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Inventory | 6 Months Ended
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Jun. 30, 2018
Inventory Disclosure [Abstract] |
Inventory | Inventory Major components of inventory were as follows ($000’s omitted):
| June 30, 2018 |  | December 31, 2017
Homes under construction | $ | 2,922,260 |  |  | $ | 2,421,405 |
Land under development | 4,045,615 |  |  | 4,135,814 |
Raw land | 531,790 |  |  | 589,911 |
| $ | 7,499,665 |  |  | $ | 7,147,130 |
We capitalize interest cost into inventory during the active development and construction of our communities. In all periods presented, we capitalized all Homebuilding interest costs into inventory because the level of our active inventory exceeded our debt levels. Information related to interest capitalized into inventory is as follows ($000’s omitted):
| Three Months Ended |  | Six Months Ended
| June 30, |  | June 30,
| 2018 |  | 2017 |  | 2018 |  | 2017
Interest in inventory, beginning of period | $ | 240,013 |  |  | $ | 203,828 |  |  | $ | 226,611 |  |  | $ | 186,097 |
Interest capitalized | 43,771 |  |  | 44,949 |  |  | 87,731 |  |  | 89,872 |
Interest expensed | (40,157 | ) |  | (35,927 | ) |  | (70,715 | ) |  | (63,119 | )
Interest in inventory, end of period | $ | 243,627 |  |  | $ | 212,850 |  |  | $ | 243,627 |  |  | $ | 212,850 |
Land option agreements We enter into land option agreements in order to procure land for the construction of homes in the future. Pursuant to these land option agreements, we generally provide a deposit to the seller as consideration for the right to purchase land at different times in the future, usually at predetermined prices. Such contracts enable us to defer acquiring portions of properties owned by third parties or unconsolidated entities until we have determined whether and when to exercise our option, which reduces our financial risks associated with long-term land holdings. Option deposits and pre-acquisition costs (such as environmental testing, surveys, engineering, and entitlement costs) are capitalized if the costs are directly identifiable with the land under option, the costs would be capitalized if we owned the land, and acquisition of the property is probable. Such costs are reflected in other assets and are reclassified to inventory upon taking title to the land. We write off deposits and pre-acquisition costs when it becomes probable that we will not go forward with the project or recover the capitalized costs. Such decisions take into consideration changes in local market conditions, the timing of required land purchases, the availability and best use of necessary incremental capital, and other factors. We record any such write-offs of deposits and pre-acquisition costs within other expense, net. If an entity holding the land under option is a variable interest entity ("VIE"), our deposit represents a variable interest in that entity. No VIEs required consolidation at either June 30, 2018 or December 31, 2017 because we determined that we were not the VIEs' primary beneficiary. Our maximum exposure to loss related to these VIEs is generally limited to our deposits and pre-acquisition costs under the land option agreements. The following provides a summary of our interests in land option agreements as of June 30, 2018 and December 31, 2017 ($000’s omitted):
| June 30, 2018 |  | December 31, 2017
| Deposits and Pre-acquisition Costs |  | Remaining Purchase Price |  | Deposits and Pre-acquisition Costs |  | Remaining Purchase Price
Land options with VIEs | $ | 73,940 |  |  | $ | 1,145,136 |  |  | $ | 78,889 |  |  | $ | 977,480 |
Other land options | 144,497 |  |  | 1,603,950 |  |  | 129,098 |  |  | 1,485,099 |
| $ | 218,437 |  |  | $ | 2,749,086 |  |  | $ | 207,987 |  |  | $ | 2,462,579 |
Land-related charges We recorded the following significant land-related charges in the three months ended June 30, 2017 ($000's omitted):
| Statement of Operations Classification |  | June 30,
|  | 2017
Net realizable value adjustments ("NRV") - land held for sale | Land sale cost of revenues |  | $ | 81,006 |
Land inventory impairments | Home sale cost of revenues |  | 31,487 |
Impairments of unconsolidated entities | Other expense, net |  | 8,017 |
Write-offs of deposits and pre-acquisition costs | Other expense, net |  | 5,063 |
Total land-related charges |  |  | $ | 125,573 |
We periodically elect to sell parcels of land to third parties in the event such assets no longer fit into our strategic operating plans or are zoned for commercial or other development. The NRV adjustments for the three months ended June 30, 2017 were primarily the result of a plan we announced in May 2017 to sell select non-core and underutilized land parcels following a strategic review of our land portfolio, pursuant to which it was determined that we would sell certain inactive land parcels, representing approximately 17 communities and 4,600 lots. These land parcels were located in diverse geographic areas and no longer fit into our strategic plans. The land parcels identified for sale included: land requiring significant additional development spend that would not yield suitable returns; land in excess of near-term need; and land entitled for certain product types inconsistent with our primary offerings. As a consequence of the change in strategy with respect to the future use of these land parcels, we recorded NRV adjustments totaling $81.0 million in the three months ended June 30, 2017 relating to inventory with a pre-NRV carrying value of $151.0 million. The estimated fair values of these inactive land parcels held for sale were generally based on comparisons to market comparable transactions, letters of intent, active negotiations with market participants, or similar market-based information supplemented in certain instances by estimated future net cash flows discounted for inherent risk associated with each underlying asset. Land inventory impairments relate to communities that are either active or that we intend to eventually open and build out. As part of the May 2017 strategic review, we decided to accelerate the monetization of two small communities primarily through a combination of changing the product offerings and lowering the sales prices within the communities. This decision resulted in land impairments of $31.5 million in the three months ended June 30, 2017. We determine the fair value of a community's inventory, and any related impairments, using a combination of discounted cash flow models and market comparable transactions, where available. These estimated cash flows are significantly impacted by estimates related to expected average selling prices, expected sales paces, expected land development and construction timelines, and anticipated land development, construction, and overhead costs. The assumptions used in the discounted cash flow models are specific to each community, which may be located in a variety of geographic markets, and offer homes at sales prices reflective of the product offering and market. Accordingly, determining the fair value of a community's inventory involves a number of variables, many of which are interrelated. The table below summarizes certain quantitative unobservable inputs utilized in determining the fair value of impairments recorded in the three months ended June 30, 2017:
| Range
| June 30, 2017
Average selling price ($000s) | $253 | to | $461
Sales pace per quarter (units) | 5 | to | 9
Discount rate | 18% | to | 25%
Our evaluations for impairments are based on our best estimates of the future cash flows to be generated from our communities. Due to uncertainties in the estimation process, the significant volatility in demand for new housing, the long life cycles of many communities, and potential changes in our strategy related to certain communities, actual results could differ significantly from such estimates.

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- Definition The entire disclosure for inventory. Includes, but is not limited to, the basis of stating inventory, the method of determining inventory cost, the classes of inventory, and the nature of the cost elements included in inventory. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 330 -URI http://asc.fasb.org/topic&trid=2126998 + Details
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