Realty Check

KHOV: Kudos For Telling It Like It Is!

I know a lot of you real estate watchers out there don’t like the numbers, don’t believe the numbers, don’t want to hear me analyze the numbers, and if that’s the case, then please stop reading right here.

For those of you left, you should know we’ll be getting a lot of new numbers at the beginning of next week:  May Existing Home Sales from the National Association of Realtors, May New Home Sales from the U.S. Dept of Commerce and the S&P/Case Shiller Monthly Home Price Index.  I know, fun stuff.

And as I begin booking all the experts and scheduling all the local builders to give you their opinions, I also start scanning the real estate world for something real to hold on to because so many of these national numbers can truly be so obtuse.  I think I found something you should all see:

The contents are clear and definitely worth reading. More importantly, these numbers come directly from a public home builder, you know, the same ones that have been berating me for somehow skewing all the numbers and personally tanking the real estate market all in order to get myself a good story and get on TV more often.

This was the slideshow presented at last week’s J.P. Morgan Basics and Industrials Conference. I have always thought Ara Hovnanian, the company CEO, was one of the straightest shooters around, and this just proves the point. After Power Pointing some truly horrific numbers in pretty colors, he points out that the recovery in home building will be more like a “boat-hull” than a U or a V (see p.24). In other words, it will be slow and painful, and frankly we haven’t even started yet.

By telling it like it is, even in pastels, Hovnanian is giving its shareholders and the housing hawks the ugly truth, and in turn legitimizing its tactics for the future (see p. 11). Many of the other homebuilders, in my view anyway, continue to sugarcoat, or even joke about the current downturn in housing.

“We do think if you’re dumb enough to buy a home builder (share), you ought to buy us,” Ryland Group Inc. Chairman and CEO R. Chad Dreier told attendees to the same conference last week. Funny.

So Kudos to KHOV, and good luck. Unfortunately KHOV operates in some of the hardest hit markets in the country, out west and in Florida, but Ara Hovnanian notes some truths: a healthy economy, still relatively low interest rates, and firm demand.

As for the numbers next week, I wouldn’t dare to prognosticate, for fear of incurring the wrath of many of you out in the blogosphere, but I’d be interested to hear your theory of recovery…that is, which boat you happen to be in.