“Frustrated” by a housing market that keeps moving in the wrong direction, Red Bank-based Hovnanian Enterprises yesterday reported its third consecutive quarterly loss.
As a result, Moody’s Investors Services cut its ratings on Hovnanian debt issues, saying the homebuilder’s cash flow from operations will likely remain negative amid the ongoing housing-sector slump, according to the Associated Press.
The publicly traded homebuilder, which last year built a new HQ assessed at $19.1 million on West Front Street, said it lost $30.7 million, or 49 cents per share, in its second fiscal quarter, compared to a profit of $101 million, or $1.55 per share, for the comparable 2006 period.
“We are frustrated to report that the housing market has continued to slip further in many locations in terms of both sales pace and sales prices,” said Ara K. Hovnanian, the company’s president and chief executive. “The housing market weakened in the latter part of the second quarter, and the slower conditions have continued into May.”
Despite a 3 percent increase in February contracts over last year, net contracts declined by about 30 percent through March and April, he said, blaming some of the downturn on the subprime mortgage market.
Hovnanian is expecting a profit in the fourth quarter of 2007 and in 2008. The company also announced it will discontinue offering earnings guidance because of the uncertainty of the housing market.
On the credit front, the AP reports:
“The downgrades reflect Moody’s expectation that cash flow from operations for all of 2007 will remain negative, that the company’s earnings-based metrics will continue to deteriorate, and that debt leverage will remain unacceptably high for the current rating,” the agency said in a statement.
Moody’s also gave the ratings a “negative” outlook, meaning the agency sees at least a 40 percent chance it will lower the ratings at some point over the next 18 months.