Hovanian reported an absolutely horrible quarter this evening, but something good always comes out of the Hovnanian quarter: a little honesty. Ara Hovnanian might be the only housing executive who has consistently maintained a realistic perspective of what is occurring in the housing market. While other CEO’s (I am not referring to Bob Toll) sell shares while also telling the public that everything is dandy, Ara and his family have essentially sunk with their ship. They’ve even made a few purchases at depressed levels. Ara’s current outlook is incredibly cautious despite a few “encouraging signs”. Hovnanian is very concerned that the government isn’t doing enough to stabilize the market and that the foreclosure market could result in further depressed prices:
“The combination of historically low mortgage rates and steep corrections in home prices have pushed affordability close to an all time high across the country. Although we lowered our sales prices further which resulted in the land impairments we took during the second quarter, we have seen more stability in home prices over the most recent six weeks. In spite of these encouraging signs, we remain concerned that the combination of the expiration of the $8,000 federal tax credit in November of this year, the depletion of the state funds allocated for the $10,000 California state tax credit for new home buyers and the potential increase in existing home listings due to another wave of foreclosures as the recent moratoriums on foreclosures have ended could have a dampening effect on our future contract pace. We are hopeful that our government will realize the importance of taking action to both increase the amount of the tax credit and extend its term.”
Toll Brothers reports tomorrow morning. Despite selling millions of dollars of TOL stock last month I am quite certain he will have a far more rosy outlook.