10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

[ X ]           Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended JULY 31, 2013

OR

[    ]           Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission file number: 1-8551

Hovnanian Enterprises, Inc. (Exact Name of Registrant as Specified in Its Charter)

Delaware (State or Other Jurisdiction of Incorporation or Organization)

22-1851059 (I.R.S. Employer Identification No.)

110 West Front Street, P.O. Box 500, Red Bank, NJ  07701 (Address of Principal Executive Offices) (Zip Code)

732-747-7800 (Registrant's Telephone Number, Including Area Code)

N/A  (Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ X ]    No [   ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes [ X ]  No [    ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer [   ]  Accelerated Filer  [ X ]

Non-Accelerated Filer  [   ]  (Do not check if smaller reporting company)   Smaller Reporting Company [   ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes [    ]  No [ X ]

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. 124,544,460 shares of Class A Common Stock and 14,656,867 shares of Class B Common Stock were outstanding as of September 3, 2013.  

1

HOVNANIAN ENTERPRISES, INC.  

FORM 10-Q  

INDEX	PAGE NUMBER
PART I.  Financial Information
Item l.  Financial Statements:
Condensed Consolidated Balance Sheets as of July 31, 2013 (unaudited) and October 31, 2012	3
Condensed Consolidated Statements of Operations (unaudited) for the three and nine months ended July 31, 2013 and 2012	5
Condensed Consolidated Statement of Equity (unaudited) for the nine months ended July 31, 2013	6
Condensed Consolidated Statements of Cash Flows (unaudited) for the nine months ended July 31, 2013 and 2012	7
Notes to Condensed Consolidated Financial Statements (unaudited)	9
Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations	43
Item 3.  Quantitative and Qualitative Disclosures About Market Risk	70
Item 4.  Controls and Procedures	71
PART II.  Other Information
Item 1.  Legal Proceedings	71
Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds	71
Item 6.  Exhibits	71
Signatures	73

2

HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In Thousands)

	July 31, 2013		October 31, 2012
	(Unaudited)		(1)
ASSETS
Homebuilding:
Cash	$	221,500	$	258,323
Restricted cash and cash equivalents		11,085		41,732
Inventories:
Sold and unsold homes and lots under development		755,496		671,851
Land and land options held for future development or sale		252,847		218,996
Consolidated inventory not owned		109,665		90,619
Total inventories		1,118,008		981,466
Investments in and advances to unconsolidated joint ventures		54,346		61,083
Receivables, deposits, and notes – net		47,542		61,794
Property, plant, and equipment – net		46,906		48,524
Prepaid expenses and other assets		59,981		66,694
Total homebuilding		1,559,368		1,519,616
Financial services:
Cash		5,758		14,909
Restricted cash and cash equivalents		12,935		22,470
Mortgage loans held for sale at fair value		84,026		117,024
Other assets		2,039		10,231
Total financial services		104,758		164,634
Total assets	$	1,664,126	$	1,684,250

(1)  Derived from the audited balance sheet as of October 31, 2012.

See notes to condensed consolidated financial statements (unaudited).

3

HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In Thousands Except Share and Per Share Amounts)

	July 31, 2013			October 31, 2012
	(Unaudited)			(1)
LIABILITIES AND EQUITY
Homebuilding:
Nonrecourse mortgages	$	55,286		$	38,302
Accounts payable and other liabilities		289,496			296,510
Customers’ deposits		37,922			23,846
Nonrecourse mortgages secured by operating properties		18,000			18,775
Liabilities from inventory not owned		94,484			77,791
Total homebuilding		495,188			455,224
Financial services:
Accounts payable and other liabilities		23,690			37,609
Mortgage warehouse lines of credit		57,452			107,485
Total financial services		81,142			145,094
Notes payable:
Senior secured notes		978,295			977,369
Senior notes		459,145			458,736
Senior amortizing notes		20,857			23,149
Senior exchangeable notes		65,772			76,851
TEU senior subordinated amortizing notes		3,181			6,091
Accrued interest		25,002			20,199
Total notes payable		1,552,252			1,562,395
Income taxes payable		2,748			6,882
Total liabilities		2,131,330			2,169,595
Equity:
Hovnanian Enterprises, Inc. stockholders’ equity deficit:
Preferred stock, $.01 par value - authorized 100,000 shares; issued 5,600 shares with a liquidation preference of $140,000 at July 31, 2013 and at October 31, 2012		135,299			135,299
Common stock, Class A, $.01 par value – authorized 400,000,000 shares; issued 136,305,223 shares at July 31, 2013 and 130,055,304 shares at October 31, 2012 (including 11,760,763 shares at July 31, 2013 and October 31, 2012 held in Treasury)		1,363			1,300
Common stock, Class B, $.01 par value (convertible to Class A at time of sale) – authorized 60,000,000 shares; issued 15,348,615 shares at July 31, 2013 and 15,350,101 shares at October 31, 2012 (including 691,748 shares at July 31, 2013 and October 31, 2012 held in Treasury)		153			154
Paid in capital - common stock		688,145			668,735
Accumulated deficit		(1,177,227	)		(1,175,703	)
Treasury stock - at cost		(115,360	)		(115,360	)
Total Hovnanian Enterprises, Inc. stockholders’ equity deficit		(467,627	)		(485,575	)
Noncontrolling interest in consolidated joint ventures		423			230
Total equity deficit		(467,204	)		(485,345	)
Total liabilities and equity	$	1,664,126		$	1,684,250

(1) Derived from the audited balance sheet as of October 31, 2012.

See notes to condensed consolidated financial statements (unaudited).

4

HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In Thousands Except Per Share Data)

(Unaudited)

	Three Months Ended July 31,					Nine Months Ended July 31,
	2013		2012			2013			2012
Revenues:
Homebuilding:
Sale of homes	$	462,376	$	371,481		$	1,206,233		$	936,305
Land sales and other revenues		3,103		4,743			18,114			36,014
Total homebuilding		465,479		376,224			1,224,347			972,319
Financial services		12,878		10,787			35,219			25,990
Total revenues		478,357		387,011			1,259,566			998,309
Expenses:
Homebuilding:
Cost of sales, excluding interest		370,464		305,178			992,362			794,168
Cost of sales interest		13,757		14,298			35,311			40,091
Inventory impairment loss and land option write-offs		623		689			3,479			7,230
Total cost of sales		384,844		320,165			1,031,152			841,489
Selling, general and administrative		42,331		36,230			116,904			104,609
Total homebuilding expenses		427,175		356,395			1,148,056			946,098
Financial services		6,640		6,111			21,205			16,651
Corporate general and administrative		14,056		11,913			40,284			36,961
Other interest		21,949		24,590			68,581			72,641
Other operations		1,839		(3,099	)		(75	)		3,289
Total expenses		471,659		395,910			1,278,051			1,075,640
Gain on extinguishment of debt		-		6,230			-			57,966
Income from unconsolidated joint ventures		3,690		852			6,806			2,324
Income (loss) before income taxes		10,388		(1,817	)		(11,679	)		(17,041	)
State and federal income tax provision (benefit):
State		1,922		(36,563	)		(277	)		(35,461	)
Federal		-		70			(9,878	)		207
Total income taxes		1,922		(36,493	)		(10,155	)		(35,254	)
Net income (loss)	$	8,466	$	34,676		$	(1,524	)	$	18,213
Per share data:
Basic:
Income (loss) per common share	$	0.06	$	0.25		$	(0.01	)	$	0.15
Weighted-average number of common shares outstanding		146,056		138,472			144,840			121,357
Assuming dilution:
Income (loss) per common share	$	0.06	$	0.25		$	(0.01	)	$	0.15
Weighted-average number of common shares outstanding		162,823		138,552			144,840			121,380

See notes to condensed consolidated financial statements (unaudited).

5

HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF EQUITY

(In Thousands Except Share Amounts)

(Unaudited)

	A Common Stock				B Common Stock						Preferred Stock
	Shares Issued and Outstanding		Amount		Shares Issued and Outstanding			Amount			Shares Issued and Outstanding		Amount		Paid-In Capital			Accumulated Deficit			Treasury Stock			Noncontrolling Interest		Total
Balance, October 31, 2012		118,294,541	$	1,300		14,658,353		$	154			5,600	$	135,299	$	668,735		$	(1,175,703	)	$	(115,360	)	$	230	$	(485,345	)
Stock options, amortization and issuances		44,812														3,154											3,154
Restricted stock amortization, issuances and forfeitures		123,840		1												2,041											2,042
Settlement of prepaid Class A Common Stock purchase contracts		2,683,679		27												(27	)										-
Exchange of senior exchangeable notes for Class A Common Stock		3,396,102		34												14,242											14,276
Conversion of Class B to Class A Common Stock		1,486		1		(1,486	)		(1	)																	-
Changes in noncontrolling interest in consolidated joint ventures		-		-																					193		193
Net loss																			(1,524	)							(1,524	)
Balance, July 31, 2013		124,544,460	$	1,363		14,656,867		$	153			5,600	$	135,299	$	688,145		$	(1,177,227	)	$	(115,360	)	$	423	$	(467,204	)

See notes to condensed consolidated financial statements (unaudited).

6

HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands)

(Unaudited)

	Nine Months Ended July 31,
	2013			2012
Cash flows from operating activities:
Net (loss) income	$	(1,524	)	$	18,213
Adjustments to reconcile net (loss) income to net cash used in operating activities:
Depreciation		3,782			4,711
Compensation from stock options and awards		5,259			3,734
Amortization of bond discounts and deferred financing costs		5,641			5,253
Gain on sale and retirement of property and assets		(4,535	)		(81	)
Income from unconsolidated joint ventures		(6,806	)		(2,324	)
Distributions of earnings from unconsolidated joint ventures		1,230			537
Gain on extinguishment of debt		-			(57,966	)
Expenses related to the debt for debt exchange		-			4,694
Inventory impairment and land option write-offs		3,479			7,230
Decrease (increase) in assets:
Mortgage loans held for sale		32,998			(19,181	)
Restricted cash, receivables, prepaids, deposits and other assets		64,806			14,129
Inventories		(149,529	)		(8,831	)
(Decrease) increase in liabilities:
State and federal income tax liabilities		(4,133	)		(35,137	)
Customers’ deposits		14,076			7,200
Accounts payable, accrued interest and other accrued liabilities		(12,141	)		(4,256	)
Net cash used in operating activities		(47,397	)		(62,075	)
Cash flows from investing activities:
Proceeds from sale of property and assets		7,208			3,033
Purchase of property, equipment, and other fixed assets		(1,300	)		(4,874	)
Investments in and advances to unconsolidated joint ventures		(5,180	)		(2,889	)
Distributions of capital from unconsolidated joint ventures		18,048			2,820
Net cash provided by (used in) investing activities		18,776			(1,910	)
Cash flows from financing activities:
Proceeds from mortgages and notes		82,617			8,347
Payments related to mortgages and notes		(56,901	)		(11,179	)
Proceeds from model sale leaseback financing programs		19,473			31,651
Payments related to model sale leaseback financing programs		(6,264	)		-
Proceeds from land bank financing program		33,449			38,146
Payments related to land bank financing program		(30,721	)		-
Net proceeds from common stock issuance		-			47,250
Net (payments) proceeds related to mortgage warehouse lines of credit		(50,033	)		28,479
Deferred financing costs from land bank financing programs and note issuances		(3,771	)		(1,067	)
Principal payments and debt repurchases		(5,202	)		(75,435	)
Payments related to the debt for debt exchange		-			(18,874	)
Purchase of treasury stock		-			(103	)
Net cash (used in) provided by financing activities		(17,353	)		47,215
Net decrease in cash and cash equivalents		(45,974	)		(16,770	)
Cash and cash equivalents balance, beginning of period		273,232			250,740
Cash and cash equivalents balance, end of period	$	227,258		$	233,970

7

HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands - Unaudited)

(Continued)

	Nine Months Ended July 31,
	2013		2012
Supplemental disclosures of cash flow:
Cash received during the period for income taxes	$	6,022	$	117

Supplemental disclosure of noncash financing activities:

In the second quarter of fiscal 2013, a property that we previously acquired when our partner in a land development joint venture transferred its interest in the venture to us, was foreclosed on by the note holder. As a result, the inventory with a book value of $9.5 million and corresponding non-recourse liability of equal amount were taken off of our balance sheet in that quarter.

In the first quarter of fiscal 2013, 18,305 of our senior exchangeable notes were exchanged for 3,396,102 shares of Class A Common Stock.

In the first quarter of fiscal 2013, we entered into a new unconsolidated homebuilding joint venture which resulted in the transfer of an existing receivable from our joint venture partners of $0.6 million at October 31, 2012, to an investment in the joint venture at January 31, 2013.

During the third quarter of fiscal 2012, we purchased our partners’ interest in one of our unconsolidated homebuilding joint ventures. The consolidation of this entity resulted in increases in inventory, other assets, non-recourse land mortgages and accounts payables and other liabilities of $34.3 million, $5.0 million, $20.6 million and $15.8 million, respectively.

In the second and third quarters of fiscal 2012, we completed several debt for equity exchanges.  See Notes 11, 12 and 16 for further information.

In the first quarter of fiscal 2012, we completed a debt for debt exchange. See Note 9 in our Annual Report on Form 10-K for the fiscal year ended October 31, 2012 for further information.

See notes to Condensed Consolidated Financial Statements (unaudited).

8

HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

1.  Hovnanian Enterprises, Inc. and Subsidiaries (the "Company”, “we”, “us” or “our”) has reportable segments consisting of six Homebuilding segments (Northeast, Mid-Atlantic, Midwest, Southeast, Southwest and West) and the Financial Services segment (see Note 18).

The accompanying unaudited Condensed Consolidated Financial Statements include our accounts and those of all wholly-owned subsidiaries after elimination of all significant intercompany balances and transactions. Certain immaterial prior year amounts have been reclassified to conform to the current year presentation.

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X and should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended October 31, 2012. In the opinion of management, all adjustments for interim periods presented have been made, which include normal recurring accruals and deferrals necessary for a fair presentation of our consolidated financial position, results of operations, and cash flows. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates, and these differences could have a significant impact on the financial statements. Results for interim periods are not necessarily indicative of the results which might be expected for a full year. The balance sheet at October 31, 2012 has been derived from the audited Consolidated Financial Statements at that date but does not include all of the information and footnotes required by GAAP for complete financial statements.

2.  For the three and nine months ended July 31, 2013, the Company’s total stock-based compensation expense was $2.7 million ($2.2 million net of tax) and $5.2 million (pre and post tax), respectively, and $0.8 million (pre and post tax) and $3.7 million (pre and post tax) for the three and nine months ended July 31, 2012, respectively. Included in this total stock-based compensation expense was the vesting of stock options of $1.6 million and $3.0 million for the three and nine months ended July 31, 2013, respectively, and $0.7 million and $3.3 million for the three and nine months ended July 31, 2012, respectively.

3.  Interest costs incurred, expensed and capitalized were:

	Three Months Ended July 31,				Nine Months Ended July 31,
(In thousands)	2013		2012		2013		2012
Interest capitalized at beginning of period	$	112,488	$	118,435	$	116,056	$	121,441
Plus interest incurred(1)		33,195		39,477		97,813		110,315
Less cost of sales interest expensed		13,757		14,298		35,311		40,091
Less other interest expensed(2)(3)		21,949		24,590		68,581		72,641
Interest capitalized at end of period(4)	$	109,977	$	119,024	$	109,977	$	119,024

(1)	Data does not include interest incurred by our mortgage and finance subsidiaries.
(2)	Other interest expensed is comprised of interest that does not qualify for interest capitalization because our assets that qualify for interest capitalization (inventory under development) do not exceed our debt. Interest on completed homes and land in planning, which does not qualify for capitalization, is expensed.
(3)	Cash paid for interest, net of capitalized interest, is the sum of other interest expensed, as defined above, and interest paid by our mortgage and finance subsidiaries adjusted for the change in accrued interest, which is calculated as follows:

9

	Three Months Ended July 31,					Nine Months Ended July 31,
(In thousands)	2013		2012			2013			2012
Other interest expensed	$	21,949	$	24,590		$	68,581		$	72,641
Interest paid by our mortgage and finance subsidiaries		731		606			2,239			1,550
Decrease/(increase) in accrued interest		5,018		(13,356	)		(4,802	)		(10,073	)
Cash paid for interest, net of capitalized interest	$	27,698	$	11,840		$	66,018		$	64,118

(4) Capitalized interest amounts are shown gross before allocating any portion of impairments to capitalized interest.

4.  Accumulated depreciation at July 31, 2013 and October 31, 2012 amounted to $78.4 million and $75.7 million, respectively, for our homebuilding property, plant and equipment.

5.  We record impairment losses on inventories related to communities under development and held for future development when events and circumstances indicate that they may be impaired and the undiscounted cash flows estimated to be generated by those assets are less than their related carrying amounts. If the expected undiscounted cash flows are less than the carrying amount, then the community is written down to its fair value. We estimate the fair value of each impaired community by determining the present value of the estimated future cash flows at a discount rate commensurate with the risk of the respective community. For the nine months ended July 31, 2013 and 2012, our discount rates used for the impairments recorded ranged from 18.0% to 18.8% and from 16.8% to 18.5%, respectively. Should the estimates or expectations used in determining cash flows or fair value decrease or differ from current estimates in the future, we may need to recognize additional impairments. During the nine months ended July 31, 2013, we evaluated inventories of all 374 communities under development and held for future development for impairment indicators through preparation and review of detailed budgets or other market indicators of impairment. We performed detailed impairment calculations for 30 of those communities (i.e., those with a projected operating loss or other impairment indicators) with an aggregate carrying value of $82.5 million. As impairment indicators are assessed on a quarterly basis, some of the communities evaluated during the nine months ended July 31, 2013 were evaluated in more than one quarterly period. Of those communities tested for impairment, one community with an aggregate carrying value of $2.7 million had undiscounted future cash flow that only exceeded the carrying amount by less than 20%. As a result of our impairment analysis, we recorded impairment losses, which are included in the Condensed Consolidated Statement of Operations and deducted from inventory, of $0.1 million and $0.2 million for the three months ended July 31, 2013 and 2012, respectively, and $1.6 million and $5.4 million for the nine months ended July 31, 2013 and 2012, respectively.

10

The following tables represent inventory impairments by homebuilding segment for the three and nine months ended July 31, 2013 and 2012:

(Dollars in millions)	Three Months Ended July 31, 2013						Three Months Ended July 31, 2012
	Number of Communities		Dollar Amount of Impairment		Pre-Impairment Value(1)		Number of Communities		Dollar Amount of Impairment		Pre-Impairment Value(1)
Northeast		1	$	0.1	$	0.4		1	$	0.1	$	0.3
Mid-Atlantic		-		-		-		-		-		-
Midwest		-		-		-		-		-		-
Southeast		-		-		-		2		0.1		0.3
Southwest		-		-		-		-		-		-
West		-		-		-		-		-		-
Total		1	$	0.1	$	0.4		3	$	0.2	$	0.6

(Dollars in millions)	Nine Months Ended July 31, 2013						Nine Months Ended July 31, 2012
	Number of Communities		Dollar Amount of Impairment(2)		Pre-Impairment Value(1)		Number of Communities		Dollar Amount of Impairment		Pre-Impairment Value(1)
Northeast		3	$	1.6	$	5.6		6	$	2.5	$	16.4
Mid-Atlantic		1		-		0.1		3		0.4		0.8
Midwest		-		-		-		1		0.1		1.1
Southeast		1		-		0.4		10		2.4		5.8
Southwest		-		-		-		-		-		-
West		-		-		-		-		-		-
Total		5	$	1.6	$	6.1		20	$	5.4	$	24.1

(1) Represents carrying value, net of prior period impairments, if any, at the time of recording the applicable period’s impairments.

(2) During the nine months ended July 31, 2013, the Mid-Atlantic had an impairment totaling $2 thousand and the Southeast had an impairment totaling $17 thousand.

11

The Condensed Consolidated Statement of Operations line item entitled “Homebuilding: Inventory impairment loss and land option write-offs” also includes write-offs of options, and approval, engineering and capitalized interest costs that we record when we redesign communities and/or abandon certain engineering costs and we do not exercise options in various locations because the communities' pro forma profitability is not projected to produce adequate returns on investment commensurate with the risk. Total aggregate write-offs related to these items were $0.5 million for both three months ended July 31, 2013 and 2012, and $1.9 million and $1.8 million for the nine months ended July 31, 2013 and 2012, respectively. Occasionally, these write-offs are offset by recovered deposits (sometimes through legal action) that had been written off in a prior period as walk-away costs. Historically, these recoveries have not been significant in comparison to the total cost written off.

      The following tables represent write-offs of such costs (after giving effect to any recovered deposits in the applicable period) and the number of lots walked away from by homebuilding segment for the three and nine months ended July 31, 2013 and 2012:

	Three Months Ended July 31,
	2013				2012
(Dollars in millions)	Number of Walk-Away Lots		Dollar Amount of Write-Offs		Number of Walk-Away Lots		Dollar Amount of Write-Offs
Northeast		73	$	0.2		210	$	0.1
Mid-Atlantic		-		-		-		-
Midwest		13		-		89		0.1
Southeast		113		0.1		-		-
Southwest		12		0.2		116		0.3
West		-		-		-		-
Total		211	$	0.5		415	$	0.5

	Nine Months Ended July 31,
	2013				2012
(Dollars in millions)	Number of Walk-Away Lots		Dollar Amount of Write-Offs		Number of Walk-Away Lots		Dollar Amount of Write-Offs
Northeast		373	$	0.4		210	$	0.4
Mid-Atlantic		164		-		182		0.2
Midwest		13		-		194		0.2
Southeast		113		0.2		734		0.7
Southwest		246		1.3		281		0.3
West		-		-		-		-
Total		909	$	1.9		1,601	$	1.8

We can incur costs while investigating land options, whereby we decide not to pursue the opportunity before we control the lots. These costs are expensed in the period we decide to no longer pursue the opportunity. For the three and nine months ended July 31, 2013, such costs were not significant and are therefore not shown in the tables above. In addition, we sometimes walk-away from a lot option when we have only incurred costs of less than $50,000; such costs are not shown in the tables above.

We have decided to mothball (or stop development on) certain communities when we have determined the current performance does not justify further investment at the time. When we decide to mothball a community, the inventory is reclassified from “Sold and unsold homes and lots under development” to “Land and land options held for future development or sale”. During the first nine months of fiscal 2013, we mothballed one community and we re-activated three previously mothballed communities. As of July 31, 2013, the net book value associated with our 51 total mothballed communities was $124.9 million, net of impairment charges recorded in prior periods of $442.9 million.

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 From time to time we enter into option agreements that include specific performance requirements, whereby we are required to purchase a minimum number of lots. Because of our obligation to purchase these lots, for accounting purposes in accordance with ASC 360-20-40-38, we are required to record this inventory on our Condensed Consolidated Balance Sheets. As of July 31, 2013, we had $0.8 million of specific performance options recorded on our Condensed Consolidated Balance Sheets to consolidated inventory not owned, with a corresponding amount recorded to liabilities from inventory not owned. Consolidated inventory not owned also consists of other options that were included on our balance sheet in accordance with GAAP.

During fiscal 2012 and 2013, we sold and leased back certain of our model homes with the right to participate in the potential profit when each home is sold to a third party at the end of the respective lease. As a result of our continued involvement, for accounting purposes in accordance with ASC 360-20-40-38, these sale and leaseback transactions are considered a financing rather than a sale. Therefore, for purposes of our Condensed Consolidated Balance Sheet, at July 31, 2013, inventory of $48.3 million was recorded to consolidated inventory not owned, with a corresponding amount of $46.1 million recorded to liabilities from inventory not owned.

In addition, we entered into a land banking arrangement in fiscal 2012 with GSO Capital Partners LP ("GSO"), that continued in fiscal 2013, whereby we sold a portfolio of our land parcels to GSO, and GSO provided us an option to purchase back finished lots on a quarterly basis. Because of our option to repurchase these parcels, for accounting purposes, in accordance with ASC 360-20-40-38, this transaction is considered a financing rather than a sale. For purposes of our Condensed Consolidated Balance Sheet, at July 31, 2013, inventory of $60.6 million was recorded as consolidated inventory not owned, with a corresponding amount of $47.6 million recorded to “Liabilities from inventory not owned” for the amount of net cash received from the transactions.

6.   Over the past several years, general liability insurance for homebuilding companies and their suppliers and subcontractors has become very difficult to obtain. The availability of general liability insurance has been limited due to a decreased number of insurance companies willing to underwrite for the industry. In addition, those few insurers willing to underwrite liability insurance have significantly increased the premium costs. We have been able to obtain general liability insurance but at higher premium costs with higher deductibles. We have been advised that a significant number of our subcontractors and suppliers have also had difficulty obtaining insurance that also provides us coverage. As a result, we introduced an owner controlled insurance program for certain of our subcontractors, whereby the subcontractors pay us an insurance premium (through a reduction of amounts we would otherwise owe such subcontractors for their work on our homes) based on the value of their services. We absorb the liability associated with their work on our homes as part of our overall general liability insurance at no additional cost to us because our existing general liability and construction defect insurance policy and related reserves for amounts under our deductible covers construction defects regardless of whether we or our subcontractors are responsible for the defect. For the nine months ended July 31, 2013 and 2012 we received $1.6 million and $1.3 million, respectively, from subcontractors related to the owner controlled insurance program, which we accounted for as a reduction to inventory.

We accrue for warranty costs that are covered under our existing general liability and construction defect policy as part of our general liability insurance deductible. This accrual is expensed as selling, general, and administrative costs.  For homes delivered in fiscal 2013 and 2012, our deductible under our general liability insurance is $20 million per occurrence for construction defects and warranty claims. For bodily injury claims, our deductible per occurrence in fiscal 2013 and 2012 is $0.25 million and $0.1 million, respectively, up to a $5 million limit. Our aggregate retention in fiscal 2013 and 2012 is $21 million for construction defects, warranty and bodily injury claims. In addition, we establish a warranty accrual for lower cost-related issues to cover home repairs, community amenities, and land development infrastructure that are not covered under our general liability and construction defect policy. We accrue an estimate for these warranty costs as part of cost of sales at the time each home is closed and title and possession have been transferred to the homebuyer. Additions and charges in the warranty reserve and general liability reserve for the three and nine months ended July 31, 2013 and 2012 were as follows:

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	Three Months Ended July 31,						Nine Months Ended July 31,
(In thousands)	2013			2012			2013			2012
Balance, beginning of period	$	125,274		$	123,580		$	121,149		$	123,865
Additions – Selling, general and administrative		5,956			3,140			14,362			10,062
Additions – Cost of sales		2,918			3,742			9,229			13,902
Charges incurred during the period		(6,691	)		(8,346	)		(17,283	)		(25,713	)
Changes to pre-existing reserves		-			-			-			-
Balance, end of period	$	127,457		$	122,116		$	127,457		$	122,116

Warranty accruals are based upon historical experience. We engage a third-party actuary that uses our historical warranty and construction defect data, worker’s compensation data, and other industry data to assist us in estimating our reserves for unpaid claims, claim adjustment expenses and incurred but not reported claims reserves for the risks that we are assuming under the general liability and workers compensation programs. The estimates include provisions for inflation, claims handling, and legal fees.

Insurance claims paid by our insurance carriers, excluding insurance deductibles paid, were $0.1 million and $13.8 million for the three months ended July 31, 2013 and 2012, respectively, and $8.6 million and $16.4 million for the nine months ended July 31, 2013 and 2012, respectively, for prior year deliveries.

7.  We are involved in litigation arising in the ordinary course of business, none of which is expected to have a material adverse effect on our financial position or results of operations, and we are subject to extensive and complex regulations that affect the development and home building, sales and customer financing processes, including zoning, density, building standards and mortgage financing. These regulations often provide broad discretion to the administering governmental authorities. This can delay or increase the cost of development or homebuilding.

We also are subject to a variety of local, state, federal and foreign laws and regulations concerning protection of health and the environment. The particular environmental laws that 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. These environmental laws may result in delays, may cause us to incur substantial compliance, remediation and/or other costs, and can prohibit or severely restrict development and homebuilding activity. 

 We received in October 2012 a notice from Region III of the United States Environmental Protection Agency (“EPA”) concerning stipulated penalties, totaling approximately $120,000, based on the extent to which we reportedly did not meet certain compliance performance specified in the previously reported consent decree entered into in August 2010; we have since paid the stipulated penalties as assessed, and more recently have paid approximately $8,000 in response to an EPA demand received in June 2013 for stipulated penalties based on information about our performance under the consent decree for 2012. Until terminated by court order, which can occur no sooner than three years from the date of its entry, the consent decree remains in effect and could give rise to additional assessments of stipulated penalties. In October 2012, we also received notices from Region III of the EPA concerning alleged violations of stormwater discharge permits, issued in 2010 pursuant to the federal Clean Water Act, at two projects in Maryland. We negotiated with the EPA two orders, which the EPA issued in February 2013, to resolve the violations. One requires us to pay a penalty of $130,000, which we have done, while the other obligates us to take certain measures to comply with those permits and detail the specific compliance measures we take, among other things. Our obligations under the orders will not materially affect us.  

 In March 2013, we received a letter from the EPA requesting information about our involvement in a housing redevelopment project in Newark, New Jersey that a Company entity undertook during the 1990s. We understand that the development is in the vicinity of a former lead smelter and that recent tests on soil samples from properties within the development conducted by the EPA show elevated levels of lead. We also understand that the smelter operated before the City of Newark acquired properties, demolished structures existing on them, and sold the properties to the Company entity in connection with the redevelopment project. We responded to the EPA’s request. In August 2013, we were notified that the EPA considers us a potentially responsible party (or "PRP") with respect to the site, that the EPA believes the site requires cleanup, and that the EPA is proposing that we address contamination at the site. We do not know the scope or extent of the Company's obligations, if any, that may arise from the site and therefore cannot provide any assurance that this matter will not have a material impact on the Company.

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We anticipate that increasingly stringent requirements will be imposed on developers and homebuilders in the future. Although we cannot predict the effect of these requirements, they could result in time-consuming and expensive compliance programs and in substantial expenditures, which could cause delays and increase our cost of operations. In addition, the continued effectiveness of permits already granted or approvals already obtained is dependent upon many factors, some of which are beyond our control, such as changes in policies, rules, and regulations and their interpretations and application. 

The Company is also involved in the following litigation:

Hovnanian Enterprises, Inc. and K. Hovnanian Venture I, L.L.C. have been named as defendants in a class action suit. The action was filed by Mike D’Andrea and Tracy D’Andrea, on behalf of themselves and all others similarly situated in the Superior Court of New Jersey, Gloucester County. The action was initially filed on May 8, 2006 alleging that the HVAC systems installed in certain of the Company’s homes are in violation of applicable New Jersey building codes and are a potential safety issue. On December 14, 2011, the Superior Court granted class certification; the potential class is 1,065 homes. We filed a request to take an interlocutory appeal regarding the class certification decision. The Appellate Division denied the request, and we filed a request for interlocutory review by the New Jersey Supreme Court, which remanded the case back to the Appellate Division for a review on the merits of the appeal on May 8, 2012. The Appellate Division, on remand, heard oral arguments on December 4, 2012 reviewing the Superior Court’s original finding of class certification. On June 18, 2013, the Appellate Division affirmed class certification. On July 3, 2013, the Company appealed the June 2013 Appellate Division’s decision to the New Jersey Supreme Court and we are awaiting their decision. The plaintiff seeks unspecified damages as well as treble damages pursuant to the NJ Consumer Fraud Act. The Company believes there is insurance coverage available to it for this action. While we have determined that a loss related to this case is not probable, it is not possible to estimate a loss or range of loss related to this matter at this time given the class certification appeal to the New Jersey Supreme Court. On December 19, 2011, certain subsidiaries of the Company filed a separate action seeking indemnification against the various manufacturers and subcontractors implicated by the class action.

8.  Cash represents cash deposited in checking accounts. Cash equivalents includes certificates of deposit, Treasury Bills and government money market funds with maturities of 90 days or less when purchased. Our cash balances are held at a few financial institutions and may, at times, exceed insurable amounts. We believe we help to mitigate this risk by depositing our cash in major financial institutions.  

Restricted cash and cash equivalents on the Condensed Consolidated Balance Sheets, totaled to $24.0 million and $64.2 million as of July 31, 2013 and October 31, 2012, respectively, which includes cash collateralizing our letter of credit agreements and facilities and is discussed in Note 10. Also included in this balance are homebuilding and financial services customers’ deposits of $5.9 million and $12.9 million at July 31, 2013, respectively, and $4.8 million and $22.5 million as of October 31, 2012, respectively, which are restricted from use by us. In addition, we previously collateralized our surety bonds with cash, but as of April 30, 2013 are no longer required to do so. The balance of this surety bond collateral was $6.2 million at October 31, 2012, which was in cash equivalents, the book value of which approximates fair value.  

Total Homebuilding Customers’ deposits are shown as a liability on the Condensed Consolidated Balance Sheets. These liabilities are significantly more than the applicable periods’ escrow cash balances because, in some states, the deposits are not restricted from use and, in other states, we are able to release the majority of this escrow cash by pledging letters of credit and surety bonds.

9.   Our mortgage banking subsidiary originates mortgage loans, primarily from the sale of our homes. Such mortgage loans are sold in the secondary mortgage market within a short period of time of origination. Mortgage loans held for sale consist primarily of single-family residential loans collateralized by the underlying property. We have elected the fair value option to record loans held for sale and therefore these loans are recorded at fair value with the changes in the value recognized in the Statements of Operations in “Revenues: Financial services.” We currently use forward sales of mortgage-backed securities, interest rate commitments from borrowers and mandatory and/or best efforts forward commitments to sell loans to investors to protect us from interest rate fluctuations. These short-term instruments, which do not require any payments to be made to the counterparty or investor in connection with the execution of the commitments, are recorded at fair value. Gains and losses on changes in the fair value are recognized in the Statements of Operations in “Revenues: Financial services.”

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At July 31, 2013 and October 31, 2012, respectively, $60.8 million and $104.6 million of mortgages held for sale were pledged against our mortgage warehouse lines of credit (see Note 10). We may incur losses with respect to mortgages that were previously sold that are delinquent and which had underwriting defects, but only to the extent the losses are not covered by mortgage insurance or resale value of the home. The reserves for these estimated losses are included in the “Financial services – Accounts payable and other liabilities” balances on the Condensed Consolidated Balance Sheet. We received 6 and 30 repurchase or make-whole inquiries during the three and nine months ended July 31, 2013, respectively. We received 15 and 49 repurchase or make-whole inquiries during the three and nine months ended July 31, 2012, respectively.

The activity in our loan origination reserves during the three and nine months ended July 31, 2013 and 2012 was as follows:

	Three Months Ended July 31,					Nine Months Ended July 31,
(In thousands)	2013		2012			2013			2012
Loan origination reserves, beginning of period	$	9,766	$	6,570		$	9,334		$	5,063
Provisions for losses during the period		345		950			1,680			3,339
Adjustments to pre-existing provisions for losses from changes in estimates		260		220			7			272
Payments/settlements		-		(359	)		(650	)		(1,293	)
Loan origination reserves, end of period	$	10,371	$	7,381		$	10,371		$	7,381

10.  We have nonrecourse mortgages for a small number of our communities totaling $55.3 million at July 31, 2013, as well as our Corporate Headquarters totaling $18.0 million at July 31, 2013, which are secured by the related real property and any improvements. These loans have installment obligations with annual principal maturities in the years ending October 31 of approximately: $55.5 million in 2013, $1.1 million in 2014, $1.2 million in 2015, $1.3 million in 2016, $1.4 million in 2017 and $12.8 million after 2017. The interest rates on these obligations ranged from 4.0% to 8.75% at July 31, 2013.

 In June 2013, K. Hovnanian Enterprises, Inc. (“K. Hovnanian”), as borrower, and we and certain of our subsidiaries, as guarantors, entered into a five-year $75 million unsecured revolving credit facility (the “Credit Facility”) with Citicorp USA, Inc., as administrative agent and issuing bank, and Citibank, N.A., as a lender. The Credit Facility is available for both letters of credit and general corporate purposes. The Credit Facility does not contain any financial maintenance covenants, but does contain certain restrictive covenants that track those contained in our indenture governing the First Lien Notes (as defined below in Note 11), which are described in Note 11. The Credit Facility also contains certain customary events of default which would permit the administrative agent at the request of the required lenders to, among other things, declare all loans then outstanding to be immediately due and payable if not cured within applicable grace periods, including the failure to make timely payments of amounts payable under the Credit Facility or other material indebtedness or the acceleration of other material indebtedness, the failure to comply with agreements and covenants or for representations or warranties to be correct in all material respects when made, specified events of bankruptcy and insolvency, and the entry of a material judgment against a loan party. Outstanding borrowings under the Credit Facility accrue interest at an annual rate equal to either, as selected by K. Hovnanian, (i) the alternate base rate plus the applicable spread determined on the date of such borrowing or (ii) an adjusted LIBOR rate plus the applicable spread determined as of the date two business days prior to the first day of the interest period for such borrowing. As of July 31, 2013, there were no borrowings and $22.8 million of letters of credit outstanding under the Credit Facility and as of such date, we believe we were in compliance with the covenants under the Credit Facility.

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In addition to the Credit Facility, we have certain stand alone cash collateralized letter of credit agreements and facilities under which there were a total of $5.1 million and $29.5 million of letters of credit outstanding as of July 31, 2013 and October 31, 2012, respectively. These agreements and facilities require us to maintain specified amounts of cash as collateral in segregated accounts to support the letters of credit issued thereunder, which will affect the amount of cash we have available for other uses. As of July 31, 2013 and October 31, 2012, the amount of cash collateral in these segregated accounts was $5.2 million and $30.7 million, respectively, which is reflected in “Restricted cash and cash equivalents” on the Condensed Consolidated Balance Sheets.

Our wholly owned mortgage banking subsidiary, K. Hovnanian American Mortgage, LLC (“K. Hovnanian Mortgage”), originates mortgage loans primarily from the sale of our homes. Such mortgage loans and related servicing rights are sold in the secondary mortgage market within a short period of time. In certain instances, we retain the servicing rights for a small amount of loans. Our secured Master Repurchase Agreement with JPMorgan Chase Bank, N.A. (“Chase Master Repurchase Agreement”), which was amended on June 28, 2013 to extend the maturity date to June 27, 2014, is a short-term borrowing facility that provides up to $50.0 million through maturity. The loan is secured by the mortgages held for sale and is repaid when we sell the underlying mortgage loans to permanent investors. Interest is payable monthly on outstanding advances at an adjusted LIBOR rate, which was 0.18673% at July 31, 2013, subject to a floor of 1%, plus the applicable margin of 2.5%. Therefore, at July 31, 2013, the interest rate was 3.5%. As of July 31, 2013, the aggregate principal amount of all borrowings outstanding under the Chase Master Repurchase Agreement was $22.9 million.

K. Hovnanian Mortgage has another secured Master Repurchase Agreement with Customers Bank (“Customers Master Repurchase Agreement”), which was amended on May 28, 2013 to extend the maturity date to May 27, 2014, that is a short-term borrowing facility that provides up to $37.5 million through maturity. The loan is secured by the mortgages held for sale and is repaid when we sell the underlying mortgage loans to permanent investors. Interest is payable daily or as loans are sold to permanent investors on outstanding advances at the current LIBOR subject to a floor of 0.5% plus the applicable margin ranging from 3.0% to 5.5% based on the takeout investor and type of loan. As of July 31, 2013, the aggregate principal amount of all borrowings outstanding under the Customers Master Repurchase Agreement was $15.1 million.

K. Hovnanian Mortgage has a third secured Master Repurchase Agreement with Credit Suisse First Boston Mortgage Capital LLC (“Credit Suisse Master Repurchase Agreement”), which was amended on January 2, 2013, that is a short-term borrowing facility that provides up to $50.0 million through June 20, 2014. The loan is secured by the mortgages held for sale and is repaid when we sell the underlying mortgage loans to permanent investors. Interest is payable monthly on outstanding advances at the Credit Suisse Cost of Funds, which was 0.48% at July 31, 2013, plus the applicable margin ranging from 3.75% to 4.0% based on the takeout investor and type of loan. As of July 31, 2013, the aggregate principal amount of all borrowings outstanding under the Credit Suisse Master Repurchase Agreement was $19.5 million.

The Chase Master Repurchase Agreement, Customers Master Repurchase Agreement and Credit Suisse Master Repurchase Agreement (together, the “Master Repurchase Agreements”) require K. Hovnanian Mortgage to satisfy and maintain specified financial ratios and other financial condition tests. Because of the extremely short period of time mortgages are held by K. Hovnanian Mortgage before the mortgages are sold to investors (generally a period of a few weeks), the immateriality to us on a consolidated basis of the size of the Master Repurchase Agreements, the levels required by these financial covenants, our ability based on our immediately available resources to contribute sufficient capital to cure any default, were such conditions to occur, and our right to cure any conditions of default based on the terms of the agreement, we do not consider any of these covenants to be substantive or material. As of July 31, 2013, we believe we were in compliance with the covenants under the Master Repurchase Agreements.

11. As of July 31, 2013, we had $992.0 million of outstanding senior secured notes ($978.3 million, net of discount), comprised of $577.0 million 7.25% Senior Secured First Lien Notes due 2020 (the “First Lien Notes”), $220.0 million 9.125% Senior Secured Second Lien Notes due 2020 (the “Second Lien Notes” and, together with the First Lien Notes, the “2020 Secured Notes”), $53.2 million 2.0% Senior Secured Notes due 2021 (the “2.0% 2021 Notes”) and $141.8 million 5.0% Senior Secured Notes due 2021 (the “5.0% 2021 Notes” and together with the 2.0% 2021 Notes, the “2021 Notes”). As of July 31, 2013, we also had $460.6 million of outstanding senior notes ($459.1 million, net of discount), comprised of $36.7 million 6.5% Senior Notes due 2014, $3.0 million 6.375% Senior Notes due 2014, $21.4 million 6.25% Senior Notes due 2015, $131.2 million 6.25% Senior Notes due 2016, $86.5 million 7.5% Senior Notes due 2016, $121.0 million 8.625% Senior Notes due 2017 and $60.8 million 11.875% Senior Notes due 2015. In addition, as of July 31, 2013, we had outstanding $20.9 million 11.0% Senior Amortizing Notes due 2017 (issued as a component of our 6.0% Exchangeable Note Units and discussed below in Note 13), $65.8 million Senior Exchangeable Notes due 2017 (issued as a component of our 6.0% Exchangeable Note Units and discussed below in Note 13) and $3.2 million 7.25% Senior Subordinated Amortizing Notes (issued as part of our 7.25% Tangible Equity Units and discussed below in Note 12). Except for K. Hovnanian Enterprises, Inc. (“K. Hovnanian”), the issuer of the notes, our home mortgage subsidiaries, joint ventures and subsidiaries holding interests in our joint ventures, certain of our title insurance subsidiaries and our foreign subsidiary, we and each of our subsidiaries are guarantors of the senior secured, senior, senior amortizing, senior exchangeable and senior subordinated amortizing notes outstanding at July 31, 2013 (see Note 23). In addition, the 2021 Notes are guaranteed by K. Hovnanian JV Holdings, L.L.C. and its subsidiaries except for certain joint ventures and joint venture holding companies (collectively, the “Secured Group”). Members of the Secured Group do not guarantee K. Hovnanian's other indebtedness.

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 The First Lien Notes are secured by a first-priority lien and the Second Lien Notes are secured by a second-priority lien, in each case, subject to permitted liens and other exceptions, on substantially all the assets owned by Hovnanian Enterprises, Inc., K. Hovnanian and the guarantors of such notes. At July 31, 2013, the aggregate book value of the real property that constituted collateral securing the 2020 Secured Notes was approximately $549.0 million, which does not include the impact of inventory investments, home deliveries, or impairments thereafter and which may differ from the value if it were appraised. In addition, cash collateral that secured the 2020 Secured Notes was $169.3 million as of July 31, 2013, which included $5.2 million of restricted cash collateralizing certain letters of credit. Subsequent to such date, cash uses include general business operations and real estate and other investments.

 The guarantees with respect to the 2021 Notes of the Secured Group are secured, subject to permitted liens and other exceptions, by a first-priority lien on substantially all of the assets of the members of the Secured Group. As of July 31, 2013, the collateral securing the guarantees included (1) $56.3 million of cash and cash equivalents (subsequent to such date, cash uses include general business operations and real estate and other investments); (2) approximately $85.0 million aggregate book value of real property of the Secured Group, which does not include the impact of inventory investments, home deliveries, or impairments thereafter and which may differ from the value if it were appraised, and (3) equity interests in guarantors that are members of the Secured Group. Members of the Secured Group also own equity in joint ventures, either directly or indirectly through ownership of joint venture holding companies, with a book value of $46.3 million as of July 31, 2013; this equity is not pledged to secure, and is not collateral for, the 2021 Notes. Members of the Secured Group are “unrestricted subsidiaries” under K. Hovnanian's other senior notes, senior secured notes and senior subordinated amortizing notes, and thus have not guaranteed such indebtedness. 

The indentures governing our notes do not contain any financial maintenance covenants, but do contain restrictive covenants that limit, among other things, the Company’s ability and that of certain of its subsidiaries, including K. Hovnanian, to incur additional indebtedness (other than certain permitted indebtedness, refinancing indebtedness and non-recourse indebtedness), pay dividends and make distributions on common and preferred stock, repurchase subordinated indebtedness (with respect to certain of the senior secured notes), make other restricted payments, make investments, sell certain assets, incur liens, consolidate, merge, sell or otherwise dispose of all or substantially all assets and enter into certain transactions with affiliates. The indentures also contain events of default which would permit the holders of the notes to declare the notes to be immediately due and payable if not cured within applicable grace periods, including the failure to make timely payments on the notes or other material indebtedness, the failure to comply with agreements and covenants and specified events of bankruptcy and insolvency and, with respect to the indentures governing the senior secured notes, the failure of the documents granting security for the senior secured notes to be in full force and effect and the failure of the liens on any material portion of the collateral securing the senior secured notes to be valid and perfected. As of July 31, 2013, we believe we were in compliance with the covenants of the indentures governing our outstanding notes.

 Under the terms of the indentures, we have the right to make certain redemptions and, depending on market conditions and covenant restrictions, may do so from time to time. We also continue to evaluate our capital structure and may also continue to make debt purchases and/or exchanges for debt or equity from time to time through tender offers, open market purchases, private transactions, or otherwise seek to raise additional debt or equity capital, depending on market conditions and covenant restrictions.

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 If our consolidated fixed charge coverage ratio, as defined in the indentures governing our senior secured and senior notes (other than the Senior Exchangeable Notes discussed in Note 13 below), is less than 2.0 to 1.0, we are restricted from making certain payments, including dividends, and from incurring indebtedness other than certain permitted indebtedness, refinancing indebtedness, and non-recourse indebtedness. As a result of this restriction, we are currently restricted from paying dividends, which are not cumulative, on our 7.625% Series A Preferred Stock. We anticipate we will continue to be restricted from paying dividends for the foreseeable future. Our inability to pay dividends is in accordance with covenant restrictions and will not result in a default under our bond indentures or otherwise affect compliance with any of the covenants contained in the bond indentures.

During the three months ended July 31, 2012, we repurchased for cash in the open market $2.0 million principal amount of our 11.875% Senior Notes due 2015. During the nine months ended July 31, 2012, we repurchased for cash in the open market and privately negotiated transactions $21.0 million principal amount of our 6.25% Senior Notes due 2016, $61.1 million principal amount of our 7.5% Senior Notes due 2016, $37.4 million principal amount of our 8.625% Senior Notes due 2017 and $2.0 million principal amount of our 11.875% Senior Notes due 2015. The aggregate purchase price for these repurchases was $1.5 million and $72.2 million, respectively, for the three and nine months ended July 31, 2012, plus accrued and unpaid interest. These repurchases resulted in a gain on extinguishment of debt of $0.4 million and $48.4 million, respectively, for the three and nine months ended July 31, 2012, net of the write-off of unamortized discounts and fees. The gain is included in the Condensed Consolidated Statement of Operations as “Gain on extinguishment of debt.” Certain of these repurchases were funded with the proceeds from our April 11, 2012 issuance of 25,000,000 shares of our Class A Common Stock (see Note 16).

In addition, during the three months ended July 31, 2012, we exchanged pursuant to agreements with bondholders, $7.8 million principal amount of our 6.25% Senior Notes due 2016, $4.0 million principal amount of our 7.5% Senior Notes due 2016 and $9.2 million principal amount of our 8.625% Senior Notes due 2017, for shares of our Class A Common Stock, as discussed in Note 16. During the nine months ended July 31, 2012, we exchanged pursuant to agreements with bondholders $7.8 million principal amount of our 6.25% Senior Notes due 2016, $4.0 million principal amount of our 7.5% Senior Notes due 2016 and $18.3 million of our outstanding 8.625% Senior Notes due 2017 for shares of our Class A Common Stock, as discussed in Note 16. These transactions resulted in a gain on extinguishment of debt of $5.8 million and $9.3 million, respectively, for the three and nine months ended July 31, 2012. The gain is included in the Condensed Consolidated Statement of Operations as “Gain on extinguishment of debt”.

 12. On February 9, 2011, we issued an aggregate of 3,000,000 7.25% Tangible Equity Units (the “TEUs”), and on February 14, 2011, we issued an additional 450,000 TEUs pursuant to the over-allotment option granted to the underwriters. Each TEU initially consists of (i) a prepaid stock purchase contract (each a “Purchase Contract”) and (ii) a senior subordinated amortizing note due February 15, 2014 (each, a “Senior Subordinated Amortizing Note”). As of July 31, 2013, we had an aggregate principal amount of $3.2 million Senior Subordinated Amortizing Notes outstanding. On each February 15, May 15, August 15 and November 15, K. Hovnanian will pay holders of the Senior Subordinated Amortizing Notes equal quarterly cash installments of $0.453125 per Senior Subordinated Amortizing Note, which cash payments in the aggregate will be equivalent to 7.25% per year with respect to each $25 stated amount of TEUs. Each installment constitutes a payment of interest (at a rate of 12.072% per annum) and a partial repayment of principal on the Senior Subordinated Amortizing Note, allocated as set forth in the amortization schedule provided in the indenture under which the Amortizing Notes were issued. The Senior Subordinated Amortizing Notes have a scheduled final installment payment date of February 15, 2014. If we elect to settle the Purchase Contracts early, holders of the Senior Subordinated Amortizing Notes will have the right to require K. Hovnanian to repurchase such holders’ Senior Subordinated Amortizing Notes, except in certain circumstances as described in the indenture governing Senior Subordinated Amortizing Notes.

Unless settled earlier, on February 15, 2014 (subject to postponement under certain circumstances), each Purchase Contract will automatically settle and we will deliver a number of shares of Class A Common Stock based on the applicable market value, as defined in the purchase contract agreement, which will be between 4.7655 shares and 5.8140 shares per Purchase Contract (subject to adjustment). Each TEU may be separated into its constituent Purchase Contract and Senior Subordinated Amortizing Note after the initial issuance date of the TEUs, and the separate components may be combined to create a TEU. The Senior Subordinated Amortizing Note component of the TEUs is recorded as debt, and the Purchase Contract component of the TEUs is recorded in equity as additional paid in capital. We have recorded $68.1 million, the initial fair value of the Purchase Contracts, as additional paid in capital. As of July 31, 2013, 2.2 million Purchase Contracts had been converted into 10.4 million shares of our Class A Common Stock. There were no Purchase Contracts converted into common stock during the three months ended July 31, 2013 and 0.6 million Purchase Contracts converted into 2.7 million shares of our Class A Common Stock during the nine months ended July 31, 2013.

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During the second quarter of fiscal 2012, we purchased pursuant to agreements with bondholders $3.1 million aggregate principal amount of our Senior Subordinated Amortizing Notes in exchange for Class A Common Stock, as discussed in Note 16. These transactions resulted in a gain on extinguishment of debt of $0.2 million for the nine months ended July 31, 2012. The gain is included in the Condensed Consolidated Statement of Operations as “Gain on extinguishment of debt.”

13. On October 2, 2012, the Company and K. Hovnanian issued $100,000,000 aggregate stated amount of 6.0% Exchangeable Note Units (the “Units”) (equivalent to 100,000 Units). Each $1,000 stated amount of Units initially consists of (1) a zero coupon senior exchangeable note due December 1, 2017 (a “Senior Exchangeable Note”) issued by K. Hovnanian, which bears no cash interest and has an initial principal amount of $768.51 per Exchangeable Note, and that will accrete to $1,000 at maturity and (2) a senior amortizing note due December 1, 2017 (the “Senior Amortizing Note”) issued by K. Hovnanian, which has an initial principal amount of $231.49 per Senior Amortizing Note, bears interest at a rate of 11.0% per annum, and has a final installment payment date of December 1, 2017. Each Unit may be separated into its constituent Senior Exchangeable Note and Senior Amortizing Note after the initial issuance date of the Units, and the separate components may be combined to create a Unit.

Each Senior Exchangeable Note had an initial principal amount of $768.51 (which will accrete to $1,000 over the term of the Senior Exchangeable Note at an annual rate of 5.17% from the date of issuance, calculated on a semi-annual bond equivalent yield basis). Holders may exchange their Senior Exchangeable Notes at their option at any time prior to 5:00 p.m., New York City time, on the business day immediately preceding December 1, 2017. Each Senior Exchangeable Note will be exchangeable for shares of Class A Common Stock at an initial exchange rate of 185.5288 shares of Class A Common Stock per Senior Exchangeable Note (equivalent to an initial exchange price, based on $1,000 principal amount at maturity, of approximately $5.39 per share of Class A Common Stock). The exchange rate will be subject to adjustment in certain events. Following certain corporate events that occur prior to the maturity date, the Company will increase the applicable exchange rate for any holder who elects to exchange its Senior Exchangeable Notes in connection with such corporate event.  In addition, holders of Senior Exchangeable Notes will also have the right to require K. Hovnanian to repurchase such holders’ Senior Exchangeable Notes upon the occurrence of certain of these corporate events.

On each June 1 and December 1 (each, an “installment payment date”), K. Hovnanian will pay holders of Senior Amortizing Notes equal semi-annual cash installments of $30.00 per Senior Amortizing Note (except for the June 1, 2013 installment payment, which was $39.83 per Senior Amortizing Note), which cash payment in the aggregate will be equivalent to 6.0% per year with respect to each $1,000 stated amount of Units. Each installment will constitute a payment of interest (at a rate of 11.0% per annum) and a partial repayment of principal on the Senior Amortizing Note. Following certain corporate events that occur prior to the maturity date, holders of the Senior Amortizing Notes will have the right to require K. Hovnanian to repurchase such holders’ Senior Amortizing Notes. As of July 31, 2013, 18,305 Senior Exchangeable Notes have been converted into 3.4 million shares of our Class A Common Stock, all of which were converted during the first quarter of fiscal 2013. There were no Senior Exchangeable Notes converted to common stock during the three months ended July 31, 2013.

14. Basic earnings per share is computed by dividing net income (loss) (the “numerator”) by the weighted-average number of common shares, adjusted for non-vested shares of restricted stock (the “denominator”) for the period.  The basic weighted-average number of shares for the three months ended July 31, 2013 includes 6.1 million shares related to Purchase Contracts (issued as part of our 7.25% Tangible Equity Units) which are issuable in the future with no additional cash required to be paid by the holders thereof. This number of shares represents the minimum number of shares that will, under all circumstances, be issuable upon settlement of the Purchase Contracts. As discussed previously in Note 12, the actual number of shares of Class A Common stock we may issue upon settlement of the Purchase Contracts will be between 4.7655 shares (which is the minimum settlement rate) and 5.8140 shares (which is the maximum settlement rate) per Purchase Contract (in each case, subject to customary anti-dilution adjustments) based on the applicable market value, as defined in the purchase contract agreement governing the Purchase Contracts, of our Class A Common Stock. Computing diluted earnings per share is similar to computing basic earnings per share, except that the denominator is increased to include the dilutive effects of options and non-vested shares of restricted stock, as well as common shares that would be issuable upon exchange of our Senior Exchangeable Notes issued as part of our 6.0% Exchangeable Note Units.  Any options that have an exercise price greater than the average market price are considered to be anti-dilutive and are excluded from the diluted earnings per share calculation.  

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 All outstanding nonvested shares that contain non-forfeitable rights to dividends or dividend equivalents that participate in undistributed earnings with common stock are considered participating securities and are included in computing earnings per share pursuant to the two-class method. The two class method is an earnings allocation formula that determines earnings per share for each class of common stock and participating securities according to dividends or dividend equivalents and participation rights in undistributed earnings. The Company’s restricted common stock (“nonvested shares”) are considered participating securities.

Basic and diluted earnings per share for the periods presented below were calculated as follows:	Three Months Ended July 31,						Nine Months Ended July 31,
(In thousands, except per share data)	2013			2012			2013			2012
Numerator:
Net earnings (loss) attributable to Hovnanian	$	8,466		$	34,676		$	(1,524	)	$	18,213
Less: undistributed earnings allocated to nonvested shares		(15	)		(76	)		-			(52	)
Numerator for basic earnings per share		8,451			34,600			(1,524	)		18,161
Plus: undistributed earnings allocated to nonvested shares		15			76			-			52
Less: undistributed earnings reallocated to nonvested shares		(15	)		(76	)		-			(52	)
Plus: interest on senior exchangeable notes		893			-			-			-
Numerator for diluted earnings per share	$	9,344		$	34,600		$	(1,524	)	$	18,161
Denominator:
Denominator for basic earnings per share		146,056			138,472			144,840			121,357
Effect of dilutive securities:
Share based payments		1,610			80			-			23
Senior exchangeable notes		15,157			-			-			-
Denominator for diluted earnings per share – weighted average shares outstanding		162,823			138,552			144,840			121,380
Basic earnings (loss) per share	$	0.06		$	0.25		$	(0.01	)	$	0.15
Diluted earnings (loss) per share	$	0.06		$	0.25		$	(0.01	)	$	0.15

Incremental shares attributed to non-vested stock and outstanding options to purchase common stock of 1.6 million for the nine months ended July 31, 2013 were excluded from the computation of diluted earnings per share because we had a net loss for the period, and any incremental shares would not be dilutive. Also, for the nine months ended July 31, 2013, 16.1 million shares of common stock issuable upon the exchange of our senior exchangeable notes were excluded from the computation of diluted earnings per share because we had a net loss for the period.

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In addition, shares related to out-of-the money stock options that could potentially dilute basic earnings per share in the future that were not included in the computation of diluted earnings per share were 2.2 million for both the three and nine months ended July 31, 2013 and were 4.9 million for both the three and nine months ended July 31, 2012 because to do so would have been anti-dilutive for the periods presented.

15.  On July 12, 2005, we issued 5,600 shares of 7.625% Series A Preferred Stock, with a liquidation preference of $25,000. Dividends on the Series A Preferred Stock are not cumulative and are payable at an annual rate of 7.625%. The Series A Preferred Stock is not convertible into the Company’s common stock and is redeemable in whole or in part at our option at the liquidation preference of the shares. The Series A Preferred Stock is traded as depositary shares, with each depositary share representing 1/1000th of a share of Series A Preferred Stock. The depositary shares are listed on the NASDAQ Global Market under the symbol “HOVNP”. During the three and nine months ended July 31, 2013 and 2012, we did not make any dividend payments on the Series A Preferred Stock as a result of covenant restrictions in certain of our indentures.

 16. Each share of Class A Common Stock entitles its holder to one vote per share, and each share of Class B Common Stock generally entitles its holder to ten votes per share. The amount of any regular cash dividend payable on a share of Class A Common Stock will be an amount equal to 110% of the corresponding regular cash dividend payable on a share of Class B Common Stock. If a shareholder desires to sell shares of Class B Common Stock, such stock must be converted into shares of Class A Common Stock.

On March 12, 2013, the Company held its Annual Meeting of Shareholders at which the Company’s shareholders approved an increase in the Company’s authorized common stock from 200,000,000 shares of Class A Common Stock, par value $0.01 per share (“Class A Common Stock”), to 400,000,000 shares of Class A Common Stock, par value $0.01 per share, and from 30,000,000 shares of Class B Common Stock, par value $0.01 per share (“Class B Common Stock”), to 60,000,000 shares of Class B Common Stock, par value $0.01 per share.

On April 11, 2012, we issued 25,000,000 shares of our Class A Common Stock at a price of $2.00 per share, resulting in net proceeds of $47.3 million. The net proceeds of the issuance, along with cash on hand, were used to purchase $75.4 million principal amount of our senior notes, as discussed in Note 11.

Pursuant to agreements with bondholders, during the second quarter of fiscal 2012, we also issued an aggregate of 3,064,330 shares of our Class A Common Stock in exchange for approximately $12.2 million of our outstanding indebtedness, consisting of $9.1 million aggregate principal amount of our outstanding 8.625% Senior Notes due 2017 and approximately $3.1 million aggregate principal amount of our 12.072% senior subordinated amortizing notes (the “exchanges”). The exchanges were effected with existing bondholders, without any underwriters, and no commission or other remuneration was paid or given directly or indirectly for soliciting such exchanges. The exchanges resulted in a gain on extinguishment of debt of $3.7 million for the nine months ended July 31, 2012. The gain is included in the Condensed Consolidated Statement of Operations as “Gain on extinguishment of debt”.

On August 4, 2008, our Board of Directors adopted a shareholder rights plan (the “Rights Plan”) designed to preserve shareholder value and the value of certain tax assets primarily associated with net operating loss carryforwards (NOL) and built-in losses under Section 382 of the Internal Revenue Code. Our ability to use NOLs and built-in losses would be limited if there was an “ownership change” under Section 382. This would occur if shareholders owning (or deemed under Section 382 to own) 5% or more of our stock increase their collective ownership of the aggregate amount of our outstanding shares by more than 50 percentage points over a defined period of time. The Rights Plan was adopted to reduce the likelihood of an “ownership change” occurring as defined by Section 382. Under the Rights Plan, one right was distributed for each share of Class A Common Stock and Class B Common Stock outstanding as of the close of business on August 15, 2008. Effective August 15, 2008, if any person or group acquires 4.9% or more of the outstanding shares of Class A Common Stock without the approval of the Board of Directors, there would be a triggering event causing significant dilution in the voting power of such person or group. However, existing stockholders who owned, at the time of the Rights Plan’s adoption, 4.9% or more of the outstanding shares of Class A Common Stock will trigger a dilutive event only if they acquire additional shares. The approval of the Board of Directors’ decision to adopt the Rights Plan may be terminated by the Board at any time, prior to the Rights being triggered. The Rights Plan will continue in effect until August 15, 2018, unless it expires earlier in accordance with its terms. The approval of the Board of Directors’ decision to adopt the Rights Plan was submitted to a stockholder vote and approved at a special meeting of stockholders held on December 5, 2008. Also at the Special Meeting on December 5, 2008, our stockholders approved an amendment to our Certificate of Incorporation to restrict certain transfers of Class A Common Stock in order to preserve the tax treatment of our NOLs and built-in losses under Section 382 of the Internal Revenue Code. Subject to certain exceptions pertaining to pre-existing 5% stockholders and Class B stockholders, the transfer restrictions in the amended Certificate of Incorporation generally restrict any direct or indirect transfer (such as transfers of our stock that result from the transfer of interests in other entities that own our stock) if the effect would be to (i) increase the direct or indirect ownership of our stock by any person (or public group) from less than 5% to 5% or more of our common stock; (ii) increase the percentage of our common stock owned directly or indirectly by a person (or public group) owning or deemed to own 5% or more of our common stock; or (iii) create a new public group. Transfers included under the transfer restrictions include sales to persons (or public groups) whose resulting percentage ownership (direct or indirect) of common stock would exceed the 5% thresholds discussed above, or to persons whose direct or indirect ownership of common stock would by attribution cause another person (or public group) to exceed such threshold.

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On July 3, 2001, our Board of Directors authorized a stock repurchase program to purchase up to 4 million shares of Class A Common Stock. There were no shares purchased during the three and nine months ended July 31, 2013. As of July 31, 2013, the maximum number of shares of Class A Common Stock that may yet be purchased under this program is 0.5 million.

17. The total income tax expense of $1.9 million recognized for the three months ended July 31, 2013 was primarily due to state tax expenses and state tax reserves for uncertain state tax positions. The total income tax benefit of $10.2 million recognized for the nine months ended July 31, 2013 was primarily due to the release of reserves for a federal tax position that was settled with the Internal Revenue Service and a favorable state tax audit settlement. The total income tax benefit of $36.5 million and $35.3 million for the three and nine months ended July 31, 2012, respectively, was primarily due to the reversal of reserves for uncertain state tax positions that have been determined to be effectively settled.

      Deferred federal and state income tax assets primarily represent the deferred tax benefits arising from temporary differences between book and tax income which will be recognized in future years as an offset against future taxable income. If the combination of future years’ income (or loss) and the reversal of the timing differences results in a loss, such losses can be carried forward to future years. In accordance with ASC 740, we evaluate our deferred tax assets quarterly to determine if valuation allowances are required. ASC 740 requires that companies assess whether valuation allowances should be established based on the consideration of all available evidence using a “more likely than not” standard. Because of the downturn in the homebuilding industry, resulting in significant inventory and intangible impairments in prior years, we are in a three-year cumulative loss position as of July 31, 2013. According to ASC 740, a three-year cumulative loss is significant negative evidence in considering whether deferred tax assets are realizable. Our valuation allowance for deferred taxes amounted to $941.1 million and $937.9 million at July 31, 2013 and October 31, 2012, respectively. The valuation allowance increased during the nine months ended July 31, 2013 primarily due to additional valuation allowance recorded for the federal and state tax benefits related to the losses incurred during the period.

18.  Our operating segments are components of our business for which discrete financial information is available and reviewed regularly by the chief operating decision-maker, our Chief Executive Officer, to evaluate performance and make operating decisions.  Based on this criteria, each of our communities qualifies as an operating segment, and therefore, it is impractical to provide segment disclosures for this many segments.  As such, we have aggregated the homebuilding operating segments into six reportable segments.

 Our homebuilding operating segments are aggregated into reportable segments based primarily upon geographic proximity, similar regulatory environments, land acquisition characteristics and similar methods used to construct and sell homes.  The Company’s reportable segments consist of the following six homebuilding segments and a financial services segment:

Homebuilding:

 (1) Northeast (New Jersey and Pennsylvania)

 (2) Mid-Atlantic (Delaware, Maryland, Virginia, West Virginia and Washington D.C.)

 (3) Midwest (Illinois, Minnesota and Ohio)

 (4) Southeast (Florida, Georgia, North Carolina and South Carolina)

 (5) Southwest (Arizona and Texas)

 (6) West (California)

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Financial Services

Operations of the Company’s Homebuilding segments primarily include the sale and construction of single-family attached and detached homes, attached townhomes and condominiums, urban infill and active adult homes in planned residential developments.  In addition, from time to time, operations of the homebuilding segments include sales of land.  Operations of the Company’s Financial Services segment include mortgage banking and title services provided to the homebuilding operations’ customers.  We do not retain or service mortgages that we originate but rather sell the mortgages and related servicing rights to investors.

Corporate and unallocated primarily represents operations at our headquarters in Red Bank, New Jersey.  This includes our executive offices, information services, human resources, corporate accounting, training, treasury, process redesign, internal audit, construction services, and administration of insurance, quality, and safety.  It also includes interest income and interest expense resulting from interest incurred that cannot be capitalized in inventory in the Homebuilding segments, as well as the gains or losses on extinguishment of debt from debt repurchases.

Evaluation of segment performance is based primarily on operating earnings from continuing operations before provision for income taxes (“Income (loss) before income taxes”).  Income (loss) before income taxes for the Homebuilding segments consists of revenues generated from the sales of homes and land, income (loss) from unconsolidated entities, management fees and other income, less the cost of homes and land sold, selling, general and administrative expenses, interest expense and non-controlling interest expense.  Income before income taxes for the Financial Services segment consists of revenues generated from mortgage financing, title insurance and closing services, less the cost of such services and certain selling, general and administrative expenses incurred by the Financial Services segment.

Operational results of each segment are not necessarily indicative of the results that would have occurred had the segment been an independent stand-alone entity during the periods presented.

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Financial information relating to the Company’s segment operations was as follows:

	Three Months Ended July 31,						Nine Months Ended July 31,
(In thousands)	2013			2012			2013			2012
Revenues:
Northeast	$	67,214		$	65,742		$	176,285		$	159,049
Mid-Atlantic		89,365			77,131			200,489			196,302
Midwest		38,478			28,271			110,204			70,100
Southeast		35,731			24,660			101,884			81,215
Southwest		182,699			139,790			476,136			346,331
West		52,062			40,559			159,491			119,322
Total homebuilding		465,549			376,153			1,224,489			972,319
Financial services		12,878			10,787			35,219			25,990
Corporate and unallocated		(70	)		71			(142	)		-
Total revenues	$	478,357		$	387,011		$	1,259,566		$	998,309
Income (loss) before income taxes:
Northeast	$	1,028		$	1,435		$	(8,510	)	$	(4,338	)
Mid-Atlantic		8,036			4,946			12,305			12,615
Midwest		1,941			294			5,420			(953	)
Southeast		276			(2,417	)		3,585			(9,150	)
Southwest		22,230			11,815			46,871			24,600
West		3,757			(1,342	)		5,084			(5,262	)
Homebuilding income before income taxes		37,268			14,731			64,755			17,512
Financial services		6,238			4,676			14,014			9,339
Corporate and unallocated		(33,118	)		(21,224	)		(90,448	)		(43,892	)
Income (loss) before income taxes	$	10,388		$	(1,817	)	$	(11,679	)	$	(17,041	)

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(In thousands)	July 31, 2013		October 31, 2012
Assets:
Northeast	$	360,882	$	396,073
Mid-Atlantic		239,832		200,969
Midwest		88,922		73,305
Southeast		97,897		90,132
Southwest		313,986		235,367
West		154,049		143,851
Total homebuilding		1,255,568		1,139,697
Financial services		104,758		164,634
Corporate and unallocated		303,800		379,919
Total assets	$	1,664,126	$	1,684,250

19.  The Company enters into land and lot option purchase contracts to procure land or lots for the construction of homes. Under these contracts, the Company will fund a stated deposit in consideration for the right, but not the obligation, to purchase land or lots at a future point in time with predetermined terms. Under the terms of the option purchase contracts, many of the option deposits are not refundable at the Company's discretion. Under the requirements of ASC 810, certain option purchase contracts may result in the creation of a variable interest in the entity (“VIE”) that owns the land parcel under option.

In compliance with ASC 810, the Company analyzes its option purchase contracts to determine whether the corresponding land sellers are VIEs and, if so, whether the Company is the primary beneficiary. Although the Company does not have legal title to the underlying land, ASC 810 requires the Company to consolidate a VIE if the Company is determined to be the primary beneficiary. In determining whether it is the primary beneficiary, the Company considers, among other things, whether it has the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance. Such activities would include, among other things, determining or limiting the scope or purpose of the VIE, selling or transferring property owned or controlled by the VIE, or arranging financing for the VIE. The Company also considers whether it has the obligation to absorb losses of the VIE or the right to receive benefits from the VIE. As a result of its analyses, the Company determined that, as of July 31, 2013 and October 31, 2012, it was not the primary beneficiary of any VIEs from which it is purchasing land under option purchase contracts.

We will continue to secure land and lots using options, some of which are with VIEs. Including deposits on our unconsolidated VIEs, at July 31, 2013, we had total cash and letters of credit deposits amounting to approximately $63.1 million to purchase land and lots with a total purchase price of $907.0 million. The maximum exposure to loss with respect to our land and lot options is limited to the deposits, although some deposits are refundable at our request or refundable if certain conditions are not met.

20.  We enter into homebuilding and land development joint ventures from time to time as a means of accessing lot positions, expanding our market opportunities, establishing strategic alliances, managing our risk profile, leveraging our capital base and enhancing returns on capital.  Our homebuilding joint ventures are generally entered into with third-party investors to develop land and construct homes that are sold directly to third-party homebuyers.  Our land development joint ventures include those entered into 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.

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The tables set forth below summarize the combined financial information related to our unconsolidated homebuilding and land development joint ventures that are accounted for under the equity method.

(Dollars in thousands)	July 31, 2013
	Homebuilding			Land Development			Total
Assets:
Cash and cash equivalents	$	38,543		$	434		$	38,977
Inventories		136,563			11,489			148,052
Other assets		8,065			5			8,070
Total assets	$	183,171		$	11,928		$	195,099
Liabilities and equity:
Accounts payable and accrued liabilities	$	28,334		$	4,593		$	32,927
Notes payable		44,861			-			44,861
Total liabilities		73,195			4,593			77,788
Equity of:
Hovnanian Enterprises, Inc.		46,271			2,454			48,725
Others		63,705			4,881			68,586
Total equity		109,976			7,335			117,311
Total liabilities and equity	$	183,171		$	11,928		$	195,099
Debt to capitalization ratio		29	%		0	%		28	%

(Dollars in thousands)	October 31, 2012
	Homebuilding			Land Development			Total
Assets:
Cash and cash equivalents	$	29,657		$	1,686		$	31,343
Inventories		177,170			14,853			192,023
Other assets		12,886			5			12,891
Total assets	$	219,713		$	16,544		$	236,257
Liabilities and equity:
Accounts payable and accrued liabilities	$	24,651		$	12,233		$	36,884
Notes payable		79,675			-			79,675
Total liabilities		104,326			12,233			116,559
Equity of:
Hovnanian Enterprises, Inc.		45,285			794			46,079
Others		70,102			3,517			73,619
Total equity		115,387			4,311			119,698
Total liabilities and equity	$	219,713		$	16,544		$	236,257
Debt to capitalization ratio		41	%		0	%		40	%

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As of July 31, 2013 and October 31, 2012, we had advances outstanding of approximately $5.6 million and $15.0 million, respectively, to these unconsolidated joint ventures, which were included in the “Accounts payable and accrued liabilities” balances in the tables above. On our Condensed Consolidated Balance Sheets our “Investments in and advances to unconsolidated joint ventures” amounted to $54.3 million and $61.1 million at July 31, 2013 and October 31, 2012, respectively. In some cases, our net investment in these joint ventures is less than our proportionate share of the equity reflected in the tables above because of the differences between asset impairments recorded against our joint venture investments and any impairments recorded in the applicable joint venture. Impairments of our joint venture equity investments are recorded when we deem a decline in fair value to be other than temporary while impairments recorded in the joint ventures are recorded when undiscounted cash flows of the community indicate that the carrying amount is not recoverable. During fiscal 2012 and the first nine months of fiscal 2013, we did not write down any joint venture investments based on our determination that none of the investments in our joint ventures sustained an other than temporary impairment during those periods.

	For the Three Months Ended July 31, 2013
(In thousands)	Homebuilding			Land Development			Total
Revenues	$	76,842		$	2,992		$	79,834
Cost of sales and expenses		(67,526	)		(3,300	)		(70,826	)
Joint venture net income (loss)	$	9,316		$	(308	)	$	9,008
Our share of net income (loss)	$	3,654		$	(154	)	$	3,500

	For the Three Months Ended July 31, 2012
(In thousands)	Homebuilding			Land Development			Total
Revenues	$	89,749		$	3,755		$	93,504
Cost of sales and expenses		(84,615	)		(3,246	)		(87,861	)
Joint venture net income	$	5,134		$	509		$	5,643
Our share of net income	$	823		$	255		$	1,078

28

	For the Nine Months Ended July 31, 2013
(In thousands)	Homebuilding			Land Development			Total
Revenues	$	211,408		$	12,468		$	223,876
Cost of sales and expenses		(194,667	)		(7,755	)		(202,422	)
Joint venture net income	$	16,741		$	4,713		$	21,454
Our share of net income	$	4,372		$	2,356		$	6,728

	For the Nine Months Ended July 31, 2012
(In thousands)	Homebuilding			Land Development			Total
Revenues	$	220,880		$	9,838		$	230,718
Cost of sales and expenses		(210,904	)		(7,830	)		(218,734	)
Joint venture net income	$	9,976		$	2,008		$	11,984
Our share of net income	$	1,803		$	1,003		$	2,806

“Income from unconsolidated joint ventures” is reflected as a separate line item in the accompanying Condensed Consolidated Statements of Operations and reflects our proportionate share of the income or loss of these unconsolidated homebuilding and land development joint ventures. The difference between our share of the loss or income from these unconsolidated joint ventures disclosed in the tables above compared to the Condensed Consolidated Statements of Operations for the three and nine months ended July 31, 2013 and 2012, is due to the reclassification of the intercompany portion of management fee income from certain joint ventures and the deferral of income for lots purchased by us from certain joint ventures. To compensate us for the administrative services we provide as the manager of certain joint ventures, we receive a management fee based on a percentage of the applicable joint venture’s revenues. These management fees, which totaled $3.4 million and $4.4 million, for the three months ended July 31, 2013 and 2012, respectively, and $9.0 million and $10.4 million for the nine months ended July 31, 2013 and 2012, respectively, are recorded in “Homebuilding-Selling, general and administrative” on the Condensed Consolidated Statements of Operations.

In determining whether or not we must consolidate joint ventures where we are the manager of the joint venture, we assess whether the other partners have specific rights to overcome the presumption of control by us as the manager of the joint venture. In most cases, the presumption is overcome because the joint venture agreements require that both partners agree on establishing the operations and capital decisions of the partnership, including budgets in the ordinary course of business.

Typically, our unconsolidated joint ventures obtain separate project-specific mortgage financing. The amount of financing is generally targeted to be no more than 50% of the joint venture’s total assets. For our more recent joint ventures, obtaining financing has become challenging, therefore, some of our joint ventures are capitalized only with equity. Including the impact of impairments recorded by the joint ventures, the average debt to capitalization ratio of all our joint ventures is currently 28%. Any joint venture financing is on a nonrecourse basis, with guarantees from us limited only to performance and completion of development, environmental warranties and indemnification, standard indemnification for fraud, misrepresentation and other similar actions, including a voluntary bankruptcy filing. In some instances, the joint venture entity is considered a VIE under ASC 810-10 "Consolidation – Overall" due to the returns being capped to the equity holders; however, in these instances, we are not the primary beneficiary, and therefore we do not consolidate these entities.

21.  As of July 31, 2013, there were no pending accounting pronouncements applicable to the Company.

29

22.  ASC 820, “Fair Value Measurements and Disclosures”, provides a framework for measuring fair value, expands disclosures about fair-value measurements and establishes a fair-value hierarchy which prioritizes the inputs used in measuring fair value summarized as follows:

Level 1                     Fair value determined based on quoted prices in active markets for identical assets.

Level 2                     Fair value determined using significant other observable inputs.

Level 3                     Fair value determined using significant unobservable inputs.

Our financial instruments measured at fair value on a recurring basis are summarized below:

(In thousands)	Fair Value Hierarchy	Fair Value at July 31, 2013			Fair Value at October 31, 2012
Mortgage loans held for sale (1)	Level 2	$	84,137		$	116,912
Interest rate lock commitments	Level 2		106			(8	)
Forward contracts	Level 2		(217	)		120
		$	84,026		$	117,024

(1)  The aggregate unpaid principal balance was $80.5 million and $113.8 million at July 31, 2013 and October 31, 2012, respectively.

We elected the fair value option for our loans held for sale for mortgage loans originated subsequent to October 31, 2008 in accordance with ASC 825, “Financial Instruments,” which permits us to measure financial instruments at fair value on a contract-by-contract basis. Management believes that the election of the fair value option for loans held for sale improves financial reporting by mitigating volatility in reported earnings caused by measuring the fair value of the loans and the derivative instruments used to economically hedge them without having to apply complex hedge accounting provisions. In addition, the fair value of servicing rights is included in the Company’s loans held for sale as of July 31, 2013. Fair value of the servicing rights is determined based on values in the Company’s servicing sales contracts. Fair value of loans held for sale is based on independent quoted market prices, where available, or the prices for other mortgage whole loans with similar characteristics.

The Financial Services segment had a pipeline of loan applications in process of $474.4 million at July 31, 2013. Loans in process for which interest rates were committed to the borrowers totaled approximately $68.0 million as of July 31, 2013. Substantially all of these commitments were for periods of 60 days or less. Since a portion of these commitments is expected to expire without being exercised by the borrowers, the total commitments do not necessarily represent future cash requirements.

The Financial Services segment uses investor commitments and forward sales of mandatory mortgage-backed securities (“MBS”) to hedge its mortgage-related interest rate exposure. These instruments involve, to varying degrees, elements of credit and interest rate risk. Credit risk is managed by entering into MBS forward commitments, option contracts with investment banks, federally regulated bank affiliates and loan sales transactions with permanent investors meeting the segment’s credit standards. The segment’s risk, in the event of default by the purchaser, is the difference between the contract price and fair value of the MBS forward commitments and option contracts. At July 31, 2013, the segment had open commitments amounting to $19.0 million to sell MBS with varying settlement dates through September 12, 2013.

30

The assets accounted for using the fair value option are initially measured at fair value. Gains and losses from initial measurement and subsequent changes in fair value are recognized in the Financial Services segment’s income. The changes in fair values that are included in income are shown, by financial instrument and financial statement line item, below:

	Three Months Ended July 31, 2013
(In thousands)	Loans Held For Sale			Interest Rate Lock Commitments			Forward Contracts
Changes in fair value included in net income (loss), all reflected in financial services revenues	$	(1,253	)	$	(157	)	$	1,127

	Three Months Ended July 31, 2012
(In thousands)	Loans Held For Sale		Interest Rate Lock Commitments		Forward Contracts
Changes in fair value included in net income (loss), all reflected in financial services revenues	$	863	$	193	$	(257	)

	Nine Months Ended July 31, 2013
(In thousands)	Loans Held For Sale			Interest Rate Lock Commitments		Forward Contracts
Changes in fair value included in net income (loss), all reflected in financial services revenues	$	(515	)	$	115	$	(337	)

	Nine Months Ended July 31, 2012
(In thousands)	Loans Held For Sale		Interest Rate Lock Commitments		Forward Contracts
Changes in fair value included in net income (loss), all reflected in financial services revenues	$	417	$	184	$	225

The Company’s assets measured at fair value on a nonrecurring basis are those assets for which the Company has recorded valuation adjustments and write-offs during the periods presented. The assets measured at fair value on a nonrecurring basis are all within the Company’s Homebuilding operations and are summarized below:

31

Non-financial Assets

		Three Months Ended July 31, 2013
(In thousands)	Fair Value Hierarchy	Pre-Impairment Amount		Total Losses			Fair Value
Sold and unsold homes and lots under development	Level 3	$	-	$	-		$	-
Land and land options held for future development or sale	Level 3	$	439	$	(118	)	$	321

		Three Months Ended July 31, 2012
(In thousands)	Fair Value Hierarchy	Pre-Impairment Amount		Total Losses			Fair Value
Sold and unsold homes and lots under development	Level 3	$	-	$	-		$	-
Land and land options held for future development or sale	Level 3	$	635	$	(165	)	$	470

		Nine Months Ended July 31, 2013
(In thousands)	Fair Value Hierarchy	Pre-Impairment Amount		Total Losses			Fair Value
Sold and unsold homes and lots under development	Level 3	$	5,243	$	(1,479	)	$	3,764
Land and land options held for future development or sale	Level 3	$	924	$	(136	)	$	788

		Nine Months Ended July 31, 2012
(In thousands)	Fair Value Hierarchy	Pre-Impairment Amount		Total Losses			Fair Value
Sold and unsold homes and lots under development	Level 3	$	6,978	$	(2,714	)	$	4,264
Land and land options held for future development or sale	Level 3	$	17,131	$	(2,693	)	$	14,438

We record impairment losses on inventories related to communities under development and held for future development when events and circumstances indicate that they may be impaired and the undiscounted cash flows estimated to be generated by those assets are less than their related carrying amounts. If the expected undiscounted cash flows are less than the carrying amount, then the community is written down to its fair value. We estimate the fair value of each impaired community by determining the present value of its estimated future cash flows at a discount rate commensurate with the risk of the respective community. Should the estimates or expectations used in determining cash flows or fair value decrease or differ from current estimates in the future, we may be required to recognize additional impairments. We recorded inventory impairments, which are included in the Condensed Consolidated Statements of Operations as “Inventory impairment loss and land option write-offs” and deducted from Inventory of $0.1 million and $0.2 million for the three months ended July 31, 2013 and 2012, respectively, and $1.6 million and $5.4 million for the nine months ended July 31, 2013 and 2012, respectively. See Note 5 for a further discussion of communities evaluated for impairment.

32

 The fair value of our cash equivalents and restricted cash approximates their carrying amount, based on Level 1 inputs.

The fair value of each series of the senior unsecured notes (other than the senior exchangeable notes and senior amortizing notes) and senior subordinated amortizing notes is estimated based on recent trades or quoted market prices for the same issues or based on recent trades or quoted market prices for our debt of similar security and maturity to achieve comparable yields, which are Level 2 measurements. The fair value of the senior unsecured notes (all series in the aggregate), other than the senior exchangeable notes and senior amortizing notes, and senior subordinated amortizing notes, was estimated at $491.8 million and $3.4 million, respectively, as of July 31, 2013. As of October 31, 2012 the fair value of the senior unsecured notes (all series in the aggregate), other than the senior exchangeable notes and the senior amortizing notes, and senior subordinated amortizing notes was estimated at $448.7 million and $5.5 million, respectively.

The fair value of each of the senior secured notes (all series in the aggregate), senior amortizing notes and senior exchangeable notes is estimated based on third party broker quotes, a Level 3 measurement. The fair value of the senior secured notes (all series in the aggregate), senior amortizing notes and senior exchangeable notes was estimated at $1,025.7 million, $20.9 million and $86.6 million, respectively, as of July 31, 2013. As of October 31, 2012, the fair value of the senior secured notes (all series in the aggregate), senior amortizing notes and senior exchangeable notes was estimated at $994.2 million, $23.1 million and $87.2 million, respectively.

23.  Hovnanian Enterprises, Inc., the parent company (the “Parent”), is the issuer of publicly traded common stock, preferred stock, which is represented by depository shares, and 7.25% Tangible Equity Units. One of its wholly owned subsidiaries, K. Hovnanian Enterprises, Inc. (the “Subsidiary Issuer”), acts as a finance entity that, as of July 31, 2013, had issued and outstanding approximately $992.0 million of senior secured notes ($978.3 million, net of discount), $460.6 million senior notes ($459.1 million, net of discount), $20.9 million senior amortizing notes and $65.8 million senior exchangeable notes (issued as components of our 6.0% Exchangeable Note Units) and $3.2 million senior subordinated amortizing notes (issued as a component of our 7.25% Tangible Equity Units). The senior secured notes, senior notes, senior amortizing notes, senior exchangeable notes and senior subordinated amortizing notes are fully and unconditionally guaranteed by the Parent.

In addition to the Parent, each of the wholly owned subsidiaries of the Parent other than the Subsidiary Issuer (collectively, “Guarantor Subsidiaries”), with the exception of our home mortgage subsidiaries, certain of our title insurance subsidiaries, joint ventures, subsidiaries holding interests in our joint ventures and our foreign subsidiary (collectively, the “Nonguarantor Subsidiaries”), have guaranteed fully and unconditionally, on a joint and several basis, the obligations of the Subsidiary Issuer to pay principal and interest under the senior secured notes (other than the 2021 Notes), senior notes, senior exchangeable notes, senior amortizing notes and senior subordinated amortizing notes. The Guarantor Subsidiaries are directly or indirectly 100% owned subsidiaries of the Parent. The 2021 Notes are guaranteed by the Guarantor Subsidiaries and the members of the Secured Group (see Note 11).

The senior unsecured notes, senior amortizing notes, senior exchangeable notes and senior subordinated amortizing notes have been registered under the Securities Act of 1933, as amended. The 2020 Secured Notes and the 2021 Notes (see Note 11) are not, pursuant to the indentures under which such notes were issued, required to be registered. The Condensed Consolidating Financial Statements presented below are in respect of our registered notes only and not the 2020 Secured Notes or the 2021 Notes (however, the Guarantor Subsidiaries for the 2020 Secured Notes are the same as those represented by the accompanying Condensed Consolidating Financial Statements). In lieu of providing separate financial statements for the Guarantor Subsidiaries of our registered notes, we have included the accompanying Condensed Consolidating Financial Statements. Therefore, separate financial statements and other disclosures concerning such Guarantor Subsidiaries are not presented.

33

The following Condensed Consolidating Financial Statements present the results of operations, financial position and cash flows of (i) the Parent, (ii) the Subsidiary Issuer, (iii) the Guarantor Subsidiaries, (iv) the Nonguarantor Subsidiaries and (v) the eliminations to arrive at the information for Hovnanian Enterprises, Inc. on a consolidated basis. 

34

HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED CONSOLIDATING BALANCE SHEET

JULY 31, 2013

(In Thousands)

	Parent			Subsidiary Issuer			Guarantor Subsidiaries			Nonguarantor Subsidiaries		Eliminations			Consolidated
ASSETS:
Homebuilding				$	191,928		$	1,023,999		$	343,441				$	1,559,368
Financial services								9,880			94,878					104,758
Intercompany receivable					1,188,191						1,278		(1,189,469	)		-
Investments in and amounts due to and from consolidated subsidiaries		(95,575	)		(19,816	)		294,247					(178,856	)		-
Total assets	$	(95,575	)	$	1,360,303		$	1,328,126		$	439,597	$	(1,368,325	)	$	1,664,126
LIABILITIES AND EQUITY:
Homebuilding	$	2,404		$	98		$	419,016		$	73,670				$	495,188
Financial services								10,076			71,066					81,142
Notes payable					1,550,549			1,512			191					1,552,252
Intercompany payable		335,039						876,600					(1,211,639	)		-
Income taxes payable (receivable)		34,609						(31,861	)							2,748
Stockholders’ (deficit) equity		(467,627	)		(190,344	)		52,783			294,247		(156,686	)		(467,627	)
Non-controlling interest in consolidated joint ventures											423					423
Total liabilities and equity	$	(95,575	)	$	1,360,303		$	1,328,126		$	439,597	$	(1,368,325	)	$	1,664,126

35

HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED CONSOLIDATING BALANCE SHEET

OCTOBER 31, 2012

(In Thousands)

	Parent			Subsidiary Issuer			Guarantor Subsidiaries			Nonguarantor Subsidiaries			Eliminations			Consolidated
ASSETS:
Homebuilding	$	6,155		$	259,339		$	976,836		$	277,286					$	1,519,616
Financial services								23,669			140,965						164,634
Investments in consolidated subsidiaries		(80,674	)		13,790			246,467						(179,583	)		-
Total assets	$	(74,519	)	$	273,129		$	1,246,972		$	418,251		$	(179,583	)	$	1,684,250
LIABILITIES AND EQUITY:
Homebuilding	$	1,671		$	125		$	391,628		$	61,800					$	455,224
Financial services								23,070			122,024						145,094
Notes payable					1,561,635			271			489						1,562,395
Income taxes payable (receivable)		40,551						(33,669	)								6,882
Intercompany		368,834			(1,930,998	)		1,589,502			(12,759	)		(14,579	)		-
Stockholders’ (deficit) equity		(485,575	)		642,367			(723,830	)		246,467			(165,004	)		(485,575	)
Non-controlling interest in consolidated joint ventures											230						230
Total liabilities and equity	$	(74,519	)	$	273,129		$	1,246,972		$	418,251		$	(179,583	)	$	1,684,250

36

HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

THREE MONTHS ENDED JULY 31, 2013

(In Thousands)

	Parent			Subsidiary Issuer			Guarantor Subsidiaries			Nonguarantor Subsidiaries			Eliminations			Consolidated
Revenues:
Homebuilding				$	(76	)	$	372,416		$	94,385		$	(1,246	)	$	465,479
Financial services								3,080			9,798						12,878
Intercompany charges					20,760			(24,931	)		(37	)		4,208			-
Total revenues		-			20,684			350,565			104,146			2,962			478,357
Expenses:
Homebuilding		3,177			30,389			351,903			77,409			2,141			465,019
Financial services		4						2,052			4,584						6,640
Total expenses		3,181			30,389			353,955			81,993			2,141			471,659
Gain (loss) on extinguishment of debt																	-
Income from unconsolidated joint ventures								34			3,656						3,690
(Loss) income before income taxes		(3,181	)		(9,705	)		(3,356	)		25,809			821			10,388
State and federal income tax (benefit) provision		(2,233	)					4,155									1,922
Equity in income (loss) from subsidiaries		9,414			(10,887	)		25,809						(24,336	)		-
Net income (loss)	$	8,466		$	(20,592	)	$	18,298		$	25,809		$	(23,515	)	$	8,466

37

 HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

THREE MONTHS ENDED JULY 31, 2012

(In Thousands)

	Parent			Subsidiary Issuer			Guarantor Subsidiaries			Nonguarantor Subsidiaries			Eliminations			Consolidated
Revenues:
Homebuilding	$	4		$	(92	)	$	356,862		$	20,701		$	(1,251	)	$	376,224
Financial services								2,237			8,550						10,787
Intercompany charges					53,026			(15,107	)		(234	)		(37,685	)		-
Total revenues		4			52,934			343,992			29,017			(38,936	)		387,011
Expenses:
Homebuilding		1,640			88,266			352,332			14,572			(67,011	)		389,799
Financial services		23						1,407			4,679			2			6,111
Total expenses		1,663			88,266			353,739			19,251			(67,009	)		395,910
Gain on extinguishment of debt					6,230												6,230
Income from unconsolidated joint ventures								30			822						852
(Loss) income before income taxes		(1,659	)		(29,102	)		(9,717	)		10,588			28,073			(1,817	)
State and federal income tax (benefit)		(4,261	)					(32,232	)								(36,493	)
Equity in income (loss) of consolidated subsidiaries		32,074			(10,375	)		10,588						(32,287	)		-
Net income (loss)	$	34,676		$	(39,477	)	$	33,103		$	10,588		$	(4,214	)	$	34,676

38

HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

NINE MONTHS ENDED JULY 31, 2013

(In Thousands)

	Parent			Subsidiary Issuer			Guarantor Subsidiaries			Nonguarantor Subsidiaries			Eliminations			Consolidated
Revenues:
Homebuilding	$	3		$	(175	)	$	1,033,927		$	194,333		$	(3,741	)	$	1,224,347
Financial services								7,743			27,476						35,219
Intercompany charges					61,167			(75,265	)		(1,788	)		15,886			-
Total revenues		3			60,992			966,405			220,021			12,145			1,259,566
Expenses:
Homebuilding		5,921			90,088			994,979			161,304			4,554			1,256,846
Financial services		13						5,742			15,450						21,205
Total expenses		5,934			90,088			1,000,721			176,754			4,554			1,278,051
(Loss) gain on extinguishment of debt					(770,009	)		770,009									-
Income from unconsolidated joint ventures								2,293			4,513						6,806
(Loss) income before income taxes		(5,931	)		(799,105	)		737,986			47,780			7,591			(11,679	)
State and federal income tax (benefit) provision		(19,308	)					9,153									(10,155	)
Equity in (loss) income of consolidated subsidiaries		(14,901	)		(33,606	)		47,780						727			-
Net (loss) income	$	(1,524	)	$	(832,711	)	$	776,613		$	47,780		$	8,318		$	(1,524	)

39

HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

NINE MONTHS ENDED JULY 31, 2012

(In Thousands)

	Parent			Subsidiary Issuer			Guarantor Subsidiaries			Nonguarantor Subsidiaries			Eliminations			Consolidated
Revenues:
Homebuilding	$	8		$	(197	)	$	934,330		$	41,907		$	(3,729	)	$	972,319
Financial services								5,232			20,758						25,990
Intercompany charges					76,975			(46,238	)		(3,682	)		(27,055	)		-
Total revenues		8			76,778			893,324			58,983			(30,784	)		998,309
Expenses:
Homebuilding		5,815			112,342			954,080			29,144			(42,392	)		1,058,989
Financial services		103						3,967			12,592			(11	)		16,651
Total expenses		5,918			112,342			958,047			41,736			(42,403	)		1,075,640
Gain on extinguishment of debt					57,966												57,966
Income from unconsolidated joint ventures								521			1,803						2,324
(Loss) income before income taxes		(5,910	)		22,402			(64,202	)		19,050			11,619			(17,041	)
State and federal income tax (benefit)		(12,929	)					(22,325	)								(35,254	)
Equity in income (loss) of consolidated subsidiaries		11,194			(32,546	)		19,050						2,302			-
Net income (loss)	$	18,213		$	(10,144	)	$	(22,827	)	$	19,050		$	13,921		$	18,213

40

HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

NINE MONTHS ENDED JULY 31, 2013

(In Thousands)

	Parent			Subsidiary Issuer			Guarantor Subsidiaries			Nonguarantor Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities:
Net (loss) income	$	(1,524	)	$	(832,711	)	$	776,613		$	47,780		$	8,318		$	(1,524	)
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities		20,418			789,831			(842,439	)		(5,365	)		(8,318	)		(45,873	)
Net cash provided by (used in) operating activities		18,894			(42,880	)		(65,826	)		42,415			-			(47,397	)
Net cash provided by investing activities					298			12,357			6,121						18,776
Net cash (used in) provided by financing activities					(5,460	)		48,090			(59,983	)					(17,353	)
Intercompany investing and financing activities – net		(18,894	)		6,404			1,009			11,481						-
Net (decrease) increase in cash		-			(41,638	)		(4,370	)		34			-			(45,974	)
Cash and cash equivalents balance, beginning of period					197,097			(2,017	)		78,152						273,232
Cash and cash equivalents balance, end of period	$	-		$	155,459		$	(6,387	)	$	78,186		$	-		$	227,258

41

HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

NINE MONTHS ENDED JULY 31, 2012

(In Thousands)

	Parent			Subsidiary Issuer			Guarantor Subsidiaries			Nonguarantor Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities:
Net income (loss)	$	18,213		$	(10,144	)	$	(22,827	)	$	19,050		$	13,921		$	18,213
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities		31,198			4,286			(23,386	)		(78,465	)		(13,921	)		(80,288	)
Net cash provided by (used in) operating activities		49,411			(5,858	)		(46,213	)		(59,415	)		-			(62,075	)
Net cash provided by (used in) investing activities					26			(2,178	)		242						(1,910	)
Net cash provided by (used in) financing activities		47,147			(94,309	)		50,954			43,423						47,215
Intercompany investing and financing activities – net		(96,558	)		112,651			2,841			(18,934	)					-
Net increase (decrease) in cash		-			12,510			5,404			(34,684	)		-			(16,770	)
Cash and cash equivalents balance, beginning of period					112,122			(4,989	)		143,607						250,740
Cash and cash equivalents balance, end of period	$	-		$	124,632		$	415		$	108,923		$	-		$	233,970

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 ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

During the first three quarters of fiscal 2013, the housing market continued to strengthen, and, as a result, we experienced further positive operating trends, including improvements in several metrics for the three and nine month periods ended July 31, 2013 compared to the same periods of fiscal 2012. For the three months ended July 31, 2013 compared to the three months ended July 31, 2012, we experienced net contract growth of 4.8%, an increase in gross margin percentage, before cost of sales interest expense and land charges, from 18.2% to 20.3% and a decrease in selling, general and administrative costs (including corporate general and administrative expenses) as a percentage of total revenue from 12.4% to 11.8%. For the nine months ended July 31, 2013 compared to the nine months ended July 31, 2012, there were improvements in the same metrics: net contract growth of 12.7%, an increase in gross margin percentage, before cost of sales interest expense and land charges, from 17.5% to 18.9% and a decrease in selling, general and administrative costs (including corporate general and administrative expenses) as a percentage of total revenue from 14.2% to 12.5%. In addition, our contract cancellation rate was 17% in the third quarter of fiscal 2013, which is below what we believe to be a normalized level of approximately 20%. Active selling communities were 186 and 175 at July 31, 2013 and 2012, respectively. Net contracts per average active selling community increased to 7.8 for the three months ended July 31, 2013 compared to 7.6 in the same period in the prior year and increased to 24.4 for the nine months ended July 31, 2013 compared to 20.8 in the same period in the prior year.  

Our gross margin percentage, before cost of sales interest expense and land charges, and selling, general and administrative costs (including corporate general and administrative expenses) as a percentage of revenues also had favorable variances when comparing sequentially from the second quarter of fiscal 2013 to the third quarter of fiscal 2013. Gross margin percentage increased from 18.9% to 20.3% and selling, general and administrative costs (including corporate general and administrative expenses) as a percentage of revenues decreased from 12.2% to 11.8%, as compared to the second quarter of fiscal 2013. Cost of sales and selling, general and administrative costs include some fixed costs that are not impacted by delivery volume. Therefore, as volume increased from the second quarter of fiscal 2013 to the third quarter of fiscal 2013, selling, general and administrative expense as a percentage of revenues improved. The increase in gross margin percentage partially resulted from the volume increase, but also was the result of higher home prices that exceeded increased construction costs in certain markets and an increase in the percentage of deliveries from newly identified communities (which we define as communities that were controlled subsequent to January 31, 2009), which generally have higher gross margins then our older communities. Provided market conditions remain stable, we expect our gross margin percentage to increase and selling, general and administrative costs as a percentage of revenues to decrease for our full fiscal 2013 year compared to the full year for fiscal 2012.

While we are encouraged by the positive operating trends of fiscal 2012 and the first nine months of fiscal 2013, several challenges such as persistently high unemployment levels, national and global economic weakness and uncertainty, the restrictive mortgage lending environment, higher mortgage interest rates and the potential for more foreclosures continue to threaten a recovery in the housing market. Our recent operating results and other national data indicate that the overall demand for new homes during fiscal 2012 and through the first nine months of fiscal 2013 has improved from the prior year. However, both national new home sales and our home sales remain below historical levels. Until there is a more robust U.S. economic recovery, we expect national demand for new homes to remain at below normal levels, with uneven improvement across our operating markets.

During the prolonged downturn of the housing market, we adjusted our approach to land acquisition and construction practices and shortened our land pipeline, reduced production volumes, and balanced home price and profitability with sales pace. We delayed and cancelled planned land purchases, renegotiated land prices and significantly reduced our total number of controlled lots owned and under option. Additionally, we significantly reduced our total number of speculative homes put into production. Since January 2009, however, we began to see more opportunities to purchase land at prices that made economic sense in light of our sales prices and sales paces and plan to continue pursuing such land acquisitions. New land purchases at pricing that we believe will generate appropriate investment returns and drive greater operating efficiencies are needed to return to sustained profitability. During the first nine months of fiscal 2013, we opened for sale 76 new communities, purchased approximately 4,500 lots within 206 newly identified communities (which we define as communities that were controlled subsequent to January 31, 2009) and optioned approximately 7,600 lots in 174 newly identified communities, 112 of which were communities identified this fiscal year. As we have experienced increased sales pace over the past year, causing communities to sell out more rapidly, we continue to consider and make new land acquisitions to replenish or grow our community count. As a result, our active community count increased by 11 and 14 communities, respectively, from July 31, 2012 and October 31, 2012 to 186 communities at July 31, 2013. We have also continued to closely evaluate and control selling, general and administrative expenses, including corporate general and administrative expenses. While homebuilding selling, general and administrative expenses increased $6.1 million from $36.2 million in the third quarter of fiscal 2012 to $42.3 million for the third quarter of fiscal 2013, in connection with our increased revenues, these expenses as a percentage of total homebuilding revenues decreased from 9.6% to 9.1% due to the revenue growth across our operating segments. Corporate general and administrative expenses as a percentage of total revenue decreased from 3.1% in the third quarter of fiscal 2012 to 2.9% in the third quarter of fiscal 2013. Given the persistence of difficult market conditions, improving the efficiency of our selling, general and administrative expenses will continue to be a significant area of focus.

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 CRITICAL ACCOUNTING POLICIES

As disclosed in our annual report on Form 10-K for the fiscal year ended October 31, 2012, our most critical accounting policies relate to revenue recognition, inventories, land options, unconsolidated joint ventures, warranty, insurance and income taxes.  Since October 31, 2012, there have been no significant changes to those critical accounting policies.

CAPITAL RESOURCES AND LIQUIDITY

Our operations consist primarily of residential housing development and sales in the Northeast (New Jersey, Pennsylvania), the Mid-Atlantic (Delaware, Maryland, Virginia, West Virginia, Washington D.C.), the Midwest (Illinois, Minnesota, Ohio), the Southeast (Florida, Georgia, North Carolina, South Carolina), the Southwest (Arizona, Texas) and the West (California).  In addition, we provide certain financial services to our homebuilding customers.

We have historically funded our homebuilding and financial services operations with cash flows from operating activities, borrowings under our bank credit facilities (when we have had such facilities for our homebuilding operations) and the issuance of new debt and equity securities.  During the prolonged housing market downturn that began in late 2006, we had been operating with a primary focus to generate cash flows from operations through reductions in assets during fiscal 2007 through fiscal 2009.  The generation of cash flow, together with debt repurchases and exchanges at prices below par, allowed us to reduce debt (notes payable, excluding accrued interest) during fiscal 2009 by approximately $754 million.  Since the latter half of fiscal 2009, we have seen more opportunities to purchase land at prices that make economic sense given the then-current home sales prices and sales paces.  As such, since that time, despite acquiring new land at higher levels than in the previous few years, we have been able to further reduce our debt by approximately $224 million.  

Our homebuilding cash balance at July 31, 2013 decreased by $36.8 million from October 31, 2012. The significant use of cash during the first three quarters of fiscal 2013 was primarily due to spending $377.6 million on land and land development, offset by cash generated by our normal operations.

Our cash uses during the three months ended July 31, 2013 and 2012 were for operating expenses, land purchases, land deposits, land development, construction spending, debt payments, state income taxes, interest payments and investments in joint ventures. We provided for our cash requirements from available cash on hand, housing and land sales, financial service revenues and other revenues. We believe that these sources of cash will be sufficient through fiscal 2013 to finance our working capital requirements and other needs. In June 2013, we enhanced our liquidity by entering into a $75 million unsecured revolving credit facility, discussed below. 

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     Our net income (loss) historically does not approximate cash flow from operating activities. The difference between net income (loss) and cash flow from operating activities is primarily caused by changes in inventory levels together with changes in receivables, prepaid and other assets, mortgage loans held for sale, interest and other accrued liabilities, deferred income taxes, accounts payable and other liabilities, and noncash charges relating to depreciation, amortization of computer software costs, stock compensation awards and impairment losses for inventory. When we are expanding our operations, inventory levels, prepaids, and other assets increase causing cash flow from operating activities to decrease. Certain liabilities also increase as operations expand and partially offset the negative effect on cash flow from operations caused by the increase in inventory levels, prepaids and other assets. Similarly, as our mortgage operations expand, net income from these operations increases, but for cash flow purposes net income is offset by the net change in mortgage assets and liabilities. The opposite is true as our investment in new land purchases and development of new communities decrease, which is what happened during the last half of fiscal 2007 through fiscal 2009, allowing us to generate positive cash flow from operations during this period. Since the latter part of fiscal 2009 cumulative through July 31, 2013, as a result of the new land purchases and land development, we have used cash in operations as we add new communities. Looking forward, given the unstable housing market, it will continue to be difficult to generate positive cash flow from operations until we return to sustained profitability. However, we will continue to make adjustments to our structure and our business plans in order to maximize our liquidity while also taking steps to return to sustained profitability, including through land acquisitions.  

In June 2013, K. Hovnanian Enterprises, Inc. (“K. Hovnanian”), as borrower, and we and certain of our subsidiaries, as guarantors, entered into a five-year $75 million unsecured revolving credit facility (the “Credit Facility”) with Citicorp USA, Inc., as administrative agent and issuing bank, and Citibank, N.A., as a lender. The Credit Facility is available for both letters of credit and general corporate purposes. The Credit Facility does not contain any financial maintenance covenants, but does contain certain restrictive covenants that track those contained in our indenture governing the First Lien Notes (as defined below), which are described below. The Credit Facility also contains certain customary events of default which would permit the administrative agent at the request of the required lenders to, among other things, declare all loans then outstanding to be immediately due and payable if not cured within applicable grace periods, including the failure to make timely payments of amounts payable under the Credit Facility or other material indebtedness or the acceleration of other material indebtedness, the failure to comply with agreements and covenants or for representations or warranties to be correct in all material respects when made, specified events of bankruptcy and insolvency, and the entry of a material judgment against a loan party. Outstanding borrowings under the Credit Facility accrue interest at an annual rate equal to either, as selected by K. Hovnanian, (i) the alternate base rate plus the applicable spread determined on the date of such borrowing or (ii) an adjusted LIBOR rate plus the applicable spread determined as of the date two business days prior to the first day of the interest period for such borrowing. As of July 31, 2013, there were no borrowings and $22.8 million of letters of credit outstanding under the Credit Facility and as of such date, we believe we were in compliance with the covenants under the Credit Facility.

In addition to the Credit Facility, we have certain stand alone cash collateralized letter of credit agreements and facilities under which there were a total of $5.1 million and $29.5 million of letters of credit outstanding as of July 31, 2013 and October 31, 2012, respectively. These agreements and facilities require us to maintain specified amounts of cash as collateral in segregated accounts to support the letters of credit issued thereunder, which will affect the amount of cash we have available for other uses. As of July 31, 2013 and October 31, 2012, the amount of cash collateral in these segregated accounts was $5.2 million and $30.7 million, respectively, which is reflected in “Restricted cash and cash equivalents” on the Condensed Consolidated Balance Sheets.

Our wholly owned mortgage banking subsidiary, K. Hovnanian American Mortgage, LLC (“K. Hovnanian Mortgage”), originates mortgage loans primarily from the sale of our homes. Such mortgage loans and related servicing rights are sold in the secondary mortgage market within a short period of time. In certain instances, we retain the servicing rights for a small amount of loans. Our secured Master Repurchase Agreement with JPMorgan Chase Bank, N.A. (“Chase Master Repurchase Agreement”), which was amended on June 28, 2013 to extend the maturity date to June 27, 2014, is a short-term borrowing facility that provides up to $50.0 million through maturity. The loan is secured by the mortgages held for sale and is repaid when we sell the underlying mortgage loans to permanent investors. Interest is payable monthly on outstanding advances at an adjusted LIBOR rate, which was 0.18673% at July 31, 2013, subject to a floor of 1%, plus the applicable margin of 2.5%. Therefore, at July 31, 2013, the interest rate was 3.5%. As of July 31, 2013, the aggregate principal amount of all borrowings outstanding under the Chase Master Repurchase Agreement was $22.9 million.

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K. Hovnanian Mortgage has another secured Master Repurchase Agreement with Customers Bank (“Customers Master Repurchase Agreement”), which was amended on May 28, 2013 to extend the maturity date to May 27, 2014, that is a short-term borrowing facility that provides up to $37.5 million through maturity. The loan is secured by the mortgages held for sale and is repaid when we sell the underlying mortgage loans to permanent investors. Interest is payable daily or as loans are sold to permanent investors on outstanding advances at the current LIBOR subject to a floor of 0.5% plus the applicable margin ranging from 3.0% to 5.5% based on the takeout investor and type of loan. As of July 31, 2013, the aggregate principal amount of all borrowings outstanding under the Customers Master Repurchase Agreement was $15.1 million.

K. Hovnanian Mortgage has a third secured Master Repurchase Agreement with Credit Suisse First Boston Mortgage Capital LLC (“Credit Suisse Master Repurchase Agreement”), which was amended on January 2, 2013, that is a short-term borrowing facility that provides up to $50.0 million through June 20, 2014. The loan is secured by the mortgages held for sale and is repaid when we sell the underlying mortgage loans to permanent investors. Interest is payable monthly on outstanding advances at the Credit Suisse Cost of Funds, which was 0.48% at July 31, 2013, plus the applicable margin ranging from 3.75% to 4.0% based on the takeout investor and type of loan. As of July 31, 2013, the aggregate principal amount of all borrowings outstanding under the Credit Suisse Master Repurchase Agreement was $19.5 million.

 The Chase Master Repurchase Agreement, Customers Master Repurchase Agreement and Credit Suisse Master Repurchase Agreement (together, the “Master Repurchase Agreements”) require K. Hovnanian Mortgage to satisfy and maintain specified financial ratios and other financial condition tests. Because of the extremely short period of time mortgages are held by K. Hovnanian Mortgage before the mortgages are sold to investors (generally a period of a few weeks), the immateriality to us on a consolidated basis of the size of the Master Repurchase Agreements, the levels required by these financial covenants, our ability based on our immediately available resources to contribute sufficient capital to cure any default, were such conditions to occur, and our right to cure any conditions of default based on the terms of the agreement, we do not consider any of these covenants to be substantive or material. As of July 31, 2013, we believe we were in compliance with the covenants under the Master Repurchase Agreements.

As of July 31, 2013, we had $992.0 million of outstanding senior secured notes ($978.3 million, net of discount), comprised of $577.0 million 7.25% Senior Secured First Lien Notes due 2020 (the “First Lien Notes”), $220.0 million 9.125% Senior Secured Second Lien Notes due 2020 (the “Second Lien Notes” and, together with the First Lien Notes, the “2020 Secured Notes”), $53.2 million 2.0% Senior Secured Notes due 2021 (the “2.0% 2021 Notes”) and $141.8 million 5.0% Senior Secured Notes due 2021 (the “5.0% 2021 Notes” and together with the 2.0% 2021 Notes, the “2021 Notes”). As of July 31, 2013, we also had $460.6 million of outstanding senior notes ($459.1 million, net of discount), comprised of $36.7 million 6.5% Senior Notes due 2014, $3.0 million 6.375% Senior Notes due 2014, $21.4 million 6.25% Senior Notes due 2015, $131.2 million 6.25% Senior Notes due 2016, $86.5 million 7.5% Senior Notes due 2016, $121.0 million 8.625% Senior Notes due 2017 and $60.8 million 11.875% Senior Notes due 2015. In addition, as of July 31, 2013, we had outstanding $20.9 million 11.0% Senior Amortizing Notes due 2017 (issued as a component of our 6.0% Exchangeable Note Units and discussed in Note 13 to the Condensed Consolidated Financial Statements), $65.8 million Senior Exchangeable Notes due 2017 (issued as a component of our 6.0% Exchangeable Note Units and discussed in Note 13 to the Condensed Consolidated Financial Statements) and $3.2 million 7.25% Senior Subordinated Amortizing Notes (issued as part of our 7.25% Tangible Equity Units and discussed in Note 12 to the Condensed Consolidated Financial Statements). Except for K. Hovnanian Enterprises, Inc. (“K. Hovnanian”), the issuer of the notes, our home mortgage subsidiaries, joint ventures and subsidiaries holding interests in our joint ventures, certain of our title insurance subsidiaries and our foreign subsidiary, we and each of our subsidiaries are guarantors of the senior secured, senior, senior amortizing, senior exchangeable and senior subordinated amortizing notes outstanding at July 31, 2013 (see Note 23 to the Condensed Consolidated Financial Statements). In addition, the 2021 Notes are guaranteed by K. Hovnanian JV Holdings, L.L.C. and its subsidiaries except for certain joint ventures and joint venture holding companies (collectively, the “Secured Group”). Members of the Secured Group do not guarantee K. Hovnanian's other indebtedness.  

      The First Lien Notes are secured by a first-priority lien and the Second Lien Notes are secured by a second-priority lien, in each case, subject to permitted liens and other exceptions, on substantially all the assets owned by Hovnanian Enterprises, Inc., K. Hovnanian and the guarantors of such notes. At July 31, 2013, the aggregate book value of the real property that constituted collateral securing the 2020 Secured Notes was approximately $549.0 million, which does not include the impact of inventory investments, home deliveries, or impairments thereafter and which may differ from the value if it were appraised. In addition, cash collateral that secured the 2020 Secured Notes was $169.3 million as of July 31, 2013, which included $5.2 million of restricted cash collateralizing certain letters of credit. Subsequent to such date, cash uses include general business operations and real estate and other investments.

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The guarantees with respect to the 2021 Notes of the Secured Group are secured, subject to permitted liens and other exceptions, by a first-priority lien on substantially all of the assets of the members of the Secured Group. As of July 31, 2013, the collateral securing the guarantees included (1) $56.3 million of cash and cash equivalents (subsequent to such date, cash uses include general business operations and real estate and other investments); (2) approximately $85.0 million aggregate book value of real property of the Secured Group, which does not include the impact of inventory investments, home deliveries, or impairments thereafter and which may differ from the value if it were appraised, and (3) equity interests in guarantors that are members of the Secured Group. Members of the Secured Group also own equity in joint ventures, either directly or indirectly through ownership of joint venture holding companies, with a book value of $46.3 million as of July 31, 2013; this equity is not pledged to secure, and is not collateral for, the 2021 Notes. Members of the Secured Group are “unrestricted subsidiaries” under K. Hovnanian's other senior notes, senior secured notes and senior subordinated amortizing notes, and thus have not guaranteed such indebtedness. 

The indentures governing our notes do not contain any financial maintenance covenants, but do contain restrictive covenants that limit, among other things, the Company’s ability and that of certain of its subsidiaries, including K. Hovnanian, to incur additional indebtedness (other than certain permitted indebtedness, refinancing indebtedness and non-recourse indebtedness), pay dividends and make distributions on common and preferred stock, repurchase subordinated indebtedness (with respect to certain of the senior secured notes), make other restricted payments, make investments, sell certain assets, incur liens, consolidate, merge, sell or otherwise dispose of all or substantially all assets and enter into certain transactions with affiliates. The indentures also contain events of default which would permit the holders of the notes to declare the notes to be immediately due and payable if not cured within applicable grace periods, including the failure to make timely payments on the notes or other material indebtedness, the failure to comply with agreements and covenants and specified events of bankruptcy and insolvency and, with respect to the indentures governing the senior secured notes, the failure of the documents granting security for the senior secured notes to be in full force and effect and the failure of the liens on any material portion of the collateral securing the senior secured notes to be valid and perfected. As of July 31, 2013, we believe we were in compliance with the covenants of the indentures governing our outstanding notes.

Under the terms of the indentures we have the right to make certain redemptions and, depending on market conditions and covenant restrictions, may do so from time to time. We also continue to evaluate our capital structure and may also continue to make debt purchases and/or exchanges for debt or equity from time to time through tender offers, open market purchases, private transactions, or otherwise seek to raise additional debt or equity capital, depending on market conditions and covenant restrictions.

If our consolidated fixed charge coverage ratio, as defined in the indentures governing our senior secured and senior notes (other than the Senior Exchangeable Notes), is less than 2.0 to 1.0, we are restricted from making certain payments, including dividends, and from incurring indebtedness other than certain permitted indebtedness, refinancing indebtedness, and non-recourse indebtedness. As a result of this restriction, we are currently restricted from paying dividends, which are not cumulative, on our 7.625% Series A Preferred Stock. We anticipate we will continue to be restricted from paying dividends for the foreseeable future. Our inability to pay dividends is in accordance with covenant restrictions and will not result in a default under our bond indentures or otherwise affect compliance with any of the covenants contained in the bond indentures.

During the three months ended July 31, 2012, we repurchased for cash in the open market $2.0 million principal amount of our 11.875% Senior Notes due 2015.  During the nine months ended July 31, 2012, we repurchased for cash in the open market and privately negotiated transactions $21.0 million principal amount of our 6.25% Senior Notes due 2016, $61.1 million principal amount of our 7.5% Senior Notes due 2016, $37.4 million principal amount of our 8.625% Senior Notes due 2017 and $2.0 million principal amount of our 11.875% Senior Notes due 2015. The aggregate purchase price for these repurchases was $1.5 million and $72.2 million, respectively, for the three and nine months ended July 31, 2012, plus accrued and unpaid interest. These repurchases resulted in a gain on extinguishment of debt of $0.4 million and $48.4 million, respectively, for the three and nine months ended July 31, 2012, net of the write-off of unamortized discounts and fees. The gain is included in the Condensed Consolidated Statement of Operations as “Gain on extinguishment of debt.” Certain of these repurchases were funded with the proceeds from our April 11, 2012 issuance of 25,000,000 shares of our Class A Common Stock (see Notes 11 and 16 to the Condensed Consolidated Financial Statements).

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 Pursuant to agreements with bondholders, during the three months ended July 31, 2012, we also issued an aggregate of 5,379,383 shares of our Class A Common Stock in exchange for an aggregate of $21.0 million of our outstanding indebtedness, consisting of $7.8 million principal amount of our 6.25% Senior Notes due 2016, $4.0 million principal amount of our 7.5% Senior Notes due 2016 and $9.2 million principal amount of our 8.625% Senior Notes due 2017. Pursuant to agreements with bondholders, during the nine months ended July 31, 2012, we issued an aggregate of 8,443,713 shares of our Class A Common Stock in exchange for an aggregate of $33.2 million of our outstanding indebtedness, consisting of $7.8 million principal amount of our 6.25% Senior Notes due 2016, $4.0 million principal amount of our 7.5% Senior Notes due 2016, $18.3 million of our outstanding 8.625% Senior Notes due 2017 and approximately $3.1 million aggregate principal amount of our 12.072% senior subordinated amortizing notes (the “exchanges”). The exchanges were effected with existing bondholders, without any underwriters, and no commission or other remuneration was paid or given directly or indirectly for soliciting such exchanges. These exchanges resulted in a gain on extinguishment of debt of $5.8 million and $9.5 million, respectively, for the three and nine months ended July 31, 2012. The gain is included in the Condensed Consolidated Statement of Operations as “Gain on extinguishment of debt.”

Total inventory, excluding consolidated inventory not owned, increased $117.5 million during the nine months ended July 31, 2013.  Total inventory, excluding consolidated inventory not owned, increased in the Mid-Atlantic by $41.9 million, in the Midwest by $11.6 million, in the Southeast by 5.7 million, in the Southwest by $62.7 million and in the West by 15.4 million. This increase was partially offset by a decrease in the Northeast of $19.8 million. The increases were primarily attributable to new land purchases and land development during the nine months ended July 31, 2013, offset by home deliveries. The decrease in the Northeast during the nine months ended July 31, 2013, was due to delivering homes at a faster pace than purchasing new land to replenish our inventory. During the nine months ended July 31, 2013, we incurred $1.6 million in impairments, primarily in the Northeast. In addition, we wrote-off costs in the amount of $1.9 million during the nine months ended July 31, 2013 related to land options that expired or that we terminated, as the communities’ forecasted profitability was not projected to produce adequate returns on investment commensurate with the risk. In the last few years, we have been able to acquire new land parcels at prices that we believe will generate reasonable returns under current homebuilding market conditions. There can be no assurances that this trend will continue in the near term. Substantially all homes under construction or completed and included in inventory at July 31, 2013 are expected to be closed during the next 12 months.  

 The total inventory increase discussed above excluded the increase in consolidated inventory not owned of $19.0 million. Consolidated inventory not owned consists of specific performance and other options that were added to our balance sheet in accordance with accounting principles generally accepted in the United States. The increase from October 31, 2012 to July 31, 2013, was primarily due to sale and leaseback of certain model homes and land banking transactions during the first nine months of fiscal 2013. During fiscal 2012 and 2013, we sold and leased back certain of our model homes with the right to participate in the potential profit when each home is sold to a third party at the end of the respective lease. As a result of our continued involvement for accounting purposes in accordance with ASC 360-20-40-38, these sale and leaseback transactions are considered a financing rather than a sale for accounting purposes. Therefore, for purposes of our Condensed Consolidated Balance Sheet, at July 31, 2013, inventory of $48.3 million was recorded to consolidated inventory not owned, with a corresponding amount of $46.1 million recorded to liabilities from inventory not owned. In addition, we entered into a land banking arrangement in fiscal 2012 with GSO Capital Partners LP (“GSO”) that continued in fiscal 2013 whereby we sold a portfolio of our land parcels to GSO, and GSO provided us an option to purchase back finished lots on a quarterly basis. Because of our option to repurchase these parcels, for accounting purposes in accordance with ASC 360-20-40-38, this transaction is considered a financing rather than a sale. For purposes of our Condensed Consolidated Balance Sheet, at July 31, 2013, inventory of $60.6 million was recorded to consolidated inventory not owned, with a corresponding amount of $47.6 million recorded to liabilities from inventory not owned for the amount of net cash received from the transactions. From time to time we enter into option agreements that include specific performance requirements, whereby we are required to purchase a minimum number of lots. Because of our obligation to purchase these lots, for accounting purposes in accordance with ASC 360-20-40-38, we are required to record this inventory on our Condensed Consolidated Balance Sheets. As of July 31, 2013, we had $0.8 million of specific performance options recorded on our Condensed Consolidated Balance Sheets to consolidated inventory not owned, with a corresponding amount recorded to liabilities from inventory not owned.

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When possible, we option property for development prior to acquisition. By optioning property, we are only subject to the loss of the cost of the option and predevelopment costs if we choose not to exercise the option (other than with respect to specific performance options discussed above). As a result, our commitment for major land acquisitions is reduced. The costs associated with optioned properties are included in “Land and land options held for future development or sale inventory”. Also included in "Land and land options held for future development or sale inventory" are amounts associated with inventory in mothballed communities. We mothball (or stop development on) certain communities when we determine the current performance does not justify further investment at the time. That is, we believe we will generate higher returns if we decide against spending money to improve land today and save the raw land until such times as the markets improve or we determine to sell the property.  As of July 31, 2013, we have mothballed land in 51 communities. The book value associated with these communities at July 31, 2013 was $124.9 million, net of impairment charges recorded in prior periods of $442.9 million. We continually review communities to determine if mothballing is appropriate. During the first three quarters of fiscal 2013, we mothballed one community, and re-activated three communities which were previously mothballed. Our inventory representing “Land and land options held for future development or sale” at July 31, 2013, on the Condensed Consolidated Balance Sheets, increased by $33.9 million compared to October 31, 2012.  The increase was primarily due to the acquisition of new land in all segments during the first nine months of fiscal 2013, offset by the movement of certain of our communities from held for future development to sold and unsold homes and lots under development during the period, combined with land sales in the Northeast and Southwest.

Inventories held for sale, which are land parcels where we have decided not to build homes, represented $1.3 million of our total inventories at July 31, 2013, and are reported at the lower of carrying amount or fair value less costs to sell. In determining fair value for land held for sale, management considers, among other things, prices for land in recent comparable sale transactions, market analysis studies, which include the estimated price a willing buyer would pay for the land (other than in a forced liquidation sale) and recent bona fide offers received from outside third parties.

The following tables summarize home sites included in our total residential real estate. The increase in total home sites available at July 31, 2013 compared to October 31, 2012 is attributable to signing new land option agreements and acquiring new land parcels, offset by terminating certain option agreements and delivering homes.

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	Active Communities(1)		Active Communities Homes		Proposed Developable Homes		Total Homes
July 31, 2013:
Northeast		12		1,368		3,068		4,436
Mid-Atlantic		25		2,249		3,053		5,302
Midwest		28		2,654		1,392		4,046
Southeast		23		1,237		1,877		3,114
Southwest		87		4,526		2,411		6,937
West		11		1,537		4,631		6,168
		186		13,571		16,432		30,003
Consolidated total
Unconsolidated joint ventures		12		2,028		749		2,777
Total including unconsolidated joint ventures		198		15,599		17,181		32,780
Owned				6,755		9,558		16,313
Optioned				6,559		6,874		13,433
Controlled lots				13,314		16,432		29,746
Construction to permanent financing lots				257		-		257
Consolidated total				13,571		16,432		30,003
Lots controlled by unconsolidated joint ventures				2,028		749		2,777
Total including unconsolidated joint ventures				15,599		17,181		32,780

(1)  Active communities are open for sale communities with 10 or more home sites available.

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	Active Communities(1)		Active Communities Homes		Proposed Developable Homes		Total Homes
October 31, 2012:
Northeast		16		1,611		2,752		4,363
Mid-Atlantic		20		2,225		3,653		5,878
Midwest		21		2,259		945		3,204
Southeast		19		848		1,331		2,179
Southwest		84		4,180		1,573		5,753
West		12		1,758		4,884		6,642
Consolidated total		172		12,881		15,138		28,019
Unconsolidated joint ventures		17		1,500		274		1,774
Total including unconsolidated joint ventures		189		14,381		15,412		29,793
Owned				6,675		9,752		16,427
Optioned				6,032		5,386		11,418
Controlled lots				12,707		15,138		27,845
Construction to permanent financing lots				174		-		174
Consolidated total				12,881		15,138		28,019
Lots controlled by unconsolidated joint ventures				1,500		274		1,774
Total including unconsolidated joint ventures				14,381		15,412		29,793

(1)  Active communities are open for sale communities with 10 or more home sites available. 

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The following table summarizes our started or completed unsold homes and models, excluding unconsolidated joint ventures, in active and substantially completed communities. Started or completed unsold homes decreased in total, and on a per active selling community basis, from October 31, 2012 to July 31, 2013, primarily due to increased sales pace in many of our homebuilding markets. Model homes decreased in total from October 31, 2012 to July 31, 2013, primarily due to model homes that were sold to a third party as sales lease-back transactions during the period.

	July 31, 2013						October 31, 2012
	Unsold Homes		Models		Total		Unsold Homes		Models		Total
Northeast		115		12		127		116		9		125
Mid-Atlantic		58		4		62		65		7		72
Midwest		13		6		19		19		22		41
Southeast		58		10		68		55		10		65
Southwest		319		16		335		355		19		374
West		52		9		61		39		6		45
Total		615		57		672		649		73		722
Started or completed unsold homes and models per active selling communities (1)		3.3		0.3		3.6		3.8		0.4		4.2

(1) Active selling communities (which are communities that are open for sale with 10 or more home sites available) were 186 and 172 at July 31, 2013 and October 31, 2012, respectively. Ratio does not include substantially completed communities, which are communities with less than 10 home sites available.

Homebuilding restricted cash and cash equivalents decreased $30.6 million to $11.1 million at July 31, 2013 compared to October 31, 2012. The decrease was primarily related to the release of cash securitizing letters of credit as we transitioned from having letters of credit issued under our letter of credit agreements and facilities that required cash collateral to having letters of credit issued under our new Credit Facility that does not require any cash collateral. Also contributing to the decrease was a reduction in our surety bond escrow cash requirements during the first nine months of fiscal 2013.

Investments in and advances to unconsolidated joint ventures decreased $6.7 million to $54.3 million at July 31, 2013 compared to October 31, 2012. The decrease was primarily due to the timing of advances at July 31, 2013 as compared to October 31, 2012. Partially offsetting this decrease was an increase related to the investment in two new homebuilding joint ventures during the first nine months of fiscal 2013. As of July 31, 2013, we had investments in eight homebuilding joint ventures and two land development joint ventures. We have no guarantees associated with our unconsolidated joint ventures, other than guarantees limited only to performance and completion of development, environmental indemnification and standard warranty and representation against fraud misrepresentation and similar actions, including a voluntary bankruptcy.

Receivables, deposits and notes decreased $14.3 million from October 31, 2012 to $47.5 million at July 31, 2013. The decrease was primarily due to a decrease in receivables for home closings as a result of cash in transit from various title companies at the end of the respective periods, as well as reimbursements from our insurance carriers for certain warranty claims.

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Prepaid expenses and other assets were as follows as of:

(In thousands)	July 31, 2013		October 31, 2012		Dollar Change
Prepaid insurance	$	4,729	$	1,729	$	3,000
Prepaid project costs		23,630		24,008		(378	)
Net rental properties		1,892		5,430		(3,538	)
Other prepaids		29,457		26,086		3,371
Other assets		273		9,441		(9,168	)
Total	$	59,981	$	66,694	$	(6,713	)

Prepaid insurance increased due to premium payments made on certain liability insurance policies during the nine months ended July 31, 2013.  These costs are amortized over the life of the associated insurance policy, which can be one to three years. Prepaid project costs consist of community specific expenditures that are used over the life of the community. Such prepaids are expensed as homes are delivered. Net rental properties decreased primarily due to the sale of our last senior residential rental property during the second quarter of fiscal 2013. The remaining balance of net rental properties represents leasehold improvements for an office building that we fully sub-lease. Other prepaids increased primarily as a result of fees paid in connection with our new Credit Facility entered into during the third quarter of fiscal 2013. Other assets decreased mainly due to the sale of Company-owned life insurance policies to a third party during the first nine months for approximately book value.

Financial Services restricted cash and cash equivalents decreased $9.5 million to $12.9 million at July 31, 2013 compared to October 31, 2012. The decrease is primarily due to escrow cash at our title company related to the timing of home closings at the end of the third quarter of fiscal 2013 compared to the end of fiscal 2012.

Financial Services - Mortgage loans held for sale consist primarily of residential mortgages receivable held for sale, of which $80.9 million and $115.0 million at July 31, 2013 and October 31, 2012, respectively, were being temporarily warehoused and are awaiting sale in the secondary mortgage market. The decrease in mortgage loans held for sale from October 31, 2012 is related to a decrease in the volume of loans originated during the third quarter of fiscal 2013 compared to the fourth quarter of fiscal 2012, partially offset by an increase in the average loan value.

Financial Services – Other assets decreased $8.2 million to $2.0 million at July 31, 2013 compared to October 31, 2012. The decrease is related to the closing of mortgages in the first quarter of fiscal 2013, which were funded in the fourth quarter of fiscal 2012, in anticipation of home closings on the last days of October 2012 that did not occur until early November, due to weather-related delays from Hurricane Sandy.

Nonrecourse mortgages increased to $55.3 million at July 31, 2013 from $38.3 million at October 31, 2012.  The increase was primarily due to new mortgages for communities in the Northeast, the Mid-Atlantic, the Midwest, the Southwest and the West obtained during the nine months ended July 31, 2013, along with increased borrowings on certain of our existing non-recourse mortgages. Offsetting the increase was a decrease due to a property in the Mid-Atlantic, which we had previously acquired when our partner in a land development joint venture transferred its interest in the venture to us, that was foreclosed on. As a result, the non-recourse liability of $9.5 million and corresponding inventory balance were taken off our balance sheet for the second quarter of fiscal 2013. Also offsetting the increase during the period were principal payments made on certain of our existing non-recourse mortgages.

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Accounts payable and other liabilities are as follows:

(In thousands)	July 31, 2013		October 31, 2012		Dollar Change
Accounts payable	$	95,101	$	89,310	$	5,791
Reserves		131,993		129,025		2,968
Accrued expenses		25,315		29,969		(4,654	)
Accrued compensation		26,355		26,625		(270	)
Other liabilities		10,732		21,581		(10,849	)
Total	$	289,496	$	296,510	$	(7,014	)

The increase in accounts payable was primarily due to a change in the scheduled timing of certain of our monthly payments. Partially offsetting this increase were decreases due to the lower volume of deliveries in the third quarter of fiscal 2013 compared to the fourth quarter of fiscal 2012. Reserves increased during the period as new accruals for general liability insurance exceeded payments for warranty related claims. The decrease in accrued expenses is primarily due to decreases in property tax accruals and amortization of abandoned lease space accruals. Other liabilities decreased primarily due to installment payments made to a former joint venture partner for the buy-out of their share of the joint venture during fiscal 2012.

Customer deposits increased $14.1 million from $23.8 million at October 31, 2012 to $37.9 million at July 31, 2013. This increase is primarily attributable to the increase in backlog during the period.

Liabilities from inventory not owned increased $16.7 million to $94.5 million at July 31, 2013 from $77.8 million at October 31, 2012. The increase is primarily due to additional transactions under our land banking and model home programs described above.

Financial Services - Accounts payable and other liabilities decreased $13.9 million to $23.7 million at July 31, 2013 as compared to October 31, 2012. The decrease was primarily associated with the decrease in Financial Services restricted cash at our title company, due to the timing of home closings during the third quarter of fiscal 2013 compared to the fourth quarter of fiscal 2012.

Financial Services - Mortgage warehouse lines of credit outstanding balance decreased $50.0 million from $107.5 million at October 31, 2012, to $57.5 million at July 31, 2013. The decrease correlates to the decrease in the volume of mortgage loans held for sale during the period, along with the decrease in financial services other assets, discussed above.

Accrued interest increased $4.8 million to $25.0 million at July 31, 2013 as compared to October 31, 2012. This increase is due to the timing of semi-annual interest payments on our bonds. 

Income taxes payable of $6.9 million at October 31, 2012 decreased $4.2 million in the nine months ended July 31, 2013 to $2.7 million primarily due to the release of reserves for a federal tax position that was settled with the Internal Revenue Service during the first quarter of fiscal 2013, offset by state tax expense.

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RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED JULY 31, 2013 COMPARED TO THE THREE AND NINE MONTHS ENDED JULY 31, 2012

Total revenues

Compared to the same prior period, revenues increased/(decreased) as follows:

	Three Months Ended
(Dollars in thousands)	July 31, 2013		July 31, 2012		Dollar Change			Percentage Change
Homebuilding:
Sale of homes	$	462,376	$	371,481	$	90,895			24.5	%
Land sales and other revenues		3,103		4,743		(1,640	)		(34.6	)%
Financial services		12,878		10,787		2,091			19.4	%
Total revenues	$	478,357	$	387,011	$	91,346			23.6	%

	Nine Months Ended
(Dollars in thousands)	July 31, 2013		July 31, 2012		Dollar Change			Percentage Change
Homebuilding:
Sale of homes	$	1,206,233	$	936,305	$	269,928			28.8	%
Land sales and other revenues		18,114		36,014		(17,900	)		(49.7	)%
Financial services		35,219		25,990		9,229			35.5	%
Total revenues	$	1,259,566	$	998,309	$	261,257			26.2	%

 Homebuilding

For the three and nine months ended July 31, 2013, sale of homes revenues increased $90.9 million, or 24.5%, and $269.9 million, or 28.8%, respectively, as compared to the same period of the prior year. These increases were primarily due to the number of home deliveries increasing 10.6% and 16.3% for the three and nine months ended July 31, 2013, respectively, compared to the three and nine months ended July 31, 2012, as well as the increase in average price per home. The average price per home increased to $345,000 in the three months ended July 31, 2013 from $307,000 in the three months ended July 31, 2012. The average price per home increased to $330,000 in the nine months ended July 31, 2013 from $298,000 in the nine months ended July 31, 2012. The fluctuations in average prices were a result of geographic and community mix of our deliveries, as well as price increases in individual communities. During the first nine months of fiscal 2013, we have been able to raise prices in a majority of our communities. Land sales are ancillary to our homebuilding operations and are expected to continue in the future but may significantly fluctuate up or down. For further details on the decreases in land sales and other revenues, see the section titled “Land Sales and Other Revenues” below.

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Information on homes delivered by segment is set forth below:

	Three Months Ended July 31,							Nine Months Ended July 31,
(Dollars in thousands)	2013		2012		% Change			2013		2012		% Change
Northeast:
Dollars	$	66,447	$	63,811		4.1	%	$	173,781	$	146,722		18.4	%
Homes		154		148		4.1	%		391		339		15.3	%
Mid-Atlantic:
Dollars	$	89,123	$	75,075		18.7	%	$	199,275	$	192,620		3.5	%
Homes		189		179		5.6	%		441		462		(4.5	)%
Midwest:
Dollars	$	37,918	$	28,213		34.4	%	$	109,446	$	69,960		56.4	%
Homes		154		128		20.3	%		451		317		42.3	%
Southeast:
Dollars	$	35,265	$	24,432		44.3	%	$	100,988	$	66,019		53.0	%
Homes		129		103		25.2	%		373		283		31.8	%
Southwest:
Dollars	$	181,593	$	139,407		30.3	%	$	463,309	$	344,844		34.4	%
Homes		606		529		14.6	%		1,625		1,363		19.2	%
West:
Dollars	$	52,030	$	40,543		28.3	%	$	159,434	$	116,140		37.3	%
Homes		109		125		(12.8	)%		377		380		(0.8	)%
Consolidated total:
Dollars	$	462,376	$	371,481		24.5	%	$	1,206,233	$	936,305		28.8	%
Homes		1,341		1,212		10.6	%		3,658		3,144		16.3	%
Unconsolidated joint ventures:
Dollars	$	76,691	$	89,304		(14.1	)%	$	209,804	$	218,770		(4.1	)%
Homes		161		175		(8.0	)%		456		462		(1.3	)%
Totals:
Housing revenues	$	539,067	$	460,785		17.0	%	$	1,416,037	$	1,155,075		22.6	%
Homes delivered		1,502		1,387		8.3	%		4,114		3,606		14.1	%

The overall increase in housing revenues and deliveries during the three and nine months ended July 31, 2013, as compared to the same periods of the prior year, was primarily attributed to market improvements demonstrated by an increase in sales pace per community from 7.6 to 7.8 for the three months ended July 31, 2012 and 2013, respectively, and from 20.8 to 24.4 for the nine months ended July 31, 2012 and 2013, respectively. 

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An important indicator of our future results are recently signed contracts and our home contract backlog for future deliveries. Our sales contracts and homes in contract backlog by segment are set forth below:

	Net Contracts (1) for the				Net Contracts (1) for the				Contract Backlog as of
	Three Months Ended July 31,				Nine Months Ended July 31,				July 31,
(Dollars in thousands)	2013		2012		2013		2012		2013		2012
Northeast:
Dollars	$	69,118	$	54,575	$	200,786	$	137,660	$	142,421	$	125,497
Homes		145		124		433		318		306		285
Mid-Atlantic:
Dollars	$	79,104	$	55,399	$	238,921	$	187,143	$	158,420	$	131,712
Homes		158		129		485		447		310		310
Midwest:
Dollars	$	57,066	$	43,100	$	157,951	$	116,939	$	144,221	$	95,615
Homes		232		182		632		531		608		440
Southeast:
Dollars	$	54,581	$	38,562	$	139,324	$	102,338	$	101,031	$	66,259
Homes		175		154		479		427		341		268
Southwest:
Dollars	$	195,403	$	166,120	$	590,189	$	436,508	$	287,719	$	180,660
Homes		663		614		2,001		1,667		882		635
West:
Dollars	$	39,322	$	65,640	$	143,931	$	157,516	$	63,374	$	74,416
Homes		75		179		308		458		122		194
Consolidated total:
Dollars	$	494,594	$	423,396	$	1,471,102	$	1,138,104	$	897,186	$	674,159
Homes		1,448		1,382		4,338		3,848		2,569		2,132
Unconsolidated joint ventures:
Dollars	$	52,280	$	83,554	$	235,071	$	264,594	$	135,173	$	139,767
Homes		120		159		524		547		324		320
Totals:
Housing revenues	$	546,874	$	506,950	$	1,706,173	$	1,402,698	$	1,032,359	$	813,926
Homes delivered		1,568		1,541		4,862		4,395		2,893		2,452

(1)  Net contracts are defined as new contracts executed during the period for the purchase of homes, less cancellations of contracts in the same period. 

As of July 31, 2013, our open for sale community count increased to 186 from 172 at October 31, 2012, which is the net result of opening 76 new communities and closing 62 communities since the beginning of fiscal 2013.  Our reported level of sales contracts (net of cancellations) has been impacted by an increase in the pace of sales in most of the Company’s segments, due to better market conditions and historically low interest rates on mortgages. Contracts per average active selling community for the three and nine months ended July 31, 2013 were 7.8 and 24.4, respectively, compared to 7.6 and 20.8, respectively, for the same period in the prior year, demonstrating a meaningful increase in sales pace over the prior year.

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  Cancellation rates represent the number of cancelled contracts in the quarter divided by the number of gross sales contracts executed in the quarter.  For comparison, the following are historical cancellation rates, excluding unconsolidated joint ventures:         

Quarter	2013			2012			2011			2010			2009
First		16	%		21	%		22	%		21	%		31	%
Second		15	%		16	%		20	%		17	%		24	%
Third		17	%		20	%		18	%		23	%		23	%
Fourth					23	%		21	%		24	%		24	%

Another common and meaningful way to analyze our cancellation trends is to compare the number of contract cancellations as a percentage of beginning backlog.  The following table provides this historical comparison, excluding unconsolidated joint ventures:         

Quarter	2013			2012			2011			2010			2009
First		12	%		18	%		18	%		13	%		22	%
Second		15	%		21	%		22	%		17	%		31	%
Third		12	%		18	%		20	%		15	%		23	%
Fourth					18	%		18	%		25	%		20	%

Historically, most cancellations occur within the legal rescission period, which varies by state but is generally less than two weeks after the signing of the contract. Cancellations also occur as a result of a buyer's failure to qualify for a mortgage, which generally occurs during the first few weeks after signing. However, beginning in fiscal 2007 and continuing through fiscal 2009, we started experiencing higher than normal numbers of cancellations later in the construction process. These cancellations were related primarily to falling prices, sometimes due to new discounts offered by us and other builders, leading the buyer to lose confidence in their contract price and due to tighter mortgage underwriting criteria leading to some customers’ inability to be approved for a mortgage loan. In some cases, the buyer will walk away from a significant nonrefundable deposit that we recognize as other revenues. Our cancellation rate based on gross sales contracts and also as a percentage of beginning backlog for the first nine months of fiscal 2013 was lower than what we believe to be normalized levels. However, it is difficult to predict if this trend will continue.

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“Total cost of sales” includes expenses for consolidated housing and land and lot sales, including inventory impairment loss and land option write-offs (defined as “land charges” in the tables below).  A breakout of such expenses for housing sales and housing gross margin is set forth below:

	Three Months Ended July 31,						Nine Months Ended July 31,
(Dollars in thousands)	2013			2012			2013			2012
Sale of homes	$	462,376		$	371,481		$	1,206,233		$	936,305
Cost of sales, net of impairment reversals and excluding interest		368,617			303,760			978,309			772,368
Homebuilding gross margin, before cost of sales interest expense and land charges		93,759			67,721			227,924			163,937
Cost of sales interest expense, excluding land sales interest expense		13,702			14,178			35,089			34,829
Homebuilding gross margin, after cost of sales interest expense, before land charges		80,057			53,543			192,835			129,108
Land charges		623			689			3,479			7,230
Homebuilding gross margin, after cost of sales interest expense and land charges	$	79,434		$	52,854		$	189,356		$	121,878
Gross margin percentage, before cost of sales interest expense and land charges		20.3	%		18.2	%		18.9	%		17.5	%
Gross margin percentage, after cost of sales interest expense, before land charges		17.3	%		14.4	%		16.0	%		13.8	%
Gross margin percentage, after cost of sales interest expense and land charges		17.2	%		14.2	%		15.7	%		13.0	%

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Cost of sales expenses as a percentage of consolidated home sales revenues are presented below:

	Three Months Ended July 31,						Nine Months Ended July 31,
	2013			2012			2013			2012
Sale of homes		100	%		100	%		100	%		100	%
Cost of sales, net of impairment reversals and excluding interest:
Housing, land and development costs		70.0	%		70.7	%		70.7	%		70.9	%
Commissions		3.3	%		3.5	%		3.3	%		3.5	%
Financing concessions		1.4	%		1.7	%		1.5	%		1.8	%
Overheads		5.0	%		5.9	%		5.6	%		6.3	%
Total cost of sales, before interest expense and land charges		79.7	%		81.8	%		81.1	%		82.5	%
Gross margin percentage, before cost of sales interest expense and land charges		20.3	%		18.2	%		18.9	%		17.5	%
Cost of sales interest		3.0	%		3.8	%		2.9	%		3.7	%
Gross margin percentage, after cost of sales interest expense and before land charges		17.3	%		14.4	%		16.0	%		13.8	%

 

We sell a variety of home types in various communities, each yielding a different gross margin.  As a result, depending on the mix of communities delivering homes, consolidated gross margin may fluctuate up or down.  Total homebuilding gross margin percentage, before interest expense and land impairment and option write off charges, increased to 20.3% during the three months ended July 31, 2013, compared to 18.2% for the same period last year and increased to 18.9% during the nine months ended July 31, 2013 compared to 17.5% for the same period last year.  The increase in gross margin percentage is primarily due to the mix of higher margin homes delivered in the three and nine months ended July 31, 2013 compared to the same periods of the prior year.  This mix change is a result of delivering more homes in communities where we acquired the land more recently at lower costs than land acquired before the housing downturn. In addition, during the nine months ended July 31, 2013 we saw an increase in the pace of sales in some of our markets and, as a result, in a majority of communities we were able to increase base prices and increase lot premiums, without adversely impacting the sales pace.  For the three months ended July 31, 2013 and 2012, gross margin was favorably impacted by the reversal of prior period inventory impairments of $13.7 million and $17.3 million, respectively, which represented 3.0% and 4.7%, respectively, of “Sale of homes” revenue. For the nine months ended July 31, 2013 and 2012, gross margin was favorably impacted by the reversal of prior period inventory impairments of $41.3 million and $55.0 million, respectively, which represented 3.4% and 5.9%, respectively, of “Sale of homes” revenue.

Reflected as inventory impairment loss and land option write-offs in cost of sales (“land charges”), we have written-off or written-down certain inventories totaling $0.6 million and $0.7 million during the three months ended July 31, 2013 and 2012, respectively, and $3.5 million and $7.2 million during the nine months ended July 31, 2013 and 2012, respectively, to their estimated fair value.  During the three and nine months ended July 31, 2013, we wrote-off residential land options and approval and engineering costs across all of our segments amounting to $0.5 million and $1.9 million, respectively, compared to $0.5 million and $1.8 million, respectively, for the three and nine months ended July 31, 2012, which are included in the total land charges discussed above.  When a community is redesigned or abandoned, engineering costs are written-off.  Option, approval and engineering costs are written-off when a community’s pro forma profitability is not projected to produce adequate returns on the investment commensurate with the risk and we believe it is probable we will cancel the option. We recorded inventory impairments of $0.1 million and $0.2 million during the three months ended July 31, 2013 and 2012, respectively, and $1.6 million and $5.4 million during the nine months ended July 31, 2013 and 2012, respectively.  Inventory impairments in the first three quarters of fiscal 2013 and 2012 were lower than they had been in several years as we have begun to see some stabilization in prices and sales pace in our segments.  It is difficult to predict if this trend will continue and, should it become necessary to further lower prices, or should the estimates or expectations used in determining estimated cash flows or fair value decrease or differ from current estimates in the future, we may need to recognize additional impairments.  See “Notes to Condensed Consolidated Financial Statements” – Note 5 for an additional information of segment impairments.

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Land Sales and Other Revenues:

Land sales and other revenues consist primarily of land and lot sales.  A breakout of land and lot sales is set forth below:

	Three Months Ended July 31,				Nine Months Ended July 31,
(In thousands)	2013		2012		2013		2012
Land and lot sales	$	1,940	$	1,823	$	15,218	$	28,737
Cost of sales, excluding interest		1,847		1,418		14,053		21,800
Land and lot sales gross margin, excluding interest		93		405		1,165		6,937
Land sales interest expense		55		120		222		5,262
Land and lot sales gross margin, including interest	$	38	$	285	$	943	$	1,675

Land sales are ancillary to our residential homebuilding operations and are expected to continue in the future but may significantly fluctuate up or down.  Although we budget land sales, they are often dependent upon receiving approvals and entitlements, the timing of which can be uncertain.  As a result, projecting the amount and timing of land sales is difficult.  There were four land sales in the three months ended July 31, 2013, compared to three in the same period of the prior year, which resulted in an increase of $0.1 million in land sales revenue.  There were 10 land sales for the nine months ended July 31, 2013, compared to 14 in the same period of the prior year, which resulted in a decrease of $13.5 million in land sales revenue.

Land sales and other revenues decreased $1.6 million and $17.9 million for the three and nine months ended July 31, 2013, compared to the same period in the prior year.  Other revenues include income from contract cancellations where the deposit has been forfeited due to contract terminations, interest income, cash discounts, buyer walk-aways and miscellaneous one-time receipts.  For the three and nine months ended July 31, 2013, compared to the three and nine months ended July 31, 2012, there were minor fluctuations in other revenues, resulting in a net decrease of $1.8 million for the three months ended July 31, 2013 as compared to the prior year and $4.4 million for the nine months ended July 31, 2013 as compared to the prior year, due mainly to interest income recognized from a note receivable in fiscal 2012.

Homebuilding Selling, General and Administrative

Homebuilding selling, general and administrative expenses increased $6.1 million and $12.3 million for the three and nine months ended July 31, 2013, compared to the same periods last year mainly due to higher insurance costs and additional overhead as a result of the increase in sales and deliveries of homes. However, these expenses increased at a slower rate than the increase in revenues. Therefore, homebuilding selling, general and administrative expenses as a percentage of homebuilding revenues improved to 9.1% and 9.5% for the three and nine months ended July 31, 2013, respectively, compared to 9.6% and 10.8% for the three and nine months ended July 31, 2012, respectively. 

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HOMEBUILDING OPERATIONS BY SEGMENT

Segment Analysis

	Three Months Ended July 31,
(Dollars in thousands, except average sales price)	2013		2012			Variance			Variance %
Northeast
Homebuilding revenue	$	67,214	$	65,742		$	1,472			2.2	%
Income before income taxes	$	1,028	$	1,435		$	(407	)		(28.4	)%
Homes delivered		154		148			6			4.1	%
Average sales price	$	431,477	$	431,155		$	322			0.1	%
Mid-Atlantic
Homebuilding revenue	$	89,365	$	77,131		$	12,234			15.9	%
Income before income taxes	$	8,036	$	4,946		$	3,090			62.5	%
Homes delivered		189		179			10			5.6	%
Average sales price	$	471,548	$	419,413		$	52,135			12.4	%
Midwest
Homebuilding revenue	$	38,478	$	28,271		$	10,207			36.1	%
Income before income taxes	$	1,941	$	294		$	1,647			560.2	%
Homes delivered		154		128			26			20.3	%
Average sales price	$	246,221	$	220,414		$	25,807			11.7	%
Southeast
Homebuilding revenue	$	35,731	$	24,660		$	11,071			44.9	%
Income (loss) before income taxes	$	276	$	(2,417	)	$	2,693			(111.4	)%
Homes delivered		129		103			26			25.2	%
Average sales price	$	273,372	$	237,204		$	36,168			15.2	%
Southwest
Homebuilding revenue	$	182,699	$	139,790		$	42,909			30.7	%
Income before income taxes	$	22,230	$	11,815		$	10,415			88.2	%
Homes delivered		606		529			77			14.6	%
Average sales price	$	299,658	$	263,529		$	36,129			13.7	%
West
Homebuilding revenue	$	52,062	$	40,559		$	11,503			28.4	%
Income (loss) before income taxes	$	3,757	$	(1,342	)	$	5,099			(380.0	)%
Homes delivered		109		125			(16	)		(12.8	)%
Average sales price	$	477,343	$	324,344		$	152,999			47.2	%

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	Nine Months Ended July 31,
(Dollars in thousands, except average sales price)	2013			2012			Variance			Variance %
Northeast
Homebuilding revenue	$	176,285		$	159,049		$	17,236			10.8	%
Loss before income taxes	$	(8,510	)	$	(4,338	)	$	(4,172	)		96.2	%
Homes delivered		391			339			52			15.3	%
Average sales price	$	444,452		$	432,808		$	11,644			2.7	%
Mid-Atlantic
Homebuilding revenue	$	200,489		$	196,302		$	4,187			2.1	%
Income before income taxes	$	12,305		$	12,615		$	(310	)		(2.5	)%
Homes delivered		441			462			(21	)		(4.5	)%
Average sales price	$	451,871		$	416,926		$	34,945			8.4	%
Midwest
Homebuilding revenue	$	110,204		$	70,100		$	40,104			57.2	%
Income (loss) before income taxes	$	5,420		$	(953	)	$	6,373			(668.7	)%
Homes delivered		451			317			134			42.3	%
Average sales price	$	242,674		$	220,694		$	21,980			10.0	%
Southeast
Homebuilding revenue	$	101,884		$	81,215		$	20,669			25.4	%
Income (loss) before income taxes	$	3,585		$	(9,150	)	$	12,735			(139.2	)%
Homes delivered		373			283			90			31.8	%
Average sales price	$	270,746		$	233,283		$	37,463			16.1	%
Southwest
Homebuilding revenue	$	476,136		$	346,331		$	129,805			37.5	%
Income before income taxes	$	46,871		$	24,600		$	22,271			90.5	%
Homes delivered		1,625			1,363			262			19.2	%
Average sales price	$	285,113		$	253,004		$	32,109			12.7	%
West
Homebuilding revenue	$	159,491		$	119,322		$	40,169			33.7	%
Income (loss) before income taxes	$	5,084		$	(5,262	)	$	10,346			(196.6	)%
Homes delivered		377			380			(3	)		(0.8	)%
Average sales price	$	422,903		$	305,632		$	117,271			38.4	%

  Homebuilding Results by Segment

Northeast - Homebuilding revenues increased 2.2% for the three months ended July 31, 2013 compared to the same period of the prior year. The increase is attributed to a 0.1% increase in average sales price and a 4.1% increase in homes delivered, offset by a $1.2 million decrease in land sales and other revenue. The increase in average sales price was the result of the mix of communities delivering in the three months ended July 31, 2013 compared to the same period of 2012, as well as increasing prices in certain communities as the market has improved.

Income before income taxes decreased $0.4 million compared to the prior year to $1.0 million for the three months ended July 31, 2013 compared to the same period of 2012. This decrease is mainly due to an increase of $2.3 million for selling, general and administrative costs due to increased insurance costs and other overhead items. In addition, inventory impairment losses and land option write-offs increased $0.1 million for the three months ended July 31, 2013 compared to the same period of 2012. Gross margin percentage before interest expense for the three months ended July 31, 2013 was relatively flat compared to the same period of the prior year.

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Homebuilding revenues increased 10.8 % for the nine months ended July 31, 2013 compared to the same period of the prior year.  The increase is attributed to a 15.3% increase in homes delivered and a 2.7% increase in average sales price. The increase in average sales price was the result of the mix of communities delivering in the nine months ended July 31, 2013 compared to the same period of 2012, as well as increased prices in certain communities as the market has improved. These increases were partially offset by a $9.8 million decrease in land sales and other revenue.

Loss before income taxes increased $4.2 million compared to the prior year to a loss of $8.5 million for the nine months ended July 31, 2013.  This increase was mainly due to a $7.0 million increase in selling, general and administrative costs due to increased insurance costs and other overhead items. Gross margin percentage before interest expense for the nine months ended July 31, 2013 was relatively flat compared to the same period of the prior year.

Mid-Atlantic - Homebuilding revenues increased 15.9% for the three months ended July 31, 2013 compared to the same period in the prior year.  The increase was primarily due to a 5.6% increase in homes delivered and a 12.4% increase in average sales price for the three months ended July 31, 2013.  The increase in average sales prices was the result of the mix of communities delivering in the three months ended July 31, 2013 compared to the same period of 2012, as well as increased prices in certain communities as the market has improved.

Income before income taxes increased $3.1 million compared to the prior year to $8.0 million for the three months ended July 31, 2013 due primarily to the increase in homebuilding revenues discussed above, while gross margin percentage before interest expense was relatively flat.

Homebuilding revenues increased 2.1% for the nine months ended July 31, 2013 compared to the same period in the prior year.  The increase was primarily due to an 8.4% increase in average sales price for the nine months ended July 31, 2013, partially offset by a 4.5% decrease in homes delivered. While community count increased slightly year over year, during the nine months ended July 31, 2012, certain communities were delivering at their peak rate. Those communities have since closed and therefore had few or no deliveries during the nine months ended July 31, 2013, while newly opened communities are not yet delivering homes or are in the early stages of delivering homes, thereby causing the decrease in homes delivered period over period. The increase in average sales prices was the result of the mix of communities delivering in the nine months ended July 31, 2013 compared to the same period of 2012, as well as increased prices in certain communities as the market has improved.

Income before income taxes decreased $0.3 million compared to the prior year to $12.3 million for the nine months ended July 31, 2013 due primarily to the slight decrease in gross margin percentage before interest expense.

Midwest - Homebuilding revenues increased 36.1% for the three months ended July 31, 2013 compared to the same period in the prior year.  The increase was primarily due to a 20.3% increase in homes delivered and a 11.7% increase in average sales price for the three months ended July 31, 2013. The increase in average sales price was the result of the mix of communities delivering in the three months ended July 31, 2013 compared to the same period of 2012, as well as increased prices in certain communities as the market has improved.

Income before income taxes increased $1.6 million compared to the prior year to $1.9 million for the three months ended July 31, 2013.  The increase for the three months ended July 31, 2013 was primarily due to the increase in homebuilding revenues discussed above and a slight increase in gross margin percentage before interest expense as compared to the same period of the prior year.

Homebuilding revenues increased 57.2% for the nine months ended July 31, 2013 compared to the same period in the prior year.  The increase was primarily due to a 42.3% increase in homes delivered and a 10.0% increase in average sales price for the nine months ended July 31, 2013.  The increase in average sales price was the result of the mix of communities delivering in the nine months ended July 31, 2013 compared to the same period of 2012, as well as increased prices in certain communities as the market has improved.

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      Income (loss) before income taxes increased $6.4 million compared to the prior year to a profit of $5.4 million for the nine months ended July 31, 2013.  The improvement from a loss to a profit for the nine months ended July 31, 2013 was primarily due to the increase in homebuilding revenue discussed above and a minor increase in gross margin percentage before interest expense for the period.

Southeast - Homebuilding revenues increased 44.9% for the three months ended July 31, 2013 compared to the same period in the prior year.  The increase for the three months ended July 31, 2013 was attributed to the 25.2% increase in homes delivered and a 15.2% increase in average sales price. The increase in average sales price was primarily due to the different mix of communities delivering in the three months ended July 31, 2013 compared to the same period of 2012, as well as increased prices in certain communities as the market has improved.

Income (loss) before income taxes increased $2.7 million compared to the prior year to a profit of $0.3 million for the three months ended July 31, 2013. The improvement from a loss to a profit for the three months ended July 31, 2013 was primarily due to the increase in homebuilding revenue discussed above, a decrease of $1.3 million in selling, general and administrative costs and a minor increase in gross margin percentage before interest expense for the period.

Homebuilding revenues increased 25.4% for the nine months ended July 31, 2013 compared to the same period in the prior year.  The increase for the nine months ended July 31, 2013 was attributed to the 31.8% increase in homes delivered and a 16.1% increase in average sales price, partially offset by a $14.3 million decrease in land sales and other revenue. The increase in average sales price was primarily due to the different mix of communities delivering in the nine months ended July 31, 2013 compared to the same period of 2012, as well as increased prices in certain communities as the market has improved.

Income (loss) before income taxes increased $12.7 million compared to the prior year to a profit of $3.6 million for the nine months ended July 31, 2013. The improvement from a loss to a profit for the nine months ended July 31, 2013 was primarily due to the increase in homebuilding revenue discussed above, a decrease in inventory impairment losses and land option write-offs of $2.9 million, a decrease of $2.2 million in selling, general and administrative costs and a significant increase in gross margin percentage before interest expense for the period.

Southwest - Homebuilding revenues increased 30.7% for the three months ended July 31, 2013 compared to the same period in the prior year.  The increase was primarily due to a 14.6% increase in homes delivered and a 13.7% increase in average sales price for the three months ended July 31, 2013, as a result of the different mix of communities delivering in the three months ended July 31, 2013 compared to the same period of 2012, as well as increased prices in certain communities as the market has improved.

Income before income taxes increased $10.4 million compared to the prior year to $22.2 million for the three months ended July 31, 2013.  The increase was primarily due to the increase in homebuilding revenues discussed above and a slight increase in gross margin percentage before interest expense for the three months ended July 31, 2013 compared to the same period of the prior year.

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            Homebuilding revenues increased 37.5% for the nine months ended July 31, 2013 compared to the same period in the prior year.  The increase was primarily due to a 19.2% increase in homes delivered and a 12.7% increase in average sales price for the nine months ended July 31, 2013, as a result of the different mix of communities delivering in the nine months ended July 31, 2013 compared to the same period in 2012, as well as increased prices in certain communities as the market has improved. This was further impacted by an $11.3 million increase in land sales and other revenue for the nine months ended July 31, 2013 compared to the same period of the prior year.

Income before income taxes increased $22.3 million compared to the prior year to $46.9 million for the nine months ended July 31, 2013.  The increase was primarily due to the increases in homebuilding revenue discussed above and a slight increase in gross margin percentage before interest expense for the nine months ended July 31, 2013 compared to the same period of the prior year.

West - Homebuilding revenues increased 28.4% for the three months ended July 31, 2013 compared to the same period in the prior year.  The increase for the three months ended July 31, 2013 was attributed to a 47.2% increase in average sales price, offset by a 12.8% decrease in homes delivered, as there were less communities open for sale at July 31, 2013 compared to July 31, 2012. The increase in average sales price was due to the different mix of communities delivering in the three months ended July 31, 2013 compared to the same period of the prior year, as well as increased prices in certain communities as the market has improved.

Income (loss) before income taxes increased $5.1 million compared to the prior year to a profit of $3.8 million for the three months ended July 31, 2013.  The improvement from a loss to a profit for the three months ended July 31, 2013 was primarily due to the impact of the increase in homebuilding revenue discussed above and a significant increase in gross margin percentage before interest expense.

Homebuilding revenues increased 33.7% for the nine months ended July 31, 2013 compared to the same period in the prior year.  The increase for the nine months ended July 31, 2013 was attributed to a 38.4% increase in average sales price, offset by a 0.8% decrease in homes delivered, as there were less communities open for sale at July 31, 2013 compared to July 31, 2012. The increase in average sales price was due to the different mix of communities delivering in the nine months ended July 31, 2013 compared to the same period of the prior year, as well as increased prices in certain communities as the market has improved. This increase was also partially offset by a $3.1 million decrease in land sales and other revenue.

Income (loss) before income taxes increased $10.3 million compared to the prior year to a profit of $5.1 million for the nine months ended July 31, 2013.  The improvement from a loss to a profit for the nine months ended July 31, 2013 was primarily due to the impact of the increase in homebuilding revenue discussed above and a significant increase in gross margin percentage before interest expense.

Financial Services

Financial services consist primarily of originating mortgages from our homebuyers, selling such mortgages in the secondary market, and title insurance activities. We use mandatory investor commitments and forward sales of mortgage-backed securities (“MBS”) to hedge our mortgage-related interest rate exposure on agency and government loans. These instruments involve, to varying degrees, elements of credit and interest rate risk. Credit risk associated with MBS forward commitments and loan sales transactions is managed by limiting our counterparties to investment banks, federally regulated bank affiliates and other investors meeting our credit standards. Our risk, in the event of default by the purchaser, is the difference between the contract price and fair value of the MBS forward commitments. For the first three quarters of fiscal 2013 and 2012, Federal Housing Administration and Veterans Administration (“FHA/VA”) loans represented 34.1% and 43.2%, respectively, of our total loans. While the origination of FHA/VA loans have decreased from the first three quarters of fiscal 2012 to the first three quarters of fiscal 2013, our conforming conventional loan originations as a percentage of our total loans increased from 51.6% for the first three quarters of fiscal 2012 to 61.0% for the first three quarters of fiscal 2013. Profits and losses relating to the sale of mortgage loans are recognized when legal control passes to the buyer of the mortgage and the sales price is collected.

During the three and nine months ended July 31, 2013, financial services provided a $6.3 million and $14.0 million pretax profit compared to $4.7 million and $9.3 million of pretax profit, respectively, for the same periods of fiscal 2012. Revenues were up 19.4% for the three months ended July 31, 2013 compared to the same period of the prior year and costs were up 8.7% for such period. Mortgage settlements and the average price of loans settled increased for the three months ended July 31, 2013 compared to the same period in the prior year, contributing to the increase in revenues. The increase in costs was attributed to the increase in the number of loans closed during such period, as well as an increase in salary costs due to increased headcount and other overhead costs. While revenues were up 35.5% for the nine months ended July 31, 2013 compared to the same period of the prior year, costs were up 27.3% for such period. Mortgage settlements and the average price of loans settled increased for the nine months ended July 31, 2013 compared to the same period in the prior year, contributing to the increase in revenues. The increase in costs was due to higher salary costs due to increased headcount and other overhead costs and to the increase in costs associated with the increase in the number of loans closed during such period. In the market areas served by our wholly owned mortgage banking subsidiaries, approximately 72.6% and 72.9% of our non-cash homebuyers obtained mortgages originated by these subsidiaries during the three months ended July 31, 2013 and 2012, respectively, and 72.7% and 75.4% of our non-cash homebuyers obtained mortgages originated by these subsidiaries for the nine months ended July 31, 2013 and 2012, respectively. Servicing rights on new mortgages originated by us are sold with the loans.

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Corporate General and Administrative

Corporate general and administrative expenses include the operations at our headquarters in Red Bank, New Jersey. These expenses include payroll, stock compensation, facility and other costs associated with our executive offices, information services, human resources, corporate accounting, training, treasury, process redesign, internal audit, construction services, and administration of insurance, quality and safety. Corporate general and administrative expenses increased to $14.1 million for the three months ended July 31, 2013 compared to $11.9 million for the three months ended July 31, 2012, and increased to $40.3 million for the nine months ended July 31, 2013 compared to $37.0 million for the nine months ended July 31, 2012. The increase for the three and nine months ended July 31, 2013 from the prior year period was attributed to increased total compensation as a result of a slight increase in headcount, additional amounts accrued for bonuses as a result of improved operating performance and additional professional services for various corporate operations.

Other Interest

Other interest decreased $2.6 million to $21.9 million for the three months ended July 31, 2013 compared to the three months ended July 31, 2012 and decreased $4.1 million to $68.6 million for the nine months ended July 31, 2013 compared to the nine months ended July 31, 2012. Our assets that qualify for interest capitalization (inventory under development) are less than our debt, and therefore a portion of interest not covered by qualifying assets must be directly expensed. For the three and nine months ended July 31, 2013, our inventory balances for the qualifying assets have increased enough to cause the amount of interest required to be directly expensed to decrease. In addition, our interest incurred decreased compared to the prior year for both the three and nine months as a result of a lower effective interest rate on our outstanding debt, resulting in less interest that was required to be directly expensed.

Other Operations

Other operations consist primarily of miscellaneous residential housing operations expenses, senior rental residential property operations, rent expense for commercial office space, amortization of prepaid bond fees, noncontrolling interest relating to consolidated joint ventures, and corporate owned life insurance. Other operations generated expenses of $1.8 million and income of $0.1 million for the three and nine months ended July 31, 2013 compared to $3.1 million of income and $3.3 million of expenses for the three and nine months ended July 31, 2012. The increase in expenses for the three months ended July 31, 2013 was reflective of a gain recognized from the sale of one of our senior rental residential properties during the third quarter of fiscal 2012. We had a similar senior rental property sale in the second quarter of fiscal 2013, therefore the nine months year over year comparison was not impacted by these sales. The decrease of expense to income for the nine months ended July 31, 2013 was primarily due to the $4.7 million of costs incurred in the prior year from a debt-for-debt exchange on November 1, 2011. Due to the then existing financial condition of K. Hovnanian as determined in accordance with ASC 470-60 and, because the holders of K. Hovnanian’s senior notes that exchanged such notes for 2021 Notes granted K. Hovnanian a concession in the form of extended maturities and reduced interest rates, the debt exchange was accounted for as a troubled debt restructuring, which required any costs incurred associated with the exchange to be expensed as incurred.  

Gain on Extinguishment of Debt

There were no debt repurchases and/or exchanges during the three and nine months ended July 31, 2013, however, such transactions during the three and nine months ended July 31, 2012, resulted in a gain on extinguishment of debt of $6.2 million and $58.0 million, respectively. During the three months ended January 31, 2012, we repurchased in the open market a total of $44.0 million principal amount of various issues of our unsecured senior notes due 2016 for an aggregate purchase price of $19.0 million, plus accrued and unpaid interest. We recognized a gain of $24.7 million net of the write-off of unamortized discounts and fees related to these purchases, which represents the difference between the aggregate principal amounts of the notes purchased and the total purchase price. As noted above, the accounting for the November 1, 2011 debt exchange was treated as a troubled debt restructuring. Under this accounting, the Company did not recognize any gain or loss on extinguishment of debt. During the three months ended April 30, 2012, we repurchased a total of $75.4 million principal amount of various issues of our unsecured notes due 2016 and 2017 for an aggregate purchase price of $51.7 million, plus accrued and unpaid interest. We recognized a gain of $23.3 million net of the write-off of unamortized discounts and fees related to these purchases, which represents the difference between the aggregate principal amounts of the notes purchased and the total purchase price. During the three months ended July 31, 2012, we repurchased for cash in the open market $2.0 million principal amount of our 11.875% Senior Notes due 2015 for an aggregate purchase price of $1.5 million, plus accrued and unpaid interest. We recognized a gain of $0.4 million net of the write-off of unamortized discounts and fees related to these purchases, which represents the difference between the aggregate principal amounts of the notes purchased and the total purchase price.During the second quarter of fiscal 2012, we exchanged $9.1 million aggregate principal amount of our outstanding 8.625% Senior Notes due 2017 and $3.1 million aggregate principal amount of our 12.072% Senior Subordinated Amortizing Notes for Class A Common Stock, as discussed in Notes 11, 12 and 16 to the Condensed Consolidated Financial Statements. These transactions resulted in a gain on extinguishment of debt of $3.7 million for the nine months ended July 31, 2012. During the third quarter of fiscal 2012, we exchanged $9.2 million aggregate principal amount of our outstanding 8.625% Senior Notes due 2017, $7.8 million aggregate principal amount of our 6.25% Senior Notes due 2016 and $4.0 million aggregate principal amount of our 7.5% Senior Notes due 2016 for Class A Common Stock, as discussed in Notes 11 and 16 to the Condensed Consolidated Financial Statements. These transactions resulted in a gain on extinguishment of debt of $5.8 million for the three and nine months ended July 31, 2012.  

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      Under the terms of our indentures governing our bonds, we have the right to make certain redemptions and, depending on market conditions and covenant restrictions, may do so from time to time.  We may also continue to make additional debt purchases and/or exchanges for debt or equity from time to time through tender offers, open market purchases, private transactions or otherwise from time to time depending on market conditions and covenant restrictions.  

Income From Unconsolidated Joint Ventures

Income from unconsolidated joint ventures was $3.7 million and $6.8 million for the three and nine months ended July 31, 2013, compared to $0.9 million and $2.3 million for the three and nine months ended July 31, 2012, an increase of $2.8 million and $4.5 million for the three and nine months ended July 31, 2013, respectively. The increase in income for the three and nine months ended July 31, 2013 was due to certain of our joint ventures delivering more homes and thus increased profits. In addition, for the nine months ended July 31, 2013 we recognized profit from one of our land development joint ventures, as we share 50% of the joint venture’s profit. These increased profits, partially offset by the expenses incurred for two of our most recently formed joint ventures in the development and construction stage, generated a favorable variance for the three and nine months ended July 31, 2013 compared to the same period of the prior year.

Total Taxes

The total income tax expense of $1.9 million recognized for the three months ended July 31, 2013 was primarily due to state tax expenses and state tax reserves for uncertain state tax positions. The total income tax benefit of $10.2 million recognized for the nine months ended July 31, 2013 was primarily due to the release of reserves for a federal tax position that was settled with the Internal Revenue Service and a favorable state tax audit settlement. The total income tax benefit of $36.5 million and $35.3 million for the three and nine months ended July 31, 2012, respectively, was primarily due to the reversal of reserves for uncertain state tax positions that have been determined to be effectively settled.

 Deferred federal and state income tax assets primarily represent the deferred tax benefits arising from temporary differences between book and tax income which will be recognized in future years as an offset against future taxable income. If the combination of future years’ income (or loss) and the reversal of the timing differences results in a loss, such losses can be carried forward to future years. In accordance with ASC 740, we evaluate our deferred tax assets quarterly to determine if valuation allowances are required.  ASC 740 requires that companies assess whether valuation allowances should be established based on the consideration of all available evidence using a “more likely than not” standard. Because of the downturn in the homebuilding industry, resulting in significant inventory and intangible impairments in prior years, we are in a three-year cumulative loss position as of July 31, 2013. According to ASC 740, a three-year cumulative loss is significant negative evidence in considering whether deferred tax assets are realizable. Our valuation allowance for deferred taxes amounted to $941.1 million and $937.9 million at July 31, 2013 and October 31, 2012, respectively. The valuation allowance increased during the nine months ended July 31, 2013 primarily due to additional valuation allowance recorded for the federal and state tax benefits related to the losses incurred during this period.

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 Inflation

Inflation has a long-term effect, because increasing costs of land, materials, and labor result in increasing sale prices of our homes.  In general, these price increases have been commensurate with the general rate of inflation in our housing markets and have not had a significant adverse effect on the sale of our homes.  A significant risk faced by the housing industry generally is that rising house construction costs, including land and interest costs, will substantially outpace increases in the income of potential purchasers.

Inflation has a lesser short-term effect, because we generally negotiate fixed price contracts with many, but not all, of our subcontractors and material suppliers for the construction of our homes.  These prices usually are applicable for a specified number of residential buildings or for a time period of between three to twelve months.  Construction costs for residential buildings represent approximately 56.0% of our homebuilding cost of sales.

Safe Harbor Statement

All statements in this Quarterly Report on Form 10-Q that are not historical facts should be considered “Forward-Looking Statements” within the meaning of the “Safe Harbor” provisions of the Private Securities Litigation Reform Act of 1995.  Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.  Although we believe that our plans, intentions and expectations reflected in, or suggested by, such forward-looking statements are reasonable, we can give no assurance that such plans, intentions, or expectations will be achieved.  Such risks, uncertainties and other factors include, but are not limited to:

● Changes in general and local economic, industry and business conditions and impacts of the sustained homebuilding downturn;

● Adverse weather and other environmental conditions and natural disasters;

● Changes in market conditions and seasonality of the Company’s business;

● Changes in home prices and sales activity in the markets where the Company builds homes;

● Government regulation, including regulations concerning development of land, the home building, sales and customer financing processes, tax laws and the environment;

● Fluctuations in interest rates and the availability of mortgage financing;

● Shortages in, and price fluctuations of, raw materials and labor;

● The availability and cost of suitable land and improved lots;

● Levels of competition;

● Availability of financing to the Company;

● Utility shortages and outages or rate fluctuations;

● Levels of indebtedness and restrictions on the Company's operations and activities imposed by the agreements governing the Company's outstanding indebtedness;

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● The Company's sources of liquidity;

● Changes in credit ratings;

● Availability of net operating loss carryforwards;

● Operations through joint ventures with third parties;

● Product liability litigation, warranty claims and claims made by mortgage investors;

● Successful identification and integration of acquisitions;

● Changes in tax laws affecting the after-tax costs of owning a home;

● Significant influence of the Company's controlling stockholders; and

● Geopolitical risks, terrorist acts and other acts of war.

Certain risks, uncertainties, and other factors are described in detail in Part I, Item 1 “Business” and Part I, Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended October 31, 2012. Except as otherwise required by applicable securities laws, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changed circumstances or any other reason after the date of this Quarterly Report on Form 10-Q.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

A primary market risk facing us is interest rate risk on our long term debt.  In connection with our mortgage operations, mortgage loans held for sale, and the associated mortgage warehouse lines of credit under our Master Repurchase Agreements are subject to interest rate risk; however, such obligations reprice frequently and are short-term in duration.  In addition, we hedge the interest rate risk on mortgage loans by obtaining forward commitments from private investors.  Accordingly, the interest rate risk from mortgage loans is not material.  We do not use financial instruments to hedge interest rate risk except with respect to mortgage loans.  We are also subject to foreign currency risk but we do not believe that this risk is material.  The following table sets forth as of July 31, 2013, our long-term debt obligations, principal cash flows by scheduled maturity, weighted average interest rates and estimated fair value (“FV”).

	Long Term Debt as of July 31, 2013 by Fiscal Year of Expected Maturity Date
(Dollars in thousands)	2013			2014			2015			2016			2017			Thereafter			Total			FV at July 31, 2013
Long term debt(1):
Fixed rate	$	56,581		$	43,724		$	90,700		$	223,691		$	127,662		$	1,073,394		$	1,615,752		$	1,701,640
Weighted average interest rate		5.96	%		6.94	%		10.26	%		6.84	%		8.70	%		7.01	%		7.26	%

(1)  Does not include the mortgage warehouse lines of credit made under our Master Repurchase Agreements.  Also does not include the new $75 million revolving Credit Facility under which there were no outstanding borrowings as of July 31, 2013. See Note 10 to our Condensed Consolidated Financial Statements for more information.

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ITEM 4.  CONTROLS AND PROCEDURES

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company’s reports under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including its chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosures.  Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.  The Company’s management, with the participation of the Company’s chief executive officer and chief financial officer, has evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of July 31, 2013.  Based upon that evaluation and subject to the foregoing, the Company’s chief executive officer and chief financial officer concluded that the design and operation of the Company’s disclosure controls and procedures are effective to accomplish their objectives.

There was no change in the Company’s internal control over financial reporting that occurred during the quarter ended July 31, 2013 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II.  Other Information

ITEM 1.  LEGAL PROCEEDINGS

Information with respect to legal proceedings is incorporated into this Part II, Item 1 from Note 7 to the Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Item 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Recent Sales of Unregistered Equity Securities

None.

Issuer Purchases of Equity Securities

No shares of our Class A Common Stock or Class B Common Stock were purchased by or on behalf of the Company or any affiliated purchaser during the fiscal third quarter of 2013. The maximum number of shares that may yet be purchased under the Company’s repurchase plans or programs is 0.5 million.

Dividends

Certain debt agreements to which we are a party contain restrictions on the payment of cash dividends.  As a result of the most restrictive of these provisions, we are not currently able to pay any cash dividends.  We have never paid a cash dividend to common stockholders.

ITEM 6.  EXHIBITS

3(a)	Restated Certificate of Incorporation of the Registrant.(2)
3(b)	Restated Bylaws of the Registrant.(3)
4(a)	Specimen Class A Common Stock Certificate.(6)
4(b)	Specimen Class B Common Stock Certificate.(6)
4(c)	Certificate of Designations, Powers, Preferences and Rights of the 7.625% Series A Preferred Stock of Hovnanian Enterprises, Inc., dated January 12, 2005.(4)
4(d)	Certificate of Designations of the Series B Junior Preferred Stock of Hovnanian Enterprises, Inc., dated August 14, 2008.(1)
4(e)	Rights Agreement, dated as of August 14, 2008, between Hovnanian Enterprises, Inc. and National City Bank, as Rights Agent, which includes the Form of Certificate of Designation as Exhibit A, Form of Right Certificate as Exhibit B and the Summary of Rights as Exhibit C.(5)

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10(a)*	Form of 2013 Incentive Stock Option Agreement – Performance Option Grant (Class A shares).
10(b)*	Form of 2013 Non-Qualified Stock Option Agreement – Performance Option Grant (Class B shares).
31(a)	Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer.
31(b)	Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer.
32(a)	Section 1350 Certification of Chief Executive Officer.
32(b)	Section 1350 Certification of Chief Financial Officer.
101	The following financial information from our Quarterly Report on Form 10-Q for the quarter ended July 31, 2013, formatted in Extensible Business Reporting Language (XBRL): (i) the Condensed Consolidated Balance Sheets at July 31, 2013 and October 31, 2012, (ii) the Condensed Consolidated Statements of Operations for the three and nine months ended July 31, 2013 and 2012, (iii) the Condensed Consolidated Statement of Equity for the nine months ended July 31, 2013, (iv) the Condensed Consolidated Statements of Cash Flows for the nine months ended July 31, 2013 and 2012, and (v) the Notes to Condensed Consolidated Financial Statements.

* Management contracts or compensatory plans or arrangements.

(1)	Incorporated by reference to Exhibits to Quarterly Report on Form 10-Q of the Registrant for the quarter ended July 31, 2008.
(2)	Incorporated by reference to Exhibits to Current Report on Form 8-K of the Registrant filed March 15, 2013.
(3)	Incorporated by reference to Exhibits to Current Report on Form 8-K of the Registrant filed December 21, 2009.
(4)	Incorporated by reference to Exhibits to Current Report on Form 8-K of the Registrant filed on July 13, 2005.
(5)	Incorporated by reference to Exhibits to the Registration Statement on Form 8-A of the Registrant filed August 14, 2008.
(6)	Incorporated by reference to Exhibits to Quarterly Report on Form 10-Q of the Registrant for the quarter ended January 31, 2009.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

HOVNANIAN ENTERPRISES, INC.
(Registrant)
DATE:	September 9, 2013
	/s/ J. LARRY SORSBY
	J. Larry Sorsby
	Executive Vice President and
	Chief Financial Officer
DATE:	September 9, 2013
	/s/ Brad G. O’Connor
	Brad G. O’Connor
	Vice President/Chief Accounting Officer/Corporate Controller

73 

EX-10

EXHIBIT 10(a)     

2012 HOVNANIAN ENTERPRISES, INC.
STOCK INCENTIVE PLAN

INCENTIVE STOCK OPTION AGREEMENT

(Performance Option Grant)

Participant:	Date of Grant:
Number of Class A Shares:	Grant Price:

Vesting Schedule: *
Date	Number of Shares
Option Termination Date:

1.     Grant of the Option. For valuable consideration, receipt of which is hereby acknowledged, Hovnanian Enterprises, Inc., a Delaware Corporation (The "Company"), hereby grants the right and option (the "Option") to purchase, on the terms and conditions hereinafter set forth, all or any part of an aggregate number of Class A Shares set forth above. This grant is made subject to the terms and conditions of the 2012 Company Stock Incentive Plan (the "Plan"), which Plan is incorporated herein by reference and subject to amendments to the Plan. The purchase price of the Shares subject to the Option (the "Grant Price") shall be the price per Share set forth above. This Option is intended to qualify as an Incentive Stock Option within the meaning of Section 422 of the Internal Revenue Code of 1986 (the "Code") to the extent possible under Section 422 of the Code. Any portion of the Option which is ineligible to be treated as an Incentive Stock Option (due to Section 422(d) of the Code or otherwise) shall be treated as a nonqualified option.

2.     Vesting. In the event that the performance goals set forth in the following sentence are achieved, this Option will vest in accordance with the schedule set forth above, subject to Section 3 of this Agreement. No portion of the Option will vest unless the Committee determines that the Company achieved $100 million in Pre-tax Profit in at least one of Fiscal 2014, Fiscal 2015 or Fiscal 2016 (the earliest of such fiscal years in which the Pre-tax Profit goal is achieved constituting the “Performance Achievement”). As used herein, “Pre-tax Profit” is defined as earnings (losses) before income tax expense as reflected on our audited financial statements, excluding the impact of any items deemed by the Committee to be extraordinary items for financial reporting purposes (e.g., losses from land impairments and losses from debt repurchases/debt retirement such as call premiums, above par purchase prices and related issuance costs).

^*Subject to achievement of performance goals, as set forth under Section 2.

Incentive Stock Option Agreement Page 1

 

3.       Exercise of Option.

(a)     Period of Exercise.

(i)     In General. The Option must be exercised before the Option Termination Date set forth above (the "Option Termination Date"). The Participant may exercise less than the full installment available to him or her under this Option, but the Participant must exercise this Option in full shares of the Common Stock of the Company. The Participant is limited to ten exercises during the term of this Option.

(ii)     Termination of Employment Other Than Due to Death, Disability or Retirement. If, prior to the Option Termination Date, the Participant ceases to be employed by the Company or a subsidiary thereof (otherwise than by reason of death, Disability or Retirement), the nonvested portion of the Option shall be canceled and the vested portion of the Option, to the extent not previously exercised, shall remain exercisable until the earlier of (a) the Option Termination Date and (b) the sixtieth (60^th) day after the date of cessation of employment, and thereafter all Options, to the extent not previously exercised, shall terminate together with all other rights hereunder. This Option shall be wholly void and of no effect after the Option Termination Date. For purposes of this Agreement, "Disability" shall mean disability within the meaning of Section 22(e)(3) of the Code, and "Retirement" shall mean termination of employment on or after age 60, or on or after age 58 with at least 15 years of "Service" to the Company and its Subsidiaries immediately preceding such termination of employment. For this purpose, "Service" means the period of employment immediately preceding Retirement, plus any prior periods of employment with the Company and its Subsidiaries of one or more years' duration, unless they were succeeded by a period of non-employment with the Company and its Subsidiaries of more than three years' duration.

(iii)     Termination of Employment Due to Death. If, prior to the Option Termination Date, the Participant ceases to be employed by the Company or a subsidiary thereof due to the Participant's death, the Option, to the extent not previously vested and exercised, shall become fully vested and exercisable, if at all, upon the later of (x) the date the Participant ceases to be employed by the Company or a subsidiary thereof due to the Participant's death and (y) the date of the Performance Achievement, and the Option shall remain exercisable (assuming it becomes initially exercisable) until the Option Termination Date, and thereafter all Options, to the extent not previously exercised, shall terminate together with all other rights hereunder. During such time, the Option will be exercisable by the person or persons to whom the Participant's rights under the Option shall pass by will or by the applicable laws of descent and distribution. For the avoidance of doubt, upon a Performance Failure (as defined below), the Option shall immediately terminate, regardless of whether such Performance Failure occurs prior to or following the Participant’s termination of employment due to death.

(iv)     Termination of Employment Due to Disability. If prior to the Option Termination Date, the Participant ceases to be employed by the Company or a subsidiary thereof by reason of Disability, the Option, to the extent not previously vested and exercised, shall become fully vested and exercisable, if at all, upon the later of (x) the date the Participant ceases to be employed by the Company or a subsidiary thereof by reason of Disability and (y) the date of the Performance Achievement, and the Option shall remain exercisable (assuming it becomes initially exercisable) until the Option Termination Date by the Participant or his or her designated personal representative on the Participant's behalf, and thereafter all Options, to the extent not previously exercised, shall terminate together with all other rights hereunder. For the avoidance of doubt, upon a Performance Failure (as defined below), the Option shall immediately terminate, regardless of whether such Performance Failure occurs prior to or following the Participant’s termination of employment due to Disability.

Incentive Stock Option Agreement Page 2

(v)     Termination of Employment Due to Retirement. If prior to the Option Termination Date the Participant ceases to be employed by the Company or a subsidiary thereof due to Participant's Retirement, the Option, to the extent not previously vested and exercised, shall become fully vested and exercisable, if at all, upon the later of (x) the Retirement date and (y) the date of the Performance Achievement, and the Option shall remain exercisable (assuming it becomes initially exercisable) until the earlier of (i) the Option Termination Date and (ii) the first anniversary of the later to occur of the Participant's Retirement and the date of the Performance Achievement, and thereafter all Options, to the extent not previously exercised, shall terminate together with all other rights hereunder. Notwithstanding the preceding sentence (and without limiting the Participant’s rights in connection with a Retirement), in the event of the Participant’s Qualified Retirement, the Option, to the extent not previously vested and exercised, shall become fully vested and exercisable, if at all, upon the later of (x) the Qualified Retirement date and (y) the date of the Performance Achievement, and the Option shall remain exercisable (assuming it becomes initially exercisable) until the Option Termination Date and shall then terminate together with all other rights under this Agreement. As used herein, the term “Qualified Retirement” means the Participant’s termination of employment with the Company and its Subsidiaries at or after reaching age 65 with at least 10 years of Service. For the avoidance of doubt, upon a Performance Failure (as defined below), the Option shall immediately terminate, regardless of whether such Performance Failure occurs prior to or following a Retirement or Qualified Retirement.

(vi)     Failure to Achieve Performance Goals. In the event that the Committee determines that the Company has failed to achieve its Pre-tax Profit performance goals as forth under Section 2 on or prior to the end of Fiscal 2016 (a “Performance Failure”), then the entire Option shall immediately terminate together with all other rights hereunder.

(b)     Method of Exercise. Subject to the provisions of the Plan, this Option may be exercised by written notice to the Company stating the number of shares with respect to which it is being exercised and accompanied by payment of the Option Price (a) by certified or bank cashier's check payable to the order of the Company in New York Clearing House Funds, (b) by surrender or delivery to the Company of shares of its Common Stock that have been held by the Participant for at least six months (or such other period of time as may be determined by the Board of Directors), or (c) in any other form acceptable to the Company together with payment or arrangement for payment of any federal income or other tax required to be withheld by the Company. As soon as practical after receipt of such notice and payment, the Company, shall, without transfer or issue tax or other incidental expense to the Participant, deliver to the Participant at the offices of the Company at 110 West Front Street, Red Bank, New Jersey, or such other place as may be mutually acceptable, or, at the election of the Company, by first-class insured mail addressed to the Participant at his or her address shown in the employment records of the Company or at the location at which he or she is employed by the Company or a subsidiary, a certificate or certificates for previously unissued shares or reacquired shares of its Common Stock as the Company may elect.

(c)     Delivery.

(i)     The Company may postpone the time of delivery of certificates for shares of its Common Stock for such additional time as the Company shall deem necessary or desirable to enable it to comply with the listing requirements of any securities exchange upon which the Common Stock of the Company may be listed, or the requirements of the Securities Act of 1933 or the Securities Exchange Act of 1934 or any Rules or Regulations of the Securities and Exchange Commission promulgates thereunder or the requirements of applicable state laws relating to authorization, issuance or sale of securities.

Incentive Stock Option Agreement Page 3

(ii)     If the Participant fails to accept delivery of the shares of Common Stock of the Company upon tender of delivery thereof, his or her right to exercise this Option with respect to such undelivered shares may be terminated by the Company.

4.     Notification of Disposition. Participant agrees to notify the Company in writing, within thirty days, of any disposition (whether by sale, exchange, gift, or otherwise) of shares of Common Stock acquired by the Participant pursuant to the exercise of this Option within one year of the transfer of such shares to the Participant.

5.     Adjustments Upon Certain Events. Subject to the terms of the Plan, in the event of any change in the outstanding Shares by reason of any Share dividend or split, reorganization, recapitalization, merger, consolidation, amalgamation, spin-off or combination transaction or exchange of Shares or other similar events (collectively, an "Adjustment Event"), the Committee shall, in its sole discretion, make an appropriate and equitable adjustment in the number of Shares subject to this Agreement to reflect such Adjustment Event. Any such adjustment made by the Committee shall be final and binding upon the Participant, the Company and all other interested persons.

6.     No Right to Continued Employment. Neither the Plan nor this Agreement shall be construed as giving the Participant the right to be retained in the employ of, or in any consulting relationship to, the Company or any Affiliate. Further, the Company or an Affiliate may at any time dismiss the Participant, free from any liability or any claim under the Plan or this Agreement, except as otherwise expressly provided herein.

7.     No Acquired Rights. In participating in the Plan, the Participant acknowledges and accepts that the Board has the power to amend or terminate the Plan, to the extent permitted thereunder, at any time and that the opportunity given to the Participant to participate in the Plan is entirely at the discretion of the Committee and does not obligate the Company or any of its Affiliates to offer such participation in the future (whether on the same or different terms). The Participant further acknowledges and accepts that such Participant's participation in the Plan is not to be considered part of any normal or expected compensation and that the termination of the Participant's employment under any circumstances whatsoever will give the Participant no claim or right of action against the Company or its Affiliates in respect of any loss of rights under this Agreement or the Plan that may arise as a result of such termination of employment.

8.     No Rights of a Shareholder. The Participant shall not have any rights or privileges as a shareholder of the Company until the Shares in question have been registered in the Company's register of shareholders.

9.     Legend on Certificates. Any Shares issued or transferred to the Participant pursuant to Section 3 of this Agreement shall be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under the Plan or the rules, regulations, and other requirements of the Securities and Exchange Commission, any stock exchange upon which such Shares are listed, and any applicable Federal or state laws or relevant securities laws of the jurisdiction of the domicile of the Participant, and the Committee may cause a legend or legends to be put on any certificates representing such Shares to make appropriate reference to such restrictions.

Incentive Stock Option Agreement Page 4

10.     Transferability. The Option may not be assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by the Participant otherwise than by will or by the laws of descent and distribution. Any purported assignment, alienation, pledge, attachment, sale, transfer or encumbrance not permitted by this Section 10 shall be void and unenforceable against the Company or any Affiliate.

11.     Withholding. The Participant may be required to pay to the Company or any Affiliate and the Company or any Affiliate shall have the right and is hereby authorized to withhold from any transfer due under this Agreement or under the Plan or from any compensation or other amount owing to the Participant, applicable withholding taxes with respect to any transfer under this Agreement or under the Plan and to take such action as may be necessary in the opinion of the Company to satisfy all obligations for the payment of such taxes. Notwithstanding the foregoing, if the Participant's employment with the Company terminates prior to the transfer of all of the Shares under this Agreement, the payment of any applicable withholding taxes with respect to any further transfer of Shares under this Agreement or the Plan shall be made solely through the sale of Shares equal to the statutory minimum withholding liability.

12.     Non-Solicitation Covenants.

(a)     The Participant acknowledges and agrees that, during the Participant's employment with the Company and its Affiliates and upon the Participant's termination of Employment with the Company and its Affiliates for any reason, for a period commencing on the termination of such Employment and ending on the second anniversary of such termination, the Participant shall not, whether on Participant's own behalf or on behalf of or in conjunction with any person, company, business entity or other organization whatsoever, directly or indirectly:

(i)       solicit any employee of the Company or its Affiliates with whom the Participant had any contact during the last two years of the Participant's employment, or who worked in the same business segment or division as the Participant during that period to terminate employment with the Company or its Affiliates;

(ii)      solicit the employment or services of, or hire, any such employee whose employment with the Company or its Affiliates terminated coincident with, or within twelve (12) months prior to or after the termination of Participant's employment with the Company and its Affiliates;

(iii)     directly or indirectly, solicit to cease to work with the Company or its Affiliates any consultant then under contract with the Company or its Affiliates.

(b)     It is expressly understood and agreed that although the Participant and the Company consider the restrictions contained in this Section 12 to be reasonable, if a final judicial determination is made by a court of competent jurisdiction that the time or any other restriction contained in this Agreement is an unenforceable restriction against the Participant, the provisions of this Agreement shall not be rendered void but shall be deemed amended to apply as to such maximum time and territory and to such maximum extent as such court may judicially determine or indicate to be enforceable. Alternatively, if any court of competent jurisdiction finds that any restriction contained in this Agreement is unenforceable, and such restriction cannot be amended so as to make it enforceable, such finding shall not affect the enforceability of any of the other restrictions contained herein.

13.     Specific Performance. The Participant acknowledges and agrees that the Company's remedies at law for a breach or threatened breach of any of the provisions of Section 12 would be inadequate and the Company would suffer irreparable damages as a result of such breach or threatened breach. In recognition of this fact, the Participant agrees that, in the event of such a breach or threatened breach, in addition to any remedies at law, the Company, without posting any bond, shall be entitled to cease making any payments or providing any benefit otherwise required by this Agreement and obtain equitable relief in the form of specific performance, temporary restraining order, temporary or permanent injunction or any other equitable remedy which may then be available.

Incentive Stock Option Agreement Page 5

14.     Choice of Law. THE INTERPRETATION, PERFORMANCE AND ENFORCEMENT OF THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF DELAWARE WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.

15.     Option Subject to Plan. By entering into this Agreement, the Participant agrees and acknowledges that the Participant has received and read a copy of the Plan. The Option is subject to the Plan. In the event of a conflict between any term or provision contained herein and a term or provision of the Plan, the applicable terms and provisions of the Plan will govern and prevail.

16.     Signature in Counterparts. This Agreement may be signed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement.

HOVNANIAN ENTERPRISES, INC.
By:
	Stephen D. Weinroth, Chair Compensation Committee
PARTICIPANT
By:

Incentive Stock Option Agreement Page 6

EX-10

EXHIBIT 10(b)

2012 HOVNANIAN ENTERPRISES, INC.
STOCK INCENTIVE PLAN

NON-QUALIFIED STOCK OPTION AGREEMENT

(Performance Option Grant)

Participant:	Date of Grant:
Number of Class B Shares:	Grant Price:

Vesting Schedule: *
Date	Number of Shares
Option Termination Date:

1.     Grant of the Option. For valuable consideration, receipt of which is hereby acknowledged, Hovnanian Enterprises, Inc., a Delaware Corporation (The "Company"), hereby grants the right and option (the "Option") to purchase, on the terms and conditions hereinafter set forth, all or any part of an aggregate number of Class B Shares set forth above. This grant is made subject to the terms and conditions of the 2012 Company Stock Incentive Plan (the "Plan"), which Plan is incorporated herein by reference and subject to amendments to the Plan. The purchase price of the Shares subject to the Option (the "Grant Price") shall be the price per Share set forth above. This Option is not an Incentive Stock Option within the meaning of Section 422 of the Internal Revenue Code of 1986 (the "Code").

2.     Vesting. In the event that the performance goals set forth in the following sentence are achieved, this Option will vest in accordance with the schedule set forth above, subject to Section 3 of this Agreement. No portion of the Option will vest unless the Committee determines that the Company achieved $100 million in Pre-tax Profit in at least one of Fiscal 2014, Fiscal 2015 or Fiscal 2016 (the earliest of such fiscal years in which the Pre-tax Profit goal is achieved constituting the “Performance Achievement”). As used herein, “Pre-tax Profit” is defined as earnings (losses) before income tax expense as reflected on our audited financial statements, excluding the impact of any items deemed by the Committee to be extraordinary items for financial reporting purposes (e.g., losses from land impairments and losses from debt repurchases/debt retirement such as call premiums, above par purchase prices and related issuance costs).

*           Subject to achievement of performance goals, as set forth under Section 2.

Non-Qualified Stock Option Agreement Page 1

 

3.       Exercise of Option.

(a)     Period of Exercise.

(i)     In General. The Option must be exercised before the Option Termination Date set forth above (the "Option Termination Date"). The Participant may exercise less than the full installment available to him or her under this Option, but the Participant must exercise this Option in full shares of the Common Stock of the Company. The Participant is limited to ten exercises during the term of this Option.

(ii)     Termination of Employment Other Than Due to Death, Disability or Retirement. If, prior to the Option Termination Date, the Participant ceases to be employed by the Company or a subsidiary thereof (otherwise than by reason of death, Disability or Retirement), the nonvested portion of the Option shall be canceled and the vested portion of the Option, to the extent not previously exercised, shall remain exercisable until the earlier of (a) the Option Termination Date and (b) the sixtieth (60^th) day after the date of cessation of employment, and thereafter all Options, to the extent not previously exercised, shall terminate together with all other rights hereunder. This Option shall be wholly void and of no effect after the Option Termination Date. For purposes of this Agreement, "Disability" shall mean disability within the meaning of Section 22(e)(3) of the Code, and "Retirement" shall mean termination of employment on or after age 60, or on or after age 58 with at least 15 years of "Service" to the Company and its Subsidiaries immediately preceding such termination of employment. For this purpose, "Service" means the period of employment immediately preceding Retirement, plus any prior periods of employment with the Company and its Subsidiaries of one or more years' duration, unless they were succeeded by a period of non-employment with the Company and its Subsidiaries of more than three years' duration.

(iii)     Termination of Employment Due to Death. If, prior to the Option Termination Date, the Participant ceases to be employed by the Company or a subsidiary thereof due to the Participant's death, the Option, to the extent not previously vested and exercised, shall become fully vested and exercisable, if at all, upon the later of (x) the date the Participant ceases to be employed by the Company or a subsidiary thereof due to the Participant's death and (y) the date of the Performance Achievement, and the Option shall remain exercisable (assuming it becomes initially exercisable) until the Option Termination Date, and thereafter all Options, to the extent not previously exercised, shall terminate together with all other rights hereunder. During such time, the Option will be exercisable by the person or persons to whom the Participant's rights under the Option shall pass by will or by the applicable laws of descent and distribution. For the avoidance of doubt, upon a Performance Failure (as defined below), the Option shall immediately terminate, regardless of whether such Performance Failure occurs prior to or following the Participant’s termination of employment due to death.

(iv)     Termination of Employment Due to Disability. If prior to the Option Termination Date, the Participant ceases to be employed by the Company or a subsidiary thereof by reason of Disability, the Option, to the extent not previously vested and exercised, shall become fully vested and exercisable, if at all, upon the later of (x) the date the Participant ceases to be employed by the Company or a subsidiary thereof by reason of Disability and (y) the date of the Performance Achievement, and the Option shall remain exercisable (assuming it becomes initially exercisable) until the Option Termination Date by the Participant or his or her designated personal representative on the Participant's behalf, and thereafter all Options, to the extent not previously exercised, shall terminate together with all other rights hereunder. For the avoidance of doubt, upon a Performance Failure (as defined below), the Option shall immediately terminate, regardless of whether such Performance Failure occurs prior to or following the Participant’s termination of employment due to Disability.

Non-Qualified Stock Option Agreement Page 2

 

(v)     Termination of Employment Due to Retirement. If prior to the Option Termination Date the Participant ceases to be employed by the Company or a subsidiary thereof due to Participant's Retirement, the Option, to the extent not previously vested and exercised, shall become fully vested and exercisable, if at all, upon the later of (x) the Retirement date and (y) the date of the Performance Achievement, and the Option shall remain exercisable (assuming it becomes initially exercisable) until the earlier of (i) the Option Termination Date and (ii) the first anniversary of the later to occur of the Participant's Retirement and the date of the Performance Achievement, and thereafter all Options, to the extent not previously exercised, shall terminate together with all other rights hereunder. Notwithstanding the preceding sentence (and without limiting the Participant’s rights in connection with a Retirement), in the event of the Participant’s Qualified Retirement, the Option, to the extent not previously vested and exercised, shall become fully vested and exercisable, if at all, upon the later of (x) the Qualified Retirement date and (y) the date of the Performance Achievement, and the Option shall remain exercisable (assuming it becomes initially exercisable) until the Option Termination Date and shall then terminate together with all other rights under this Agreement. As used herein, the term “Qualified Retirement” means the Participant’s termination of employment with the Company and its Subsidiaries at or after reaching age 65 with at least 10 years of Service. For the avoidance of doubt, upon a Performance Failure (as defined below), the Option shall immediately terminate, regardless of whether such Performance Failure occurs prior to or following a Retirement or Qualified Retirement.

(vi)     Failure to Achieve Performance Goals. In the event that the Committee determines that the Company has failed to achieve its Pre-tax Profit performance goals as forth under Section 2 on or prior to the end of Fiscal 2016 (a “Performance Failure”), then the entire Option shall immediately terminate together with all other rights hereunder.

(b)     Method of Exercise. Subject to the provisions of the Plan, this Option may be exercised by written notice to the Company stating the number of shares with respect to which it is being exercised and accompanied by payment of the Option Price (a) by certified or bank cashier's check payable to the order of the Company in New York Clearing House Funds, (b) by surrender or delivery to the Company of shares of its Common Stock that have been held by the Participant for at least six months (or such other period of time as may be determined by the Board of Directors), or (c) in any other form acceptable to the Company together with payment or arrangement for payment of any federal income or other tax required to be withheld by the Company. As soon as practical after receipt of such notice and payment, the Company, shall, without transfer or issue tax or other incidental expense to the Participant, deliver to the Participant at the offices of the Company at 110 West Front Street, Red Bank, New Jersey, or such other place as may be mutually acceptable, or, at the election of the Company, by first-class insured mail addressed to the Participant at his or her address shown in the employment records of the Company or at the location at which he or she is employed by the Company or a subsidiary, a certificate or certificates for previously unissued shares or reacquired shares of its Common Stock as the Company may elect.

(c)     Delivery.

(i)     The Company may postpone the time of delivery of certificates for shares of its Common Stock for such additional time as the Company shall deem necessary or desirable to enable it to comply with the listing requirements of any securities exchange upon which the Common Stock of the Company may be listed, or the requirements of the Securities Act of 1933 or the Securities Exchange Act of 1934 or any Rules or Regulations of the Securities and Exchange Commission promulgates thereunder or the requirements of applicable state laws relating to authorization, issuance or sale of securities.

Non-Qualified Stock Option Agreement Page 3

 

(ii)     If the Participant fails to accept delivery of the shares of Common Stock of the Company upon tender of delivery thereof, his or her right to exercise this Option with respect to such undelivered shares may be terminated by the Company.

4.     Adjustments Upon Certain Events. Subject to the terms of the Plan, in the event of any change in the outstanding Shares by reason of any Share dividend or split, reorganization, recapitalization, merger, consolidation, amalgamation, spin-off or combination transaction or exchange of Shares or other similar events (collectively, an "Adjustment Event"), the Committee shall, in its sole discretion, make an appropriate and equitable adjustment in the number of Shares subject to this Agreement to reflect such Adjustment Event. Any such adjustment made by the Committee shall be final and binding upon the Participant, the Company and all other interested persons.

5.     No Right to Continued Employment. Neither the Plan nor this Agreement shall be construed as giving the Participant the right to be retained in the employ of, or in any consulting relationship to, the Company or any Affiliate. Further, the Company or an Affiliate may at any time dismiss the Participant, free from any liability or any claim under the Plan or this Agreement, except as otherwise expressly provided herein.

6.     No Acquired Rights. In participating in the Plan, the Participant acknowledges and accepts that the Board has the power to amend or terminate the Plan, to the extent permitted thereunder, at any time and that the opportunity given to the Participant to participate in the Plan is entirely at the discretion of the Committee and does not obligate the Company or any of its Affiliates to offer such participation in the future (whether on the same or different terms). The Participant further acknowledges and accepts that such Participant's participation in the Plan is not to be considered part of any normal or expected compensation and that the termination of the Participant's employment under any circumstances whatsoever will give the Participant no claim or right of action against the Company or its Affiliates in respect of any loss of rights under this Agreement or the Plan that may arise as a result of such termination of employment.

7.     No Rights of a Shareholder. The Participant shall not have any rights or privileges as a shareholder of the Company until the Shares in question have been registered in the Company's register of shareholders.

8.     Legend on Certificates. Any Shares issued or transferred to the Participant pursuant to Section 3 of this Agreement shall be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under the Plan or the rules, regulations, and other requirements of the Securities and Exchange Commission, any stock exchange upon which such Shares are listed, and any applicable Federal or state laws or relevant securities laws of the jurisdiction of the domicile of the Participant, and the Committee may cause a legend or legends to be put on any certificates representing such Shares to make appropriate reference to such restrictions.

9.     Transferability. The Option may not be assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by the Participant otherwise than by will or by the laws of descent and distribution. Notwithstanding the foregoing, a Participant may transfer this option in whole or in part by gift or domestic relations order to a family member of the Participant (a "Permitted Transferee") and, following any such transfer such option or portion thereof shall be exercisable only by the Permitted Transferee, provided that no such option or portion thereof is transferred for value, and provided further that, following any such transfer, neither such option or any portion thereof nor any right hereunder shall be transferable other than to the Participant or otherwise than by will or the laws of descent and distribution or be subject to attachment, execution or other similar process. For purposes of this paragraph, "family member" includes any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law, including adoptive relationships, any person sharing the Participant's household (other than a tenant or employee), trust in which these persons have more than fifty percent of the beneficial interest, a foundation in which these persons (or the Participant) control the management of assets and any other entity in which these persons (or the Participant) own more than fifty percent of the voting interests. Any purported assignment, alienation, pledge, attachment, sale, transfer or encumbrance not permitted by this Section 9 shall be void and unenforceable against the Company or any Affiliate.

Non-Qualified Stock Option Agreement Page 4

 

10.     Withholding. The Participant may be required to pay to the Company or any Affiliate and the Company or any Affiliate shall have the right and is hereby authorized to withhold from any transfer due under this Agreement or under the Plan or from any compensation or other amount owing to the Participant, applicable withholding taxes with respect to any transfer under this Agreement or under the Plan and to take such action as may be necessary in the opinion of the Company to satisfy all obligations for the payment of such taxes. Notwithstanding the foregoing, if the Participant's employment with the Company terminates prior to the transfer of all of the Shares under this Agreement, the payment of any applicable withholding taxes with respect to any further transfer of Shares under this Agreement or the Plan shall be made solely through the sale of Shares equal to the statutory minimum withholding liability.

11.     Non-Solicitation Covenants.

(a)     The Participant acknowledges and agrees that, during the Participant's employment with the Company and its Affiliates and upon the Participant's termination of Employment with the Company and its Affiliates for any reason, for a period commencing on the termination of such Employment and ending on the second anniversary of such termination, the Participant shall not, whether on Participant's own behalf or on behalf of or in conjunction with any person, company, business entity or other organization whatsoever, directly or indirectly:

(i)     solicit any employee of the Company or its Affiliates with whom the Participant had any contact during the last two years of the Participant's employment, or who worked in the same business segment or division as the Participant during that period to terminate employment with the Company or its Affiliates;

(ii)     solicit the employment or services of, or hire, any such employee whose employment with the Company or its Affiliates terminated coincident with, or within twelve (12) months prior to or after the termination of Participant's employment with the Company and its Affiliates;

(iii)     directly or indirectly, solicit to cease to work with the Company or its Affiliates any consultant then under contract with the Company or its Affiliates.

(b)     It is expressly understood and agreed that although the Participant and the Company consider the restrictions contained in this Section 11 to be reasonable, if a final judicial determination is made by a court of competent jurisdiction that the time or any other restriction contained in this Agreement is an unenforceable restriction against the Participant, the provisions of this Agreement shall not be rendered void but shall be deemed amended to apply as to such maximum time and territory and to such maximum extent as such court may judicially determine or indicate to be enforceable. Alternatively, if any court of competent jurisdiction finds that any restriction contained in this Agreement is unenforceable, and such restriction cannot be amended so as to make it enforceable, such finding shall not affect the enforceability of any of the other restrictions contained herein.

Non-Qualified Stock Option Agreement Page 5

 

12.     Specific Performance. The Participant acknowledges and agrees that the Company's remedies at law for a breach or threatened breach of any of the provisions of Section 11 would be inadequate and the Company would suffer irreparable damages as a result of such breach or threatened breach. In recognition of this fact, the Participant agrees that, in the event of such a breach or threatened breach, in addition to any remedies at law, the Company, without posting any bond, shall be entitled to cease making any payments or providing any benefit otherwise required by this Agreement and obtain equitable relief in the form of specific performance, temporary restraining order, temporary or permanent injunction or any other equitable remedy which may then be available.

13.     Choice of Law. THE INTERPRETATION, PERFORMANCE AND ENFORCEMENT OF THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF DELAWARE WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.

14.     Option Subject to Plan. By entering into this Agreement, the Participant agrees and acknowledges that the Participant has received and read a copy of the Plan. The Option is subject to the Plan. In the event of a conflict between any term or provision contained herein and a term or provision of the Plan, the applicable terms and provisions of the Plan will govern and prevail.

15.     Signature in Counterparts. This Agreement may be signed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement.

HOVNANIAN ENTERPRISES, INC.
By:
	Stephen D. Weinroth, Chair Compensation Committee
PARTICIPANT
By:
	Ara K. Hovnanian President, Chief Executive Officer and Chairman of the Board

Non-Qualified Stock Option Agreement Page 6

 

EX-31

CERTIFICATIONS

Exhibit 31(a)

I, Ara K. Hovnanian, certify that:

1.   I have reviewed this quarterly report on Form 10-Q for the period ended July 31, 2013 of Hovnanian Enterprises, Inc. (the “registrant”);

2.   Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.   Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.   The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.   The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: September 9, 2013

/s/ ARA K. HOVNANIAN
Ara K. Hovnanian
Chairman, President and Chief Executive Officer

EX-31

CERTIFICATIONS

Exhibit 31(b)

I, J. Larry Sorsby, certify that:

1.   I have reviewed this quarterly report on Form 10-Q for the period ended July 31, 2013 of Hovnanian Enterprises, Inc. (the “registrant”);

2.   Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.   Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.   The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.   The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: September 9, 2013

/s/ J. LARRY SORSBY
J. Larry Sorsby
Executive Vice President and Chief Financial Officer

EX-32

Exhibit 32(a)

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Hovnanian Enterprises, Inc. (the “Company”) on Form 10-Q for the period ended July 31, 2013 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Ara K. Hovnanian, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1.   The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.   The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: September 9, 2013

/s/ ARA K. HOVNANIAN
Ara K. Hovnanian
Chairman, President and Chief Executive Officer

EX-32

Exhibit 32(b)

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Hovnanian Enterprises, Inc. (the “Company”) on Form 10-Q for the period ended July 31, 2013 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, J. Larry Sorsby, Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1.   The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.   The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: September 9, 2013

/s/ J. LARRY SORSBY
J. Larry Sorsby
Executive Vice President and Chief Financial Officer

XML

Note 23 (Details) - Condensed Consolidating Financial Statements - Statements of Operations (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Jul. 31, 2013	Jul. 31, 2012	Jul. 31, 2013	Jul. 31, 2012
Condensed Income Statements, Captions [Line Items]
Homebuilding	$ 465,479	$ 376,224	$ 1,224,347	$ 972,319
Financial services	12,878	10,787	35,219	25,990
Total revenues	478,357	387,011	1,259,566	998,309
Costs and Expenses	471,659	395,910	1,278,051	1,075,640
(Loss) gain on extinguishment of debt		6,230		57,966
(Loss) income from unconsolidated joint ventures	3,690	852	6,806	2,324
(Loss) income before income taxes	10,388	(1,817)	(11,679)	(17,041)
State and federal income tax (benefit) provision	1,922	(36,493)	(10,155)	(35,254)
Net income (loss)	8,466	34,676	(1,524)	18,213
Financial services	6,640	6,111	21,205	16,651
Homebuilding [Member] | Consolidation, Eliminations [Member]
Condensed Income Statements, Captions [Line Items]
Costs and Expenses	2,141	(67,011)	4,554	(42,392)
Homebuilding [Member] | Parent Company [Member]
Condensed Income Statements, Captions [Line Items]
Costs and Expenses	3,177	1,640	5,921	5,815
Homebuilding [Member] | Subsidiary Issuer [Member]
Condensed Income Statements, Captions [Line Items]
Costs and Expenses	30,389	88,266	90,088	112,342
Homebuilding [Member] | Guarantor Subsidiaries [Member]
Condensed Income Statements, Captions [Line Items]
Costs and Expenses	351,903	352,332	994,979	954,080
Homebuilding [Member] | Non-Guarantor Subsidiaries [Member]
Condensed Income Statements, Captions [Line Items]
Costs and Expenses	77,409	14,572	161,304	29,144
Homebuilding [Member] | Consolidated Entities [Member]
Condensed Income Statements, Captions [Line Items]
Costs and Expenses	465,019	389,799	1,256,846	1,058,989
Homebuilding [Member]
Condensed Income Statements, Captions [Line Items]
Total revenues	465,549	376,153	1,224,489	972,319
Costs and Expenses	67,526	84,615	194,667	210,904
(Loss) income before income taxes	37,268	14,731	64,755	17,512
Consolidation, Eliminations [Member]
Condensed Income Statements, Captions [Line Items]
Homebuilding	(1,246)	(1,251)	(3,741)	(3,729)
Financial services
Intercompany charges	4,208	(37,685)	15,886	(27,055)
Total revenues	2,962	(38,936)	12,145	(30,784)
Costs and Expenses	2,141	(67,009)	4,554	(42,403)
(Loss) gain on extinguishment of debt
(Loss) income from unconsolidated joint ventures
(Loss) income before income taxes	821	28,073	7,591	11,619
State and federal income tax (benefit) provision
Equity in income (loss) of consolidated subsidiaries	(24,336)	(32,287)	727	2,302
Net income (loss)	(23,515)	(4,214)	8,318	13,921
Financial services		2		(11)
Parent Company [Member]
Condensed Income Statements, Captions [Line Items]
Homebuilding		4	3	8
Financial services
Intercompany charges
Total revenues		4	3	8
Costs and Expenses	3,181	1,663	5,934	5,918
(Loss) gain on extinguishment of debt
(Loss) income from unconsolidated joint ventures
(Loss) income before income taxes	(3,181)	(1,659)	(5,931)	(5,910)
State and federal income tax (benefit) provision	(2,233)	(4,261)	(19,308)	(12,929)
Equity in income (loss) of consolidated subsidiaries	9,414	32,074	(14,901)	11,194
Net income (loss)	8,466	34,676	(1,524)	18,213
Financial services	4	23	13	103
Subsidiary Issuer [Member]
Condensed Income Statements, Captions [Line Items]
Homebuilding	(76)	(92)	(175)	(197)
Financial services
Intercompany charges	20,760	53,026	61,167	76,975
Total revenues	20,684	52,934	60,992	76,778
Costs and Expenses	30,389	88,266	90,088	112,342
(Loss) gain on extinguishment of debt		6,230	(770,009)	57,966
(Loss) income from unconsolidated joint ventures
(Loss) income before income taxes	(9,705)	(29,102)	(799,105)	22,402
State and federal income tax (benefit) provision
Equity in income (loss) of consolidated subsidiaries	(10,887)	(10,375)	(33,606)	(32,546)
Net income (loss)	(20,592)	(39,477)	(832,711)	(10,144)
Financial services
Guarantor Subsidiaries [Member]
Condensed Income Statements, Captions [Line Items]
Homebuilding	372,416	356,862	1,033,927	934,330
Financial services	3,080	2,237	7,743	5,232
Intercompany charges	(24,931)	(15,107)	(75,265)	(46,238)
Total revenues	350,565	343,992	966,405	893,324
Costs and Expenses	353,955	353,739	1,000,721	958,047
(Loss) gain on extinguishment of debt			770,009
(Loss) income from unconsolidated joint ventures	34	30	2,293	521
(Loss) income before income taxes	(3,356)	(9,717)	737,986	(64,202)
State and federal income tax (benefit) provision	4,155	(32,232)	9,153	(22,325)
Equity in income (loss) of consolidated subsidiaries	25,809	10,588	47,780	19,050
Net income (loss)	18,298	33,103	776,613	(22,827)
Financial services	2,052	1,407	5,742	3,967
Non-Guarantor Subsidiaries [Member]
Condensed Income Statements, Captions [Line Items]
Homebuilding	94,385	20,701	194,333	41,907
Financial services	9,798	8,550	27,476	20,758
Intercompany charges	(37)	(234)	(1,788)	(3,682)
Total revenues	104,146	29,017	220,021	58,983
Costs and Expenses	81,993	19,251	176,754	41,736
(Loss) gain on extinguishment of debt
(Loss) income from unconsolidated joint ventures	3,656	822	4,513	1,803
(Loss) income before income taxes	25,809	10,588	47,780	19,050
State and federal income tax (benefit) provision
Equity in income (loss) of consolidated subsidiaries
Net income (loss)	25,809	10,588	47,780	19,050
Financial services	4,584	4,679	15,450	12,592
Consolidated Entities [Member]
Condensed Income Statements, Captions [Line Items]
Homebuilding	465,479	376,224	1,224,347	972,319
Financial services	12,878	10,787	35,219	25,990
Intercompany charges
Total revenues	478,357	387,011	1,259,566	998,309
Costs and Expenses	471,659	395,910	1,278,051	1,075,640
(Loss) gain on extinguishment of debt		6,230		57,966
(Loss) income from unconsolidated joint ventures	3,690	852	6,806	2,324
(Loss) income before income taxes	10,388	(1,817)	(11,679)	(17,041)
State and federal income tax (benefit) provision	1,922	(36,493)	(10,155)	(35,254)
Equity in income (loss) of consolidated subsidiaries
Net income (loss)	8,466	34,676	(1,524)	18,213
Financial services	$ 6,640	$ 6,111	$ 21,205	$ 16,651

XML

Note 10

9 Months Ended

Jul. 31, 2013

Line Of Credit [Abstract]

Line Of Credit [Text Block]

10.  We have nonrecourse mortgages for a small number of our communities totaling $55.3 million at July 31, 2013, as well as our Corporate Headquarters totaling $18.0 million at July 31, 2013, which are secured by the related real property and any improvements. These loans have installment obligations with annual principal maturities in the years ending October 31 of approximately: $55.5 million in 2013, $1.1 million in 2014, $1.2 million in 2015, $1.3 million in 2016, $1.4 million in 2017 and $12.8 million after 2017. The interest rates on these obligations ranged from 4.0% to 8.75% at July 31, 2013.

 In June 2013, K. Hovnanian Enterprises, Inc. (“K. Hovnanian”), as borrower, and we and certain of our subsidiaries, as guarantors, entered into a five-year $75 million unsecured revolving credit facility (the “Credit Facility”) with Citicorp USA, Inc., as administrative agent and issuing bank, and Citibank, N.A., as a lender. The Credit Facility is available for both letters of credit and general corporate purposes. The Credit Facility does not contain any financial maintenance covenants, but does contain certain restrictive covenants that track those contained in our indenture governing the First Lien Notes (as defined below in Note 11), which are described in Note 11. The Credit Facility also contains certain customary events of default which would permit the administrative agent at the request of the required lenders to, among other things, declare all loans then outstanding to be immediately due and payable if not cured within applicable grace periods, including the failure to make timely payments of amounts payable under the Credit Facility or other material indebtedness or the acceleration of other material indebtedness, the failure to comply with agreements and covenants or for representations or warranties to be correct in all material respects when made, specified events of bankruptcy and insolvency, and the entry of a material judgment against a loan party. Outstanding borrowings under the Credit Facility accrue interest at an annual rate equal to either, as selected by K. Hovnanian, (i) the alternate base rate plus the applicable spread determined on the date of such borrowing or (ii) an adjusted LIBOR rate plus the applicable spread determined as of the date two business days prior to the first day of the interest period for such borrowing. As of July 31, 2013, there were no borrowings and $22.8 million of letters of credit outstanding under the Credit Facility and as of such date, we believe we were in compliance with the covenants under the Credit Facility.

In addition to the Credit Facility, we have certain stand alone cash collateralized letter of credit agreements and facilities under which there were a total of $5.1 million and $29.5 million of letters of credit outstanding as of July 31, 2013 and October 31, 2012, respectively. These agreements and facilities require us to maintain specified amounts of cash as collateral in segregated accounts to support the letters of credit issued thereunder, which will affect the amount of cash we have available for other uses. As of July 31, 2013 and October 31, 2012, the amount of cash collateral in these segregated accounts was $5.2 million and $30.7 million, respectively, which is reflected in “Restricted cash and cash equivalents” on the Condensed Consolidated Balance Sheets.

Our wholly owned mortgage banking subsidiary, K. Hovnanian American Mortgage, LLC (“K. Hovnanian Mortgage”), originates mortgage loans primarily from the sale of our homes. Such mortgage loans and related servicing rights are sold in the secondary mortgage market within a short period of time. In certain instances, we retain the servicing rights for a small amount of loans. Our secured Master Repurchase Agreement with JPMorgan Chase Bank, N.A. (“Chase Master Repurchase Agreement”), which was amended on June 28, 2013 to extend the maturity date to June 27, 2014, is a short-term borrowing facility that provides up to $50.0 million through maturity. The loan is secured by the mortgages held for sale and is repaid when we sell the underlying mortgage loans to permanent investors. Interest is payable monthly on outstanding advances at an adjusted LIBOR rate, which was 0.18673% at July 31, 2013, subject to a floor of 1%, plus the applicable margin of 2.5%. Therefore, at July 31, 2013, the interest rate was 3.5%. As of July 31, 2013, the aggregate principal amount of all borrowings outstanding under the Chase Master Repurchase Agreement was $22.9 million.

K. Hovnanian Mortgage has another secured Master Repurchase Agreement with Customers Bank (“Customers Master Repurchase Agreement”), which was amended on May 28, 2013 to extend the maturity date to May 27, 2014, that is a short-term borrowing facility that provides up to $37.5 million through maturity. The loan is secured by the mortgages held for sale and is repaid when we sell the underlying mortgage loans to permanent investors. Interest is payable daily or as loans are sold to permanent investors on outstanding advances at the current LIBOR subject to a floor of 0.5% plus the applicable margin ranging from 3.0% to 5.5% based on the takeout investor and type of loan. As of July 31, 2013, the aggregate principal amount of all borrowings outstanding under the Customers Master Repurchase Agreement was $15.1 million.

K. Hovnanian Mortgage has a third secured Master Repurchase Agreement with Credit Suisse First Boston Mortgage Capital LLC (“Credit Suisse Master Repurchase Agreement”), which was amended on January 2, 2013, that is a short-term borrowing facility that provides up to $50.0 million through June 20, 2014. The loan is secured by the mortgages held for sale and is repaid when we sell the underlying mortgage loans to permanent investors. Interest is payable monthly on outstanding advances at the Credit Suisse Cost of Funds, which was 0.48% at July 31, 2013, plus the applicable margin ranging from 3.75% to 4.0% based on the takeout investor and type of loan. As of July 31, 2013, the aggregate principal amount of all borrowings outstanding under the Credit Suisse Master Repurchase Agreement was $19.5 million.

The Chase Master Repurchase Agreement, Customers Master Repurchase Agreement and Credit Suisse Master Repurchase Agreement (together, the “Master Repurchase Agreements”) require K. Hovnanian Mortgage to satisfy and maintain specified financial ratios and other financial condition tests. Because of the extremely short period of time mortgages are held by K. Hovnanian Mortgage before the mortgages are sold to investors (generally a period of a few weeks), the immateriality to us on a consolidated basis of the size of the Master Repurchase Agreements, the levels required by these financial covenants, our ability based on our immediately available resources to contribute sufficient capital to cure any default, were such conditions to occur, and our right to cure any conditions of default based on the terms of the agreement, we do not consider any of these covenants to be substantive or material. As of July 31, 2013, we believe we were in compliance with the covenants under the Master Repurchase Agreements.

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Note 9 (Details) (Pledged Against Mortgage Warehouse LOC [Member], USD $) In Millions, unless otherwise specified	Jul. 31, 2013	Oct. 31, 2012
Pledged Against Mortgage Warehouse LOC [Member]
Note 9 (Details) [Line Items]
Pledged Financial Instruments, Not Separately Reported, Loans Receivable, for Repurchase Agreements	$ 60.8	$ 104.6

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Condensed Consolidated Statements of Operations (Unaudited) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Jul. 31, 2013	Jul. 31, 2012	Jul. 31, 2013	Jul. 31, 2012
Revenues:
Sale of homes	$ 462,376	$ 371,481	$ 1,206,233	$ 936,305
Land sales and other revenues	3,103	4,743	18,114	36,014
Total homebuilding	465,479	376,224	1,224,347	972,319
Financial services	12,878	10,787	35,219	25,990
Total revenues	478,357	387,011	1,259,566	998,309
Expenses:
Cost of sales, excluding interest	370,464	305,178	992,362	794,168
Cost of sales interest	13,757	14,298	35,311	40,091
Inventory impairment loss and land option write-offs	623	689	3,479	7,230
Total cost of sales	384,844	320,165	1,031,152	841,489
Selling, general and administrative	42,331	36,230	116,904	104,609
Total homebuilding expenses	427,175	356,395	1,148,056	946,098
Financial services	6,640	6,111	21,205	16,651
Corporate general and administrative	14,056	11,913	40,284	36,961
Other interest	21,949	24,590	68,581	72,641
Other operations	1,839	(3,099)	(75)	3,289
Total expenses	471,659	395,910	1,278,051	1,075,640
Gain on extinguishment of debt		6,230		57,966
Income from unconsolidated joint ventures	3,690	852	6,806	2,324
Income (loss) before income taxes	10,388	(1,817)	(11,679)	(17,041)
State and federal income tax provision (benefit):
Tax provision (benefit)	1,922	(36,493)	(10,155)	(35,254)
Net income (loss)	8,466	34,676	(1,524)	18,213
Basic:
Income (loss) per common share (in Dollars per share)	$ 0.06	$ 0.25	$ (0.01)	$ 0.15
Weighted-average number of common shares outstanding (in Shares)	146,056	138,472	144,840	121,357
Assuming dilution:
Income (loss) per common share (in Dollars per share)	$ 0.06	$ 0.25	$ (0.01)	$ 0.15
Weighted-average number of common shares outstanding (in Shares)	162,823	138,552	144,840	121,380
State and Local Jurisdiction [Member]
State and federal income tax provision (benefit):
Tax provision (benefit)	1,922	(36,563)	(277)	(35,461)
Federal Jurisdiction [Member]
State and federal income tax provision (benefit):
Tax provision (benefit)		$ 70	$ (9,878)	$ 207

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Note 3

9 Months Ended

Jul. 31, 2013

Home Building Interest [Abstract]

Home Building Interest [Text Block]

3.  Interest costs incurred, expensed and capitalized were:

	Three Months Ended July 31,				Nine Months Ended July 31,
(In thousands)	2013		2012		2013		2012
Interest capitalized at beginning of period	$	112,488	$	118,435	$	116,056	$	121,441
Plus interest incurred(1)		33,195		39,477		97,813		110,315
Less cost of sales interest expensed		13,757		14,298		35,311		40,091
Less other interest expensed(2)(3)		21,949		24,590		68,581		72,641
Interest capitalized at end of period(4)	$	109,977	$	119,024	$	109,977	$	119,024

(1)	Data does not include interest incurred by our mortgage and finance subsidiaries.
(2)	Other interest expensed is comprised of interest that does not qualify for interest capitalization because our assets that qualify for interest capitalization (inventory under development) do not exceed our debt. Interest on completed homes and land in planning, which does not qualify for capitalization, is expensed.
(3)	Cash paid for interest, net of capitalized interest, is the sum of other interest expensed, as defined above, and interest paid by our mortgage and finance subsidiaries adjusted for the change in accrued interest, which is calculated as follows:

	Three Months Ended July 31,					Nine Months Ended July 31,
(In thousands)	2013		2012			2013			2012
Other interest expensed	$	21,949	$	24,590		$	68,581		$	72,641
Interest paid by our mortgage and finance subsidiaries		731		606			2,239			1,550
Decrease/(increase) in accrued interest		5,018		(13,356	)		(4,802	)		(10,073	)
Cash paid for interest, net of capitalized interest	$	27,698	$	11,840		$	66,018		$	64,118

(4) Capitalized interest amounts are shown gross before allocating any portion of impairments to capitalized interest.

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Note 17

9 Months Ended

Jul. 31, 2013

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

17. The total income tax expense of $1.9 million recognized for the three months ended July 31, 2013 was primarily due to state tax expenses and state tax reserves for uncertain state tax positions. The total income tax benefit of $10.2 million recognized for the nine months ended July 31, 2013 was primarily due to the release of reserves for a federal tax position that was settled with the Internal Revenue Service and a favorable state tax audit settlement. The total income tax benefit of $36.5 million and $35.3 million for the three and nine months ended July 31, 2012, respectively, was primarily due to the reversal of reserves for uncertain state tax positions that have been determined to be effectively settled.

      Deferred federal and state income tax assets primarily represent the deferred tax benefits arising from temporary differences between book and tax income which will be recognized in future years as an offset against future taxable income. If the combination of future years’ income (or loss) and the reversal of the timing differences results in a loss, such losses can be carried forward to future years. In accordance with ASC 740, we evaluate our deferred tax assets quarterly to determine if valuation allowances are required. ASC 740 requires that companies assess whether valuation allowances should be established based on the consideration of all available evidence using a “more likely than not” standard. Because of the downturn in the homebuilding industry, resulting in significant inventory and intangible impairments in prior years, we are in a three-year cumulative loss position as of July 31, 2013. According to ASC 740, a three-year cumulative loss is significant negative evidence in considering whether deferred tax assets are realizable. Our valuation allowance for deferred taxes amounted to $941.1 million and $937.9 million at July 31, 2013 and October 31, 2012, respectively. The valuation allowance increased during the nine months ended July 31, 2013 primarily due to additional valuation allowance recorded for the federal and state tax benefits related to the losses incurred during the period.

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Note 19 (Details) (USD $) In Millions, unless otherwise specified	Jul. 31, 2013
Table Text Block [Abstract]
Deposits Associated with Land and Lot Options of Unconsolidated Variable Interest Entities	$ 63.1
Purchase Price Associated with Land and Lot Options of Unconsolidated Variable Interest Entities	$ 907.0

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Note 11 (Details) (USD $)	3 Months Ended	9 Months Ended															1 Months Ended	9 Months Ended																							3 Months Ended	9 Months Ended					3 Months Ended								9 Months Ended
	Jul. 31, 2012	Jul. 31, 2012	Jul. 31, 2013	Oct. 31, 2012		Apr. 30, 2012	Feb. 09, 2011	Jul. 31, 2013 Initial [Member]	Jul. 31, 2013 Additional [Member]	Jul. 31, 2013 Cash [Member] The 9.125% 2020 Notes [Member]	Jul. 31, 2013 Cash [Member] Guarantees [Member]	Jul. 31, 2013 Letters of Credit Collateral [Member]	Oct. 31, 2012 Letters of Credit Collateral [Member]	Jul. 31, 2013 Real Estate [Member] Senior Notes [Member]	Jul. 31, 2013 Notes Collateral [Member]	Jul. 31, 2013 The 9.125% 2020 Notes [Member]	Jul. 31, 2005 Series A Preferred Stock [Member]	Jul. 31, 2013 Series A Preferred Stock [Member]	Jul. 31, 2013 Common Class A [Member]	Oct. 31, 2012 Common Class A [Member]		Apr. 11, 2012 Common Class A [Member]	Jul. 31, 2013 The 7.25% 2020 Notes [Member]	Jul. 31, 2013 The 9.125% 2020 Notes [Member]	Jul. 31, 2013 The 2.0% 2021 Notes [Member]	Jul. 31, 2013 The 5.0% 2021 Notes [Member]	Jul. 31, 2013 The 6.5% 2014 Notes [Member]	Jul. 31, 2013 The 6.375% 2014 Notes [Member]	Jul. 31, 2013 The 6.25% 2015 Notes [Member]	Jul. 31, 2013 The 6.25% 2016 Notes [Member]	Jul. 31, 2013 The 7.5% 2016 Notes [Member]	Jul. 31, 2013 The 8.625% 2017 Notes [Member]	Apr. 30, 2012 The 8.625% 2017 Notes [Member]	Jul. 31, 2013 The 11.875% 2015 Notes [Member]	Jul. 31, 2013 The 11.0% 2017 Amortizing Note [Member]	Jul. 31, 2013 The 6.00% Exchangable Note Units [Member]	Oct. 02, 2012 The 6.00% Exchangable Note Units [Member]	Jul. 31, 2013 Senior Exchangeable Notes Due 2017 [Member]	Jul. 31, 2013 Exchangeable Note Units [Member]	Jul. 31, 2013 Tangible Equity Units [Member]	Jul. 31, 2012 Note Repurchases [Member]	Jul. 31, 2012 Note Repurchases [Member]	Jul. 31, 2012 Three Months [Member] The 6.25% 2016 Notes [Member]	Jul. 31, 2012 Three Months [Member] The 7.5% 2016 Notes [Member]	Jul. 31, 2012 Three Months [Member] The 8.625% 2017 Notes [Member]	Jul. 31, 2013 Three Months [Member] The 11.875% 2015 Notes [Member]	Jul. 31, 2012 Three Months [Member]	Jul. 31, 2013 Nine Months [Member] The 6.25% 2016 Notes [Member]	Jul. 31, 2012 Nine Months [Member] The 6.25% 2016 Notes [Member]	Jul. 31, 2013 Nine Months [Member] The 7.5% 2016 Notes [Member]	Jul. 31, 2012 Nine Months [Member] The 7.5% 2016 Notes [Member]	Jul. 31, 2013 Nine Months [Member] The 8.625% 2017 Notes [Member]	Jul. 31, 2012 Nine Months [Member] The 8.625% 2017 Notes [Member]	Jul. 31, 2013 Nine Months [Member] The 11.875% 2015 Notes [Member]	Jul. 31, 2012 Nine Months [Member]
Note 11 (Details) [Line Items]
Debt Instrument, Face Amount (in Dollars)								$ 992,000,000	$ 460,600,000														$ 577,000,000	$ 220,000,000	$ 53,200,000	$ 141,800,000	$ 36,700,000	$ 3,000,000	$ 21,400,000	$ 131,200,000	$ 86,500,000	$ 121,000,000		$ 60,800,000			$ 100,000,000	$ 65,800,000
Secured Debt			978,300,000
Debt Instrument, Interest Rate, Stated Percentage																							7.25%	9.125%	2.00%	5.00%	6.50%	6.375%	6.25%	6.25%	7.50%	8.625%		11.875%	11.00%	6.00%	6.00%		6.00%
Senior Notes, Unsecured			459,100,000																																20,900,000			65,800,000
Subordinated Debt (in Dollars)			3,181,000	6,091,000	[1]																																			3,200,000
Tangible Equity Units, Rate			7.25%				7.25%																																	7.25%
Debt Collateral														85,000,000		549,000,000
Cash Collateral for Borrowed Securities										169,300,000	56,300,000	5,200,000	30,700,000
Investments in and Advance to Affiliates, Subsidiaries, Associates, and Joint Ventures			54,300,000	61,100,000											46,300,000
Fixed Charge Coverage Ratio, Numerator			2.0
Fixed Charge Coverage Ratio, Denominator			1.0
Preferred Stock, Dividend Rate, Percentage																	7.625%	7.625%
Debt Instrument, Repurchased Face Amount (in Dollars)						12,200,000																											9,100,000													2,000,000		21,000,000		61,100,000		37,400,000		2,000,000
Debt Instrument, Repurchase Amount																																															1,500,000								72,200,000
Gains (Losses) on Extinguishment of Debt (in Dollars)	6,230,000	57,966,000																																							400,000	48,400,000					5,800,000								9,300,000
Common Stock, Shares, Issued (in Shares)																			136,305,223	130,055,304	[1]	25,000,000
Debt Instrument Exchanged Face Amount																																											$ 7,800,000	$ 4,000,000	$ 9,200,000				$ 7,800,000		$ 4,000,000		$ 18,300,000

[1] Derived from the audited balance sheet as of October 31, 2012.

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Note 11

9 Months Ended

Jul. 31, 2013

Disclosure Text Block [Abstract]

Long-term Debt [Text Block]

11. As of July 31, 2013, we had $992.0 million of outstanding senior secured notes ($978.3 million, net of discount), comprised of $577.0 million 7.25% Senior Secured First Lien Notes due 2020 (the “First Lien Notes”), $220.0 million 9.125% Senior Secured Second Lien Notes due 2020 (the “Second Lien Notes” and, together with the First Lien Notes, the “2020 Secured Notes”), $53.2 million 2.0% Senior Secured Notes due 2021 (the “2.0% 2021 Notes”) and $141.8 million 5.0% Senior Secured Notes due 2021 (the “5.0% 2021 Notes” and together with the 2.0% 2021 Notes, the “2021 Notes”). As of July 31, 2013, we also had $460.6 million of outstanding senior notes ($459.1 million, net of discount), comprised of $36.7 million 6.5% Senior Notes due 2014, $3.0 million 6.375% Senior Notes due 2014, $21.4 million 6.25% Senior Notes due 2015, $131.2 million 6.25% Senior Notes due 2016, $86.5 million 7.5% Senior Notes due 2016, $121.0 million 8.625% Senior Notes due 2017 and $60.8 million 11.875% Senior Notes due 2015. In addition, as of July 31, 2013, we had outstanding $20.9 million 11.0% Senior Amortizing Notes due 2017 (issued as a component of our 6.0% Exchangeable Note Units and discussed below in Note 13), $65.8 million Senior Exchangeable Notes due 2017 (issued as a component of our 6.0% Exchangeable Note Units and discussed below in Note 13) and $3.2 million 7.25% Senior Subordinated Amortizing Notes (issued as part of our 7.25% Tangible Equity Units and discussed below in Note 12). Except for K. Hovnanian Enterprises, Inc. (“K. Hovnanian”), the issuer of the notes, our home mortgage subsidiaries, joint ventures and subsidiaries holding interests in our joint ventures, certain of our title insurance subsidiaries and our foreign subsidiary, we and each of our subsidiaries are guarantors of the senior secured, senior, senior amortizing, senior exchangeable and senior subordinated amortizing notes outstanding at July 31, 2013 (see Note 23). In addition, the 2021 Notes are guaranteed by K. Hovnanian JV Holdings, L.L.C. and its subsidiaries except for certain joint ventures and joint venture holding companies (collectively, the “Secured Group”). Members of the Secured Group do not guarantee K. Hovnanian's other indebtedness.

 The First Lien Notes are secured by a first-priority lien and the Second Lien Notes are secured by a second-priority lien, in each case, subject to permitted liens and other exceptions, on substantially all the assets owned by Hovnanian Enterprises, Inc., K. Hovnanian and the guarantors of such notes. At July 31, 2013, the aggregate book value of the real property that constituted collateral securing the 2020 Secured Notes was approximately $549.0 million, which does not include the impact of inventory investments, home deliveries, or impairments thereafter and which may differ from the value if it were appraised. In addition, cash collateral that secured the 2020 Secured Notes was $169.3 million as of July 31, 2013, which included $5.2 million of restricted cash collateralizing certain letters of credit. Subsequent to such date, cash uses include general business operations and real estate and other investments.

 The guarantees with respect to the 2021 Notes of the Secured Group are secured, subject to permitted liens and other exceptions, by a first-priority lien on substantially all of the assets of the members of the Secured Group. As of July 31, 2013, the collateral securing the guarantees included (1) $56.3 million of cash and cash equivalents (subsequent to such date, cash uses include general business operations and real estate and other investments); (2) approximately $85.0 million aggregate book value of real property of the Secured Group, which does not include the impact of inventory investments, home deliveries, or impairments thereafter and which may differ from the value if it were appraised, and (3) equity interests in guarantors that are members of the Secured Group. Members of the Secured Group also own equity in joint ventures, either directly or indirectly through ownership of joint venture holding companies, with a book value of $46.3 million as of July 31, 2013; this equity is not pledged to secure, and is not collateral for, the 2021 Notes. Members of the Secured Group are “unrestricted subsidiaries” under K. Hovnanian's other senior notes, senior secured notes and senior subordinated amortizing notes, and thus have not guaranteed such indebtedness. 

The indentures governing our notes do not contain any financial maintenance covenants, but do contain restrictive covenants that limit, among other things, the Company’s ability and that of certain of its subsidiaries, including K. Hovnanian, to incur additional indebtedness (other than certain permitted indebtedness, refinancing indebtedness and non-recourse indebtedness), pay dividends and make distributions on common and preferred stock, repurchase subordinated indebtedness (with respect to certain of the senior secured notes), make other restricted payments, make investments, sell certain assets, incur liens, consolidate, merge, sell or otherwise dispose of all or substantially all assets and enter into certain transactions with affiliates. The indentures also contain events of default which would permit the holders of the notes to declare the notes to be immediately due and payable if not cured within applicable grace periods, including the failure to make timely payments on the notes or other material indebtedness, the failure to comply with agreements and covenants and specified events of bankruptcy and insolvency and, with respect to the indentures governing the senior secured notes, the failure of the documents granting security for the senior secured notes to be in full force and effect and the failure of the liens on any material portion of the collateral securing the senior secured notes to be valid and perfected. As of July 31, 2013, we believe we were in compliance with the covenants of the indentures governing our outstanding notes.

 Under the terms of the indentures, we have the right to make certain redemptions and, depending on market conditions and covenant restrictions, may do so from time to time. We also continue to evaluate our capital structure and may also continue to make debt purchases and/or exchanges for debt or equity from time to time through tender offers, open market purchases, private transactions, or otherwise seek to raise additional debt or equity capital, depending on market conditions and covenant restrictions.

 If our consolidated fixed charge coverage ratio, as defined in the indentures governing our senior secured and senior notes (other than the Senior Exchangeable Notes discussed in Note 13 below), is less than 2.0 to 1.0, we are restricted from making certain payments, including dividends, and from incurring indebtedness other than certain permitted indebtedness, refinancing indebtedness, and non-recourse indebtedness. As a result of this restriction, we are currently restricted from paying dividends, which are not cumulative, on our 7.625% Series A Preferred Stock. We anticipate we will continue to be restricted from paying dividends for the foreseeable future. Our inability to pay dividends is in accordance with covenant restrictions and will not result in a default under our bond indentures or otherwise affect compliance with any of the covenants contained in the bond indentures.

During the three months ended July 31, 2012, we repurchased for cash in the open market $2.0 million principal amount of our 11.875% Senior Notes due 2015. During the nine months ended July 31, 2012, we repurchased for cash in the open market and privately negotiated transactions $21.0 million principal amount of our 6.25% Senior Notes due 2016, $61.1 million principal amount of our 7.5% Senior Notes due 2016, $37.4 million principal amount of our 8.625% Senior Notes due 2017 and $2.0 million principal amount of our 11.875% Senior Notes due 2015. The aggregate purchase price for these repurchases was $1.5 million and $72.2 million, respectively, for the three and nine months ended July 31, 2012, plus accrued and unpaid interest. These repurchases resulted in a gain on extinguishment of debt of $0.4 million and $48.4 million, respectively, for the three and nine months ended July 31, 2012, net of the write-off of unamortized discounts and fees. The gain is included in the Condensed Consolidated Statement of Operations as “Gain on extinguishment of debt.” Certain of these repurchases were funded with the proceeds from our April 11, 2012 issuance of 25,000,000 shares of our Class A Common Stock (see Note 16).

In addition, during the three months ended July 31, 2012, we exchanged pursuant to agreements with bondholders, $7.8 million principal amount of our 6.25% Senior Notes due 2016, $4.0 million principal amount of our 7.5% Senior Notes due 2016 and $9.2 million principal amount of our 8.625% Senior Notes due 2017, for shares of our Class A Common Stock, as discussed in Note 16. During the nine months ended July 31, 2012, we exchanged pursuant to agreements with bondholders $7.8 million principal amount of our 6.25% Senior Notes due 2016, $4.0 million principal amount of our 7.5% Senior Notes due 2016 and $18.3 million of our outstanding 8.625% Senior Notes due 2017 for shares of our Class A Common Stock, as discussed in Note 16. These transactions resulted in a gain on extinguishment of debt of $5.8 million and $9.3 million, respectively, for the three and nine months ended July 31, 2012. The gain is included in the Condensed Consolidated Statement of Operations as “Gain on extinguishment of debt”.

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Note 5 (Details) - Write-Offs and Lots Walked Away From (USD $) In Millions, unless otherwise specified	3 Months Ended		9 Months Ended
	Jul. 31, 2013	Jul. 31, 2012	Jul. 31, 2013	Jul. 31, 2012
Note 5 (Details) - Write-Offs and Lots Walked Away From [Line Items]
Number of Walk-Away Lots	211	415	909	1,601
Dollar Amount of Write-Offs (in Dollars)	$ 0.5	$ 0.5	$ 1.9	$ 1.8
Northeast [Member]
Note 5 (Details) - Write-Offs and Lots Walked Away From [Line Items]
Number of Walk-Away Lots	73	210	373	210
Dollar Amount of Write-Offs (in Dollars)	0.2	0.1	0.4	0.4
Mid-Atlantic [Member]
Note 5 (Details) - Write-Offs and Lots Walked Away From [Line Items]
Number of Walk-Away Lots			164	182
Dollar Amount of Write-Offs (in Dollars)				0.2
Midwest [Member]
Note 5 (Details) - Write-Offs and Lots Walked Away From [Line Items]
Number of Walk-Away Lots	13	89	13	194
Dollar Amount of Write-Offs (in Dollars)		0.1		0.2
Southeast [Member]
Note 5 (Details) - Write-Offs and Lots Walked Away From [Line Items]
Number of Walk-Away Lots	113		113	734
Dollar Amount of Write-Offs (in Dollars)	0.1		0.2	0.7
Southwest [Member]
Note 5 (Details) - Write-Offs and Lots Walked Away From [Line Items]
Number of Walk-Away Lots	12	116	246	281
Dollar Amount of Write-Offs (in Dollars)	$ 0.2	$ 0.3	$ 1.3	$ 0.3

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Note 12 (Details) (USD $)	3 Months Ended	9 Months Ended							9 Months Ended		3 Months Ended	9 Months Ended
	Jul. 31, 2012	Jul. 31, 2013	Jul. 31, 2012	Oct. 31, 2012		Feb. 09, 2011	Feb. 09, 2011 Initial [Member]	Feb. 14, 2011 Additional [Member]	Jul. 31, 2013 Common Class A [Member] Life of the Issuance [Member]	Jul. 31, 2013 Tangible Equity Units [Member]	Apr. 30, 2012 Amortizing Notes [Member]	Jul. 31, 2012 Amortizing Notes [Member]	Jul. 31, 2013 Life of the Issuance [Member]	Jul. 31, 2013 Minimum [Member]	Jul. 31, 2013 Maximum [Member]
Note 12 (Details) [Line Items]
Tangible Equity Units, Units Issued							3,000,000	450,000
Tangible Equity Units, Rate		7.25%				7.25%				7.25%
Subordinated Debt (in Dollars)		$ 3,181,000		$ 6,091,000	[1]					$ 3,200,000
Tangible Equity Units, Cash Installment, Per Note (in Dollars per share)		$ 0.453125
Tangible Equity Units Rate Per Year		7.25%
Tangible Equity Units, Stated Amount (in Dollars per share)		$ 25
Tangible Equity Units, Annual Interest Rate		12.072%
Tangible Equity Units, Number of Shares Upon Conversion, Per Unit														4.7655	5.8140
Prepaid Stock Purchase Contracts Issued (in Dollars)										68,100,000
Tangible Equity Units, Number Converted		600,000											2,200,000
Prepaid Stock Purchase Contracts Shares Settled		2,700,000							10,400,000
Stock Issued (in Dollars)											3,100,000
Gains (Losses) on Extinguishment of Debt (in Dollars)	$ 6,230,000		$ 57,966,000									$ 200,000

[1] Derived from the audited balance sheet as of October 31, 2012.

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Note 22 (Tables)

9 Months Ended

Jul. 31, 2013

Fair Value Disclosures [Abstract]

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis [Table Text Block]

(In thousands)	Fair Value Hierarchy	Fair Value at July 31, 2013			Fair Value at October 31, 2012
Mortgage loans held for sale (1)	Level 2	$	84,137		$	116,912
Interest rate lock commitments	Level 2		106			(8	)
Forward contracts	Level 2		(217	)		120
		$	84,026		$	117,024

Fair Value, Option, Quantitative Disclosures [Table Text Block]

	Three Months Ended July 31, 2013
(In thousands)	Loans Held For Sale			Interest Rate Lock Commitments			Forward Contracts
Changes in fair value included in net income (loss), all reflected in financial services revenues	$	(1,253	)	$	(157	)	$	1,127

	Three Months Ended July 31, 2012
(In thousands)	Loans Held For Sale		Interest Rate Lock Commitments		Forward Contracts
Changes in fair value included in net income (loss), all reflected in financial services revenues	$	863	$	193	$	(257	)

	Nine Months Ended July 31, 2013
(In thousands)	Loans Held For Sale			Interest Rate Lock Commitments		Forward Contracts
Changes in fair value included in net income (loss), all reflected in financial services revenues	$	(515	)	$	115	$	(337	)

	Nine Months Ended July 31, 2012
(In thousands)	Loans Held For Sale		Interest Rate Lock Commitments		Forward Contracts
Changes in fair value included in net income (loss), all reflected in financial services revenues	$	417	$	184	$	225

Fair Value Measurements, Nonrecurring [Table Text Block]

		Three Months Ended July 31, 2013
(In thousands)	Fair Value Hierarchy	Pre-Impairment Amount		Total Losses			Fair Value
Sold and unsold homes and lots under development	Level 3	$	-	$	-		$	-
Land and land options held for future development or sale	Level 3	$	439	$	(118	)	$	321

		Three Months Ended July 31, 2012
(In thousands)	Fair Value Hierarchy	Pre-Impairment Amount		Total Losses			Fair Value
Sold and unsold homes and lots under development	Level 3	$	-	$	-		$	-
Land and land options held for future development or sale	Level 3	$	635	$	(165	)	$	470

		Nine Months Ended July 31, 2013
(In thousands)	Fair Value Hierarchy	Pre-Impairment Amount		Total Losses			Fair Value
Sold and unsold homes and lots under development	Level 3	$	5,243	$	(1,479	)	$	3,764
Land and land options held for future development or sale	Level 3	$	924	$	(136	)	$	788

		Nine Months Ended July 31, 2012
(In thousands)	Fair Value Hierarchy	Pre-Impairment Amount		Total Losses			Fair Value
Sold and unsold homes and lots under development	Level 3	$	6,978	$	(2,714	)	$	4,264
Land and land options held for future development or sale	Level 3	$	17,131	$	(2,693	)	$	14,438

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Note 20

9 Months Ended

Jul. 31, 2013

Equity Method Investments and Joint Ventures [Abstract]

Equity Method Investments and Joint Ventures Disclosure [Text Block]

20.  We enter into homebuilding and land development joint ventures from time to time as a means of accessing lot positions, expanding our market opportunities, establishing strategic alliances, managing our risk profile, leveraging our capital base and enhancing returns on capital.  Our homebuilding joint ventures are generally entered into with third-party investors to develop land and construct homes that are sold directly to third-party homebuyers.  Our land development joint ventures include those entered into 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 tables set forth below summarize the combined financial information related to our unconsolidated homebuilding and land development joint ventures that are accounted for under the equity method.

(Dollars in thousands)	July 31, 2013
	Homebuilding			Land Development			Total
Assets:
Cash and cash equivalents	$	38,543		$	434		$	38,977
Inventories		136,563			11,489			148,052
Other assets		8,065			5			8,070
Total assets	$	183,171		$	11,928		$	195,099
Liabilities and equity:
Accounts payable and accrued liabilities	$	28,334		$	4,593		$	32,927
Notes payable		44,861			-			44,861
Total liabilities		73,195			4,593			77,788
Equity of:
Hovnanian Enterprises, Inc.		46,271			2,454			48,725
Others		63,705			4,881			68,586
Total equity		109,976			7,335			117,311
Total liabilities and equity	$	183,171		$	11,928		$	195,099
Debt to capitalization ratio		29	%		0	%		28	%

(Dollars in thousands)	October 31, 2012
	Homebuilding			Land Development			Total
Assets:
Cash and cash equivalents	$	29,657		$	1,686		$	31,343
Inventories		177,170			14,853			192,023
Other assets		12,886			5			12,891
Total assets	$	219,713		$	16,544		$	236,257
Liabilities and equity:
Accounts payable and accrued liabilities	$	24,651		$	12,233		$	36,884
Notes payable		79,675			-			79,675
Total liabilities		104,326			12,233			116,559
Equity of:
Hovnanian Enterprises, Inc.		45,285			794			46,079
Others		70,102			3,517			73,619
Total equity		115,387			4,311			119,698
Total liabilities and equity	$	219,713		$	16,544		$	236,257
Debt to capitalization ratio		41	%		0	%		40	%

As of July 31, 2013 and October 31, 2012, we had advances outstanding of approximately $5.6 million and $15.0 million, respectively, to these unconsolidated joint ventures, which were included in the “Accounts payable and accrued liabilities” balances in the tables above. On our Condensed Consolidated Balance Sheets our “Investments in and advances to unconsolidated joint ventures” amounted to $54.3 million and $61.1 million at July 31, 2013 and October 31, 2012, respectively. In some cases, our net investment in these joint ventures is less than our proportionate share of the equity reflected in the tables above because of the differences between asset impairments recorded against our joint venture investments and any impairments recorded in the applicable joint venture. Impairments of our joint venture equity investments are recorded when we deem a decline in fair value to be other than temporary while impairments recorded in the joint ventures are recorded when undiscounted cash flows of the community indicate that the carrying amount is not recoverable. During fiscal 2012 and the first nine months of fiscal 2013, we did not write down any joint venture investments based on our determination that none of the investments in our joint ventures sustained an other than temporary impairment during those periods.

	For the Three Months Ended July 31, 2013
(In thousands)	Homebuilding			Land Development			Total
Revenues	$	76,842		$	2,992		$	79,834
Cost of sales and expenses		(67,526	)		(3,300	)		(70,826	)
Joint venture net income (loss)	$	9,316		$	(308	)	$	9,008
Our share of net income (loss)	$	3,654		$	(154	)	$	3,500

	For the Three Months Ended July 31, 2012
(In thousands)	Homebuilding			Land Development			Total
Revenues	$	89,749		$	3,755		$	93,504
Cost of sales and expenses		(84,615	)		(3,246	)		(87,861	)
Joint venture net income	$	5,134		$	509		$	5,643
Our share of net income	$	823		$	255		$	1,078

	For the Nine Months Ended July 31, 2013
(In thousands)	Homebuilding			Land Development			Total
Revenues	$	211,408		$	12,468		$	223,876
Cost of sales and expenses		(194,667	)		(7,755	)		(202,422	)
Joint venture net income	$	16,741		$	4,713		$	21,454
Our share of net income	$	4,372		$	2,356		$	6,728

	For the Nine Months Ended July 31, 2012
(In thousands)	Homebuilding			Land Development			Total
Revenues	$	220,880		$	9,838		$	230,718
Cost of sales and expenses		(210,904	)		(7,830	)		(218,734	)
Joint venture net income	$	9,976		$	2,008		$	11,984
Our share of net income	$	1,803		$	1,003		$	2,806

“Income from unconsolidated joint ventures” is reflected as a separate line item in the accompanying Condensed Consolidated Statements of Operations and reflects our proportionate share of the income or loss of these unconsolidated homebuilding and land development joint ventures. The difference between our share of the loss or income from these unconsolidated joint ventures disclosed in the tables above compared to the Condensed Consolidated Statements of Operations for the three and nine months ended July 31, 2013 and 2012, is due to the reclassification of the intercompany portion of management fee income from certain joint ventures and the deferral of income for lots purchased by us from certain joint ventures. To compensate us for the administrative services we provide as the manager of certain joint ventures, we receive a management fee based on a percentage of the applicable joint venture’s revenues. These management fees, which totaled $3.4 million and $4.4 million, for the three months ended July 31, 2013 and 2012, respectively, and $9.0 million and $10.4 million for the nine months ended July 31, 2013 and 2012, respectively, are recorded in “Homebuilding-Selling, general and administrative” on the Condensed Consolidated Statements of Operations.

In determining whether or not we must consolidate joint ventures where we are the manager of the joint venture, we assess whether the other partners have specific rights to overcome the presumption of control by us as the manager of the joint venture. In most cases, the presumption is overcome because the joint venture agreements require that both partners agree on establishing the operations and capital decisions of the partnership, including budgets in the ordinary course of business.

Typically, our unconsolidated joint ventures obtain separate project-specific mortgage financing. The amount of financing is generally targeted to be no more than 50% of the joint venture’s total assets. For our more recent joint ventures, obtaining financing has become challenging, therefore, some of our joint ventures are capitalized only with equity. Including the impact of impairments recorded by the joint ventures, the average debt to capitalization ratio of all our joint ventures is currently 28%. Any joint venture financing is on a nonrecourse basis, with guarantees from us limited only to performance and completion of development, environmental warranties and indemnification, standard indemnification for fraud, misrepresentation and other similar actions, including a voluntary bankruptcy filing. In some instances, the joint venture entity is considered a VIE under ASC 810-10 "Consolidation – Overall" due to the returns being capped to the equity holders; however, in these instances, we are not the primary beneficiary, and therefore we do not consolidate these entities.

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Note 19

9 Months Ended

Jul. 31, 2013

Table Text Block [Abstract]

Schedule of Variable Interest Entities [Table Text Block]

19.  The Company enters into land and lot option purchase contracts to procure land or lots for the construction of homes. Under these contracts, the Company will fund a stated deposit in consideration for the right, but not the obligation, to purchase land or lots at a future point in time with predetermined terms. Under the terms of the option purchase contracts, many of the option deposits are not refundable at the Company's discretion. Under the requirements of ASC 810, certain option purchase contracts may result in the creation of a variable interest in the entity (“VIE”) that owns the land parcel under option.

In compliance with ASC 810, the Company analyzes its option purchase contracts to determine whether the corresponding land sellers are VIEs and, if so, whether the Company is the primary beneficiary. Although the Company does not have legal title to the underlying land, ASC 810 requires the Company to consolidate a VIE if the Company is determined to be the primary beneficiary. In determining whether it is the primary beneficiary, the Company considers, among other things, whether it has the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance. Such activities would include, among other things, determining or limiting the scope or purpose of the VIE, selling or transferring property owned or controlled by the VIE, or arranging financing for the VIE. The Company also considers whether it has the obligation to absorb losses of the VIE or the right to receive benefits from the VIE. As a result of its analyses, the Company determined that, as of July 31, 2013 and October 31, 2012, it was not the primary beneficiary of any VIEs from which it is purchasing land under option purchase contracts.

We will continue to secure land and lots using options, some of which are with VIEs. Including deposits on our unconsolidated VIEs, at July 31, 2013, we had total cash and letters of credit deposits amounting to approximately $63.1 million to purchase land and lots with a total purchase price of $907.0 million. The maximum exposure to loss with respect to our land and lot options is limited to the deposits, although some deposits are refundable at our request or refundable if certain conditions are not met.

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Note 5 (Details) (USD $)	3 Months Ended		9 Months Ended
	Jul. 31, 2013	Jul. 31, 2012	Jul. 31, 2013		Jul. 31, 2012
Note 5 (Details) [Line Items]
Number Of Communities Evaluated For Impairment	374		374
Number of Communities Performed Detailed Impairment Calculations	30		30
Carrying Value Of Communities Tested For Impairment	$ 82,500,000		$ 82,500,000
Number Of Communities Tested For Impairment For Which Undiscounted Future Cash Flow Only Exceeded Carrying Amount By Less Than 20%	1		1
Percentage Undiscounted Cash Flow Exceeds Carrying Amount			20.00%
Impairment of Real Estate	100,000	200,000	1,600,000	[1]	5,400,000
Land Option Write-offs	500,000	500,000	1,900,000		1,800,000
Number of Communities Mothballed During the Period			1
Number of Communities Mothballed	51		51
Inventory, Real Estate, Mothballed Communities	124,900,000		124,900,000
Inventory, Real Estate, Mothballed Communities, Accumulated Impairment Charges	442,900,000		442,900,000
Inventory Real Estate Specific Permance Options	800,000		800,000
One Community [Member]
Note 5 (Details) [Line Items]
Carrying Value Of Communities Tested For Impairment For Which Undiscounted Future Cash Flow Only Exceeded Carrying Amount By Less Than 20%	2,700,000		2,700,000
Mid-Atlantic [Member]
Note 5 (Details) [Line Items]
Impairment of Real Estate			2,000
Southeast [Member]
Note 5 (Details) [Line Items]
Impairment of Real Estate			17,000
Residential Real Estate [Member]
Note 5 (Details) [Line Items]
	48,300,000		48,300,000
	46,100,000		46,100,000
Land [Member]
Note 5 (Details) [Line Items]
	60,600,000		60,600,000
	$ 47,600,000		$ 47,600,000
Minimum [Member]
Note 5 (Details) [Line Items]
Fair Value Inputs, Discount Rate			18.00%		16.80%
Maximum [Member]
Note 5 (Details) [Line Items]
Fair Value Inputs, Discount Rate			18.80%		18.50%

[1] During the nine months ended July 31, 2013, the Mid-Atlantic had an impairment totaling $2 thousand and the Southeast had an impairment totaling $17 thousand.

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Note 9 (Tables)

9 Months Ended

Jul. 31, 2013

Receivables [Abstract]

Loan Origination Reserves [Table Text Block]

	Three Months Ended July 31,					Nine Months Ended July 31,
(In thousands)	2013		2012			2013			2012
Loan origination reserves, beginning of period	$	9,766	$	6,570		$	9,334		$	5,063
Provisions for losses during the period		345		950			1,680			3,339
Adjustments to pre-existing provisions for losses from changes in estimates		260		220			7			272
Payments/settlements		-		(359	)		(650	)		(1,293	)
Loan origination reserves, end of period	$	10,371	$	7,381		$	10,371		$	7,381

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Supplemental Disclosure of Noncash Activities (Details) (USD $) In Millions, except Share data, unless otherwise specified	3 Months Ended			9 Months Ended
	Apr. 30, 2013	Jan. 31, 2013	Jul. 31, 2012	Jul. 31, 2013
Supplemental Disclosure of Noncash Activities (Details) [Line Items]
Real Estate Owned, Transfer from Real Estate Owned	$ 9.5
Stock Issued During Period, Shares, Conversion of Convertible Securities (in Shares)		3,396,102		3,400,000
Noncash or Part Noncash Acquisition, Other Assets Acquired		0.6	5.0
Senior Exchangeable Notes [Member]
Supplemental Disclosure of Noncash Activities (Details) [Line Items]
Senior exchangeable notes exchanged for Class A Common Stock (in Shares)		18,305		18,305
Inventories [Member]
Supplemental Disclosure of Noncash Activities (Details) [Line Items]
Noncash or Part Noncash Acquisition, Inventory Acquired			34.3
Nonrecourse Land Mortgages [Member]
Supplemental Disclosure of Noncash Activities (Details) [Line Items]
Noncash or Part Noncash Acquisition, Debt Assumed			20.6
Accounts Payable and Accrued Liabilities [Member]
Supplemental Disclosure of Noncash Activities (Details) [Line Items]
Noncash or Part Noncash Acquisition, Other Liabilities Assumed			$ 15.8

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Note 6 (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended		9 Months Ended
	Jul. 31, 2013	Jul. 31, 2012	Jul. 31, 2013	Jul. 31, 2012	Oct. 31, 2012
Product Warranties Disclosures [Abstract]
Cash Received From Subcontractors For Owner Controlled Insurance Program			$ 1.6	$ 1.3
General Liability Insurance, Deductible	20	20	20	20
Bodily Injury Insurance, Deductible	0.25	0.10	0.25	0.10
Bodily Injury Insurance, Limit	5		5		5
Aggregate Retention for Construction Defects, Warranty and Bodily Injury Claims	21	21	21	21
Payments by Insurance Companies for Claims	$ 0.1	$ 13.8	$ 8.6	$ 16.4

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Note 3 (Tables)

9 Months Ended

Jul. 31, 2013

Home Building Interest [Abstract]

Home Building Interest [Table Text Block]

	Three Months Ended July 31,				Nine Months Ended July 31,
(In thousands)	2013		2012		2013		2012
Interest capitalized at beginning of period	$	112,488	$	118,435	$	116,056	$	121,441
Plus interest incurred(1)		33,195		39,477		97,813		110,315
Less cost of sales interest expensed		13,757		14,298		35,311		40,091
Less other interest expensed(2)(3)		21,949		24,590		68,581		72,641
Interest capitalized at end of period(4)	$	109,977	$	119,024	$	109,977	$	119,024

Cash Paid for Interest, Net of Capitalized Interest [Table Text Block]

	Three Months Ended July 31,					Nine Months Ended July 31,
(In thousands)	2013		2012			2013			2012
Other interest expensed	$	21,949	$	24,590		$	68,581		$	72,641
Interest paid by our mortgage and finance subsidiaries		731		606			2,239			1,550
Decrease/(increase) in accrued interest		5,018		(13,356	)		(4,802	)		(10,073	)
Cash paid for interest, net of capitalized interest	$	27,698	$	11,840		$	66,018		$	64,118

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Note 18 (Details)	9 Months Ended
	Jul. 31, 2013
Segment Reporting [Abstract]
Number of Reportable Segments	6

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Note 22 (Details) - Changes in Fair Values Included in Income (Loss) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Jul. 31, 2013	Jul. 31, 2012	Jul. 31, 2013	Jul. 31, 2012
Loans Held For Sale [Member]
Fair Value, Option, Quantitative Disclosures [Line Items]
Changes in fair value included in net income (loss), all reflected in financial services revenues	$ (1,253)	$ 863	$ (515)	$ 417
Interest Rate Lock Commitments [Member]
Fair Value, Option, Quantitative Disclosures [Line Items]
Changes in fair value included in net income (loss), all reflected in financial services revenues	(157)	193	115	184
Forward Contracts [Member]
Fair Value, Option, Quantitative Disclosures [Line Items]
Changes in fair value included in net income (loss), all reflected in financial services revenues	$ 1,127	$ (257)	$ (337)	$ 225

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Note 17 (Details) (USD $)	3 Months Ended		9 Months Ended
	Jul. 31, 2013	Jul. 31, 2012	Jul. 31, 2013	Jul. 31, 2012	Oct. 31, 2012
Income Tax Disclosure [Abstract]
Income Tax Expense (Benefit)	$ 1,922,000	$ (36,493,000)	$ (10,155,000)	$ (35,254,000)
Deferred Tax Assets, Valuation Allowance		$ 941,100,000		$ 941,100,000	$ 937,900,000

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Note 3 (Details) - Interest Costs Incurred, Expensed and Capitalized (USD $) In Thousands, unless otherwise specified	3 Months Ended				9 Months Ended
	Jul. 31, 2013		Jul. 31, 2012		Jul. 31, 2013		Jul. 31, 2012
Interest Costs Incurred, Expensed and Capitalized [Abstract]
Interest capitalized at beginning of period	$ 112,488		$ 118,435		$ 116,056		$ 121,441
Plus interest incurred(1)	33,195	[1]	39,477	[1]	97,813	[1]	110,315	[1]
Less cost of sales interest expensed	13,757		14,298		35,311		40,091
Less other interest expensed(2)(3)	21,949	[2],[3]	24,590	[2],[3]	68,581	[2],[3]	72,641	[2],[3]
Interest capitalized at end of period(4)	$ 109,977	[4]	$ 119,024	[4]	$ 109,977	[4]	$ 119,024	[4]

[1] Data does not include interest incurred by our mortgage and finance subsidiaries.

[2] Other interest expensed is comprised of interest that does not qualify for interest capitalization because our assets that qualify for interest capitalization (inventory under development) do not exceed our debt. Interest on completed homes and land in planning, which does not qualify for capitalization, is expensed.

[3] Cash paid for interest, net of capitalized interest, is the sum of other interest expensed, as defined above, and interest paid by our mortgage and finance subsidiaries adjusted for the change in accrued interest, which is calculated as follows:

[4] Capitalized interest amounts are shown gross before allocating any portion of impairments to capitalized interest.

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Note 20 (Details) - Unconsolidated Homebuilding and Land Development Joint Ventures (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Jul. 31, 2013	Jul. 31, 2012	Jul. 31, 2013	Jul. 31, 2012	Oct. 31, 2012
Schedule of Equity Method Investments [Line Items]
Debt to capitalization ratio	28.00%		28.00%
Cost of sales and expenses	$ (471,659)	$ (395,910)	$ (1,278,051)	$ (1,075,640)
Our share of net income	3,690	852	6,806	2,324
Homebuilding [Member] | Segment [Member]
Schedule of Equity Method Investments [Line Items]
Our share of net income	3,654	823	4,372	1,803
Homebuilding [Member]
Schedule of Equity Method Investments [Line Items]
Cash and cash equivalents	38,543		38,543		29,657
Inventories	136,563		136,563		177,170
Other assets	8,065		8,065		12,886
Total assets	183,171		183,171		219,713
Accounts payable and accrued liabilities	28,334		28,334		24,651
Notes payable	44,861		44,861		79,675
Total liabilities	73,195		73,195		104,326
Hovnanian Enterprises, Inc.	46,271		46,271		45,285
Others	63,705		63,705		70,102
Total equity	109,976		109,976		115,387
Total liabilities and equity	183,171		183,171		219,713
Debt to capitalization ratio	29.00%		29.00%		41.00%
Revenues	76,842	89,749	211,408	220,880
Cost of sales and expenses	(67,526)	(84,615)	(194,667)	(210,904)
Joint venture net income	9,316	5,134	16,741	9,976
Land Development [Member] | Segment [Member]
Schedule of Equity Method Investments [Line Items]
Our share of net income	(154)	255	2,356	1,003
Land Development [Member]
Schedule of Equity Method Investments [Line Items]
Cash and cash equivalents	434		434		1,686
Inventories	11,489		11,489		14,853
Other assets	5		5		5
Total assets	11,928		11,928		16,544
Accounts payable and accrued liabilities	4,593		4,593		12,233
Total liabilities	4,593		4,593		12,233
Hovnanian Enterprises, Inc.	2,454		2,454		794
Others	4,881		4,881		3,517
Total equity	7,335		7,335		4,311
Total liabilities and equity	11,928		11,928		16,544
Debt to capitalization ratio	0.00%		0.00%		0.00%
Revenues	2,992	3,755	12,468	9,838
Cost of sales and expenses	(3,300)	(3,246)	(7,755)	(7,830)
Joint venture net income	(308)	509	4,713	2,008
Unconsolidated Joint Ventures [Member] | Segment [Member]
Schedule of Equity Method Investments [Line Items]
Our share of net income	3,500	1,078	6,728	2,806
Unconsolidated Joint Ventures [Member]
Schedule of Equity Method Investments [Line Items]
Cash and cash equivalents	38,977		38,977		31,343
Inventories	148,052		148,052		192,023
Other assets	8,070		8,070		12,891
Total assets	195,099		195,099		236,257
Accounts payable and accrued liabilities	32,927		32,927		36,884
Notes payable	44,861		44,861		79,675
Total liabilities	77,788		77,788		116,559
Hovnanian Enterprises, Inc.	48,725		48,725		46,079
Others	68,586		68,586		73,619
Total equity	117,311		117,311		119,698
Total liabilities and equity	195,099		195,099		236,257
Debt to capitalization ratio	28.00%		28.00%		40.00%
Revenues	79,834	93,504	223,876	230,718
Cost of sales and expenses	(70,826)	(87,861)	(202,422)	(218,734)
Joint venture net income	$ 9,008	$ 5,643	$ 21,454	$ 11,984

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Note 18

9 Months Ended

Jul. 31, 2013

Segment Reporting [Abstract]

Segment Reporting Disclosure [Text Block]

18.  Our operating segments are components of our business for which discrete financial information is available and reviewed regularly by the chief operating decision-maker, our Chief Executive Officer, to evaluate performance and make operating decisions.  Based on this criteria, each of our communities qualifies as an operating segment, and therefore, it is impractical to provide segment disclosures for this many segments.  As such, we have aggregated the homebuilding operating segments into six reportable segments.

 Our homebuilding operating segments are aggregated into reportable segments based primarily upon geographic proximity, similar regulatory environments, land acquisition characteristics and similar methods used to construct and sell homes.  The Company’s reportable segments consist of the following six homebuilding segments and a financial services segment:

Homebuilding:

 (1) Northeast (New Jersey and Pennsylvania)

 (2) Mid-Atlantic (Delaware, Maryland, Virginia, West Virginia and Washington D.C.)

 (3) Midwest (Illinois, Minnesota and Ohio)

 (4) Southeast (Florida, Georgia, North Carolina and South Carolina)

 (5) Southwest (Arizona and Texas)

 (6) West (California)

Financial Services

Operations of the Company’s Homebuilding segments primarily include the sale and construction of single-family attached and detached homes, attached townhomes and condominiums, urban infill and active adult homes in planned residential developments.  In addition, from time to time, operations of the homebuilding segments include sales of land.  Operations of the Company’s Financial Services segment include mortgage banking and title services provided to the homebuilding operations’ customers.  We do not retain or service mortgages that we originate but rather sell the mortgages and related servicing rights to investors.

Corporate and unallocated primarily represents operations at our headquarters in Red Bank, New Jersey.  This includes our executive offices, information services, human resources, corporate accounting, training, treasury, process redesign, internal audit, construction services, and administration of insurance, quality, and safety.  It also includes interest income and interest expense resulting from interest incurred that cannot be capitalized in inventory in the Homebuilding segments, as well as the gains or losses on extinguishment of debt from debt repurchases.

Evaluation of segment performance is based primarily on operating earnings from continuing operations before provision for income taxes (“Income (loss) before income taxes”).  Income (loss) before income taxes for the Homebuilding segments consists of revenues generated from the sales of homes and land, income (loss) from unconsolidated entities, management fees and other income, less the cost of homes and land sold, selling, general and administrative expenses, interest expense and non-controlling interest expense.  Income before income taxes for the Financial Services segment consists of revenues generated from mortgage financing, title insurance and closing services, less the cost of such services and certain selling, general and administrative expenses incurred by the Financial Services segment.

Operational results of each segment are not necessarily indicative of the results that would have occurred had the segment been an independent stand-alone entity during the periods presented.

Financial information relating to the Company’s segment operations was as follows:

	Three Months Ended July 31,						Nine Months Ended July 31,
(In thousands)	2013			2012			2013			2012
Revenues:
Northeast	$	67,214		$	65,742		$	176,285		$	159,049
Mid-Atlantic		89,365			77,131			200,489			196,302
Midwest		38,478			28,271			110,204			70,100
Southeast		35,731			24,660			101,884			81,215
Southwest		182,699			139,790			476,136			346,331
West		52,062			40,559			159,491			119,322
Total homebuilding		465,549			376,153			1,224,489			972,319
Financial services		12,878			10,787			35,219			25,990
Corporate and unallocated		(70	)		71			(142	)		-
Total revenues	$	478,357		$	387,011		$	1,259,566		$	998,309
Income (loss) before income taxes:
Northeast	$	1,028		$	1,435		$	(8,510	)	$	(4,338	)
Mid-Atlantic		8,036			4,946			12,305			12,615
Midwest		1,941			294			5,420			(953	)
Southeast		276			(2,417	)		3,585			(9,150	)
Southwest		22,230			11,815			46,871			24,600
West		3,757			(1,342	)		5,084			(5,262	)
Homebuilding income before income taxes		37,268			14,731			64,755			17,512
Financial services		6,238			4,676			14,014			9,339
Corporate and unallocated		(33,118	)		(21,224	)		(90,448	)		(43,892	)
Income (loss) before income taxes	$	10,388		$	(1,817	)	$	(11,679	)	$	(17,041	)

(In thousands)	July 31, 2013		October 31, 2012
Assets:
Northeast	$	360,882	$	396,073
Mid-Atlantic		239,832		200,969
Midwest		88,922		73,305
Southeast		97,897		90,132
Southwest		313,986		235,367
West		154,049		143,851
Total homebuilding		1,255,568		1,139,697
Financial services		104,758		164,634
Corporate and unallocated		303,800		379,919
Total assets	$	1,664,126	$	1,684,250

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Condensed Consolidated Statements of Cash Flows (Unaudited) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Jul. 31, 2013	Jul. 31, 2012
Cash flows from operating activities:
Net (loss) income	$ (1,524)	$ 18,213
Adjustments to reconcile net (loss) income to net cash used in operating activities:
Depreciation	3,782	4,711
Compensation from stock options and awards	5,259	3,734
Amortization of bond discounts and deferred financing costs	5,641	5,253
Gain on sale and retirement of property and assets	(4,535)	(81)
Income from unconsolidated joint ventures	(6,806)	(2,324)
Distributions of earnings from unconsolidated joint ventures	1,230	537
Gain on extinguishment of debt		(57,966)
Expenses related to the debt for debt exchange		4,694
Inventory impairment and land option write-offs	3,479	7,230
Decrease (increase) in assets:
Mortgage loans held for sale	32,998	(19,181)
Restricted cash, receivables, prepaids, deposits and other assets	64,806	14,129
Inventories	(149,529)	(8,831)
(Decrease) increase in liabilities:
State and federal income tax liabilities	(4,133)	(35,137)
Customers’ deposits	14,076	7,200
Accounts payable, accrued interest and other accrued liabilities	(12,141)	(4,256)
Net cash used in operating activities	(47,397)	(62,075)
Cash flows from investing activities:
Proceeds from sale of property and assets	7,208	3,033
Purchase of property, equipment, and other fixed assets	(1,300)	(4,874)
Investments in and advances to unconsolidated joint ventures	(5,180)	(2,889)
Distributions of capital from unconsolidated joint ventures	18,048	2,820
Net cash provided by (used in) investing activities	18,776	(1,910)
Cash flows from financing activities:
Proceeds from mortgages and notes	82,617	8,347
Payments related to mortgages and notes	(56,901)	(11,179)
Proceeds from model sale leaseback financing programs	19,473	31,651
Payments related to model sale leaseback financing programs	(6,264)
Proceeds from land bank financing program	33,449	38,146
Payments related to land bank financing program	(30,721)
Net proceeds from common stock issuance		47,250
Net (payments) proceeds related to mortgage warehouse lines of credit	(50,033)	28,479
Deferred financing costs from land bank financing programs and note issuances	(3,771)	(1,067)
Principal payments and debt repurchases	(5,202)	(75,435)
Payments related to the debt for debt exchange		(18,874)
Purchase of treasury stock		(103)
Net cash (used in) provided by financing activities	(17,353)	47,215
Net decrease in cash and cash equivalents	(45,974)	(16,770)
Cash and cash equivalents balance, beginning of period	273,232	250,740
Cash and cash equivalents balance, end of period	227,258	233,970
Supplemental disclosures of cash flow:
Cash received during the period for income taxes	$ 6,022	$ 117

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Note 1

9 Months Ended

Jul. 31, 2013

Disclosure Text Block [Abstract]

Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]

1.  Hovnanian Enterprises, Inc. and Subsidiaries (the "Company”, “we”, “us” or “our”) has reportable segments consisting of six Homebuilding segments (Northeast, Mid-Atlantic, Midwest, Southeast, Southwest and West) and the Financial Services segment (see Note 18).

The accompanying unaudited Condensed Consolidated Financial Statements include our accounts and those of all wholly-owned subsidiaries after elimination of all significant intercompany balances and transactions. Certain immaterial prior year amounts have been reclassified to conform to the current year presentation.

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X and should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended October 31, 2012. In the opinion of management, all adjustments for interim periods presented have been made, which include normal recurring accruals and deferrals necessary for a fair presentation of our consolidated financial position, results of operations, and cash flows. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates, and these differences could have a significant impact on the financial statements. Results for interim periods are not necessarily indicative of the results which might be expected for a full year. The balance sheet at October 31, 2012 has been derived from the audited Consolidated Financial Statements at that date but does not include all of the information and footnotes required by GAAP for complete financial statements.

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Note 4

9 Months Ended

Jul. 31, 2013

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment Disclosure [Text Block]

4.  Accumulated depreciation at July 31, 2013 and October 31, 2012 amounted to $78.4 million and $75.7 million, respectively, for our homebuilding property, plant and equipment.

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Note 22 (Details) - Assets Measured at Fair Value on a Nonrecurring Basis (USD $) In Thousands, unless otherwise specified	3 Months Ended				9 Months Ended
	Jul. 31, 2013		Jul. 31, 2012		Jul. 31, 2013		Jul. 31, 2012
Note 22 (Details) - Assets Measured at Fair Value on a Nonrecurring Basis [Line Items]
Pre-Impairment Amount	$ 400	[1]	$ 600	[1]	$ 6,100	[1]	$ 24,100	[1]
Total Losses	(100)		(200)		(1,600)	[2]	(5,400)
Sold and Unsold Homes and Lots Under Development [Member] | Fair Value, Inputs, Level 3 [Member]
Note 22 (Details) - Assets Measured at Fair Value on a Nonrecurring Basis [Line Items]
Fair Value					3,764		4,264
Sold and Unsold Homes and Lots Under Development [Member]
Note 22 (Details) - Assets Measured at Fair Value on a Nonrecurring Basis [Line Items]
Pre-Impairment Amount					5,243		6,978
Total Losses					(1,479)		(2,714)
Land and Land Options Held for Future Development or Sale [Member] | Fair Value, Inputs, Level 3 [Member]
Note 22 (Details) - Assets Measured at Fair Value on a Nonrecurring Basis [Line Items]
Fair Value	321		470		788		14,438
Land and Land Options Held for Future Development or Sale [Member]
Note 22 (Details) - Assets Measured at Fair Value on a Nonrecurring Basis [Line Items]
Pre-Impairment Amount	439		635		924		17,131
Total Losses	$ (118)		$ (165)		$ (136)		$ (2,693)

[1] Represents carrying value, net of prior period impairments, if any, at the time of recording the applicable period's impairments.

[2] During the nine months ended July 31, 2013, the Mid-Atlantic had an impairment totaling $2 thousand and the Southeast had an impairment totaling $17 thousand.

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Note 2

9 Months Ended

Jul. 31, 2013

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

2.  For the three and nine months ended July 31, 2013, the Company’s total stock-based compensation expense was $2.7 million ($2.2 million net of tax) and $5.2 million (pre and post tax), respectively, and $0.8 million (pre and post tax) and $3.7 million (pre and post tax) for the three and nine months ended July 31, 2012, respectively. Included in this total stock-based compensation expense was the vesting of stock options of $1.6 million and $3.0 million for the three and nine months ended July 31, 2013, respectively, and $0.7 million and $3.3 million for the three and nine months ended July 31, 2012, respectively.

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Note 1 (Details) (Homebuilding [Member])	9 Months Ended
	Jul. 31, 2013
Homebuilding [Member]
Note 1 (Details) [Line Items]
Number of Operating Segments	6

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Note 21

9 Months Ended

Jul. 31, 2013

Disclosure Text Block [Abstract]

Description of New Accounting Pronouncements Not yet Adopted [Text Block]

21.  As of July 31, 2013, there were no pending accounting pronouncements applicable to the Company.

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Note 5 (Tables)

9 Months Ended

Jul. 31, 2013

Inventory Impairments And Land Option Cost Write Offs [Abstract]

Inventory Impairment [Table Text Block]

(Dollars in millions)	Three Months Ended July 31, 2013						Three Months Ended July 31, 2012
	Number of Communities		Dollar Amount of Impairment		Pre-Impairment Value(1)		Number of Communities		Dollar Amount of Impairment		Pre-Impairment Value(1)
Northeast		1	$	0.1	$	0.4		1	$	0.1	$	0.3
Mid-Atlantic		-		-		-		-		-		-
Midwest		-		-		-		-		-		-
Southeast		-		-		-		2		0.1		0.3
Southwest		-		-		-		-		-		-
West		-		-		-		-		-		-
Total		1	$	0.1	$	0.4		3	$	0.2	$	0.6

(Dollars in millions)	Nine Months Ended July 31, 2013						Nine Months Ended July 31, 2012
	Number of Communities		Dollar Amount of Impairment(2)		Pre-Impairment Value(1)		Number of Communities		Dollar Amount of Impairment		Pre-Impairment Value(1)
Northeast		3	$	1.6	$	5.6		6	$	2.5	$	16.4
Mid-Atlantic		1		-		0.1		3		0.4		0.8
Midwest		-		-		-		1		0.1		1.1
Southeast		1		-		0.4		10		2.4		5.8
Southwest		-		-		-		-		-		-
West		-		-		-		-		-		-
Total		5	$	1.6	$	6.1		20	$	5.4	$	24.1

Write-Offs and Lots Walked Away From [Table Text Block]

	Three Months Ended July 31,
	2013				2012
(Dollars in millions)	Number of Walk-Away Lots		Dollar Amount of Write-Offs		Number of Walk-Away Lots		Dollar Amount of Write-Offs
Northeast		73	$	0.2		210	$	0.1
Mid-Atlantic		-		-		-		-
Midwest		13		-		89		0.1
Southeast		113		0.1		-		-
Southwest		12		0.2		116		0.3
West		-		-		-		-
Total		211	$	0.5		415	$	0.5

	Nine Months Ended July 31,
	2013				2012
(Dollars in millions)	Number of Walk-Away Lots		Dollar Amount of Write-Offs		Number of Walk-Away Lots		Dollar Amount of Write-Offs
Northeast		373	$	0.4		210	$	0.4
Mid-Atlantic		164		-		182		0.2
Midwest		13		-		194		0.2
Southeast		113		0.2		734		0.7
Southwest		246		1.3		281		0.3
West		-		-		-		-
Total		909	$	1.9		1,601	$	1.8

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Note 22 (Details) - Financial Instruments Measured at Fair Value on a Recurring Basis (USD $) In Thousands, unless otherwise specified	Jul. 31, 2013		Oct. 31, 2012
Note 22 (Details) - Financial Instruments Measured at Fair Value on a Recurring Basis [Line Items]
Mortgage loans held for sale	$ 84,026		$ 117,024
Mortgage Loans Held for Sale [Member] | Fair Value, Inputs, Level 2 [Member]
Note 22 (Details) - Financial Instruments Measured at Fair Value on a Recurring Basis [Line Items]
Mortgage loans held for sale	84,137	[1]	116,912	[1]
Interest Rate Lock Commitments [Member] | Fair Value, Inputs, Level 2 [Member]
Note 22 (Details) - Financial Instruments Measured at Fair Value on a Recurring Basis [Line Items]
Mortgage loans held for sale	106		(8)
Forward Contracts [Member] | Fair Value, Inputs, Level 2 [Member]
Note 22 (Details) - Financial Instruments Measured at Fair Value on a Recurring Basis [Line Items]
Mortgage loans held for sale	$ (217)		$ 120

[1] The aggregate unpaid principal balance was $80.5 million and $113.8 million at July 31, 2013 and October 31, 2012, respectively.

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Note 20 (Tables)

9 Months Ended

Jul. 31, 2013

Equity Method Investments and Joint Ventures [Abstract]

Equity Method Investments [Table Text Block]

(Dollars in thousands)	July 31, 2013
	Homebuilding			Land Development			Total
Assets:
Cash and cash equivalents	$	38,543		$	434		$	38,977
Inventories		136,563			11,489			148,052
Other assets		8,065			5			8,070
Total assets	$	183,171		$	11,928		$	195,099
Liabilities and equity:
Accounts payable and accrued liabilities	$	28,334		$	4,593		$	32,927
Notes payable		44,861			-			44,861
Total liabilities		73,195			4,593			77,788
Equity of:
Hovnanian Enterprises, Inc.		46,271			2,454			48,725
Others		63,705			4,881			68,586
Total equity		109,976			7,335			117,311
Total liabilities and equity	$	183,171		$	11,928		$	195,099
Debt to capitalization ratio		29	%		0	%		28	%

(Dollars in thousands)	October 31, 2012
	Homebuilding			Land Development			Total
Assets:
Cash and cash equivalents	$	29,657		$	1,686		$	31,343
Inventories		177,170			14,853			192,023
Other assets		12,886			5			12,891
Total assets	$	219,713		$	16,544		$	236,257
Liabilities and equity:
Accounts payable and accrued liabilities	$	24,651		$	12,233		$	36,884
Notes payable		79,675			-			79,675
Total liabilities		104,326			12,233			116,559
Equity of:
Hovnanian Enterprises, Inc.		45,285			794			46,079
Others		70,102			3,517			73,619
Total equity		115,387			4,311			119,698
Total liabilities and equity	$	219,713		$	16,544		$	236,257
Debt to capitalization ratio		41	%		0	%		40	%

	For the Three Months Ended July 31, 2013
(In thousands)	Homebuilding			Land Development			Total
Revenues	$	76,842		$	2,992		$	79,834
Cost of sales and expenses		(67,526	)		(3,300	)		(70,826	)
Joint venture net income (loss)	$	9,316		$	(308	)	$	9,008
Our share of net income (loss)	$	3,654		$	(154	)	$	3,500

	For the Three Months Ended July 31, 2012
(In thousands)	Homebuilding			Land Development			Total
Revenues	$	89,749		$	3,755		$	93,504
Cost of sales and expenses		(84,615	)		(3,246	)		(87,861	)
Joint venture net income	$	5,134		$	509		$	5,643
Our share of net income	$	823		$	255		$	1,078

	For the Nine Months Ended July 31, 2013
(In thousands)	Homebuilding			Land Development			Total
Revenues	$	211,408		$	12,468		$	223,876
Cost of sales and expenses		(194,667	)		(7,755	)		(202,422	)
Joint venture net income	$	16,741		$	4,713		$	21,454
Our share of net income	$	4,372		$	2,356		$	6,728

	For the Nine Months Ended July 31, 2012
(In thousands)	Homebuilding			Land Development			Total
Revenues	$	220,880		$	9,838		$	230,718
Cost of sales and expenses		(210,904	)		(7,830	)		(218,734	)
Joint venture net income	$	9,976		$	2,008		$	11,984
Our share of net income	$	1,803		$	1,003		$	2,806

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Note 22 (Details) (USD $)	3 Months Ended		9 Months Ended
	Jul. 31, 2013	Jul. 31, 2012	Jul. 31, 2013		Jul. 31, 2012	Oct. 31, 2012
Note 22 (Details) [Line Items]
Loans Held for Sale, Mortgages, Unpaid Principal	$ 80,500,000		$ 80,500,000			$ 113,800,000
Loan Applications in Process	474,400,000		474,400,000
Number of Days in Commitment	60 days		60 days
Other Commitment	19,000,000		19,000,000
Impairment of Real Estate	100,000	200,000	1,600,000	[1]	5,400,000
Interest Rate Committed [Member]
Note 22 (Details) [Line Items]
Interest Rate Committed Loan Applications	68,000,000		68,000,000
Senior Unsecured Notes [Member] | Fair Value, Inputs, Level 2 [Member]
Note 22 (Details) [Line Items]
Notes Payable, Fair Value Disclosure	491,800,000		491,800,000			448,700,000
Senior Subordinated Notes [Member] | Fair Value, Inputs, Level 2 [Member]
Note 22 (Details) [Line Items]
Notes Payable, Fair Value Disclosure	3,400,000		3,400,000			5,500,000
Senior Secured Notes [Member] | Fair Value, Inputs, Level 3 [Member]
Note 22 (Details) [Line Items]
Notes Payable, Fair Value Disclosure	1,025,700,000		1,025,700,000			994,200,000
Senior Amortizing Notes [Member] | Fair Value, Inputs, Level 3 [Member]
Note 22 (Details) [Line Items]
Notes Payable, Fair Value Disclosure	20,900,000		20,900,000			23,100,000
Senior Exchangeable Notes [Member] | Fair Value, Inputs, Level 3 [Member]
Note 22 (Details) [Line Items]
Notes Payable, Fair Value Disclosure	$ 86,600,000		$ 86,600,000			$ 87,200,000

[1] During the nine months ended July 31, 2013, the Mid-Atlantic had an impairment totaling $2 thousand and the Southeast had an impairment totaling $17 thousand.

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Note 10 (Details) (USD $)	9 Months Ended		25 Months Ended
	Jul. 31, 2013	Oct. 31, 2012	Jun. 30, 2013 Citi Bank [Member]	Jul. 31, 2013 Letters of Credit Collateral [Member]	Oct. 31, 2012 Letters of Credit Collateral [Member]	Jul. 31, 2013 After November 1 [Member] Chase Master Repurchase Agreement [Member]	Jul. 31, 2013 Reference Rate [Member]	Jun. 20, 2014 Reference Rate [Member] Minimum [Member] Credit Suisse Master Repurchase Agreement [Member]	Jul. 31, 2013 Reference Rate [Member] Minimum [Member] Chase Master Repurchase Agreement [Member]	Jul. 31, 2013 Residential Mortgage [Member]	Jul. 31, 2013 Commercial Real Estate [Member]	Jul. 31, 2013 Chase Master Repurchase Agreement [Member]	Jul. 31, 2013 Customers Master Repurchase Agreement [Member]	May 28, 2013 Customers Master Repurchase Agreement [Member]	Jun. 20, 2014 Credit Suisse Master Repurchase Agreement [Member]	Jul. 31, 2013 Credit Suisse Master Repurchase Agreement [Member]	Jul. 31, 2013 Minimum [Member] Chase Master Repurchase Agreement [Member] Spread [Member]	May 28, 2013 Minimum [Member] Customers Master Repurchase Agreement [Member] Spread [Member]	May 28, 2013 Minimum [Member] Customers Master Repurchase Agreement [Member] Reference Rate [Member]	Jul. 31, 2013 Minimum [Member] Credit Suisse Master Repurchase Agreement [Member] Spread [Member]	May 28, 2013 Maximum [Member] Customers Master Repurchase Agreement [Member] Spread [Member]	Jul. 31, 2013 Maximum [Member] Credit Suisse Master Repurchase Agreement [Member] Spread [Member]
Note 10 (Details) [Line Items]
Secured Debt	$ 978,300,000									$ 55,300,000	$ 18,000,000
Long-term Debt, Maturities, Repayments of Principal in Next Twelve Months	55,500,000
Long-term Debt, Maturities, Repayments of Principal in Year Two	1,100,000
Long-term Debt, Maturities, Repayments of Principal in Year Three	1,200,000
Long-term Debt, Maturities, Repayments of Principal in Year Four	1,300,000
Long-term Debt, Maturities, Repayments of Principal in Year Five	1,400,000
Long-term Debt, Maturities, Repayments of Principal after Year Five	12,800,000
Debt Instrument, Interest Rate, Stated Percentage Rate Range, Minimum	4.00%
Debt Instrument, Interest Rate, Stated Percentage Rate Range, Maximum	8.75%
Line of Credit Facility, Expiration Period			5 years
Line of Credit Facility, Maximum Borrowing Capacity			75,000,000			50,000,000								37,500,000
Letters of Credit Outstanding, Amount	5,100,000	29,500,000	22,800,000
Cash Collateral for Borrowed Securities				5,200,000	30,700,000
Assets Sold under Agreements to Repurchase, Interest Rate	3.50%						0.18673%	0.48%	1.00%								2.50%	3.00%	0.50%	3.75%	5.50%	4.00%
Warehouse Agreement Borrowings												$ 22,900,000	$ 15,100,000			$ 19,500,000
Line of Credit Facility, Number of Days from Receipt of a Termination Notice Requirement															50 years

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Note 6 (Details) - Warranty Reserve and General Liability Reserve (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Jul. 31, 2013	Jul. 31, 2012	Jul. 31, 2013	Jul. 31, 2012
Note 6 (Details) - Warranty Reserve and General Liability Reserve [Line Items]
Balance, beginning of period	$ 125,274	$ 123,580	$ 121,149	$ 123,865
Charges incurred during the period	(6,691)	(8,346)	(17,283)	(25,713)
Changes to pre-existing reserves	0	0	0	0
Balance, end of period	127,457	122,116	127,457	122,116
Selling, General and Administrative Expenses [Member]
Note 6 (Details) - Warranty Reserve and General Liability Reserve [Line Items]
Product warranty accrual additions	5,956	3,140	14,362	10,062
Cost of Sales [Member]
Note 6 (Details) - Warranty Reserve and General Liability Reserve [Line Items]
Product warranty accrual additions	$ 2,918	$ 3,742	$ 9,229	$ 13,902

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Note 4 (Details) (USD $) In Millions, unless otherwise specified	Jul. 31, 2013	Oct. 31, 2012
Property, Plant and Equipment [Abstract]
Accumulated Depreciation, Depletion and Amortization, Property, Plant, and Equipment	$ 78.4	$ 75.7

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Condensed Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) (USD $)	Jul. 31, 2013	Oct. 31, 2012
Preferred stock, par value (in Dollars per share)	$ 0.01	$ 0.01	[1]
Preferred stock, shares authorized	100,000	100,000	[1]
Preferred stock, shares issued	5,600	5,600	[1]
Preferred stock, liquidation preference (in Dollars per share)	$ 140,000	$ 140,000	[1]
Common Class A [Member]
Common stock, par value (in Dollars per share)	$ 0.01	$ 0.01	[1]
Common stock, shares authorized	400,000,000	400,000,000	[1]
Common stock, shares issued	136,305,223	130,055,304	[1]
Common stock, shares held in Treasury	11,760,763	11,760,763	[1]
Common Class B [Member]
Common stock, par value (in Dollars per share)	$ 0.01	$ 0.01	[1]
Common stock, shares authorized	60,000,000	60,000,000	[1]
Common stock, shares issued	15,348,615	15,350,101	[1]
Common stock, shares held in Treasury	691,748	691,748	[1]

[1] Derived from the audited balance sheet as of October 31, 2012.

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Note 7

9 Months Ended

Jul. 31, 2013

Disclosure Text Block Supplement [Abstract]

Legal Matters and Contingencies [Text Block]

7.  We are involved in litigation arising in the ordinary course of business, none of which is expected to have a material adverse effect on our financial position or results of operations, and we are subject to extensive and complex regulations that affect the development and home building, sales and customer financing processes, including zoning, density, building standards and mortgage financing. These regulations often provide broad discretion to the administering governmental authorities. This can delay or increase the cost of development or homebuilding.

We also are subject to a variety of local, state, federal and foreign laws and regulations concerning protection of health and the environment. The particular environmental laws that 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. These environmental laws may result in delays, may cause us to incur substantial compliance, remediation and/or other costs, and can prohibit or severely restrict development and homebuilding activity. 

 We received in October 2012 a notice from Region III of the United States Environmental Protection Agency (“EPA”) concerning stipulated penalties, totaling approximately $120,000, based on the extent to which we reportedly did not meet certain compliance performance specified in the previously reported consent decree entered into in August 2010; we have since paid the stipulated penalties as assessed, and more recently have paid approximately $8,000 in response to an EPA demand received in June 2013 for stipulated penalties based on information about our performance under the consent decree for 2012. Until terminated by court order, which can occur no sooner than three years from the date of its entry, the consent decree remains in effect and could give rise to additional assessments of stipulated penalties. In October 2012, we also received notices from Region III of the EPA concerning alleged violations of stormwater discharge permits, issued in 2010 pursuant to the federal Clean Water Act, at two projects in Maryland. We negotiated with the EPA two orders, which the EPA issued in February 2013, to resolve the violations. One requires us to pay a penalty of $130,000, which we have done, while the other obligates us to take certain measures to comply with those permits and detail the specific compliance measures we take, among other things. Our obligations under the orders will not materially affect us.  

 In March 2013, we received a letter from the EPA requesting information about our involvement in a housing redevelopment project in Newark, New Jersey that a Company entity undertook during the 1990s. We understand that the development is in the vicinity of a former lead smelter and that recent tests on soil samples from properties within the development conducted by the EPA show elevated levels of lead. We also understand that the smelter operated before the City of Newark acquired properties, demolished structures existing on them, and sold the properties to the Company entity in connection with the redevelopment project. We responded to the EPA’s request. In August 2013, we were notified that the EPA considers us a potentially responsible party (or "PRP") with respect to the site, that the EPA believes the site requires cleanup, and that the EPA is proposing that we address contamination at the site. We do not know the scope or extent of the Company's obligations, if any, that may arise from the site and therefore cannot provide any assurance that this matter will not have a material impact on the Company.

We anticipate that increasingly stringent requirements will be imposed on developers and homebuilders in the future. Although we cannot predict the effect of these requirements, they could result in time-consuming and expensive compliance programs and in substantial expenditures, which could cause delays and increase our cost of operations. In addition, the continued effectiveness of permits already granted or approvals already obtained is dependent upon many factors, some of which are beyond our control, such as changes in policies, rules, and regulations and their interpretations and application. 

The Company is also involved in the following litigation:

Hovnanian Enterprises, Inc. and K. Hovnanian Venture I, L.L.C. have been named as defendants in a class action suit. The action was filed by Mike D’Andrea and Tracy D’Andrea, on behalf of themselves and all others similarly situated in the Superior Court of New Jersey, Gloucester County. The action was initially filed on May 8, 2006 alleging that the HVAC systems installed in certain of the Company’s homes are in violation of applicable New Jersey building codes and are a potential safety issue. On December 14, 2011, the Superior Court granted class certification; the potential class is 1,065 homes. We filed a request to take an interlocutory appeal regarding the class certification decision. The Appellate Division denied the request, and we filed a request for interlocutory review by the New Jersey Supreme Court, which remanded the case back to the Appellate Division for a review on the merits of the appeal on May 8, 2012. The Appellate Division, on remand, heard oral arguments on December 4, 2012 reviewing the Superior Court’s original finding of class certification. On June 18, 2013, the Appellate Division affirmed class certification. On July 3, 2013, the Company appealed the June 2013 Appellate Division’s decision to the New Jersey Supreme Court and we are awaiting their decision. The plaintiff seeks unspecified damages as well as treble damages pursuant to the NJ Consumer Fraud Act. The Company believes there is insurance coverage available to it for this action. While we have determined that a loss related to this case is not probable, it is not possible to estimate a loss or range of loss related to this matter at this time given the class certification appeal to the New Jersey Supreme Court. On December 19, 2011, certain subsidiaries of the Company filed a separate action seeking indemnification against the various manufacturers and subcontractors implicated by the class action.

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Condensed Consolidated Statement of Equity (Unaudited) (USD $) In Thousands, except Share data	Common Class A [Member]	Common Class B [Member]	Preferred Stock [Member]	Additional Paid-in Capital [Member]	Accumulated Deficit [Member]	Treasury Stock [Member]	Noncontrolling Interest [Member]	Total
Balance at Oct. 31, 2012	$ 1,300	$ 154	$ 135,299	$ 668,735	$ (1,175,703)	$ (115,360)	$ 230	$ (485,345)	[1]
Balance (in Shares) at Oct. 31, 2012	118,294,541	14,658,353	5,600
Stock options, amortization and issuances				3,154				3,154
Stock options, amortization and issuances (in Shares)	44,812
Restricted stock amortization, issuances and forfeitures	1			2,041				2,042
Restricted stock amortization, issuances and forfeitures (in Shares)	123,840
Settlement of prepaid Class A Common Stock purchase contracts	27			(27)
Settlement of prepaid Class A Common Stock purchase contracts (in Shares)	2,683,679							2,700,000
Exchange of senior exchangeable notes for Class A Common Stock	34			14,242				14,276
Exchange of senior exchangeable notes for Class A Common Stock (in Shares)	3,396,102							3,400,000
Conversion of Class B to Class A Common Stock (in Shares)	1,486	(1,486)
Conversion of Class B to Class A Common Stock	1	(1)
Changes in noncontrolling interest in consolidated joint ventures							193	193
Net loss					(1,524)			(1,524)
Balance at Jul. 31, 2013	$ 1,363	$ 153	$ 135,299	$ 688,145	$ (1,177,227)	$ (115,360)	$ 423	$ (467,204)
Balance (in Shares) at Jul. 31, 2013	124,544,460	14,656,867	5,600

[1] Derived from the audited balance sheet as of October 31, 2012.

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Note 13 (Details) (USD $)	3 Months Ended	9 Months Ended						0 Months Ended		0 Months Ended
	Jan. 31, 2013	Jul. 31, 2013	Oct. 02, 2012 Senior Exchangeable Notes [Member] Initial [Member] The 6.00% Exchangable Note Units [Member]	Oct. 02, 2012 Senior Exchangeable Notes [Member] The 6.00% Exchangable Note Units [Member]	Jul. 31, 2013 Senior Exchangeable Notes [Member]	Jan. 31, 2013 Senior Exchangeable Notes [Member]	Oct. 02, 2012 Senior Amortizing Notes [Member] Initial [Member] The 6.00% Exchangable Note Units [Member]	Oct. 02, 2012 Senior Amortizing Notes [Member] Additional [Member] The 6.00% Exchangable Note Units [Member]	Oct. 02, 2012 Senior Amortizing Notes [Member] Per Annum [Member] The 6.00% Exchangable Note Units [Member]	Oct. 02, 2012 Senior Amortizing Notes [Member] The 6.00% Exchangable Note Units [Member]	Jul. 31, 2013 Initial [Member]	Jul. 31, 2013 Additional [Member]	Jul. 31, 2013 The 6.00% Exchangable Note Units [Member]	Oct. 02, 2012 The 6.00% Exchangable Note Units [Member]
Note 13 (Details) [Line Items]
Debt Instrument, Face Amount (in Dollars)											$ 992,000,000	$ 460,600,000		$ 100,000,000
Debt Instrument, Interest Rate, Stated Percentage							11.00%		11.00%				6.00%	6.00%
Note Units Number														100,000
Note Units Stated Amount (in Dollars per Item)														1,000
Number of Coupons			0
Note Units Initial Principal Amount Exchangeable Note (in Dollars per Item)			768.51
Note Units Principal Amount At Maturity (in Dollars per Item)			1,000
Note Units Initial Principal Amount Senior Amortizing Note (in Dollars per Item)							231.49
Debt Instrument, Interest Rate, Effective Percentage				5.17%
Convertible Debt Shares Issued Upon Conversion (in Dollars per Item)				185.5288
Share Price For Exchangeable Note Conversion (in Dollars per Item)				5.39
Debt Instrument Periodic Payments (in Dollars)								$ 39.83		$ 30.00
Senior exchangeable notes exchanged for Class A Common Stock (in Shares)					18,305	18,305
Stock Issued During Period, Shares, Conversion of Convertible Securities (in Shares)	3,396,102	3,400,000

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Condensed Consolidated Balance Sheets (Current Period Unaudited) (USD $) In Thousands, unless otherwise specified	Jul. 31, 2013	Oct. 31, 2012
Restricted cash and cash equivalents	$ 24,000	$ 64,200
Investments in and advances to unconsolidated joint ventures	54,300	61,100
Total assets	1,664,126	1,684,250	[1]
Notes payable:
Senior notes	459,100
TEU senior subordinated amortizing notes	3,181	6,091	[1]
Accrued interest	25,002	20,199	[1]
Total notes payable	1,552,252	1,562,395	[1]
Income taxes payable	2,748	6,882	[1]
Secured debt	978,300
Total liabilities	2,131,330	2,169,595	[1]
Equity:
Preferred stock, $.01 par value - authorized 100,000 shares; issued 5,600 shares with a liquidation preference of $140,000 at July 31, 2013 and at October 31, 2012	135,299	135,299	[1]
Paid in capital - common stock	688,145	668,735	[1]
Accumulated deficit	(1,177,227)	(1,175,703)	[1]
Treasury stock - at cost	(115,360)	(115,360)	[1]
Total Hovnanian Enterprises, Inc. stockholders’ equity deficit	(467,627)	(485,575)	[1]
Noncontrolling interest in consolidated joint ventures	423	230	[1]
Total equity deficit	(467,204)	(485,345)	[1]
Total liabilities and equity	1,664,126	1,684,250	[1]
Homebuilding [Member] | Nonrecourse Land Mortgages [Member]
Notes payable:
Secured debt	55,286	38,302	[1]
Homebuilding [Member] | Nonrecourse Mortgages Secured By Operating Properties [Member]
Notes payable:
Secured debt	18,000	18,775	[1]
Homebuilding [Member]
Cash	221,500	258,323	[1]
Restricted cash and cash equivalents	11,085	41,732	[1]
Sold and unsold homes and lots under development	755,496	671,851	[1]
Land and land options held for future development or sale	252,847	218,996	[1]
Consolidated inventory not owned	109,665	90,619	[1]
Total inventories	1,118,008	981,466	[1]
Investments in and advances to unconsolidated joint ventures	54,346	61,083	[1]
Receivables, deposits, and notes – net	47,542	61,794	[1]
Property, plant, and equipment – net	46,906	48,524	[1]
Prepaid expenses and other assets	59,981	66,694	[1]
Total assets	1,559,368	1,519,616	[1]
Notes payable:
Liabilities from inventory not owned	94,484	77,791	[1]
Total liabilities	495,188	455,224	[1]
Equity:
Accounts payable and other liabilities	289,496	296,510	[1]
Customers’ deposits	37,922	23,846	[1]
Financial Services [Member]
Cash	5,758	14,909	[1]
Restricted cash and cash equivalents	12,935	22,470	[1]
Mortgage loans held for sale at fair value	84,026	117,024	[1]
Other assets	2,039	10,231	[1]
Total assets	104,758	164,634	[1]
Notes payable:
Total liabilities	81,142	145,094	[1]
Equity:
Accounts payable and other liabilities	23,690	37,609	[1]
Mortgage warehouse lines of credit	57,452	107,485	[1]
Senior Secured Notes [Member]
Notes payable:
Secured debt	978,295	977,369	[1]
Senior Notes [Member]
Notes payable:
Senior notes	459,145	458,736	[1]
Senior Amortizing Notes [Member]
Notes payable:
Senior notes	20,857	23,149	[1]
Senior Exchangeable Notes [Member]
Notes payable:
Senior notes	65,772	76,851	[1]
Common Class A [Member]
Equity:
Common stock	1,363	1,300	[1]
Common Class B [Member]
Equity:
Common stock	$ 153	$ 154	[1]

[1] Derived from the audited balance sheet as of October 31, 2012.

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Note 7 (Details) (USD $)	1 Months Ended			1 Months Ended
	Jun. 30, 2013	Oct. 31, 2012	Dec. 14, 2011	Feb. 28, 2013 Subsequent Event [Member]
Note 7 (Details) [Line Items]
Loss Contingency Fine Assessed	$ 8,000	$ 120,000		$ 130,000
Potential Class, Number of Homes			1,065

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Note 23 (Details) - Condensed Consolidating Financial Statements - Balance Sheets (USD $) In Thousands, unless otherwise specified	Jul. 31, 2013	Oct. 31, 2012
ASSETS:
Assets	$ 1,664,126	$ 1,684,250	[1]
Investments in consolidated subsidiaries	54,300	61,100
LIABILITIES AND EQUITY:
Liabilities	2,131,330	2,169,595	[1]
Notes payable	1,552,252	1,562,395	[1]
Income taxes payable (receivable)	2,748	6,882	[1]
Stockholders’ (deficit) equity	(467,627)	(485,575)	[1]
Non-controlling interest in consolidated joint ventures	423	230	[1]
Total liabilities and equity	1,664,126	1,684,250	[1]
Homebuilding [Member] | Parent Company [Member]
ASSETS:
Assets		6,155
LIABILITIES AND EQUITY:
Liabilities	2,404	1,671
Homebuilding [Member] | Subsidiary Issuer [Member]
ASSETS:
Assets	191,928	259,339
LIABILITIES AND EQUITY:
Liabilities	98	125
Homebuilding [Member] | Guarantor Subsidiaries [Member]
ASSETS:
Assets	1,023,999	976,836
LIABILITIES AND EQUITY:
Liabilities	419,016	391,628
Homebuilding [Member] | Non-Guarantor Subsidiaries [Member]
ASSETS:
Assets	343,441	277,286
LIABILITIES AND EQUITY:
Liabilities	73,670	61,800
Homebuilding [Member] | Consolidated Entities [Member]
ASSETS:
Assets	1,559,368	1,519,616
LIABILITIES AND EQUITY:
Liabilities	495,188	455,224
Homebuilding [Member]
ASSETS:
Assets	1,559,368	1,519,616	[1]
Investments in consolidated subsidiaries	54,346	61,083	[1]
LIABILITIES AND EQUITY:
Liabilities	495,188	455,224	[1]
Financial Services [Member] | Consolidation, Eliminations [Member]
ASSETS:
Assets	0
Investments in consolidated subsidiaries		(179,583)
LIABILITIES AND EQUITY:
Liabilities	0
Financial Services [Member] | Parent Company [Member]
ASSETS:
Assets	0
Investments in consolidated subsidiaries		(80,674)
Financial Services [Member] | Subsidiary Issuer [Member]
ASSETS:
Assets	0
Investments in consolidated subsidiaries		13,790
LIABILITIES AND EQUITY:
Liabilities	0
Financial Services [Member] | Guarantor Subsidiaries [Member]
ASSETS:
Assets	9,880	23,669
Investments in consolidated subsidiaries		246,467
LIABILITIES AND EQUITY:
Liabilities	10,076	23,070
Financial Services [Member] | Non-Guarantor Subsidiaries [Member]
ASSETS:
Assets	94,878	140,965
LIABILITIES AND EQUITY:
Liabilities	71,066	122,024
Financial Services [Member] | Consolidated Entities [Member]
ASSETS:
Assets	104,758	164,634
LIABILITIES AND EQUITY:
Liabilities	81,142	145,094
Financial Services [Member]
ASSETS:
Assets	104,758	164,634	[1]
LIABILITIES AND EQUITY:
Liabilities	81,142	145,094	[1]
Consolidation, Eliminations [Member]
ASSETS:
Assets	(1,368,325)	(179,583)
Intercompany receivable	(1,189,469)	14,579
Investments in consolidated subsidiaries	(178,856)
LIABILITIES AND EQUITY:
Notes payable	0
Intercompany Payable	1,189,469	(14,579)
Stockholders’ (deficit) equity	(156,686)	(165,004)
Non-controlling interest in consolidated joint ventures	0
Total liabilities and equity	(1,368,325)	(179,583)
Parent Company [Member]
ASSETS:
Assets	(95,575)	(74,519)
Intercompany receivable	0	(368,834)
Investments in consolidated subsidiaries	(95,575)
LIABILITIES AND EQUITY:
Notes payable	0
Intercompany Payable	0	368,834
Income taxes payable (receivable)	34,609	40,551
Stockholders’ (deficit) equity	(467,627)	(485,575)
Non-controlling interest in consolidated joint ventures	0
Total liabilities and equity	(95,575)	(74,519)
Subsidiary Issuer [Member]
ASSETS:
Assets	1,360,303	273,129
Intercompany receivable	1,188,191	1,930,998
Investments in consolidated subsidiaries	(19,816)
LIABILITIES AND EQUITY:
Notes payable	1,550,549	1,561,635
Intercompany Payable	(1,188,191)	(1,930,998)
Stockholders’ (deficit) equity	(190,344)	642,367
Non-controlling interest in consolidated joint ventures	0
Total liabilities and equity	1,360,303	273,129
Guarantor Subsidiaries [Member]
ASSETS:
Assets	1,328,126	1,246,972
Intercompany receivable	0	(1,589,502)
Investments in consolidated subsidiaries	294,247
LIABILITIES AND EQUITY:
Notes payable	1,512	271
Intercompany Payable	0	1,589,502
Income taxes payable (receivable)	(31,861)	(33,669)
Stockholders’ (deficit) equity	52,783	(723,830)
Non-controlling interest in consolidated joint ventures	0
Total liabilities and equity	1,328,126	1,246,972
Non-Guarantor Subsidiaries [Member]
ASSETS:
Assets	439,597	418,251
Intercompany receivable	1,278	12,759
Investments in consolidated subsidiaries	0
LIABILITIES AND EQUITY:
Notes payable	191	489
Intercompany Payable	(1,278)	(12,759)
Stockholders’ (deficit) equity	294,247	246,467
Non-controlling interest in consolidated joint ventures	423	230
Total liabilities and equity	439,597	418,251
Consolidated Entities [Member]
ASSETS:
Assets	1,664,126	1,684,250
Intercompany receivable	0
Investments in consolidated subsidiaries	0
LIABILITIES AND EQUITY:
Notes payable	1,552,252	1,562,395
Intercompany Payable	0
Income taxes payable (receivable)	2,748	6,882
Stockholders’ (deficit) equity	(467,627)	(485,575)
Non-controlling interest in consolidated joint ventures	423	230
Total liabilities and equity	$ 1,664,126	$ 1,684,250

[1] Derived from the audited balance sheet as of October 31, 2012.

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Note 22

9 Months Ended

Jul. 31, 2013

Fair Value Disclosures [Abstract]

Fair Value Disclosures [Text Block]

22.  ASC 820, “Fair Value Measurements and Disclosures”, provides a framework for measuring fair value, expands disclosures about fair-value measurements and establishes a fair-value hierarchy which prioritizes the inputs used in measuring fair value summarized as follows:

Level 1                     Fair value determined based on quoted prices in active markets for identical assets.

Level 2                     Fair value determined using significant other observable inputs.

Level 3                     Fair value determined using significant unobservable inputs.

Our financial instruments measured at fair value on a recurring basis are summarized below:

(In thousands)	Fair Value Hierarchy	Fair Value at July 31, 2013			Fair Value at October 31, 2012
Mortgage loans held for sale (1)	Level 2	$	84,137		$	116,912
Interest rate lock commitments	Level 2		106			(8	)
Forward contracts	Level 2		(217	)		120
		$	84,026		$	117,024

(1)  The aggregate unpaid principal balance was $80.5 million and $113.8 million at July 31, 2013 and October 31, 2012, respectively.

We elected the fair value option for our loans held for sale for mortgage loans originated subsequent to October 31, 2008 in accordance with ASC 825, “Financial Instruments,” which permits us to measure financial instruments at fair value on a contract-by-contract basis. Management believes that the election of the fair value option for loans held for sale improves financial reporting by mitigating volatility in reported earnings caused by measuring the fair value of the loans and the derivative instruments used to economically hedge them without having to apply complex hedge accounting provisions. In addition, the fair value of servicing rights is included in the Company’s loans held for sale as of July 31, 2013. Fair value of the servicing rights is determined based on values in the Company’s servicing sales contracts. Fair value of loans held for sale is based on independent quoted market prices, where available, or the prices for other mortgage whole loans with similar characteristics.

The Financial Services segment had a pipeline of loan applications in process of $474.4 million at July 31, 2013. Loans in process for which interest rates were committed to the borrowers totaled approximately $68.0 million as of July 31, 2013. Substantially all of these commitments were for periods of 60 days or less. Since a portion of these commitments is expected to expire without being exercised by the borrowers, the total commitments do not necessarily represent future cash requirements.

The Financial Services segment uses investor commitments and forward sales of mandatory mortgage-backed securities (“MBS”) to hedge its mortgage-related interest rate exposure. These instruments involve, to varying degrees, elements of credit and interest rate risk. Credit risk is managed by entering into MBS forward commitments, option contracts with investment banks, federally regulated bank affiliates and loan sales transactions with permanent investors meeting the segment’s credit standards. The segment’s risk, in the event of default by the purchaser, is the difference between the contract price and fair value of the MBS forward commitments and option contracts. At July 31, 2013, the segment had open commitments amounting to $19.0 million to sell MBS with varying settlement dates through September 12, 2013.

The assets accounted for using the fair value option are initially measured at fair value. Gains and losses from initial measurement and subsequent changes in fair value are recognized in the Financial Services segment’s income. The changes in fair values that are included in income are shown, by financial instrument and financial statement line item, below:

	Three Months Ended July 31, 2013
(In thousands)	Loans Held For Sale			Interest Rate Lock Commitments			Forward Contracts
Changes in fair value included in net income (loss), all reflected in financial services revenues	$	(1,253	)	$	(157	)	$	1,127

	Three Months Ended July 31, 2012
(In thousands)	Loans Held For Sale		Interest Rate Lock Commitments		Forward Contracts
Changes in fair value included in net income (loss), all reflected in financial services revenues	$	863	$	193	$	(257	)

	Nine Months Ended July 31, 2013
(In thousands)	Loans Held For Sale			Interest Rate Lock Commitments		Forward Contracts
Changes in fair value included in net income (loss), all reflected in financial services revenues	$	(515	)	$	115	$	(337	)

	Nine Months Ended July 31, 2012
(In thousands)	Loans Held For Sale		Interest Rate Lock Commitments		Forward Contracts
Changes in fair value included in net income (loss), all reflected in financial services revenues	$	417	$	184	$	225

The Company’s assets measured at fair value on a nonrecurring basis are those assets for which the Company has recorded valuation adjustments and write-offs during the periods presented. The assets measured at fair value on a nonrecurring basis are all within the Company’s Homebuilding operations and are summarized below:

Non-financial Assets

		Three Months Ended July 31, 2013
(In thousands)	Fair Value Hierarchy	Pre-Impairment Amount		Total Losses			Fair Value
Sold and unsold homes and lots under development	Level 3	$	-	$	-		$	-
Land and land options held for future development or sale	Level 3	$	439	$	(118	)	$	321

		Three Months Ended July 31, 2012
(In thousands)	Fair Value Hierarchy	Pre-Impairment Amount		Total Losses			Fair Value
Sold and unsold homes and lots under development	Level 3	$	-	$	-		$	-
Land and land options held for future development or sale	Level 3	$	635	$	(165	)	$	470

		Nine Months Ended July 31, 2013
(In thousands)	Fair Value Hierarchy	Pre-Impairment Amount		Total Losses			Fair Value
Sold and unsold homes and lots under development	Level 3	$	5,243	$	(1,479	)	$	3,764
Land and land options held for future development or sale	Level 3	$	924	$	(136	)	$	788

		Nine Months Ended July 31, 2012
(In thousands)	Fair Value Hierarchy	Pre-Impairment Amount		Total Losses			Fair Value
Sold and unsold homes and lots under development	Level 3	$	6,978	$	(2,714	)	$	4,264
Land and land options held for future development or sale	Level 3	$	17,131	$	(2,693	)	$	14,438

We record impairment losses on inventories related to communities under development and held for future development when events and circumstances indicate that they may be impaired and the undiscounted cash flows estimated to be generated by those assets are less than their related carrying amounts. If the expected undiscounted cash flows are less than the carrying amount, then the community is written down to its fair value. We estimate the fair value of each impaired community by determining the present value of its estimated future cash flows at a discount rate commensurate with the risk of the respective community. Should the estimates or expectations used in determining cash flows or fair value decrease or differ from current estimates in the future, we may be required to recognize additional impairments. We recorded inventory impairments, which are included in the Condensed Consolidated Statements of Operations as “Inventory impairment loss and land option write-offs” and deducted from Inventory of $0.1 million and $0.2 million for the three months ended July 31, 2013 and 2012, respectively, and $1.6 million and $5.4 million for the nine months ended July 31, 2013 and 2012, respectively. See Note 5 for a further discussion of communities evaluated for impairment.

 The fair value of our cash equivalents and restricted cash approximates their carrying amount, based on Level 1 inputs.

The fair value of each series of the senior unsecured notes (other than the senior exchangeable notes and senior amortizing notes) and senior subordinated amortizing notes is estimated based on recent trades or quoted market prices for the same issues or based on recent trades or quoted market prices for our debt of similar security and maturity to achieve comparable yields, which are Level 2 measurements. The fair value of the senior unsecured notes (all series in the aggregate), other than the senior exchangeable notes and senior amortizing notes, and senior subordinated amortizing notes, was estimated at $491.8 million and $3.4 million, respectively, as of July 31, 2013. As of October 31, 2012 the fair value of the senior unsecured notes (all series in the aggregate), other than the senior exchangeable notes and the senior amortizing notes, and senior subordinated amortizing notes was estimated at $448.7 million and $5.5 million, respectively.

The fair value of each of the senior secured notes (all series in the aggregate), senior amortizing notes and senior exchangeable notes is estimated based on third party broker quotes, a Level 3 measurement. The fair value of the senior secured notes (all series in the aggregate), senior amortizing notes and senior exchangeable notes was estimated at $1,025.7 million, $20.9 million and $86.6 million, respectively, as of July 31, 2013. As of October 31, 2012, the fair value of the senior secured notes (all series in the aggregate), senior amortizing notes and senior exchangeable notes was estimated at $994.2 million, $23.1 million and $87.2 million, respectively.

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Note 16

9 Months Ended

Jul. 31, 2013

Common Stock [Abstract]

Common Stock [Text Block]

 16. Each share of Class A Common Stock entitles its holder to one vote per share, and each share of Class B Common Stock generally entitles its holder to ten votes per share. The amount of any regular cash dividend payable on a share of Class A Common Stock will be an amount equal to 110% of the corresponding regular cash dividend payable on a share of Class B Common Stock. If a shareholder desires to sell shares of Class B Common Stock, such stock must be converted into shares of Class A Common Stock.

On March 12, 2013, the Company held its Annual Meeting of Shareholders at which the Company’s shareholders approved an increase in the Company’s authorized common stock from 200,000,000 shares of Class A Common Stock, par value $0.01 per share (“Class A Common Stock”), to 400,000,000 shares of Class A Common Stock, par value $0.01 per share, and from 30,000,000 shares of Class B Common Stock, par value $0.01 per share (“Class B Common Stock”), to 60,000,000 shares of Class B Common Stock, par value $0.01 per share.

On April 11, 2012, we issued 25,000,000 shares of our Class A Common Stock at a price of $2.00 per share, resulting in net proceeds of $47.3 million. The net proceeds of the issuance, along with cash on hand, were used to purchase $75.4 million principal amount of our senior notes, as discussed in Note 11.

Pursuant to agreements with bondholders, during the second quarter of fiscal 2012, we also issued an aggregate of 3,064,330 shares of our Class A Common Stock in exchange for approximately $12.2 million of our outstanding indebtedness, consisting of $9.1 million aggregate principal amount of our outstanding 8.625% Senior Notes due 2017 and approximately $3.1 million aggregate principal amount of our 12.072% senior subordinated amortizing notes (the “exchanges”). The exchanges were effected with existing bondholders, without any underwriters, and no commission or other remuneration was paid or given directly or indirectly for soliciting such exchanges. The exchanges resulted in a gain on extinguishment of debt of $3.7 million for the nine months ended July 31, 2012. The gain is included in the Condensed Consolidated Statement of Operations as “Gain on extinguishment of debt”.

On August 4, 2008, our Board of Directors adopted a shareholder rights plan (the “Rights Plan”) designed to preserve shareholder value and the value of certain tax assets primarily associated with net operating loss carryforwards (NOL) and built-in losses under Section 382 of the Internal Revenue Code. Our ability to use NOLs and built-in losses would be limited if there was an “ownership change” under Section 382. This would occur if shareholders owning (or deemed under Section 382 to own) 5% or more of our stock increase their collective ownership of the aggregate amount of our outstanding shares by more than 50 percentage points over a defined period of time. The Rights Plan was adopted to reduce the likelihood of an “ownership change” occurring as defined by Section 382. Under the Rights Plan, one right was distributed for each share of Class A Common Stock and Class B Common Stock outstanding as of the close of business on August 15, 2008. Effective August 15, 2008, if any person or group acquires 4.9% or more of the outstanding shares of Class A Common Stock without the approval of the Board of Directors, there would be a triggering event causing significant dilution in the voting power of such person or group. However, existing stockholders who owned, at the time of the Rights Plan’s adoption, 4.9% or more of the outstanding shares of Class A Common Stock will trigger a dilutive event only if they acquire additional shares. The approval of the Board of Directors’ decision to adopt the Rights Plan may be terminated by the Board at any time, prior to the Rights being triggered. The Rights Plan will continue in effect until August 15, 2018, unless it expires earlier in accordance with its terms. The approval of the Board of Directors’ decision to adopt the Rights Plan was submitted to a stockholder vote and approved at a special meeting of stockholders held on December 5, 2008. Also at the Special Meeting on December 5, 2008, our stockholders approved an amendment to our Certificate of Incorporation to restrict certain transfers of Class A Common Stock in order to preserve the tax treatment of our NOLs and built-in losses under Section 382 of the Internal Revenue Code. Subject to certain exceptions pertaining to pre-existing 5% stockholders and Class B stockholders, the transfer restrictions in the amended Certificate of Incorporation generally restrict any direct or indirect transfer (such as transfers of our stock that result from the transfer of interests in other entities that own our stock) if the effect would be to (i) increase the direct or indirect ownership of our stock by any person (or public group) from less than 5% to 5% or more of our common stock; (ii) increase the percentage of our common stock owned directly or indirectly by a person (or public group) owning or deemed to own 5% or more of our common stock; or (iii) create a new public group. Transfers included under the transfer restrictions include sales to persons (or public groups) whose resulting percentage ownership (direct or indirect) of common stock would exceed the 5% thresholds discussed above, or to persons whose direct or indirect ownership of common stock would by attribution cause another person (or public group) to exceed such threshold.

On July 3, 2001, our Board of Directors authorized a stock repurchase program to purchase up to 4 million shares of Class A Common Stock. There were no shares purchased during the three and nine months ended July 31, 2013. As of July 31, 2013, the maximum number of shares of Class A Common Stock that may yet be purchased under this program is 0.5 million.

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Note 3 (Details) - Cash Paid for Interest, Net of Capitalized Interest (USD $) In Thousands, unless otherwise specified	3 Months Ended				9 Months Ended
	Jul. 31, 2013		Jul. 31, 2012		Jul. 31, 2013		Jul. 31, 2012
Note 3 (Details) - Cash Paid for Interest, Net of Capitalized Interest [Line Items]
Other interest expensed	$ 21,949	[1],[2]	$ 24,590	[1],[2]	$ 68,581	[1],[2]	$ 72,641	[1],[2]
Cash paid for interest, net of capitalized interest	27,698		11,840		66,018		64,118
Subsidiaries [Member]
Note 3 (Details) - Cash Paid for Interest, Net of Capitalized Interest [Line Items]
Interest paid by our mortgage and finance subsidiaries	731		606		2,239		1,550
Decrease/(increase) in accrued interest	$ 5,018		$ (13,356)		$ (4,802)		$ (10,073)

[1] Other interest expensed is comprised of interest that does not qualify for interest capitalization because our assets that qualify for interest capitalization (inventory under development) do not exceed our debt. Interest on completed homes and land in planning, which does not qualify for capitalization, is expensed.

[2] Cash paid for interest, net of capitalized interest, is the sum of other interest expensed, as defined above, and interest paid by our mortgage and finance subsidiaries adjusted for the change in accrued interest, which is calculated as follows:

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Note 23 (Details) - Condensed Consolidating Financial Statements - Statements of Cash Flows (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Jul. 31, 2013	Jul. 31, 2012
Condensed Cash Flow Statements, Captions [Line Items]
Net income (loss)	$ (1,524)	$ 18,213
Net cash provided by (used in) operating activities	(47,397)	(62,075)
Net cash provided by (used in) investing activities	18,776	(1,910)
Net cash provided by (used in) financing activities	(17,353)	47,215
Net increase (decrease) in cash	(45,974)	(16,770)
Cash and cash equivalents balance, beginning of period	273,232	250,740
Cash and cash equivalents balance, end of period	227,258	233,970
Consolidation, Eliminations [Member]
Condensed Cash Flow Statements, Captions [Line Items]
Net income (loss)	8,318	13,921
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities	(8,318)	(13,921)
Parent Company [Member]
Condensed Cash Flow Statements, Captions [Line Items]
Net income (loss)	(1,524)	18,213
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities	20,418	31,198
Net cash provided by (used in) operating activities	18,894	49,411
Net cash provided by (used in) investing activities
Net cash provided by (used in) financing activities		47,147
Intercompany investing and financing activities – net	(18,894)	(96,558)
Net increase (decrease) in cash
Cash and cash equivalents balance, beginning of period
Subsidiary Issuer [Member]
Condensed Cash Flow Statements, Captions [Line Items]
Net income (loss)	(832,711)	(10,144)
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities	789,831	4,286
Net cash provided by (used in) operating activities	(42,880)	(5,858)
Net cash provided by (used in) investing activities	298	26
Net cash provided by (used in) financing activities	(5,460)	(94,309)
Intercompany investing and financing activities – net	6,404	112,651
Net increase (decrease) in cash	(41,638)	12,510
Cash and cash equivalents balance, beginning of period	197,097	112,122
Cash and cash equivalents balance, end of period	155,459	124,632
Guarantor Subsidiaries [Member]
Condensed Cash Flow Statements, Captions [Line Items]
Net income (loss)	776,613	(22,827)
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities	(842,439)	(23,386)
Net cash provided by (used in) operating activities	(65,826)	(46,213)
Net cash provided by (used in) investing activities	12,357	(2,178)
Net cash provided by (used in) financing activities	48,090	50,954
Intercompany investing and financing activities – net	1,009	2,841
Net increase (decrease) in cash	(4,370)	5,404
Cash and cash equivalents balance, beginning of period	(2,017)	(4,989)
Cash and cash equivalents balance, end of period	(6,387)	415
Non-Guarantor Subsidiaries [Member]
Condensed Cash Flow Statements, Captions [Line Items]
Net income (loss)	47,780	19,050
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities	(5,365)	(78,465)
Net cash provided by (used in) operating activities	42,415	(59,415)
Net cash provided by (used in) investing activities	6,121	242
Net cash provided by (used in) financing activities	(59,983)	43,423
Intercompany investing and financing activities – net	11,481	(18,934)
Net increase (decrease) in cash	34	(34,684)
Cash and cash equivalents balance, beginning of period	78,152	143,607
Cash and cash equivalents balance, end of period	78,186	108,923
Consolidated Entities [Member]
Condensed Cash Flow Statements, Captions [Line Items]
Net income (loss)	(1,524)	18,213
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities	(45,873)	(80,288)
Net cash provided by (used in) operating activities	(47,397)	(62,075)
Net cash provided by (used in) investing activities	18,776	(1,910)
Net cash provided by (used in) financing activities	(17,353)	47,215
Net increase (decrease) in cash	(45,974)	(16,770)
Cash and cash equivalents balance, beginning of period	273,232	250,740
Cash and cash equivalents balance, end of period	$ 227,258	$ 233,970

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Note 9 (Details) - Loan Origination Reserves (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Jul. 31, 2013	Jul. 31, 2012	Jul. 31, 2013	Jul. 31, 2012
Loan Origination Reserves [Abstract]
Loan origination reserves, beginning of period	$ 9,766	$ 6,570	$ 9,334	$ 5,063
Provisions for losses during the period	345	950	1,680	3,339
Adjustments to pre-existing provisions for losses from changes in estimates	260	220	7	272
Payments/settlements		(359)	(650)	(1,293)
Loan origination reserves, end of period	$ 10,371	$ 7,381	$ 10,371	$ 7,381

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Note 18 (Details) - Segment Operations - Operating Activity (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Jul. 31, 2013	Jul. 31, 2012	Jul. 31, 2013	Jul. 31, 2012
Segment Reporting Information [Line Items]
Revenues	$ 478,357	$ 387,011	$ 1,259,566	$ 998,309
Income (loss) before income taxes	10,388	(1,817)	(11,679)	(17,041)
Homebuilding [Member] | Northeast [Member]
Segment Reporting Information [Line Items]
Revenues	67,214	65,742	176,285	159,049
Income (loss) before income taxes	1,028	1,435	(8,510)	(4,338)
Homebuilding [Member] | Mid-Atlantic [Member]
Segment Reporting Information [Line Items]
Revenues	89,365	77,131	200,489	196,302
Income (loss) before income taxes	8,036	4,946	12,305	12,615
Homebuilding [Member] | Midwest [Member]
Segment Reporting Information [Line Items]
Revenues	38,478	28,271	110,204	70,100
Income (loss) before income taxes	1,941	294	5,420	(953)
Homebuilding [Member] | Southeast [Member]
Segment Reporting Information [Line Items]
Revenues	35,731	24,660	101,884	81,215
Income (loss) before income taxes	276	(2,417)	3,585	(9,150)
Homebuilding [Member] | Southwest [Member]
Segment Reporting Information [Line Items]
Revenues	182,699	139,790	476,136	346,331
Income (loss) before income taxes	22,230	11,815	46,871	24,600
Homebuilding [Member] | West [Member]
Segment Reporting Information [Line Items]
Revenues	52,062	40,559	159,491	119,322
Income (loss) before income taxes	3,757	(1,342)	5,084	(5,262)
Homebuilding [Member]
Segment Reporting Information [Line Items]
Revenues	465,549	376,153	1,224,489	972,319
Income (loss) before income taxes	37,268	14,731	64,755	17,512
Financial Services [Member]
Segment Reporting Information [Line Items]
Revenues	12,878	10,787	35,219	25,990
Income (loss) before income taxes	6,238	4,676	14,014	9,339
Corporate and Other [Member]
Segment Reporting Information [Line Items]
Revenues	(70)	71	(142)
Income (loss) before income taxes	$ (33,118)	$ (21,224)	$ (90,448)	$ (43,892)

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Note 23 (Tables)

9 Months Ended

Jul. 31, 2013

Condensed Financial Statements Disclosure [Abstract]

Condensed Balance Sheet [Table Text Block]

	Parent			Subsidiary Issuer			Guarantor Subsidiaries			Nonguarantor Subsidiaries		Eliminations			Consolidated
ASSETS:
Homebuilding				$	191,928		$	1,023,999		$	343,441				$	1,559,368
Financial services								9,880			94,878					104,758
Intercompany receivable					1,188,191						1,278		(1,189,469	)		-
Investments in and amounts due to and from consolidated subsidiaries		(95,575	)		(19,816	)		294,247					(178,856	)		-
Total assets	$	(95,575	)	$	1,360,303		$	1,328,126		$	439,597	$	(1,368,325	)	$	1,664,126
LIABILITIES AND EQUITY:
Homebuilding	$	2,404		$	98		$	419,016		$	73,670				$	495,188
Financial services								10,076			71,066					81,142
Notes payable					1,550,549			1,512			191					1,552,252
Intercompany payable		335,039						876,600					(1,211,639	)		-
Income taxes payable (receivable)		34,609						(31,861	)							2,748
Stockholders’ (deficit) equity		(467,627	)		(190,344	)		52,783			294,247		(156,686	)		(467,627	)
Non-controlling interest in consolidated joint ventures											423					423
Total liabilities and equity	$	(95,575	)	$	1,360,303		$	1,328,126		$	439,597	$	(1,368,325	)	$	1,664,126

	Parent			Subsidiary Issuer			Guarantor Subsidiaries			Nonguarantor Subsidiaries			Eliminations			Consolidated
ASSETS:
Homebuilding	$	6,155		$	259,339		$	976,836		$	277,286					$	1,519,616
Financial services								23,669			140,965						164,634
Investments in consolidated subsidiaries		(80,674	)		13,790			246,467						(179,583	)		-
Total assets	$	(74,519	)	$	273,129		$	1,246,972		$	418,251		$	(179,583	)	$	1,684,250
LIABILITIES AND EQUITY:
Homebuilding	$	1,671		$	125		$	391,628		$	61,800					$	455,224
Financial services								23,070			122,024						145,094
Notes payable					1,561,635			271			489						1,562,395
Income taxes payable (receivable)		40,551						(33,669	)								6,882
Intercompany		368,834			(1,930,998	)		1,589,502			(12,759	)		(14,579	)		-
Stockholders’ (deficit) equity		(485,575	)		642,367			(723,830	)		246,467			(165,004	)		(485,575	)
Non-controlling interest in consolidated joint ventures											230						230
Total liabilities and equity	$	(74,519	)	$	273,129		$	1,246,972		$	418,251		$	(179,583	)	$	1,684,250

Condensed Income Statement [Table Text Block]

	Parent			Subsidiary Issuer			Guarantor Subsidiaries			Nonguarantor Subsidiaries			Eliminations			Consolidated
Revenues:
Homebuilding				$	(76	)	$	372,416		$	94,385		$	(1,246	)	$	465,479
Financial services								3,080			9,798						12,878
Intercompany charges					20,760			(24,931	)		(37	)		4,208			-
Total revenues		-			20,684			350,565			104,146			2,962			478,357
Expenses:
Homebuilding		3,177			30,389			351,903			77,409			2,141			465,019
Financial services		4						2,052			4,584						6,640
Total expenses		3,181			30,389			353,955			81,993			2,141			471,659
Gain (loss) on extinguishment of debt																	-
Income from unconsolidated joint ventures								34			3,656						3,690
(Loss) income before income taxes		(3,181	)		(9,705	)		(3,356	)		25,809			821			10,388
State and federal income tax (benefit) provision		(2,233	)					4,155									1,922
Equity in income (loss) from subsidiaries		9,414			(10,887	)		25,809						(24,336	)		-
Net income (loss)	$	8,466		$	(20,592	)	$	18,298		$	25,809		$	(23,515	)	$	8,466

	Parent			Subsidiary Issuer			Guarantor Subsidiaries			Nonguarantor Subsidiaries			Eliminations			Consolidated
Revenues:
Homebuilding	$	4		$	(92	)	$	356,862		$	20,701		$	(1,251	)	$	376,224
Financial services								2,237			8,550						10,787
Intercompany charges					53,026			(15,107	)		(234	)		(37,685	)		-
Total revenues		4			52,934			343,992			29,017			(38,936	)		387,011
Expenses:
Homebuilding		1,640			88,266			352,332			14,572			(67,011	)		389,799
Financial services		23						1,407			4,679			2			6,111
Total expenses		1,663			88,266			353,739			19,251			(67,009	)		395,910
Gain on extinguishment of debt					6,230												6,230
Income from unconsolidated joint ventures								30			822						852
(Loss) income before income taxes		(1,659	)		(29,102	)		(9,717	)		10,588			28,073			(1,817	)
State and federal income tax (benefit)		(4,261	)					(32,232	)								(36,493	)
Equity in income (loss) of consolidated subsidiaries		32,074			(10,375	)		10,588						(32,287	)		-
Net income (loss)	$	34,676		$	(39,477	)	$	33,103		$	10,588		$	(4,214	)	$	34,676

	Parent			Subsidiary Issuer			Guarantor Subsidiaries			Nonguarantor Subsidiaries			Eliminations			Consolidated
Revenues:
Homebuilding	$	3		$	(175	)	$	1,033,927		$	194,333		$	(3,741	)	$	1,224,347
Financial services								7,743			27,476						35,219
Intercompany charges					61,167			(75,265	)		(1,788	)		15,886			-
Total revenues		3			60,992			966,405			220,021			12,145			1,259,566
Expenses:
Homebuilding		5,921			90,088			994,979			161,304			4,554			1,256,846
Financial services		13						5,742			15,450						21,205
Total expenses		5,934			90,088			1,000,721			176,754			4,554			1,278,051
(Loss) gain on extinguishment of debt					(770,009	)		770,009									-
Income from unconsolidated joint ventures								2,293			4,513						6,806
(Loss) income before income taxes		(5,931	)		(799,105	)		737,986			47,780			7,591			(11,679	)
State and federal income tax (benefit) provision		(19,308	)					9,153									(10,155	)
Equity in (loss) income of consolidated subsidiaries		(14,901	)		(33,606	)		47,780						727			-
Net (loss) income	$	(1,524	)	$	(832,711	)	$	776,613		$	47,780		$	8,318		$	(1,524	)

	Parent			Subsidiary Issuer			Guarantor Subsidiaries			Nonguarantor Subsidiaries			Eliminations			Consolidated
Revenues:
Homebuilding	$	8		$	(197	)	$	934,330		$	41,907		$	(3,729	)	$	972,319
Financial services								5,232			20,758						25,990
Intercompany charges					76,975			(46,238	)		(3,682	)		(27,055	)		-
Total revenues		8			76,778			893,324			58,983			(30,784	)		998,309
Expenses:
Homebuilding		5,815			112,342			954,080			29,144			(42,392	)		1,058,989
Financial services		103						3,967			12,592			(11	)		16,651
Total expenses		5,918			112,342			958,047			41,736			(42,403	)		1,075,640
Gain on extinguishment of debt					57,966												57,966
Income from unconsolidated joint ventures								521			1,803						2,324
(Loss) income before income taxes		(5,910	)		22,402			(64,202	)		19,050			11,619			(17,041	)
State and federal income tax (benefit)		(12,929	)					(22,325	)								(35,254	)
Equity in income (loss) of consolidated subsidiaries		11,194			(32,546	)		19,050						2,302			-
Net income (loss)	$	18,213		$	(10,144	)	$	(22,827	)	$	19,050		$	13,921		$	18,213

Condensed Cash Flow Statement [Table Text Block]

	Parent			Subsidiary Issuer			Guarantor Subsidiaries			Nonguarantor Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities:
Net (loss) income	$	(1,524	)	$	(832,711	)	$	776,613		$	47,780		$	8,318		$	(1,524	)
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities		20,418			789,831			(842,439	)		(5,365	)		(8,318	)		(45,873	)
Net cash provided by (used in) operating activities		18,894			(42,880	)		(65,826	)		42,415			-			(47,397	)
Net cash provided by investing activities					298			12,357			6,121						18,776
Net cash (used in) provided by financing activities					(5,460	)		48,090			(59,983	)					(17,353	)
Intercompany investing and financing activities – net		(18,894	)		6,404			1,009			11,481						-
Net (decrease) increase in cash		-			(41,638	)		(4,370	)		34			-			(45,974	)
Cash and cash equivalents balance, beginning of period					197,097			(2,017	)		78,152						273,232
Cash and cash equivalents balance, end of period	$	-		$	155,459		$	(6,387	)	$	78,186		$	-		$	227,258

	Parent			Subsidiary Issuer			Guarantor Subsidiaries			Nonguarantor Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities:
Net income (loss)	$	18,213		$	(10,144	)	$	(22,827	)	$	19,050		$	13,921		$	18,213
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities		31,198			4,286			(23,386	)		(78,465	)		(13,921	)		(80,288	)
Net cash provided by (used in) operating activities		49,411			(5,858	)		(46,213	)		(59,415	)		-			(62,075	)
Net cash provided by (used in) investing activities					26			(2,178	)		242						(1,910	)
Net cash provided by (used in) financing activities		47,147			(94,309	)		50,954			43,423						47,215
Intercompany investing and financing activities – net		(96,558	)		112,651			2,841			(18,934	)					-
Net increase (decrease) in cash		-			12,510			5,404			(34,684	)		-			(16,770	)
Cash and cash equivalents balance, beginning of period					112,122			(4,989	)		143,607						250,740
Cash and cash equivalents balance, end of period	$	-		$	124,632		$	415		$	108,923		$	-		$	233,970

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Note 14 (Tables)

9 Months Ended

Jul. 31, 2013

Earnings Per Share [Abstract]

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

Basic and diluted earnings per share for the periods presented below were calculated as follows:	Three Months Ended July 31,						Nine Months Ended July 31,
(In thousands, except per share data)	2013			2012			2013			2012
Numerator:
Net earnings (loss) attributable to Hovnanian	$	8,466		$	34,676		$	(1,524	)	$	18,213
Less: undistributed earnings allocated to nonvested shares		(15	)		(76	)		-			(52	)
Numerator for basic earnings per share		8,451			34,600			(1,524	)		18,161
Plus: undistributed earnings allocated to nonvested shares		15			76			-			52
Less: undistributed earnings reallocated to nonvested shares		(15	)		(76	)		-			(52	)
Plus: interest on senior exchangeable notes		893			-			-			-
Numerator for diluted earnings per share	$	9,344		$	34,600		$	(1,524	)	$	18,161
Denominator:
Denominator for basic earnings per share		146,056			138,472			144,840			121,357
Effect of dilutive securities:
Share based payments		1,610			80			-			23
Senior exchangeable notes		15,157			-			-			-
Denominator for diluted earnings per share – weighted average shares outstanding		162,823			138,552			144,840			121,380
Basic earnings (loss) per share	$	0.06		$	0.25		$	(0.01	)	$	0.15
Diluted earnings (loss) per share	$	0.06		$	0.25		$	(0.01	)	$	0.15

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Note 18 (Tables)

9 Months Ended

Jul. 31, 2013

Operations [Member]

Note 18 (Tables) [Line Items]

Schedule of Segment Reporting Information, by Segment [Table Text Block]

	Three Months Ended July 31,						Nine Months Ended July 31,
(In thousands)	2013			2012			2013			2012
Revenues:
Northeast	$	67,214		$	65,742		$	176,285		$	159,049
Mid-Atlantic		89,365			77,131			200,489			196,302
Midwest		38,478			28,271			110,204			70,100
Southeast		35,731			24,660			101,884			81,215
Southwest		182,699			139,790			476,136			346,331
West		52,062			40,559			159,491			119,322
Total homebuilding		465,549			376,153			1,224,489			972,319
Financial services		12,878			10,787			35,219			25,990
Corporate and unallocated		(70	)		71			(142	)		-
Total revenues	$	478,357		$	387,011		$	1,259,566		$	998,309
Income (loss) before income taxes:
Northeast	$	1,028		$	1,435		$	(8,510	)	$	(4,338	)
Mid-Atlantic		8,036			4,946			12,305			12,615
Midwest		1,941			294			5,420			(953	)
Southeast		276			(2,417	)		3,585			(9,150	)
Southwest		22,230			11,815			46,871			24,600
West		3,757			(1,342	)		5,084			(5,262	)
Homebuilding income before income taxes		37,268			14,731			64,755			17,512
Financial services		6,238			4,676			14,014			9,339
Corporate and unallocated		(33,118	)		(21,224	)		(90,448	)		(43,892	)
Income (loss) before income taxes	$	10,388		$	(1,817	)	$	(11,679	)	$	(17,041	)

Assets [Member]

Note 18 (Tables) [Line Items]

Schedule of Segment Reporting Information, by Segment [Table Text Block]

(In thousands)	July 31, 2013		October 31, 2012
Assets:
Northeast	$	360,882	$	396,073
Mid-Atlantic		239,832		200,969
Midwest		88,922		73,305
Southeast		97,897		90,132
Southwest		313,986		235,367
West		154,049		143,851
Total homebuilding		1,255,568		1,139,697
Financial services		104,758		164,634
Corporate and unallocated		303,800		379,919
Total assets	$	1,664,126	$	1,684,250

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Note 6

9 Months Ended

Jul. 31, 2013

Product Warranties Disclosures [Abstract]

Product Warranty Disclosure [Text Block]

6.   Over the past several years, general liability insurance for homebuilding companies and their suppliers and subcontractors has become very difficult to obtain. The availability of general liability insurance has been limited due to a decreased number of insurance companies willing to underwrite for the industry. In addition, those few insurers willing to underwrite liability insurance have significantly increased the premium costs. We have been able to obtain general liability insurance but at higher premium costs with higher deductibles. We have been advised that a significant number of our subcontractors and suppliers have also had difficulty obtaining insurance that also provides us coverage. As a result, we introduced an owner controlled insurance program for certain of our subcontractors, whereby the subcontractors pay us an insurance premium (through a reduction of amounts we would otherwise owe such subcontractors for their work on our homes) based on the value of their services. We absorb the liability associated with their work on our homes as part of our overall general liability insurance at no additional cost to us because our existing general liability and construction defect insurance policy and related reserves for amounts under our deductible covers construction defects regardless of whether we or our subcontractors are responsible for the defect. For the nine months ended July 31, 2013 and 2012 we received $1.6 million and $1.3 million, respectively, from subcontractors related to the owner controlled insurance program, which we accounted for as a reduction to inventory.

We accrue for warranty costs that are covered under our existing general liability and construction defect policy as part of our general liability insurance deductible. This accrual is expensed as selling, general, and administrative costs.  For homes delivered in fiscal 2013 and 2012, our deductible under our general liability insurance is $20 million per occurrence for construction defects and warranty claims. For bodily injury claims, our deductible per occurrence in fiscal 2013 and 2012 is $0.25 million and $0.1 million, respectively, up to a $5 million limit. Our aggregate retention in fiscal 2013 and 2012 is $21 million for construction defects, warranty and bodily injury claims. In addition, we establish a warranty accrual for lower cost-related issues to cover home repairs, community amenities, and land development infrastructure that are not covered under our general liability and construction defect policy. We accrue an estimate for these warranty costs as part of cost of sales at the time each home is closed and title and possession have been transferred to the homebuyer. Additions and charges in the warranty reserve and general liability reserve for the three and nine months ended July 31, 2013 and 2012 were as follows:

	Three Months Ended July 31,						Nine Months Ended July 31,
(In thousands)	2013			2012			2013			2012
Balance, beginning of period	$	125,274		$	123,580		$	121,149		$	123,865
Additions – Selling, general and administrative		5,956			3,140			14,362			10,062
Additions – Cost of sales		2,918			3,742			9,229			13,902
Charges incurred during the period		(6,691	)		(8,346	)		(17,283	)		(25,713	)
Changes to pre-existing reserves		-			-			-			-
Balance, end of period	$	127,457		$	122,116		$	127,457		$	122,116

Warranty accruals are based upon historical experience. We engage a third-party actuary that uses our historical warranty and construction defect data, worker’s compensation data, and other industry data to assist us in estimating our reserves for unpaid claims, claim adjustment expenses and incurred but not reported claims reserves for the risks that we are assuming under the general liability and workers compensation programs. The estimates include provisions for inflation, claims handling, and legal fees.

Insurance claims paid by our insurance carriers, excluding insurance deductibles paid, were $0.1 million and $13.8 million for the three months ended July 31, 2013 and 2012, respectively, and $8.6 million and $16.4 million for the nine months ended July 31, 2013 and 2012, respectively, for prior year deliveries.

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Note 16 (Details) (USD $)	3 Months Ended		9 Months Ended						0 Months Ended	3 Months Ended	9 Months Ended				9 Months Ended						9 Months Ended
	Jul. 31, 2013	Jul. 31, 2012	Jul. 31, 2013	Jul. 31, 2012	Apr. 30, 2012	Jul. 03, 2001	Jul. 31, 2013 Increased Amount [Member] Common Class A [Member]	Jul. 31, 2013 Increased Amount [Member] Common Class B [Member]	Apr. 11, 2012 Common Class A [Member]	Apr. 30, 2012 Common Class A [Member]	Jul. 31, 2013 Common Class A [Member]	Mar. 12, 2013 Common Class A [Member]	Oct. 31, 2012 Common Class A [Member]		Jul. 31, 2013 Common Class B [Member]	Mar. 12, 2013 Common Class B [Member]	Oct. 31, 2012 Common Class B [Member]		Apr. 11, 2012 Senior Notes Purchased With Stock Issuance Proceeds [Member]	Apr. 30, 2012 The 8.625% 2017 Notes [Member]	Jul. 31, 2012 The 12.072% Notes [Member]	Apr. 30, 2012 The 12.072% Notes [Member]	Jul. 31, 2013 Minimum [Member]
Note 16 (Details) [Line Items]
Common Stock, Voting Rights											one				ten
Common Stock Dividends, Percent of Increase from Class A to Class B	110.00%		110.00%
Common Stock, Shares Authorized (in Shares)							400,000,000	60,000,000			400,000,000	200,000,000	400,000,000	[1]	60,000,000	30,000,000	60,000,000	[1]
Common Stock, Par or Stated Value Per Share (in Dollars per share)											$ 0.01	$ 0.01	$ 0.01	[1]	$ 0.01	$ 0.01	$ 0.01	[1]
Stock Issued During Period, Shares, New Issues (in Shares)									25,000,000
Sale of Stock, Price Per Share (in Dollars per share)									$ 2.00
Stock Issued During Period, Value, New Issues (in Dollars)									$ 47,300,000
Debt Instrument, Repurchased Face Amount (in Dollars)					12,200,000														75,400,000	9,100,000		3,100,000
Stock Issued During Period, Shares, Other (in Shares)										3,064,330
Gains (Losses) on Extinguishment of Debt (in Dollars)		6,230,000		57,966,000																	3,700,000
Shareholder Ownership Percentage	4.90%		4.90%																				5.00%
Shareholder Ownership, Percentage of Increase	50.00%		50.00%
Number of Rights	1		1
Shareholder, Percent of Stock Acquired	4.90%		4.90%
Shareholders, Pre-existing Ownership Percentage	5.00%		5.00%
Shareholders, Current Ownership Percentage	5.00%		5.00%
Shareholders Ownership Percentage on Transfers	5.00%		5.00%
Shareholders, Ownership Percentage Threshold	5.00%		5.00%
Stock Repurchase Program, Number of Shares Authorized to be Repurchased (in Shares)						4,000,000
Stock Repurchased During Period, Shares (in Shares)	0		0
Stock Repurchase Program, Remaining Authorized Repurchase Amount (in Dollars)			$ 500,000

[1] Derived from the audited balance sheet as of October 31, 2012.

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Note 23

9 Months Ended

Jul. 31, 2013

Condensed Financial Statements Disclosure [Abstract]

Condensed Financial Statements Disclosure [Text Block]

23.  Hovnanian Enterprises, Inc., the parent company (the “Parent”), is the issuer of publicly traded common stock, preferred stock, which is represented by depository shares, and 7.25% Tangible Equity Units. One of its wholly owned subsidiaries, K. Hovnanian Enterprises, Inc. (the “Subsidiary Issuer”), acts as a finance entity that, as of July 31, 2013, had issued and outstanding approximately $992.0 million of senior secured notes ($978.3 million, net of discount), $460.6 million senior notes ($459.1 million, net of discount), $20.9 million senior amortizing notes and $65.8 million senior exchangeable notes (issued as components of our 6.0% Exchangeable Note Units) and $3.2 million senior subordinated amortizing notes (issued as a component of our 7.25% Tangible Equity Units). The senior secured notes, senior notes, senior amortizing notes, senior exchangeable notes and senior subordinated amortizing notes are fully and unconditionally guaranteed by the Parent.

In addition to the Parent, each of the wholly owned subsidiaries of the Parent other than the Subsidiary Issuer (collectively, “Guarantor Subsidiaries”), with the exception of our home mortgage subsidiaries, certain of our title insurance subsidiaries, joint ventures, subsidiaries holding interests in our joint ventures and our foreign subsidiary (collectively, the “Nonguarantor Subsidiaries”), have guaranteed fully and unconditionally, on a joint and several basis, the obligations of the Subsidiary Issuer to pay principal and interest under the senior secured notes (other than the 2021 Notes), senior notes, senior exchangeable notes, senior amortizing notes and senior subordinated amortizing notes. The Guarantor Subsidiaries are directly or indirectly 100% owned subsidiaries of the Parent. The 2021 Notes are guaranteed by the Guarantor Subsidiaries and the members of the Secured Group (see Note 11).

The senior unsecured notes, senior amortizing notes, senior exchangeable notes and senior subordinated amortizing notes have been registered under the Securities Act of 1933, as amended. The 2020 Secured Notes and the 2021 Notes (see Note 11) are not, pursuant to the indentures under which such notes were issued, required to be registered. The Condensed Consolidating Financial Statements presented below are in respect of our registered notes only and not the 2020 Secured Notes or the 2021 Notes (however, the Guarantor Subsidiaries for the 2020 Secured Notes are the same as those represented by the accompanying Condensed Consolidating Financial Statements). In lieu of providing separate financial statements for the Guarantor Subsidiaries of our registered notes, we have included the accompanying Condensed Consolidating Financial Statements. Therefore, separate financial statements and other disclosures concerning such Guarantor Subsidiaries are not presented.

The following Condensed Consolidating Financial Statements present the results of operations, financial position and cash flows of (i) the Parent, (ii) the Subsidiary Issuer, (iii) the Guarantor Subsidiaries, (iv) the Nonguarantor Subsidiaries and (v) the eliminations to arrive at the information for Hovnanian Enterprises, Inc. on a consolidated basis. 

HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED CONSOLIDATING BALANCE SHEET

JULY 31, 2013

(In Thousands)

	Parent			Subsidiary Issuer			Guarantor Subsidiaries			Nonguarantor Subsidiaries		Eliminations			Consolidated
ASSETS:
Homebuilding				$	191,928		$	1,023,999		$	343,441				$	1,559,368
Financial services								9,880			94,878					104,758
Intercompany receivable					1,188,191						1,278		(1,189,469	)		-
Investments in and amounts due to and from consolidated subsidiaries		(95,575	)		(19,816	)		294,247					(178,856	)		-
Total assets	$	(95,575	)	$	1,360,303		$	1,328,126		$	439,597	$	(1,368,325	)	$	1,664,126
LIABILITIES AND EQUITY:
Homebuilding	$	2,404		$	98		$	419,016		$	73,670				$	495,188
Financial services								10,076			71,066					81,142
Notes payable					1,550,549			1,512			191					1,552,252
Intercompany payable		335,039						876,600					(1,211,639	)		-
Income taxes payable (receivable)		34,609						(31,861	)							2,748
Stockholders’ (deficit) equity		(467,627	)		(190,344	)		52,783			294,247		(156,686	)		(467,627	)
Non-controlling interest in consolidated joint ventures											423					423
Total liabilities and equity	$	(95,575	)	$	1,360,303		$	1,328,126		$	439,597	$	(1,368,325	)	$	1,664,126

HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED CONSOLIDATING BALANCE SHEET

OCTOBER 31, 2012

(In Thousands)

	Parent			Subsidiary Issuer			Guarantor Subsidiaries			Nonguarantor Subsidiaries			Eliminations			Consolidated
ASSETS:
Homebuilding	$	6,155		$	259,339		$	976,836		$	277,286					$	1,519,616
Financial services								23,669			140,965						164,634
Investments in consolidated subsidiaries		(80,674	)		13,790			246,467						(179,583	)		-
Total assets	$	(74,519	)	$	273,129		$	1,246,972		$	418,251		$	(179,583	)	$	1,684,250
LIABILITIES AND EQUITY:
Homebuilding	$	1,671		$	125		$	391,628		$	61,800					$	455,224
Financial services								23,070			122,024						145,094
Notes payable					1,561,635			271			489						1,562,395
Income taxes payable (receivable)		40,551						(33,669	)								6,882
Intercompany		368,834			(1,930,998	)		1,589,502			(12,759	)		(14,579	)		-
Stockholders’ (deficit) equity		(485,575	)		642,367			(723,830	)		246,467			(165,004	)		(485,575	)
Non-controlling interest in consolidated joint ventures											230						230
Total liabilities and equity	$	(74,519	)	$	273,129		$	1,246,972		$	418,251		$	(179,583	)	$	1,684,250

HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

THREE MONTHS ENDED JULY 31, 2013

(In Thousands)

	Parent			Subsidiary Issuer			Guarantor Subsidiaries			Nonguarantor Subsidiaries			Eliminations			Consolidated
Revenues:
Homebuilding				$	(76	)	$	372,416		$	94,385		$	(1,246	)	$	465,479
Financial services								3,080			9,798						12,878
Intercompany charges					20,760			(24,931	)		(37	)		4,208			-
Total revenues		-			20,684			350,565			104,146			2,962			478,357
Expenses:
Homebuilding		3,177			30,389			351,903			77,409			2,141			465,019
Financial services		4						2,052			4,584						6,640
Total expenses		3,181			30,389			353,955			81,993			2,141			471,659
Gain (loss) on extinguishment of debt																	-
Income from unconsolidated joint ventures								34			3,656						3,690
(Loss) income before income taxes		(3,181	)		(9,705	)		(3,356	)		25,809			821			10,388
State and federal income tax (benefit) provision		(2,233	)					4,155									1,922
Equity in income (loss) from subsidiaries		9,414			(10,887	)		25,809						(24,336	)		-
Net income (loss)	$	8,466		$	(20,592	)	$	18,298		$	25,809		$	(23,515	)	$	8,466

 HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

THREE MONTHS ENDED JULY 31, 2012

(In Thousands)

	Parent			Subsidiary Issuer			Guarantor Subsidiaries			Nonguarantor Subsidiaries			Eliminations			Consolidated
Revenues:
Homebuilding	$	4		$	(92	)	$	356,862		$	20,701		$	(1,251	)	$	376,224
Financial services								2,237			8,550						10,787
Intercompany charges					53,026			(15,107	)		(234	)		(37,685	)		-
Total revenues		4			52,934			343,992			29,017			(38,936	)		387,011
Expenses:
Homebuilding		1,640			88,266			352,332			14,572			(67,011	)		389,799
Financial services		23						1,407			4,679			2			6,111
Total expenses		1,663			88,266			353,739			19,251			(67,009	)		395,910
Gain on extinguishment of debt					6,230												6,230
Income from unconsolidated joint ventures								30			822						852
(Loss) income before income taxes		(1,659	)		(29,102	)		(9,717	)		10,588			28,073			(1,817	)
State and federal income tax (benefit)		(4,261	)					(32,232	)								(36,493	)
Equity in income (loss) of consolidated subsidiaries		32,074			(10,375	)		10,588						(32,287	)		-
Net income (loss)	$	34,676		$	(39,477	)	$	33,103		$	10,588		$	(4,214	)	$	34,676

	Parent			Subsidiary Issuer			Guarantor Subsidiaries			Nonguarantor Subsidiaries			Eliminations			Consolidated
Revenues:
Homebuilding	$	3		$	(175	)	$	1,033,927		$	194,333		$	(3,741	)	$	1,224,347
Financial services								7,743			27,476						35,219
Intercompany charges					61,167			(75,265	)		(1,788	)		15,886			-
Total revenues		3			60,992			966,405			220,021			12,145			1,259,566
Expenses:
Homebuilding		5,921			90,088			994,979			161,304			4,554			1,256,846
Financial services		13						5,742			15,450						21,205
Total expenses		5,934			90,088			1,000,721			176,754			4,554			1,278,051
(Loss) gain on extinguishment of debt					(770,009	)		770,009									-
Income from unconsolidated joint ventures								2,293			4,513						6,806
(Loss) income before income taxes		(5,931	)		(799,105	)		737,986			47,780			7,591			(11,679	)
State and federal income tax (benefit) provision		(19,308	)					9,153									(10,155	)
Equity in (loss) income of consolidated subsidiaries		(14,901	)		(33,606	)		47,780						727			-
Net (loss) income	$	(1,524	)	$	(832,711	)	$	776,613		$	47,780		$	8,318		$	(1,524	)

	Parent			Subsidiary Issuer			Guarantor Subsidiaries			Nonguarantor Subsidiaries			Eliminations			Consolidated
Revenues:
Homebuilding	$	8		$	(197	)	$	934,330		$	41,907		$	(3,729	)	$	972,319
Financial services								5,232			20,758						25,990
Intercompany charges					76,975			(46,238	)		(3,682	)		(27,055	)		-
Total revenues		8			76,778			893,324			58,983			(30,784	)		998,309
Expenses:
Homebuilding		5,815			112,342			954,080			29,144			(42,392	)		1,058,989
Financial services		103						3,967			12,592			(11	)		16,651
Total expenses		5,918			112,342			958,047			41,736			(42,403	)		1,075,640
Gain on extinguishment of debt					57,966												57,966
Income from unconsolidated joint ventures								521			1,803						2,324
(Loss) income before income taxes		(5,910	)		22,402			(64,202	)		19,050			11,619			(17,041	)
State and federal income tax (benefit)		(12,929	)					(22,325	)								(35,254	)
Equity in income (loss) of consolidated subsidiaries		11,194			(32,546	)		19,050						2,302			-
Net income (loss)	$	18,213		$	(10,144	)	$	(22,827	)	$	19,050		$	13,921		$	18,213

HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

NINE MONTHS ENDED JULY 31, 2013

(In Thousands)

	Parent			Subsidiary Issuer			Guarantor Subsidiaries			Nonguarantor Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities:
Net (loss) income	$	(1,524	)	$	(832,711	)	$	776,613		$	47,780		$	8,318		$	(1,524	)
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities		20,418			789,831			(842,439	)		(5,365	)		(8,318	)		(45,873	)
Net cash provided by (used in) operating activities		18,894			(42,880	)		(65,826	)		42,415			-			(47,397	)
Net cash provided by investing activities					298			12,357			6,121						18,776
Net cash (used in) provided by financing activities					(5,460	)		48,090			(59,983	)					(17,353	)
Intercompany investing and financing activities – net		(18,894	)		6,404			1,009			11,481						-
Net (decrease) increase in cash		-			(41,638	)		(4,370	)		34			-			(45,974	)
Cash and cash equivalents balance, beginning of period					197,097			(2,017	)		78,152						273,232
Cash and cash equivalents balance, end of period	$	-		$	155,459		$	(6,387	)	$	78,186		$	-		$	227,258

HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

NINE MONTHS ENDED JULY 31, 2012

(In Thousands)

	Parent			Subsidiary Issuer			Guarantor Subsidiaries			Nonguarantor Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities:
Net income (loss)	$	18,213		$	(10,144	)	$	(22,827	)	$	19,050		$	13,921		$	18,213
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities		31,198			4,286			(23,386	)		(78,465	)		(13,921	)		(80,288	)
Net cash provided by (used in) operating activities		49,411			(5,858	)		(46,213	)		(59,415	)		-			(62,075	)
Net cash provided by (used in) investing activities					26			(2,178	)		242						(1,910	)
Net cash provided by (used in) financing activities		47,147			(94,309	)		50,954			43,423						47,215
Intercompany investing and financing activities – net		(96,558	)		112,651			2,841			(18,934	)					-
Net increase (decrease) in cash		-			12,510			5,404			(34,684	)		-			(16,770	)
Cash and cash equivalents balance, beginning of period					112,122			(4,989	)		143,607						250,740
Cash and cash equivalents balance, end of period	$	-		$	124,632		$	415		$	108,923		$	-		$	233,970

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Note 2 (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended		9 Months Ended
	Jul. 31, 2013	Jul. 31, 2012	Jul. 31, 2013	Jul. 31, 2012
Note 2 (Details) [Line Items]
Allocated Share-based Compensation Expense	$ 2.7	$ 0.8	$ 5.2	$ 3.7
Allocated Share-based Compensation Expense, Net of Tax	2.2
Stock options vested in period [Member]
Note 2 (Details) [Line Items]
Allocated Share-based Compensation Expense	$ 1.6	$ 0.7	$ 3.0	$ 3.3

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Note 9

9 Months Ended

Jul. 31, 2013

Receivables [Abstract]

Loans, Notes, Trade and Other Receivables Disclosure [Text Block]

9.   Our mortgage banking subsidiary originates mortgage loans, primarily from the sale of our homes. Such mortgage loans are sold in the secondary mortgage market within a short period of time of origination. Mortgage loans held for sale consist primarily of single-family residential loans collateralized by the underlying property. We have elected the fair value option to record loans held for sale and therefore these loans are recorded at fair value with the changes in the value recognized in the Statements of Operations in “Revenues: Financial services.” We currently use forward sales of mortgage-backed securities, interest rate commitments from borrowers and mandatory and/or best efforts forward commitments to sell loans to investors to protect us from interest rate fluctuations. These short-term instruments, which do not require any payments to be made to the counterparty or investor in connection with the execution of the commitments, are recorded at fair value. Gains and losses on changes in the fair value are recognized in the Statements of Operations in “Revenues: Financial services.”

At July 31, 2013 and October 31, 2012, respectively, $60.8 million and $104.6 million of mortgages held for sale were pledged against our mortgage warehouse lines of credit (see Note 10). We may incur losses with respect to mortgages that were previously sold that are delinquent and which had underwriting defects, but only to the extent the losses are not covered by mortgage insurance or resale value of the home. The reserves for these estimated losses are included in the “Financial services – Accounts payable and other liabilities” balances on the Condensed Consolidated Balance Sheet. We received 6 and 30 repurchase or make-whole inquiries during the three and nine months ended July 31, 2013, respectively. We received 15 and 49 repurchase or make-whole inquiries during the three and nine months ended July 31, 2012, respectively.

The activity in our loan origination reserves during the three and nine months ended July 31, 2013 and 2012 was as follows:

	Three Months Ended July 31,					Nine Months Ended July 31,
(In thousands)	2013		2012			2013			2012
Loan origination reserves, beginning of period	$	9,766	$	6,570		$	9,334		$	5,063
Provisions for losses during the period		345		950			1,680			3,339
Adjustments to pre-existing provisions for losses from changes in estimates		260		220			7			272
Payments/settlements		-		(359	)		(650	)		(1,293	)
Loan origination reserves, end of period	$	10,371	$	7,381		$	10,371		$	7,381

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Note 23 (Details) (USD $)	Jul. 31, 2013	Oct. 31, 2012		Feb. 09, 2011	Jul. 31, 2013 Net [Member] Subsidiary Issuer [Member]	Jul. 31, 2013 Subsidiary Issuer [Member] Senior Notes [Member]	Jul. 31, 2013 Subsidiary Issuer [Member]	Jul. 31, 2013 Fair Value, Inputs, Level 3 [Member] Senior Amortizing Notes [Member]	Jul. 31, 2013 Tangible Equity Units [Member]	Jul. 31, 2013 Senior Exchangeable Notes Due 2017 [Member]	Jul. 31, 2013 The 6.00% Exchangable Note Units [Member]	Oct. 02, 2012 The 6.00% Exchangable Note Units [Member]
Note 23 (Details) [Line Items]
Tangible Equity Units, Rate	7.25%			7.25%					7.25%
Number of Wholly Owned Subsidiaries	1
Debt Instrument, Face Amount						$ 460,600,000	$ 992,000,000			$ 65,800,000		$ 100,000,000
Secured Debt	978,300,000				978,300,000
Senior Notes, Unsecured	459,100,000				459,100,000			20,900,000		65,800,000
Debt Instrument, Interest Rate, Stated Percentage											6.00%	6.00%
Subordinated Debt	$ 3,181,000	$ 6,091,000	[1]				$ 3,200,000		$ 3,200,000

[1] Derived from the audited balance sheet as of October 31, 2012.

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Note 5

9 Months Ended

Jul. 31, 2013

Inventory Impairments And Land Option Cost Write Offs [Abstract]

Inventory Impairments And Land Option Cost Write Offs [Text Block]

5.  We record impairment losses on inventories related to communities under development and held for future development when events and circumstances indicate that they may be impaired and the undiscounted cash flows estimated to be generated by those assets are less than their related carrying amounts. If the expected undiscounted cash flows are less than the carrying amount, then the community is written down to its fair value. We estimate the fair value of each impaired community by determining the present value of the estimated future cash flows at a discount rate commensurate with the risk of the respective community. For the nine months ended July 31, 2013 and 2012, our discount rates used for the impairments recorded ranged from 18.0% to 18.8% and from 16.8% to 18.5%, respectively. Should the estimates or expectations used in determining cash flows or fair value decrease or differ from current estimates in the future, we may need to recognize additional impairments. During the nine months ended July 31, 2013, we evaluated inventories of all 374 communities under development and held for future development for impairment indicators through preparation and review of detailed budgets or other market indicators of impairment. We performed detailed impairment calculations for 30 of those communities (i.e., those with a projected operating loss or other impairment indicators) with an aggregate carrying value of $82.5 million. As impairment indicators are assessed on a quarterly basis, some of the communities evaluated during the nine months ended July 31, 2013 were evaluated in more than one quarterly period. Of those communities tested for impairment, one community with an aggregate carrying value of $2.7 million had undiscounted future cash flow that only exceeded the carrying amount by less than 20%. As a result of our impairment analysis, we recorded impairment losses, which are included in the Condensed Consolidated Statement of Operations and deducted from inventory, of $0.1 million and $0.2 million for the three months ended July 31, 2013 and 2012, respectively, and $1.6 million and $5.4 million for the nine months ended July 31, 2013 and 2012, respectively.

The following tables represent inventory impairments by homebuilding segment for the three and nine months ended July 31, 2013 and 2012:

(Dollars in millions)	Three Months Ended July 31, 2013						Three Months Ended July 31, 2012
	Number of Communities		Dollar Amount of Impairment		Pre-Impairment Value(1)		Number of Communities		Dollar Amount of Impairment		Pre-Impairment Value(1)
Northeast		1	$	0.1	$	0.4		1	$	0.1	$	0.3
Mid-Atlantic		-		-		-		-		-		-
Midwest		-		-		-		-		-		-
Southeast		-		-		-		2		0.1		0.3
Southwest		-		-		-		-		-		-
West		-		-		-		-		-		-
Total		1	$	0.1	$	0.4		3	$	0.2	$	0.6

(Dollars in millions)	Nine Months Ended July 31, 2013						Nine Months Ended July 31, 2012
	Number of Communities		Dollar Amount of Impairment(2)		Pre-Impairment Value(1)		Number of Communities		Dollar Amount of Impairment		Pre-Impairment Value(1)
Northeast		3	$	1.6	$	5.6		6	$	2.5	$	16.4
Mid-Atlantic		1		-		0.1		3		0.4		0.8
Midwest		-		-		-		1		0.1		1.1
Southeast		1		-		0.4		10		2.4		5.8
Southwest		-		-		-		-		-		-
West		-		-		-		-		-		-
Total		5	$	1.6	$	6.1		20	$	5.4	$	24.1

(1) Represents carrying value, net of prior period impairments, if any, at the time of recording the applicable period’s impairments.

(2) During the nine months ended July 31, 2013, the Mid-Atlantic had an impairment totaling $2 thousand and the Southeast had an impairment totaling $17 thousand.

The Condensed Consolidated Statement of Operations line item entitled “Homebuilding: Inventory impairment loss and land option write-offs” also includes write-offs of options, and approval, engineering and capitalized interest costs that we record when we redesign communities and/or abandon certain engineering costs and we do not exercise options in various locations because the communities' pro forma profitability is not projected to produce adequate returns on investment commensurate with the risk. Total aggregate write-offs related to these items were $0.5 million for both three months ended July 31, 2013 and 2012, and $1.9 million and $1.8 million for the nine months ended July 31, 2013 and 2012, respectively. Occasionally, these write-offs are offset by recovered deposits (sometimes through legal action) that had been written off in a prior period as walk-away costs. Historically, these recoveries have not been significant in comparison to the total cost written off.

      The following tables represent write-offs of such costs (after giving effect to any recovered deposits in the applicable period) and the number of lots walked away from by homebuilding segment for the three and nine months ended July 31, 2013 and 2012:

	Three Months Ended July 31,
	2013				2012
(Dollars in millions)	Number of Walk-Away Lots		Dollar Amount of Write-Offs		Number of Walk-Away Lots		Dollar Amount of Write-Offs
Northeast		73	$	0.2		210	$	0.1
Mid-Atlantic		-		-		-		-
Midwest		13		-		89		0.1
Southeast		113		0.1		-		-
Southwest		12		0.2		116		0.3
West		-		-		-		-
Total		211	$	0.5		415	$	0.5

	Nine Months Ended July 31,
	2013				2012
(Dollars in millions)	Number of Walk-Away Lots		Dollar Amount of Write-Offs		Number of Walk-Away Lots		Dollar Amount of Write-Offs
Northeast		373	$	0.4		210	$	0.4
Mid-Atlantic		164		-		182		0.2
Midwest		13		-		194		0.2
Southeast		113		0.2		734		0.7
Southwest		246		1.3		281		0.3
West		-		-		-		-
Total		909	$	1.9		1,601	$	1.8

We can incur costs while investigating land options, whereby we decide not to pursue the opportunity before we control the lots. These costs are expensed in the period we decide to no longer pursue the opportunity. For the three and nine months ended July 31, 2013, such costs were not significant and are therefore not shown in the tables above. In addition, we sometimes walk-away from a lot option when we have only incurred costs of less than $50,000; such costs are not shown in the tables above.

We have decided to mothball (or stop development on) certain communities when we have determined the current performance does not justify further investment at the time. When we decide to mothball a community, the inventory is reclassified from “Sold and unsold homes and lots under development” to “Land and land options held for future development or sale”. During the first nine months of fiscal 2013, we mothballed one community and we re-activated three previously mothballed communities. As of July 31, 2013, the net book value associated with our 51 total mothballed communities was $124.9 million, net of impairment charges recorded in prior periods of $442.9 million.

 From time to time we enter into option agreements that include specific performance requirements, whereby we are required to purchase a minimum number of lots. Because of our obligation to purchase these lots, for accounting purposes in accordance with ASC 360-20-40-38, we are required to record this inventory on our Condensed Consolidated Balance Sheets. As of July 31, 2013, we had $0.8 million of specific performance options recorded on our Condensed Consolidated Balance Sheets to consolidated inventory not owned, with a corresponding amount recorded to liabilities from inventory not owned. Consolidated inventory not owned also consists of other options that were included on our balance sheet in accordance with GAAP.

During fiscal 2012 and 2013, we sold and leased back certain of our model homes with the right to participate in the potential profit when each home is sold to a third party at the end of the respective lease. As a result of our continued involvement, for accounting purposes in accordance with ASC 360-20-40-38, these sale and leaseback transactions are considered a financing rather than a sale. Therefore, for purposes of our Condensed Consolidated Balance Sheet, at July 31, 2013, inventory of $48.3 million was recorded to consolidated inventory not owned, with a corresponding amount of $46.1 million recorded to liabilities from inventory not owned.

In addition, we entered into a land banking arrangement in fiscal 2012 with GSO Capital Partners LP ("GSO"), that continued in fiscal 2013, whereby we sold a portfolio of our land parcels to GSO, and GSO provided us an option to purchase back finished lots on a quarterly basis. Because of our option to repurchase these parcels, for accounting purposes, in accordance with ASC 360-20-40-38, this transaction is considered a financing rather than a sale. For purposes of our Condensed Consolidated Balance Sheet, at July 31, 2013, inventory of $60.6 million was recorded as consolidated inventory not owned, with a corresponding amount of $47.6 million recorded to “Liabilities from inventory not owned” for the amount of net cash received from the transactions.

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Supplemental Disclosure of Noncash Activities

9 Months Ended

Jul. 31, 2013

Supplemental Cash Flow Elements [Abstract]

Cash Flow, Supplemental Disclosures [Text Block]

Supplemental disclosure of noncash financing activities:

In the second quarter of fiscal 2013, a property that we previously acquired when our partner in a land development joint venture transferred its interest in the venture to us, was foreclosed on by the note holder. As a result, the inventory with a book value of $9.5 million and corresponding non-recourse liability of equal amount were taken off of our balance sheet in that quarter.

In the first quarter of fiscal 2013, 18,305 of our senior exchangeable notes were exchanged for 3,396,102 shares of Class A Common Stock.

In the first quarter of fiscal 2013, we entered into a new unconsolidated homebuilding joint venture which resulted in the transfer of an existing receivable from our joint venture partners of $0.6 million at October 31, 2012, to an investment in the joint venture at January 31, 2013.

During the third quarter of fiscal 2012, we purchased our partners’ interest in one of our unconsolidated homebuilding joint ventures. The consolidation of this entity resulted in increases in inventory, other assets, non-recourse land mortgages and accounts payables and other liabilities of $34.3 million, $5.0 million, $20.6 million and $15.8 million, respectively.

In the second and third quarters of fiscal 2012, we completed several debt for equity exchanges.  See Notes 11, 12 and 16 for further information.

In the first quarter of fiscal 2012, we completed a debt for debt exchange. See Note 9 in our Annual Report on Form 10-K for the fiscal year ended October 31, 2012 for further information.

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Note 8 (Details) (USD $) In Thousands, unless otherwise specified	Jul. 31, 2013	Oct. 31, 2012
Note 8 (Details) [Line Items]
Restricted Cash and Cash Equivalents	$ 24,000	$ 64,200
Homebuilding [Member]
Note 8 (Details) [Line Items]
Restricted Cash and Cash Equivalents	5,900	4,800
Customer Deposits [Member]
Note 8 (Details) [Line Items]
Restricted Cash and Cash Equivalents	12,900	22,500
Surety Bond [Member]
Note 8 (Details) [Line Items]
Restricted Cash and Cash Equivalents		$ 6,200

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Note 5 (Details) - Inventory Impairments by Homebuilding Segment (USD $) In Thousands, unless otherwise specified	3 Months Ended				9 Months Ended
	Jul. 31, 2013		Jul. 31, 2012		Jul. 31, 2013		Jul. 31, 2012
Note 5 (Details) - Inventory Impairments by Homebuilding Segment [Line Items]
Number of Communities	1		3		5		20
Dollar Amount of Impairment	$ 100		$ 200		$ 1,600	[1]	$ 5,400
Pre-Impairment Value	400	[2]	600	[2]	6,100	[2]	24,100	[2]
Northeast [Member]
Note 5 (Details) - Inventory Impairments by Homebuilding Segment [Line Items]
Number of Communities	1		1		3		6
Dollar Amount of Impairment	100		100		1,600	[1]	2,500
Pre-Impairment Value	400	[2]	300	[2]	5,600	[2]	16,400	[2]
Mid-Atlantic [Member]
Note 5 (Details) - Inventory Impairments by Homebuilding Segment [Line Items]
Number of Communities					1		3
Dollar Amount of Impairment						[1]	400
Pre-Impairment Value		[2]		[2]	100	[2]	800	[2]
Midwest [Member]
Note 5 (Details) - Inventory Impairments by Homebuilding Segment [Line Items]
Number of Communities							1
Dollar Amount of Impairment						[1]	100
Pre-Impairment Value		[2]		[2]		[2]	1,100	[2]
Southeast [Member]
Note 5 (Details) - Inventory Impairments by Homebuilding Segment [Line Items]
Number of Communities			2		1		10
Dollar Amount of Impairment			100			[1]	2,400
Pre-Impairment Value		[2]	300	[2]	400	[2]	5,800	[2]
Southwest [Member]
Note 5 (Details) - Inventory Impairments by Homebuilding Segment [Line Items]
Dollar Amount of Impairment						[1]
Pre-Impairment Value		[2]		[2]		[2]		[2]
West [Member]
Note 5 (Details) - Inventory Impairments by Homebuilding Segment [Line Items]
Dollar Amount of Impairment						[1]
Pre-Impairment Value		[2]		[2]		[2]		[2]

[1] During the nine months ended July 31, 2013, the Mid-Atlantic had an impairment totaling $2 thousand and the Southeast had an impairment totaling $17 thousand.

[2] Represents carrying value, net of prior period impairments, if any, at the time of recording the applicable period's impairments.

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Note 6 (Tables)

9 Months Ended

Jul. 31, 2013

Product Warranties Disclosures [Abstract]

Schedule of Product Warranty Liability [Table Text Block]

	Three Months Ended July 31,						Nine Months Ended July 31,
(In thousands)	2013			2012			2013			2012
Balance, beginning of period	$	125,274		$	123,580		$	121,149		$	123,865
Additions – Selling, general and administrative		5,956			3,140			14,362			10,062
Additions – Cost of sales		2,918			3,742			9,229			13,902
Charges incurred during the period		(6,691	)		(8,346	)		(17,283	)		(25,713	)
Changes to pre-existing reserves		-			-			-			-
Balance, end of period	$	127,457		$	122,116		$	127,457		$	122,116

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Note 18 (Details) - Segment Operations - Assets (USD $) In Thousands, unless otherwise specified	Jul. 31, 2013	Oct. 31, 2012
Segment Reporting Information [Line Items]
Assets	$ 1,664,126	$ 1,684,250	[1]
Homebuilding [Member] | Segment [Member]
Segment Reporting Information [Line Items]
Assets	1,255,568	1,139,697
Homebuilding [Member] | Northeast [Member]
Segment Reporting Information [Line Items]
Assets	360,882	396,073
Homebuilding [Member] | Mid-Atlantic [Member]
Segment Reporting Information [Line Items]
Assets	239,832	200,969
Homebuilding [Member] | Midwest [Member]
Segment Reporting Information [Line Items]
Assets	88,922	73,305
Homebuilding [Member] | Southeast [Member]
Segment Reporting Information [Line Items]
Assets	97,897	90,132
Homebuilding [Member] | Southwest [Member]
Segment Reporting Information [Line Items]
Assets	313,986	235,367
Homebuilding [Member] | West [Member]
Segment Reporting Information [Line Items]
Assets	154,049	143,851
Homebuilding [Member]
Segment Reporting Information [Line Items]
Assets	1,559,368	1,519,616	[1]
Financial Services [Member]
Segment Reporting Information [Line Items]
Assets	104,758	164,634	[1]
Corporate and Other [Member]
Segment Reporting Information [Line Items]
Assets	$ 303,800	$ 379,919

[1] Derived from the audited balance sheet as of October 31, 2012.

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Note 14 (Details)			9 Months Ended		3 Months Ended			9 Months Ended
	Jul. 31, 2013	Feb. 09, 2011	Jul. 31, 2013 Non-Vested Stock and Outstanding Options [Member] Because of Net Loss [Member]	Jul. 31, 2013 Senior Exchangeable Notes [Member] Because of Net Loss [Member]	Jul. 31, 2013 Included in EPS [Member]	Jul. 31, 2013 Equity Option [Member]	Jul. 31, 2012 Equity Option [Member]	Jul. 31, 2013 Equity Option [Member]	Jul. 31, 2013 The 6.00% Exchangable Note Units [Member]	Oct. 02, 2012 The 6.00% Exchangable Note Units [Member]	Jul. 31, 2013 Minimum [Member]	Jul. 31, 2013 Maximum [Member]
Note 14 (Details) [Line Items]
Prepaid Stock Purchase Contracts, Shares Included in Basic Earnings Per Share					6,100,000
Tangible Equity Units, Rate	7.25%	7.25%
Tangible Equity Units, Number of Shares Upon Conversion, Per Unit											4.7655	5.8140
Debt Instrument, Interest Rate, Stated Percentage									6.00%	6.00%
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount			1,600,000			2,200,000	12,000,000	12,000,000
Debt Instrument, Convertible, Number of Equity Instruments				16,100,000

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Note 12

9 Months Ended

Jul. 31, 2013

Tangible Equity Units Disclosure [Abstract]

Tangible Equity Units Disclosure [Text Block]

 12. On February 9, 2011, we issued an aggregate of 3,000,000 7.25% Tangible Equity Units (the “TEUs”), and on February 14, 2011, we issued an additional 450,000 TEUs pursuant to the over-allotment option granted to the underwriters. Each TEU initially consists of (i) a prepaid stock purchase contract (each a “Purchase Contract”) and (ii) a senior subordinated amortizing note due February 15, 2014 (each, a “Senior Subordinated Amortizing Note”). As of July 31, 2013, we had an aggregate principal amount of $3.2 million Senior Subordinated Amortizing Notes outstanding. On each February 15, May 15, August 15 and November 15, K. Hovnanian will pay holders of the Senior Subordinated Amortizing Notes equal quarterly cash installments of $0.453125 per Senior Subordinated Amortizing Note, which cash payments in the aggregate will be equivalent to 7.25% per year with respect to each $25 stated amount of TEUs. Each installment constitutes a payment of interest (at a rate of 12.072% per annum) and a partial repayment of principal on the Senior Subordinated Amortizing Note, allocated as set forth in the amortization schedule provided in the indenture under which the Amortizing Notes were issued. The Senior Subordinated Amortizing Notes have a scheduled final installment payment date of February 15, 2014. If we elect to settle the Purchase Contracts early, holders of the Senior Subordinated Amortizing Notes will have the right to require K. Hovnanian to repurchase such holders’ Senior Subordinated Amortizing Notes, except in certain circumstances as described in the indenture governing Senior Subordinated Amortizing Notes.

Unless settled earlier, on February 15, 2014 (subject to postponement under certain circumstances), each Purchase Contract will automatically settle and we will deliver a number of shares of Class A Common Stock based on the applicable market value, as defined in the purchase contract agreement, which will be between 4.7655 shares and 5.8140 shares per Purchase Contract (subject to adjustment). Each TEU may be separated into its constituent Purchase Contract and Senior Subordinated Amortizing Note after the initial issuance date of the TEUs, and the separate components may be combined to create a TEU. The Senior Subordinated Amortizing Note component of the TEUs is recorded as debt, and the Purchase Contract component of the TEUs is recorded in equity as additional paid in capital. We have recorded $68.1 million, the initial fair value of the Purchase Contracts, as additional paid in capital. As of July 31, 2013, 2.2 million Purchase Contracts had been converted into 10.4 million shares of our Class A Common Stock. There were no Purchase Contracts converted into common stock during the three months ended July 31, 2013 and 0.6 million Purchase Contracts converted into 2.7 million shares of our Class A Common Stock during the nine months ended July 31, 2013.

During the second quarter of fiscal 2012, we purchased pursuant to agreements with bondholders $3.1 million aggregate principal amount of our Senior Subordinated Amortizing Notes in exchange for Class A Common Stock, as discussed in Note 16. These transactions resulted in a gain on extinguishment of debt of $0.2 million for the nine months ended July 31, 2012. The gain is included in the Condensed Consolidated Statement of Operations as “Gain on extinguishment of debt.”

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Note 8

9 Months Ended

Jul. 31, 2013

Cash and Cash Equivalents [Abstract]

Cash and Cash Equivalents Disclosure [Text Block]

8.  Cash represents cash deposited in checking accounts. Cash equivalents includes certificates of deposit, Treasury Bills and government money market funds with maturities of 90 days or less when purchased. Our cash balances are held at a few financial institutions and may, at times, exceed insurable amounts. We believe we help to mitigate this risk by depositing our cash in major financial institutions.  

Restricted cash and cash equivalents on the Condensed Consolidated Balance Sheets, totaled to $24.0 million and $64.2 million as of July 31, 2013 and October 31, 2012, respectively, which includes cash collateralizing our letter of credit agreements and facilities and is discussed in Note 10. Also included in this balance are homebuilding and financial services customers’ deposits of $5.9 million and $12.9 million at July 31, 2013, respectively, and $4.8 million and $22.5 million as of October 31, 2012, respectively, which are restricted from use by us. In addition, we previously collateralized our surety bonds with cash, but as of April 30, 2013 are no longer required to do so. The balance of this surety bond collateral was $6.2 million at October 31, 2012, which was in cash equivalents, the book value of which approximates fair value.  

Total Homebuilding Customers’ deposits are shown as a liability on the Condensed Consolidated Balance Sheets. These liabilities are significantly more than the applicable periods’ escrow cash balances because, in some states, the deposits are not restricted from use and, in other states, we are able to release the majority of this escrow cash by pledging letters of credit and surety bonds.

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Note 20 (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended		9 Months Ended
	Jul. 31, 2013	Jul. 31, 2012	Jul. 31, 2013	Jul. 31, 2012	Oct. 31, 2012
Equity Method Investments and Joint Ventures [Abstract]
Advances to Affiliate	$ 5.6		$ 5.6		$ 15.0
Investments in and Advance to Affiliates, Subsidiaries, Associates, and Joint Ventures	54.3		54.3		61.1
Management Fees Revenue	$ 3.4	$ 4.4	$ 9.0	$ 10.4
Joint Venture Financing, Percent of Assets	50.00%		50.00%
Joint Venture, Average Debt to Capitalization Ratio	28.00%		28.00%

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Note 15

9 Months Ended

Jul. 31, 2013

Disclosure Text Block Supplement [Abstract]

Preferred Stock [Text Block]

15.  On July 12, 2005, we issued 5,600 shares of 7.625% Series A Preferred Stock, with a liquidation preference of $25,000. Dividends on the Series A Preferred Stock are not cumulative and are payable at an annual rate of 7.625%. The Series A Preferred Stock is not convertible into the Company’s common stock and is redeemable in whole or in part at our option at the liquidation preference of the shares. The Series A Preferred Stock is traded as depositary shares, with each depositary share representing 1/1000th of a share of Series A Preferred Stock. The depositary shares are listed on the NASDAQ Global Market under the symbol “HOVNP”. During the three and nine months ended July 31, 2013 and 2012, we did not make any dividend payments on the Series A Preferred Stock as a result of covenant restrictions in certain of our indentures.

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Note 13

9 Months Ended

Jul. 31, 2013

Exchangeable Note Units And Senior Amortizing Notes [Abstract]

Exchangeable Note Units And Senior Amortizing Notes [Text Block]

13. On October 2, 2012, the Company and K. Hovnanian issued $100,000,000 aggregate stated amount of 6.0% Exchangeable Note Units (the “Units”) (equivalent to 100,000 Units). Each $1,000 stated amount of Units initially consists of (1) a zero coupon senior exchangeable note due December 1, 2017 (a “Senior Exchangeable Note”) issued by K. Hovnanian, which bears no cash interest and has an initial principal amount of $768.51 per Exchangeable Note, and that will accrete to $1,000 at maturity and (2) a senior amortizing note due December 1, 2017 (the “Senior Amortizing Note”) issued by K. Hovnanian, which has an initial principal amount of $231.49 per Senior Amortizing Note, bears interest at a rate of 11.0% per annum, and has a final installment payment date of December 1, 2017. Each Unit may be separated into its constituent Senior Exchangeable Note and Senior Amortizing Note after the initial issuance date of the Units, and the separate components may be combined to create a Unit.

Each Senior Exchangeable Note had an initial principal amount of $768.51 (which will accrete to $1,000 over the term of the Senior Exchangeable Note at an annual rate of 5.17% from the date of issuance, calculated on a semi-annual bond equivalent yield basis). Holders may exchange their Senior Exchangeable Notes at their option at any time prior to 5:00 p.m., New York City time, on the business day immediately preceding December 1, 2017. Each Senior Exchangeable Note will be exchangeable for shares of Class A Common Stock at an initial exchange rate of 185.5288 shares of Class A Common Stock per Senior Exchangeable Note (equivalent to an initial exchange price, based on $1,000 principal amount at maturity, of approximately $5.39 per share of Class A Common Stock). The exchange rate will be subject to adjustment in certain events. Following certain corporate events that occur prior to the maturity date, the Company will increase the applicable exchange rate for any holder who elects to exchange its Senior Exchangeable Notes in connection with such corporate event.  In addition, holders of Senior Exchangeable Notes will also have the right to require K. Hovnanian to repurchase such holders’ Senior Exchangeable Notes upon the occurrence of certain of these corporate events.

On each June 1 and December 1 (each, an “installment payment date”), K. Hovnanian will pay holders of Senior Amortizing Notes equal semi-annual cash installments of $30.00 per Senior Amortizing Note (except for the June 1, 2013 installment payment, which was $39.83 per Senior Amortizing Note), which cash payment in the aggregate will be equivalent to 6.0% per year with respect to each $1,000 stated amount of Units. Each installment will constitute a payment of interest (at a rate of 11.0% per annum) and a partial repayment of principal on the Senior Amortizing Note. Following certain corporate events that occur prior to the maturity date, holders of the Senior Amortizing Notes will have the right to require K. Hovnanian to repurchase such holders’ Senior Amortizing Notes. As of July 31, 2013, 18,305 Senior Exchangeable Notes have been converted into 3.4 million shares of our Class A Common Stock, all of which were converted during the first quarter of fiscal 2013. There were no Senior Exchangeable Notes converted to common stock during the three months ended July 31, 2013.

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Document And Entity Information	9 Months Ended
	Jul. 31, 2013	Sep. 03, 2013 Common Class A [Member]	Sep. 03, 2013 Common Class B [Member]
Document Information [Line Items]
Entity Registrant Name	HOVNANIAN ENTERPRISES INC
Document Type	10-Q
Current Fiscal Year End Date	--10-31
Entity Common Stock, Shares Outstanding		124,544,460	14,656,867
Amendment Flag	false
Entity Central Index Key	0000357294
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Filer Category	Accelerated Filer
Entity Well-known Seasoned Issuer	No
Document Period End Date	Jul. 31, 2013
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q3

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Note 14

9 Months Ended

Jul. 31, 2013

Earnings Per Share [Abstract]

Earnings Per Share [Text Block]

14. Basic earnings per share is computed by dividing net income (loss) (the “numerator”) by the weighted-average number of common shares, adjusted for non-vested shares of restricted stock (the “denominator”) for the period.  The basic weighted-average number of shares for the three months ended July 31, 2013 includes 6.1 million shares related to Purchase Contracts (issued as part of our 7.25% Tangible Equity Units) which are issuable in the future with no additional cash required to be paid by the holders thereof. This number of shares represents the minimum number of shares that will, under all circumstances, be issuable upon settlement of the Purchase Contracts. As discussed previously in Note 12, the actual number of shares of Class A Common stock we may issue upon settlement of the Purchase Contracts will be between 4.7655 shares (which is the minimum settlement rate) and 5.8140 shares (which is the maximum settlement rate) per Purchase Contract (in each case, subject to customary anti-dilution adjustments) based on the applicable market value, as defined in the purchase contract agreement governing the Purchase Contracts, of our Class A Common Stock. Computing diluted earnings per share is similar to computing basic earnings per share, except that the denominator is increased to include the dilutive effects of options and non-vested shares of restricted stock, as well as common shares that would be issuable upon exchange of our Senior Exchangeable Notes issued as part of our 6.0% Exchangeable Note Units.  Any options that have an exercise price greater than the average market price are considered to be anti-dilutive and are excluded from the diluted earnings per share calculation.  

 All outstanding nonvested shares that contain non-forfeitable rights to dividends or dividend equivalents that participate in undistributed earnings with common stock are considered participating securities and are included in computing earnings per share pursuant to the two-class method. The two class method is an earnings allocation formula that determines earnings per share for each class of common stock and participating securities according to dividends or dividend equivalents and participation rights in undistributed earnings. The Company’s restricted common stock (“nonvested shares”) are considered participating securities.

Basic and diluted earnings per share for the periods presented below were calculated as follows:	Three Months Ended July 31,						Nine Months Ended July 31,
(In thousands, except per share data)	2013			2012			2013			2012
Numerator:
Net earnings (loss) attributable to Hovnanian	$	8,466		$	34,676		$	(1,524	)	$	18,213
Less: undistributed earnings allocated to nonvested shares		(15	)		(76	)		-			(52	)
Numerator for basic earnings per share		8,451			34,600			(1,524	)		18,161
Plus: undistributed earnings allocated to nonvested shares		15			76			-			52
Less: undistributed earnings reallocated to nonvested shares		(15	)		(76	)		-			(52	)
Plus: interest on senior exchangeable notes		893			-			-			-
Numerator for diluted earnings per share	$	9,344		$	34,600		$	(1,524	)	$	18,161
Denominator:
Denominator for basic earnings per share		146,056			138,472			144,840			121,357
Effect of dilutive securities:
Share based payments		1,610			80			-			23
Senior exchangeable notes		15,157			-			-			-
Denominator for diluted earnings per share – weighted average shares outstanding		162,823			138,552			144,840			121,380
Basic earnings (loss) per share	$	0.06		$	0.25		$	(0.01	)	$	0.15
Diluted earnings (loss) per share	$	0.06		$	0.25		$	(0.01	)	$	0.15

Incremental shares attributed to non-vested stock and outstanding options to purchase common stock of 1.6 million for the nine months ended July 31, 2013 were excluded from the computation of diluted earnings per share because we had a net loss for the period, and any incremental shares would not be dilutive. Also, for the nine months ended July 31, 2013, 16.1 million shares of common stock issuable upon the exchange of our senior exchangeable notes were excluded from the computation of diluted earnings per share because we had a net loss for the period.

In addition, shares related to out-of-the money stock options that could potentially dilute basic earnings per share in the future that were not included in the computation of diluted earnings per share were 2.2 million for both the three and nine months ended July 31, 2013 and were 4.9 million for both the three and nine months ended July 31, 2012 because to do so would have been anti-dilutive for the periods presented.

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Note 15 (Details) (USD $)				1 Months Ended	3 Months Ended	9 Months Ended
	Jul. 31, 2013	Oct. 31, 2012		Jul. 31, 2005 Series A Preferred Stock [Member]	Jul. 31, 2013 Series A Preferred Stock [Member]	Jul. 31, 2013 Series A Preferred Stock [Member]	Jul. 12, 2005 Series A Preferred Stock [Member]
Note 15 (Details) [Line Items]
Preferred Stock, Shares Issued (in Shares)	5,600	5,600	[1]				5,600
Preferred Stock, Liquidation Preference Per Share (in Dollars per share)	$ 140,000	$ 140,000	[1]				$ 25,000
Preferred Stock, Dividend Rate, Percentage				7.625%		7.625%
Dividends, Preferred Stock					$ 0	$ 0

[1] Derived from the audited balance sheet as of October 31, 2012.

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Note 14 (Details) - Earnings per Share Calculation (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Jul. 31, 2013	Jul. 31, 2012	Jul. 31, 2013	Jul. 31, 2012
Numerator:
Net earnings (loss) attributable to Hovnanian	$ 8,466	$ 34,676	$ (1,524)	$ 18,213
Less: undistributed earnings allocated to nonvested shares	(15)	(76)		(52)
Numerator for basic earnings per share	8,451	34,600	(1,524)	18,161
Plus: undistributed earnings allocated to nonvested shares	15	76		52
Less: undistributed earnings reallocated to nonvested shares	(15)	(76)		(52)
Plus: interest on senior exchangeable notes	893
Numerator for diluted earnings per share	$ 9,344	$ 34,600	$ (1,524)	$ 18,161
Denominator for basic earnings per share (in Shares)	146,056	138,472	144,840	121,357
Share based payments (in Shares)	1,610	80		23
Senior exchangeable notes (in Shares)	15,157
Denominator for diluted earnings per share – weighted average shares outstanding (in Shares)	162,823	138,552	144,840	121,380
Basic earnings (loss) per share (in Dollars per share)	$ 0.06	$ 0.25	$ (0.01)	$ 0.15
Diluted earnings (loss) per share (in Dollars per share)	$ 0.06	$ 0.25	$ (0.01)	$ 0.15