Hovnanian Enterprises (HOV) J.P. Morgan 2026 Global Leveraged Finance Conference summary

Affordability and policy environment

• Industry leaders are engaged in policy discussions, but no major regulatory changes are expected to quickly improve affordability.

• Ideas like limiting investor purchases and rent-to-own programs are discussed, but their impact is seen as limited.

• First-time buyer tax credits had some past success and could be revisited.

• Local development fees significantly affect affordability, with some markets seeing fees over $100,000 per home.

• Land values and supply are slow to adjust, making rapid affordability improvements unlikely.

Incentives, margins, and land strategy

• Incentives have risen from 8% to 12.5% over the past year, impacting margins.

• Margin recovery is expected as older land deals with lower incentives are replaced by newer deals underwritten at higher incentives.

• Maintaining sales pace is prioritized, but if incentives erode margins too far, communities may be exited.

• No significant impairments have occurred, but further margin declines could trigger write-downs.

• Cost reductions in labor and materials, especially lumber, have helped offset some margin pressure.

Market and product performance

• Northeast markets (New Jersey, Delaware, Virginia, Maryland) are outperforming, while Dallas and Southeast Florida lag.

• Active adult products are the strongest segment, benefiting from less reliance on mortgages and strong equity markets.

• First-time buyer products are most challenged due to affordability issues; a strategic shift away from these is underway.

• January and February saw year-over-year improvement in traffic and contracts, with optimism for the spring selling season.

• Improvement has been broad-based across markets and product types.