Friday, September 7, 2012

Hovnanian Earnings Call ($HOV)

From the HOV earnings call,

Our land acquisition associates have been very busy, which has resulted in a full land committee calendar here at corporate. During the third quarter of 2012, we optioned 2,200 lots, bringing the total new land controls since January of '09 to 19,500 lots in 344 communities. During the third quarter, we spent $117.6 million on land and land development. To put this in perspective, we spent only $118 million of land and land development for the first 6 months of the year. We are not stretching or reaching in order to buy more land deals during the third quarter. The increased land spend was a function of finding more land deals that underwrote to a 25% plus IRR, based on the current sales pace and the current sales prices. The improvements we have seen in home prices and sales paces around the country are justifying higher land prices. This in turn causes more land sellers to consider selling, which creates more opportunities for us to buy land while maintaining our IRR underwriting criteria.

Now I will say overall, given the very low interest rates, we're definitely seeing a bias toward customers picking the larger houses. I think the logic is, with rates so low, the incremental monthly cost is not particularly great. So if they have good credit scores, recently we've seen a little bit more leaning toward the larger model homes than the average one that we had been experiencing.

Phoenix, I mean obviously, we're in the dead of summer or just finished the dead of summer, which is their slow season as they get up over 100 degrees all the time. Generally speaking, Phoenix is rock-solid, and we've been enjoying really good and steady price increasing in many of our communities there. So we haven't seen any slowing whatsoever there right now.
There is a housing bubble again in a number of states.

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