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Hovnanian Expects Job Growth as Housing Rebounds


The housing rebound could cause the unemployment rate to drop significantly in the next few years, said Ara Hovnanian, CEO of Hovnanian Enterprises, one of the nation's largest builders of single-family homes.

Source: Hovnanian Enterprises

"We are undoubtedly well on the recovery route. It's not a question of are we beginning it. I'd say it began at the beginning of this year and that's not just for Hovnanian Enterprises. That's for the entire industry," Hovnanian said, noting that net sales orders for the 10 public homebuilders have increased 30 percent year-over-year.

"That means we're all going to start building, which means we're going to be hiring, and that will boost employment and help strengthen the economy overall."

Speaking on CNBC's "Futures Now," Hovnanian said there are other signs the housing market is turning around, too. The hottest markets for new construction currently include Florida, Phoenix, San Francisco, Orange Country, Calif., Dallas and Houston. Across the board, new home price increases are "significant." Prices are rising in most every market, he said.

Still, Hovnanian cautioned the housing recovery will take a while. To put it in baseball terms, he said we're only in the second inning.

(Read More: Recovery on the Rocks? Builders Warn on Housing.)

Take housing starts, for example. Hovnanian noted that for four decades, there was an average of 1.4 million housing starts per year.

"Housing starts are way up this year by around 20 percent, but it's only 800,000 starts," Hovnanian said. "The bottom was about 500,000 starts. So it's well off the bottom, but we're nowhere near just the average production let alone production at the peak where we had over 2 million starts per year."

Hovnanian said it could take four years to "get back to full normal."

In the meantime, though, Hovnanian suggested the ongoing worries over the looming "fiscal cliff" could put the fragile housing market at risk. After all, some economists worry the series of enacted legislation, which, if unchanged, will result in tax increases and spending cuts come Jan. 1 could throw the U.S. back into a recession.

(Read More: What Is the 'Fiscal Cliff?')

"Confidence is a very important factor in the home buying decision. It's a major decision for anyone, and if they're uncertain about what's going on, that may cause hesitation," Hovnanian said. "However, I'm confident that both sides of the aisle are going to see the necessity to calm the markets to reach some kind of settlement, even if it's for the next year and let the economy get back on route to recovery."

To avoid going over the "fiscal cliff," policymakers will decide on how to cut spending, such as possibly eliminating the mortgage reduction rate. Hovnanian said it's highly unlikely mortgage reduction will be eliminated outright, but he thinks it's possible the rate will be reduced. ovnanian said he wouldn't be surprised if the current mortgage limit of $1 million was reduced to $500,000, although he wouldn't endorse such a move. Still, he said it wouldn't affect his business very much being as the average home it builds sells for around $300,000.

Whatever the cuts may be, Hovnanian is optimistic policymakers won't do anything too drastic to the housing industry.

"I think people realize that the housing recovery is fragile," he said. "We've been through a very difficult time. I don't think anyone in Washington wants to see a repeat of that."


Read on for 10 Things You Need to Know to Trade Futures

Sector Watch: U.S. Homebuilders

—Toll Brothers

—DR Horton

—Hovnanian Enterprises

—PulteGroup

—Ryland Group

—Lennar Corp

—Beazer Homes USA

—Meritage Homes

—KB Home



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