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    hovn_corresp-040513.htm

April 5, 2013

VIA EDGAR

Mr. Rufus Decker

Accounting Branch Chief

Division of Corporation Finance

Securities and Exchange Commission

100 F Street N. E.

Washington, D. C. 20549-7010

Re:

Hovnanian Enterprises, Inc.

Form 10-K for the Year Ended October 31, 2012

Filed December 20, 2012

Filed No. 1-8551

Dear Mr. Decker:

We have prepared the following in response to your comment letter dated March 7, 2013 with respect to the following:

Hovnanian Enterprises, Inc. (the “Company”)

Form 10-K for the year ended October 31, 2012 (the “10-K”)

File Number: 1-8551

The paragraphs that follow respond to the questions asked under each of the respective headers in your letter. For convenience of reference, the text of the comments in your letter has been reproduced in italics herein. As you have requested, any additional disclosures or other revisions to our current disclosure proposed in our responses to your comments will be included in future filings, including our interim filings, if applicable.

In connection with our responses, we acknowledge that:

·

the Company is responsible for the adequacy and accuracy of the disclosure in its filings;

·

staff comments or changes to disclosure in response to staff comments do not foreclose the Commission from taking any action with respect to the filings; and

Mr. Rufus Decker

Accounting Branch Chief

Division of Corporation Finance

Securities and Exchange Commission

April 5, 2013

Page 2

·

the Company may not assert staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.

We trust that you will find these responses acceptable, however, if you have further questions or comments, please contact me at 732-383-2698.

Sincerely,

/s/ Brad G. O’Connor

Brad G. O’Connor

Vice President, Chief Accounting Officer and Corporate Controller

Mr. Rufus Decker

Accounting Branch Chief

Division of Corporation Finance

Securities and Exchange Commission

April 5, 2013

Page 3

General

1.

Where a comment below requests additional disclosures or other revisions to be made, these revisions should be included in your future filings, including your interim filings, if applicable.

Response

Where our responses to the comments below involve additional disclosures or other revisions to our disclosures, we have included our planned revised disclosures in our responses. These revised disclosures, adjusted for any subsequent events or other changes in circumstances, will be included in our future filings, including our interim filings, if applicable.

Backlog, page 9

2.

Please present your backlog information excluding unconsolidated joint ventures. In this regard we note that your current presentation includes sales values that will not be reflected as revenues in your financial statements.

Response

We respectfully refer the Staff to the table on page 42 in Part I, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” which table provides detailed information on the Company’s backlog excluding unconsolidated joint ventures.  In future filings, the Company will include backlog data excluding unconsolidated joint ventures in its discussion of backlog in Part I, Item 1, “Business” or include a specific cross-reference to such data in the table in Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Item 6. Selected Financial Data, page 22

3.

It appears that the line item titled “expenses” in your table on page 23 does not include inventory impairment and land option write-off charges which are shown separately in the line below. Therefore, the line item, as currently presented represents a non-GAAP measure. Please revise your description of this line item to clearly indicate that it excludes inventory impairment loss and land option write-offs. Please refer to Item 10(e)(1)(ii)(E) of Regulation S-K.

Mr. Rufus Decker

Accounting Branch Chief

Division of Corporation Finance

Securities and Exchange Commission

April 5, 2013

Page 4

Response

We appreciate the Staff’s comment and, in order to have the table be more transparent as to what is included in the Expenses line item, we will revise the table in future filings to title the expenses line item as “Expenses excluding inventory impairment loss, land option write-offs, goodwill and intangible amortization and impairment” and also add a new line item for total expenses, which will sum the “Expenses excluding inventory impairment loss, land option write-offs, goodwill and intangible amortization and impairment” line item, the “Inventory impairment loss and land option write-offs” line item and the “Goodwill and intangible amortization and impairment” line item.  The proposed revised version of the table is provided below:

Year Ended

Summary Consolidated Statements of Operations Data

(In thousands, Except Per Share Data)

October 31, 2012

October 31, 2011

October 31, 2010

October 31, 2009

October 31, 2008

Revenues

$

1,485,353

$

1,134,907

$

1,371,842

$

1,596,290

$

3,308,111

Expenses excluding inventory impairment loss, land option write-offs, goodwill and intangible amortization and impairment

1,550,406

1,323,316

1,557,428

1,972,978

3,692,556

Inventory impairment loss and land option write-offs

12,530

101,749

135,699

659,475

710,120

Goodwill and intangible amortization and impairment

-

-

-

-

36,883

Total Expenses

1,562,936

1,425,065

1,693,127

2,632,453

4,439,559

(Loss) gain on extinguishment of debt

(29,066

)

7,528

25,047

410,185

-

Gain (loss) from unconsolidated joint ventures

5,401

(8,958

)

956

(46,041

)

(36,600

)

Loss before income taxes

(101,248

)

(291,588

)

(295,282

)

(672,019

)

(1,168,048

)

State and federal (benefit) income tax provision

(35,051

)

(5,501

)

(297,870

)

44,693

(43,458

)

Net (loss) income

(66,197

)

(286,087

)

2,588

(716,712

)

(1,124,590

)

Less: preferred stock dividends

-

-

-

-

-

Net (loss) income available to common stockholders

$

(66,197

)

$

(286,087

)

$

2,588

$

(716,712

)

$

(1,124,590

)

Per share data:

Basic:

(Loss) income per common share

$

(0.52

)

$

(2.85

)

$

0.03

$

(9.16

)

$

(16.04

)

Weighted-average number of common shares outstanding

126,350

100,444

78,691

78,238

70,131

Assuming dilution:

(Loss) income per common share

$

(0.52

)

$

(2.85

)

$

0.03

$

(9.16

)

$

(16.04

)

Weighted-average number of common shares outstanding

126,350

100,444

79,683

78,238

70,131

Mr. Rufus Decker

Accounting Branch Chief

Division of Corporation Finance

Securities and Exchange Commission

April 5, 2013

Page 5

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, page 24

Critical Accounting Policies, page 24

Inventories, page 25

4.

We note the assessment of communities for indication of impairment is performed quarterly, primarily by completing detailed budgets for all of your communities and identifying those communities with a projected operating loss for any projected fiscal year or for the entire projected community life. For those communities with projected losses, you estimate the remaining undiscounted future cash flows and compare those to the carrying value of the community, to determine if the carrying value of the asset is recoverable. In order to provide readers with an understanding of your inventory that may be at risk of impairment please revise both your annual and interim critical accounting policy disclosures to:

·

Quantify the number of communities you analyzed for impairment as of each balance sheet date presented;

·

Of the communities analyzed for impairment, quantify both the number of communities with projected operating losses and the aggregate carrying value of those communities; and

·

For those communities for which you estimated the remaining undiscounted future cash flows, quantify both the number of communities for which the remaining undiscounted cash flows are not substantially in excess of the carrying value of the community and disclose the aggregate carrying value of those communities.

Response

We appreciate the Staff’s comment and, in order to have more complete disclosure of the impairment assessment of our communities, in future annual and interim filings, we will add to the disclosure in the Notes to our Consolidated Financial Statements the number of communities analyzed for indication of impairment, the number of communities with impairment indicators that required impairment calculations and their aggregate carrying value, and the number of communities for which the remaining undiscounted cash flows were not substantially in excess of their carrying values and the aggregate carrying value of those communities.

Mr. Rufus Decker

Accounting Branch Chief

Division of Corporation Finance

Securities and Exchange Commission

April 5, 2013

Page 6

The revised disclosure (added text underlined) to Note 13 to our Consolidated Financial Statements is as follows (please note that in our future filings, we will present the underlined disclosure for each balance sheet date presented):

“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 year ended October 31, 2012, our discount rates used for the impairments recorded ranged from 16.8% to 18.5%.  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. During the year ended October 31, 2012, we evaluated inventories of all 331 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 54 of those communities (i.e., those with a projected operating loss or other impairment indicators) with an aggregate carrying value of $77.7 million.  As impairment indicators are assessed on a quarterly basis, some of the communities evaluated during the fiscal year ended October 31, 2012 were evaluated in more than one quarterly period.  Of those communities tested for impairment, 17 communities with an aggregate carrying value of $31.6 million had undiscounted future cash flows 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 Consolidated Statements of Operations and deducted from inventory, of $9.8 million, $77.5 million, and $122.5 million for the years ended October 31, 2012, 2011, and 2010, respectively.”

Results of Operations, page 39

4.

With reference to your cost of sales and gross margin information on page 43, to the extent that homes sold include inventory for which you recognized valuation adjustments in prior periods and the corresponding revenues recognized exceeded your estimates when determining such valuation adjustments, please provide investors with a discussion and analysis regarding the favorable impact to gross profit, including the corresponding amount. Please refer to Items 303(A)(3)(i) and (ii) of Regulation S-K for guidance.

Mr. Rufus Decker

Accounting Branch Chief

Division of Corporation Finance

Securities and Exchange Commission

April 5, 2013

Page 7

Response

In response to the Staff’s comment, we will include disclosure in our future filings of the amount of the valuation adjustment reversed in gross margin in the period and the impact that reversal had on gross margin percentage for the periods presented.

The additional disclosure for our future filings is as follows:

“For the years ended October 31, 2012, 2011 and 2010, gross margin was favorably impacted by the reversal of prior period inventory impairments of $75.7 million, $91.8 million and $168.6 million, respectively, which represented 5.4%, 8.6% and 12.7%, respectively, of sales of homes revenue.”

Homebuilding Operations by Segment, page 46

5.

In the interest of transparency to investors, please revise to also explain that reasons for material changes in your contract cancellation rates between periods presented. For example, although your Northeast division was able to generate more revenue on an increased number of home deliveries, it also experienced a 45% increase in its contract cancellation rate which increased from 18% in fiscal 2011 to 26% in 2012.

Response

We respectfully refer the Staff to its comment number 2 in its letter dated May 30, 2008, in which the Staff requested that we consider additional disclosures that would convey to investors the risks related to recoverability of our homebuilding assets as well as the risk that additional charges may be recorded to help investors evaluate impairments and specifically to consider whether segment contract cancellation data would be meaningful in this regard.  In response to the Staff’s request (as provided in our response letter dated June 5, 2008), we considered ways to provide additional quantitative disclosures for investors in light of the then existing market conditions and informed the Staff that we would include contract cancellation percentages by segment. At that time, industry conditions were such that cancellation rates in homebuilding markets generally were unusually high, and we believed that providing cancellation rates by segment would provide investors with an indication of which markets were experiencing greater turmoil.  Our homebuilding markets now reflect more stabilized conditions, and our cancellation rates as a whole are more typical of what we believe to be more normalized levels (as presented in the table on page 42 of “Management’s Discussion and Analysis of Financial Condition and Results of Operations”).  Accordingly, we no longer view contract cancellation rates by segment to be meaningful information for investors.

Mr. Rufus Decker

Accounting Branch Chief

Division of Corporation Finance

Securities and Exchange Commission

April 5, 2013

Page 8

In addition, even if we were to continue to provide segment cancellation data, there is little additional information we could include about the underlying reasons for changes in cancellation rates other than that they show a general indication of the health of a particular market (which was the initial reason for the including the disclosure) and whether or not the rate experienced falls within what we would consider to be a normal level (disclosure we already include on a Company-wide basis).

Therefore, to avoid confusion about the informative value of segment level cancellation rates and in light of current industry conditions, we will remove such segment data from future filings but will continue to include the table on Company-wide cancellation rates and the discussion of those rates in our Management’s Discussion and Analysis of Financial Condition and Results of Operations.  At such time, if any, that segment cancellation rates become meaningful, we will again provide such data.

Note 3 - Summary of Significant Accounting Policies, page 72

Inventories, page 73

6.

During fiscal 2012, you entered into a land banking arrangement with GSO Capital Partners LP (“GSO”). You sold a portfolio of your lan