Company: HOVVB
Filing Date: 2025-08-29
Form Type: 10-Q
Source: 0001753926-25-001413
Chunk: 4

Company: HOVNANIAN ENTERPRISES INC
Filing Date: 2025-08-29
Form: 10-Q
Item: Part I, Item 2
Chunk 4
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During fiscal 2024 and continuing through the first nine months of fiscal 2025, mortgage rates have fluctuated but still remain at a persistently high level. As a result, affordability generally remains challenging for homebuyers. We have stayed aggressive in our pricing, incentives and concessions in order to align with the current market.

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We continue to use our increased inventory of quick move-in homes ("QMI homes") to help meet buyers’ needs for more affordable housing in the existing uncertain interest rate environment. The time between contract signing and closing is shorter with a QMI home as compared to a to be built home, which provides customers with more certainty on their mortgage pricing. The availability of QMI homes also allows us to offer mortgage interest rate buydown assistance, which is a tool we offer through our wholly-owned mortgage banking subsidiary ("K. Hovnanian Mortgage"), to help ease the impact of higher monthly payments from rising interest rates. We pay the cost of interest rate buydowns for customers that qualify through K. Hovnanian Mortgage and decide to use the program. The level of interest rate based incentives utilized differs across our markets and is one of several available options we use to drive sales and close homes.

Although the long-term fundamentals of the new home market remain favorable, during the first nine months of fiscal 2025, volatility in the broader economy and affordability constraints caused many consumers to delay purchasing a new home. As a result of this more difficult sales environment, we experienced a decrease in net contracts compared to the first nine months of fiscal 2024, although net contracts for the third quarter of fiscal 2025 increased from the prior year period. Even as mortgage rates increased and we focused on increasing sales pace versus price, we were still able to raise net prices in approximately 40%, 31% and 21% of our communities during the first, second and third quarters of fiscal 2025, respectively.

There remains a great degree of uncertainty due to inflation, tariffs, the continued possibility of an economic recession, employment risk and the potential for further mortgage rate increases. While we continue to experience some supply chain issues, we remain focused on continuing to shorten our construction cycle times and building on our national initiatives to drive down costs with our material providers and trade partners. The changing conditions in the housing market, and in the general economy, makes it difficult to predict how strongly our business will be impacted by these external factors over the remainder of