Wednesday, December 19, 2007

Hovnanian: 40% Cancellation Rate

by Bill McBride on 12/19/2007 12:04:00 AM

Press Release: Hovnanian Enterprises Reports Fiscal 2007 Results

Sales:

... the Company delivered 13,564 homes with an aggregate sales value of $4.6 billion in fiscal 2007, down 24.4% from 17,940 home deliveries with an aggregate sales value of $5.9 billion in fiscal 2006. In the fourth quarter, the Company delivered 3,969 homes with an aggregate sales value of $1.3 billion in fiscal 2007, a decline of 22.0% in sales value from the fourth quarter in fiscal 2006.
Cancellation rate:
The Company's contract cancellation rate, excluding unconsolidated joint ventures, for the fourth quarter of fiscal 2007 was 40%, compared with the rate of 35% reported in both the fourth quarter of 2006 and the third quarter of fiscal 2007.
The headline number will be their losses and writedowns, but for the overall housing market, I think sales and cancellations are interesting. I use changes in the cancellation rate to adjust the New Home sales number from the Census Bureau (since the Census Bureau excludes cancellations). With rising industry wide cancellation rates, the Census Bureau understates the increase in inventory.

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