Hovnanian: Higher Home Prices, Rising Mortgage Rates Dampened Home Sales in July and August

From housing economist Tom Lawler:

Hovnanian Enterprises, the seventh largest US home builder, reported that net home orders in the quarter ended July 31, 2013 totaled 1,568, up 1.8% from the comparable quarter of 2012. The company’s sales cancellation rate, expressed as a % of gross orders, was 18% last quarter, compared to 21% a year ago. Home deliveries last quarter totaled 1,502, up 3.8% from the comparable quarter of 2012, at an average sales price of $358,899, up 8.0% from a year ago. The company’s order backlog at the end of July totaled 2,893, up 18.0% from a year ago.

CEO Ara Hovnanian noted that while the company was “pleased” that the company was able to “raise home prices, grow revenues, and increase (its) gross margin, higher home prices combined with rising mortgage rates “dampened home sales in July and August.” In its “Review of Financial Results” presentation, which includes net contracts for August, the company showed that net contracts in July and August of this year were down 12.7% from July and August of last year.

CR Note: I expect new home sales to continue to increase over the next few years, but it looks like July and August were fairly weak for Hovnanian.