swung to an expected third-quarter loss, as large land impairment charges related to unprofitable inventory hammered the homebuilder's results.
The Red Bank., N.J.-based builder reported a loss of $80.5 million, or $1.27 a share, for the quarter ended July 31. That compared with earnings of $74.4 million, or $1.15 a share, a year earlier.
Analysts expected a loss of 99 cents a share for the recent quarter, according to Thomson Financial.
Revenue fell 27% to $1.1 billion, matching analyst estimates. New contracts dropped 24%, excluding those from joint ventures.
The losses stemmed from $109 million of land impairment charges. As housing prices fall, homebuilders of all types are being forced to mark down the value of their inventories. In essence, the companies paid too much for land in recent years and are now losing money by building on this inventory.
"Conditions in most of our markets remain challenging," Ara K. Hovnanian, the company's CEO, said in a statement. "Credit tightening in the mortgage market has reduced the number of qualified home buyers, existing home inventory levels remain persistently high in many of our markets and buyer psychology has been negatively impacted by a steady stream of news related to falling housing prices, foreclosure rates, and mortgage availability.
"In light of these negative influences, our sales pace fell further in many of our communities, and we reacted by offering further price concessions and incentives. This created additional downward pressure on profit margins and led to additional land-related charges in the quarter."
Shares of Hovnanian, which slid 3.7% in the regular session Thursday, were down another 21 cents, or 1.9%, to $11.16 in after-hours trading.