In response to challenging market conditions, sales incentives remained elevated in the fiscal third quarter for Hovnanian Enterprises as the home builder worked to solve affordability concerns for prospective buyers.
In the face of the difficult market, the home builder still exceeded its guidance range for all financial metrics, growing revenue, sales revenue, home contracts, and deliveries on a year-over-year basis. The impact of incentives did compress gross margin and profit for Hovnanian Enterprises in the fiscal third quarter.
Third Quarter By the Numbers
- Total revenue in the fiscal third quarter increased 10.8% on a year-over-year basis to $800.6 million.
- Contracts in the third quarter increased 1.6% to 1,211 homes—representing $619.6 million. The company’s cancellation rate in the quarter was 19%, up marginally from 17% in the prior-year period.
- Home deliveries increased 13.3% to 1,676 in the third quarter while the average price of deliveries declined 1.7% to $557,292.
- The builder ended the period with 607 homes in backlog, a 187.7% increase compared to the third quarter of 2024. Total quick move-in homes (QMIs) decreased 5.3% to 1,073 compared to the third quarter of 2024.
- Third quarter profit for Hovnanian Enterprises was $16.6 million, or $1.99 per share, down from $72.9 million, or $9.75 per share, in the prior-year period. The profit per share results significantly underperformed Wall Street expectations of around $3.51 per share.
What They’re Saying
“While the market environment remains challenging, we’re encouraged by our performance this quarter. Affordability challenges are weighing on buyer activity as home prices remain high, and mortgage rates have only seen modest declines from recent highs. We have addressed these affordability headwinds with increased incentives that led to the first year-over-year increase in quarterly contracts per community this fiscal year.” — Ara Hovnanian, chairman of the board, president, and CEO
“Our gross margin was down year-over-year mainly due to increased incentives for affordability and also related to our focus on pace versus price and our short-term strategy of burning through low-margin lots. During this year’s third quarter, incentives were 11.6% of the average sales price. This is up 390 basis points from a year ago. It’s up 110 basis points from the second quarter of 2025 and it’s up 860 basis points from fiscal year 2022. Other than the extraordinary cost to buy down mortgage rates to make our homes affordable today, our gross margin would be very healthy.” — Hovnanian
“The buydown usage in our deliveries indicates that buyers continue to rely on these rate buydowns to combat affordability at the current mortgage rates. Given the persistently high mortgage rate environment, we assume buydowns will remain at similar levels going forward. In order to meet home buyers’ needs for lower mortgage rates and certainty, we’re intentionally operating at elevated levels of QMIs.” — Hovnanian
