What Hovnanian Enterprises, Inc. told the SEC could break it.

Hovnanian continues to experience certain supply-chain issues and faces uncertainty from inflation and tariffs/trade-policy changes that can raise the cost of building materials and components and lengthen construction cycle times; these material-cost and availability pressures (alongside the possibility of recession and rate increases) could cause it to take longer and incur more cost to build homes, compressing margins.

“While we continue to experience certain supply chain issues, we remain focused on continuing to shorten our construction cycle times”

Hovnanian operates with substantial leverage — senior secured notes, a 1.75-lien term loan due January 2028, a $125M senior-secured revolving facility due 2028 and Series A preferred (with $10.7M annual dividends) — and substantially all of its assets are pledged to support its senior secured revolving credit facility, which can make raising additional financing harder; a negative credit-rating change or inability to obtain capital could reduce sales and hinder growth, and it maintains charter transfer restrictions to protect its tax NOLs.

“In addition, substantially all of our assets are pledged to support our senior secured revolving credit facility, which may make it more difficult to raise additional financing in the future. We could be adversely affected by a negative change in our credit rating.”

Hovnanian's residential development requires environmental and other regulatory approvals, and it is exposed to politically contentious, frequently changing land-use/environmental rules — notably EPA and U.S. Army Corps of Engineers rulemaking that has expanded and contracted the scope of 'waters of the United States' (wetlands and streams) under the Clean Water Act, which directly affects permitting requirements for the homebuilding industry and can delay or constrain its communities.

“several major joint rulemakings and formal guidance by the Environmental Protection Agency ( “ EPA ” ) and the U.S. Army Corps of Engineers have expanded and contracted the scope of “waters of the United States” (i.e., wetlands and streams) subject to regulation under the Clean Water Act (“CWA”), which impacts, among other things, permitting requirements applicable to the homebuilding industr”

Hovnanian's homebuilding (97% of revenue) is cyclical and significantly affected by general/local economic conditions and mortgage-financing availability — the large majority of buyers finance purchases, so elevated mortgage rates impair affordability and demand (net contracts per active selling community fell 10.0% to 35.9 in fiscal 2025), forcing costly builder forward commitments and rate buydowns; a downturn could trigger cancellations and unrecoverable profit declines.

“The large majority of our customers finance their acquisitions through lenders providing mortgage financing. Mortgage rates, up until late 2022, had been historically low, which made the homes we sell more affordable.”