Crazy Eddie, a former discounter of electronics equipment in the New York City area, used to advertise "Prices so low, we're practically giving them away." Last week, the huge residential construction company Hovnanian pulled one out of the discounters' playbook and ran a three-day sale of its bloated inventory of homes, dropping prices by as much as 30 percent just to get the houses off their books and the cash into their reserves.
Those are pretty close to foreclosure price discounts, and we wonder what the couple down the street who paid full price for their Hovnanian home a year ago are going to think about their builder selling the market short. With the cost of materials and labor producing already slim margins in the residential construction business, Hovnanian is probably taking a financial beating, but it is better than sitting on thousands of unsold homes. The company sold 2,100 houses in 72 hours, 10 times its customary rate, and got a big boost from Wall Street on the Hovnanian stock price (for a day at least).
No good idea goes unheeded, so look for a second round of new home dumping when two of Hovnanian's competitors report their earnings this coming week. For anyone sitting on some cash and poised to relocate, this could be the week to keep an eye on those builders' web sites. Both KB Home and Lennar, who have done business for 50 years, build thousands of homes every year across the southern U.S., as well as in the upper Midwest. Their inventories of unsold homes are huge. Neither of the companies' web sites is hinting at any forthcoming fire sale, but we bet they both will be practically giving away houses this week, relatively speaking.