Hovnanian CEO Is More Pessimistic About Housing Recovery

The chief executive of homebuilder Hovnanian Enterprises said he no longer sees the signs of stabilization in the housing market he did in March, and now warns the industry is still a ways from improvement.

“The subprime has gotten a lot of attention and it’s not just been the direct effect of the subprime but the psychological effect, even by those that are not using subprime mortgages.… It’s causing hesitation,” CEO Ara Hovnanian told CNBC’s Erin Burnett on "Street Signs."

But the problem has not spread to normal prime mortgages, he added.

And while the subprime market made up about 18% of Hovnanian’s business in 2006, and some 14% in the first quarter, a dropoff would not have a major impact, Hovnanian said. “It’s meaningful, but it’s not a huge part of business.”

Qualifications for lending are tightening, but the market is not going away, he added.

At a time when fellow homebuilders Lennar and D.R. Horton are reporting weak second quarters, posting declines of 27% and 37% in orders, respectively, Hovnanian does not expect to see the same magnitude of problems.

“Without tipping our hat too much, I’d be surprised if we end up 40% down as some of my peers announced recently,” he said.