Good morning, and thank you for joining us today for Hovnanian Enterprises Fiscal 2013 Second Quarter Earnings Conference Call. An archive of the webcast will be available after the completion of the call and run for 12 months. This conference is being recorded and rebroadcast .[Operator Instructions] The company will also be webcasting a slide presentation, along with the opening comments from management. These slides are available on the Investor 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 turn the call over to Jeff O'Keefe, Vice President of Investor Relations. Jeff, please go ahead, sir.

Okay, thank you. Before we get started, I would like to read through our forward-looking statements quickly. All statements made on this conference call that are not historical facts should be considered as forward-looking statements. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements of the company to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Although we believe that our plans, intentions and expectations reflected in or suggested by such forward-looking statements are reasonable, we can give no assurance that such plans, intentions or expectations will be achieved. Such risks, uncertainties and other factors include, but are not limited to, changes in general and local economic and industry and business conditions and impacts of the sustained homebuilding downturn; adverse weather and other environmental conditions and natural disasters; changes in market conditions and seasonality of the company's business; changes in home prices and sales activity in the markets where the company builds homes; government regulation, including regulations concerning development of land, the homebuilding, sales and customer financing processes; tax laws and the environment; fluctuations in interest rates and the availability of mortgage financing; shortages in and price fluctuations of raw materials and labor; the availability and cost of suitable land and improved lots; levels of competition; availability of financing to the company; utility shortages and outages or rate fluctuations; levels of indebtedness and restrictions on the company's operations and activities imposed by the agreements governing the company's outstanding indebtedness; the company's sources of liquidity; changes in credit ratings; availability of net operating loss carryforwards; operation through joint ventures with third parties; product liability litigation; warranty claims and claims by mortgage investors; successful identification and integration of acquisitions; significant influence of the company's controlling stockholders; changes in tax laws affecting the aftertax cost of owning a home; geopolitical risks; terrorist acts and other acts of war; and other factors described in detail on the company's Annual Report on Form 10-K for the year ended October 31, 2012. Except as otherwise required by applicable securities laws, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changed circumstances or any other reason. Now, I'll turn the call over to Ara Hovnanian, our Chairman, President and Chief Executive Officer.

Thanks, Jeff. And thank you, all, for participating in this morning's call to review the results of our second quarter ended April, 2013. Joining me on the call today are Larry Sorsby, our Executive Vice President and CFO; Brad O'Connor, Vice President, Chief Accounting Officer and Corporate Controller; David Valiaveedan, Vice President of Finance and Treasurer; and Jeff O'Keefe, Vice President of Investor Relations. Let me start on Slide 3. We see in the top left-hand portion of that slide that our total revenues continue to increase year-over-year due to increased volumes, higher selling prices for our homes and mix. Here, we show that the second quarter of 2011 in gray, the second quarter of 2012 in yellow, and the second quarter of 2013 in blue. Total revenues have increased 66% over the 2 years shown. Moving across the top, our gross margin has also continued to show year-over-year improvements. The 150 basis point year-over-year improvement in gross margin this quarter also resulted from our change in community mix and home price increases across many of our communities. Over the 2-year period shown, our gross margin has increased 410 basis points for the quarter. There are 3 general scenarios that are playing out across the country with respect to home price increases and construction cost increases, the topic that's on everyone's minds. These increases have varied from market to market, with the hottest markets seeing the biggest increases in both home prices and construction costs. In the majority of the situations, we have been able to raise our home prices more than the construction costs have increased, thereby increasing gross margin. Southern and Northern California, as well as Phoenix, certainly have many communities that fall into that category. In other markets, we've been able to raise prices -- home prices…

Thanks, Ara. We're very focused on controlling new land parcels. On Slide 13, we show that since January 2009, we've controlled 26,200 lots in 450 communities. At the end of the second quarter of 2013, there are still about 15,400 of these newly controlled lots remaining at attractive land values for future deliveries. The right-hand side of this slide shows that total gross additions during the second quarter were 3,100 lots. During the second quarter, we walked away from about 400 newly identified lots. In recent quarters, these walk-aways have typically occurred during the initial due diligence period and our deposit has been refunded. The net results for the second quarter was that our total lots purchased or controlled since January 2009 increased about 2,700 lots sequentially from the first quarter of 2013. Turning now to Slide 14. You'll see our owned and optioned land position broken out by our publicly reported segments. Based on our trailing 12-month deliveries, we own 3.1 years worth of land. However, if you exclude the roughly 6,800 mothballed lots, we only have 1.8 years of land based on the delivery rate of the past 4 quarters. At the end of the second quarter, 81% of our optioned lots are newly identified lots. Excluding mothballed lots, 72% of our total lots are newly identified lots. Our investment and land option deposits was $64 million at April 30, 2013, with $62.3 million in cash deposits and the other $1.7 million of deposits being held by letters of credit. Additionally, we have another $6.3 million invested in predevelopment expenses. Turning now to Slide 15. We show our mothballed lots broken out by geographic segments. In total, we have about 6,800 mothballed lots within 52 communities that were mothballed as of April 30, 2013. The book value at…

Thank you, Larry. If -- I'd like to close by giving a few comments on the overall housing cycle. Frankly, it amazes me that I'm already hearing some concerns that we're in a new bubble or that the market will crash once mortgage rates move at all. As a homebuilder that's recently been through the mother of all cycles, we are constantly reviewing housing data to keep a perspective on the housing market and if you'll bear with me for a moment, I'd like to share some of the key metrics with you. I'd like to start with Slide 25, which shows total housing starts by year, from World War II to the present. I've shown this slide, although -- on prior calls, although this is updated a little bit more. There's a lot of data on this slide, but I'll focus on decade average starts, which are represented by the horizontal green lines. You see them toward the top of the bars, spanning 10 years at a time. Five of the last 6 decades since World War II have had average annual housing starts between 1.4 million and 1.5 million. The exception was the decade of the '70s, which had average starts, about 1.75 million per year. In the decade of the 2000s, in spite of the overproduction mid-decade, we also averaged just over 1.4 million starts per year, thanks to the significant reduction in housing starts toward the end of the decade. Prior to this downturn, annual housing starts had only gotten as low as 1 million starts per year in the worst downturns. I've circled some of those recent troughs on the chart. It's happened 3x in recent history, once in the '70s, '80s and '90s. Twice, it stayed that low for 1 year, once for 2…

[Operator Instructions] Your first question comes from the line of Alan Ratner from Zelman & Associates. Alan Ratner - Zelman & Associates, LLC: Thanks for all the commentary on the market and kind of where you guys see things playing out. That was very helpful, and I guess just to expand on that, given the focus on rates today, and the increases that we've seen over the past few weeks, I was hoping you might be willing to provide a little bit more commentary on your May order results, which it looks like if you look at it sequentially versus April, it was down about 20% or so, which is a bit more than you typically see, May versus April, and obviously the year-over-year increases are contracting as well, partly due to tougher comps. But was just hoping you can maybe tie that into what we are seeing in rates right now, and maybe what you're seeing out of buyers in response to those higher mortgage rates?

Well, there are a variety of factors moving at the same time. I'd say, what you might see in terms of less than robust growth, compared to the prior quarters, but still growth over prior months. Maybe more affected by the fact that we have been, as our peers have been, more aggressively moving home prices. It's difficult to replenish the land supply, and we've been run -- burning through our communities faster than we'd like. So we've had the luxury of not being as focused on sales pace and focusing more on price and margin, and we've been more aggressive than we have in the past. I think many of our competitors have been more aggressive than they have in the past as well. So I think that may be driving it more than rates at this stage. Alan Ratner - Zelman & Associates, LLC: So, following on to that then, if I hear that correctly, is it possible in some markets, you might be kind of hitting that resistance point on price, maybe where things have -- you gave the anecdotes in Northern Cal and Phoenix, I'm not sure what your order trends look like there specifically, but is it something now that order growth is kind of flat lining here, that maybe you found that resistance point and you would expect to see some more modest price increases, or maybe flatlining?

I would not say we're hitting resistance points, but I would say, obviously, as we've raised prices more aggressively, the velocity has slowed, and the velocity growth has slowed, but we're far from hitting resistance points, and we still have solid sales in all locations.

Your next question comes from the line of Michael Rehaut from JPMorgan. Michael Jason Rehaut - JP Morgan Chase & Co, Research Division: First question I had was on -- just following on the May orders if, and I apologize if this was in a slide, I'm dialing in from outside of the office, but just to give us a sense, in terms of the community count, I believe for 2Q, it was down, I believe you said 5% year-over-year. If that, also -- if there was a greater decline, average community counts in May, and how you're thinking about community count for the rest of the year?

I'm looking it up, Mike, just give us a second. We'll come back to you if you have another one. Hold on, I think we've got it. What is it?

189 in May.

No, that's the total, give me, how many, JVs, what was the consolidates? Michael Jason Rehaut - JP Morgan Chase & Co, Research Division: Consolidated was 176.

It was down 1 from April, Mike. 176 versus 177 wholly-owned.

And Mike, you may not have it, again, you might not have had the slides in front of you, but sales per community were at 2.8 in May of '13, and that compared to 2.6 last year. So we're still up a little bit, maybe up slightly less than the prior few quarters. Michael Jason Rehaut - JP Morgan Chase & Co, Research Division: Before I hit my second question, just the thoughts on community count for the rest of the year?

Yes, a difficult number to predict. I sound like a broken record, but we're working hard to have it grow, and it's grown modestly so far this year, and we would hope to see continued, modest growth. Michael Jason Rehaut - JP Morgan Chase & Co, Research Division: Great, and then, also on your comments about the mothballed communities and lot position that you have 1,000 lots that you can move from mothball to active, I believe you said, correct me if I'm wrong, over the last next 12 months. . .

The next, I think he said, the couple of quarters. Michael Jason Rehaut - JP Morgan Chase & Co, Research Division: The next couple of quarters. Is that part of the 92% of controlled lots that you cited in fiscal '14?

No, it is not.

Your next question comes from the line of Nishu Sood from Deutsche Bank.

I wanted to ask you a question about the products mix, the first time buyer versus the move-up buyer. Now you folks, as well as other builders, have seen a tailwind in terms of your average selling price from being able to sell more move-up products. Maybe that's a function of the -- the high affordability IRR that you were talking about, and maybe the first time buyers are still suffering from hangover from the homebuyer tax rate, but eventually in the recovery, the first-time buyer has to come back. So my question is, how do you see that playing out in terms of your -- the trends in your revenues, your ASP, your margins. Is it enough? Does it become a headwind to the ASP and the revenue growth? How significant do you foresee that in the next couple of years?

Well first of all, our margins are actually not dramatically different for the first time home buying product or the move-down product or the active adult product. They're are somewhat similar. However, in absolute price, obviously there's a difference in absolute dollars per home. First time home-buying product would obviously be lower. When I referred to margins earlier, I meant percentages in margins. So that part might be a negative. On the other hand, that would clearly be a little bit of an afterburner effect that would help the market in a time when it might normally want to start leveling off for a variety of reasons. We've had a very good recovery without this part of the food chain really in the battle, so to speak, and I think having first-time homebuyers join in as well would really help the overall market, increase demand and when first-time homebuyers buy their first home, in some cases, from somebody that owns a home that wants to move up, it enables them to move up. So while there may be a little downward pressure on average price, in average dollar profit per home, not on margin, I think that would be offset by the positive effects of the first-time homebuyers being able to really get some financing and get back into the market in a normal way.

And the second question, I wanted to also ask about the mothballed lots. You guys give terrific details on that, so do appreciate that. I wanted to focus in on the 4,800 lots that are in the West, the California region. Now I think by most folks' reckoning, California, Northern California, Southern California, #1 and #2 markets in the country probably, and certainty your example, that you showed on pricing support that. So that's obviously a huge positive for these 4,800 lots that you have mothballed. I wanted to ask how much progress has been made in kind of getting those back to the breakeven or above water point. How much further do we need to see before that significant chunk of the mothballed lots begins to approach feasibility again?

I think it really depends, community by community. There's not one answer for every community that represents that 4,800 mothballed lots in California, but it is clearly accurate to state that because of those rapid price increases that we're seeing in -- throughout the state of California, that a number of those mothballed communities in California are becoming ripe to be unmothballed, and it's not so much driven by margin to make our decision to unmothball those communities. I mean when we wrote those communities down, in most instances, the way GAAP worked, we wrote them down to roughly 1/2 a normalized margin, and we've seen price increases. We get the margin very close to normalized margins, but all of that's a factor that we look at -- the primary thing that we look at is how much cash are we going to recover from the lots that are invested, and where those parcels are located, and we just know that as the market just continues along the trend line, we certainly don't have to have the same kind of price increases to see quite a number of our California mothballed lots come back into production.

Your next question comes from the line of Dan Oppenheim from Credit Suisse. Daniel Oppenheim - Crédit Suisse AG, Research Division: I was wondering if you can talk a little bit more about some of the West. I think it's helpful again in terms of some of the pricing in your comments in terms of -- trying to be aggressive on that. I guess, one thing that we've also seen is an effort, really, in terms of meter out the pace of sales. I guess, just trying to think, I think a lot of the questions have been trying to get a better sense, in terms of why some of the West -- orders in the West were just a little bit weaker than some of the other regions, given the strength in pricing there. How -- what portion of the communities would you say you're sort of metering out the orders right now, versus the slow orders being a function of the consumer slowing down, based on price.

Well, orders in the West have been affected by a couple of factors. Certainly, we've been particularly aggressive in pricing, but part of the reason we've been aggressive in pricing is that we've been burning through the communities there, and haven't had the new ones open up yet, so it's been just a little more challenging from the number of storefronts, and I think that has affected it. The West, in fact, has been the most rapidly improving and appreciating market. Though -- that I wouldn't misread those numbers.

I think just to echo Ara's point, the community count in California dropped by 6 on a year-over-year basis. So I think the decline in contracts you're seeing is primarily driven by the drop in community count.

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

Just was curious on the corporate expenses. It moved up the last quarter, I guess sequentially $1.2 million, where do you see that going forward, and was there any one-time issues in that in the second quarter?

I think -- nothing really comes to mind. I don't think there's any one-time issues. It's tweaked up very modestly. It fluctuates a little bit from quarter-to-quarter, just because of the timing of certain issues. So I wouldn't read too much into it. I think it's going to be relatively fixed for the foreseeable future.

Close to the -- so closer to the $14 million range, versus the, I guess $11 million or $12 million, previous?

I think you just got to look at what our current run rate has been, and draw your own conclusions. I'm not going to get granular than that.

Right, and on the May consolidated orders, what were they, excluding JVs for 2013 and 2012?

Repeat that again, please?

The May consolidated orders for 2013, 2012?

Well, the absolute number?

Excluding joint ventures.

Excluding JVs, yes.

It was -- in May of 2013, it was 493, and the prior year, that was 462.

Your next question comes from the line of David Goldberg from UBS.

It's actually Sue on for David today. Can you talk a little bit about the material prices and what you're seeing there. We've seen lumber coming down recently. How long do you think it is before we start to see that in your results, and more generally speaking, as material companies, as the producers there start to bring more capacity online, do you think that we could actually move from seeing some price inflation there to maybe seeing things normalize or perhaps come down a little bit, especially maybe as we move into 2014 or a little further out?

That's a good question, I was frankly surprised by lumber prices coming down. Well at first, I wasn't surprised by the previous period where they've been going up quite significantly over the last year. I was surprised that they recently came back off their highs over the last 6 to 8 weeks. As I understand it, in lumber, which is the single most significant material cost in a house, it was really because other mothballed mills have been coming back online again, and increasing capacity, in anticipation of increasing demand, and some had purchased lumber in greater quantities as prices were going up to protect their costs, and basically that pulled in demand from futures. So that combination of factors, as I understand it, helped lumber prices fall off. Lumber prices had been hurting our margins in the past, it clearly, as the single most cost important material, and now that, that's going down, that will definitely help, and that will -- should play out into the next few quarters, but there are a lot of other moving parts, copper as you might have seen, well that's not a really significant part, has been moving up, so different materials are going up and down at different times.

Typically, we lock lumber prices up kind of 90 days into the future, so there's a little lag effect before we'll see the benefit flow through our P&L of declining prices, and as Ara says, there's are a lot of moving parts that may obfuscate what the real impact of lumber is. Lumber represents 14%, 15% of the total construction cost of a home.

Okay, and then just a follow-up question, in terms of the land market, we have heard that there are some more nontraditional, kind of lending sources that are coming together to fund private builders again. Are you seeing any of this out there, and is that leading to any greater competition, in terms of the land market?

Not exactly sure what you mean by nontraditional lenders. I mean, we've been using GSO, a wholly-owned subsidiary of Blackstone on land banking, I don't know if that's what you mean, or whether you just mean people that are non-banks, that are not lending just for land, but actually for the entire project, including the vertical construction. We are seeing different kinds of lenders that are out there, and we're occasionally seeing traditional banks making lower loan-to-value loans on projects as well. So we're -- the general trend I think is clearly that financial institutions of one kind or another are sticking their foot back in the water, but it's still hard to find traditional banks that are doing it. So higher cost, lenders, financial institutions, hedge funds whatever you want to describe it, that are tiptoeing back in, perhaps.

Right. And overall, I wouldn't say that we've seen a huge impact on that with our private homebuilders competing. I'd still say -- while that is happening, and I'm sure it will gradually increase, I'd say in most cases, in most markets, the primary competition really still remains from our fellow peers among the publics.

And your next question comes from the line of Alex Barrón from Housing Research Center. Alex Barrón - Housing Research Center, LLC: I was just -- wanting to understand if your incentives have changed much, as these interest rates have moved in the month of May, and I guess just generally how you guys think about adjusting your approach to sales, if some rates don't come back down to 3.5?%.

Overall, our net pricing has been going up. We do that, in a variety of ways, we increase base prices, we increase lot premiums or the calls for options, we reduced concessions, or we reduce incentives. Generally speaking, I would say incentives have absolutely continued to come down, even with the little blip up that we have seen in mortgage rates. We have continued to see reductions in incentives. I really don't anticipate that changing dramatically at this point. Alex Barrón - Housing Research Center, LLC: What about on the cost of land, are you seeing more competition for land in the last couple of months, or are you seeing land prices start to taper off?

I would say it's more or less the same competitors, and we are all being a little more aggressive because we've been -- the sales pace has been greater, and we've been selling through our communities more rapidly and perhaps, we're all filling a little more confident that this recovery is here to stay, and is gaining momentum. So I would not say land prices are falling off. I would say we are -- as you might expect in this point of the recovery, we're seeing recovery in land purchases as well.

Yes, Alex, as home prices rise in the market or absorption paces increase in the market, land is more valuable, and that more valuable land is what's being reflected in what the builders that are -- the winning bidders are willing to pay. Alex Barrón - Housing Research Center, LLC: But you're not changing your underwriting too much?

What we've said in the script, and we'll reiterate it now, is in certain, very hot markets, we might change our underwriting criteria from the then current home prices, then current absorption pace and construction cost. We will continue to use that, but instead of having a 25% unlevered IRR hurdle rate, we might lower it to around 20%.

Your next question comes from the line of Susan Berliner from JPMorgan.

This is actually Wade. I just have a quick question in terms of looking at like the Southeast and West regions. I see in the West, obviously that the average price is up pretty substantially year-over-year, but just that the number of actual contracts is down versus the Southeast region, just was wondering if there was any kind of color there you might be able to provide, if that's due to community growth or just a...

You might have missed a similar question, and we pointed out that there has been a reduction in community count in the West, and when you combine that with more aggressive prices, part of which is because we're running it through -- burning through our communities, it wasn't surprising to us that the overall sales are down.

Just last quick question, with the land banking, if there's any update you guys might be able to provide on -- expanding relationship with GSO again?

We have a $250 million kind of agreement with GSO in 2 major tranches. The first $125 million as we mentioned earlier, probably in the last call or 2 is totally done. The second $125 million tranche, we're probably close to halfway through that, and although we don't have any firm agreement with GSO to expand it beyond that $250 million, they've indicated that if we have an interest in it, that they have an interest in talking to us about it as well, so we have a great relationship with them. It's been mutually beneficial, and nothing leads me to believe that if we wanted to go back to them, that they would not be willing to increase it, but at this point, we've not approached it.

Ladies and gentlemen, this will conclude our question-and-answer session for today's conference. I would now like to turn the call over to Ara Hovnanian.

Great. Well thank you, very much. We're pleased to report a profit after a long drought in that category, but obviously as you heard, the market really shows signs of continued improvement, continued momentum, and we'll look forward to reporting continued progress in our subsequent quarterly calls. Thank you.

This concludes our conference call for today. Thank you all for participating, and have a nice day. All parties may now disconnect.