XML 22 R10.htm IDEA: XBRL DOCUMENT

Fair Value Measurements

6 Months Ended

Jun. 30, 2021

We apply the following methods and assumptions in estimating our fair value measurements:

Cash equivalents — The fair value measurement of money market funds is based on quoted market prices in active markets (Level 1). The fair value measurement of other cash equivalents is based on observable market-based inputs principally derived from or corroborated by observable market data (Level 2).

Short-term investments — The fair value measurement of our short-term investments is based on observable market-based inputs or inputs that are derived principally from or corroborated by observable market data by correlation or other means (Level 2).

Restricted cash — The carrying value of restricted cash approximates fair value due to the short period of time amounts are borrowed on our credit facilities, home sales proceeds are held in restricted accounts for repayment of our credit facilities and amounts are held in escrow (Level 1).

Mortgage loans held for sale — The fair value of mortgage loans held for sale is generally calculated by reference to quoted prices in secondary markets for commitments to sell mortgage loans with similar characteristics (Level 2).

Interest rate lock commitments — The fair value of interest rate lock commitments (“IRLCs”) is calculated by reference to quoted prices in secondary markets for commitments to sell mortgage loans with similar characteristics. Expired commitments are excluded from the fair value measurement. Since not all IRLCs will become closed loans, we adjust our fair value measurements for the estimated amount of IRLCs that will not close. This adjustment is effected through the pull-through rate, which represents the probability that an interest rate lock commitment will ultimately result in a closed loan (Level 3).

The following table presents the range and weighted-average pull-through rates used in determining the fair value of IRLCs as of the dates presented:


	June 30, 2021	December 31, 2020
Range	47% - 100%	47% - 100%
Weighted-average	79%	75%

Forward contracts — The fair value of mandatory loan sales commitments and derivative instruments such as forward sales of mortgage-backed securities that are utilized as economic hedging instruments is calculated by reference to quoted prices for similar assets (Level 2).

The following tables present the balances of assets and liabilities measured at fair value on a recurring basis, by level within the fair value hierarchy, as of the dates presented (in thousands):


	June 30, 2021
	Total		Level 1		Level 2		Level 3
Cash equivalents:
Money market funds	$	3,494,642	$	3,494,642	$	—	$	—
Short-term investments:
U.S. government agency securities	829,925		—		829,925		—
Treasury bills	44,988		—		44,988		—
Municipal securities	5,962		—		5,962		—
Mortgage origination-related:
Mortgage loans held for sale	171,450		—		171,450		—
IRLCs	6,413		—		—		6,413
Forward contracts - other current assets	69		—		69		—
Forward contracts - other current liabilities	(686)		—		(686)		—
Total	$	4,552,763	$	3,494,642	$	1,051,708	$	6,413


	December 31, 2020
	Total		Level 1		Level 2		Level 3
Cash equivalents:
Money market funds	$	1,486,384	$	1,486,384	$	—	$	—
Municipal securities	3,228		—		3,228		—
Short-term investments:
Treasury bills	1,163,813		—		1,163,813		—
U.S. government agency securities	1,037,577		—		1,037,577		—
Municipal securities	16,220		—		16,220		—
Certificates of deposit	498		—		498		—
Mortgage origination-related:
Mortgage loans held for sale	330,758		—		330,758		—
IRLCs	12,342		—		—		12,342
Forward contracts - other current liabilities	(2,608)		—		(2,608)		—
Total	$	4,048,212	$	1,486,384	$	2,549,486	$	12,342

The following table presents the changes in our IRLCs for the periods presented (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020 (1)
Balance, beginning of the period	$	5,002	$	2,225	$	12,342	$	937
Issuances	16,120		10,142		34,421		15,507
Transfers	(16,041)		(8,586)		(40,439)		(13,142)
Fair value changes recognized in earnings	1,332		1,310		89		1,789
Balance, end of period	$	6,413	$	5,091	$	6,413	$	5,091

(1) Beginning balance represents transfers of IRLCs from Level 2 to Level 3 within the fair value hierarchy as of January 1, 2020.

At June 30, 2021, the notional amounts of the hedging instruments related to our mortgage loans held for sale were $355.0 million and $479.3 million for our IRLCs and forward contracts, respectively. At December 31, 2020, the notional amounts of the hedging instruments related to our mortgage loans held for sale were $378.1 million and $652.1 million for our IRLCs and forward contracts, respectively. We do not have the right to offset our derivative positions.

See Note 11 for the carrying amount and estimated fair value of our convertible senior notes.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details