House and Land Inventory

9 Months Ended

Sep. 30, 2025

Major components of inventory were as follows ($000’s omitted):


	September 30, 2025		December 31, 2024
Homes under construction	$	5,857,201	$	5,770,355
Land under development	6,772,262		6,243,745
Raw land	584,641		548,848
Consolidated inventory not owned (a)	120,186		102,865
Land held for sale	17,687		27,007
	$	13,351,977	$	12,692,820

(a) Consolidated inventory not owned includes land sold to third parties for which the Company retains a repurchase option.

We capitalize interest cost into inventory during the active development and construction of our communities. In all periods presented, we capitalized substantially 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				Nine Months Ended
	September 30,				September 30,
	2025		2024		2025		2024
Interest in inventory, beginning of period	$	136,624	$	149,362	$	139,960	$	139,078
Interest capitalized	26,139		26,443		78,360		86,346
Interest expensed	(31,199)		(29,708)		(86,756)		(79,327)
Interest in inventory, end of period	$	131,564	$	146,097	$	131,564	$	146,097

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 may serve to reduce 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 income, net. See Note 1.

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 September 30, 2025 or December 31, 2024 because we determined that we were not any VIE's 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 September 30, 2025 and December 31, 2024 ($000’s omitted):


	September 30, 2025				December 31, 2024
	Deposits and Pre-acquisition Costs		Remaining Purchase Price		Deposits and Pre-acquisition Costs		Remaining Purchase Price
Land options with VIEs	$	399,980	$	3,477,827	$	358,066	$	3,104,196
Other land options	765,801		6,394,924		700,397		6,127,486
	$	1,165,781	$	9,872,751	$	1,058,463	$	9,231,682

Land-related charges

We recorded the following land-related charges ($000's omitted):


		Three Months Ended				Nine Months Ended
		September 30,				September 30,
	Statement of Operations Classification	2025		2024		2025		2024
Land impairments	Home sale cost of revenues	$	16,752	$	3,081	$	42,181	$	3,204
Net realizable value ("NRV") adjustments - land held for sale	Land sale and other cost of revenues	39		4,318		1,115		4,319
Write-offs of deposits and pre-acquisition costs	Other expense, net	10,836		4,732		26,515		12,406
		$	27,627	$	12,131	$	69,811	$	19,929

Our evaluations for land impairments, NRV adjustments, and write-offs of deposits and pre-acquisition costs are based on our best estimates of the future cash flows of our communities. Due to uncertainties in the estimation process, the significant volatility in demand for new housing, the long life cycles of certain of our communities, and potential changes in our strategy related to certain communities, actual results could differ significantly from such estimates. See Note 3 for a summary of such charges by reportable segment.