Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from the line of Carl Reichardt of Wells Fargo.
Carl Reichardt - Wells Fargo
I had a question about mothballing the 8,700 lots. I’m just trying to get a sense of what scenario would have to unfold for those lots to come back to market. In other words, is the mothballing due to the fact that you can’t bring them to market today at positive gross margins? Or due to the amount of capital they need to get to the market? I’m just trying to decide also how you get to normalized margins when your interest coupons are going to be so much higher than it’s been in the past, so can you kind of work through that with me, Ara?
Ara K. Hovnanian
Sure. We mothball for a variety of reasons but I mean generally speaking, we mothball when we can't generate a sufficient cash flow by building new houses. As I mentioned in two conditions, both on the West Coast, in those micro markets around those particular communities the prices have crept up just a bit, the sales pace has crept up just a bit and it was enough -- the combination was enough to say you know, it now should generate sufficient cash flow and it’s time to un-mothball these communities. It happened ahead of our projections and that was obviously a positive event. Hopefully we’ll see that trend continue in other markets.
What was interesting is part of what caused that is that other communities were closing in those markets and there was no other location to get supply to the market so those that were there had good demand relative to the smaller supply and that picked up the pace and price.
I see that kind of phenomenon happening everywhere. There’s builders are closing communities, they are not replenishing them, so community count is going down. That should help us get to an environment of un-mothballing more communities.
Carl Reichardt - Wells Fargo
Okay. And then secondarily, you mentioned that 37% of the apps to the mortgage company are first-time entry level buyers. Is that comparable to what you are seeing in terms of what you are selling right now? And are the can rates higher on the first-time buyers?
Ara K. Hovnanian
It is comparable to what we are selling. I mean, the mortgage company is providing 85% of our mortgages, so it’s pretty representative. That number, by the way, has been growing a bit each of the last three quarters for us, presumably the first time home buyer credit has had something to do with that, as well as a little bit of a shift in focus toward that marketplace.
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