Hovnanian Enterprises grew home sales revenues, deliveries, and profits per share on a year-over-year basis in the second quarter in a “Goldilocks environment,” according to CEO Ara Hovnanian.

“The [housing] market is not too hot and not too cold,” Hovnanian said during the home builder’s earnings call for the second quarter, ended April 30. “The current environment feels more sustainable with higher rates keeping the resale supply limited and demand in check, yet sufficient to have a good supply-demand balance.”

In the quarter, Hovnanian Enterprises reported sales of home revenues increased to $686.9 million on 1,283 homes compared with $670.7 million on 1,225 homes in the second quarter of 2023. Consolidated contracts in the quarter increased to 1,512 homes or $758.8 million compared with 1,477 homes or $785.7 million in the prior-year period.

“We are firmly in the higher-for-longer mortgage rate environment, yet demand for new homes remains resilient,” Hovnanian said. “Our contracts per community for the second quarter increased to 13.9, which was 22% higher than the average second quarter contracts per community since 1997.”

Hovnanian said website visits reached their highest levels in over five years in April and foot traffic at selling communities remains strong, both suggesting “sustained, healthy levels of demand going forward.”

The builder said elevated levels of quick move-in (QMI) homes remain a key element of its operating strategy moving forward. At the end of the quarter, Hovnanian Enterprises averaged 7.2 QMIs per community, including 1.3 finished QMIs per community. Approximately 65% of sales in the second quarter were QMIs, significantly higher than the historical average of 40%.

The builder’s cancellation rate in the quarter was 14%, down from 18% in the second quarter of 2023. Hovnanian Enterprises reported a backlog value of $1.13 billion in the quarter, down 14.7% on a year-over-year basis.

During the company’s earnings call, Hovnanian highlighted ongoing efforts to help drive down constructions, including a multiyear effort to minimize and unify SKUs across its operating divisions.

“This [focus] gives us the ability to truly hone in on costs by limiting the items we negotiate with our suppliers and trades and buy in larger quantities,” Hovnanian said. “Like the Goldilocks [market] scenario, we are big enough to have clout with our suppliers, but small and nimble enough to rally our divisions around a smaller number of SKUs across the country and unify them. Our average base construction cost was down 6% year over year. The cost savings help offset the cost of mortgage rate buydowns.”

Hovnanian said the company has just “scratched the surface” for cost savings and anticipates further cost reduction in future quarters.

During the quarter, 73% of customers utilized mortgage rate buydowns, a decline from 79% in the first quarter. Hovnanian said the share of buyers using buydowns has stabilized around 72% in recent months, and the company expects that share to remain consistent moving forward.

Hovnanian Enterprises generated profit of $50.8 million in the second quarter, or $6.66 per share, compared with $34.1 million, or $4.47 per share, in the second quarter of 2023.

The builder allocated $230.5 million toward land and land development spending in the quarter, up from $156.5 million in the same quarter a year ago. At quarter’s end, Hovnanian’s total controlled consolidated lot count was 36,841, an increase from 28,657 in the prior-year period. The company had 109 active communities at quarter’s end.

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