Homebuilders Planning for Brighter Future

Posted by: Prashant Gopal on September 4, 2009

Hovnanian Enterprises disappointed Wall Street this week with an earnings report that showed deep revenue and profit declines. But CEO Ara Hovnanian, who said that new home contracts have improved in recent months, sounded upbeat about the future. Hovnanian said the company would raise prices, cut incentives, buy land and reopen two projects it mothballed in Southern California and Arizona.

Hovnanian’s announcement is just the latest sign of new-found confidence in the housing market. In the latest BusinessWeek issue, I argue that the housing market’s strength is more broadbased than the real estate industry acknowledges. And the recovery is not just concentrated in foreclosure and other low-priced sales.
Home prices appear to be rising in medium- and high-end markets as well, according to Case Shiller’s seasonally-adjusted Tiered Price Indices.

Builder and Realtor lobbyists are pushing for the extention and expansion of buyer incentives. They argue that the housing market cannot maintain its momentum unless the $8,000 first-time buyer credit is nearly doubled, extended through 2010, and given to all buyers, not just first-time buyers. The $8,000 credit is now due to expire after Nov. 30.

The $8,000 credit seems to have helped in spurring sales. It’s not clear what would happen if it is allowed to expire. Interestingly, Hovnanian said the expiration of the $10,000 credit for new home buyers in California in July did not hurt business signifantly.

I would say thus far, keep in mind it’s only been a few weeks, we haven’t seen a huge impact, so we are pleased with that. Part of that could be driven by the federal credit and that expires at the end of November, so you know, it’s hard to know what the impact of losing both of them will be and it’s hard to know what the impact will be after a greater period of time in California.

But based on the first few weeks, thus far things seem to be holding

Reader Comments

jambo

September 5, 2009 6:43 PM

The builders are living in denial. There will not be a housing recovery because ppl are unemployed, and there will be a new glut of foreclosures coming right up. A $8k is nothing.

If people don't have jobs, how are they suppose to have money to buy the overpriced homes? Do we want to start the whole cycle all over again, only to let people go underwater and foreclose on their homes?

Snoz

September 6, 2009 2:09 AM

Gopal and others in the real estate scam want the Federal government to re-inflate the real estate bubble with more easy money. It is precisely the easy money that encouraged Fannie, Freddie, and Wall St to make risky bets on real estate -- and lost. In addition, the fraud perpetrated by real estate promoters and builders, sales agent, mortgage lenders and appraisers has caused the collapse of the Wall St financials. With Wall St broke and unable to pay, the taxpayers were the lucky ones left to pick up the tab. The biggest perpetrator of fraud are those who use the media to promote real estate as the vehicle to riches. These con-artist use TV, radio, newspaper and even BW to hard-sell as well as soft-peddle the idea that flipping real estate is the failsafe get-rich formula. These con-artists are quick to write that the real estate market has climbed out of the bottom; prices are not only recovering but rising; and now is the time to buy regardless of rebates. It appears that BW has been providing a medium for a certain writer who prostituted his soul for promoting the real estate business.

megan

September 7, 2009 1:59 PM

That would be nice if the buy credit was doubled. I am trying to get my loan approved before the nov deadline.
Home business insurance

Rick Arvielo

September 7, 2009 5:56 PM

Rick Arvielo

September 8, 2009 11:07 AM

Wes

September 11, 2009 12:50 PM

With the amount of articles I too question the author's motives. I have seen no data that points to a meaningful recovery, only data that obsfrucates what is really happening. For instance, it's been widely reported that prices are up in June 2009 vs. May 2009, and prices have now turned positive. Since when did we compare month to month? What really matters is YoY. If we were back in February 2006 when prices were down from January 2006, we would have been constantly reminded that prices were still up "X% YoY" by the real-estate industrial complex.

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About

BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.

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