. The number of buildable lots Toll Brothers controls nationwide is down 26% to 67,500. Despite all the downward pressures in the housing markets, Toll Brothers still plans to build more than 6,000 houses in FY 2007.

Mr. Rassman firmly believes that declining home prices are building up demand for homes. As soon as consumers think the market has bottomed out, which Mr. Rassman argues will be by mid-year, home buyers will begin to enter the market in large numbers as they will not want to wait until it is too late.

Home Depot's (NYSE:HD) CFO Carol Tome expects an economic slowdown between now and the end of 2007, a slowdown lasting roughly one year. Back in September, the retailer said that sales for the remainder of 2006 would come in at the low end of a range of 14% to 17% growth, and for per-share earnings to increase at the low end of a 10% to 14% range. In 2007, sales could slow considerably.

Tome said that Home Depot's worst-case scenario would be for the U.S. housing market and economy to slow to a point where sales at comparable Home Depot stores -- known as "same-store sales" -- could decrease by single-digit percentages of around 4 to 6 percent.

In what seems like the most obvious statement that could be given by a CFO, Tome said that Home Depot's strong balance sheet should allow the company to weather an economic slump while continuing to enhance its overall core retail business.

I'm not sure how a "core business" can be enhanced when the shopping segment temporarily dries up, except for loading more selections and possible categories into Home Depot stores to steal customers from other retailers as everyone fights for every single consumer penny -- especially in a slowdown.