RED BANK, N.J. (
shares bid lower Wednesday morning after the homebuilder reported a double-digit drop in new-home contracts after the closing bell late Tuesday.
Hovnanian narrowed quarterly losses in its fiscal fourth quarter, ended Oct. 31 but said it sold 13% fewer homes in the period. Excluding joint ventures, it sold 1,078 homes, while completed sales fell almost 17% year-over-year to 1,204. The average price of its holds fell 12% to $261,530.
Hovnanian shares were 3.7% lower in premarket trading Wednesday.
The U.S. housing market continues to struggle and has been under tremendous pressure for some time. Demand fell further after the
, and continues to suffer amid high unemployment and foreclosures.
New-home sales are expected to have risen to an annualized rate of 300,000 in November though the figure has fallen four of the last six months.
Hovnanian's contract cancellation rates, excluding unconsolidated joint ventures, was flat year-over-year at 24%. Contract backlog at the end of its fiscal year, excluding unconsolidated joint ventures, was 1,249 homes with a sales value of $370.8 million, 30% and 34% lower, respectively, compared with year-earlier results.
"In spite of strong long-term demographics, the current housing market remains quite challenging," said CEO Ara K. Hovnanian. "The combination of a lackluster job market and high foreclosure activity is clearly having a dampening effect on the housing market. The only silver lining is that we continue to find land acquisition opportunities which we believe will yield appropriate returns at today's home prices and sales paces."
"Even without a general housing recovery, we are optimistic that as the percentage of deliveries from newly identified communities increases, our overall performance should continue to improve," the CEO added.
Quarterly revenue decreased 19.3% to $353 million, from $437.4 million in the fourth quarter last year.
Net losses narrowed to $132.1 million, or $1.68 loss per share, from $250.8 million, or $3.21 loss per share.
Analysts' consensus call was for a loss of 66 cents a share on revenue of $288.1 million.
disappointing homebuilding permits data further confirms that the "housing market recovery remains fragile at best," Kevin Brungardt, CEO of RoundPoint Financial, a mortgage origination and servicing firm, told the
He cited the usual suspects of high unemployment, potential buyers' low confidence among in the stability of home prices and the large inventory of distressed properties that still need to be cleared.
Foreclosure activity declined dramatically in November, but Brungardt said the 21% month-over-month drop was "a false positive," a result of the so-called "robosigning" scandal that led to procedural delays and foreclosure moratoriums at servicers like
Bank of America
, which stand behind the vast majority of U.S. mortgages, have said they won't push forward on foreclosures during the holiday season.
Brungardt estimated that the shadow inventory of homes could take two to three years to clear to a point when housing supply and demand begin to match up again, and that no acknowledged housing bottom will appear until that shadow inventory is significantly curtailed.
Homebuilders should expected material dampening of
new-home purchases until then, Brungardt forecast. Current homeowners will also continue to be impacted unfavorably, he told
Brungardt added that the recent spike in
mortgage rates -- a jump of 70 basis points over a short period of time -- also worked to delay a housing market recovery. Rates are still historically low, he conceded, but need to stay in the 4.5% to 4.75% range in order to fuel a meaningful recovery. He expects mortgage rates will fall again and then level out for a period of time.
stocks in the homebuilder sector, the
SPDR S&P Homebuilders
, an exchange-traded fund that tracks the homebuilder sector, gained 0.1% ahead of the opening bell.
-- Written by Miriam Marcus Reimer in New York.
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