Already struggling against a tide of falling real estate values, Red Bank-based homebuilding giant Hovnanian Enterprises is now, like others in its industry, fighting a rip current brought on by the collapse of the subprime mortgage market.
The company reported a sharp drop in revenue and a larger-than-expected net loss yesterday.
According to TheStreet.com, Hovnanian:
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 company’s assessment of the real estate market is, for the moment, rather glum:
“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.”