What changed in this filing

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Item 1. Business

2024-12-18 compared with 2023-12-18 · 87 added, 94 removed, 196 unchanged (48% of the section changed)

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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.

(“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 369,000 homes, including 7,649 homes in fiscal 2023.

Since the incorporation of HEI’s predecessor company, the Company combined with its unconsolidated joint ventures have delivered in excess of 375,000 homes, including 6,201 homes in fiscal 2024 .

The Company has two distinct operations:

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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 113 communities in 27 markets in 13 states throughout the United States.

We market and build homes for first-time buyers, first-time and second-time move-up buyers, luxury buyers, active lifestyle buyers and empty nesters.

Excluding unconsolidated joint ventures, we are currently offering homes for sale in 130 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 $ 62,000 to $ 1,910,000 with an average sales price, including options, of $ 538,000 nationwide in fiscal 2024 .

Our operations span all significant aspects of the home-buying process –

from design, construction, and sale, to mortgage origination and title services.

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:

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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.

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Paul, Minnesota market.

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.

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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.

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 18 of the nation’s top 50 housing markets.

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:

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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.”

For financial information about our segments, see Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Human Capital

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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, 2024 , 17.1 % of our associates had been with the Company for more than 15 years, and the average tenure of all associates was approximately 7.3 years.

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The committee is led by the CEO and comprised of members of senior leadership and associates in different functions throughout the organization representing various backgrounds.

The objective of the committee is to advise on and evaluate the Company’s diversity and inclusion initiatives and to offer suggestions and guidance.

All associates are required to take a diversity and inclusion training course on an annual basis.

Associates in leadership positions (representing approximately 21.9% of all associates) are required to participate in more extensive diversity and inclusion training sessions.

Those in leadership positions (representing approximately 21.8 % of all associates) are required to participate in more extensive diversity and inclusion training sessions.

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 2022, we extended our partnership and financial commitment with BTF for another three years.

Over the last two years, our leadership team has conducted quarterly Town Halls.

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 three 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, Executive Vice President and Group Presidents.

This year, the Company also introduced two new channels for engaging associates companywide, "Lunch & Learns" and "Coffee Chats".

In fiscal 2023, the Company also introduced two new channels for engaging associates companywide, “ Lunch & Learns ” and “ Coffee Chats ” .

The goal of these new platforms is to fuel our companywide objective to foster a culture of engagement and facilitate more two -way communication.

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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 2023, whereby most office associates may work two days a week from home.

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 2024 , whereby most office associates may work two days a week from home.

We believe this change to 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, associates can work remotely up to eight weeks a year. 

We also have committed considerable resources to furthering our associates’

personal and professional growth.

We have a repository of over 500 training modules/courses to facilitate these learning sessions in both in-person and virtual settings, including mandatory diversity, ethics, workplace harassment prevention and safety training courses.

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.

Corporate Offices and Available Information

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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.

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

As a result of the sharp increase in interest rates beginning in fiscal 2022, we 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.

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.

In fiscal 2023, we executed "Build-For-Rent" agreements to supplement our existing for sale business.

The Build-For-Rent sales channel added incremental sales volume during fiscal 2023 and allowed us to increase inventory turnover.

We also remain focused on maintaining adequate liquidity and identifying investment opportunities that make economic sense in light of our current sales prices and sales paces.

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 2023 and fiscal 2024, 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 2024 , 2023 and 2022 allowed us to repurchase $ 113.5 million, $ 245.0 million and $ 100.0 million in aggregate principal of senior secured notes, respectively.

Also, 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.

We also repurchased 188,800 shares of our Class A common stock with an aggregate market value of $26.5 million in fiscal 2024.

In response to changing market conditions, we have been strategic in new land purchases at pricing that we believe will generate appropriate investment returns needed to sustain profitability.

In addition to our current focus on liquidity and flexibility, we intend to continue to focus on our historic key business strategies, as enumerated below.

After the past several years of concentrating

on debt reduction, in fiscal 2024 we shifted our focus back to growth as a focal point.

housing market continues to be driven by positive fundamentals and as a result

we increased our lot count, community count and spending on 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.

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As noted above, we offer a broad product array to provide housing to a wide range of customers.

Our customers consist of first-time buyers, first-time and second-time move-up buyers, luxury buyers, active lifestyle buyers and empty nesters.

Our diverse product array includes single-family detached homes, attached townhomes and condominiums, urban infill and active lifestyle homes.

We are committed to customer satisfaction and quality in the homes that we build.

We recognize that our future success rests in the ability to deliver quality homes to satisfied customers.

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.

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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.

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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 land inventory, while maintaining our ability to commence new developments during favorable market periods.

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.

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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 2023, 2022 and 2021, rather than purchase additional lots in underperforming communities, we took advantage of this right and walked away from 3,838 lots, 5,121 lots and 3,201 lots, respectively, out of 28,227 total lots, 27,617 total lots and 23,624 total lots, respectively, under option, resulting in charges to pre-tax income of $1.5 million, $5.7 million and $1.6 million, respectively.

In fiscal 2024 , 2023 and 2022 , rather than purchase additional lots in underperforming communities, we took advantage of this right and walked away from 3,800 lots, 3,838 lots and 5,121 lots, respectively, out of 39,059 total lots, 28,227 total lots and 27,617 total lots, respectively, under option, resulting in charges to income before taxes of $1.6 million, $ 1.5 million and $ 5.7 million, respectively.

Design - Our residential communities are generally located in urban and suburban areas easily accessible through public and personal transportation.

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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.

Beginning in fiscal 2022 and continuing in fiscal 2023, we increased our inventory of QMI homes in connection with our current business strategy discussed above.

Beginning in fiscal 2022 and continuing through fiscal 2024 , we have increased our inventory of QMI homes in connection with our current business strategy discussed above.

Materials and Subcontractors - We attempt to maintain efficient operations by utilizing standardized materials available from a variety of sources.

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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.

Since the COVID-19 pandemic began, we have experienced construction delays due to 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 is varied from market to market.

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 but are still currently experiencing increased construction cycle times of 30 - 45 days over our pre-pandemic average in many of our markets.

We cannot predict the extent to which shortages in necessary materials or labor will continue or re-occur in our markets in the future.

However, as home sales slow nationally, we expect pressure to alleviate on material suppliers and subcontractors, which over time should, absent other factors, allow construction cycle times to revert back to historical norms.

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.

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.

Recently, we have started offering curated "Looks" packages for customers to select, rather than a large number of a la carte options.

This approach has continued to expand and 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.

We have also started offering curated “ Looks ” packages for customers to select, rather than a large number of a la carte options.

This approach has continued to expand and 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.

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During the year ended October 31, 2024 , for the markets in which our mortgage subsidiaries originated loans, 25.1 % of our home buyers paid in cash and 79.4 % of our noncash home buyers obtained mortgages from our mortgage banking subsidiary.

The loans we originated in fiscal 2023 were 69.8% conforming conventional loans and 29.5% Federal Housing Administration/Veterans Affairs (“FHA/VA”).

The loans we originated in fiscal 2024 were 64.0 % conforming conventional loans and 35.4 % Federal Housing Administration/Veterans Affairs (“FHA/VA”).

The remaining 0.6 % of our loan originations represented loans which exceeded conforming conventions.

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Our 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.

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.

Information on housing revenues, homes delivered and average sales price by segment for the year ended October 31, 2024 , is set forth below:

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Consolidated total

Domestic unconsolidated joint ventures(1)

(1) Represents housing revenues and home deliveries for our domestic 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 domestic unconsolidated joint ventures.

In addition, during the fourth quarter of fiscal 2023, we delivered 2,176 homes through our unconsolidated joint venture in the Kingdom of Saudi Arabia.

Unconsolidated joint ventures( 1 )

( 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

The dollar value of our net sales contracts, excluding unconsolidated joint ventures, was $2.5 billion for both the years ended October 31, 2023 and 2022 and the number of homes contracted increased 3.8% to 4,647 in fiscal 2023 from 4,477 in fiscal 2022.

 Information on the dollar value of net sales contracts by segment for the years ended October 31, 2023 and 2022, is set forth below:

The dollar value of our net sales contracts, excluding unconsolidated joint ventures, was $ 2.8 billion and $ 2.5 billion for the years ended October 31, 2024 and 2023 , respectively, and the number of homes contracted increased 11.6 % to 5,186 in fiscal 2024 from 4,647 in fiscal 2023 .

Information on the dollar value of net sales contracts by segment for the years ended October 31, 2024 and 2023 , is set forth below:

Percentage of

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Consolidated total

Domestic unconsolidated joint ventures(1)

(1) Represents net contract dollars for our domestic 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 domestic unconsolidated joint ventures.

In addition, during fiscal 2023 and 2022, we contracted 13 homes and 300 homes, respectively, through our unconsolidated joint venture in the Kingdom of Saudi Arabia.

Unconsolidated joint ventures( 1 )

( 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.

Active Selling Communities

The average number of active selling communities increased from 113 for fiscal 2022 to 114 for fiscal 2023.

We ended fiscal 2024 with 130 active selling communities as compared to 113 active selling communities at October 31, 2023 .

The average number of active selling communities increased to 119 for fiscal 2024 from 114 for fiscal 2023.

Information on our active selling communities by segment as of October 31, 2024 , 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.” 

Delivered( 1 )

Available( 2 )

Includes 430 home sites under option.

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At October 31, 2024 and 2023 , including domestic unconsolidated joint ventures, we had a backlog of signed contracts for 2,052 homes and 2,196 homes, respectively, representing a 6.6 % decrease, with sales values aggregating $ 1.2 billion and $ 1.3 billion, respectively.

Our focus on QMI homes continues to result in higher backlog conversion.

Additionally at October 31, 2024 and 2023, we had a backlog of signed contracts for 276 homes and 50 homes, respectively, from our unconsolidated joint venture in the Kingdom of Saudi Arabia.

The majority of our backlog at October 31, 2023 is expected to be completed and closed within the next six to nine months. 

The majority of our backlog at October 31, 2024 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, 2024 , range from $ 62,000 to $ 1,910,000 in the Northeast, from $ 276,000 to $ 1,177,000 in the Southeast and from $ 250,000 to $ 880,000 in the West.

At November 30, 2023 and 2022, our backlog of signed contracts, including domestic unconsolidated joint ventures, was 2,158 homes and 2,396 homes, respectively, with sales values aggregating $1.3 billion and $1.4 billion, respectively.

Additionally at November 30, 2023 and 2022, we had a backlog of signed contracts for 20 homes and 2,218 homes, respectively, from our unconsolidated joint venture in the Kingdom of Saudi Arabia.

For information on our backlog excluding unconsolidated joint ventures, see the contract table in Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations –

Homebuilding:

Key Performance Indicators.”

At November 30, 2024 and 2023 , our backlog of signed contracts, including domestic unconsolidated joint ventures, was 2,111 homes and 2,158 homes, respectively, with sales values aggregating $ 1.3 billion for both periods.

Additionally at November 30, 2024 and 2023, we had a backlog of signed contracts for 20 homes for both periods, from our unconsolidated joint venture in the Kingdom of Saudi Arabia.

For information on our backlog excluding unconsolidated joint ventures, see the contract table in Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Homebuilding:

Key Performance Indicators.”

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.

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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.”

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.

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, 2024 , 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 31,754 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.”

The proposed developable home sites in communities in planning are included in the 41,895 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.”

Communities in Planning

(Dollars in thousands)

Value ( 1 )( 2 )

Combined total

Properties under option also include costs incurred on properties not under option but which are under evaluation.

For properties under option, as of October 31, 2023, option fees and deposits aggregated approximately $79.9 million.

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, 2024 , option fees and deposits were $ 125.0 million.

As of October 31, 2024 , we spent an additional $ 52.4 million in nonrefundable predevelopment costs on such properties, including properties not under option but under evaluation.

The book value for properties under option includes land banking arrangements of $27.7 million, which is included in "Consolidated inventory not owned" on our Consolidated Balance Sheets.

The book value for properties under option includes land banking costs of $ 23.6 million, which is included in “ Consolidated inventory not owned ” on our Consolidated Balance Sheets.

We either option or acquire improved or unimproved home sites from land developers or other sellers.

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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". See Note 3 to the Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K for further discussion on mothballed communities.

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

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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.

During fiscal 2023, relative to the prior fiscal year, labor and material shortages that were initially due to the COVID-19 pandemic continued to gradually improve.

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 issues, but due to increased availability prices began to decrease during the second half of fiscal 2022 and into fiscal 2024 .

We cannot predict, however, the extent to which shortages in necessary raw materials or labor may occur in the future.

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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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 protection of health and the environment, 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, and the remediation of contamination at properties that we have owned or developed or currently own or are developing (“environmental laws”).

The particular environmental laws which apply to any given community vary greatly according to the community site, the site’s environmental conditions and the present and former uses of the site.

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 the protection of the environment, 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.

The particular environmental laws which apply to any given community vary greatly according to the community site, the site’s environmental conditions and the present and former uses of the site.

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 the protection of the environment, 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.

Despite our past ability to obtain necessary permits and approvals for our communities, we anticipate that increasingly stringent requirements will be imposed on developers and homebuilders in the future.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business