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Hovnanian CEO on the Housing Market Recovery

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    Hovnanian Enterprises CEO Ara Hovnanian on the state of the housing market.

  • Duration 5:06
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I think drop there.

Well home builder confidence reaching its highest level since April 2006 this is helping to boost housing starts today -- home builder is up nearly 350.

T percent over just the past year so could this boost of confidence send their stock even higher let's ask the chairman CEO and president of -- in enterprises.

Ara Hovnanian and and look let's put this into perspective you were saying everything's relative used to be separate billion dollar market -- now 750 million it's not like -- totally recovered.

Here absolutely -- were thrilled obviously and we're glad for the vote of confidence but we're at the early innings of this recovery.

Our market -- used to -- -- and half billion we're still under a billion we've got a long way to go but we're very very confident and feel good about momentum right now let's get into some basic supply and demand the supply of housing has gone way you weighed down the number of contractors I think we have put.

Up this a full screen if we can't.

We used to have one point six million housing contractors in the United States that of course was that the boom with the market.

Look at to where it's fallen even when you take into account.

All of the lack of interest in housing in recent years still that's a huge drop that needs.

Far fewer houses are being built is that why prices are going up right now well it it absolutely is supply and demand both on the used -- existing home side that supply is coming down.

And then on the new side.

Homebuilders many public builders have gone out of business and many of the private builders have not been able to get capital and are out of the marketplace.

That's an unfortunate thing but it's certainly for those that are surviving those have have a good capital structure it means a lot of opportunity on this recovery.

What was the Darwinian place shakes itself out both the U of course are among the fittest surviving so far can we get shouldn't give us a prediction for 2013.

Boy -- -- me put it in perspective housing starts averaged one point six million per year for decades.

Last.

In this downturn we've got down to 500000.

Starts was a 1000006 average 500000 -- everybody's excited today because it's about 850000.

Plus or minus starts.

So that's good it's been a big recovery.

If I had -- to venture a guess I'd say will be approaching the million starts this year.

-- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- But it's also important because the extended or maturity -- We had a big chunk of debt do that was in 2016.

We've extended -- out to 2022021.

That gives us a lot of runway.

Which -- really have this mode of recovery gain momentum to do with a capital's streets of -- and reinvesting it back right now we're buying land all over the country.

We've been buying and we've stepped up a little bit more there are lots of opportunities out.

Yesterday we had Dolly -- -- provincial element -- high end real searched on seven billion in deals over her career.

Saying that she suddenly -- a massive bottleneck in advance of the end of the year because people.

Are so scared about tax implications if we don't have a fiscal -- deal what either way are you seeing that same bottleneck in sales I can't say look.

We're absolutely seeing -- and all the public builders are reporting quarter over quarter improvements that are significant we reporter our quarter just recently.

Up about 44% in dollar volume over the same quarter last year so it's really building up but I don't think it's a year end phenomenon I just think.

We're building momentum people are feeling very good about the housing market in general.

And when you combined -- record low interest rates.

Three and a half percent for thirty year fixed rate mortgage our parents didn't have rates that -- But that was preferences into effect yesterday -- I do I think he's done a fabulous job of really making sure this economy didn't although he has been hurting savers because interest rates are so low -- people on fixed income are really not getting any kind of return.

Which leads me to wonder whether a lot of them are actually buying real estate -- investment do you see.

More investment related real estate right now.

Not on the new home front but -- a helpful phenomenon is on the existing home resale foreclosures and short sales we are seeing some investors there that are buying include.

Both mom and pop investors and sophisticated.

Hedge fund money and private equity money.

Buying the foreclosed homes and then turning them around and renting them and taking the long term perspective not a flip I think that's been helpful to the overall market.

Era both mania and again if you listen this guy a year ago when he came on saying the stock is gonna do well you would have made 350% effect that Barack congratulations thank you hopefully -- -- -- happy holidays we'll see with the new -- absolutely excellent.

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