Red Bank-based Hovnanian Enterprises, one of America’s largest publicly traded homebuilders, got walloped again in its latest fiscal quarter.
Continuing a slide that company official haven’t been able to foresee the end of, Hovnanian reported that sales results “significantly deteriorated” in October from recent months, with new orders down and contract cancellations up steeply.
As reported by Reuters:
Hovnanian said preliminary results for the fiscal fourth-quarter ended October 31, showed that excluding unconsolidated joint ventures, net contracts fell 10 percent to 2,781 homes, while sales slid 19 percent to 3,969 homes.
Would-be buyers canceled contracts at a rate of 40 percent, as many found themselves unable to qualify for mortgages. The cancellation rate rose from 35 percent in the prior quarter as well as the year-earlier quarter.
In early September, the company reported stronger-than-expected sales activity as a result of steep markdowns and heavy promotions that in some cases cut hundreds of thousands of dollars from asking prices for new homes.
The drop-off and cancellations were attributed to the difficulty that would-be homebuyers are having in obtaining mortgages as a result of the subprime lending crisis, a malady affecting the entire homebuilding industry and others that tie their fortunes to it.
“While Hovnanian’s debt paydown and solid fourth-quarter cash flow generation are positives, we believe the net impact of this announcement is negative, as it points to a further softening of conditions in October, which we note is an initial data point that the market continue to soften following the Sept-end quarters of most builders,” JP Morgan analyst Michael Rehaut, wrote in a research note.
The company plans to release detailed results for the fourth fiscal quarter Dec. 18. In late afternoon trading, HOV shares were at $9.88 each, down 23 cents from Monday’s close.