HOVNANIAN ENTERPRISES INC (HOV) Business
This page reproduces the company's own Item 1 Business text from the linked SEC filing. It is filer text, not grepcent analysis, scoring, or investment advice.
Informational only - not investment advice. See Disclaimer.
BUSINESS
Business Overview
Hovnanian Enterprises, Inc. (“HEI”) conducts all of its homebuilding and financial services operations through its subsidiaries (references herein to the “Company,” “we,” “us” or “our” refer to HEI and its consolidated subsidiaries and should be understood to reflect the consolidated business of HEI’s subsidiaries). Through its subsidiaries, HEI designs, constructs, markets, and sells single-family detached homes, attached townhomes and condominiums, urban infill, and active lifestyle homes in planned residential developments and is one of the nation’s largest builders of residential homes. Founded in 1959 by Kevork Hovnanian, HEI was incorporated in New Jersey in 1967 and reincorporated in Delaware in 1983. Since the incorporation of HEI’s predecessor company, the Company combined with its unconsolidated joint ventures have delivered in excess of 382,000 homes, including 6,431 homes in fiscal 2025. The Company has two distinct operations: homebuilding and financial services. Our homebuilding operations consist of three reportable segments: Northeast, Southeast and West. Our financial services operations provide mortgage loans and title services to the customers of our homebuilding operations.
Excluding unconsolidated joint ventures, we are currently offering homes for sale in 140 communities in 27 markets in 13 states throughout the United States. We market and build homes for first-time buyers, move-up buyers, luxury buyers, active lifestyle buyers and empty nesters. We offer a variety of home styles at base prices ranging from $182,000 to $1,191,000 with an average sales price, including options, of $519,000 nationwide in fiscal 2025.
Our operations span all significant aspects of the home-buying process – from design, construction, and sale, to mortgage origination and title services.
The following is a summary of our growth history:
1959 - Founded by Kevork Hovnanian as a New Jersey homebuilder.
1983 - Completed initial public offering.
1986 - Entered the North Carolina market through the investment in New Fortis Homes.
1992 - Entered the greater Washington, D.C. market.
1994 - Entered the Coastal Southern California market.
1998 - Expanded in the greater Washington, D.C. market through the acquisition of P.C. Homes.
1999 - Entered the Dallas, Texas market through our acquisition of Goodman Homes. Further diversified and strengthened our position as New Jersey’s largest homebuilder through the acquisition of Matzel & Mumford.
2001 - Continued expansion in the greater Washington D.C. and North Carolina markets through the acquisition of Washington Homes. This acquisition further strengthened our operations in each of these markets.
2002 - Entered the Central Valley market in Northern California and Inland Empire region of Southern California through the acquisition of Forecast Homes.
2003 - Expanded operations in Texas and entered the Houston market through the acquisition of Parkside Homes and Brighton Homes. Entered the greater Ohio market through our acquisition of Summit Homes and entered the greater metro Phoenix market through our acquisition of Great Western Homes.
2004 - Entered the greater Tampa, Florida market through the acquisition of Windward Homes and started operations in the Minneapolis/St. Paul, Minnesota market.
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2005 - Entered the Orlando, Florida market through our acquisition of Cambridge Homes and entered the greater Chicago, Illinois market and expanded our position in Florida and Minnesota through the acquisition of the operations of Town & Country Homes, which occurred concurrently with our entering into a joint venture with affiliates of Blackstone Real Estate Advisors to own and develop Town & Country Homes’ existing residential communities. We also entered the Cleveland, Ohio market through the acquisition of Oster Homes.
2006 - Entered the coastal markets of South Carolina and Georgia through the acquisition of Craftbuilt Homes.
During fiscal 2016, we exited the Minneapolis, Minnesota and Raleigh, North Carolina markets and sold land portfolios in those markets. During fiscal 2018, we completed a wind-down of our operations in the San Francisco Bay area in Northern California and in Tampa, Florida. During fiscal 2020, we began a wind-down of our operations in the Chicago, Illinois market which was completed in fiscal 2023.
Geographic Breakdown of Markets by Segment
The Company markets and builds homes that are constructed in 17 of the nation’s top 50 housing markets. We segregate our homebuilding operations geographically into the following three segments:
Northeast: Delaware, Maryland, New Jersey, Ohio, Pennsylvania, Virginia and West Virginia
Southeast: Florida, Georgia and South Carolina
West: Arizona, California and Texas
For financial information about our segments, see Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
Human Capital
As of October 31, 2025, we employed 1,891 full-time associates of whom 1,194 were involved in our homebuilding operations, 186 were involved in our financial services operations and 511 were involved in our corporate operations. We do not have collective bargaining agreements relating to any of our associates.
Successful execution of our strategy is dependent on attracting, developing and retaining key associates and members of our management team. The skills, experience and industry knowledge of our team significantly benefit our operations and performance. We continuously evaluate, modify, and enhance our internal processes and technologies to increase engagement, productivity, efficiency and the skills our associates need to be successful.
We believe that talented associates are the Company’s greatest asset and play a key role in creating long-term value for our stakeholders. As of October 31, 2025, 16% of our associates had been with the Company for more than 15 years, and the average tenure of all associates was approximately 7 years. We understand that our ultimate success and ability to compete are significantly dependent on how well we identify, hire, train, and retain highly qualified personnel. We realize that each associate has a unique vision and their own special talents. We are committed to being an employer that fosters the growth of each associate, while building an inclusive and diverse workforce.
The Company is also a founding member of the Building Talent Foundation (“BTF”) whose mission is to advance the education, training and careers of people from underrepresented groups in the fields of skilled technical workers and as business owners in the residential construction industry. The Company actively utilizes BTF’s residential construction careers platform JobsToBuild to find new talent. In fiscal 2024, we extended our partnership and financial commitment with BTF for another two years.
Over the last four years, our leadership team has conducted quarterly Town Halls. These events have become a staple in the organization and serve as an opportunity for associates to hear from senior leadership candidly about our Company and directly ask questions of our CEO, CFO, President and COO. The Company's “Lunch & Learns” and “Coffee Chats” platforms for associates are designed to fuel our companywide objective to foster a culture of engagement and facilitate more two-way communication.
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Through a combination of competitive benefits and educational programs, we believe that we positively contribute to the well-being of our associates and the communities in which they live and work. Our benefits packages include medical, dental, and vision coverage, as well as paid parental leave, health savings accounts, life insurance, disability income, 401(k) savings plan with a company match and other assistance and wellness programs. Together, these benefits help keep our associates and their dependents healthy, while giving them tax-advantaged ways to save for retirement and establish long-term financial security. This package of programs is routinely reevaluated in order to meet the changing needs of our associates in our diverse organization.
In light of the Company’s experience managing the novel coronavirus (“COVID-19”) pandemic and the recognition of the associated environmental benefits, the Company previously introduced a hybrid work schedule and continued its use throughout fiscal 2025, whereby most office associates may work two days a week from home. We believe a hybrid work model promotes a healthier work and home life balance for our associates while simultaneously providing the environmental benefits of having fewer vehicles on the road. In addition to the weekly hybrid schedule, non-field associates can work remotely up to eight weeks a year.
We also have committed considerable resources to furthering our associates’ personal and professional growth. Effective
January 1, 2026, we plan to reinstate the tuition reimbursement benefit, which has been suspended since May 2009. Additionally, we offer a comprehensive library of over 500 training modules/courses to facilitate learning sessions both in-person and virtually, including required courses on diversity, ethics, workplace harassment prevention, cybersecurity and safety training courses.
Corporate Offices and Available Information
Our corporate offices are located at 90 Matawan Road, Fifth Floor, Matawan, New Jersey 07747 (See Item 2 “Properties”). Our telephone number is 732-747-7800, and our Internet web site address is www.khov.com. Information available on or through our web site is not a part of this Form 10-K. We make available free of charge through our web site our Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to these reports filed or furnished pursuant to Section 13(d) or 15(d) of the Securities Exchange Act of 1934, as amended (“Exchange Act”), as soon as reasonably practicable after they are filed with, or furnished to, the Securities and Exchange Commission (“SEC”). Copies of the Company’s Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to these reports are available free of charge upon request. The SEC also maintains an Internet site (http://www.sec.gov) that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC.
Business Strategies
In response to changing market conditions, we have taken a disciplined and strategic approach to our new land purchases at price points that we believe will generate appropriate investment returns needed to sustain profitability, while taking into consideration the current market environment of elevated sales concessions. The housing market continues to be driven by positive fundamentals and as a result we increased our community count and continued to invest in land and land development during the year. In addition, we intend to continue to focus on our historic key business strategies, as enumerated below. We believe that these strategies separate us from our competitors in the residential homebuilding industry and the adoption, implementation and adherence to these principles will continue to benefit our business.
As a result of the sharp increase in interest rates that began in fiscal 2022, we have shifted our focus to increasing the availability of quick-move-in homes (“QMI homes”). The rationale behind this shift in focus is that QMI homes provide our customers with more certainty on what their mortgage payments will be at closing. QMI homes also allow us to offer customers mortgage rate buydowns that would be cost prohibitive on homes with a longer time until delivery. QMI homes greatly reduce the complexity of choices for our customers and significantly increase efficiencies for our trades, construction and purchasing teams. Beginning in fiscal 2023, we began executing “Build-For-Rent” agreements to supplement our existing for sale business. The Build-For-Rent sales channel added incremental deliveries during fiscal years 2025, 2024 and 2023, which allowed us to increase inventory turnover.
We remain focused on maintaining adequate liquidity and identifying investment opportunities that make economic sense in light of our current sales prices and sales paces. Our excess liquidity in fiscal years 2025, 2024 and 2023 allowed us to repurchase $26.6 million, $113.5 million and $245.0 million in aggregate principal of senior secured notes, respectively. In May 2024, we completed a debt exchange resulting in a $75.3 million principal reduction of our senior notes and term loans, which included an aggregate cash payment of $31.5 million. In September 2025, we issued $900.0 million in aggregate principal amount of senior notes. The net proceeds therefrom, along with cash on hand, were used to redeem the entire principal amount of our then outstanding senior secured notes and payoff in full our secured term loan credit facility. We also extended the maturity date of our senior secured revolving credit facility to June 2028. In addition to the debt transactions, during fiscal years 2025, 2024 and 2023, we also repurchased 257,908 shares, 188,800 shares and 118,478 shares, respectively, of our Class A common stock with an aggregate market value of $30.1 million, $26.5 million and $4.8 million, respectively. These strategic actions contributed to our
ongoing efforts to manage and simplify the Company’s capital structure and
strengthen its financial position.
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Our goal is to become a significant builder in each of the selected markets in which we operate, which will enable us to achieve economies of scale and differentiate ourselves from most of our competitors.
As noted above, we offer a broad product array to provide housing to a wide range of customers.
We are committed to customer satisfaction and quality in the homes that we build. We recognize that our future success rests on the ability to deliver quality homes to satisfied customers. We seek to expand our commitment to customer service through a variety of quality initiatives. In addition, we remain focused on attracting and developing quality associates. See “Human Capital” above for further discussion.
We focus on achieving high returns on invested capital. Each new community is evaluated based on its ability to meet or exceed internal rate of return requirements. Our belief is that the best way to create lasting value for our shareholders is through a strong focus on return on invested capital.
We prefer to use a risk-averse land acquisition strategy. We attempt to acquire land with a minimum cash investment and negotiate takedown options, thereby limiting the financial exposure to the amounts invested in property and predevelopment costs. This approach significantly reduces our risk and generally allows us to obtain necessary development approvals before acquisition of the land.
Our strategy also includes homebuilding and land development joint ventures as a means of controlling lot positions, expanding our market opportunities, establishing strategic alliances, reducing our risk profile, leveraging our capital base and enhancing our returns on capital. Our homebuilding joint ventures are generally entered into with third-party investors to develop land and construct homes that are sold directly to home buyers. Our land development joint ventures include those with developers and other homebuilders, as well as financial investors to develop finished lots for sale to the joint venture’s members or other third-parties.
We manage our financial services operations to better serve all of our home buyers. Our current mortgage financing and title service operations enhance our contact with customers and allow us to coordinate the home-buying experience from beginning to end. Further, we are able to employ a range of pricing incentives through our mortgage financing operations, including temporary and permanent mortgage rate buy downs, which are tools that provide buyers with the opportunity to secure mortgage rates below market level.
Operating Policies and Procedures
We attempt to reduce the effect of certain risks inherent in the housing industry through the following policies and procedures:
Training - Our training is designed to provide our associates with the knowledge, attitudes, skills and habits necessary to succeed in their jobs. Our training department regularly conducts in-person, online or webinar training in sales, construction, administration and managerial skills.
Land Acquisition, Planning, and Development - Before entering into a contract to acquire land, we complete extensive comparative studies and analyses which assist us in evaluating the economic feasibility of such land acquisition.
| ● | Where possible, we acquire land for future development through the use of land options, which need not be exercised before the completion of the regulatory approval process. We attempt to structure these options with flexible takedown schedules rather than with an obligation to take down the entire parcel upon receiving regulatory approval. If we are unable to negotiate flexible takedown schedules, we will buy parcels in a single bulk purchase. Additionally, we purchase improved lots in certain markets by acquiring a small number of improved lots with an option on additional lots. This allows us to minimize the economic costs and risks of carrying a large inventory of land, while maintaining our ability to commence new developments during favorable market periods. | |
|---|---|---|
| ● | Our option and purchase agreements are typically subject to numerous conditions, including, but not limited to, our ability to obtain necessary governmental approvals for the proposed community. Generally, the deposit on the agreement will be returned to us if all approvals are not obtained, although predevelopment costs may not be recoverable. By paying an additional nonrefundable deposit, we have the right to extend a significant number of our options for varying periods of time. In most instances, we have the right to cancel any of our land option agreements by forfeiture of our deposit on the agreement. In fiscal 2025, 2024 and 2023, rather than purchase additional lots in underperforming communities, we took advantage of this right and walked away from 14,902 lots, 3,800 lots and 3,838 lots, respectively, out of 45,289 total lots, 39,059 total lots and 28,227 total lots, respectively, under option, resulting in charges to income before income taxes of $18.2 million, $1.6 million and $1.5 million, respectively. |
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Design - Our residential communities are generally located in urban and suburban areas easily accessible through public and personal transportation. Our communities are designed as neighborhoods that fit existing land characteristics. We strive to create diversity within the overall planned community by offering a mix of homes with differing architecture, textures and colors. Recreational amenities, such as swimming pools, tennis courts, clubhouses, open areas and tot lots, are frequently included.
Construction - We design and supervise the development and building of our communities. Our homes are constructed according to standardized prototypes, which are designed and engineered to provide innovative product design while attempting to minimize costs of construction. We generally employ subcontractors for the installation of site improvements and construction of homes. Agreements with subcontractors are generally short term and provide for a fixed price for labor and materials. We rigorously control costs through the use of computerized monitoring systems.
Because of the risks involved in speculative building, our general policy is to construct an attached condominium or townhouse building only after signing contracts for the sale of at least 50% of the homes in that building. Historically, a majority of our single-family detached homes were constructed after the signing of a sales contract and mortgage approval was obtained, which limits the buildup of inventory of unsold homes and the costs of maintaining and carrying that inventory. We are actively managing the number of QMI homes in connection with our current business strategy discussed above.
Materials - We attempt to maintain efficient operations by utilizing standardized materials available from a variety of sources. We have reduced construction and administrative costs by consolidating the number of vendors serving certain markets and by executing national purchasing contracts with select vendors. Due to the COVID-19 pandemic, we experienced construction delays from shortages in the supply of materials, as well as labor shortages in all of our markets. The impact and the particular materials associated with the delays varied from market to market. We have improved our cycle times since the beginning of fiscal 2023 by approximately 30 days, which brings us closer to our pre-pandemic average in many of our markets. We cannot predict the extent to which shortages in necessary materials or labor will re-occur in our markets in the future.
Marketing and Sales - Our homes in residential communities are sold principally through on-site sales offices. In order to respond to our customers’ needs and trends in housing design, we rely upon our internal market research group to analyze information gathered from, among other sources, buyer profiles, exit interviews at model sites, focus groups and demographic databases. We make use of our website, internet, newspaper, radio, television, magazine, billboard, video and direct mail advertising, special and promotional events, illustrated brochures and full-sized and scale model homes in our comprehensive marketing program. We also offer curated “Looks” packages for customers to select, rather than a large number of a la carte options. This approach provides customers with a more streamlined selection process and allows us to be more efficient in purchasing, sales and construction.
We have a national call center which is responsible for follow up generated by our website and our digital marketing efforts. The call center supports our ability to swiftly respond to incoming customer leads, schedule and conduct virtual tours and video chats, as well as set up in person model home tours.
Customer Service and Quality Control - In many of our markets, associates are responsible for customer service and preclosing quality control inspections as well as responding to post-closing customer needs. Prior to closing, each home is inspected, and any necessary completion work is undertaken by us or our subcontractors. Our homes are enrolled in a standard limited warranty program which, in general, provides a homebuyer with a limited warranty for the home’s materials and workmanship which follows each state’s applicable statute of repose. All of the warranties contain standard exceptions, including, but not limited to, damage caused by the customer.
Customer Financing - We sell our homes to customers who generally finance their purchases through mortgages. Our financial services segment provides our customers with competitive financing and coordinates and expedites the loan origination transaction through the steps of loan application, loan approval, and closing and title services. We originate loans in each of the states in which we build homes. We believe that our ability to offer financing to customers on competitive terms as a part of the sales process is an important factor in completing sales.
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During the year ended October 31, 2025, for the markets in which our mortgage subsidiaries originated loans, 20.2% of our home buyers paid in cash and 80.0% of our noncash home buyers obtained mortgages from our mortgage banking subsidiary. The loans we originated in fiscal 2025 were 58.7% conforming conventional loans and 40.3% Federal Housing Administration/Veterans Affairs (“FHA/VA”). The remaining 1.0% of our loan originations represented loans which exceeded conforming conventions.
We sell virtually all of the loans and loan-servicing rights that we originate within a short period of time. Loans are sold either individually or against forward commitments to institutional investors, including banks, mortgage banking firms, and savings and loan associations.
Residential Development Activities
Our residential development activities include site planning and engineering, obtaining environmental and other regulatory approvals and constructing roads, sewer, water, and drainage facilities, recreational facilities, and other amenities and marketing and selling homes. These activities are performed by our associates, together with independent architects, consultants and contractors. Our associates also conduct long-term planning of communities. A residential development generally includes single-family detached homes and/or a number of residential buildings containing from two to 24 individual homes per building, together with recreational amenities, such as swimming pools, tennis courts, clubhouses, open areas and tot lots.
Housing Revenues
Information on housing revenues, homes delivered and average sales price by segment for the year ended October 31, 2025, is set forth below:
| (Housing revenues in thousands) | Housing Revenues | Homes Delivered | Average Sales Price | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Northeast | $ | 1,146,746 | 1,968 | $ | 582,696 | ||||||
| Southeast | 349,448 | 704 | 496,375 | ||||||||
| West | 1,356,714 | 2,824 | 480,423 | ||||||||
| Consolidated total | $ | 2,852,908 | 5,496 | $ | 519,088 | ||||||
| Unconsolidated joint ventures(1) | $ | 621,785 | 935 | $ | 665,011 |
(1) Represents housing revenues and home deliveries for our unconsolidated homebuilding joint ventures for the period. We provide this data as a supplement to our consolidated results as an indicator of the volume managed in our unconsolidated joint ventures. See Note 20 to the Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K for a further discussion of our unconsolidated joint ventures.
Net Sales Contracts
Information on the dollar value of net sales contracts by segment for the year ended October 31, 2025 is set forth below:
| (In thousands) | Net Sales Contracts | ||
|---|---|---|---|
| Northeast | $ | 983,961 | |
| Southeast | 324,393 | ||
| West | 1,290,351 | ||
| Consolidated total | $ | 2,598,705 | |
| Unconsolidated joint ventures(1) | $ | 675,853 |
(1) Represents net contract dollars for our unconsolidated homebuilding joint ventures for the period. We provide this data as a supplement to our consolidated results as an indicator of the volume managed in our unconsolidated joint ventures. See Note 20 to the Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K for a further discussion of our unconsolidated joint ventures.
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Active Selling Communities
We ended fiscal 2025 with 140 active selling communities as compared to 130 active selling communities at October 31, 2024. The average number of active selling communities increased to 129 for fiscal 2025 from 119 for fiscal 2024.
Information on our active selling communities by segment as of October 31, 2025, is set forth below. Contracted not delivered and remaining homes available in our active selling communities are included in the consolidated total homesites under the total residential real estate chart in Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
| Contracted | Remaining | ||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Approved | Homes | Not | Homes | ||||||||||||||||
| Communities | Homes | Delivered | Delivered(1) | Available(2) | |||||||||||||||
| Northeast | 46 | 7,689 | 2,845 | 631 | 4,213 | ||||||||||||||
| Southeast | 27 | 3,702 | 1,484 | 220 | 1,998 | ||||||||||||||
| West | 67 | 10,723 | 3,870 | 391 | 6,462 | ||||||||||||||
| Total | 140 | 22,114 | 8,199 | 1,242 | 12,673 |
| (1) | Includes 392 home sites under option. |
|---|---|
| (2) | Of the total remaining homes available, 971 were under construction or completed (including 64 models and sales offices), and 9,539 were under option. |
Backlog
At October 31, 2025, including domestic unconsolidated joint ventures, we had a backlog of signed contracts for 1,517 homes with sales values aggregating $0.9 billion. Our focus on QMI homes continues to result in higher backlog conversion. Additionally at October 31, 2025, we had a backlog of signed contracts for 723 homes from our unconsolidated joint venture in the Kingdom of Saudi Arabia. The majority of our backlog at October 31, 2025 is expected to be completed and closed within the next six to nine months.
Current base prices for our homes in contract backlog at October 31, 2025, range from $182,000 to $1,100,000 in the Northeast, from $275,000 to $1,191,000 in the Southeast and from $284,000 to $948,000 in the West.
Sales of our homes typically are made pursuant to a standard sales contract that provides the customer with a statutorily mandated right of rescission for a period ranging up to 15 days after execution. Sales contracts require a nominal customer deposit at the time of signing. In addition, in some Northeast locations, we typically obtain an additional 5% to 10% down payment due within 30 to 60 days after signing. In most markets, an additional deposit is required when a customer selects and commits to optional upgrades in the home. The contract may include a financing contingency, which permits customers to cancel their obligation in the event mortgage financing at prevailing interest rates (including financing arranged or provided by us) is unobtainable within the period specified in the contract. This contingency period typically is four to eight weeks following the date of execution of the contract. When mortgage rates increase or housing values decline in certain markets, some customers cancel their contracts and forfeit their deposits. Sales contracts are included in backlog once the sales contract is signed by the customer, which in some cases includes contracts that are in the rescission or cancellation periods. However, revenues from sales of homes are recognized in the Consolidated Statements of Operations, when control is transferred to the buyer, which occurs when the buyer takes title to and possession of the home and there is no continuing involvement. For further information on cancellation rates, see the contract cancellation rates table in Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Homebuilding: Key Performance Indicators.”
Residential Land Inventory in Planning
It is our objective to control a supply of land, primarily through options, whenever possible, consistent with anticipated homebuilding requirements in each of our housing markets. Controlled land (land owned and under option) as of October 31, 2025, exclusive of active selling communities and excluding unconsolidated joint ventures, is summarized in the following table. The proposed developable home sites in communities in planning are included in the 35,885 consolidated total home sites under the total residential real estate table in Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
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Communities in Planning
| Total | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Number | Proposed | Land | |||||||||||||
| of Proposed | Developable | Option | Book | ||||||||||||
| (Dollars in thousands) | Communities | Home Sites | Price | Value (1) | |||||||||||
| Northeast: | |||||||||||||||
| Under option | 117 | 13,213 | $ | 657,843 | $ | 64,668 | |||||||||
| Owned | 9 | 931 | $ | 33,952 | |||||||||||
| Total | 126 | 14,144 | $ | 98,620 | |||||||||||
| Southeast: | |||||||||||||||
| Under option | 39 | 3,863 | $ | 348,840 | $ | 29,470 | |||||||||
| Owned | - | - | $ | - | |||||||||||
| Total | 39 | 3,863 | $ | 29,470 | |||||||||||
| West: | |||||||||||||||
| Under option | 36 | 3,380 | $ | 380,068 | $ | 42,244 | |||||||||
| Owned | 10 | 583 | $ | 8,113 | |||||||||||
| Total | 46 | 3,963 | $ | 50,357 | |||||||||||
| Totals: | |||||||||||||||
| Under option | 192 | 20,456 | $ | 1,386,751 | $ | 136,382 | |||||||||
| Owned | 19 | 1,514 | $ | 42,065 | |||||||||||
| Combined total | 211 | 21,970 | $ | 178,447 |
| Column 1 | Column 2 |
|---|---|
| (1) | Properties under option also includes costs incurred on properties not under option but which are under evaluation. For properties under option, as of October 31, 2025, option fees and deposits were $99.0 million. As of October 31, 2025, we had also spent an additional $37.4 million in nonrefundable predevelopment costs. |
We either option or acquire improved or unimproved home sites from land developers or other sellers. Under a typical agreement with the land developer, we purchase a minimal number of home sites. The balance of the home sites to be purchased is covered under an option agreement or a nonrecourse purchase agreement. During a declining homebuilding market, we typically decide to “mothball” (or stop development on) certain communities where we have determined that current market conditions do not justify further investment at that time. When we decide to mothball a community, the inventory is reclassified on our Consolidated Balance Sheets from “Sold and unsold homes and lots under development” to “Land and land options held for future development or sale”.
Raw Materials
The homebuilding industry has from time-to-time experienced raw material and labor shortages. In particular, shortages and fluctuations in the price of lumber or other important raw materials has resulted in the past, and could result in the future, in start or completion delays or increases to the cost of developing one or more of our residential communities. We attempt to maintain efficient operations by utilizing standardized materials available from a variety of sources. In addition, we generally contract with subcontractors to construct our homes. We have reduced construction and administrative costs by consolidating the number of vendors serving certain markets and by executing national purchasing contracts with select vendors. Labor and material shortages that were initially due to the COVID-19 pandemic have improved. For example, we previously experienced a significant rise in lumber prices caused by supply chain challenges. These difficulties created temporary constraints
that drove up costs and affected our ability to source necessary materials in a
timely manner. As supply chain conditions have improved and the availability of
lumber has increased, the pressure on prices has eased. We cannot predict, however, the extent to which shortages in necessary raw materials or labor may occur in the future.
Seasonality
Our business is seasonal in nature and, historically, weather-related problems, typically in the fall, late winter and early spring, can delay starts or closings and increase costs.
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Competition
Our homebuilding operations are highly competitive. We are among the top 20 homebuilders in the United States in terms of both homebuilding revenues and home deliveries. We compete with numerous real estate developers in each of the geographic areas in which we operate. Our competition ranges from small local builders to larger private regional builders to publicly owned builders and developers, some of which have greater sales and financial resources than we do. Previously owned homes and the availability of rental housing provide additional competition. We compete primarily on the basis of reputation, price, location, design, quality, service and amenities.
Regulation and Environmental Matters
We are subject to extensive and complex laws and regulations that affect the development of land and home building, sales and customer financing processes concerning zoning, building design, construction, and similar matters, including local regulations which impose restrictive zoning and density requirements in order to limit the number of homes that can eventually be built within the boundaries of a particular locality. In addition, we are subject to registration and filing requirements in connection with the construction, advertisement and sale of our communities in certain states and localities in which we operate even if all necessary government approvals have been obtained. We may also be subject to periodic delays or may be precluded entirely from developing communities due to building moratoriums that could be implemented in the future in the states in which we operate. Generally, such moratoriums relate to insufficient water or sewerage facilities or inadequate road capacity.
In addition, some state and local governments in markets where we operate have approved, and others may approve, slow-growth, or no-growth initiatives that could negatively affect the availability of land and building opportunities within those areas. Approval of these initiatives could adversely affect our ability to build and sell homes in the affected markets and/or could require the satisfaction of additional administrative and regulatory requirements, which could result in slowing the progress or increasing the costs of our homebuilding operations in these markets. Any such delays or costs could have a negative effect on our future revenues and earnings.
We are also subject to a variety of local, state, federal and foreign laws and regulations concerning environmental, health and safety matters, including those regulating the emission or discharge of materials into the environment, the management of storm water runoff at construction sites, the handling, use, storage and disposal of hazardous substances, impacts to wetlands and other sensitive environments. Certain environmental laws and regulations also
impose obligations for the cleanup of properties affected by hazardous
substance spills or releases on a joint and several basis and without regard to
fault and liability. We may become liable, either contractually or by operation
of law, for remediation costs at any properties currently or formerly owned,
leased or operated by us, or at third-party sites, such as off-site disposal
facilities. We may also be subject to third-party claims arising from the presence
of hazardous substances, including claims for hazardous substances that have
migrated offsite (e.g., property damage) or exposure to hazardous substances
(e.g., personal injury). In addition, we are generally required to obtain
permits and other approvals under environmental laws and regulations to carry
out our operations.
The particular laws and regulations that apply to a site may vary greatly according to the specific factors at each site, for example, due to the type of community, the site’s environmental conditions and the present and former uses of the site. These and other environmental, health and safety
laws and regulations can result in delays, substantial costs, fines or
penalties and can prohibit or severely restrict development
and homebuilding activity. See Risk Factors – “Homebuilders are subject to a number of federal, local, state, and foreign laws and regulations concerning the development of land and homebuilding, sales and customer financing processes and environmental, health and safety matters, which can cause us to incur delays and costs associated with compliance and which can prohibit or restrict our activity in some regions or areas”, Item 3 “Legal Proceedings” and Note 18 to the Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K.