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No Summer of Love

Hovnanian Enterprises, a big national homebuilder headquartered in New Jersey, reported disppointing results yesterday for its second quarter. Sales, at $1.1 billion, came in $100 million less than what Wall Street was expecting and 29% below the same period last year. Cash flow fell 80% to $40 million. Contracts for new homes slid 24%. Management again lowered its sales estimate for the year. The forecast, joked Gimmie Credit analyst Vicki Bryan, calls for “six more weeks of winter for homebuilders and no summer of love.”

Homebuilders woes are many, including an oversuppy of new homes, rising interest rates and tougher terms on new mortgages so fewer buyers qualify. Add a new one, a slew of lawsuits claiming builders forced buyers into taking out loans they couldn’t afford through their captive mortgage brokerage arms.

What’s interesting about Hovnanian’s strategy is that the company continues to hold prices fairly steady. Its average price per home was $347,000 for the quarter, 3.5% higher than at year-end. The company clearly would prefer to lose sales than lower overall prices. That’s a bit of good news for home owners in market’s where Hovnanian competes.

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