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

(dollars in thousands, except per share data)

Forward-Looking Statements

Some of the statements in this Quarterly Report on Form 10-Q, as well as statements made by us in periodic press releases or other public communications, constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Certain, but not necessarily all, of such forward-looking statements can be identified by the use of forward-looking terminology, such as “believes,” “expects,” “may,” “will,” “should” or “anticipates” or the negative thereof or other comparable terminology. All statements other than of historical facts are forward-looking statements. Forward-looking statements contained in this document may include those regarding market trends, our financial position and financial results, business strategy, the outcome of pending litigation, investigations or similar contingencies, projected plans and objectives of management for future operations. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results or performance to be materially different from future results, performance or achievements expressed or implied by the forward-looking statements. Such risk factors include, but are not limited to the following: general economic and business conditions (on both a national and regional level); interest rate changes; access to suitable financing by us and our customers; increased regulation in the mortgage banking industry; the ability of our mortgage banking subsidiary to sell loans it originates into the secondary market; competition; the availability and cost of land and other raw materials used by us in our homebuilding operations; shortages of labor; the economic impact of a major epidemic or pandemic; weather related slow-downs; building moratoriums; governmental regulation; fluctuation and volatility of stock and other financial markets; mortgage financing availability; and other factors over which we have little or no control. We undertake no obligation to update such forward-looking statements except as required by law. For additional information regarding risk factors, see Part II, Item 1A of this Quarterly Report on Form 10-Q and Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

Unless the context otherwise requires, references to “NVR,” “we,” “us,” or “our” include NVR and its consolidated subsidiaries.

Results of Operations for the Three and Nine Months Ended September 30, 2024 and 2023

Business Environment and Current Outlook

Demand for new homes remained solid in the third quarter of 2024 despite continued affordability issues driven by high mortgage interest rates and home prices. New home demand continues to be favorably impacted by a limited supply of homes in the resale market; however, we expect that affordability issues, inflationary pressures, interest rate volatility and economic uncertainty may weigh on future demand. We also expect to continue to face cost pressures related to building materials, labor and land costs which we expect will impact profit margins based on our ability to manage these costs while balancing sales pace and home prices. Although we are unable to predict the extent to which this will impact our operational and financial performance, we believe that we are well positioned to take advantage of opportunities that may arise from future economic and homebuilding market volatility due to the strength of our balance sheet and our disciplined lot acquisition strategy.

Business

Our primary business is the construction and sale of single-family detached homes, townhomes and condominiums, all of which are primarily constructed on a pre-sold basis. To fully serve customers of our homebuilding operations, we also operate a mortgage banking and title services business. We primarily conduct our operations in mature markets. Additionally, we generally grow our business through market share gains in our existing markets and by expanding into markets contiguous to our current active markets. Our four homebuilding reportable segments consist of the following regions:

Mid Atlantic:						Maryland, Virginia, West Virginia, Delaware and Washington, D.C.
North East:						New Jersey and Eastern Pennsylvania
Mid East:						New York, Ohio, Western Pennsylvania, Indiana and Illinois
South East:						North Carolina, South Carolina, Tennessee, Florida, Georgia and Kentucky

Our lot acquisition strategy is predicated upon avoiding the financial requirements and risks associated with direct land ownership and development. We generally do not engage in land development (see discussion below of our land development activities). Instead, we typically acquire finished building lots from various third party land developers pursuant to fixed price finished lot purchase agreements (“LPAs”). These LPAs require deposits, typically ranging up to 10% of the aggregate purchase price of the finished lots, in the form of cash or letters of credit that may be forfeited if we fail to perform under the LPA. This strategy has allowed us to maximize inventory turnover, which we believe enables us to minimize market risk and to operate with less capital, thereby enhancing rates of return on equity and total capital.

In addition to constructing homes primarily on a pre-sold basis and utilizing what we believe is a conservative lot acquisition strategy, we focus on obtaining and maintaining a leading market position in each market we serve. This strategy allows us to gain valuable efficiencies and competitive advantages in our markets, which we believe contributes to minimizing the adverse effects of regional economic cycles and provides growth opportunities within these markets. Our continued success is contingent upon our ability to control an adequate supply of finished lots on which to build.

In certain specific strategic circumstances we engage in joint venture arrangements with land developers or directly acquire raw ground already zoned for its intended use for development. Once we acquire control of raw ground, we determine whether to sell the raw parcel to a developer and enter into an LPA with the developer to purchase the finished lots or to hire a developer to develop the land on our behalf. While joint venture arrangements and direct land development activity are not our preferred method of acquiring finished building lots, we may enter into additional transactions in the future on a limited basis where there exists a compelling strategic or prudent financial reason to do so. We expect, however, to continue to acquire substantially all our finished lot inventory using LPAs with forfeitable deposits.

As of September 30, 2024, we controlled approximately 151,800 lots as described below.

Lot Purchase Agreements

We controlled approximately 144,400 lots under LPAs with third parties through deposits in cash and letters of credit totaling approximately $696,500 and $10,400, respectively. Included in the number of controlled lots are approximately 9,600 lots for which we have recorded a contract land deposit impairment reserve of approximately $47,700 as of September 30, 2024.

Joint Venture Limited Liability Corporations (“JVs”)

We had an aggregate investment totaling approximately $27,800 in three JVs, expected to produce approximately 5,150 lots. Of the lots to be produced by the JVs, approximately 4,800 lots were controlled by us and approximately 350 were either under contract with unrelated parties or currently not under contract. We had additional funding commitments totaling approximately $9,800 to one of the JVs as of September 30, 2024.

Land Under Development

We owned land with a carrying value of approximately $63,300 that will be developed into approximately 2,600 finished lots.

See Notes 2, 3 and 4 to the condensed consolidated financial statements included herein for additional information regarding LPAs, JVs and land under development, respectively.

Raw Land Purchase Agreements

In addition, we have certain properties under contract with land owners that are expected to yield approximately 38,200 lots, which are not included in the number of total lots controlled. Some of these properties may require rezoning or other approvals to achieve the expected yield. As of September 30, 2024, these properties are controlled with deposits in cash totaling approximately $19,700, of which approximately $5,100 is refundable if certain contractual conditions are not met. We generally expect to assign the raw land contracts to a land developer and simultaneously enter into an LPA with the assignee if the project is determined to be feasible.

Key Financial Results

Our consolidated revenues for the third quarter of 2024 totaled $2,732,951, a 6% increase from the third quarter of 2023. Net income for the third quarter ended September 30, 2024 was $429,323, or $130.50 per diluted share. For the third quarter ended September 30, 2024, net income decreased 1% and diluted earnings per share increased 4% when compared to net income and diluted earnings per share for the third quarter of 2023, respectively. Our homebuilding gross profit margin percentage decreased to 23.4% in the third quarter of 2024 from 24.3% in the third quarter of 2023. New orders, net of cancellations (“New Orders”) increased by 19% in the third quarter of 2024 compared to the third quarter of 2023. The New Order cancellation rate for the third quarter of 2024 increased to 14.5% from 13.6% in the same period in 2023. The average sales price for New Orders in the third quarter of 2024 was $450.7, a decrease of 1% compared to the third quarter of 2023.

Homebuilding Operations

The following table summarizes the results of operations and other data for our homebuilding operations:

						Three Months Ended September 30,												Nine Months Ended September 30,
						2024						2023						2024						2023
Financial Data:
Revenues						$	2,677,640					$	2,512,409					$	7,511,708					$	6,927,511
Cost of sales						$	2,051,087					$	1,902,174					$	5,724,916					$	5,238,230
Gross profit margin percentage						23.4		%				24.3		%				23.8		%				24.4		%
Selling, general and administrative expenses						$	149,777					$	142,715					$	443,493					$	434,876
Operating Data:
New orders (units)						5,650						4,746						17,766						16,539
Average new order price						$	450.7					$	456.1					$	454.7					$	447.7
Settlements (units)						5,908						5,606						16,656						15,330
Average settlement price						$	453.2					$	448.0					$	451.0					$	451.8
Backlog (units)																		11,339						10,371
Average backlog price																		$	469.5					$	463.1
New order cancellation rate						14.5		%				13.6		%				13.5		%				12.7		%

Consolidated Homebuilding - Three Months Ended September 30, 2024 and 2023

Homebuilding revenues increased 7% in the third quarter of 2024 compared to the same period in 2023, primarily as a result of a 5% increase in the number of units settled. The increase in settlements was primarily attributable to a 3% higher backlog unit balance entering the third quarter of 2024 compared to the backlog unit balance entering the third quarter of 2023, coupled with a higher backlog turnover rate quarter over quarter. Gross profit margin percentage in the third quarter of 2024 decreased to 23.4%, from 24.3% in the third quarter of 2023. Gross profit margin was negatively impacted by higher lot costs and closing cost assistance quarter over quarter.

Selling, general and administrative (“SG&A”) expense in the third quarter of 2024 increased by approximately $7,100 compared to the third quarter of 2023, but as a percentage of revenue decreased to 5.6% from

5.7% quarter over quarter. The increase in SG&A expense was primarily attributable to a $7,000 increase in personnel costs attributable to an increase in headcount quarter over quarter. Additionally, sales and marketing expenses were approximately $3,300 higher quarter over quarter due to an increase in model home related expenses. These increases in SG&A expense were partially offset by a $6,600 decrease in equity-based compensation quarter over quarter due primarily to the Options and RSUs issued as part of the 2018 four-year block grant being fully vested as of December 31, 2023.

New Orders increased 19%, while the average sales price of New Orders decreased 1% in the third quarter of 2024 compared to the third quarter of 2023. New Orders were impacted primarily by a higher sales absorption rate in the third quarter of 2024.

Consolidated Homebuilding - Nine Months Ended September 30, 2024 and 2023

Homebuilding revenues increased 8% in the first nine months of 2024 compared to the same period in 2023, primarily as a result of a 9% increase in the number of units settled. The increase in settlements was attributable to a 12% higher backlog unit balance entering 2024 compared to the backlog unit balance entering 2023. Gross profit margin percentage in the first nine months of 2024 decreased to 23.8% from 24.4% in the first nine months of 2023. Gross profit margin was negatively impacted by higher lot costs and closing cost assistance year over year.

SG&A expense in the first nine months of 2024 increased by approximately $8,600 compared to the same period in 2023, and as a percentage of revenue decreased to 5.9% in 2024 from 6.3% in 2023. The increase in SG&A expense was primarily attributable to a $14,500 increase in personnel costs attributable to an increase in headcount year over year. Additionally, sales and marketing expenses were approximately $7,200 higher year over year due to an increase in model home related expenses. These increases in SG&A expense were partially offset by a $17,700 decrease in equity-based compensation year over year due primarily to the Options and RSUs issued as part of the 2018 four-year block grant being fully vested as of December 31, 2023.

New Orders and the average sales price of New Orders increased 7% and 2%, respectively, in the first nine months of 2024 compared to the same period in 2023. New Orders were favorably impacted primarily by a higher sales absorption rate year over year. The increase in the average sales price of New Orders is primarily attributable to a relative shift to higher priced markets and communities in certain of our reporting segments as discussed in the respective segments below.

Our backlog represents homes sold but not yet settled with our customers. As of September 30, 2024, our backlog increased on a unit basis by 9% to 11,339 units and on a dollar basis by 11% to $5,323,366 when compared to 10,371 units and $4,802,807, respectively, as of September 30, 2023. The increase in the number of backlog units was primarily attributable to a 12% higher backlog unit balance entering 2024 compared to the backlog unit balance entering 2023. Backlog dollars were higher primarily due to the increase in backlog units year over year.

Our backlog may be impacted by customer cancellations for various reasons that are beyond our control, such as failure to obtain mortgage financing, inability to sell an existing home, job loss, or a variety of other reasons. In any period, a portion of the cancellations that we experience are related to new sales that occurred during the same period, and a portion are related to sales that occurred in prior periods and therefore appeared in the opening backlog for the current period. Calculated as the total of all cancellations during the period as a percentage of gross sales during that same period, our cancellation rate was approximately 14% and 13% in the first nine months of 2024 and 2023, respectively. During the most recent four quarters, approximately 5% of a reporting quarter’s opening backlog cancelled during the fiscal quarter. We can provide no assurance that our historical cancellation rates are indicative of the actual cancellation rate that may occur during the remainder of 2024 or future years. Other than those units that are cancelled, we expect to settle substantially all of our September 30, 2024 backlog within the next twelve months.

The backlog turnover rate is impacted by various factors, including, but not limited to, changes in New Order activity, internal production capacity, external subcontractor capacity, building material supply chain disruptions and other external factors over which we do not exercise control.

Reportable Segments

Homebuilding segment profit includes all revenues and income generated from the sale of homes, less the cost of homes sold, SG&A expenses, and a corporate capital allocation charge determined by corporate management. The corporate capital allocation charge eliminates in consolidation and is based on the segment’s average net assets employed. The corporate capital allocation charged to the operating segment allows the Chief Operating Decision Maker to determine whether the operating segment is providing the desired rate of return after covering our cost of capital.

We record charges on contract land deposits when we determine that it is probable that recovery of the deposit is impaired. For segment reporting purposes, impairments on contract land deposits are generally charged to the operating segment upon the termination of an LPA with the developer, or the restructuring of an LPA resulting in the forfeiture of the deposit. We evaluate our entire net contract land deposit portfolio for impairment each quarter. For presentation purposes below, the contract land deposit reserve as of September 30, 2024 and December 31, 2023 has been allocated to the respective year’s reportable segments to show contract land deposits on a net basis. The net contract land deposit balances below also include approximately $10,400 and $7,700 as of September 30, 2024 and December 31, 2023, respectively, of letters of credit issued as deposits in lieu of cash.

The following tables summarize certain homebuilding operating activity by reportable segment for the three and nine months ended September 30, 2024 and 2023.

Selected Segment Financial Data:

						Three Months Ended September 30,												Nine Months Ended September 30,
						2024						2023						2024						2023
Revenues:
Mid Atlantic						$	1,147,893					$	1,146,559					$	3,299,047					$	3,146,501
North East						300,448						268,237						843,452						684,593
Mid East						501,190						468,727						1,352,137						1,282,806
South East						728,109						628,886						2,017,072						1,813,611

						Three Months Ended September 30,												Nine Months Ended September 30,
						2024						2023						2024						2023
Gross profit margin:
Mid Atlantic						$	288,131					$	281,230					$	830,097					$	775,983
North East						78,251						67,861						221,829						180,389
Mid East						114,087						103,918						302,977						278,983
South East						159,431						156,846						459,137						476,319

						Three Months Ended September 30,												Nine Months Ended September 30,
						2024						2023						2024						2023
Gross profit margin percentage:
Mid Atlantic						25.1		%				24.5		%				25.2		%				24.7		%
North East						26.0		%				25.3		%				26.3		%				26.3		%
Mid East						22.8		%				22.2		%				22.4		%				21.7		%
South East						21.9		%				24.9		%				22.8		%				26.3		%

						Three Months Ended September 30,												Nine Months Ended September 30,
						2024						2023						2024						2023
Segment profit:
Mid Atlantic						$	214,132					$	212,826					$	613,262					$	567,119
North East						56,246						48,787						157,476						125,779
Mid East						81,385						75,136						211,374						193,360
South East						95,089						107,666						280,936						339,723

Operating Activity:

						Three Months Ended September 30,																								Nine Months Ended September 30,
						2024												2023												2024												2023
						Units						Average Price						Units						Average Price						Units						Average Price						Units						Average Price
New orders, net of cancellations:
Mid Atlantic						2,206						$	514.7					1,822						$	526.2					6,785						$	522.2					6,405						$	520.2
North East						536						$	616.4					448						$	561.3					1,541						$	617.2					1,353						$	563.7
Mid East						1,105						$	400.2					916						$	407.2					3,630						$	404.8					3,572						$	392.4
South East						1,803						$	354.1					1,560						$	372.8					5,810						$	363.9					5,209						$	366.3
Total						5,650						$	450.7					4,746						$	456.1					17,766						$	454.7					16,539						$	447.7

						Three Months Ended September 30,																								Nine Months Ended September 30,
						2024												2023												2024												2023
						Units						Average Price						Units						Average Price						Units						Average Price						Units						Average Price
Settlements:
Mid Atlantic						2,229						$	514.9					2,199						$	521.2					6,394						$	515.9					6,024						$	522.2
North East						495						$	606.9					476						$	563.5					1,445						$	583.6					1,271						$	538.6
Mid East						1,219						$	411.1					1,209						$	387.5					3,343						$	404.5					3,265						$	392.8
South East						1,965						$	370.5					1,722						$	365.2					5,474						$	368.5					4,770						$	380.2
Total						5,908						$	453.2					5,606						$	448.0					16,656						$	451.0					15,330						$	451.8

			As of September 30,
			2024												2023
			Units						Average Price						Units						Average Price
Backlog:
Mid Atlantic			4,485						$	531.4					4,073						$	531.7
North East			1,124						$	646.5					967						$	587.5
Mid East			2,263						$	411.5					2,160						$	401.1
South East			3,467						$	369.8					3,171						$	379.3
Total			11,339						$	469.5					10,371						$	463.1

						Three Months Ended September 30,												Nine Months Ended September 30,
						2024						2023						2024						2023
New order cancellation rate:
Mid Atlantic						12.4		%				12.8		%				12.2		%				13.0		%
North East						12.3		%				11.5		%				13.8		%				11.5		%
Mid East						16.5		%				15.3		%				15.1		%				13.3		%
South East						16.5		%				14.1		%				13.8		%				12.3		%

						Three Months Ended September 30,												Nine Months Ended September 30,
						2024						2023						2024						2023
Average active communities:
Mid Atlantic						146						167						152						166
North East						32						36						32						37
Mid East						98						109						100						111
South East						146						119						143						110
Total						422						431						427						424

Homebuilding Inventory:

						September 30, 2024						December 31, 2023
Sold inventory:
Mid Atlantic						$	873,945					$	796,591
North East						251,437						220,511
Mid East						325,572						268,269
South East						517,526						412,873
Total (1)						$	1,968,480					$	1,698,244

						September 30, 2024						December 31, 2023
Unsold lots and housing units inventory:
Mid Atlantic						$	82,328					$	116,165
North East						29,772						18,804
Mid East						23,780						20,559
South East						90,070						60,953
Total (1)						$	225,950					$	216,481

(1) The reconciling items between segment inventory and consolidated inventory include certain consolidation adjustments necessary to convert the reportable segments’ results, which are predominantly maintained on a cash basis, to a full accrual basis for external financial statement presentation purposes. These consolidation adjustments are not allocated to our operating segments.

Lots Controlled and Land Deposits:

						September 30, 2024						December 31, 2023
Total lots controlled:
Mid Atlantic						48,800						46,000
North East						16,400						14,300
Mid East						22,700						22,200
South East						63,900						59,000
Total						151,800						141,500

						September 30, 2024						December 31, 2023
Contract land deposits, net:
Mid Atlantic						$	252,385					$	222,922
North East						80,283						61,182
Mid East						58,765						46,804
South East						287,399						253,292
Total						$	678,832					$	584,200

Mid Atlantic

Three Months Ended September 30, 2024 and 2023

The Mid Atlantic segment profit was relatively flat quarter over quarter, as revenues remained flat due to a 1% increase in the number of units settled, offset by a 1% decline in the average settlement price. The segment’s gross profit margin percentage increased to 25.1% in the third quarter of 2024 from 24.5% in the third quarter of 2023. Gross profit margins were positively impacted by lower lumber costs quarter over quarter.

Segment New Orders increased 21%, while the average sales price of New Orders decreased 2% in the third quarter of 2024 compared to the third quarter of 2023. Despite a 12% decrease in the average number of active communities quarter over quarter, New Orders were favorably impacted by a higher sales absorption rate in the third quarter of 2024. The decrease in the average sales price of New Orders was primarily attributable to a shift to lower priced communities within certain markets in the segment quarter over quarter.

Nine Months Ended September 30, 2024 and 2023

The Mid Atlantic segment had an approximate $46,100, or 8%, increase in segment profit in the first nine months of 2024 compared to the first nine months of 2023. The increase in segment profit was driven by an increase in segment revenues of approximately $152,500, or 5%, coupled with an increase in gross profit margins. Segment revenues increased due to a 6% increase in the number of units settled which was primarily attributable to an 11% higher backlog unit balance entering 2024 compared to backlog entering 2023. The segment’s gross profit margin percentage increased to 25.2% in the first nine months of 2024 from 24.7% in the first nine months of 2023. Gross profit margins were positively impacted primarily by the improved leveraging of certain operating costs attributable to the increase in settlement activity, offset partially by higher lot costs and closing cost assistance year over year.

Segment New Orders increased 6% in the first nine months of 2024 compared to the first nine months of 2023, while the average sales price of New Orders remained relatively flat. Despite an 8% decrease in the average number of active communities year over year, New Orders were favorably impacted by a higher sales absorption rate year over year.

North East

Three Months Ended September 30, 2024 and 2023

The North East segment had an approximate $7,500, or 15%, increase in segment profit in the third quarter of 2024 compared to the third quarter of 2023. The increase in segment profit was driven by an increase in segment revenues of approximately $32,200, or 12%. Segment revenues increased due to a 4% increase in the number of units settled and a 8% increase in the average settlement price quarter over quarter. The increase in settlements was primarily attributable to a 9% higher backlog unit balance entering the third quarter of 2024 compared to backlog entering the third quarter of 2023, offset partially by a lower backlog turnover rate quarter over quarter. The increase in the average settlement price was primarily attributable to a 9% higher average price of units in backlog entering the third quarter of 2024 compared to the average price of units in backlog entering the third quarter of 2023. The segment's gross profit margin percentage increased to 26.0% in the third quarter of 2024 from 25.3% in the third quarter of 2023. Gross profit margins were positively impacted primarily by the improved leveraging of certain operating costs attributable to the increase in settlement activity, offset partially by higher lot costs and closing cost assistance. In addition, margins were favorably impacted by lower lumber costs quarter over quarter.

Segment New Orders and the average sales price of New Orders increased 20% and 10%, respectively, in the third quarter of 2024 compared to the third quarter of 2023. Despite a 12% decrease in the average number of active communities quarter over quarter, New Orders were favorably impacted by a higher sales absorption rate quarter over quarter. The increase in the average sales price of New Orders was primarily attributable to a shift to higher priced communities in certain markets quarter over quarter.

Nine Months Ended September 30, 2024 and 2023

The North East segment had an approximate $31,700, or 25%, increase in segment profit in the first nine months of 2024 compared to the first nine months of 2023. Segment profits were favorably impacted by an increase in segment revenue of approximately $158,900, or 23%. Segment revenues were favorably impacted by a 14%

increase in the number of units settled and a 8% increase in the average settlement price year over year. The increase in settlements was primarily attributable to a 16% higher backlog unit balance entering 2024 compared to backlog entering 2023, coupled with a higher backlog turnover rate year over year. The increase in the average settlement price was primarily attributable to a 9% higher average sales price of units in backlog entering 2024 compared to backlog entering 2023. The segment's gross profit margin percentage was flat year over year.

Segment New Orders and the average sales price of New Orders increased 14% and 10%, respectively, in the first nine months of 2024 compared to the first nine months of 2023. Despite an 11% decrease in the average number of active communities year over year, New Orders were favorably impacted by a higher sales absorption rate year over year. The increase in the average sales price of New Orders was primarily attributable to a shift to higher priced communities in certain markets year over year.

Mid East

Three Months Ended September 30, 2024 and 2023

The Mid East segment had an approximate $6,200, or 8%, increase in segment profit in the third quarter of 2024 compared to the third quarter of 2023, due primarily to an increase in segment revenues of approximately $32,500, or 7%, coupled with an increase in gross profit margins to 22.8% in the the third quarter of 2024 from 22.2% in the third quarter of 2023. Segment revenues were favorably impacted by a 6% increase in the average price of homes settled quarter over quarter, due to a 6% higher average sales price of units in backlog entering the third quarter of 2024 compared to backlog entering the third quarter of 2023. The segment's gross profit margin percentage was favorably impacted by the higher average settlement prices and lower lumber costs quarter over quarter, offset partially by higher lot costs and closing cost assistance.

Segment New Orders increased 21% in the third quarter of 2024 compared to the third quarter of 2023, while the average sales price of New Orders decreased 2% quarter over quarter. Despite a 10% decrease in the average number of active communities quarter over quarter, New Orders were favorably impacted by a higher sales absorption rate in the third quarter of 2024. The decrease in the average sales price of New Orders was primarily attributable to a shift to lower priced markets within the segment.

Nine Months Ended September 30, 2024 and 2023

The Mid East segment had an approximate $18,000, or 9%, increase in segment profit in the first nine months of 2024 compared to the first nine months of 2023, due primarily to an increase in segment revenues of approximately $69,300, or 5%, coupled with an increase in gross profit margins to 22.4% in the first nine months of 2024 from 21.7% in the first nine months of 2023. Segment revenues increased due to a 3% increase in the average price of units settled and a 2% increase in the number of units settled year over year. The increase in the average settlement price was attributable primarily to the 6% increase in the average settlement price in the third quarter of 2024 as discussed above. The increase in settlements was attributable primarily to a 7% higher backlog unit balance entering 2024 compared to the backlog entering 2023. Gross profit margin was favorably impacted by the improved leveraging of certain operating costs as settlement activity increased, offset partially by higher lot costs and closing cost assistance year over year.

Segment New Orders increased 2% in the first nine months of 2024 compared to the first nine months of 2023, while the average sales price of New Orders increased 3% year over year. Despite a 10% decrease in the average number of active communities year over year, New Orders were favorably impacted by a higher sales absorption rate year over year. The increase in the average sales price of New Orders was primarily attributable to a shift to higher priced communities within certain markets year over year.

South East

Three Months Ended September 30, 2024 and 2023

The South East segment had an approximate $12,600, or 12%, decrease in segment profit in the third quarter of 2024 compared to the third quarter of 2023. The decrease in segment profit was primarily driven by a decrease in gross profit margins to 21.9% in the third quarter of 2024 from 24.9% in the third quarter of 2023. Gross profit margins were negatively impacted primarily by higher lot costs and closing cost assistance. Segment revenues in the

third quarter of 2024 were higher by approximately $99,200, or 16%, due to primarily to a 14% increase in the number of units settled. The increase in settlements is attributable primarily to a 9% higher backlog unit balance entering the third quarter of 2024 compared to the backlog entering the third quarter of 2023, coupled with a higher backlog turnover rate quarter over quarter.

Segment New Orders increased 16% in the third quarter of 2024 compared to the third quarter of 2023, while the average sales price of New Orders decreased 5% quarter over quarter. New Orders were favorably impacted by a 22% increase in the average number of active communities, offset partially by a 6% lower absorption rate within the segment quarter over quarter. The decrease in the average sales price of New Orders was primarily attributable to a shift to lower priced communities in certain markets within the segment quarter over quarter.

Nine Months Ended September 30, 2024 and 2023

The South East segment had an approximate $58,800, or 17%, decrease in segment profit in the first nine months of 2024 compared to the first nine months of 2023 due primarily to a decrease in gross profit margins to 22.8% in the first nine months of 2024 from 26.3% in the first nine months of 2023. Gross profit margins were negatively impacted primarily by higher lot costs and closing cost assistance. Segment revenues in the third quarter of 2024 were higher by approximately $203,500, or 11%, due to a 15% increase in the number of units settled, partially offset by a 3% decrease in the average price of units settled year over year. The increase in settlements was attributable primarily to a 15% higher backlog balance entering 2024 compared to the backlog entering 2023, coupled with a higher backlog turnover rate year over year. The decrease in the average settlement price was attributable primarily to a 7% lower average sales price of units in backlog entering 2024 compared to backlog entering 2023.

Segment New Orders increased 12% in the first nine months of 2024 compared to the first nine months of 2023, while the average sales price of New Orders decreased 1% year over year. The increase in New Orders was primarily attributable to a 30% increase in the average number of active communities, offset partially by a 14% lower absorption rate within the segment year over year.

Homebuilding Segment Reconciliations to Consolidated Homebuilding Operations

In addition to the corporate capital allocation and contract land deposit impairments discussed above, the other reconciling items between homebuilding segment profit and homebuilding consolidated income before tax include unallocated corporate overhead (which includes all management incentive compensation), equity-based compensation expense, consolidation adjustments and external corporate interest expense. Our overhead functions, such as accounting, treasury and human resources, are centrally performed and the costs are not allocated to our operating segments. Consolidation adjustments consist of such items to convert the reportable segments’ results, which are predominantly maintained on a cash basis, to a full accrual basis for external financial statement presentation purposes, and are not allocated to our operating segments. External corporate interest expense primarily consists of interest charges on our Senior Notes, and is not charged to the operating segments because the charges are included in the corporate capital allocation discussed above.

						Three Months Ended September 30,												Nine Months Ended September 30,
						2024						2023						2024						2023
Homebuilding consolidated gross profit:
Mid Atlantic						$	288,131					$	281,230					$	830,097					$	775,983
North East						78,251						67,861						221,829						180,389
Mid East						114,087						103,918						302,977						278,983
South East						159,431						156,846						459,137						476,319
Consolidation adjustments and other						(13,347)						380						(27,248)						(22,393)
Homebuilding consolidated gross profit						$	626,553					$	610,235					$	1,786,792					$	1,689,281

						Three Months Ended September 30,												Nine Months Ended September 30,
						2024						2023						2024						2023
Homebuilding consolidated income before taxes:
Mid Atlantic						$	214,132					$	212,826					$	613,262					$	567,119
North East						56,246						48,787						157,476						125,779
Mid East						81,385						75,136						211,374						193,360
South East						95,089						107,666						280,936						339,723
Reconciling items:
Contract land deposit reserve adjustment (1)						(3,079)						(3,783)						5,712						6,696
Equity-based compensation expense (2)						(18,012)						(24,665)						(51,410)						(69,356)
Corporate capital allocation (3)						86,489						74,171						246,044						215,862
Unallocated corporate overhead						(36,780)						(38,376)						(122,300)						(130,701)
Consolidation adjustments and other						2,575						16,947						6,666						10,948
Corporate interest expense						(6,787)						(6,583)						(20,052)						(20,126)
Corporate interest income						32,409						38,680						106,173						101,963
Reconciling items sub-total						56,815						56,391						170,833						115,286
Homebuilding consolidated income before taxes						$	503,667					$	500,806					$	1,433,881					$	1,341,267

(1)This item represents changes to the contract land deposit impairment reserve, which are not allocated to our reportable segments. See further discussion of lot deposit impairment charges in Note 2 in the accompanying condensed consolidated financial statements.

(2)The decrease in equity-based compensation expense for the three and nine-month periods ended September 30, 2024 was primarily attributable to the Options and RSUs issued as part of the 2018 four-year block grant being fully vested as of December 31, 2023.

(3)This item represents the elimination of the corporate capital allocation charge included in the respective homebuilding reportable segments. The corporate capital allocation charge is based on the segment’s monthly average asset balance, and is as follows for the periods presented:

						Three Months Ended September 30,												Nine Months Ended September 30,
						2024						2023						2024						2023
Corporate capital allocation charge:
Mid Atlantic						$	35,976					$	33,994					$	104,872					$	102,509
North East						10,578						8,944						30,456						24,542
Mid East						11,929						9,974						32,850						29,453
South East						28,006						21,259						77,866						59,358
Total						$	86,489					$	74,171					$	246,044					$	215,862

Mortgage Banking Segment

Three and Nine Months Ended September 30, 2024 and 2023

We conduct our mortgage banking activity through NVR Mortgage Finance, Inc. (“NVRM”), a wholly owned subsidiary. NVRM focuses exclusively on serving the homebuilding segment's customers. NVRM sells almost all of the mortgage loans it closes to investors in the secondary markets on a servicing-released basis, typically within 30 days from the loan closing. The following table summarizes the results of our mortgage banking operations and certain statistical data for the three and nine months ended September 30, 2024 and 2023:

						Three Months Ended September 30,												Nine Months Ended September 30,
						2024						2023						2024						2023
Loan closing volume:
Total principal						$	1,656,507					$	1,621,599					$	4,564,597					$	4,240,529
Loan volume mix:
Adjustable rate mortgages						2		%				2		%				2		%				3		%
Fixed-rate mortgages						98		%				98		%				98		%				97		%
Operating profit:
Segment profit						$	36,156					$	39,921					$	112,046					$	107,191
Equity-based compensation expense						(1,211)						(1,387)						(3,055)						(4,132)
Mortgage banking income before tax						$	34,945					$	38,534					$	108,991					$	103,059
Capture rate:						86		%				89		%				86		%				86		%
Mortgage banking fees:
Net gain on sale of loans						$	43,896					$	46,767					$	135,046					$	127,898
Title services						11,316						9,753						31,875						30,068
Servicing fees						99						96						242						155
						$	55,311					$	56,616					$	167,163					$	158,121

Loan closing volume for the three and nine months ended September 30, 2024 increased by approximately $34,900, or 2%, and $324,100, or 8%, respectively, from the same periods in 2023. The increase in loan closing volume during both the three and nine months ended September 30, 2024 was primarily attributable to the 5% and 9% increases in the homebuilding segment’s number of units settled for the three and nine months ended September 30, 2024, respectively, when compared to the same periods in 2023. The favorable impact of higher

homebuilding settlements on loan closing volume during the third quarter of 2024 was partially offset by a lower capture rate quarter over quarter.

Segment profit for the three months ended September 30, 2024 decreased by approximately $3,800, or 9%, from the same period in 2023. This decrease was attributable to an increase in general and administrative expenses and a decrease in mortgage banking fees. General and administrative expenses increased by approximately $2,400, or 11%, from the same period in 2023, primarily due to an increase in personnel costs. Mortgage banking fees decreased by approximately $1,300, or 2%, which was primarily due to a decrease in gains on sales of loans.

Segment profit for the nine months ended September 30, 2024 increased by approximately $4,900, or 5%, from the same period in 2023. This increase was primarily attributable to an increase of approximately $9,000, or 6%, in mortgage banking fees due to an increase in gains on sales of loans. This increase was partially offset by an increase in general and administrative expenses of approximately $6,600, or 10%, during the nine months ended September 30, 2024, which was primarily due to an increase in personnel costs.

Seasonality

We historically have experienced variability in our quarterly results, generally having higher New Order activity in the first half of the year and higher home settlements, revenue and net income in the second half of the year. However, in recent years our typical seasonal trends have been affected by significant changes in market conditions. As a result, our quarterly results of operations are not necessarily indicative of the results that may be expected for the full year.

Effective Tax Rate

Our effective tax rate for the three and nine months ended September 30, 2024 was 20.3% and 20.6%, respectively, compared to 19.7% and 18.2% for the three and nine months ended September 30, 2023, respectively. The increase in the effective tax rate in the three and nine month periods of 2024 compared to the same periods in 2023 was primarily attributable to a lower income tax benefit recognized for excess tax benefits from stock option exercises, which totaled approximately $23,100 and $73,700 for the three and nine months ended September 30, 2024, respectively, and approximately $31,900 and $111,000 for the three and nine months ended September 30, 2023, respectively.

We expect to experience volatility in our effective tax rate in future quarters as the amount of the excess tax benefit from equity-based awards is dependent on our stock price when awards are exercised as well as on the timing of exercises, which historically has varied from quarter to quarter.

Liquidity and Capital Resources

We fund our operations primarily from our current cash holdings and cash flows generated by operating activities. In addition, we have available a short-term unsecured working capital revolving credit facility and revolving mortgage repurchase facility, as further described below. As of September 30, 2024, we had approximately $2,500,000 in cash and cash equivalents, approximately $282,900 in unused committed capacity under our revolving credit facility and $150,000 in unused committed capacity under our revolving mortgage repurchase facility.

Material Cash Requirements

We believe that our current cash holdings, cash generated from operations, and cash available under our short-term unsecured credit agreement and revolving mortgage repurchase facility, as well as the public debt and equity markets, will be sufficient to satisfy both our short term and long term cash requirements for working capital to support our daily operations and meet commitments under our contractual obligations with third parties. Our material contractual obligations primarily consist of the following:

(i) Payments due to service our debt and interest on that debt. Future interest payments on our outstanding senior notes total $158,550, with $27,000 due within the next twelve months.

(ii) Payment obligations totaling approximately $485,000 under existing LPAs for deposits to be paid to land developers, assuming that contractual development milestones are met by the developers and we exercise our option to acquire finished lots under those LPAs. We expect to make the majority of these payments within the next three years.

(iii) Obligations under operating and finance leases related primarily to office space and our production facilities. See Note 13 of this Quarterly Report on Form 10-Q for additional discussion of our leases.

In addition to funding growth in our homebuilding and mortgage banking operations, we historically have used a substantial portion of our excess liquidity to repurchase outstanding shares of our common stock in open market and privately negotiated transactions. This ongoing repurchase program assists us in accomplishing our primary objective, creating increases in shareholder value. See Part II, Item 2, Unregistered Sales of Equity Securities and Use of Proceeds, of this Quarterly Report on Form 10-Q for further discussion of repurchase activity during the third quarter of 2024. For the nine months ended September 30, 2024, we repurchased 192,655 shares of our common stock at an aggregate purchase price of $1,493,362. As of September 30, 2024, we had approximately $682,507 available under a Board approved repurchase authorization.

Capital Resources

Senior Notes

As of September 30, 2024, we had Senior Notes with an aggregate principal balance of $900,000, which mature in May 2030. The Senior Notes are senior unsecured obligations and rank equally in right of payment with any of our existing and future unsecured senior indebtedness, will rank senior in right of payment to any of our future indebtedness that is by its terms expressly subordinated to the Senior Notes and will be effectively subordinated to any of our existing and future secured indebtedness to the extent of the value of the collateral securing such indebtedness. The indenture governing the Senior Notes does not contain any financial covenants; however, it does contain, among other items, and subject to certain exceptions, covenants that restrict our ability to create, incur, assume or guarantee secured debt, enter into sale and leaseback transactions and conditions related to mergers and/or the sale of assets. We were in compliance with all covenants under the Senior Notes as of September 30, 2024.

Credit Agreement

We have an unsecured revolving credit agreement (the "Credit Agreement") with a group of lenders which may be used for working capital and general corporate purposes. The Credit Agreement provides for aggregate revolving loan commitments of $300,000 (the "Facility"). Under the Credit Agreement, we may request increases of up to $300,000 to the Facility in the form of revolving loan commitments or term loans to the extent that new or existing lenders agree to provide additional revolving loan or term loan commitments. In addition, the Credit Agreement provides for a $100,000 sublimit for the issuance of letters of credit of which there was approximately $17,100 outstanding as of September 30, 2024. The Credit Agreement termination date is February 12, 2026. There were no borrowings outstanding under the Credit Agreement as of September 30, 2024.

Repurchase Agreement

NVRM has an unsecured revolving mortgage repurchase facility (the "Repurchase Agreement") which provides for aggregate borrowings up to $150,000 and is non-recourse to NVR. In July 2024, NVRM entered into the Second Amendment to the Repurchase Agreement, which extended the term of the Repurchase Agreement through July 14, 2025. All other terms and conditions under the amended Repurchase Agreement remained materially consistent. As of September 30, 2024, there were no borrowing base limitations reducing the amount available under the Repurchase Agreement. There were no borrowings outstanding under the Repurchase Agreement as of September 30, 2024.

For additional information regarding the Senior Notes, Credit Agreement and Repurchase Agreement, see Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2023.

Cash Flows

For the nine months ended September 30, 2024, cash, restricted cash, and cash equivalents decreased by $646,777. Net cash provided by operating activities was $737,412 for the nine months ended September 30, 2024,

due primarily to cash provided by earnings. Cash was primarily used to fund the increase in inventory of $307,247, attributable to an increase in units under construction as of September 30, 2024 compared to December 31, 2023 and a net use of approximately $166,000 from mortgage loan activity.

Net cash used in investing activities for the nine months ended September 30, 2024 was $19,797. Cash was used primarily for purchases of property, plant and equipment of $23,621.

Net cash used in financing activities was $1,364,392 for the nine months ended September 30, 2024. Cash was used to repurchase 192,655 shares of our common stock at an aggregate purchase price of $1,493,362 under our ongoing common stock repurchase program, discussed above. Cash was provided from stock option exercise proceeds totaling $130,778.

Critical Accounting Estimates

There have been no material changes to our critical accounting estimates as previously disclosed in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2023.