Alex Barron: Got it. Now I guess along those fronts, can you talk about how many homes you guys have under construction and how does that split between specs and build to order I guess? Well, I guess the build to order would be close to your backlog. But I’m just curious on the spec side, how many homes you guys have and how many of those are completed specs?
Ara Hovnanian: Brad?
Brad O’Connor: I think we have a slide on that.
Ara Hovnanian: The completed spec is 142 as of October 31. The total, I don’t know Jeff if you have your specs.
Alex Barron: I know you have where it’s average per community. But I don’t know if you have the total.
Jeff O’Keefe: Yes, we did give the total slide. On that slide, it’s 680 at October 31.
Ara Hovnanian: So Alex to put the finished specs and call them QMIs into perspective, it’s a little over one per community across the country on average.
Alex Barron: Got it. Okay, that makes sense. I think I heard you say that on pricing and incentives, it seems like you guys are more willing to or have been up until fiscal year end were less willing to upset the backlog and maybe were more willing to do that on new communities coming out of the ground. But now that you’re kind of in the new fiscal year and other guys are desperately trying to get some sales before year end, I’m sure you’re seeing more price cuts from your competitors. So are you guys kind of engaging in those similar ways or are you still waiting maybe more for the spring selling season and still trying to protect the backlog? Just trying to get a sense —
Ara Hovnanian: I’d say in good time — we’re not in the phase of protecting backlog in the majority of our communities. There are a few exceptions where we’ve got a lot of backlog and we don’t want to disrupt it. But in general, good times, bad times, rising prices, lowering prices, we’re always very aware of what our competitors are doing. I think the thing to focus on is with the incentives that we are currently offering, and, again, we have dialed them up since the fiscal year end, our current sales have margins above 20% and that’s not as good as what we just delivered, but certainly better than one might expect at this time in the housing cycle.
Larry Sorsby: One other comment I’d make or repeat really is that we historically have been a build or build to order builder rather than having a bunch of quick move in homes or specs. And after the last quarter the demand for homes that were kind of move in ready has increased, we didn’t have much. So as we monitor what our competitors are doing, we are seeing more demand on the homes that are kind of move in ready. So we are continuing to produce more. We think that will also help sales as we get more homes that can meet that kind of demand from a consumer wanting to move quickly so that they can lock in an affordable mortgage rate.
Alex Barron: Correct. Okay, great. Thanks. I’ll get back in the queue. Appreciate it.
Ara Hovnanian: Okay. Alex, if you’d like to ask another question or two, I think we’ve got time.
Alex Barron: Sure. I guess since you just mentioned you are mostly built to order. What is the typical deposit you guys get from consumers, from customers to build? In other words, how much money do they typically have at risk if they cancel?
Ara Hovnanian: It’s a good question. It varies quite a bit by geographic region. The East Coast tends to be higher I think on base price. The higher divisions have about a 10% purchase price deposit. On top of that if they’re doing a lot of options and upgrades, we take a higher deposit on those options and upgrades. On the West Coast, we tend to have lower deposits. I think somewhere close to 3% is very typical on the West Coast. Sometimes when it’s higher than 3%, there’s a negotiation around 3%. So those are kind of the two goalposts.
Alex Barron: It’s interesting, because I think there’s a pretty decent correlation between the level of deposits and cancellation rates, so that’s why I was kind of —
Ara Hovnanian: We agree with it. Yes, we agree.
Alex Barron: But at the same time, it seems — I guess competitive pressures are shifting what you were just talking about people moving towards spec building I guess to try to get people more payment certainty and that type of thing. Now in terms of seasonality, I guess this past year was anything but normal with demand super strong at the beginning of the year, low rates and then the opposite at the end of the year. What is I guess your crystal ball or your expectation for this year? Do you think we’re going to see more normal seasonality or do you think it’s still going to be largely driven by interest rates that if interest rates start to stabilize or come down, you’ll see an acceleration in the backend, or how do you think things could play out?
Ara Hovnanian: Brad?
Brad O’Connor: If I was to guess that acceleration will have — excuse me, interest rates will have a big effect on the seasonality. And if rates jumped considerably in the spring selling season, I think that will dampen the normal rise you’d see in the spring selling season. If rates level off or even go down toward the end of the year when you’d normally see seasonality bring down sales, it might heighten the impact of sales at that time. So I do agree with I think what you’re expecting that rates will impact normal seasonality.
