Wednesday, June 03, 2009

Hovnanian Calls Out for Government Support

Hovnanian Enterprises, Inc. (NYSE: HOV) reported results and as a home builder had no choice but to make the case that they are trying very hard in a difficult environment. They point with some optimism to the contract cancellation rate which is now tracking at 24% is a real improvement over previous quarters.

But when you listen to the executives cry out to the government you realize that they do not have enough control over their own business model. I know times are tough; but they are tough for everyone. investing is Darwinian and management teams that do not have control over their business model will face the obvious consequences. Read this quote

“...we remain concerned that the combination of the expiration of the $8,000 federal tax credit in November of this year, the depletion of the state funds allocated for the $10,000 California state tax credit for new home buyers and the potential increase in existing home listings due to another wave of foreclosures as the recent moratoriums on foreclosures have ended could have a dampening effect on our future contract pace. We are hopeful that our government will realize the importance of taking action to both increase the amount of the tax credit and extend its term."

Essentially they are looking for third party events to alter their cost structure. Not good.