NEIL CAVUTO, HOST: My next guest does quite a bit of business in Florida (search). He builds homes there — big homes, luxury homes. So is he worried?
Joining us now is Ara Hovnanian, the CEO of Hovnanian Enterprises. Shares of his company jumping nine percent Tuesday on a very bullish profit report. This gets boring, having Ara onto report about these boffo earnings, but here we go again.
Hello, sir. How are you?
CAVUTO: First to Florida, then your earnings. Any impact there for you?
HOVNANIAN: We are very fortunate. Our only operations are really in Tampa and we haven’t had that much of a problem in our office.
Obviously, our employees are having a tricky time. Their children are home from school, some of them have their power out. But on the whole we have been very fortunate.
CAVUTO: You were telling me during the break your mortgage operation is down there. Was that affected?
HOVNANIAN: Ironically, yes, our national headquarters is based in West Palm Beach, right in the path of the storm. But they also were unscathed. Se have been doubly fortunate.
CAVUTO: All right, because that could have been messy...
CAVUTO: ... delaying people’s loan approval.
CAVUTO: Let’s talk a little bit about the fear, though, that this has for builders and companies that do business in that neck of the woods, or Hurricane Row as they call it. Would you ever rethink your commitment to Florida as a result?
HOVNANIAN: You know, I’m asked that from time to time. But to be honest, Florida is such a big market. It’s a demographically very important market. Typically the first or second largest in the country.
So you really can’t write off that market. You just have to deal with it as a cost of doing business and part of the reality. Just like California has earthquakes, Florida has hurricanes.
CAVUTO: True. But I wonder whether the increased publicity of these hurricanes and maybe another one, Ivan, coming down the pike, if that makes prospective buyers say, "You know, maybe not"?
HOVNANIAN: I’ve got to say, it hasn’t historically. And, you know, we have had a history, obviously, down there for quite some time. And it has not been a long-term issue, whatsoever.
CAVUTO: Let me ask you something about your business. And you had said when the Fed started raising interest rates that it wouldn’t hurt your business, you and your competitors. And I see that seems to be a consistent theme, and so far a correct one.
Now people are beginning to wonder, given the softness in recent economic numbers, if it would be wise for Alan Greenspan to go slow on the rate hikes if — to have them at all in September and October. What do you think?
HOVNANIAN: You know, it is funny. I hate to be overly optimistic and think we’re in a win-win situation, but if the economy remains a little sluggish, then I think the outlook for raising rates is not very problematic.
On the other hand, if the economy steams up a bit, it is more likely we’re going to have more gradual rate increases. But, generally speaking, that is pretty good for home building, because good job growth, good consumer confidence, you know, good GDP is a positive thing for home builders.
CAVUTO: All right.
HOVNANIAN: I feel like I’m pretty comfortable under either scenario. But if I had to guess, I’d say sometime over the next 12 months we’re going to see a gradual increasing of rates, and that doesn’t trouble me.
CAVUTO: That’s going out on a limb. All right. Ara Hovnanian, thank you very much.
HOVNANIAN: All right, Neil.
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