Company: HOVVB
Filing Date: 2025-02-28
Form Type: 10-Q
Source: 0001753926-25-000367
Chunk: 9

Company: HOVNANIAN ENTERPRISES INC
Filing Date: 2025-02-28
Form: 10-Q
Item: Part I, Item 2
Chunk 9
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 and overall housing affordability.

During fiscal 2024 and continuing through the first quarter of fiscal 2025, mortgage rates 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.

The number of existing home sales listings remain at all-time low levels, which limits the supply of homes available for purchase, leading to increased demand for new homes. There was a solid demand for our homes in the first quarter of fiscal 2025 as compared to the same period of the prior year, which led to an increase in net contracts, as compared to the first quarter of fiscal 2024. We were able to increase net prices in approximately 40% of our communities during the first quarter of fiscal 2025.

There still 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 fiscal 2025 and beyond.

Our cash position allowed us to spend $247.6 million on land purchases and land development for long-term growth during the three months ended January 31, 2025, and still have