Hovnanian Reports Wider Quarterly Loss as Sales Demand Slows
Hovnanian Enterprises Inc., the worst-performing U.S. homebuilder this year, reported a wider loss for its fiscal first quarter as inclement weather extended construction times and sales demand slowed.
The net loss for the three months ended Jan. 31 was $24.5 million, or 17 cents a share, compared with $11.3 million, or 8 cents, a year earlier, the Red Bank, N.J.-based company said Tuesday in a statement. The average estimate of nine analysts was for a loss of 4 cents a share, according to data compiled by Bloomberg.
Hovnanian, New Jersey's largest homebuilder, said last month that while revenue grew in the first quarter, a slower sales pace, poor weather and labor and material shortages in some markets hurt home deliveries, leading to a wider loss for a quarter. Net contracts dropped to 1,202 homes from 1,344.
"The strong recovery trajectory from the spring selling season of 2013 has softened on a year-over-year basis," Chief Executive Officer Ara Hovnanian said in the statement. "Net contracts in the months of December, January and February have not met our expectations."
Across the homebuilding industry, orders started to slow in the second half of last year, partly because of rising mortgage rates and prices. The industry has taken another hit in recent months with the cold weather in much of the U.S., Robert Rulla, an analyst at Fitch Ratings in Chicago, said in a phone interview before Hovnanian reported its results.
"The harsh weather we've experienced had a bit of an effect on net orders, particularly in the Northeast and Midwest," Rulla said. "What we're hearing from homebuilders is that order rates are fairly weak so far this year."
Housing starts dropped 16% in January from December, the biggest decline in almost three years, according to the Commerce Department. Contracts to purchase existing homes rose less than forecast in January, climbing 0.1% after a 5.8% decline the previous month, according to the National Association of Realtors.
Hovnanian's first-quarter revenue increased to $364 million from $358.2 million a year earlier, as the average price of homes delivered jumped 10% to about $351,300. Home deliveries slipped to 1,138 homes from 1,188 a year earlier. Contract backlog, an indication of future sales, rose to 2,456 from 2,301 year earlier.
Hovnanian said it is seeking to boost sales during the spring selling season with promotions such as a "Big Deal Days" sales campaign during the month of March.
"We believe this is a temporary pause in the industry's recovery, and based on the level of housing starts across the country, we continue to believe the homebuilding industry is still in the early stages of recovery," Ara Hovnanian said in the statement.
Industrywide, contracts to buy U.S. new homes unexpectedly climbed in January to the highest level in more than five years, rising 9.6% to a 468,000 annualized pace, the Commerce Department reported on Feb. 26. It was the biggest jump since July 2008 and beat the highest estimate among the 82 economists surveyed by Bloomberg.