More HOV nonsense and stupid hombuilder analysis
Let's get one point clear......home prices are falling around America. Home prices are falling for a variety of reasons including skyrocketing foreclosures, rising unemployment, falling wages, increasing non housing related costs, tightening credit standards all resulting in too much supply and too little demand.
The price declines are accellerating and inventory is growing. As prices continue to crash, homes start selling below construction cost even if you are given the lot for free. Right now such pricing can be seen in CA, FL, NV, GA and AZ. It is getting much closer in CO, TX and the Carolinas. These are the key areas where new homebuilders build.
No matter how you want to cloud the issue, when homes are selling below construction cost, every home sold is a loss and drains cash from the balance sheet.
Over the past few years, there has never been more BS representationis or Wall Street analysis than that provided by and for the publicly traded HBs. How many "one time" impairments are not going to be included in losses as builders impair only a few of their owned lots each quarter?
This one by HOV tonight is a perfect example of builder BS:
"Homebuilding gross margin, before interest expense included in cost of sales, was 8.5% in the third quarter of 2008..."
How stupid does Hovnanian think its shareholders are?......obviously very stupid to make such a statement. HOV has $2.6 Billion dollars in debt.....and a material portion at over 11%. At a blended rate of 8%, HOV is paying over $200 million dollars a year in interest alone.
Could you imagine someone saying to the bankruptcy judge.... but for the debt accumulated, I would be able to pay my bills, live comfortably, and not declare bankruptcy??????
Hello...anyone home SEC watching out for fair disclosure???
Don't be fooled. These homebuilders are losing hundreds of millions every quarter. In HOV's case, losses for eight quarters in a row. As these builders continue to build, execs take home huge salaries, and home prices continue to fall, the losses will only continue to accumulate until the money runs out.
Until prices stop crashing, there is no bottom.....plain and simple. If prices keep falling, most HBs will go BK......just like what happens to the airlines selling seats below cost. Any idiot can analyze a homebuilder, it is one of the easiest businesses to analyze.....it is obvious by the way the data is presented and clouded, the builders and Wall Street analysts all think we are idiots.