"K. Hovnanian, remaining committed to a pace-over-price philosophy, relied on heightened incentives to clear inventory, pushing homebuilding gross profit margins to 13.4%, 490 basis points lower than a year earlier. The comparison is difficult, mainly because we've offered even greater incentives this year to maintain sales pace, which has driven much of the year-over-year decline in profit."
"To turn things around, K. Hovnanian is selling through low-margin, entry-level inventory and shifting toward a higher-margin product mix. Executives expect this change in strategy to push profits and margins higher in the latter half of the year, but in today's environment, nothing is certain."
"While many builders intentionally reduce their spec count, K. Hovnanian deliberately chose to maintain an elevated number of spec homes to support its pace-over-price strategy. By focusing on specs and selling them before construction is finished, K. Hovnanian can also sign and deliver more contracts within the same quarter."
Hovnanian Enterprises reported $20.9 million in net income for Q1 2026, exceeding Wall Street expectations after posting a net loss the previous quarter. The company is executing a strategic shift away from entry-level homes toward higher-margin move-up products, with stronger demand emerging in the latter half of the quarter. However, challenges remain significant. Gross profit margins declined to 13.4%, down 490 basis points year-over-year, as the company increased incentives to maintain sales pace and clear inventory. Deliveries were lower due to slower market conditions. Management expects the strategic pivot toward higher-margin products to improve profitability and margins in the second half of the year, though uncertainty persists in the current homebuilding environment.
Read at www.housingwire.com
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