By Scott Malone
NEW YORK (Reuters) - While all U.S. home builders have taken hits from the housing slump, Hovnanian Enterprises Inc. (HOV.N: Quote, Profile, Research, Stock Buzz) is facing what one of its top executives on Monday called America's "worst" market: Fort Myers, Florida.
Hovnanian bought the largest home builder in that city on the coast of the Gulf of Mexico in south Florida in August 2005, just as sales dried up in the area, leaving the sixth-largest U.S. home builder with little choice but to slash some home prices by as much as $100,000 to keep sales moving.
"It is by far the worst housing market that we're in and I wouldn't be surprised if it's not the worst housing market in the country," J. Larry Sorsby, executive vice president and chief financial officer of Hovnanian, said at the Reuters Real Estate Summit in New York.
Sorsby said the recent turmoil in the U.S. housing market was amplified in Florida, as buyers late to the U.S. housing boom looked to the warm clime for investment properties.
As of December, some 16.1 percent of the home mortgages in the Fort Myers and nearby Cape Coral area were classed as "subprime," or made to less-creditworthy buyers, according to estimates by First American LoanPerformance.
'GOLD RUSH'
"A lot of people rushed, like the Gold Rush, to buy a house in Florida on speculation rather than on an absolute intent to live there," Sorsby said. "We've reduced a number of home prices $100,000 or more in Fort Myers."
The $100,000 price reductions came on single-family detached homes originally priced at $325,000 to $400,000, according to company officials.
Earlier this year, Red Bank, New Jersey-based Hovnanian took a $90 million pretax charge related to problems at its Fort Myers operation. The company wrote down the value of some land parcels in the area it had bought for $80,000 to $85,000 to about $20,000, Sorsby said.
"Our focus right now is kind of completing the homes that we have in backlog," Sorsby said. "We've not been able to sell very many to new customers, and even if we could, we don't make a decent margin at it."
He predicted it would be some time before the Fort Myers market improves, but said Hovnanian had no plan to pull out.
"We have no intention at this point of leaving Fort Myers," Sorsby said. "We think it's a good market longer term."
The pain in Florida is not limited to Fort Myers.
"The job market itself is also somewhat dependent on housing, particularly in parts of the country where housing has been very important to growth," said Mark Zandi, chief economist at Moody's Economy.com. "Florida is a good example.
"You go to the east coast of Florida, from just north of Palm Beach ... all the way over to Orlando, that area's been almost recession-like conditions ... just because the housing market has gone south and taken the job market." Continued...
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