Hey, anybody hear that we're in a housing boom?
Yeah, I thought so.
One of the 10 largest homebuilders in the country, Hovnanian Enterprises
Although new orders dipped a bit in the quarter, Hovnanian delivered about 12% more homes in the quarter than during the year-ago period, and the average selling prices of those homes climbed by about 18%. Backlog also grew strongly, whether measured in numbers of homes (35.7%) or dollar value (61%). Stripping out unconsolidated joint-venture contributions, both figures were still positive, with homes increasing 12.5% and dollar value growing by almost 18%.
Also important, Hovnanian continues to report excellent efficiency numbers. The annualized return on equity for the quarter exceeded 30%, and the annualized return on assets is solidly in the double digits.
Of course, you can't talk about a homebuilder without talking about the housing bubble. Honestly, I'd rather go through a Novocain-free root canal than talk about whether there is, or isn't, a housing bubble in the country. So I'll say two things. First, if you really want to hear about the housing market, watch the Fox News financial programs on Saturday -- that seems to be the only thing the people on those shows want to talk about. Second, remember this: Whenever someone tells you "It's different this time," it's probably not different, and that person is probably trying to sell you something you don't really want.
Though Hovnanian carries a fair bit of debt, it's not out of line with similar builders. What's more, the company generates solid margins and returns on its capital. Like other homebuilders, Hovnanian trades at a valuation that suggests we're at or near peak cycle times. I'm not inclined to disagree, but there's no doubt that business today is still quite strong.
For more Foolishness related to housing, see:
Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).
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