CEO of Luxury Home Builder on Successes
This is a rush transcript from "Your World with Neil Cavuto," September 17, 2007. This copy may not be in its final form and may be updated.
NEIL CAVUTO, HOST: All right, this is a FOX News Alert: 2,100 sales, 1,700 contracts, 400 deposits, thousands of prospective home buyers taking advantage of what many call the deal of the century.
And my next guest could not be happier. Ara Hovnanian is the CEO of luxury home builder Hovnanian Enterprises.
And, essentially, what you did, to bring people up to speed, is, this past weekend, you had a big discount...
ARA HOVNANIAN, CEO, HOVNANIAN ENTERPRISES: Yes.
CAVUTO: ... Across your major home communities, prices up to 20 percent off, $100,000, depending on the home. Reaction?
HOVNANIAN: Well, we were thrilled. It definitely exceeded our expectations. We knew there would be a lot of — a lot of sales. We had so many hits on our Web site that it actually crashed for a little while over the weekend. But the actual results were better than we anticipated.
CAVUTO: All right. So, inventory went down?
HOVNANIAN: Yes, absolutely, which was one of our objectives. We had more homes than we would have liked. And we were just running a special to whittle that down.
It was a big special. And some argue against you, Ara, that you set a dangerous precedent.
CAVUTO: Wait long enough, the Ara Hovnanians, the Bob Tolls, the others, will chop those prices fast.
HOVNANIAN: Well, you know, the problem has been, many consumers — between the publicity in the media, which is understandable, about housing prices coming down, and going out and seeing, slowly, but surely, prices have been whittling down, at many home builders, almost all home builders across the country.
And, so, people were waiting. We wanted to just take it that extra step, make sure it was announced, and people knew there were some good opportunities, and get them off the fence. And that's what happened.
CAVUTO: But are you worried, Ara, that people now have been spoiled, much as they do buying cars and electronics items, that, if there's not a sale, they're not going to come out?
HOVNANIAN: Well, you know, I think that the sale mentality — well, first of all, we are not doing it every week. We are not doing it every month. It's something that...
CAVUTO: Maybe you have to consider that, because, Monday, today, like, did you get any interest in your communities? They're back up again.
HOVNANIAN: I don't get it by day.
But, yes, the prices went back to what they were just prior to this. But, look, right around the corner, Bergdorf Goodman's or every retail store around runs sales all the time. It doesn't mean they don't sell when they're not running sells.
CAVUTO: All right. So, for the poor guy who bought his house, let's say, Thursday, before all this began, right, now, what are you going to do for him?
HOVNANIAN: Well, see, the reality is, there have been incentives in the marketplace that have been increasing over the last year. So, the guy that bought Thursday definitely got a very good deal.
CAVUTO: Yes, but he did not get $100,000 less, right?
HOVNANIAN: Not quite as good as what...
HOVNANIAN: ... the people got over the weekend, without a doubt.
CAVUTO: Well, here is what Steve Jobs did for people who bought the iPhone, you know, gave them a $100 gift certificate.
HOVNANIAN: I'm well aware of that, but...
CAVUTO: Are you going to give a garage to people?
HOVNANIAN: He was precedent-setting, for sure.
CAVUTO: So you're saying, no, you're not going to do that?
HOVNANIAN: We are not. They have gotten — the people that bought got a great opportunity. Most of the incentive was focuses on our unique inventory home.
HOVNANIAN: And, many of the times, colors were selected and upgrades were selected.
CAVUTO: But you know what I'm thinking, Ara? There is a barbecue later next summer, right? And the two dudes are right next door to each other, and the guys says to the one guy, you and I have the same model house. I got mine for $100,000 less.
CAVUTO: That's going to be an awful barbecue.
Yes, but reality is, the marketplace has adjusted. And whether we did it or somebody's resale did that, that is what is happening in the marketplace. We don't set the pricing in the market, really. We react to where the market is. And the market is looking for lower prices. And...
CAVUTO: And we should point out, to be fair to you, the market liked what you were doing, your stock up 3 percent today. It was up 10 percent on Friday, still off a little bit more than 60 percent from your highs, but trend is your friend.
HOVNANIAN: By the way, for the consumers, they will be happier — for the ones that live there, they will be happier to see the community be successful, continue to build more homes, and get rid of the excess inventory. That is ultimately better for their home values.
CAVUTO: We shall see. But I dare you to go to one of the barbecues next summer and see how that goes.
CAVUTO: All right. Ara Hovnanian, very good seeing you again.
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