Another Home Builder Expects Market to Stabilize in 2007

A day after reporting a fourth-quarter loss, executives at home builder Hovnanian Enterprises Inc. said Tuesday they expect the housing market to stabilize early next year, the Philadelphia Inquirer reports.

Meanwhile, the nation’s stumbling housing industry was hit with more bad news as data showed applications for permits to build new homes fell for a 10th consecutive month. Applications for home loans were up last week, but most of that activity came in the form of refinancing.

Hovnanian’s president and CEO blamed some of the current downturn on home buyers waiting for incentives and price adjustments before purchasing.

“I’m not quite sure how long or what it will take to get the home buyers off the sidelines,” Ara K. Hovnanian, head of the home builder, said.

He said he expects home sales to pick up after the traditionally slow period between Thanksgiving and the Super Bowl and believes the market is nearing a point where prices will stabilize, instead of continuing to fall.

Analysts disagreed. Nishu Sood, an analyst with Deutsche Bank, said the prediction was too optimistic.

“We continue to think it’s too early to call for a bottom in the housing market. What we’re anticipating is home prices will continue to decline in the spring selling season,” he said.

Hovnanian, based in Red Bank, builds luxury homes in 17 states including populous California, Florida, New Jersey and New York. On Monday, it reported that it swung to a loss in the fourth quarter.

The quarter included $315 million in charges related to inventory impairments and land option write-offs, which company officials said Tuesday will help company accounting in future years.

Alex Barron, who follows the industry for JMP Securities, said home prices will continue to fall because of a glut of inventory, and prices already at levels in which fewer people can afford the mortgage loans.

“Every builder bought or optioned too much land over the last couple of years on the expectation that market trends were going to continue indefinitely,” Barron said. “Now that housing prices have begun to come down, that’s what’s triggering a lot of these writedowns.”

Company officials said in the conference call that the company has about a three-month inventory of housing.