B&C Crisis Shaking Market's Foundation?

The crisis in the subprime mortgage sector is shaking the very foundation of the housing market, according to one of the nation's largest homebuilders.Ara Hovnanian of Hovnanian Enterprises said the subprime debacle is causing problems up and down the housing food chain. For one thing, fewer people can qualify for starter homes, Mr. Hovnanian said at the National Association of Home Builders' Multifamily Pillars of the Industry conference in Hollywood, Fla. For another, repeat buyers are finding fewer prospects for their houses, which they must sell before they can move, he said. But perhaps most important, the situation is having a dampening effect on the market in general. "The biggest impact is psychological," Mr. Hovnanian told the meeting. "Homebuyers were just beginning to feel good about getting back into the market" when the subprime meltdown became fodder for the media, he said. "Now they have lost their confidence." Hovnanian Enterprises is the parent company of K. Hovnanian Homes, the nation's sixth-largest builder based upon revenues and deliveries. Mr. Hovnanian said 15% of his buyers had to use subprime financing last year in order to qualify. But he said he expects that percentage to dwindle to 9% at most because of tightening loan standards.