Note 18

9 Months Ended

Jul. 31, 2011

Equity Method Investments Disclosure [Text Block]

18.  We enter into homebuilding and land development joint ventures from time to time as a means of accessing lot positions, expanding our market opportunities, establishing strategic alliances, managing our risk profile, leveraging our capital base and enhancing returns on capital.  Our homebuilding joint ventures are generally entered into with third-party investors to develop land and construct homes that are sold directly to third-party homebuyers.  Our land development joint ventures include those entered into with developers and other homebuilders as well as financial investors to develop finished lots for sale to the joint venture’s members or other third parties.

During the three months ended January 31, 2011, we entered into a joint venture agreement to acquire a portfolio of homebuilding projects, including land we previously owned. We sold the land we owned to the joint venture for net proceeds of $36.1 million, which was equal to our book value in the land at that time, and recorded an investment in unconsolidated joint ventures of $19.7 million for our interest in the venture.  During the three months ended April 30, 2011 we expanded this joint venture, selling additional land we owned to the joint venture for net proceeds of $27.2 million, which was equal to our book value in the land at that time, and recorded an additional investment of $11.4 million for our interest in the venture.  Separately, during the three months ended January 31, 2011, our partner in a land development joint venture transferred its interest in the venture to us.  The consolidation resulted in increases in inventory and non-recourse land mortgages of $9.5 million and $18.5 million, respectively, and a decrease in other liabilities of $9.0 million as of July 31, 2011.

The tables set forth below summarize the combined financial information related to our unconsolidated homebuilding and land development joint ventures that are accounted for under the equity method.

(Dollars in thousands)	As of July 31, 2011
	Homebuilding		Land Development		Total
Assets:
Cash and cash equivalents	$	29,645	$	751	$	30,396
Inventories		327,475		14,736		342,211
Other assets		21,391		1		21,392
Total assets	$	378,511	$	15,488	$	393,999
Liabilities and equity:
Accounts payable and accrued   liabilities	$	26,830	$	12,143	$	38,973
Notes payable		212,552		21		212,573
Total liabilities		239,382		12,164		251,546
Equity of:
Hovnanian Enterprises, Inc.		55,234		1,372		56,606
Others		83,895		1,952		85,847
Total equity		139,129		3,324		142,453
Total liabilities and equity	$	378,511	$	15,488	$	393,999
Debt to capitalization ratio		60%		1%		60%

(Dollars in thousands)	As of October 31, 2010
	Homebuilding		Land Development		Total
Assets:
Cash and cash equivalents	$	17,538	$	161	$	17,699
Inventories		247,790		73,864		321,654
Other assets		20,321				20,321
Total assets	$	285,649	$	74,025	$	359,674
Liabilities and equity:
Accounts payable and accrued   liabilities	$	19,076	$	17,266	$	36,342
Notes payable		159,715		36,791		196,506
Total liabilities		178,791		54,057		232,848
Equity of:
Hovnanian Enterprises, Inc.		29,208		2,510		31,718
Others		77,650		17,458		95,108
Total equity		106,858		19,968		126,826
Total liabilities and equity	$	285,649	$	74,025	$	359,674
Debt to capitalization ratio		60%		65%		61%

As of July 31, 2011 and October 31, 2010, we had advances outstanding of approximately $13.1 million and $13.5 million, respectively, to these unconsolidated joint ventures, which were included in the “Accounts payable and accrued liabilities” balances in the table above.  On our Condensed Consolidated Balance Sheets our “Investments in and advances to unconsolidated joint ventures” amounted to $62.5 million and $38.0 million at July 31, 2011 and October 31, 2010, respectively.  In some cases, our net investment in these joint ventures is less than our proportionate share of the equity reflected in the table above because of the differences between asset impairments recorded against our joint venture investments and any impairments recorded in the applicable joint venture.  During the first nine months of fiscal 2011 and 2010, respectively, there were no impairments recorded by any of our unconsolidated joint ventures and we did not write down any joint venture investments based on our determination that none of the investments in our joint ventures sustained an other than temporary impairment during those periods.

	For the Three Months Ended July 31, 2011
(In thousands)	Homebuilding			Land Development			Total
Revenues	$	57,781		$	3,249		$	61,030
Cost of sales and expenses		(58,629	)		(3,076	)		(61,705	)
Joint venture net (loss)  income		(848	)		173			(675	)
Our share of net (loss) income	$	(2,246	)	$	139		$	(2,107	)

	For the Three Months Ended July 31, 2010
(In thousands)	Homebuilding			Land Development			Total
Revenues	$	45,729		$	2,346		$	48,075
Cost of sales and expenses		(49,754	)		(2,490	)		(52,244	)
Joint venture net loss	$	(4,025	)	$	(144	)	$	(4,169	)
Our share of net loss	$	(553	)	$	(83	)	$	(636	)

	For the Nine Months Ended July 31, 2011
(In thousands)	Homebuilding			Land Development			Total
Revenues	$	110,302		$	9,888		$	120,190
Cost of sales and expenses		(119,057	)		(9,215	)		(128,272	)
Joint venture net (loss) income	$	(8,755	)	$	673		$	(8,082	)
Our share of net (loss) income	$	(6,175	)	$	419		$	(5,756	)

	For the Nine Months Ended July 31, 2010
(In thousands)	Homebuilding			Land Development			Total
Revenues	$	101,410		$	12,606		$	114,016
Cost of sales and expenses		(101,163	)		(18,641	)		(119,804	)
Joint venture net income (loss)	$	247		$	(6,035	)	$	(5,788	)
Our share of net loss	$	(34	)	$	(494	)	$	(528	)

“(Loss) income from unconsolidated joint ventures” is reflected as a separate line in the accompanying Condensed Consolidated Statements of Operations and reflects our proportionate share of the income or loss of these unconsolidated homebuilding and land development joint ventures.  The difference between our share of the income or loss from these unconsolidated joint ventures disclosed in the tables above for the three and nine months ended July 31, 2011 and July 31, 2010 compared to the Condensed Consolidated Statements of Operations is due primarily to one joint venture that had net income for which we do not get any share of the profit because of the cumulative equity position of the joint venture, the reclassification of the intercompany portion of management fee income from certain joint ventures and the deferral of income for lots purchased by us from certain joint ventures.  Our ownership interests in the joint ventures vary but our voting interests are generally 50% or less.  In determining whether or not we must consolidate joint ventures where we are the manager of the joint venture, we assess whether the other partners have specific rights to overcome the presumption of control by us as the manager of the joint venture.  In most cases, the presumption is overcome because the joint venture agreements require that both partners agree on establishing the operating and capital decisions of the partnership, including budgets in the ordinary course of business.

Typically, our unconsolidated joint ventures obtain separate project specific mortgage financing. The amount of financing was targeted to be no more than 50% of the joint venture’s total assets. For our more recent joint ventures obtaining financing has become challenging, therefore, some of our joint ventures are capitalized only with equity. However, for our most recent joint venture a portion of our partner's capital contribution was in the form of mortgage financing. Including the impact of impairments recorded by the joint ventures, the average debt to capitalization ratio of all our joint ventures is currently 60%.  Any joint venture financing is on a nonrecourse basis, with guarantees from us limited only to completion of development, environmental indemnification, standard warranty and representation against fraud, misrepresentation and other similar actions, including a voluntary bankruptcy filing.  In some instances, the joint venture entity is considered a variable interest entity under ASC 810-10 "Consolidation – Overall" due to the returns being capped to the equity holders; however, in these instances, we are not the primary beneficiary, and therefore we do not consolidate these entities.