The homebuilding sector is standing on a shaky foundation as the meltdown of the mortgage industry has resulted in a backlog of inventory. The National Association of Realtors said in August the supply of unsold single-family homes in the U.S. rose to a 16-year high to 3.85 million.
The trouble has spurred homebuilders to take a page from the retail industry and cut prices dramatically. However, Hovnanian Enterprises Inc. took it one step further and offered a big discount sale dubbed "Deal of the Century" slashing prices by as much as 25% around the U.S. for its glut of housing inventory for this past weekend only. The Red Bank, N.J.-homebuilder reported it had registered more than 2,100 gross sales including more than 1,700 contracts and more than 400 sales deposits.
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"The preliminary results from our 'Deal of the Century' sales promotion exceeded our expectations," Ara K. Hovnanian, president and chief executive officer of the company, said in a statement. "The high level of traffic we saw in our sales offices and models over the weekend and over the past several weeks convinces us that there are interested buyers in the market today."
But is this just a band aid for a company so entrenched in a declining sector?
Diana Olick of CNBC suggested on her blog that Hovnanian hasn’t been managing cash flow as well as some of the other builders during this downturn and called the sale "a short-term fix for one quarter arguably, and they’re going to continue to run into the same problems if they don’t start selling their homes at market prices." —Gerald Magpily
See Hovnanian Enterprises press release
See post from CNBC's Realty Check blog
See story from BloggingStocks
See Homebuilder Dealwatch
Tags: subprime, sub prime lending
