The Asbury Park Press from New Jersey. "Kara Homes' bankruptcy filing has left scores of customers and creditors wondering if the troubled builder is going to complete the developments it has under construction and make good on its debts."

"East Brunswick-based Kara Homes, one of the biggest home builders in Monmouth and Ocean counties, filed for Chapter 11 bankruptcy Thursday night. Under Chapter 11, Kara will be allowed to remain in business, and creditors' claims will be frozen while it comes up with a reorganization plan and tries to regain its footing."

"Experts said Kara is an example of what can go wrong to an aggressive builder when the real estate industry collapses. After paying top dollar for land, it is not able to sell its homes at a high enough price to pay off its debts, they said."

"'This was part of what we were looking for, and I don't use the word 'bubble' — but a housing sector slowdown,' said David H. Downs, a professor at Virginia Commonwealth University School. 'The question is, who was going to be overleveraged?'"

"The fallout from Kara's bankruptcy is far-reaching. The filing lists thousands of creditors. Some homeowners said they have been left in the lurch. Ira Cohen had hoped the builder would complete the clubhouse, swimming pool and landscaping to the entrance of the development. 'We're concerned whether or not they're going to complete this development at all,' Cohen said."

"Ellen Voltolino of Dover Township put down $12,500 on a Kara house in in Lakewood with the caveat that the money would be returned if she couldn't sell her old house, she said. Her house was on the market from January to June but didn't sell, she said. She asked for her money back but hasn't received a response."

"'It's like they stole my money,' Voltolino said. 'I don't have $12,000 to throw away in the garbage.'"

"Some customers are not waiting to see if Kara makes good on its debts. Ocean Township lawyer Douglas Katich said Friday that he would file civil lawsuits on behalf of several customers charging company officials with fraud, a charge he said would be appropriate 'if they are soliciting deposits when they knew the business wasn't viable.'"

"Kara might find other developers willing to buy some of its undeveloped land. Home-building giant Hovnanian Enterprises of Red Bank has looked at a number of Kara's parcels and has purchased one in Shrewsbury, said J. Larry Sorsby, Hovnanian's chief financial officer."

The Star Ledger. "Faced with rising inventories of unsold homes, Hovnanian Enterprises said it plans to ax executive and field jobs to improve its bottom line and weather what the Red Bank-based home builder describes as 'the steepest decline in new-home sales in our memory.'"

"In an internal memo to employees, CEO Ara Hovnanian said an unspecified number of staff reductions were necessary in order 'to remain healthy,' as the nation's eighth-largest U.S. home builder grapples with the broad downturn plaguing its industry."

"'In many locations, including corporate headquarters, we have been forced to face the fact that we no longer have enough work for all of our Associates,' Hovnanian wrote. 'We consider this action to be a last resort.'"

"News of Hovnanian's job cuts comes one day after East Brunswick-based Kara Homes, one of the state's largest private home builders of condominiums and active adult communities, filed for protection from creditors under Chapter 11. 'The company ran out of cash,' said Kara Homes bankruptcy attorney David Bruck."

"Bruck blamed the builder's financial meltdown on 'slowing sales..brought about by a slowing economy.'"

"'I believe it was the economy, the market itself, and some lack of projecting (by Kara Homes) to some degree,' said Anthony Garofalo, president of Vintage Contracting of NJ in Belmar. Other factors, such as a slowdown in sales and massive incentives the homebuilder was offering, also contributed to the bankruptcy, he said."

"In its memo, Hovnanian told its employees it is working to renegotiate the terms of some of the company's land options, in the hope of reducing purchase prices or extending the time periods in which they agreed to exercise them. Builders can either own their land outright or hold options to buy land, which are easier to walk away from, according to analysts."

"Typically, when builders take write-downs to walk away from land options, it is a sign that either land values are falling or demand in that market has dried up, said Robert Curran, a senior housing analyst at Fitch Ratings."