Upscale home builder Hovnanian Enterprises began a three-day sales event yesterday in 19 states that effectively cuts home prices by up to $100,000 through incentives and offers of extra appliances and upgrades.
The sale, held amid a slumping U.S. housing market that many do not see recovering before 2009, will continue through 9 p.m. Sunday at 31 new-home communities in Southern California and will include live entertainment and prize giveaways.
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 company said.
John Wurster, resident community manager of Hovnanian's Bella Lago project in Chula Vista, said dozens of people showed up on the first day of the sale to check out the 155-home project, where prices range up to $1.3 million.
“We've had a good turnout, and the phone's been ringing off the hook,” he said.
Two of the five heavily discounted homes featured in the sale were reserved, and visitors were touring other home sites, Wurster said.
Incentives include 50 percent discounts on upgrades and $50,000 to $130,000 in cash and financing incentives.
“We believe consumers respond well to the thought that they're offered an opportunity to get a real special value,” said Nick Pappas, president of the company's California coastal division, which includes San Diego. “While they might have been postponing a decision to buy a home, we think there's demand for housing.”
Hovnanian was ranked the 11th-largest builder in San Diego County through the first half of the year by locally based MarketPointe Realty Advisors.
It is offering the special deals at three of its six local projects – Piazza d'Oro in Oceanside, Lake Rancho Viejo in Oceanside and Bella Lago.
“It's not going to give you a shot in the arm for your brand, but it's a way to generate cash,” said Standard & Poor's equity analyst Ken Leon. “Looking at their cost structure, Hovnanian decided they need to sell at least 1,000 homes this weekend.”
The company's shares rose 97 cents, or 9.7 percent, yesterday on the New York Stock Exchange and were unchanged in after-hours trading. Their 52-week range is $9.76 to $38.66.
The special sale comes about a week after Hovnanian, rated the sixth-largest 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 that it faced fresh headwinds 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.
Staff writer Roger Showley contributed to this report.
