Hovnanian Enterprises Profile
Hovnanian Enterprises, Inc. (HEI), through its subsidiaries, engages in the homebuilding and financial services operations.
HEI designs, constructs, markets, and sells single-family detached homes, attached townhomes and condominiums, urban infill, and active lifestyle homes in planned residential developments. The company is one of the nation's largest builders of residential homes.
The company has three reportable homebuilding segments consisted of Northeast, Southeast, and West. The company's financial services operations provide mortgage loans and title services to the customers of its homebuilding operations.
The company offers homes for sale in 113 communities in 27 markets in 13 states throughout the United States. The company markets and builds homes for first-time buyers, first-time, and second-time move-up buyers, luxury buyers, active lifestyle buyers and empty nesters.
The company's operations span all significant aspects of the home-buying process from design, construction, and sale to mortgage origination and title services.
During 2020, the company began a wind down of its operations in the Chicago, Illinois market which was completed in the year ended October 31, 2023 (fiscal 2023).
Geographic Breakdown of Markets by Segment
The company markets and builds homes that are constructed in 18 of the nation's top 50 housing markets. The company segregates its homebuilding operations geographically into the following three segments:
Northeast: Delaware, Illinois, Maryland, New Jersey, Ohio, Pennsylvania, Virginia, and West Virginia.
Southeast: Florida, Georgia, and South Carolina.
West: Arizona, California, and Texas.
Business Strategies
The company's strategy includes homebuilding and land development joint ventures as a means of controlling lot positions, expanding its market opportunities, establishing strategic alliances, and reducing its risk profile. The company's homebuilding joint ventures are generally entered into with third-party investors to develop land and construct homes that are sold directly to home buyers. The company's 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.
The company manages its financial services operations to better serve all of its home buyers. The company's mortgage financing and title service operations enhance its contact with customers and allow the company to coordinate the home-buying experience from beginning to end.
Design
The company's residential communities are generally located in urban and suburban areas easily accessible through public and personal transportation. Its communities are designed as neighborhoods that fit existing land characteristics. The company strives 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
The company designs and supervises the development and building of its communities. The company's homes are constructed according to standardized prototypes, which are designed and engineered to provide innovative product design The company generally employs subcontractors for the installation of site improvements and construction of homes.
Materials and Subcontractors
The company generally contracts with subcontractors to construct its homes.
Marketing and Sales
The company's homes in residential communities are sold principally through on-site sales offices. In order to respond to its customers' needs and trends in housing design, the company relies upon its internal market research group to analyze information gathered from, among other sources, buyer profiles, exit interviews at model sites, focus groups and demographic databases. The company makes use of its 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 its comprehensive marketing program.
The company has a national call center, which is responsible for follow up generated by its web site and its digital marketing efforts. The call center supports its 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 Financing
The company sells its homes to customers who generally finance their purchases through mortgages. Its financial services segment provides its 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. The company originates loans in each of the states in which it builds homes.
During the year ended October 31, 2023, for the markets in which the company's mortgage subsidiaries originated loans, 19.8% of the company's home buyers paid in cash, and 70.1% of the company's noncash home buyers obtained mortgages from its mortgage banking subsidiary. The loans the company originated in the year ended October 31, 2023 were 69.8% conforming conventional loans and 29.5% Federal Housing Administration/Veterans Affairs (FHA/VA). The remaining 0.7% of the company's loan originations represent loans, which exceed conforming conventions.
The company sells virtually all of the loans and loan-servicing rights that it originates 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
The company's 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 the company's associates, together with independent architects, consultants and contractors. The company's associates also carry out 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 amenities, such as club houses, swimming pools, tennis courts, tot lots and open areas.
Seasonality
The company's 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.
History
Hovnanian Enterprises, Inc. was founded in 1959. The company was incorporated in New Jersey in 1967 and reincorporated in Delaware in 1983.
