View:
Download DOC
Download PDF 
UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549

FORM 10Q


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

       For quarterly period ended JULY 31, 1999  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                                        22-1851059
(State or other jurisdiction or                 (I.R.S. Employer
incorporation or organization)                  Identification No.)

l0 Highway 35, P.O. Box 500, Red Bank, N. J.  07701
(Address of principal executive offices)

732-747-7800
(Registrant's telephone number, including area code)
Same
(Former name, former address and former fiscal year, if changed
since last report)

     Indicate by check mark whether the registrant (l) has filed all reports
required to be filed by Sections l3 or l5(d) of the Securities Exchange Act of
l934 during the preceding l2 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 the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.  14,268,780 Class A Common
Shares and 7,654,994 Class B Common Shares were outstanding as of September 3,
1999.
                          HOVNANIAN ENTERPRISES, INC.

                                   FORM 10Q

                                     INDEX

                                                              PAGE NUMBER

PART I.   Financial Information
     Item l.  Consolidated Financial Statements:

              Consolidated Balance Sheets at July 31,
                1999 (unaudited) and October 31, 1998              3

              Consolidated Statements of Income for the three
                and nine months ended July 31, 1999 and 1998
                (unaudited)                                        5

              Consolidated Statements of Stockholders' Equity
                for the nine months ended July 31, 1999
                (unaudited)                                        6

              Consolidated Statements of Cash Flows
                for the nine months ended July 31, 1999
                and 1998 (unaudited)                               7

              Notes to Consolidated Financial
                Statements (unaudited)                             8

     Item 2.  Management's Discussion and Analysis
                of Financial Condition and Results
                of Operations                                     19

PART II.  Other Information

     Item 6(a).  Exhibit 10(a) Amendment to Amended and Restated
                 Credit Agreement

     Item 6(b).  Exhibit 27 - Financial Data Schedules

     Item 6(c).  No reports on Form 8K have been filed during
                 the quarter for which this report is filed.

Signatures                                                        29

HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands)

                                                     July  31,    October 31,
          ASSETS                                       1999           1998
                                                   -----------    -----------
                                                            
Homebuilding:
  Cash and cash equivalents.......................   $ 13,326       $ 13,306
                                                   -----------    -----------
  Inventories - At cost, not in excess of fair
     value:
    Sold and unsold homes and lots under
     development..................................    354,260        332,225
    Land and land options held for future
      development or sale.........................     78,801         43,508
                                                   -----------    -----------
      Total Inventories...........................    433,061        375,733
                                                   -----------    -----------

  Receivables, deposits, and notes................     33,721         29,490
                                                   -----------    -----------

  Property, plant, and equipment - net............     23,863         16,831
                                                   -----------    -----------

  Prepaid expenses and other assets...............     35,202         32,650
                                                   -----------    -----------
      Total Homebuilding..........................    539,173        468,010
                                                   -----------    -----------

Financial Services:
  Cash and cash equivalents.......................      3,254          1,486
  Mortgage loans held for sale....................     44,715         71,611
  Other assets....................................      2,114          3,717
                                                   -----------    -----------
      Total Financial Services....................     50,083         76,814
                                                   -----------    -----------

Investment Properties:
  Held for sale:
    Land and improvements.........................        107         17,832
    Other assets..................................        672            295
  Held for investment:
    Cash..........................................                       762
    Rental property - net.........................     10,747         10,794
    Other assets..................................      1,084            868
                                                   -----------    -----------
      Total Investment Properties.................     12,610         30,551
                                                   -----------    -----------

Collateralized Mortgage Financing:
  Collateral for bonds payable....................      5,349          5,970
  Other assets....................................        140            426
                                                   -----------    -----------
      Total Collateralized Mortgage Financing.....      5,489          6,396
                                                   -----------    -----------
Income Taxes Receivable - Including deferred tax
  benefits........................................      4,739          7,331
                                                   -----------    -----------
Total Assets......................................   $612,094       $589,102
                                                   ===========    ===========

See notes to consolidated financial statements.


HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands)

                                                       July 31,   October 31,
LIABILITIES AND STOCKHOLDERS' EQUITY                     1999         1998
                                                     -----------  -----------
                                                            
Homebuilding:
  Nonrecourse land mortgages........................   $ 14,002     $ 11,846
  Accounts payable and other liabilities............     49,216       53,765
  Customers' deposits...............................     22,585       23,857
  Nonrecourse mortgages secured by operating
    properties......................................      3,688        3,770
                                                     -----------  -----------
      Total Homebuilding............................     89,491       93,238
                                                     -----------  -----------
Financial Services:
  Accounts payable and other liabilities............      2,042        2,422
  Mortgage warehouse line of credit.................     43,131       66,666
                                                     -----------  -----------
      Total Financial Services......................     45,173       69,088
                                                     -----------  -----------
Investment Properties:
  Accounts payable and other liabilities............      1,063        1,373
                                                     -----------  -----------
      Total Investment Properties...................      1,063        1,373
                                                     -----------  -----------
Collateralized Mortgage Financing:
  Accounts payable and other liabilities............         15            6
  Bonds collateralized by mortgages receivable......      3,972        5,652
                                                     -----------  -----------
      Total Collateralized Mortgage Financing.......      3,987        5,658
                                                     -----------  -----------
Notes Payable:
  Revolving credit agreement........................                  68,000
  Senior Notes......................................    150,000
  Subordinated notes................................    100,000      145,449
  Accrued interest..................................      5,063        4,904
                                                     -----------  -----------
      Total Notes Payable...........................    255,063      218,353
                                                     -----------  -----------
      Total Liabilities.............................    394,777      387,710
                                                     -----------  -----------
Stockholders' Equity:
  Preferred Stock,$.01 par value-authorized 100,000
    shares; none issued
  Common Stock,Class A,$.01 par value-authorized
    87,000,000 shares; issued 15,848,256 shares
    (including 2,590,374 shares held in Treasury)...        158          157
  Common Stock,Class B,$.01 par value-authorized
    13,000,000 shares; issued 8,005,212 shares
    (including 345,874 shares held in Treasury).....         79           80
  Paid in Capital...................................     34,619       34,561
  Retained Earnings.................................    204,372      183,182
  Treasury Stock - at cost..........................    (21,911)     (16,588)
                                                     -----------  -----------
      Total Stockholders' Equity....................    217,317      201,392
                                                     -----------  -----------
Total Liabilities and Stockholders' Equity..........   $612,094     $589,102
                                                     ===========  ===========
See notes to consolidated financial statements.


HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands Except Per Share Data)

                                         Three Months Ended   Nine Months Ended
                                              July 31,            July 31,
                                         ------------------- -------------------
                                            1999      1998      1999      1998
                                         --------- --------- --------- ---------
                                                           
Revenues:
  Homebuilding:
    Sale of homes......................  $227,071  $237,900  $621,094  $645,524
    Land sales and other revenues......     3,552     1,954    11,447     8,293
                                         --------- --------- --------- ---------
      Total Homebuilding...............   230,623   239,854   632,541   653,817
  Financial Services...................     5,616     5,562    15,428    13,264
  Investment Properties................       385     2,530     1,168     6,783
  Collateralized Mortgage Financing....        47       179       322       541
                                         --------- --------- --------- ---------
      Total Revenues...................   236,671   248,125   649,459   674,405
                                         --------- --------- --------- ---------
Expenses:
  Homebuilding:
    Cost of sales......................   179,957   196,024   494,581   536,630
    Selling, general and administrative    20,690    17,530    56,810    49,045
    Inventory impairment loss..........     1,232     1,550     1,633     3,498
                                         --------- --------- --------- ---------
      Total Homebuilding...............   201,879   215,104   553,024   589,173
                                         --------- --------- --------- ---------
  Financial Services...................     5,257     4,837    14,358    11,628
                                         --------- --------- --------- ---------
  Investment Properties................       123       787     1,224     2,663
                                         --------- --------- --------- ---------
  Collateralized Mortgage Financing....        68       181       341       540
                                         --------- --------- --------- ---------
  Corporate General and Administrative.     8,016     5,543    20,869    14,683
                                         --------- --------- --------- ---------
  Interest.............................     6,849     8,773    21,237    25,239
                                         --------- --------- --------- ---------
  Other Operations.....................       409       510     1,689     1,461
                                         --------- --------- --------- ---------
      Total Expenses...................   222,601   235,735   612,742   645,387
                                         --------- --------- --------- ---------
Income Before Income Taxes and
  Extraordinary Loss...................    14,070    12,390    36,717    29,018
                                         --------- --------- --------- ---------
State and Federal Income Taxes:
  State................................     1,554       982     4,382     2,226
  Federal..............................     4,038     3,695    10,277     8,153
                                         --------- --------- --------- ---------
    Total Taxes........................     5,592     4,677    14,659    10,379
                                         --------- --------- --------- ---------
Extraordinary Loss From Extinguishment
  Of Debt, Net of Income Taxes.........      (868)               (868)
                                         --------- --------- --------- ---------
Net Income.............................  $  7,610  $  7,713  $ 21,190  $ 18,639
                                         ========= ========= ========= =========
Per Share Data:
Basic:
  Income Per Common Share Before
    Extraordinary Loss.................  $   0.40  $   0.35  $   1.04  $   0.85
  Extraordinary Loss...................      (.04)               (.04)
                                         --------- --------- --------- ---------
  Net Income...........................  $   0.36  $   0.35  $   1.00  $   0.85
                                         ========= ========= ========= =========
  Weighted Average Number of Common
    Shares Outstanding..................   20,979    21,785    21,274    21,822
Assuming Dilution:
  Income Per Common Share Before
    Extraordinary Loss.................  $   0.40  $   0.35  $   1.03  $   0.84
  Extraordinary Loss...................      (.04)               (.04)
                                         --------- --------- --------- ---------
  Net Income...........................  $   0.36  $   0.35  $   0.99  $   0.84
                                         ========= ========= ========= =========
  Weighted Average Number of Common
    Shares Outstanding.................    21,206    22,107    21,491    22,103

See notes to consolidated financial statements.



HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Dollars In Thousands)

                              A Common Stock       B Common Stock
                           -------------------  -------------------
                              Shares               Shares
                            Issued and           Issued and          Paid-In  Retained  Treasury
                           Outstanding  Amount  Outstanding  Amount  Capital  Earnings   Stock      Total
                           -----------  ------  -----------  ------  -------  --------  --------  --------
                                                                          
Balance, October 31, 1998. 13,865,923     $157    7,694,297     $80  $34,561  $183,182  ($16,588) $201,392
Sale of Common Stock
  under Employee Stock
  Option Plan.............     10,000                                     58                            58

Conversion of Class B to
  Class A Common Stock....     34,959        1      (34,959)     (1)

Treasury stock purchases..   (653,000)                                                    (5,323)   (5,323)
Net Income................                                                      21,190              21,190
                           -----------  ------  -----------  ------  -------  --------  --------  --------
Balance, July 31, 1999.... 13,257,882     $158    7,659,338     $79  $34,619  $204,372  $(21,911) $217,317
                           ===========  ======  ===========  ======  =======  ========  ========  ========

See notes to consolidated financial statements.


HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
                                    (In Thousands)


                                                         Nine Months Ended
                                                              July 31,
                                                       ---------------------
                                                          1999       1998
                                                       ---------- ----------
                                                            
Cash Flows From Operating Activities:
  Net Income.......................................... $  21,190   $ 18,639
  Adjustments to reconcile net income to net cash
    used in operating activities:
      Depreciation....................................     3,750      2,936
      Loss (gain) on sale and retirement of property
        and assets....................................       527     (2,678)
      Extraordinary loss from extinguishment of debt,
        net of income taxes...........................       868
      Deferred income taxes...........................     2,472      1,623
      Impairment losses...............................     1,633      3,498
      Decrease (increase) in assets:
      Receivables, prepaids and other assets........      (7,712)    (4,536)
        Mortgage notes receivable.....................    28,496     (9,541)
        Inventories...................................   (59,998)    (9,403)
      Increase (decrease) in liabilities:
        State and Federal income taxes................       588      5,301
        Customers' deposits...........................    (1,076)     3,319
        Interest and other accrued liabilities........      (902)      (974)
        Post development completion costs.............      (574)     1,840
        Accounts payable..............................    (3,791)      (490)
                                                       ---------- ----------
          Net cash (used) in provided by operating
            activities................................   (14,529)     9,534
                                                       ---------- ----------
Cash Flows From Investing Activities:
  Proceeds from sale of property and assets...........    18,850     22,134
  Purchase of property................................   (10,453)    (2,128)
  Investment in and advances to unconsolidated
    affiliates........................................        85        473
  Investment in income producing properties...........      (841)    (4,927)
                                                       ---------- ----------
          Net cash provided by investing activities...     7,641     15,552
                                                       ---------- ----------
Cash Flows From Financing Activities:
  Proceeds from mortgages and notes...................   523,617    432,627
  Proceeds from senior debt...........................   150,000
  Principal payments on mortgages and notes...........  (614,758)  (453,891)
  Principal payments on subordinated debt.............   (46,301)
  Investment in mortgage notes receivable.............       621      1,756
  Purchase of treasury stock..........................    (5,323)    (1,729)
  Proceeds from sale of stock.........................        58        626
                                                       ---------- ----------
          Net cash provided by (used) in financing
            activities................................     7,914    (20,611)
                                                       ---------- ----------
Net Increase In Cash..................................     1,026      4,475
Cash Balance, Beginning Of Period.....................    15,554     11,313
                                                       ---------- ----------
Cash Balance, End Of Period..........................  $  16,580  $  15,788
                                                       ========== ==========

See notes to consolidated financial statements.

HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED

     1.  The consolidated financial statements, except for the October 31, 1998
consolidated balance sheets, have been prepared without audit.  In the opinion
of management, all adjustments for interim periods presented have been made,
which include only normal recurring accruals and deferrals necessary for a fair
presentation of consolidated financial position, results of operations, and
changes in cash flows.  The preparation of financial statements in conformity
with generally accepted accounting principles 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 the interim periods are not necessarily indicative of
the results which might be expected for a full year.

     2.  Interest costs incurred, expensed and capitalized were:

                              Three Months Ended     Nine Months Ended
                                   July 31,              July 31,
                              -------------------   -------------------
                                1999       1998       1999       1998
                              --------   --------   --------   --------
                                        (Dollars in Thousands)
Interest Incurred (1):
  Residential (3)...........  $  6,110   $  6,789     16,794   $ 20,087
  Commercial(4).............       266        680        911      1,844
                              --------   --------   --------   --------
    Total Incurred..........  $  6,376   $  7,469     17,705   $ 21,931
                              ========   ========   ========   ========
Interest Expensed:
  Residential (3)...........  $  6,583   $  8,093     20,326   $ 23,395
  Commercial (4)............       266        680        911      1,844
                              --------   --------   --------   --------
     Total Expensed.........  $  6,849   $  8,773     21,237   $ 25,239
                              ========   ========   ========   ========
Interest Capitalized at
  Beginning of Period.......  $ 21,017   $ 29,846     25,545   $ 35,950
Plus Interest Incurred......     6,376      7,469     17,705     21,931
Less Interest Expensed......     6,849      8,773     21,237     25,239
Less Impairment Write Off...                                        460
Less Sale of Assets.........      (242)                1,227      3,640
                              --------   --------   --------   --------
Interest Capitalized at
  End of Period.............  $ 20,786   $ 28,542     20,786   $ 28,542
                              ========   ========   ========   ========
Interest Capitalized at
  End of Period:
  Residential(3)............  $ 20,336   $ 26,036   $ 20,336   $ 26,036
  Commercial(2).............       450      2,506        450      2,506
                              --------   --------   --------   --------
    Total Capitalized.......  $ 20,786   $ 28,542   $ 20,786   $ 28,542
                              ========   ========   ========   ========

(1)  Does not include interest incurred by the Company's mortgage and finance
     subsidiaries.
(2)  Does not include a reduction for depreciation.
(3)  Represents acquisition interest for construction, land and development
     costs which is charged to interest expense when homes are delivered
     and when land is not under active development.
(4)  Represents interest allocated to or incurred on long term debt for
     investment properties and charged to interest expense.

     3.  Homebuilding accumulated depreciation at July 31, 1999 and October 31,
1998 amounted to $18,235,000 and $15,088,000, respectively.  Rental property
accumulated depreciation at July 31, 1999 and October 31, 1998 amounted to
$2,111,000 and $1,826,000, respectively.


     4.  In accordance with FAS 121, the Company records impairment losses on
inventories related to communities under 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.  As of July 31, 1999 developed lots in a substantially completed
community in New York with a carrying amount of $2,895,000, including approval,
engineering and capitalized interest, were written down $1,232,000 to its fair
value.  The Company is contracted to sell substantially all of the lots in the
fourth quarter ended October 31, 1999.  During the three months ended April 30,
1999 the Company also recorded a $401,000 impairment loss on land in Florida.
As of July 31, 1998 inventory in New Jersey with a carrying amount of $2,536,000
was written down $1,550,000 to its fair value.  In addition, the Company, from
time to time, will write off certain residential land options including
approval, engineering and capitalized interest costs for properties management
decided not to purchase.  The Company wrote off such costs on two properties in
New Jersey amounting to $1,589,000 and $359,000 during the three months ended
January 31, 1998 and April 30, 1998, respectively.  Residential inventory FAS
121 impairment losses and option write offs are reported on the Consolidated
Statements of Income as "Homebuilding-Inventory Impairment Loss."

     5.  The Company is involved from time to time in litigation arising in the
ordinary course of business, none of which is expected to have a material
adverse effect on the Company.  As of July 31, 1999 and 1998, respectively, the
Company is obligated under various performance letters of credit amounting to
$6,781,000 and $10,727,000.

     6.  On May 4, 1999, the Company issued $150,000,000 principal amount of 9
1/8% Senior Notes due May 1, 2009.  Interest is payable semi-annually.  The
proceeds were used to reduce the outstanding balance on the Company's "Revolving
Credit Facility" to zero, for general Corporate purposes, and on June 7, 1999,
to redeem the remaining $45,449,000 11 1/4% Subordinated Notes due 2002.  The
early retirement of these notes resulted in an extraordinary loss of $868,000
net of income taxes of $468,000.

     7.  Financial Information of Subsidiary Issuer and Subsidiary Guarantors.
Hovnanian Enterprises, Inc., the parent company (the "Parent" or "Company") is
the issuer of publicly traded common stock.  One of its wholly owned
subsidiaries, K. Hovnanian Enterprises, Inc., (the "Subsidiary Issuer") was the
issuer of certain Senior Notes on May 4, 1999.

     The Subsidiary Issuer acts as a finance and management entity that as of
July 31, 1999 had issued and outstanding approximately $100,000,000 of
subordinated notes and a revolving credit agreement with an outstanding balance
of zero.  Both the subordinated notes and the revolving credit agreement are
fully and unconditionally guaranteed by the Parent.

     Each of the wholly owned subsidiaries of the Parent (collectively the
"Guarantor Subsidiaries"), with the exception of four subsidiaries formerly
engaged in the issuance of collateralized mortgage obligations, a mortgage
lending subsidiary, a subsidiary holding and licensing the "K. Hovnanian" trade
name and a subsidiary engaged in homebuilding activity in Poland (collectively
the "Non-guarantor Subsidiaries"), have guaranteed fully and unconditionally, on
a joint and several basis, the obligation to pay principal and interest under
the revolving credit agreement of the Subsidiary Issuer.

     Additionally the Parent has provided full, unconditional and joint and
several guarantees to the Senior Notes which aggregate $150,000,000 as of July
31, 1999.  The Guarantor Subsidiaries may also provide similar guarantees to the
Subsidiary Issuer.

     In lieu of providing separate audited financial statements for the
Guarantor Subsidiaries the Company has included the accompanying consolidated
condensed financial statements based on our understanding of the Securities and
Exchange Commission's interpretation and application of Rule 3-10 of the
Securities and Exchange Commission's Regulations S-X and Staff Accounting
Bulletin 53. Management does not believe that separate financial statements of
the Guarantor Subsidiaries are material to investors.  Therefore, separate
financial statement and other disclosures concerning the Guarantor Subsidiaries
are not presented.

     The following consolidating condensed financial information present the
results of operations, financial position and cash flows of (i) the Parent (ii)
the Subsidiary Issuer (iii) the Guarantor Subsidiaries of the Parent (iv) the
Non-guarantor Subsidiaries of the Parent and (v) the eliminations to arrive at
the information for Hovnanian Enterprises, Inc. on a consolidated basis.

HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
CONSOLIDATING CONDENSED BALANCE SHEET
JULY 31, 1999
(Thousands of Dollars)

                                                        Guarantor     Non-
                                             Subsidiary  Subsid-    Guarantor   Elimin-     Consol-
                                    Parent    Issuer     iaries    Subsidiaries ations      idated
                                   --------  ---------- ---------- ------------ ---------- ----------
                                                                         
ASSETS
Homebuilding:
  Cash and cash equivalents........$     64  $   3,836  $   9,378  $        48  $          $  13,326
  Inventories......................                       430,036        3,025               433,061
  Receivables, deposits, and notes.              3,215     30,506                             33,721
  Property, plant, and equipment...             15,577      8,245           41                23,863
  Prepaid expenses and other assets             12,888     22,284           30                35,202
                                   --------  ---------- ---------- ------------ ---------- ----------
    Total Homebuilding.............      64     35,516    500,449        3,144               539,173
                                   --------  ---------- ---------- ------------ ---------- ----------
Financial Services.................                         1,363       48,720                50,083
                                   --------  ---------- ---------- ------------ ---------- ----------
Investment Properties:
  Held for sale....................                           779                                779
  Held for investment..............                        11,831                             11,831
                                   --------  ---------- ---------- ------------ ---------- ----------
    Total Investment Properties....                        12,610                             12,610
                                   --------  ---------- ---------- ------------ ---------- ----------
Collateralized Mortgage Financing..                                      5,489                 5,489
                                   --------  ---------- ---------- ------------ ---------- ----------
Income Taxes Receivables...........  (2,139)      (149)     9,094       (2,067)                4,739
                                   --------  ---------- ---------- ------------ ---------- ----------
Investments in and amounts due to
  and from consolidated
  subsidiaries..................... 219,392    232,670   (251,814)       4,649   (204,897)
                                   --------  ---------- ---------- ------------ ---------- ----------
Total Assets.......................$217,317  $ 268,037  $ 271,702  $    59,935  $(204,897) $ 612,094
                                   ========  ========== ========== ============ ========== ==========

LIABILITIES
Homebuilding:
  Accounts payable and other
    liabilities....................$         $  12,981  $  36,045  $       190  $          $  49,216
  Customers' deposits..............                        22,419          166                22,585
  Nonrecourse mortgages............                        17,690                             17,690
                                   --------  ---------- ---------- ------------ ---------- ----------
    Total Homebuilding.............             12,981     76,154          356                89,491
                                   --------  ---------- ---------- ------------ ---------- ----------
Financial Services.................                           554       44,619                45,173
Investment Properties..............                         1,063                              1,063
Collateralized Mortgage Financing..                                      3,987                 3,987
Notes Payable......................            255,047         16                            255,063
                                   --------  ---------- ---------- ------------ ---------- ----------
    Total Liabilities..............            268,028     77,787       48,962               394,777
                                   --------  ---------- ---------- ------------ ---------- ----------
STOCKHOLDERS' EQUITY............... 217,317          9    193,915       10,973   (204,897)   217,317
                                   --------  ---------- ---------- ------------ ---------- ----------
Total Liabilities and Stockholders'
  Equity...........................$217,317  $ 268,037  $ 271,702  $    59,935  $(204,897) $ 612,094
                                   ========  ========== ========== ============ ========== ==========


HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
CONSOLIDATING CONDENSED BALANCE SHEET
OCTOBER 31, 1998
(Thousands of Dollars)

                                                        Guarantor   Non-
                                            Subsidiary   Subsid-  Guarantor     Elimin-    Consol-
                                     Parent   Issuer     iaries   Subsidiaries  ations     idated
                                   --------  --------- ---------- ------------ ---------- ----------
                                                                        
ASSETS
Homebuilding:
  Cash and cash equivalents........$     14  $ (9,660) $  21,732  $     1,220  $          $  13,306
  Inventories......................                      373,364        2,369               375,733
  Receivables, deposits, and notes.             2,618     26,872                             29,490
  Property, plant, and equipment...            10,180      6,627           24                16,831
  Prepaid expenses and other assets     187     9,931     22,530            2                32,650
                                   --------  --------- ---------- ------------ ---------- ----------
    Total Homebuilding.............     201    13,069    451,125        3,615               468,010
                                   --------  --------- ---------- ------------ ---------- ----------
Financial Services.................                        1,461       75,353                76,814
                                   --------  --------- ---------- ------------ ---------- ----------
Investment Properties:
  Held for sale....................                       18,127                             18,127
  Held for investment..............                       12,424                             12,424
                                   --------  --------- ---------- ------------ ---------- ----------
    Total Investment Properties....                       30,551                             30,551
                                   --------  --------- ---------- ------------ ---------- ----------
Collateralized Mortgage Financing..                                     6,396                 6,396
Income Taxes Receivables-Including
  deferred tax benefits............      41       382      8,419       (1,511)                7,331
                                   --------  --------- ---------- ------------ ---------- ----------
Investments in and amounts due to
  and from consolidated
  subsidiaries..................... 201,150   210,648   (236,457)       7,941   (183,282)
                                   --------  --------- ---------- ------------ ---------- ----------
Total Assets.......................$201,392  $224,099  $ 255,099  $    91,794  $(183,282) $ 589,102
                                   ========  ========= ========== ============ ========== ==========
LIABILITIES
Homebuilding:
  Accounts payable and other
    liabilities....................$         $  5,908   $ 47,636  $       221  $          $  53,765
  Customers' deposits..............                       23,367          490                23,857
  Nonrecourse mortgages............                       15,616                             15,616
                                   --------  --------- ---------- ------------ ---------- ----------
    Total Homebuilding.............             5,908     86,619          711                93,238
                                   --------  --------- ---------- ------------ ---------- ----------
Financial Services.................                          677       68,411                69,088
Investment Properties..............                        1,373                              1,373
Collateralized Mortgage Financing..                                     5,658                 5,658
Notes Payable......................           218,182        171                            218,353
                                   --------  --------- ---------- ------------ ---------- ----------
    Total Liabilities..............           224,090     88,840       74,780               387,710
                                   --------  --------- ---------- ------------ ---------- ----------
STOCKHOLDERS' EQUITY............... 201,392         9    166,259       17,014   (183,282)   201,392
                                   --------  --------- ---------- ------------ ---------- ----------
Total Liabilities and Stockholders'
  Equity...........................$201,392  $224,099  $ 255,099  $    91,794  $(183,282) $ 589,102
                                   ========  ========= ========== ============ ========== ==========


HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS
THREE MONTHS ENDED JULY 31, 1999
(Thousands of Dollars)

                                                        Guarantor   Non-
                                            Subsidiary  Subsid-   Guarantor    Elimin-    Consol-
                                   Parent    Issuer     iaries    Subsidiaries ations     idated
                                   -------  ---------- ---------- ------------ ---------- ----------
                                                      
Revenues:
  Homebuilding.....................$  (159) $     598  $ 229,067  $     5,866  $  (4,749) $ 230,623
  Financial Services...............                          967        4,649                 5,616
  Investment Properties............                          670                    (285)       385
  Collateralized Mortgage Financing                                        47                    47
  Intercompany Charges.............            24,562     (1,635)                (22,927)
  Equity In Pretax Income of
    Consolidated Subsidiaries......(12,893)                                      (12,893)
                                   -------  ---------- ---------- ------------ ---------- ----------
    Total Revenues................  12,734     25,160    229,069       10,562    (40,854)   236,671
                                   -------  ---------- ---------- ------------ ---------- ----------

Expenses:
  Homebuilding.....................                      206,352          621     (5,094)   201,879
  Financial Services...............                          681        4,709       (133)     5,257
  Investment Properties............                          395                    (272)       123
  Collateralized Mortgage Financing                                        68                    68
  Corporate General and
    Administration.................             7,500        529                     (13)     8,016
  Interest.........................            15,828      7,146           57    (16,182)     6,849
  Other Operations.................               366         39            4                   409
                                   -------  ---------- ---------- ------------ ---------- ----------
    Total Expenses.................            23,694    215,142        5,459    (21,694)   222,601
                                   -------  ---------- ---------- ------------ ---------- ----------

Income (Loss) Before Income Taxes.. 12,734      1,466     13,927        5,103    (19,160)    14,070

State and Federal Income Taxes.....  5,124        468      5,238        1,668     (6,906)     5,592
Extraordinary Loss.................              (868)                                         (868)
                                   -------  ---------- ---------- ------------ ---------- ----------
Net Income (Loss)..................$ 7,610  $    (130) $   8,689  $     3,435  $ (12,254) $   7,610
                                   =======  ========== ========== ============ ========== ==========


HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS
THREE MONTHS ENDED JULY 31, 1998
(Thousands of Dollars)

                                                        Guarantor   Non-
                                            Subsidiary  Subsid-   Guarantor    Elimin-    Consol-
                                   Parent    Issuer     iaries    Subsidiaries ations     idated
                                   -------  ---------- ---------- ------------ ---------- ----------
                                                                        
Revenues:
  Homebuilding.....................$        $     100  $ 237,573  $     7,318  $  (5,137) $ 239,854
  Financial Services...............                          971        4,591                 5,562
  Investment Properties............                        2,797                    (267)     2,530
  Collateralized Mortgage Financing                                       179                   179
  Intercompany Charges.............            21,879        548                 (22,427)
  Equity In Pretax Income of
    Consolidated Subsidiaries...... 12,390                                       (12,390)
                                   -------  ---------- ---------- ------------ ---------- ----------
    Total Revenues................  12,390     21,979    241,889       12,088    (40,221)   248,125
                                   -------  ---------- ---------- ------------ ---------- ----------

Expenses:
  Homebuilding.....................                      217,774        2,286     (4,956)   215,104
  Financial Services...............                          716        4,269       (148)     4,837
  Investment Properties............                          903                    (116)       787
  Collateralized Mortgage Financing                                       181                   181
  Corporate General and
    Administration.................             5,442        194                     (93)     5,543
  Interest.........................            15,735      8,806          128    (15,896)     8,773
  Other Operations.................               454         52            4        510
                                   -------  ---------- ---------- ------------ ---------- ----------
    Total Expenses.................            21,631    228,445        6,868    (21,209)   235,735
                                   -------  ---------- ---------- ------------ ---------- ----------

Income (Loss) Before Income Taxes.. 12,390        348     13,444        5,220    (19,012)    12,390

State and Federal Income Taxes.....  4,677                 4,687        2,044     (6,731)     4,677
                                   -------  ---------- ---------- ------------ ---------- ----------
Net Income (Loss)..................$ 7,713  $     348  $   8,757  $     3,176  $ (12,281) $   7,713
                                   =======  ========== ========== ============ ========== ==========


HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS
NINE MONTHS ENDED JULY 31, 1999
(Thousands of Dollars)

                                                        Guarantor   Non-
                                            Subsidiary  Subsid-   Guarantor    Elimin-    Consol-
                                   Parent    Issuer     iaries    Subsidiaries ations     idated
                                   -------  ---------- ---------- ------------ ---------- ----------
                                                                        
Revenues:
  Homebuilding.....................$  (159) $     627  $ 629,986  $    15,400  $ (13,313) $ 632,541
  Financial Services...............                        2,578       12,850                15,428
  Investment Properties............                        2,014                    (846)     1,168
  Collateralized Mortgage Financing                                       322                   322
  Intercompany Charges.............            66,402        349                 (66,751)
  Equity In Pretax Income of
    Consolidated Subsidiaries...... 35,540                                       (35,540)
                                   -------  ---------- ---------- ------------ ---------- ----------
    Total Revenues................  35,381     67,029    634,927       28,572   (116,450)   649,459
                                   -------  ---------- ---------- ------------ ---------- ----------

Expenses:
  Homebuilding.....................                      564,875        1,789    (13,640)   553,024
  Financial Services...............                        1,853       12,859       (354)    14,358
  Investment Properties............                        1,916                    (692)     1,224
  Collateralized Mortgage Financing                                       341                   341
  Corporate General and
    Administration.................            20,038        985                    (154)    20,869
  Interest.........................            44,514     21,342          249    (44,868)    21,237
  Other Operations.................             1,282        396           11                 1,689
                                   -------  ---------- ---------- ------------ ---------- ----------
    Total Expenses.................            65,834    591,367       15,249    (59,708)   612,742
                                   -------  ---------- ---------- ------------ ---------- ----------

Income (Loss) Before Income Taxes.. 35,381      1,195     43,560       13,323    (56,742)    36,717

State and Federal Income Taxes..... 14,191        468     16,490        5,178    (21,668)    14,659
Extraordinary Loss.................              (868)                                         (868)
                                   -------  ---------- ---------- ------------ ---------- ----------
Net Income (Loss)..................$21,190  $    (141) $  27,070  $     8,145  $(35,074) $  21,190
                                   =======  ========== ========== ============ ========== ==========


HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS
NINE MONTHS ENDED JULY 31, 1998
(Thousands of Dollars)

                                                        Guarantor   Non-
                                            Subsidiary  Subsid-   Guarantor    Elimin-    Consol-
                                   Parent    Issuer     iaries    Subsidiaries ations     idated
                                   -------  ---------- ---------- ------------ ---------- ----------
                                                                        
Revenues:
  Homebuilding.....................$        $     597  $ 648,874  $    18,008  $ (13,662) $ 653,817
  Financial Services...............                        2,771       10,493     13,264
  Investment Properties............                        7,585                    (802)     6,783
  Collateralized Mortgage Financing                                       541                   541
  Intercompany Charges.............            62,362      4,017                 (66,379)
  Equity In Pretax Income of
    Consolidated Subsidiaries...... 29,018                                       (29,018)
                                   -------  ---------- ---------- ------------ ---------- ----------
    Total Revenues................  29,018     69,959    663,247       29,042   (109,861)   674,405
                                   -------  ---------- ---------- ------------ ---------- ----------

Expenses:
  Homebuilding.....................                      598,363        4,283    (13,473)   589,173
  Financial Services...............                        1,944        9,961       (277)    11,628
  Investment Properties............                        3,240                    (577)     2,663
  Collateralized Mortgage Financing                                       540                   540
  Corporate General and
    Administration.................            14,232        616                    (165)    14,683
  Interest.........................            46,321     25,216          184    (46,482)    25,239
  Other Operations.................             1,231        219           11                 1,461
                                   -------  ---------- ---------- ------------ ---------- ----------
    Total Expenses.................            61,784    629,598       14,979    (60,974)   645,387
                                   -------  ---------- ---------- ------------ ---------- ----------

Income (Loss) Before Income Taxes.. 29,018      1,175     33,649       14,063    (48,887)    29,018

State and Federal Income Taxes..... 10,379                11,882        5,493    (17,375)    10,379
                                   -------  ---------- ---------- ------------ ---------- ----------
Net Income (Loss)..................$18,639  $   1,175  $  21,767  $     8,570  $ (31,512) $  18,639
                                   =======  ========== ========== ============ ========== ==========


HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS
NINE MONTHS ENDED JULY 31, 1999
(Thousands of Dollars)

                                                         Guarantor     Non-
                                              Subsidiary   Subsid-   Guarantor   Elimin-    Consol-
                                      Parent    Issuer     iaries   Subsidiaries ations     idated
                                     --------  --------- ---------- ------------ ---------- ----------
                                                                          
Cash Flows From Operating Activities:
  Net Income (loss)..................$ 21,190  $   (141) $  27,070  $     8,145  $ (35,074) $  21,190
  Adjustments to reconcile net income
    (loss) to net cash provided by
    (used in) operating activities...   2,367    (4,030)   (81,151)      11,170     35,074    (36,571)
                                     --------  --------- ---------- ------------ ---------- ----------
    Net Cash Provided By (Used In)
      Operating Activities...........  23,557    (4,171)   (54,081)      19,315               (15,381)

Net Cash Provided by (Used In)
  Investing Activities...............            (1,909)     9,071          479                 7,641

Net Cash Provided By(Used In)
  Financing Activities...............  (5,265)   36,551      2,695      (25,215)                8,776

Intercompany Investing and Financing
  Activities - Net................... (18,242)  (16,975)    31,925        3,292
                                     --------  --------- ---------- ------------ ---------- ----------
Net Increase (Decrease) In Cash......      50    13,496    (10,390)      (2,129)                1,026
Cash and Cash Equivalent Balance,
  Beginning of Period................      14    (9,660)    23,023        2,177                15,554
                                     --------  --------- ---------- ------------ ---------- ----------
Cash and Cash Equivalent Balance,
  End of Period......................$     64  $  3,836  $  12,633  $        48  $          $  16,580
                                     ========  ========= ========== ============ ========== ==========


HOVNANIAN ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS
NINE MONTHS ENDED JULY 31, 1998
(Thousands of Dollars)

                                                         Guarantor     Non-
                                              Subsidiary   Subsid-   Guarantor   Elimin-    Consol-
                                      Parent    Issuer     iaries   Subsidiaries ations     idated
                                     --------  --------- ---------- ------------ ---------- ----------
                                                                          
Cash Flows From Operating Activities:
  Net Income (loss)..................$ 18,639  $  1,175  $  21,767  $     8,570  $ (31,512) $  18,639
  Adjustments to reconcile net income
    (loss) to net cash provided by
    (used in) operating activities...   5,596    (2,127)   (13,371)     (30,715)    31,512     (9,105)
                                     --------  --------- ---------- ------------ ---------- ----------
    Net Cash Provided By (Used In)
      Operating Activities...........  24,235      (952)     8,396      (22,145)                9,534

Net Cash Provided by (Used In)
  Investing Activities...............            (1,279)    17,276         (445)               15,552

Net Cash Provided By(Used In)
  Financing Activities...............  (1,105)   (9,000)   (17,609)       7,103     (20,611)

Intercompany Investing and Financing
  Activities - Net................... (23,129)   18,663     (8,432)      12,898
                                     --------  --------- ---------- ------------ ---------- ----------
Net Increase (Decrease) In Cash......       1     7,432       (369)      (2,589)                4,475
Cash and Cash Equivalent Balance,
  Beginning of Period................      10    (5,485)    13,857        2,931                11,313
                                     --------  --------- ---------- ------------ ---------- ----------
Cash and Cash Equivalent Balance,
  End of Period......................$     11  $  1,947  $  13,488  $       342 $          $  15,788
                                     ========  ========= ========== ============ ========== ==========



MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
   AND RESULTS OF OPERATIONS

CAPITAL RESOURCES AND LIQUIDITY

     The Company's uses for cash during the nine months ended July 31, 1999 were
for operating expenses, increases in housing inventories, construction, income
taxes, interest, the paydown of subordinated debt and the repurchase of common
stock.  The Company provided for its cash requirements from outside borrowings,
including the issuance of $150,000,000 senior indebtedness and the revolving
credit facility, sales of commercial properties, and from housing and other
revenues.  The Company believes that these sources of cash are sufficient to
finance its working capital requirements and other needs.

     In December 1998 the Board of Directors authorized a stock repurchase
program to purchase up to 3 million shares of Class A Common Stock.  This
authorization expires on December 31, 2000.  As of July 31, 1999, 2,244,500
shares have been repurchased under this program, of which 653,000 shares were
purchased during the nine months ended July 31, 1999.

     The Company's bank borrowings are made pursuant to a revolving credit
agreement (the "Agreement") that provides a revolving credit line of up to
$275,000,000 (the "Revolving Credit Facility") through July 2002.  Interest is
payable monthly and at various rates of either prime or Libor plus 1.45%.  The
Company believes that it will be able either to extend the Agreement beyond July
2002 or negotiate a replacement facility,  but there can be no assurance of such
extension or replacement facility.  The Company currently is in compliance and
intends to maintain compliance with its covenants under the Agreement.

     The subordinated indebtedness issued by the Company and outstanding as of
July 31, 1999 was $100,000,000 9 3/4% Subordinated Notes due June 2005.  On May
4, 1999, the Company issued $150,000,000 9 1/8% Senior Notes due in 2009.  On
June 7, 1999, the Company redeemed the remaining $45,449,000 principal amount 11
1/4% Subordinate Notes due April 2002.  The early retirement of these notes
resulted in an extraordinary loss of $868,000 net of income taxes of $468,000.
The remaining proceeds were used to reduce the outstanding balance on the
Company's "Revolving Credit Facility" to zero and for general corporate
purposes.

     The Company's mortgage banking subsidiary borrows under a bank warehousing
arrangement.  Other finance subsidiaries formerly borrowed from a multi-builder
owned financial corporation and a builder owned financial corporation to finance
mortgage backed securities, but in fiscal 1988 decided to cease further
borrowing from multi-builder and builder owned financial corporations.  These
non-recourse borrowings have been generally secured by mortgage loans originated
by one of the Company's subsidiaries.  As of July 31, 1999, the aggregate
principal amount of all such borrowings was $47,103,000.

     The book value of the Company's residential inventories, rental
condominiums, and commercial properties completed and under development amounted
to the following:

                                               July 31,      October 31,
                                                 1999            1998
                                             ------------    ------------

Residential real estate inventory..........  $433,061,000    $375,733,000
Residential rental property................    10,747,000      10,794,000
                                             ------------    ------------
  Total Residential Real Estate............   443,808,000     386,527,000
Commercial properties......................       107,000      17,832,000
                                             ------------    ------------
  Combined Total...........................  $443,915,000    $404,359,000
                                             ============    ============

     The increase in residential real estate inventory during the nine months
ended July 31, 1999 was primarily the result of increased communities in
California.  Substantially all residential homes under construction or completed
and included in real estate inventory at July 31, 1999 are expected to be closed
during the next twelve months.  Most residential real estate completed or under
development is financed through the Company's line of credit and senior notes
and subordinated indebtedness.

     The following table summarizes housing lots in the Company's active selling
communities under development (including Poland):

                                                       (1)          (2)
                                            Homes   Contracted   Remaining
                       Commun-    Approved  Deliv-      Not      Home Sites
                        ities       Lots    ered    Delivered    Available
                       -------    --------  ------  ----------   ----------

  July 31, 1999.........   73      18,021    6,834     1,694       9,493

  October 31, 1998......   84      17,020    6,553     1,672       8,795

(1) Includes 12 and 8 lots under option at July 31, 1999 and October 31, 1998,
respectively.

(2) Of the total home lots available, 429 and 460 were under construction or
complete (including 59 and 54 models and sales offices), 5,543 and 4,570 were
under option, and 284 and 330 were financed through purchase money mortgages at
July 31, 1999 and October 31, 1998, respectively.

     In addition, at July 31, 1999 and October 31, 1998, respectively, in
substantially completed or suspended communities, the Company owned or had under
option 62 and 283 home lots.  The Company also controls a supply of land
primarily through options for future development.  This land is consistent with
anticipated home building requirements in its housing markets.  At July 31, 1999
the Company controlled such land to build 12,490 proposed homes, compared to
10,963 homes at October 31, 1998.

     The following table summarizes the Company's started or completed unsold
homes in active, substantially complete and suspended communities:

                              July 31,               October 31,
                                1999                     1998
                     -----------------------   -----------------------
                     Unsold                    Unsold
                     Homes    Models   Total   Homes    Models   Total
                     ------   ------   -----   ------   ------   -----

Northeast Region....   121       24     145      180       16     196
North Carolina......   149       --     149       93       --      93
Florida.............     8       --       8       24        6      30
Maryland............     6        2       8       --       --      --
Virginia............    18        7      25       23       11      34
California..........    50       26      76       78       21      99
Poland..............    27       --      27       11       --      11
                     ------   ------   -----   ------   ------   -----
  Total                379       59     438      409       54     463
                     ======   ======   =====   ======   ======   =====

     During fiscal 1997 the Company announced it was planning an orderly exit
from the business of owning investment properties.  During the first quarter of
fiscal 1999 the Company sold three land parcels which reduced such properties
$17,725,000.  At July 31, 1999 the Company had remaining one small investment
property.

     Collateral Mortgage Financing - Collateral for bonds payable consists of
collateralized mortgages receivable which are pledged against non-recourse
collateralized mortgage obligations.  Financial Services - Mortgage loans held
for sale consist of residential mortgages receivable of which $44,109,000 and
$71,002,000 at July 31, 1999 and October 31, 1998, respectively, are being
temporarily warehoused and awaiting sale in the secondary mortgage market.  The
balance of such mortgages is being held as an investment by the Company.  The
Company may incur risk with respect to mortgages that are delinquent, but only
to the extent the losses are not covered by mortgage insurance or resale value
of the house.  Historically, the Company has incurred minimal credit losses.



RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED JULY 31, 1999 COMPARED
TO THE THREE AND NINE MONTHS ENDED JULY 31, 1998

     The Company's operations consist primarily of residential housing
development and sales in its Northeast Region (comprised of New Jersey, southern
New York State and eastern Pennsylvania), North Carolina, southeastern Florida,
northern Virginia, southwestern California and Poland.  The Company is expanding
into Maryland and expects to begin selling homes in its fourth quarter of fiscal
1999.  In addition, the Company provides financial services to its homebuilding
customers and third parties.

     Important indicators of the future results of the Company are recently
signed contracts and home contract backlog for future deliveries.  The Company's
sales contracts and homes in contract (using base sales prices) by market area
is set forth below:

                        Sales Contracts for the
                           Nine Months Ended         Contract Backlog
                                July 31,             as of July 31,
                        -----------------------    ---------------------
                           1999          1998         1999       1998
                        ---------     ---------    ---------   ---------
                                      (Dollars in Thousands)
Northeast Region:
  Dollars.............  $316,170      $411,040     $242,597    $294,385
  Homes...............     1,379         1,847        1,012       1,218

North Carolina:
  Dollars.............  $114,862      $ 93,195     $ 65,889    $ 50,623
  Homes...............       600           504          327         260

Florida:
  Dollars.............  $ 25,051      $ 25,936     $ 14,805    $ 19,813
  Homes...............       112           135           66          98

Virginia:
  Dollars.............  $ 41,616      $ 28,714     $ 37,766    $ 29,632
  Homes...............       182           114          170         127

California:
  Dollars.............  $ 79,740      $ 53,706     $ 33,639    $ 21,688
  Homes...............       380           313          148         134

Poland:
  Dollars.............  $    654      $  2,125     $    294    $  1,591
  Homes...............         6            26            2          19

Totals:
  Dollars.............  $578,093      $614,716     $394,990    $417,732
  Homes...............     2,659         2,939        1,725       1,856


Total Revenues:

     Revenues for the three months ended July 31, 1999 decreased $11.4 million
or 4.6%, compared to the same period last year.  This was the result of a $10.8
million decrease in revenues from the sale of homes, a $2.1 million decrease in
investment properties revenues, and a $0.1 million decrease in collateralized
mortgage financing revenues.  The decreases were partially offset by a $1.6
million increase in land sales and other homebuilding revenues.

     Revenues for the nine months ended July 31, 1999 decreased $24.9 million or
3.7%, compared to the same period last year.  This was the result of a $24.4
million decrease in revenues from the sale of homes, a $5.6 million decrease in
investment properties revenues, and a $0.2 million decrease in collateralized
mortgage financing revenues.  The decreases were partially offset by a $3.1
million increase in land sales and other homebuilding revenues, and a $2.2
million increase in financial services revenues.



Homebuilding:

     Revenues from the sale of homes decreased $10.8 million or 4.6% during the
three months ended July 31, 1999, and decreased $24.4 million or 3.8% during the
nine months ended July 31, 1999 compared to the same periods last year.
Revenues from sales of homes are recorded at the time each home is delivered and
title and possession have been transferred to the buyer.

     Information on homes delivered by market area is set forth below:

                        Three Months Ended    Nine Months Ended
                             July 31,              July 31,
                        -------------------   -------------------
                          1999       1998       1999      1998
                        ---------  --------   --------   --------
                                  (Dollars in Thousands)

Northeast Region:
  Housing Revenues.....  $142,503  $162,847   $395,687   $437,991
  Homes Delivered......       539       679      1,499      1,916

North Carolina:
  Housing Revenues.....  $ 38,269  $ 34,655   $ 97,902   $ 88,595
  Homes Delivered......       205       188        508        476

Florida:
  Housing Revenues.....  $  9,690  $  8,111   $ 27,554   $ 32,877
  Homes Delivered......        41        44        119        187

Virginia:
  Housing Revenues.....  $ 11,400  $ 11,256   $ 29,952   $ 22,217
  Homes Delivered......        46        46        127         84

California:
  Housing Revenues.....  $ 24,792  $ 18,832   $ 68,651   $ 59,566
  Homes Delivered......       120       104        351        316

Poland:
  Housing Revenues.....  $    417  $  2,199   $  1,348   $  4,278
  Homes Delivered......         2        24         11         48

Totals:
  Housing Revenues.....  $227,071  $237,900   $621,094   $645,524
  Homes Delivered......       953     1,085      2,615      3,027

     The 12.2% and 13.6% decreases in the number of homes delivered for the
three and nine months ended July 31, 1999, respectively, compared to the same
periods last year, were primarily due to the decreases in Florida and Northeast
Region which were somewhat offset by increases in North Carolina, Virginia and
California.  In Florida, deliveries declined since the Company cut back its
operations due to dissatisfaction with its performance.  The decrease in
deliveries in the Northeast Region was primarily due to a reduced number of
communities during the three and nine months ended July 31, 1999, compared to
the same periods last year.  The increases in North Carolina, Virginia and
California were primarily due to the Company's attempts to increase its presence
in these markets by opening more communities.  The decrease in housing revenues
was 4.6% and 3.8% during the three and nine months ended July 31, 1999,
respectively, compared to the same periods last year.  The decrease in housing
revenues was not as great as the decrease in the number of homes delivered due
to higher average home prices.  Average home prices increased to $237,512
compared to $213,255 during the nine months ended July 31, 1999 and 1998,
respectively.

     Cost of sales includes expenses for housing and land and lot sales.  A
breakout of such expenses for housing sales and housing gross margin is set
forth below:

                               Three Months Ended     Nine Months Ended
                                    July 31,             July 31,
                              -------------------   -------------------
                                1999       1998       1999       1998
                              --------   --------   --------   --------
                                        (Dollars in Thousands)

Sale of Homes................ $227,071   $237,900   $621,094   $645,524
Cost of Sales................  178,089    194,898    487,423    532,646
                              --------   --------   --------   --------
Housing Gross Margin......... $ 48,982   $ 43,002   $133,671   $112,878
                              ========   ========   ========   ========

Gross Margin Percentage......    21.6%      18.1%      21.5%      17.5%

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

                               Three Months Ended    Nine Months Ended
                                    July 31,              July 31,
                              -------------------   -------------------
                                1999       1998       1999       1998
                              --------   --------   --------   --------
Sale of Homes................  100.0%     100.0%     100.0%     100.0%
                              --------   --------   --------   --------
Cost of Sales:
      Housing, land &
        development costs....   70.4       74.2       70.4       74.7
      Commissions............    2.0        1.9        2.0        1.9
      Financing concessions..    0.8        0.7        0.8        0.7
      Overheads..............    5.2        5.1        5.3        5.2
                              --------   --------   --------   --------
Total Cost of Sales..........   78.4       81.9       78.5       82.5
                              --------   --------   --------   --------
Gross Margin.................   21.6%      18.1%      21.5%      17.5%
                              ========   ========   ========   ========

     The Company sells a variety of home types in various local communities,
each yielding a different gross margin.  As a result, depending on the mix of
both communities and on home types delivered, consolidated quarterly gross
margin will fluctuate up or down and may not be representative of the
consolidated gross margin for the year.  In addition, gross margin percentages
are higher in the Northeast Region compared to the Company's other markets. For
the three and nine months ended July 31, 1999 the Company's gross margin
percentage increased 3.5% and 4.0%, respectively, compared to the same periods
last year.  This can be attributed to higher gross margins being achieved in
each of the Company's markets.  Higher gross margins are primarily attributed to
positive effects from process redesign and quality programs that reduced housing
and land development costs, selective price increases or reduced selling
incentives in the Company's stronger markets, and an increased percentage of
deliveries from the better performing communities.

     Selling, general, and administrative costs as a percentage of total
homebuilding revenues increased to 9.0% for the three months ended July 31, 1999
from 7.3% for the prior year's three months, and increased to 9.0% for the nine
months ended July 31, 1999 from 7.5% for the prior year's nine months.  Such
expenses increased during the three and nine months ended July 31, 1999 $3.2
million and $7.8 million, respectively, compared to the same periods last year.
The overall percentage and dollar increases in selling, general and
administrative is principally due to decreased deliveries and increases in
administrative costs primarily in the Company's Northeast Region, North
Carolina, and California.


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   Nine Months Ended
                                       July 31,              July 31,
                                   ------------------   -------------------
                                     1999      1998        1999      1998
                                   --------  --------   --------   --------

Land and Lot Sales................ $  1,974  $    954   $  7,508   $  4,317
Cost of Sales.....................    1,868     1,126      7,158      3,984
                                   --------  --------   --------   --------
Land and Lot Sales Gross Margin...      106      (172)       350        333
Interest Expense..................       94        96        836        413
                                   --------  --------   --------   --------
Land and Lot Sales Profit Before
  Tax............................. $     12  $   (268)  $   (486)  $   (80)
                                   ========  ========   ========   ========

     Land and lot sales are incidental to the Company's residential housing
operations and are expected to continue in the future but may significantly
fluctuate up or down.


Financial Services

     Financial services consist primarily of originating mortgages from the
Company's homebuyers, as well as from third parties, selling such mortgages in
the secondary market, and title insurance activities.  For the three and nine
months ended July 31, 1999 financial services provided a $0.4 million and $1.1
million pretax profit, respectively, compared to a profit of $0.7 million and
$1.6 million for the same periods in 1998.  The Company's mortgage banking goals
are to improve profitability by increasing the capture rate of its homebuyers
and expanding its business to include originations from unrelated third parties.
The Company has initiated efforts to originate mortgages from unrelated third
parties and expects these third party loans to increase as a percentage of the
Company's total loan volume over the next few years.

Investment Properties

     Investment Properties consisted of rental properties, property management,
and gains or losses from the sale of such properties.  At the end of the second
quarter of 1997 the Company announced that it was planning an orderly exit from
the investment properties business.  During the three months ended January 31,
1999 the Company sold three land parcels for a total sales price of $20.8
million and recorded a loss before income taxes of $0.5 million.  At July 31,
1999 all commercial facilities and land (except for one small parcel) have been
liquidated.  The Company is retaining two senior citizen residential rental
communities.

Collateralized Mortgage Financing

     In the years prior to February 29, 1988 the Company pledged mortgage loans
originated by its mortgage banking subsidiaries against collateralized mortgage
obligations ("CMO's").  Subsequently the Company discontinued its CMO program.
As a result, CMO operations are diminishing as pledged loans are decreasing
through principal amortization and loan payoffs, and related bonds are reduced.
In recent years, as a result of bonds becoming callable, the Company has also
sold a portion of its CMO pledged mortgages.


Corporate General and Administrative

     Corporate general and administrative expenses include the operations at the
Company's headquarters in Red Bank, New Jersey.  Such expenses include the
Company's executive offices, information services, human resources, corporate
accounting, training, treasury, process redesign, internal audit, and
administration of insurance, quality, and safety.  As a percentage of total
revenues, such expenses increased to 3.4% for the three months ended July 31,
1999 from 2.2% for the prior year's three months.  For the nine months ended
July 31, 1999 such expenses increased to 3.2% from 2.2% for the prior year nine
months.  Corporate general and administrative expenses increased $2.5 million
and $6.2 million during the three and nine months ended July 31, 1999 compared
to the same periods last year.  These increases are primarily attributed to
increased process redesign costs associated with the design and development of
streamlined business processes associated with the implementation of SAP, our
new enterprise wide fully integrated software package and increased depreciation
expense related to capitalized process redesign costs in prior years.


Interest

     Interest expense includes housing, land and lot, and rental properties
interest.  Interest expense is broken down as follows:

                            Three Months Ended  Nine Months Ended
                                 July 31,             July 31,
                            ------------------  ------------------
                              1999      1998       1999     1998
                            --------  --------  --------  --------

Sale of Homes.............. $ 6,489   $ 7,997    19,490   $22,982
Land and Lot Sales.........      94        96       836       413
Rental Properties..........     266       680       911     1,844
                            --------  --------  --------  --------
Total...................... $ 6,849   $ 8,773    21,237   $25,239
                            ========  ========  ========  ========

     Housing interest as a percentage of sale of homes revenues amounted to 2.9%
and 3.1% for the three and nine months ended July 31, 1999, respectively, and
3.4% and 3.6% for the three and nine months ended July 31, 1998, respectively.
The decrease in the percentage for the three and nine months ended July 31, 1999
was primarily the result of the Company's lower debt levels.  Lower debt levels
are attributed to debt reductions resulting from cash generated by the
liquidation of investment properties and income from fiscal 1998.


Other Operations

     Other operations consist primarily of miscellaneous residential housing
operations expenses, amortization of prepaid subordinated note issuance expenses
and corporate owned life insurance loan interest.


Total Taxes

     Total taxes as a percentage of income before taxes amounted to
approximately 39.9% and 35.8% for the nine months ended July 31, 1999 and 1998,
respectively.  The increase in this percentage from 1998 to 1999 is primarily
attributed to higher state taxes and the elimination of certain federal tax
benefits associated with the Company's corporate owned life insurance.  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.


Extraordinary Loss

     On June 7, 1999, the Company redeemed $45,449,000 11 1/4% Subordinated
Notes due 2002 at a price of 101.875% of par which resulted in an extraordinary
loss of $868,000 net of income taxes of $468,000.


Year 2000 Issues

     The Company has assessed and formulated a plan to resolve its information
technology ("IT") and non-IT system year 2000 issues.  The Company has
designated a full-time year 2000 project leader, engaged consultants to review
and evaluate its plan, completed the identification of Company IT and non-IT
noncompliant systems and evaluated subcontractors' and suppliers' state of
readiness.  The Company's plan has prioritized its efforts on its software
systems and computer hardware equipment.  The Company has upgraded, fixed or
retired 98% of its noncompliant systems.  All other Company IT and non-IT
systems are not considered critical to Company operations, and if non-capable
for year 2000, would only be an inconvenience.  The Company does not anticipate
the costs of implementation of its plan to have a material impact on future
earnings and is expected to be funded through operations.

     The Company is concerned about the readiness of its subcontractors and
suppliers.  The Company has communicated with 100% of these third parties.  The
Company has been informed that 85% of the subcontractors and suppliers are year
2000 compliant, and the remaining 15% are expected to be compliant by September
30, 1999.  If any of the third parties are not year 2000 compliant by September
30, 1999 and such third parties would have a substantial impact on the Company's
operations, the Company will look to replace such subcontractors and suppliers.
In most cases, the Company uses more than one subcontractor and supplier so it
believes finding replacements will not be difficult.

     The Company believes it is on track to solve its year 2000 issues.  It does
not believe it will have material lost revenues due to the year 2000 issues.
Based on the above, it sees no need to develop a worst-case year 2000 scenario.
However, the Company is in the process of developing year 2000 contingency plans
which are approximately 90% complete.



Inflation

     Inflation has a long-term effect on the Company because increasing costs of
land, materials and labor result in increasing sale prices of its homes.  In
general, these price increases have been commensurate with the general rate of
inflation in the Company's housing market and have not had a significant adverse
effect on the sale of the Company's homes.  A significant risk faced by the
housing industry generally is that rising house costs, including land and
interest costs, will substantially outpace increases in the income of potential
purchasers.  In recent years, in the price ranges in which it sells homes, the
Company has not found this risk to be a significant problem.

     Inflation has a lesser short-term effect on the Company because the Company
generally negotiates fixed price contracts with its subcontractors and material
suppliers for the construction of its homes.  These prices usually are
applicable for a specified number of residential buildings or for a time period
of between four to twelve months.  Construction costs for residential buildings
represent approximately 56% of the Company's total costs and expenses.


Quantitative and Qualitative Disclosure of Market Risk

     On May 4, 1999, the Company issued $150,000,000 9 1/8% Senior Notes due in
2009.  Such transaction was conducted under market conditions and falls within
the parameters of the Company's strategy for managing its market risk.  The
proceeds were used to reduce the outstanding balance on the Company's "Revolving
Credit Facility" to zero, for general corporate purposes, and on June 7, 1999,
to redeem the remaining $45,449,000 11 1/4% Subordinated Notes due 2002.

                                  SIGNATURES



         Pursuant to the requirements of the Securities Exchange Act of l934,
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 13, 1999           /S/J.LARRY SORSBY
                                    J. Larry Sorsby,
                                    Senior Vice President,
                                    Treasurer and
                                    Chief Financial Officer


DATE:  September 13, 1999           /S/PAUL W. BUCHANAN
                                    Paul W. Buchanan,
                                    Senior Vice President
                                    Corporate Controller



  


 5
 1000

                             
                   9-MOS
                          OCT-31-1999
                               JUL-31-1999
                                          16,580
                                         0
                                   33,721
                                         0
                                    433,061
                               571,356
                                          42,098
                                  18,235
                                 612,094
                          137,102
                                        257,660
                                           237
                                0
                                          0
                                     217,080
                   612,094
                                        628,601
                               649,459
                                          494,581
                                  591,505
                                     0
                                     0
                              21,237
                                 36,717
                                    14,659
                             22,058
                                       0
                                    868
                                            0
                                    21,190
                                     1.00
                                     0.99





                          AMENDMENT TO
             AMENDED AND RESTATED CREDIT AGREEMENT


     This Amendment to Amended and Restated Credit Agreement ("Amendment") dated
as  of  the  13th  day  of  July,  1999 among  K.  Hovnanian  Enterprises,  Inc.
("Company"),  Hovnanian  Enterprises, Inc. ("Hovnanian"),  the  subsidiaries  of
Hovnanian  listed on the signature pages of this Amendment (each, together  with
Hovnanian, a "Guarantor" and collectively the "Guarantors"), PNC Bank,  National
Association  as  Agent  for the Banks ("Agent"), and the financial  institutions
listed  on the signature pages of this Amendment (collectively, the "Banks"  and
severally each a "Bank").
                           BACKGROUND
     WHEREAS,  pursuant  to that certain Amended and Restated Credit  Agreement,
dated  as of July 29, 1998, among the Company, certain Guarantors named  therein
or  thereafter added, the Banks named therein, and the Agent (as the same may be
amended  or supplemented from time to time, the "Credit Agreement"),  the  Banks
named therein agreed to make certain loans and extend credit to the Company;
     WHEREAS, the performance by the Company of its obligations under the Credit
Agreement  and the Notes is guaranteed, jointly and severally, by the Guarantors
pursuant to the Guaranties of the Guarantors to each of the Banks (collectively,
the "Guaranties");
     WHEREAS, NationsBank, National Association ("NationsBank") has assigned its
Revolving Credit  Commitment to Bank of America National Trust and Savings
Association ("B of A") as a result of which B of A has succeeded to the rights,
title, interest and obligations of NationsBank with respect thereto and under
the Credit Agreement and related agreements and documents;
     WHEREAS,  the Company, the Guarantors, the Banks and the Agent desire to
modify the provisions of the Credit Agreement under the terms and conditions set
forth in this Amendment.
     NOW, THEREFORE, with the foregoing Background incorporated by reference and
made part hereof, and intending to be legally bound, the parties hereto promise
and agree as follows:
     1. All terms used herein as defined terms and not herein defined shall
have the respective meanings ascribed to them in the Credit Agreement.
     2. The definitions of "Commitment Termination Date," "Revolving Credit
Commitments," "Revolving Credit Commitment Percentage" and  "Total  Debt
Multiplier" contained  in  Paragraph 1.1 of the Credit Agreement are hereby
deleted and respectively  replaced in their entirety by the following  new
definitions:
          "Commitment  Termination Date" shall mean, with  respect  to
          each  Bank,  July 31, 2002, provided, however,  that  on  or
          before  April 30  of each year, each Bank will  review  its
          respective  commitment  and, in  its  sole  discretion,  may
          extend  the  Commitment Termination Date  for  a  period  of
          twelve  months,  provided,  that  in  no  event  shall   the
          Commitment Termination Date be so extended unless and  until
          all Banks agree to such extension in writing.

          "Revolving   Credit   Commitments"  means   the   collective
          commitments of all the Banks to make Revolving Credit  Loans
          to  the  Company pursuant to this Agreement in an  aggregate
          principal  amount  not to exceed, at any  time  outstanding,
          $265,000,000,  as such amount may be increased  pursuant  to
          Subsection  8.7(c) hereof up to a maximum collective  amount
          of  $290,000,000,  provided,  however,  that  the  Revolving
          Credit Commitment of each Bank shall at all times be reduced
          by  an  amount  equal to each such Bank's  Revolving  Credit
          Commitment  Percentage of any then outstanding Excess  Other
          Senior  Homebuilding Indebtedness and the "Revolving  Credit
          Commitment  of  any Bank at any particular  time  means  the
          respective commitment of such Bank to make Revolving  Credit
          Loans to the Company pursuant to this Agreement in an amount
          equal   to   its  Revolving  Credit  Commitment   Percentage
          multiplied  by  the  aggregate  principal  amount   of   the
          Revolving   Credit  Commitments,  all  as   set   forth   on
          Replacement Schedule 9 attached hereto.

          "Revolving  Credit Commitment Percentage" shall  mean,  with
          respect  to any Bank at any time, the amount of such  Bank's
          Revolving Credit Commitment divided by the aggregate  amount
          of the Revolving Credit Commitments of all the Banks, as set
          forth on Replacement Schedule 9 attached hereto.

          "Total  Debt Multiplier" shall mean 2.75 (or 2.40 as of  and
          after  August 1, 2000), subject to Out of Compliance  Period
          Adjustments which cannot, in any event, cause the Total Debt
          Multiplier to exceed 2.75 (or 2.40 as of and after August 1,
          2000).

     3. Paragraph 2.8 of the Credit Agreement is modified to delete the number
of  "$40,000,000"  in  the third line thereof and replace it with the number
"$80,000,000."   The  parties  acknowledge and confirm that letter  of credit
#7402235 in the face amount of $4,968,000 issued by B of A on June 25, 1999 is
deemed a Letter of Credit issued under the Agreement.
     4. Notwithstanding any provision of the Credit Agreement to the contrary,
including without limitation  the  definitions  of  "Excess  Other   Senior
Homebuilding  Indebtedness" and "Revolving Credit Commitments", no reduction  in
the Revolving Credit Commitment of any Bank shall result from the issuance  of
the Company's 9 1/8% Senior Notes due 2009 in the original principal amount of
$150,000,000 issued pursuant to an Indenture Supplement dated as of May 4, 1999
among (as identified therein) the Company, the Issuer, the Guarantors and First
Union National Bank, as trustee.

     5. Paragraph 9.8 of the Credit Agreement is hereby deleted in its entirety
       and replaced by the following:
       Documentation Agent. The parties hereto covenant and agree that B of
A shall be a documentation agent (the "Documentation Agent") who shall perform
such duties and responsibilities as the Company, the Agent and the  Banks  may
hereafter request and the Documentation Agent shall accept (in its discretion).
Without the prior written consent of the Agent, no duty, responsibility, right
or option granted to the Agent shall be delegated to the Documentation Agent and
no compensation payable to the Agent shall be shared with the Documentation
Agent. Except as limited by this paragraph, each  disclaimer,  exculpation
provision, indemnity and other provision contained in Section 9 of the Credit
Agreement provided for the benefit of the Agent shall likewise be deemed given
to and provided for the Documentation Agent.
     6.  Contemporaneously with the execution hereof, the Company shall pay to
the Agent, for the benefit of each Bank, in consideration of the agreements and
undertakings of the Banks set forth in this Amendment, an amendment fee equal to
one-tenth of one percent (.10%) of the amount of the Facility Commitment of each
such Bank (the calculation thereof being made after giving effect to any changes
to their respective Facility Commitments made as a result of this Amendment).
     7.   The Company hereby warrants and represents as follows:
          (a) There is not currently outstanding any Event of Default or any
event  which with the giving of notice or the lapse of time or both would become
an Event of Default;
          (b)  The Company has full power, authority and legal right to execute,
deliver and perform under this Amendment.   The  execution,  delivery   and
performance by the Company of this Amendment have been duly authorized by all
necessary corporate action and are in furtherance of its corporate purposes.
          (c) The Guarantors each have full power, authority and legal right to
execute, deliver and perform under this Amendment. The execution, delivery  and
performance by each Guarantor of this Amendment have been duly authorized by all
necessary corporate action and are in furtherance of its respective  corporate
purposes.
          (d) No consent of any other Person (including shareholders of the
Company  or of any of the Guarantors) and no consent, license, approval  or
authorization of, or registration or declaration with, any governmental  body,
authority,  bureau or agency is required in connection  with  the  execution,
delivery and performance by the Company and the Guarantors of this Amendment.
          (e) The execution, delivery and performance of and compliance  with
this  Amendment will not result in any violation of or be in conflict  with  or
constitute a default  under  any  term  of the respective  certificates   of
incorporation or bylaws of the Company or any Guarantor, or of any agreement,
indenture, mortgage, lease, assignment, note or other instrument to which the
Company or any Guarantor is a party or which purports to be binding upon any  of
them or upon any of their properties or assets, or any judgment, decree, order,
law, statute, ordinance, rule or governmental regulation applicable to any of
them (except to the extent that any such violations, in the aggregate, could not
reasonably  be  expected to have a Material Adverse Effect), or result in the
creation  of  an Encumbrance upon any of their properties or assets pursuant  to
any such term.
          (f) The respective representations and warranties of the Company and
each of the Guarantors contained in the Credit Agreement are true and complete
and correct in all material respects (or as to any representation or  warranty
which is expressly qualified by reference to the term "Material Adverse Effect",
then in all respects) as if made on and as of the date of this Amendment, except
that the following changes have occurred with respect to the Schedules attached
to and made part of the Credit Agreement:
               (i) Schedule 1 has been modified as a result of the inclusion of
additional Guarantors and other Consolidated Subsidiaries since the date of  the
Credit Agreement, each additional Guarantor having executed a separate  Joinder
Agreement and also executing this Amendment in such capacity with the Supplement
to  Schedule 1 reflecting the names and  status  of  all  such  additional
Consolidated Subsidiaries attached hereto and made part hereof;
               (ii)  Replacement Schedule 9 and Replacement Schedule 11 attached
to this Amendment are deemed incorporated into  the  Credit  Agreement  and
Supplement to Schedule1 attached to this Amendment is deemed incorporated into
Schedule 1  to the Credit Agreement.
               (iii) Schedule  A  attached hereto  reflects  the  names  of
Guarantors for whom Articles of Dissolution have been filed with the appropriate
office of each such entity's state of formation since the date of  the  Credit
Agreement.
     8. This Amendment shall amend and be deemed incorporated into the Credit
Agreement. To  the  extent  any  provision  of this Amendment  is  expressly
inconsistent with any term or provision of the Credit Agreement, the terms and
provisions of this Amendment shall control.
     9. This Amendment may be executed by one or more of the parties hereto on
any number of separate counterparts, and all of said counterparts taken together
shall be deemed and constitute one and the same instrument.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

     IN WITNESS WHEREOF, the undersigned parties have executed this Amendment on
the date first above written.

                         BORROWER:

                              K. HOVNANIAN ENTERPRISES, INC.

                              By:
                                  ------------------------------------
                              Name:  J. Larry Sorsby
                              Title: Senior Vice President,Treasurer and
                                     Chief Financial Officer

                              Attest:
                                     --------------------------------
                              Name:
                              Title:


                              GUARANTORS:

                              HOVNANIAN ENTERPRISES, INC.

                              By:
                                  ------------------------------------
                              Name:  J. Larry Sorsby
                              Title: Senior Vice President, Treasurer and
                                     Chief Financial Officer


                              Attest:
                                     --------------------------------
                              Name:
                              Title:


ARROW PROPERTIES, INC.

BALLANTRAE DEVELOPMENT CORP.

BALLANTRAE HOME SALES, INC.

DRYER ASSOCIATES, INC.

EASTERN NATIONAL TITLE INSURANCE AGENCY, INC.

EASTERN TITLE AGENCY, INC.

EXC, INC.

FOUNDERS TITLE AGENCY, INC.

GOVERNOR'S ABSTRACT CO., INC.

HOVNANIAN AT TARPON LAKES I, INC.

HOVNANIAN AT WINDSONG EAST BRUNSWICK, INC.

HOVNANIAN DEVELOPMENTS OF FLORIDA, INC.

HOVNANIAN OF PALM BEACH IX, INC.HOVNANIAN OF PALM BEACH XI, INC.

HOVNANIAN OF PALM BEACH, INC.

HOVNANIAN PENNSYLVANIA, INC.

HOVNANIAN PROPERTIES OF ATLANTIC COUNTY, INC.

HOVNANIAN TEXAS, INC.

JERSEY CITY DANFORTH CSO, INC.

K. HOV INTERNATIONAL, INC.

K. HOVNANIAN ACQUISITIONS, INC.

K. HOVNANIAN AT ASHBURN VILLAGE, INC.

K. HOVNANIAN AT ATLANTIC CITY, INC.

K. HOVNANIAN AT BALLANTRAE ESTATES, INC.

K. HOVNANIAN AT BALLANTRAE, INC.

K. HOVNANIAN AT BARRINGTON, INC.

K. HOVNANIAN AT BEDMINSTER II, INC.

K. HOVNANIAN AT BEDMINSTER, INC.

K. HOVNANIAN AT BELMONT, INC.

K. HOVNANIAN AT BERLIN, INC.

K. HOVNANIAN AT BERNARDS II, INC.

K. HOVNANIAN AT BERNARDS III, INC.

K. HOVNANIAN AT BERNARDS IV, INC.

K. HOVNANIAN AT BRANCHBURG I, INC.

K. HOVNANIAN AT BRANCHBURG II, INC.

K. HOVNANIAN AT BRANCHBURG III, INC.

K. HOVNANIAN AT BRANCHBURG IV, INC.

K. HOVNANIAN AT BRIDGEPORT, INC.

K. HOVNANIAN AT BRIDGEWATER II, INC.

K. HOVNANIAN AT BRIDGEWATER III, INC.

K. HOVNANIAN AT BRIDGEWATER IV, INC.

K. HOVNANIAN AT BRIDGEWATER V, INC.

K. HOVNANIAN AT BRIDGEWATER VI, INC.

K. HOVNANIAN AT BULL RUN, INC.

K. HOVNANIAN AT BURLINGTON II, INC.

K. HOVNANIAN AT BURLINGTON III, INC.

K. HOVNANIAN AT BURLINGTON, INC.

K. HOVNANIAN AT CALABRIA, INC.

K. HOVNANIAN AT CAMERON CHASE, INC.

K. HOVNANIAN AT CARMEL DEL MAR, INC.

K. HOVNANIAN AT CARMEL, INC.

K. HOVNANIAN AT CAROLINA COUNTRY CLUB I, INC.

K. HOVNANIAN AT CAROLINA COUNTRY CLUB II, INC.

K. HOVNANIAN AT CAROLINA COUNTRY CLUB III, INC.

K. HOVNANIAN AT CASTILE, INC.

K. HOVNANIAN AT CEDAR GROVE I, INC.

K. HOVNANIAN AT CEDAR GROVE II, INC.

K. HOVNANIAN AT CHAPEL TRAIL, INC.

K. HOVNANIAN AT CHAPPARRAL, INC.

K. HOVNANIAN AT CLARKSTOWN, INC.

K. HOVNANIAN AT COCONUT CREEK, INC.

K. HOVNANIAN AT CRESTLINE, INC.

K. HOVNANIAN AT CRYSTAL SPRINGS, INC.

K. HOVNANIAN AT DOMINION RIDGE, INC.

K. HOVNANIAN AT DONINGUEZ HILLS, INC.

K. HOVNANIAN AT EAST BRUNSWICK V, INC.

K. HOVNANIAN AT EAST BRUNSWICK VI, INC.

K. HOVNANIAN AT EAST BRUNSWICK VII, INC.

K. HOVNANIAN AT EAST BRUNSWICK VIII, INC.

K. HOVNANIAN AT EAST WHITELAND I, INC.

K. HOVNANIAN AT EAST WINDSOR I, INC.

K. HOVNANIAN AT EAST WINDSOR II, INC.

K. HOVNANIAN AT EXETER HILLS, INC.

K. HOVNANIAN AT FAIR LAKES GLEN, INC.

K. HOVNANIAN AT FAIR LAKES, INC.

K. HOVNANIAN AT FAIRWAY VIEWS, INC.

K. HOVNANIAN AT FREEHOLD TOWHSHIP, INC.

K. HOVNANIAN AT FT. MYERS I, INC.

K. HOVNANIAN AT FT. MYERS II, INC.

K. HOVNANIAN AT GREENBROOK, INC.

K. HOVNANIAN AT HACKETTSTOWN, INC.

K. HOVNANIAN AT HALF MOON BAY, INC.

K. HOVNANIAN AT HAMILTON II, INC.

K. HOVNANIAN AT HAMPTON OAKS, INC.

K. HOVNANIAN AT HANOVER, INC.

K. HOVNANIAN AT HERSHEY'S MILL, INC. (a PA Corp)K. HOVNANIAN AT HIGHLAND
  VINEYARDS, INC.

K. HOVNANIAN AT HOLLY CREST, INC.

K. HOVNANIAN AT HOLMDEL TOWNSHIP, INC.

K. HOVNANIAN AT HOPEWELL I, INC.

K. HOVNANIAN AT HOPEWELL III, INC.

K. HOVNANIAN AT HOPEWELL IV, INC.

K. HOVNANIAN AT HOPEWELL V, INC.

K. HOVNANIAN AT HOPEWELL VI, INC.

K. HOVNANIAN AT HORIZON HEIGHTS, INC.

K. HOVNANIAN AT HOWELL TOWNSHIP, INC.

K. HOVNANIAN AT HUNTER ESTATES, INC.

K. HOVNANIAN AT INVERRARY I, INC.

K. HOVNANIAN AT JACKSONVILLE II, INC.

K. HOVNANIAN AT JEFFERSON, INC.

K. HOVNANIAN AT JERSEY CITY I, INC.

K. HOVNANIAN AT JERSEY CITY II, INC.

K. HOVNANIAN AT JERSEY CITY III, INC.

K. HOVNANIAN AT KINGS GRANT I, INC.

K. HOVNANIAN AT KLOCKNER FARMS, INC.

K. HOVNANIAN AT LA TERRAZA, INC.

K. HOVNANIAN AT LA TROVATA, INC.

K. HOVNANIAN AT LAKE CHARLESTON II, INC.

K. HOVNANIAN AT LAKE CHARLESTON, INC.

K. HOVNANIAN AT LAKES OF BOCA RATON, INC.

K. HOVNANIAN AT LAKEWOOD, INC.

K. HOVNANIAN AT LAWRENCE GROVE, INC.

K. HOVNANIAN AT LAWRENCE SQUARE, INC.

K. HOVNANIAN AT LOCUST GROVE I, INC.

K. HOVNANIAN AT LOWER SAUCON, INC.

K. HOVNANIAN AT LOWER SAUCON II, INC.

K. HOVNANIAN AT MAHWAH II, INC.

K. HOVNANIAN AT MAHWAH III, INC.

K. HOVNANIAN AT MAHWAH IV, INC.

K. HOVNANIAN AT MAHWAH IX, INC.

K. HOVNANIAN AT MAHWAH V, INC.

K. HOVNANIAN AT MAHWAH VI, INC.

K. HOVNANIAN AT MAHWAH VII, INC.

K. HOVNANIAN AT MAHWAH VIII, INC.

K. HOVNANIAN AT MANALAPAN, INC.

K. HOVNANIAN AT MARLBORO TOWNSHIP II, INC.

K. HOVNANIAN AT MARLBORO TOWNSHIP III, INC.

K. HOVNANIAN AT MARLBORO TOWNSHIP IV, INC.

K. HOVNANIAN AT MARLBORO TOWNSHIP, INC.

K. HOVNANIAN AT MARTIN DOWNS II, INC.

K. HOVNANIAN AT MEDFORD I, INC.

K. HOVNANIAN AT MERRIMACK II, INC.

K. HOVNANIAN AT MERRIMACK, INC.

K. HOVNANIAN AT MONTCLAIR, INC.

K. HOVNANIAN AT MONTCLAIR, NJ, INC.

K. HOVNANIAN AT MONTGOMERY I, INC.

K. HOVNANIAN AT MONTVILLE II, INC.

K. HOVNANIAN AT MONTVILLE, INC.

K. HOVNANIAN AT NEWARK I, INC.

K. HOVNANIAN AT NEWARK URBAN RENEWAL CORPORATION I, INC.

K. HOVNANIAN AT NEWARK URBAN RENEWAL CORPORATION III, INC.

K. HOVNANIAN AT NEWARK URBAN RENEWAL CORPORATION IV, INC.

K. HOVNANIAN AT NEWARK URBAN RENEWAL CORPORATION V, INC.

K. HOVNANIAN AT NORTH BRUNSWICK II, INC.

K. HOVNANIAN AT NORTH BRUNSWICK III, INC.

K. HOVNANIAN AT NORTH BRUNSWICK IV, INC.

K. HOVNANIAN AT NORTHERN WESTCHESTER, INC.

K. HOVNANIAN AT NORTHLAKE, INC.

K. HOVNANIAN AT OCEAN TOWNSHIP II, INC.

K. HOVNANIAN AT OCEAN TOWNSHIP, INC.

K. HOVNANIAN AT OCEAN WALK, INC.

K. HOVNANIAN AT P.C. HOMES, INC.

K. HOVNANIAN AT P.C. PROPERTIES, INC.

K. HOVNANIAN AT PARK RIDGE, INC.

K. HOVNANIAN AT PASCO I, INC.

K. HOVNANIAN AT PASCO II, INC.

K. HOVNANIAN AT PEEKSKILL, INC.

K. HOVNANIAN AT PEMBROKE SHORES, INC.

K. HOVNANIAN AT PERKIOMEN I, INC.

K. HOVNANIAN AT PERKIOMEN II, INC.

K. HOVNANIAN AT PLAINSBORO I, INC.

K. HOVNANIAN AT PLAINSBORO III, INC.

K. HOVNANIAN AT POLO TRACE, INC.

K. HOVNANIAN AT PORT IMPERIAL NORTH, INC.

K. HOVNANIAN AT PORT IMPERIAL URBAN RENEWAL, INC.

K. HOVNANIAN AT PRESTON, INC.

K. HOVNANIAN AT PRINCETON, INC.

K. HOVNANIAN AT RANCHO CHRISTIANITOS, INC.

K. HOVNANIAN AT RARITAN I, INC.

K. HOVNANIAN AT RESERVOIR RIDGE, INC.

K. HOVNANIAN AT RIVER OAKS, INC.

K. HOVNANIAN AT SAN SEVAINE, INC.

K. HOVNANIAN AT SARATOGA, INC.

K. HOVNANIAN AT SCOTCH PLAINS II, INC.

K. HOVNANIAN AT SENECA CROSSING, INC.

K. HOVNANIAN AT SMITHVILLE II, INC.

K. HOVNANIAN AT SMITHVILLE, INC.

K. HOVNANIAN AT SOMERSET III, INC.

K. HOVNANIAN AT SOMERSET VI, INC.

K. HOVNANIAN AT SOMERSET VIII, INC.

K. HOVNANIAN AT SOUTH BRUNSWICK II, INC.

K. HOVNANIAN AT SOUTH BRUNSWICK III, INC.

K. HOVNANIAN AT SOUTH BRUNSWICK IV, INC.

K. HOVNANIAN AT SOUTH BRUNSWICK V, INC.

K. HOVNANIAN AT SOUTH BRUNSWICK, INC.

K. HOVNANIAN AT SPRING RIDGE, INC.

K. HOVNANIAN AT STONE CANYON, INC.

K. HOVNANIAN AT STONEGATE, INC. (a CA Corporation)

K. HOVNANIAN AT STONEGATE, INC. (a VA Corporation)

K. HOVNANIAN AT STONY POINT, INC.

K. HOVNANIAN AT STUART ROAD, INC.

K. HOVNANIAN AT SUMMERWOOD, INC.

K. HOVNANIAN AT SULLY STATION, INC.

K. HOVNANIAN AT SYCAMORE, INC.

K. HOVNANIAN AT TANNERY HILL, INC.

K. HOVNANIAN AT TARPON LAKES III, INC.

K. HOVNANIAN AT TAUNTON, INC.

K. HOVNANIAN AT THE BLUFF, INC.

K. HOVNANIAN AT THE CEDARS, INC.

K. HOVNANIAN AT THE GLEN, INC.

K. HOVNANIAN AT THE RESERVE AT MEDFORD, INC.

K. HOVNANIAN AT THORNBURY, INC.

K. HOVNANIAN AT TIERRASANTA, INC.

K. HOVNANIAN AT TUXEDO, INC.

K. HOVNANIAN AT UNION TOWNSHIP I, INC.

K. HOVNANIAN AT UPPER FREEHOLD TOWNSHIP I, INC.

K. HOVNANIAN AT UPPER MAKEFIELD I, INC.

K. HOVNANIAN AT UPPER MERION, INC.

K. HOVNANIAN AT VAIL RANCH, INC.

K. HOVNANIAN AT VALLEYBROOK II, INC.

K. HOVNANIAN AT VALLEYBROOK, INC.

K. HOVNANIAN AT WALL TOWNSHIP IV, INC.

K. HOVNANIAN AT WALL TOWNSHIP VI, INC.

K. HOVNANIAN AT WALL TOWNSHIP VII, INC.

K. HOVNANIAN AT WALL TOWNSHIP, INC.

K. HOVNANIAN AT WASHINGTONVILLE, INC.

K. HOVNANIAN AT WAYNE II, INC.

K. HOVNANIAN AT WAYNE III, INC.

K. HOVNANIAN AT WAYNE IV, INC.

K. HOVNANIAN AT WAYNE V, INC.

K. HOVNANIAN AT WAYNE VI, INC.

K. HOVNANIAN AT WAYNE VII, INC.

K. HOVNANIAN AT WAYNE, INC.

K. HOVNANIAN AT WEST ORANGE, INC.

K. HOVNANIAN AT WESTCHESTER, INC.

K. HOVNANIAN AT WINSTON TRAILS II, INC.

K. HOVNANIAN AT WINSTON TRAILS, INC.

K. HOVNANIAN AVIATION, INC.

K. HOVNANIAN COMPANIES AT WILDROSE, INC.

K. HOVNANIAN COMPANIES NORTHEAST, INC.

K. HOVNANIAN COMPANIES OF CALIFORNIA, INC.

K. HOVNANIAN COMPANIES OF CENTRAL JERSEY, INC.

K. HOVNANIAN COMPANIES OF FLORIDA, INC.

K. HOVNANIAN COMPANIES OF MARYLAND, INC.

K. HOVNANIAN COMPANIES OF METRO WASHINGTON, INC.

K. HOVNANIAN COMPANIES OF NEW YORK, INC.

K. HOVNANIAN COMPANIES OF NORTH CAROLINA, INC.

K. HOVNANIAN COMPANIES OF PENNSYLVANIA, INC.

K. HOVNANIAN COMPANIES OF SOUTHERN CALIFORNIA, INC.

K. HOVNANIAN CONSTRUCTION MANAGEMENT, INC.

K. HOVNANIAN DEVELOPMENTS OF CALIFORNIA, INC.

K. HOVNANIAN DEVELOPMENTS OF MARYLAND, INC.

K. HOVNANIAN DEVELOPMENTS OF METRO WASHINGTON, INC.

K. HOVNANIAN DEVELOPMENTS OF NEW JERSEY, INC.

K. HOVNANIAN DEVELOPMENTS OF NEW YORK, INC.

K. HOVNANIAN FLORIDA DIVISION, INC. (f/k/a K. HOVNANIAN TREASURE COAST, INC.)

K. HOVNANIAN INVESTMENT PROPERTIES OF NEW JERSEY, INC.

K. HOVNANIAN INVESTMENT PROPERTIES, INC.

K. HOVNANIAN MARINE, INC.

K. HOVNANIAN MORTGAGE USA, INC.

K. HOVNANIAN PROPERTIES OF EAST BRUNSWICK II, INC.

K. HOVNANIAN PROPERTIES OF FRANKLIN, INC.

K. HOVNANIAN PROPERTIES OF HAMILTON, INC.

K. HOVNANIAN PROPERTIES OF LAKE WORTH, INC.

K. HOVNANIAN PROPERTIES OF NEWARK URBAN RENEWAL CORPORATION, INC.

K. HOVNANIAN PROPERTIES OF NORTH BRUNSWICK I, INC.

K. HOVNANIAN PROPERTIES OF NORTH BRUNSWICK III, INC.

K. HOVNANIAN PROPERTIES OF NORTH BRUNSWICK IV, INC.

K. HOVNANIAN PROPERTIES OF NORTH BRUNSWICK V, INC.

K. HOVNANIAN PROPERTIES OF NORTH CENTER DRIVE, INC.

K. HOVNANIAN PROPERTIES OF PISCATAWAY, INC.

K. HOVNANIAN PROPERTIES OF POMPANO BEACH, INC.

K. HOVNANIAN PROPERTIES OF RED BANK, INC.

K. HOVNANIAN PROPERTIES OF ROUTE 35, INC.

K. HOVNANIAN PROPERTIES OF WALL TOWNSHIP VIII, INC.

K. HOVNANIAN REAL ESTATE INVESTMENT, INC.

K. HOVNANIAN SOUTHEAST FLORIDA, INC.

K. HOVNANIAN SOUTHEAST REGION, INC. (f/k/a K. HOVNANIAN FLORIDA REGION, INC.)K.
  HOVNANIAN'S FOUR SEASONS OF THE PALM BEACHES, INC.

KHC ACQUISITION, INC.

KHIPE, INC.

KINGS GRANT EVESHAM CORP.

LANDARAMA, INC.

MINERVA GROUP, INC.

MOLLY PITCHER CONSTRUCTION CO., INC.

MONTEGO BAY I ACQUISITION CORP., INC.

MONTEGO BAY II ACQUISITION CORP., INC.

NEW ENGLAND COMMUNITY MANAGEMENT CO., INC.

NEW K. HOVNANIAN DEVELOPMENTS OF FLORIDA, INC.

PARTHENON GROUP, INC.

PIKE UTILITIES, INC.

PINE BROOK CO., INC.

RECREATIONAL DEVELOPMENT CORP., INC.

STONEBROOK HOMES, INC.

THE NEW FORTIS CORPORATION

TROPICAL SERVICE BUILDERS, INC.

WESTERN FINANCIAL SERVICES, INC.

                                   By:
                                         ---------------------------------
                                   Name: J. Larry Sorsby
                                   Title: On behalf of, and as Senior
                                          Vice President,Treasurer and Chief
                                          Financial Officer of
                                         each of the foregoing corporations

                                   Attest:
                                            ---------------------------
                                   Name:
                                   Title:


K. HOVNANIAN AT BERKELEY, L.L.C.

K. HOVNANIAN AT BERNARDS V, L.L.C.

K. HOVNANIAN AT BLUE HERON PINES, L.L.C.

K. HOVNANIAN AT CARMEL VILLAGE, L.LC.

K. HOVNANIAN AT CHESTER I, L.L.C.

K. HOVNANIAN AT CLIFTON, L.L.C.

K. HOVNANIAN AT GUTTENBERG, L.L.C.

K. HOVNANIAN AT JACKSON, L.L.C.

K. HOVNANIAN AT JERSEY CITY IV, L.L.C.

K. HOVNANIAN AT KING FARM, L.L.C.

K. HOVNANIAN AT LAKE TERRAPIN, L.L.C.

K. HOVNANIAN AT LAFAYETTE ESTATES, L.L.C.

K. HOVNANIAN AT LAWRENCE V, L.L.C.

K. HOVNANIAN AT LINWOOD, L.L.C.

K. HOVNANIAN AT LOWER SAUCON II, L.L.C.

K. HOVNANIAN AT MANSFIELD I, LLC

K. HOVNANIAN AT MANSFIELD II, LLC

K. HOVNANIAN AT MENIFEE, L.L.C.

K. HOVNANIAN AT MIDDLETOWN, L.L.C.

K. HOVNANIAN AT NORTH BRUNSWICK VI, L.L.C.

K. HOVNANIAN AT NORTHFIELD, L.L.C.

K. HOVNANIAN AT PRICE WILLIAM, L.L.C.

K. HOVNANIAN AT ROWLAND HEIGHTS, L.L.C.

K. HOVNANIAN AT SOUTH AMBOY, L.L.C.

K. HOVNANIAN AT SOUTH BANK, L.L.C.

K. HOVNANIAN AT UPPER FREEHOLD TOWNSHIP II, L.L.C.

K. HOVNANIAN AT WANAQUE, L.L.C.

K. HOVNANIAN AT WAYNE VIII, L.L.C.

K. HOVNANIAN AT WEST WINDSOR, L.L.C.

K. HOVNANIAN AT WINCHESTER, L.L.C.

K. HOVNANIAN CENTRAL ACQUISITIONS, L.L.C.

K. HOVNANIAN NORTH CENTRAL ACQUISITIONS, L.L.C.

K. HOVNANIAN NORTH JERSEY ACQUISITIONS, L.L.C.

K. HOVNANIAN SHORE ACQUISITIONS, L.L.C.

K. HOVNANIAN SOUTH JERSEY ACQUISITION, L.L.C.
K. HOVNANIAN'S FOUR SEASONS, L.L.C.


                                 By:  K. Hovnanian
                                 Developments of New Jersey, Inc., as the sole
                                 member of each of the foregoing limited
                                 liability companies

                                 By:
                                      ---------------------------------
                                 Name:  J. Larry Sorsby
                                 Title: Senior Vice President, Treasurer and
                                        Chief Financial Officer

                                 Attest:
                                          -----------------------------
                                 Name:
                                 Title:


                                 AGENT:

                                 PNC Bank, National Association, as Agent
                                 By:
                                     ----------------------------------
                                 Name:
                                 Title:

                                 BANKS:

                                 PNC Bank, National Association
                                 By:
                                    --------------------------------
                                 Name:
                                 Title:

                                 Bank of America National Trust
                                 and Savings Association

                                 By:
                                  ------------------------------------
                                 Name:
                                 Title:

                                 First Union National Bank

                                 By:
                                  ------------------------------------
                                 Name:
                                 Title:

                                 BankBoston, N.A.
                                 (f/k/a First National Bank of Boston)

                                 By:
                                  ---------------------------------
                                 Name:
                                 Title:

                                 First National Bank of Chicago

                                 By:
                                  ----------------------------------
                                 Name:
                                 Title:

                                 Comerica Bank

                                 By:
                                  -----------------------------------
                                 Name:
                                 Title:

                                 Credit Lyonnais New York Branch

                                 By:
                                  ----------------------------------
                                 Name:
                                 Title:

                                 Guaranty Federal Bank F.S.B.

                                 By:
                                  ----------------------------------
                                 Name:
                                 Title:

                            SUPPLEMENT TO SCHEDULE 1
            Consolidated Subsidiaries of Hovnanian Enterprises, Inc.

                                                                      Type
        Company Name                                                  Code

  (1)K. HOVNANIAN NORTH JERSEY ACQUISITIONS, L.L.C.                    5
         (K. HOVNANIAN AT NORTH JERSEY ACQUISITION, L.L.C.)
  (1)K. HOVNANIAN CENTRAL ACQUISITIONS, L.L.C.                         5
         (K. HOVNANIAN CENTRAL ACQUISITION, L.L.C.)
  (1)K. HOVNANIAN NORTH CENTRAL ACQUISITIONS, L.L.C.                   5
         (K. HOVNANIAN NORTH CENTRAL ACQUISITION, L.L.C.)
  (1)K. HOVNANIAN SHORE ACQUISITIONS, L.L.C.                           5
         (K. HOVNANIAN SHORE ACQUISITION, L.L.C.)
   K. HOVNANIAN SOUTH JERSEY ACQUISITION, L.L.C.                       5

  K. HOVNANIAN AT CHESTER I, L.L.C.                                    5

  K. HOVNANIAN AT WANAQUE, L.L.C.                                      5

  K. HOVNANIAN AT WEST WINDSOR, L.L.C.                                 5

  K. HOVNANIAN AT NORTH BRUNSWICK VI, L.L.C.                           5

  K. HOVNANIAN AT MIDDLETOWN, L.L.C.                                   5

  K. HOVNANIAN AT BERKELEY, L.L.C.                                     5

  K. HOVNANIAN AT BLUE HERON PINES, L.L.C.                             5

  K. HOVNANIAN AT JACKSON, L.L.C.                                      5

  K. HOVNANIAN AT LAWRENCE V, L.L.C.                                   5

  K. HOVNANIAN AT WINCHESTER, L.L.C.                                   5

  K. HOVNANIAN AT KING FARM, L.L.C.                                    5

  K. HOVNANIAN AT PRICE WILLIAM, L.L.C.                                5

  K. HOVNANIAN AT LAKE TERRAPIN, L.L.C.                                5

  K. HOVNANIAN AT MENIFEE, L.L.C.                                      5

  K. HOVNANIAN AT ROWLAND HEIGHTS, L.L.C.                              5

  K. HOVNANIAN AT CARMEL VILLAGE, L.L.C.                               5

  K. HOVNANIAN'S FOUR SEASONS, L.L.C.                                  5

  K. HOVNANIAN AT SOUTH BANK, L.L.C.                                   5

  K. HOVNANIAN AT DONINGUEZ HILLS, INC.                                5

  K. HOVNANIAN AT LOWER SAUCON II, INC.                                5

  K. HOVNANIAN AT SUMMERWOOD, INC.                                     5

  K. HOVNANIAN'S FOUR SEASONS OF THE PALM BEACHES, INC.                5

  K. HOVNANIAN AT BARRINGTON, INC.                                     5

  (2)K. HOVNANIAN PROPERTIES OF LAKE WORTH, INC.                       6

  (2)K. HOVNANIAN PROPERTIES POMPANO BEACH, INC.                       6

  (2)K. HOVNANIAN PROPERTIES OF WALL TOWNSHIP VIII, INC.               6

  (2)K. HOVNANIAN PROPERTIES OF FRANKLIN, INC.                         6

  (2)K. HOVNANIAN PROPERTIES OF HAMILTON, INC.                         6

  (2)K. HOVNANIAN PROPERTIES OF NEWARK URBAN RENEWAL CORPORATION, INC. 6

  (2)K. HOVNANIAN PROPERTIES OF NORTH BRUNSWICK I, INC.                6

  (2)K. HOVNANIAN PROPERTIES OF NORTH BRUNSWICK III, INC.              6

  (2)K. HOVNANIAN PROPERTIES OF NORTH BRUNSWICK IV, INC.               6

  (2)K. HOVNANIAN PROPERTIES OF NORTH BRUNSWICK V, INC.                6

  (2)K. HOVNANIAN PROPERTIES OF NORTH CENTER DRIVE, INC.               6

  (2)K. HOVNANIAN PROPERTIES OF PISCATAWAY, INC.                       6

  (2)K. HOVNANIAN PROPERTIES OF ROUTE 35, INC.                         6

  K. HOVNANIAN AT GUTTENBERG, L.L.C.                                   5

  K. HOVNANIAN AT CLIFTON, L.L.C.                                      5

  K. HOVNANIAN AT JERSEY CITY IV, L.L.C.                               5

  K. HOVNANIAN AT UPPER FREEHOLD TOWNSHIP II, L.L.C.                   5

  K. HOVNANIAN AT LAFAYETTE ESTATES, L.L.C.                            5

  K. HOVNANIAN AT SOUTH AMBOY, L.L.C.                                  5

  K. HOVNANIAN AT LINWOOD, L.L.C.                                      5

  K. HOVNANIAN AT UPPER FREEHOLD TOWHSHIP III, L.L.C.                  5


(1) Noted entities are shown by corrected names.  These noted entities executed
the Amended and Restated Credit Agreement using the incorrect names which are
shown in parenthesis above.  Each entity has executed and delivered a Joinder
Agreement using their correct name.

(2) Notes entities were formerly Income Producing Property Subsidiaries whose
type has changed to Operating Property Subsidiaries.  Each such entity has
submitted a Joinder Agreement to become a Guarantor of the Credit Facility.

Type Codes:

1) The Borrower
2) A Finance Subsidiary
3) A Mortgage Subsidiary
4) An Income Producing Property Subsidiary
5) A Homebuilding Subsidiary
6) An Operating Property Subsidiary
7) Other Corporate Subsidiary
8) KHL, Inc.

                             REPLACEMENT SCHEDULE 9
                         K. Hovnanian Enterprises, Inc.
                      Revolving Credit Commitments of Banks


PNC Bank National Association    $50,000,000   18.87%   $10,000,000   21.82%
Two Tower Center - 18th Floor
East Brunswick, New Jersey 08816

Bank of America, NT & SA         $60,000,000     22.64%     N/A  21.82%
Commercial Real Estate Services
12th Floor, 231 South LaSalle
Chicago, Illinois  60697

First Union National Bank        $30,000,000     11.32%     N/A  10.91%
FC7-200-1-22
CN 1
Pennington, New Jersey 08034

First National Bank of Chicago   $25,000,000      9.43%     N/A  9.09%
One First National Plaza
Suite 0151
Chicago, Illinois 60670

First National Bank of Boston    $25,000,000      9.43%     N/A  9.09%
115 Perimeter Center Place, N.E.
Suite 500
Atlanta, Georgia 30346

Comerica Bank                    $25,000,000      9.43%     N/A  9.09%
500 Woodward Avenue
Detroit, Michigan  48226

Credit Lyonnais                  $25,000,000      9.43%     N/A  9.09%
1301 Avenue of the Americas
18th Floor
New York, New York  10019

Guaranty Federal Bank, F.S.B.    $25,000,000      9.43%     N/A  9.09%
8333 Douglas Avenue
Dallas, Texas  75225
                                 ------------            ------------
                                 $265,000,000            $10,000,000

The Revolving Credit Commitment Percentages and the Facility Percentages shown
above are approximate figures.  Each respective Bank's Revolving Credit
Commitment Percentage shall be equal to such Bank's Revolving Credit Commitment
divided by the aggregate amount of the Revolving Credit Commitments of all
Banks.  Each Bank's Facility Percentage shall be equal to such Bank's Facility
Commitment divided by the aggregate amount of the Facility Commitments of all
Banks.

                             REPLACEMENT SCHEDULE 11
                                  (Page 1 of 1)
                         K. Hovnanian Enterprises, Inc.
                       Letter of Credit Limit of Each Bank


BANK NAME                                  MAXIMUM AMOUNT OF
                                           LETTERS OF CREDIT


PNC Bank, National Association              $20,000,000

Bank of America, National Trust and Savings
     Association                            $40,000,000

First Union National Bank                    $5,000,000

The First National Bank of Chicago                   $0

First National Bank of Boston               $20,000,000

Comerica Bank                                        $0

Credit Lyonnais                                      $0

Guaranty Federal Bank, F.S.B.                        $0