Hovnanian Says Housing Market Still Deteriorating

Upscale U.S. home builder Hovnanian Enterprises said Tuesday fourth-quarter net contracts and home deliveries fell, while cancellations rose amid the housing market's decline.

The company also said the sales pace in October in most of its markets "significantly deteriorated" when compared with recent months, but shares rose 1.8 percent as the company also moved to shore up its balance sheet.

Tighter credit standards brought on by defaults in the subprime mortgage market, a glut of homes for sale and buyer concern about economic weakness have home builders scrambling to strengthen their balance sheets to weather the market decline, which began more than 18 months ago.

Hovnanian said preliminary fourth-quarter results showed net contracts fell 10 percent to 2,781 homes, while deliveries slid 19 percent to 3,969 homes.

The figures for both exclude home deliveries from unconsolidated joint ventures.

The Red Bank, N.J.-based company said cancellations for the quarter that ended Oct. 31, were 40 percent of gross contracts, up from 35 percent in the previous quarter as well as the year-ago quarter.

Hovnanian blamed the higher cancellation rate on the inability of some customers to obtain loans due to the tightening of mortgage underwriting standards.

The company said its contract backlog at the end of October, excluding unconsolidated joint ventures, was 5,938 homes, down 30 percent from last year.

Hovnanian also said it was focusing on shoring up its balance sheet and cash flow.

It said it cut debt by $390 million in the fourth quarter, retired the remaining $140 million of its $150 million 10-1/2 percent senior notes and reduced the amount drawn under its $1.5 billion unsecured revolving credit facility by $250 million to $206 million.

Hovnanian's shares rose 18 cents to $10.29 in early trading on the New York Stock Exchange.