The CEO of Hovnanian Enterprises (HOV) said Thursday that a final push by homebuyers in April to qualify for a government tax credit didn't give the homebuilder's sales as big a boost as he'd hoped.
The company's new-home contracts tumbled 17% in the February-April quarter vs. a year ago. Excluding communities that are no longer open, new contracts were flat, however.
Those results exceeded the builder's internal projections, but still disappointed.
"I'd be less than candid if I didn't say we were hoping for better sales due to the impact of the homebuyer tax credit," CEO Ara Hovnanian said.
The tax credit — $8,000 for first-time homebuyers and $6,500 for repeat buyers — helped stoke sales for homebuilders this spring. In April, new-home sales nationwide jumped 14.8%; in March, new-home sales posted the biggest monthly increase in 47 years.
The government incentive expired April 30, although homebuyers have until June 30 to close on their purchase. That had many builders anticipating they would see a spike in sales as buyers raced to qualify for the credits.
Hovnanian said the deadline pulled some home sales forward into April, and that appears to have sapped some of the sales that ordinarily might have happened in May.
The builder's sales per community were slower last month than a year earlier.
"Given the fact that the tax credit is no longer in place, this reduction in sales per community in May seems reasonable," Hovnanian said. "The jury is still out as to what the impact will be on the expiration of credit on sales going forward."
Many experts anticipate home sales will decline in coming months now that the government incentive has ended, although some homebuyers in California can still qualify for a $10,000 tax credit enacted by the state legislature. New Jersey lawmakers are working to enact a $15,000 tax credit of their own.
Regardless, high unemployment and job insecurities continue to keep many buyers on the fence.
Hovnanian, based in Red Bank, N.J., reported Wednesday a smaller net loss of $28.6 million, or 36 cents a share, in its second quarter. Revenue dropped to $318.6 million from $398 million a year earlier.
Management said home prices remain stable in most of the company's markets, which has helped raise its profit margins and led to smaller write-downs. The builder also saw a lower rate of cancellation on new home contracts than a year earlier.