Gee, imagine that. You slash prices, and you move dead inventory.
Retail 101 folks. This ain't brain surgery.
Meanwhile, Hovnanian just reset the comps for years to come... And they'll never sell another house at the inflated price - can you imagine the Hovnanian sales rep trying to explain to a buyer that the $150,000 off deal was only last weekend, and that they'd have to pay the higher price? Not a chance.
And the funniest thing about this story is that Hovnanian was (illegally) calling on his other builder buddies to RAISE prices just a few weeks ago. Suckers!
Hovnanian Spurs Home Sales With Price Cuts of Up to 30%
72-hour promotion by Hovnanian Enterprises Inc. designed to jump-start sagging home sales exceeded the company's expectations, resulting in more than 2,100 gross sales, the homebuilder said.
The figure included more than 1,700 contracts and more than 400 sales deposits. In its fiscal third quarter ended July 31, Hovnanian recorded 2,539 signed contracts, excluding unconsolidated joint ventures.
September 18, 2007
Supply and Demand, Meet Price - Hovnanian firesale moves homes with 30% off, $100,000+ discounts
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But they said on the radio that it was a one time "sale."
Nice! The next question is how will the competition react?
Agree with the setting of comp prices for years to come. One or two firesales does not make a market. However, when you sell that many houses it then becomes the market. And its not just resales. Can you imagine some chump who bought two years ago and put down 30% only to see that equity disappear!
something about a big sharp object falling from some high place and catching it comes to mind.
suckers.
KHov stated that negative press is the reason people are not buying homes, and that their weekend "Deal of the Century" serves as proof of this is a negative press based housing recession. I want to point to the foundational flaw in their logic and note what the weekend event really proves the real reason people are not buying homes.
Khov is pointing to the 2k plus commitments (contracts and/or deposits) they made over a weekend sales event that they (not anyone else) called "The Deal of the Century" where they cut asking prices by up to 25%. These "commitments" are not closings and hence not final, but we'll go with them as such none the less. Based upon the response by the public to the "Deal of the Century" KHov is saying that the media is responsible for the depressed new home market. Sorry, but I fail to see the evidentiary nexus between KHov's commercial success with their "Deal of the Century" promotion and the conclusion that negative media commentary is keeping buyers away. Instead to me the response by the public to the "Deal of the Century" seems to indicate that PRICE is what is keeping buyers on the sidelines, not the media. By dropping PRICE the public responded immediately and came off the sidelines to purchase a home, despite all the "negative" press the media presented during this same time frame as the "Deal of the Century". Therefore, one can only empirically conclude that PRICE if affixed too high, keeps consumers from making a commitment to purchase a home. However, once PRICE is reduced to a level that consumers can afford then they come forward to commit to purchase, despite negative media on the topic of home purchases. I would have figured that a sophisticated business operation as KHov would employ people that appreciated the basic economic concepts, but lets not be harsh we all know how that gets spun. As a cross check, I'm sure if you did a price/performance comparison between other builders and KHov this weekend you'd see that other builders who did not have such drastic price cuts did not perform nearly as well (normalizing the data as best as possible to insure that a fair comparision is being made of course). Therefore I find KHov's comments to be misplaced and in error, and recommend that they continue to lower PRICE, as that seems to be the most effective tool in bringing buyers back into the market. FYI, I did not go to KHov's home sites near where I currently live (Metro DC). I was too busy finishing the application process for the lease of a townhome I will be renting the next two years for over 1k USD/month LESS that it would cost for me to service the debt on an equivalent home in the area. (Note that I am not even including any other carrying costs in this statement, just monthly debt service vs. rental payment). I plan on pocketing the difference and saving up to purchase a home when the lease expires. By then KHov and other builders should rediscover that affordable PRICES are what attracts buyers.
Even 30% is too much.
Would you feel like a chump or what if you had bought (I should say borrowed in order to buy) a dump off these people at full price less than three years ago?
Man, talk about feeling used.
burn, baby burn.
i say 50% off for the going out of business sale
gee if i buy a 4 thousand dollar land lot for a million bucks and use shareholders money and charge a 6 percent commission i have made quite a bundle and transfered corporate wealth to myself and commited no crime and yet pulled off a giant robbery, just by being politicaly correct
How many of those buyers are wanna-be flippers? How many will fall out of contract because of inability to finance? How many existing Hov owners are going to walk away since the American dream to profit $100K gambling on house appreciation is gone?
Not to mention we aren't even knee deep in the ARM resets to come.
And the neighbors who had bought previously just got hosed as their home's value just dropped $100k. Might as well make arrangements to be buried in your basement...
Did any of you actually visit any of the properties that were "on sale"? I did. At least I got as far as driving to the entrance to one community. My opinion? Look somewhere else. Cookie-cutter houses with virtually zero lot (how does 0.07 acres for a three bedroom house or 0.15 acres for a four bedroom house sound?). There was one redeeming feature, though: If you're looking for cheap labor in the form of illegal aliens, you won't have to go far. From what I saw, a fair number of those shopping the houses had multi-family residence in mind. This was not a sale. Rather, it was a marketing ploy to unload properties which couldn't sell even in the hayday of the real estate mania.
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