Red Bank-based Hovnanian Enterprises was blindsided by the swift drop in values on its inventoried land, the company acknowledged yesterday in reporting a $115 million fourth-quarter loss.
“We did not anticipate the suddenness or magnitude of the fall in pricing that occurred this year in many of our communities,” the company said in a statement on Monday. “Our profitability, and the pace of new home sales, in our markets continues to be adversely impacted by high contract cancellation rates, increases in the number of resale listings, and increases in the number of new homes available for sale.”
The downturn occurred just as the company began moving into its gleaming new digs overlooking the Navesink River.
Yet the homebuilding giant forecast a profitable 2007. Chief Executive Ara Hovnanian said he’s “started to see a glimmer of hopeful indicators that the markets may be stabilizing,” according to MarketWatch.
Hovnanian’s contract cancellation rate for the fourth quarter was 35%, compared with 25% in the fourth quarter of 2005 and a 33% rate in the third quarter of fiscal 2006.
That led to a fourth-quarter loss of $1.88 a share, compared to a net profit of $168.1 million, or $2.53 a share, a year earlier. Revenue was $1.7 billion, down from $1.8 billion in the fourth quarter of fiscal 2005.
For the full year, the company said it earned $149.5 million, or $2.14 a share, vs. a net profit of $471.8 million, or $7.16 a share, a year earlier.
Still, the company forecast a profit of $1.50 to $2 a share in fiscal 2007.