You don't have to live in a hovel if you buy a Hovnanian. Hovnanian Enterprises designs, builds, and markets single-family detached homes, condominiums, and townhomes for first-time, move-up, and luxury buyers as well as for empty-nesters and active adults. The company offers homes for sale under the K. Hovnanian, Brighton, Matzel and Mumford, Oster, Parkwood Builders, and Town & Country names. Its average home price is about $280,000. The company operates in about 200 communities in 16 states. Its K. Hovnanian American Mortgage unit offers mortgage financing and title services. Members of the Hovnanian family control about 90% of Hovnanian Enterprises.
Like its peers, Hovnanian was hit hard by the housing downturn and credit crunch. Revenues have fallen sharply since 2006 as housing demand has declined. The company managed to achieve a profit in 2010 due to a favorable tax credit. However, Hovnanian fell into the red again in 2011 as the housing industry struggled to make a strong comeback. Sales were down by 17% in 2011.
As a result of the weaker demand the company has built fewer homes and as a result, sales have declined. Hovnanian delivered about 4,200 homes (including joint ventures) in fiscal 2011(down from more than 20,000 in 2006).
In order to reduce costs the company cut its workforce some 75% between 2006 and 2010. Hovnanian also has reduced its general and administrative expenses. The company "mothballed" or stopped development on more than 50 communities (half of which were in California). However, the firm did begin investing in the future in 2010 and reactivated more than a dozen previously mothballed communities. The following year Hovnanian invested some $400 million in new land purchaes and land development. But it continued to reconfigure its communities by mothballing eight, selling three and re-activting four.
Anticipating a housing recovery, Hovnanian is increasing its community count and has purchased land at discounted prices in the Southeast (Florida, Georgia, and the Carolinas), Southwest (Arizona and Texas), and West (California). The Southwest (in particular, Texas) is a major contributor to Hovnanian's revenues (some 30% in 2010). Home prices in Texas have been relatively stable compared to the rest of the country.
The company in 2009 and 2010 also entered into joint ventures with GTIS Partners to design, build, and sell homes across communities in the greater Chicago; Palm Beach County, Florida; California; and Virginia markets. Hovnanian owns about 20% stake in the ventures. – less