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Company Name: Hovnanian EnterprisesCompany Ticker: HOV USDate: 2015-06-09Event Description: Q2 2015 Earnings CallMarket Cap: 407.73Current PX: 2.785YTD Change($): -1.345YTD Change(%): -32.567Bloomberg Estimates - EPS Current Quarter: 0.050 Current Year: 0.045Bloomberg Estimates - Sales Current Quarter: 660.000 Current Year: 2378.833Page 1 of 12

Q2 2015 Earnings CallCompany Participants

•Jeffrey T. O'Keefe•Ara K. Hovnanian•J. Larry Sorsby

Other Participants

•Susan Maklari•Megan McGrath•Jason Marcus•Alan Ratner•Susan Berliner

MANAGEMENT DISCUSSION SECTION

Operator

Good morning and thank you for joining us today for Hovnanian Enterprise Fiscal 2015 Second Quarter EarningsConference Call. An archive of the webcast will be available after the completion of the call and run for 12 months.This conference is being recorded for rebroadcast, and all participants are currently in a listen-only mode.Management will make some opening remarks about the second quarter results and then open up the lines forquestions. The company will also be webcasting a slide presentation along with the opening comments frommanagement. The slides are available on the Investor Relations' page on the company's website at www.khov.com.Those listeners who would like to follow along should log on to the website at this time.Before we begin, I'd like to turn the call over to Jeff O'Keefe, Vice President-Investor Relations. Jeff, please go ahead.

Jeffrey T. O'Keefe

Thank you, Amanda, and thank you all for participating in this morning's call to review the results for our secondquarter which ended April 30, 2015. All statements in this conference call that are not historical facts should beconsidered as forward-looking statements within the meaning of the Safe Harbor provision of the Private SecuritiesLitigation Reform Act of 1995.Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results,performance or achievements expressed or implied by the forward-looking statements. Although we believe that ourplans, intentions and expectations reflected in or suggested by such forward-looking statements are reasonable, we cangive 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 otherenvironmental conditions and natural disasters; levels of indebtedness and restrictions on the company's operations andactivities imposed by the agreements governing the company's outstanding indebtedness; the company's sources of liquidity; changes in credit ratings; changes in market conditions and seasonality of the company's business, the

Company Name: Hovnanian EnterprisesCompany Ticker: HOV USDate: 2015-06-09Event Description: Q2 2015 Earnings CallMarket Cap: 407.73Current PX: 2.785YTD Change($): -1.345YTD Change(%): -32.567Bloomberg Estimates - EPS Current Quarter: 0.050 Current Year: 0.045Bloomberg Estimates - Sales Current Quarter: 660.000 Current Year: 2378.833Page 2 of 12

availability and cost of suitable land and improved lots, shortages in and price fluctuations of raw materials and labor;regional and local economic factors including dependency on certain sectors of economy, and employment levelsaffecting home prices and sales activity in the markets where the company builds homes; fluctuations in interest ratesand availability of mortgage financing; changes in the tax laws affecting the after-tax costs of owning a home,operations through joint ventures with third-parties, government regulations including regulations concerningdevelopment of land, the homebuilding, sales and customer financing processes, tax laws and the environment, productliability litigation, warranty claims and claims made by mortgage investors; levels of competition; availability of financing to the company; successful identification and integration of acquisitions; significant influence of thecompany's controlling stockholders; availability of operating loss carry-forwards; utility shortages and outages or ratefluctuations; geopolitical risks, terrorist acts and other acts of war; and certain risks, uncertainties and other factorsdescribed in detail in the company's Annual Report on Form 10-K for the fiscal year ended October 31, 2014, andsubsequent filings with the Securities and Exchange Commission.Except as otherwise required by applicable securities laws, we undertake no obligation to publicly update or revise anyforward-looking statements, whether as a result of new information, future events, changed circumstances or any otherreason.Joining me today from the company are Ara Hovnanian, Chairman, President and Chief Executive Officer; LarrySorsby, Executive Vice President and CFO; Brad O'Connor, Vice President, Chief Accounting Officer and Controller.I'll now turn the call over to Ara. Ara, go ahead?

Ara K. Hovnanian

Thanks, Jeff. Let me get started with our second quarter results which can be found on slide 3. Our net contract dollarsincreased 5% despite a slight decline in a number of net contracts we sign. This is due to a higher average sales priceprimarily as a result of product mix.We successfully opened up more communities during the quarter, and as a result, our active communities grew 6%year-over-year. However, our net contracts per community declined 5% year-over-year negating the benefits of theincreased community count.Our contract backlog was stronger at the end of the second quarter, growing to $1.171 billion. The dollar amount of thebacklog increased 12% and the number of homes in backlog increased 6%. This growth in the backlog gives usconfidence that we'll be able to continue to grow our top line in the second half of fiscal 2015 and improve ourperformance.Our total revenues grew by 4%. This growth was driven by a 5% increase in average sales price which was offset by a1% decline in deliveries. Similar to what we've experienced in other recent quarters, the increase in average sales priceis primarily due to geographic and product mix changes and not related to our ability to raise prices on our homes.Unfortunately, our second quarter gross margin declined by 410 basis points and our total SG&A as a percentage of total revenues increased by 80 basis points. I'll go into more detail about these metrics in just a moment.While we began the year with a year-over-year improvement in our first quarter results, we took a step backwardsduring the second quarter of fiscal 2015 and our loss increased in the second quarter compared to a year ago. Thesecond quarter of 2015 was challenging for us.As we move forward, we're very focused on generating further growth in revenues so that we can gain moreefficiencies. In addition, we're very focused on improving the results of our weaker divisions and, thereby, returningour operating metrics to more normal levels.Let me go into a little more detail about our gross margin and SG&A. And as you can see on the left-hand side of slide 4, we show our annual gross margin percentage for the last five years – four years. We're pleased that we made solid progress from 2011 to 2012 to 2013, returning to more normalized gross margin levels of roughly 20% in both fiscal

Company Name: Hovnanian EnterprisesCompany Ticker: HOV USDate: 2015-06-09Event Description: Q2 2015 Earnings CallMarket Cap: 407.73Current PX: 2.785YTD Change($): -1.345YTD Change(%): -32.567Bloomberg Estimates - EPS Current Quarter: 0.050 Current Year: 0.045Bloomberg Estimates - Sales Current Quarter: 660.000 Current Year: 2378.833Page 3 of 12

2013 and fiscal 2014.However, we've taken a step back in 2015. On the right-hand side of the slide, you can see that we reported a 16.1%gross margin for the second quarter, 410 basis points less than last year's second quarter. As we discussed last quarter,we expected the second quarter gross margin to be weak because of offering more incentives and concessions onstarted unsold homes commonly referred to as spec homes.We're not the only homebuilder that recently felt pressure on its gross margin. On slide 5, we show all nine of thepublic builders that reported March quarter end results. All of them had year-over-year declines in gross margin. Fiveof them had margin declines in excess of 200 basis points, and one was similar to our decline. Nonetheless, it doesn'tmake us feel great about our decline. On slide 6, we show a trend of increasing the number of specs per communityfrom the second quarter of 2014 to the fourth quarter of 2014.As we explained during our Analyst Call last quarter, we believe we are too aggressive in our spec starts, especially incertain geographies and communities. We took action to reduce our specs with special incentives and concessions.Unfortunately, as you would expect, that took a toll on our margins. However, we made progress on our goal of reduction. The number of specs per community declined to 4.1 at the end of the second quarter of fiscal 2015, which isbelow the recent peak of 4.7 specs per community at the end of the fourth quarter of fiscal 2014. Let me explain thenegative impact that specs had on our gross margin during the second quarter and why we think the gross margin willimprove during the remainder of fiscal 2015.Turning to slide 7. Our gross margin during the second quarter of 2015 was less than we thought, primarily because of additional incentive concessions, as I said earlier, that we offered on specs. The following numbers excludes Houstonwhere our gross margins continue to improve during the second quarter.Margins on our to-be-built homes declined 220 basis points during the second quarter of fiscal 2015, compared to lastyear's second quarter. Relative to our peers' margin declines, our decline in gross margins on to-be-built homes wouldhave put us in the middle of the pack. However, margins on our spec homes declined two times that amount or 450basis points over the same time period. You can clearly see from these numbers that the bulk of the pressure on grossmargin was from spec home deliveries.Furthermore, the percentage of deliveries from spec homes in the second quarter increased to 52% in this year's secondquarter from 42% in last year's second quarter. It's difficult for spec homes to be sold with lower gross margins thanto-be-built homes, but the increased incentives we offered over the last six months exacerbated the typical spread.Because 25% of the deliveries were specs sold during the quarter, the impact was greater than we anticipated when weprovided guidance during our first quarter conference call.Spec deliveries in the second quarter of 2015 increased to 52% of our total deliveries from 46% in the first quarter.Given the current level of specs and our expectations for specs per community going forward, we believe thepercentage of quarterly spec deliveries will gravitate back to the low 40% range over the next several quarters.Turning to slide 8, we show that the discount on spec homes compared to-be-built homes was 250 basis points duringthe second quarter of 2014 and that we increased the discount on spec homes compared with to-be-built homes to 480basis points during the second quarter of 2015. The discount on specs compared to to-be-built homes appears to havepeaked this quarter. It was 230 basis points higher than it was in the second quarter a year ago. Clearly, you can see thatwe are aggressive in taking action to bringing our spec position into better balance by geography and by community.Last quarter, we warned you that we were increasing incentives on our specs. Now, I'm happier to say that we arescaling back our incentive and concessions that we are offering on spec homes, and we've already begun to see thespread trending towards normalized levels.The trend of fewer specs as a percentage of total deliveries and a more normal spread between specs and to-be-builthomes should lead to sequential improvements in gross margin in the final two quarters of fiscal 2015. It should alsolead to an improved gross margin in fiscal 2016.