Good morning and thank you for joining us today for Hovnanian Enterprises’ fiscal 2007 second quarter earnings conference call. By now you should have all received a copy of the earnings press release. However, if anyone is missing a copy and would like one, please contact Donna Roberts at 732-383-2200. We will send you a copy of the release and ensure that you are on the company’s distribution list. There will be a replay of today’s call. This telephone replay will be available after the completion of the call and run for one week. The replay can be accessed by dialing 888-286-8010, passcode 44220838. Again, the replay number is 888-286-8010, passcode 44220838. An archive of the webcast slides will be available for 12 months. This conference is being recorded for rebroadcast and all participants are currently in a listen only mode. Management will make some opening remarks about second quarter results and then open up the line for questions. The company will also be webcasting a slide presentation along with the opening comments from management. The slides are available on the investors page of the company’s website at www.khov.com. Those listeners who would like to follow along should log on to the website at this time. Before we begin, I would like to remind everyone that the cautionary language about forward-looking statements contained in the press release also applies to any comments made during this conference call and to the information in the slide presentation. I would now like to turn the call over to the host, Ara Hovnanian, President and Chief Executive Officer of Hovnanian Enterprises. Ara, please go ahead.

Thank you very much. I think our first order of business is to make sure our next operator can pronounce the name fastly and properly. Good morning and thank you for participating in today’s call to review the results of our second quarter ended April. Joining me today from the company are Larry Sorsby, Executive Vice President and CFO; Paul Buchanan, Senior Vice President and Corporate Controller; Brad O’Connor, Vice President and Associate Corporate Controller; and Jeff O’Keefe, Director of Investor Relations. Overall, the housing market remains very challenging. If you turn to slide one, you see that for the second quarter of ’07, we reported total revenues of $1.1 billion, down quite a bit from last year and a significantly lower gross margin of 16.3%. Our pretax loss prior to land-related charges was $7 million and we took a $34 million pretax charge for land-related items. This netted out to a loss for the second quarter of $0.49 per fully diluted common share. Before land-related charges, our loss was $0.12 per fully diluted share. As you may know, adding insult to injury, when you report losses you utilize the basic number of shares versus the fully diluted shares in calculating earnings per share. On an operating basis, these results are moderately better than the initial indication we gave on March 4th but the amount of land-related impairment and walk-away charges was a bit higher than we had expected, the net result being about the same. We delivered 3,150 homes on a consolidated basis. That’s down 31% compared to the delivery of 4,555 homes in the second quarter of ’06. These numbers exclude home deliveries in our unconsolidated joint ventures, compared with the 612 homes in the second quarter of fiscal ’06. It is frustrating to report these poor operating…

Thank you, Ara. I’ll walk through some specifics for the second quarter and first half of 2007, as well as provide you with our delivery and revenue projections for the remainder of this year. If you’ll turn to slide 7, it shows our updated projections for deliveries and revenues for ’07. As we state in our press release, due to uncertain market conditions, we have pulled our previously issued earnings guidance and we are not issuing new earnings guidance at this time. However, we expect total deliveries to be between 13,200 to 14,200 homes, excluding deliveries from unconsolidated joint ventures. This would result in total revenues between $4.5 billion and $5 billion. The incentives and concessions we have offered have driven our margins below normal levels. Slide 8 displays our homebuilding gross margins on an annual basis for the past several years. In 2000 and 2001, before the rapid price appreciation we saw in many markets, we posted more normalized gross margins of 20%. We posted abnormally high gross margins in ’03, ’04, and ’05 of at least 25.5%, and in the last two quarters, which are seen on the far right of the graph, we have posted abnormally low gross margins. Homebuilding gross margin was 16.3% for the second quarter, below the 18% we posted in the first quarter of ’07. This reduction is due to the difficult operating environment that we are experiencing throughout many of our markets, which has forced us to lower home prices through increased use of concessions and incentives. Also impacting this gross margin is our Fort Myers Cape Coral operations, which have continued to weaken and is operating pre-impairment at a negative gross margin level and post-impairment at roughly a break-even gross margin level, based at current sales prices. Given these lower-than-normal levels…

Thanks, Larry. I wish I could give you better news but unfortunately, it’s a challenging market. I am providing you with as frank and comprehensive an analysis of current conditions as possible. The levels of existing home inventory, some of which are new homes that have never been occupied, is just too high. We need to see this inventory clear the market before we can expect to realize sustainable year-over-year increases in net contracts and positive momentum in home pricing. We also need a more positive buyer psyche. We thought we had seen signs of stabilization at the end of the first quarter but our second quarter ended with weak trends in net contracts, as the sub-prime issues became the focus of the market. So it seems that we’ve got more work to do. On the positive side, first the economy is still creating jobs -- not as many as it had been, but jobs are being created, unlike the past downturns we’ve had to deal with where there were job losses. Second, our interest rates are near record lows by historical standards, again unlike what we had to deal with in ’81 or ’91. Third, the recent price corrections, while painful, when combined with the current low rates have dramatically helped affordability, which was part of the problem that caused the slowdown in the first place. And fourth, permits have remained constrained relative to past cycles in the highly regulated markets. As a company, we are almost 50 years old and have successfully operated through numerous cycles. Although this downturn is a little different than what we have experienced in the past, we do know how to handle it -- we focus on balance sheet and cash flow and make the corrections in the field as we need to week by week. As we get further into the correction, financially sensible opportunities in land and companies will arise that will help propel the growth and profits that always follow these market corrections, for those that have the capital to take advantage of the opportunities. The market will soon play right into our core strengths -- land and company acquisitions. We plan to prosper after this correction as we have in all corrections in the past. The long-term demand for housing is stronger than ever and we know we just have to hunker down and weather the current period to prepare for the inevitable upturn. With that, I conclude my comments for today and I will be pleased to open up the floor for questions.

(Operator Instructions) Your first question is from the line of Stephen Kim of Citigroup.

Thanks, guys. Two questions for you; first of all, could you talk about your inventory? I know that you guys provide -- I think you gave $3.6 billion in sold and unsold homes and lot development. I was hoping you might be able to break out or give some sense as to what the land portion embedded in that $3.6 billion was.

We don’t provide that level of detail, Stephen.

Is that something you think you might -- forget that. Someone’s going to count that as my second question. I wish you would.

Duly noted. We understand.

Okay, good. Second question related to your cash flow. I was wondering whether I could get the components, operating cash, cash from investments, cash from financing.

The cash flow we are referring to are before financing. It is just purely from operations.

I’m not talking about the guidance figures. I’m talking about just simply, do you have the components at the end of the second quarter?

We’ll let Brad answer that. Brad O’Connor: If you want to tie right to what’s going to be in the 10-Q, what you’re looking for is cash flow from operations, cash flow from investing activities, and then exclude or subtract the change in mortgage notes receivable line that’s in the operating section of the cash flow statement.

Got it. Great, thanks.

Your next question is from the line of Michael Rehaut of JP Morgan.

Thanks. Good morning. The first question I have is I was wondering if you could describe a little bit more in terms of the incentives that you saw that you mentioned you had to increase during the quarter, and perhaps where you were on an average in terms of percent of sales price of home at the beginning of the quarter and where you ended toward the end of the quarter. And then I have a follow-up.

First of all, as you know, it is extremely situationally isolated. I would say in the most recent quarter we certainly saw a broader use of incentives in the Southern California inland empire market, Riverside and San Bernardino counties, and also in the Sacramento market. Interestingly enough, along the coastal Southern California area, we really did not change our incentives at all. That was the market that slowed down first and that’s showing a little more sign of stability. The Riverside/San Bernardino area slowed down later and that is still going through more of a correction. To give you an idea on the magnitude in those areas, certainly we’ve seen 5% concession increases, about $20,000 let’s say, on a $400,000 house. That’s just a typical example. They are all over the place depending on the pricing. I guess the best way to answer it is I can’t give a uniform answer. They are very different in different parts of the market. Obviously in the Texas markets, as you know, those have been stronger. We haven’t had to resort to concessions, but certainly there are other parts where we have and the example could be anywhere from a few thousand dollars to $50,000 on higher end homes.

Thanks very much, Ara, for that detail. The second question is related and is given that you have seen this increase in incentives and a certain weakening of prices during the quarter, I guess I was surprised that you didn’t take more in terms of land impairments of only $34 million. First, if you could just fine-tune if that $34 million was all land impairments or if there was some option walk-aways, but what was the process in terms of -- I assume that you determine those charges at the end of the quarter. You saw the prices weakening substantially, and maybe you could give us some insight as to why there weren’t a larger level of charges, or is that something that we’re just going to have to wait and see and could kind of hit us in a larger degree next quarter.

First of all, unfortunately, as you know, we have taken substantial land impairments already. We have tried to do a good job of making sure we cover communities that were on the cusp as well, but it is something we have to do regularly. As I did mention as well, not every geographic area was affected, so we just have to look community by community, and we’ll continue to do that on a regular basis. I would say if the market continues as we have seen in the first few weeks of May, then it is likely we will have additional impairments, but frankly the analysis is significant. It takes some time and we’ll be spending a lot of time this quarter analyzing if there are additional sites that warrant the impairments. At this stage, I wouldn’t anticipate the kind of impairment levels that we did in the fourth quarter of ’06 but short of saying that I don’t anticipate them of that magnitude, I’ll say we haven’t completed the analysis and it will be ongoing. The other part of your question is part of the charges did have to do with walk-aways. Brad, would you happen to have that number at your fingertips? Brad O’Connor: It was $5 million of the number was walk-aways.

$5 million in walk-aways, about $29 in impairments.

And where are those impairments, largely?

They were fairly spread out. Some in California, some on the east coast -- they were fairly spread out. Minneapolis I think had one.

Great. Thanks very much.

Your next question is from the line of Carl Reichardt of Wachovia Securities.

Good morning. Just one question, actually; when you’re looking at your community count for year-end ’07, Larry, can you tell me what you’re expecting to add and the number of communities you are expecting to close to get to your year-end community count?

We haven’t refreshed the year-end community count. That would be the first point that I would make. We just said it was going to be less than what we have previously told you last quarter, so we are just not prepared to give any detail on that.

Is it your sense that -- is that a function of a slowdown in the number of communities you expect to close, or a slowdown in the number that you expect to open?

Well, it is probably a combination of all of the above in order to get to a total, so it is being driven up by us not closing them as rapidly and driven down by not opening some. So it is a combination, Carl.

Okay. Thanks.

Your next question is from the line of Daniel Oppenheim of Banc of America.

Thanks very much. I was wondering, as you talk about managing in a long-term slower environment but working down inventory and generating cash flow, that seems to suggest much more of a focus on absorption. Can you talk about what your goals are for absorption relative to what you are seeing in terms of absorption right now?

Absorption as you know, Dan, is a very different in different parts of the market. To give you an example, in northern California in Sacramento, in the very good parts of the market let’s say in ’05, a typical community in that geography was absorbing six to seven homes per month. Things have slowed down to the point of -- and those that have got some good absorption, let’s say two homes per month, we’d probably like to see that tweaked up to three homes per month, as an example. We don’t expect to have absorption get back to the pace of ’05. We think that was abnormally high but we do want in many cases, not all cases but in many cases, we would rather see the absorption go a little higher than we are talking about now. So in some communities where it is two, we would like to get it to three. In others where it is four, it may be fine and yet other communities, if it is five we may want to get it to six. In some cases, frankly, we had hardly any absorption and we’ve got to do more price reductions to start getting on the radar screen in absorption. So it’s really all over the place, but in general, we are not just shifting the pendulum a little more towards absorption and worrying a little less about margin.

Thanks very much. I guess a quick follow-up; in terms of thinking about that, where you are looking to increase the absorption there, have you started to adjust -- with that new tactic, was that something you started in May? Is that something that is starting right now?

It’s been a gradual process. I would suspect we are going to gradually try to continue to increase that.

Last question, do you worry about fighting for a larger share of a smaller pie with other builders that I think there is generally a focus on absorption from many of the builders --

I wouldn’t say that we’re fighting for market share per se, Dan. It’s that what we do is we budget based on recent sales trends and then we try to, anywhere that we’ve got communities that aren’t meeting their current budget, they’ve got to take action, whether it means step up the sales and marketing effort or change the sales people or increase incentives. We just want to keep on track. We’re budgeting what I would call a 10-year low absorption paces and we just don’t want to fall to a 100-year low absorption paces. We just want to keep some absorption and keep the blood flowing.

Thanks very much.

Sure. With all of them, by the way, it’s not fire sale prices, get rid of it at any price. We are really looking at our inventory by category and situationally. If it is a spec home which is finished, and as Larry mentioned our spec home level is only slightly higher than our 10-year average but if it is finished, chances are we will be a little more aggressive. If it is a developed land scenario, we’ll be aggressive but not as aggressive. If it is land that we haven’t developed, then in some cases we may not want to be very aggressive at all and we may be better off postponing the community. Basically, we do an analysis on what kind of land investment recovery can we get. If it gets to the point where we have to get concessions so low that we’re just not getting enough return of the dollars we have invested, then we are better off postponing the community and just waiting for the market to clear a little bit. In some areas in Southern Florida, in Palm Beach County, in those places we’re better off letting the market clear a little bit because there’s just so much overhang that it’s not worth chasing the concessions to move the inventory. It is not a one-size-fits-all strategy right now. We have to look at every situation and really fight the market tactically.

Your next question is from the line of Lee Brading of Wachovia Securities.

You mentioned earlier that the bulk sale in Fort Myers, I know you probably don’t want to say specifically who’s buying, but just on a broad standpoint across your market, who is looking to buy? Are you seeing developers, private builders, some of the other big production guys?

I would say in general it is not the big public, it’s not really developers. I think Fort Myers is kind of a special situation. I would call it more a investor/speculator than anything else in that particular case. But for the most part, there’s not many land sellers that are adjusting the price of land to today’s market realities, and therefore there’s a bunch of buyers of land out there.

There is just not transaction activity. The land sale market is just really slowed to a complete trickle, with very few buyers of any type out there, and that’s part of the reason why you do see many home builders resorting to selling spec homes, because it’s really a way of liquidating the land portfolio. It’s easier to sell land by plopping a house on it than it is to sell land, because there are just not many buyers out there.

That’s helpful. And then, on the sub-prime comment, that it’s only 3% exposure in Q2, I imagine it’s a combination of customers not showing up and the tighter lending standards as well. Could you give some examples or details on how you have tightened your standards? I did see the FICO scores were up. Is it there or is it a few different items that you are tweaking?

It is really an industry-wide -- mortgage industry-wide tightening of criteria. We did not make these loans and hold them. We underwrote them to the criteria that the end buyer of that loan dictated. What’s really happened is that FICO scores requirements have increased in order to qualify for some of the sub-prime and therefore it has just taken the bottom of the pyramid out of the arena of being able to qualify for a mortgage because they don’t have a high enough credit score. So that’s really what’s happening.

Could you quantify how much you’ve seen it increase? For example, the FICO scores?

I think it was -- what was it, 60 points? 40 to 60 points -- I forget what the exact tightening was but it was quite significant in terms of credit worthiness increased substantially.

That’s helpful. Thanks.

Your next question is from the line of Joel Locker of FBN Securities.

Just was wondering about your capital investment in land options. I just noticed it’s gone from $362 million to $392 million in the last six months. I’m just wondering if you could elaborate on that increase in investment.

I don’t have that number off the top of my head but I would suspect some of them -- I did mention in some cases we had walked away from options, so you saw the number go down, only to find that after the seller tried to market it to others had no success and came back to us at substantially reduced option prices. And then we did have to put up another deposit but on much more improved terms.

I think the other thing that -- it is not just land options. That category is land and land options, so it is certain inactive communities that we now own that are also in that category. My suspicion is although there may be some minor impact from increase in the deposit that probably though, I’ve not done the analysis, probably the bulk of it is a community or two that is just inactive that’s in that category that we took down.

And just on the impairment reversals, how many did you have this quarter and what do you expect for the rest of fiscal ’07 and fiscal ’08?

You cannot really project impairments, so --

No, impairment reversals. I’m saying you’ve impaired about $200 million worth of land owned. How many of that will go through the income statement in the next six quarters and how many went through in the second quarter?

Brad, do you have it? Go ahead. Brad O’Connor: For the second quarter, it was roughly $13 million, and for the six months it was $27 million, so it’s been running $13 million to $14 million a quarter. I don’t have a projection though because we don’t get the projection that way.

We wouldn’t give it to him if we had it, so --

Right. All right. Thanks a lot.

You have a follow-up from the line of Stephen Kim of Citigroup.

You guys made mention of the land sale that you made in Fort Myers. I think you indicated that you took a slight loss on it.

Steve, just for clarification, we just entered a land contract. The sale hasn’t been consummated yet. We anticipate that in the fourth quarter if all goes well, but it is simply an option contract at this stage.

Okay, that was the -- because you had sort of talked about two halves to the land sale, so I was getting a little confused there. I thought you --

Let me try to clarify. There are two interested parties. One that’s an interested party in the landing corp, Cape Coral. That one is actually a signed contract but it is still at the investigation period, although they have a substantial deposit. The other one I believe is in Leheigh Acres in the area, and that’s in active negotiation but not yet a signed contract. But neither of those transactions have obviously closed yet.

Right, but you have taken impairments, you had said I thought, on both of them?

We did. We thought it would be most prudent to impair both of them, both of the areas as though they were going to be sold in bulk. If you were going to build through them in theory, the impairment would not be triggered and then we reserve sufficiently. But we did not reserve for a bulk sale.

I see. Okay, got it. And in terms of -- but you said -- I think that you had indicated that the price was slightly below your carrying basis?

Yes, that’s right.

Okay, and had that basis been reduced since the time you initially entered in -- since you initially had taken ownership of that land?

Substantially.

I’m sorry?

Substantially.

That’s what I thought. Could you give us a sense, or maybe what magnitude it was lower than what you had initially paid?

Well, we did not buy all of that land in one transaction. These are, if you remember, scattered lots in that area so they were literally bought in small increments on a regular basis. To give you an idea on how significantly that market corrected, at the peak lot transactions happened in one of the areas at about $80,000 a piece. The market continued to come all the way down. We wrote it down, and not all of ours, by the way, was purchased at $85,000 but that was where it was at the peak. We wrote down the values to the low 20s, and I think the contract amount off the top of my head came in just slightly below that level.

Thank you. That’s what I was looking for. Thanks a lot.

Your next question is from the line of Robert Manowitz of RBS Greenwich Capital.

Good morning. I just wanted to go back to your comments on your covenants and make sure I fully understand your plans here and what the underlying message was. I guess what I interpreted was that you expect that the two times coverage ratio could be challenging in the near-term but you are comfortable that the leverage trigger won’t be met. Is that kind of what you were trying to tell us?

We don’t have a straight interest coverage debt. I never mentioned two times for anything with respect to our bank revolver, but the point is as long as our leverage does not increase significantly from where it is now, we don’t have to deal with an interest coverage test in our revolver agreement. We're going to certainly do everything in our power not only to not let the leverage go up, but to actually decrease it in order to provide even a larger cushion, so we just have a unique covenant with respect to the way the interest coverage covenant works in our bank revolver.

Understood. That ratio is not two times is what you're telling me?

I don't remember precisely what it is.

As a follow-up to that then, does it make sense to give yourself some incremental wiggle room at this point?

We agree. We're not going to give ourselves wiggle room by going back to loosen the covenants. We think we're in good shape. We would rather give ourselves the wiggle room, if you will, by reducing our inventories further and focusing even more on cash flow.

Great. That leads me into my next question, which ties to your comments on the absorption versus margin shift that is now starting to take place. How should we think about your gross margins and your backlog today versus the gross margins that we saw in your income statement in the second quarter of this year, obviously excluding the land charges?

That's a good way to try to figure out if we'll give you a projection, and we're just not comfortable giving all of the uncertainties that we're faced with in the individual markets of really giving you clarity or projections on margins at this point.

Your next question is from Justin Speer - Credit Suisse.

Good morning, gentlemen. From a higher level, have you seen competitors continue the restraint on starts across their markets here recently, be it public or private?

Well, it really depends. What we have seen is there are some builders whose strategy is that they will start a group of spec homes and as soon as they sell those spec homes in a community they will start another batch of spec homes, sell those and start another batch. I think they are acting in a disciplined fashion in that they are not saying we're starting ten homes a month no matter what; that would be dangerous, because that could cause a rapid build-up of inventory. We're not seeing in the new home area at our competitors a growth in that inventory, but we certainly are seeing builders that are continually starting new specs as they sell the ones they have on hand.

So do you expect potentially this may be or lead to a catalyst that will result in maybe prices coming down further?

No. I think what Ara is saying is that the new home builders in the aggregate are being prudent and disciplined and in fact controlling the inventory level of unsold homes at very reasonable levels. No one is building up a lot of spec inventory. Frankly, the concern on inventory levels is more pointed, frankly, at the used home market. That's where we see the problem of inventories much more so than we do on the new home front.

Unfortunately, some of the MLS listings are not used homes in a traditional sense. Some are still investor purchases of brand new homes.

What will be the catalyst? Do you think there's a certain level of pricing that will get the buyer motivated, do you think?

It really changes. Back in December, January, and February, even though that was not the hot time of the marketplace, it just felt like the buyer’s psychology was shifting. There was not a big change in supplier inventory, but the psychology was shifting and people were finally starting to think, well, the prices have come down enough, this may be the time to get into the market. Prices were starting to stabilize. Just about then, the subprime issues really came out and that changed the dynamics again. In a low activity market, it doesn't take a lot to throw it slightly off of equilibrium. I can’t say that there is a set point. It just changes. We had reached that set point and then there was a new factor into the market that modified it. Now, the good news is there is still job growth, interest rates are still good. A lot of the issue is psychological. The good news about that -- well I mean, part of the issue is inventory overhang; part of it is the psychological attitude of buyers. The good news about that psychology is just like we saw it shifting fairly quickly in December/January/February, it could shift back again to a more positive mood. This is what's different and unusual is this is not a slowdown like we had to deal with in ‘81 and ‘82 or ‘91 and ‘92 where you had to hope that employment grew and you actually had jobs and people were not being laid off in masses as they were. That's not the situation here. We have job growth, the economy is decent, a little slower but decent, so we have just got this two-pronged issue of a little excess inventory both in MLS and new homes, and buyer psychology. The buyer psychology has been rattled and it's been rattled recently by the whole subprime and foreclosure news that we see in the media every single day. You can't open up the paper any day without an article about it. It affects the psyche.

People are delaying their home purchase decisions because of the uncertainty in the markets. I think there's actually some pent-up demand out there for whatever the catalyst ends up being, whether it's more positive press or some demand that get publicized in a particular set of communities or that people become convinced that prices aren't going to be lowering further. Whatever the catalyst ends up being, I think once that occurs there's some pent-up demand. I'm not suggesting that I think there's going to be a run on housing or that we'll have long lines of people or anything. I just think there's solid demand out there that is just waiting for the right opportunity and the right signal to come back into the market.

Your next question is a follow-up from the line of Michael Rehaut – JP Morgan.

Larry, you had mentioned earlier some detail on the JV debt-to-cap and some details on the debt. I was wondering if you could further go over in what instances are you on the hook, maybe not as much from the environmental completion but overall the maintenance guarantees? What would trigger that?

We never provide a maintenance guarantee to where we're injecting equity. We don't do that.

So what are the instances where you do have certain completion guarantees and how would they be triggered?

Well the completion guarantee is if we decide we're not moving forward with the project with us and our partner, we agree to complete the project, provided that the lender gives us the money to complete it and pay the overheads. That's what the completion guarantee is.

To the extent that you're familiar with it -- and I know that a lot of these JV agreements are different -- but is there any detail you can give on how your JVs are different from the whole Technical Olympic troubles?

I'm just not familiar enough with Technical Olympic to comment on it.

What I can tell you on that is number one, the one huge area of difference is in leverage. I believe the leverage was 80% debt-to-cap. Ours is 39% debt-to-cap, about half. That is the fundamental difference in the leverage and that's what really separates us. We specifically went out to say we're going to manage our joint ventures on a low risk profile. This is not a way -- well, I'll leave it at that comment. So, that's the big fundamental driver.

But I think really, Mike's question there was with respect to the completion guarantee and Mike, if you'll call me offline, I'll speculate on what happened with respect to Technical Olympic. I just don't want to do it publicly. We have not done what I believe Technical Olympic did to trigger some of their issues. So I'm not going to speculate publicly.

I appreciate that and Ara's point is very fair in terms of the leverage going in, I think is very different. The other question I had was just going back to your revolver and if you care to or if you're able to go over, what is the actual leverage ratio that would trigger the covenants on the revolver and on your core debt, fixed or the debt issues that you have outstanding. Aside from the revolver, what are the covenant triggers either if those do have interest coverage, or do those have leverage ratio coverage or both?

Let me first speak to the revolver. First, if I gave you the number, you can't calculate it, because of the way the revolver doesn't just take equity, it's an adjusted tangible net number, so I'm not going to tell you exactly what it is because it's just not something you could ever tie it to or calculate to. I'll just tell you that it's leverage substantially higher than where we are today. We don't intend to get there. We're taking steps to even provide more of a cushion by deleveraging and therefore we're not concerned about that particular issue in our revolver, we don't think there's any other covenants inside the revolver that concern us. With respect to agreements outside of the revolver, every senior and subordinated note have a debt occurrence test that does have a coverage component or covenant to it, but there's all kinds of buckets to solve that particular problem and we don't believe we're close on that with respect to that issue either.

Your next question is from the line of Alex Barron - Agency Trading Group. Alex Barron - Agency Trading Group: Thanks, guys. Can you talk about your impairments in a little more detail like how many communities you impaired and what was the dollar breakdown by region?

Hold on and we'll give you a little color. It was spread out geographically. Brad, do you want to pull that up? Brad O’Connor: It's about ten communities and Ara gave you the locations before. It will take me a few minutes to give it to you by public segment. I don't have it here.

So, it is spread out geographically in ten different communities. Brad O’Connor: The bigger places were California; there was a community in Minnesota, Pennsylvania, and then Fort Myers that we talked about. That's basically where they are. Alex Barron - Agency Trading Group: Okay, so the bulk I guess was in California then?

Well, that's not what he said. He told you the four different places that the bulk of it came from. Minnesota, Pennsylvania, Florida, and California. Alex Barron - Agency Trading Group: Do you guys have your pre-tax income breakdown by region?

No, we don't have that yet. It will be in the 10-Q.

Your next question comes from Susan Berliner - Bear Stearns. Susan Berliner - Bear Stearns: I know you said that thus far the first quarter the few weeks have been weak as well and I was wondering if going sequentially, I know you how had given a good color about orders and cancellation rates deteriorating throughout the quarter if you have seen continuing deterioration thus far in the third quarter?

I think we just want to say that it's continued to be weak rather than try to make a judgment on whether it is weaker or slightly better. I mean, it continues to be weak. Susan Berliner - Bear Stearns: Have you seen anything on the Alt-A, and if you can give any details on your Alt-A lending at this point versus last year?

Alt-A also has had a tighter underwriting criteria applied to it. It is generally very creditworthy customers with even higher credit FICO scores required this year than last year and our use of Alt-A has increased some. I'll give you an extreme example and as someone that's highly qualified recently bought a second home that makes great income and a great credit score, the mortgage company would rather do that as an Alt-A. There's not even a penalty from the rate perspective, just to not have to go through the trouble of verifying all of the documentation and so on and so forth. Alt A by itself does not mean there's a stigma or anything close to subprime and I think the pricing of the Alt A product being almost on top of prime product is the best indication of that. Susan Berliner - Bear Stearns: Can you update us on what's going on in the Washington D.C. market, if it's still stabilizing or if incentives are increasing there as well?

It's interesting. The DC market both Virginia and Maryland side, for us, had been fairly steady and decent; obviously nothing like what it was, but was steady and decent. In the last I would say month or two, it has weakened just a bit, and we have taken some steps in incentives or pricing to bolster that. But the DC market for us is not nearly as challenging as markets like Florida or parts of California.

As there are no further questions in queue, I'd like to turn the call back over to Mr. Hovnanian for closing remarks.

Great. Well, thank you very much. I wish I could give you better news, but as I said in my prepared comments, we just try to be as forthright and comprehensive as possible. We continue to maneuver through these markets. We've been through these cycles many times before and as we have in the past, we'll bounce through and come out stronger than before. Thank you very much and I look forward to giving you continued news in the next quarter's release. Thank you.