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Hovnanian’s Outlook is Optimistic

Posted February 19, 2010 by Matthew Denton

The future may be favorable for the real estate giant

In the words of Ara Hovnanian, chief executive of homebuilding company Hovnanian Enterprises, Inc., we shouldn’t fret with the future of the real estate market that much.

Two years ago, Hovnanian wasn’t at ease with the pace of the property market. He said to CNBC , “The housing environment is difficult. All public builders are having challenges. The focus is on liquidity, it’s on cash flow, both for our company and the industry…and we just have to weather through it… Existing home inventories are leveling off; it’s not improving yet, which is what we need, but it’s not getting worse…and new-home inventory is fairly in control, and has been coming down among all the public homebuilders… Existing home inventories are leveling off; it’s not improving yet, which is what we need, but it’s not getting worse…and new-home inventory is fairly in control, and has been coming down among all the public homebuilders.”

Now, the market seems to have changed and Hovnanian’s outlook (take note: seems) is leaning on the optimistic side. An Associated Press report states, “(He) said new construction and the inventory of homes for sale have fallen well below normal levels in many cities. So the addition of more homes on the market shouldn’t hurt builders. Hovnanian noted that in Sacramento, Calif., a market hard-hit by foreclosures in recent years, there is about a 2-month supply of homes available now versus more than a year’s worth back in 2007. And in Orlando, Fla., supply is down to around 7 months, down from well over a 2-year supply at the start of 2008, he said.”

And why shouldn’t he be more positive? The extended first time homebuyer tax credit will end on April 30 so more Americans are more likely to beat the deadline. Home sales will surge and builders will be on track again.

Second, it benefited from the tax rule last year that extends the time companies have to offset past losses. Finally, low interest rates paved the way for the company to slightly recover from heavy losses as buyers found it easier to fulfill their dream of homeownership.

What a difference two years makes for the industry!

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