CHICAGO – Upscale U.S. home builder Hovnanian Enterprises Inc (HOV) is holding a nationwide three-day sales that effectively cuts home prices by up to $100,000 through incentives and offers extra appliances and upgrades.
Hovnanian said Friday the sale, held amid a slumping U.S. housing market that many do not see recovering before 2009, will be held Friday through Sunday in the 19 states the home builder serves, including California, New Jersey, Texas, North Carolina and Virginia, and will include live entertainment and prize giveaways.
Its shares jumped 9.2 percent to $10.95 in afternoon trading on the New York Stock Exchange.
"It's not going to give you a shot in the arm for your brand, but it's a way to generate cash," Standard & Poor's equity analyst Ken Leon said. "Looking at their cost structure, Hovnanian decided they need to sell at least 1,000 homes this weekend."
Home prices in the various communities in the sale, dubbed "The Deal of the Century," range from the high $100,000s to the mid $1,000,000s, the Red Bank, New Jersey-based company said.
The sale comes about a week after the No. 6 U.S. home builder posted a third-quarter loss and a 27 percent decline in sales. Hovnanian also warned Sept. 6 that conditions in most of the regions it operates remain challenging.
At the time, the company said it was offering additional incentives and concessions to entice buyers, but it faced fresh head winds because of tighter lending standards caused by the meltdown in the subprime market that is now spilling into the market for jumbo mortgages.
After several torrid years of growth, the U.S. housing market has seen demand drop steeply. Higher interest rates for home buyers who bought at low introductory rates and a credit crunch spurred by rising defaults have swelled the supply of homes for sale.
Dozens of U.S. mortgage lenders have curtailed lending this year as defaults soared, home price appreciation ended and investors stopped buying many loans.
Much of the weakness has focused on subprime lenders, but investors have grown increasingly worried about risks from "Alt-A" home loans, which fall between prime and subprime in quality" and "jumbo" prime mortgages once thought safe.
Hovnanian Chief Executive Ara Hovnanian said Aug. 30 the risk of recession was heightened and called for an interest rate cut by the U.S. Federal Reserve.
The company said its sale began at 9 a.m. on Friday at sales centers in participating neighborhoods and will run through 9 p.m. on Sunday. As of July 31, Hovnanian served 449 U.S. communities, as well as building on single lots in Ohio, Kentucky, Michigan and New Jersey.