Home Builders Sit On Years Of Land Supply
BusinessWire put out a release regarding Hovnanians' debt float. The credit agent brings up the land issue. "Hovnanian extensively uses lot options. The use of land option contracts without specific performance clauses gives the company the ability to renegotiate price/terms or void the option, which limits downside risk. At present 73.7% of its lots are controlled through options."
"Total lots, including those owned, were 100,927 at Jan. 31, 2005. This represents a 6.7-year supply based on latest 12 months home deliveries."
The "lack of available land" is easier to understand as the public home builders sit on thousands of sites, raising prices. "The company has one of the lowest owned-lot positions in the industry." Companys like Centex hold far more.
These lots may never be bought. The "backlog" can be cancelled by the buyer. How many new home "sales" will ever be built?