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Thursday, December 12, 2013

Lawler on Hovnanian: Net Home Orders Slowed Significantly in Summer; Rebounded Modestly as Year-End Approached

by Calculated Risk on 12/12/2013 06:46:00 PM

From housing economist Tom Lawler:

Hovnanian Enterprises reported that net orders (including jvs) in the quarter ended October 31, 2013 totaled 1,315, down 8.9% from the comparable quarter of 2012. The dip in orders came despite a YOY community-count increase of 6.9%. The company’s sales cancellation rate, expressed as a % of gross orders, was 23% last quarter, unchanged from a year ago. Home deliveries last quarter totaled 1,816, up 3.8% from the comparable quarter of 2012, at an average sales price of $371,401, up 13.8% from a year go. The company’s order backlog at the end of October was 2,392, up 11.5% from last October, at an average order price of $354,672, up 2.5% from a year ago.

Hovnanian said in its sales release that its “sales slowed from July through September due to the adverse impacts of higher mortgage rates, the sequester and the government shutdown,” but another factor was Hovnanian’s aggressive price increases (highlighted in last quarter’s presentation) in several markets, especially California. Hovnanian’s net orders in California last quarter were down 48.4% from a year ago, at an average contract price of $571,800, up 41.5% from a year ago.

Hovnanian Click on graph for larger image.

In its quarter presentation Hovnanian provided monthly net orders figures, including an estimate for November. Combined net orders for October and November were virtually unchanged from the same two months of 2012 (847 vs. 849) While in its press release Hovnanian said that November net orders exceed last November’s levels, its quarterly presentation showed a small YOY decline (382 vs. 385).

Hovnanian joined the vast bulk of publicly-traded large home builders reporting a significant drop in net home orders last quarter – consistent with Census’s estimate of a substantial decline in new home sales during that period.