Hovnanian Expects to Take Charge as Housing Sales Cool
Facing a continued slump in the U.S. housing market, luxury home builder Hovnanian Enterprises said Monday it expects to take a charge of $90 million to $110 million related to land impairments and write-offs.
As housing demand has cooled, developers have stopped building new units to avoid being saddled with inventory of homes they cannot sell.
Hovnanian shares fell about 2 percent on the New York Stock Exchange. The shares are down more than 56 percent for the year, compared with a 34 percent slide in the Dow Jones U.S. home builders index.
Hovnanian's announcement comes less than three months after the company withdrew its fiscal 2007 earnings forecast, saying the protracted slowdown in the housing market had made it difficult to make accurate predictions.
Hovnanian said the pretax charge was for land impairment and write-offs of predevelopment costs and land deposits during its fiscal third quarter, ended last month.
Analysts, on average, expect the company to report a third-quarter loss of 11 cents per share, according to Reuters Estimates. In the year-earlier period, Hovnanian reported a profit of $77.4 million, or $1.15 per share.
On a preliminary basis, Hovnanian said it delivered 31 percent fewer homes in the third quarter than a year earlier, while net contracts fell 24 percent, excluding unconsolidated joint ventures.
The third-quarter cancellation rate was 35 percent, compared with 33 percent a year earlier.
The Red Bank, New Jersey-based company said it was still reviewing financial results and impairment charges, and plans to release third-quarter results on Sept. 6.
After several boom years, the housing market has slowed sharply. A cooling economy and a credit crunch spurred by rising defaults among subprime borrowers -- those with less robust credit histories -- has prompted many buyers to step back.