Housing Gloom Continues for Hovnanian

Homebuilding gross margins dropped to 16.3% from 23.7% a year earlier.

After a 3% increase in our February contracts over last year, the company's contracts declined approximately 30% year over year through March and April, Hovnanian said. The company attributed the decline to the problems in the subprime mortgage market.

"While we have felt the sub-prime impact directly in the form of fewer potential homebuyers qualifying for a mortgage as lending standards have tightened, the more significant impact has been indirectly through a further pullback in home buyers' psychology toward making a purchase," Hovnanian said.

The company said it was withdrawing its guidance and increasing its focus on improving its balance sheet to generate cash flow, which may involve walking away from more land options.