<SUBMISSION>
<ACCESSION-NUMBER>0000950147-00-001206
<TYPE>10-Q
<PUBLIC-DOCUMENT-COUNT>5
<PERIOD>20000630
<FILING-DATE>20000811
<FILER>
<COMPANY-DATA>
<CONFORMED-NAME>MERITAGE CORP
<CIK>0000833079
<ASSIGNED-SIC>6798
<IRS-NUMBER>860611231
<STATE-OF-INCORPORATION>MD
<FISCAL-YEAR-END>1231
</COMPANY-DATA>
<FILING-VALUES>
<FORM-TYPE>10-Q
<ACT>34
<FILE-NUMBER>001-09977
<FILM-NUMBER>693392
</FILING-VALUES>
<BUSINESS-ADDRESS>
<STREET1>6613 N SCOTTSDALE RD
<STREET2>STE 200
<CITY>SCOTTSDALE
<STATE>AZ
<ZIP>85250
<PHONE>6029988700
</BUSINESS-ADDRESS>
<MAIL-ADDRESS>
<STREET1>6613 NORTH SCOTTSDALE ROAD
<STREET2>SUITE200
<CITY>SCOTTSDALE
<STATE>AZ
<ZIP>85250
</MAIL-ADDRESS>
<FORMER-COMPANY>
<FORMER-CONFORMED-NAME>MONTEREY HOMES CORP
<DATE-CHANGED>19970113
</FORMER-COMPANY>
<FORMER-COMPANY>
<FORMER-CONFORMED-NAME>HOMEPLEX MORTGAGE INVESTMENTS CORP
<DATE-CHANGED>19920703
</FORMER-COMPANY>
<FORMER-COMPANY>
<FORMER-CONFORMED-NAME>EMERALD MORTGAGE INVESTMENTS CORP
<DATE-CHANGED>19900502
</FORMER-COMPANY>
</FILER>
<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>0001.txt
<DESCRIPTION>QUARTERLY REPORT FOR THE QTR ENDED 6/30/00
<TEXT>

================================================================================

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
    EXCHANGE ACT OF 1934

    For the quarterly period ended June 30, 2000

                                       OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
    EXCHANGE ACT OF 1934

                          COMMISSION FILE NUMBER 1-9977


                              MERITAGE CORPORATION
             (Exact Name of Registrant as Specified in Its Charter)


               Maryland                                          86-0611231
     (State or Other Jurisdiction)                            (I.R.S. Employer
   of Incorporation or Organization)                         Identification No.)


 6613 North Scottsdale Road, Suite 200
          Scottsdale, Arizona                                      85250
(Address of Principal Executive Offices)                         (Zip Code)


                                 (480) 998-8700
              (Registrant's Telephone Number, Including Area Code)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days: Yes [X] No [ ].

As of August 10, 2000,  5,171,277  shares of Meritage  Corporation  common stock
were outstanding.

================================================================================
<PAGE>
                              MERITAGE CORPORATION
                  FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2000
                                TABLE OF CONTENTS


                                                                        Page No.
                                                                        --------
PART I. FINANCIAL INFORMATION

     ITEM 1. FINANCIAL STATEMENTS:

             Consolidated Balance Sheets as of June 30, 2000 and
             December 31, 1999.........................................    3

             Consolidated Statements of Earnings for the Three and
             Six Month Periods ended June 30, 2000 and 1999............    4

             Consolidated Statements of Cash Flows for the Six
             Month Periods ended June 30, 2000 and 1999................    5

             Notes to Condensed Consolidated Financial Statements......    6

     ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
             CONDITION AND RESULTS OF OPERATIONS.......................   10

     ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
             MARKET RISK...............................................   13

PART II. OTHER INFORMATION

     ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.......   13

     ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K..........................   14

SIGNATURES.............................................................  S-1

                                        2
<PAGE>
                          PART I FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

                      MERITAGE CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS


<TABLE>
<CAPTION>
                                                               June 30,          December 31,
                                                                 2000               1999
                                                            -------------       -------------
                                                             (Unaudited)
<S>                                                         <C>                 <C>
ASSETS
  Cash and cash equivalents                                 $   9,458,651       $  13,422,016
  Real estate under development                               200,586,220         171,012,405
  Deposits on real estate under option or contract             17,491,489          15,699,609
  Receivables                                                   1,543,645           1,643,187
  Deferred tax asset                                              834,375             698,634
  Goodwill                                                     18,208,069          18,741,625
  Property and equipment, net                                   4,480,562           4,040,134
  Other assets                                                  1,412,621           1,301,286
                                                            -------------       -------------
       Total Assets                                         $ 254,015,632       $ 226,558,896
                                                            =============       =============
LIABILITIES
  Accounts payable and accrued liabilities                  $  38,246,068       $  41,950,761
  Home sale deposits                                           12,316,004           8,261,000
  Notes payable                                               101,753,499          85,936,601
                                                            -------------       -------------

       Total Liabilities                                      152,315,571         136,148,362
                                                            -------------       -------------
STOCKHOLDERS' EQUITY
  Common stock, par value $.01 per share; 50,000,000
   Shares authorized; issued and outstanding -
   5,606,862
   Shares at June 30, 2000, and 5,474,906 shares at
   December 31, 1999                                               56,069              54,749
  Additional paid-in capital                                  100,985,745         100,406,745
  Accumulated earnings (deficit)                                5,195,358          (8,148,535)
  Less cost of shares held in treasury (414,685 shares at
    June 30, 2000, and 186,000 shares at December 31,
    1999)                                                      (4,537,111)         (1,902,425)
                                                            -------------       -------------

       Total Stockholders' Equity                             101,700,061          90,410,534
                                                            -------------       -------------

  Total Liabilities and Stockholders' Equity                $ 254,015,632       $ 226,558,896
                                                            =============       =============
</TABLE>
      See accompanying notes to condensed consolidated financial statements

                                        3
<PAGE>
                      MERITAGE CORPORATION AND SUBSIDIARIES
                       CONSOLIDATED STATEMENTS OF EARNINGS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                       Three Months Ended June 30,        Six Months Ended June 30,
                                     ------------------------------    ------------------------------
                                         2000             1999             2000             1999
                                     -------------    -------------    -------------    -------------
<S>                                  <C>              <C>              <C>              <C>
Home sales revenue                   $ 120,802,671    $  76,646,871    $ 212,455,331    $ 127,953,068
Land sales revenue                         899,406           74,900        1,656,917          154,800
                                     -------------    -------------    -------------    -------------
                                       121,702,077       76,721,771      214,112,248      128,107,868

Cost of home sales                     (96,393,849)     (60,810,073)    (171,350,198)    (102,132,361)
Cost of land sales                        (789,267)         (34,500)      (1,470,472)         (69,000)
                                     -------------    -------------    -------------    -------------
                                       (97,183,116)     (60,844,573)    (172,820,670)    (102,201,361)

Home sales gross profit                 24,408,822       15,836,798       41,105,133       25,820,707
Land sales gross profit                    110,139           40,400          186,445           85,800
                                     -------------    -------------    -------------    -------------
                                        24,518,961       15,877,198       41,291,578       25,906,507

Commissions and other sales costs       (6,457,926)      (4,492,042)     (12,236,486)      (7,907,859)
General and administrative expense      (4,846,778)      (3,678,297)      (8,848,739)      (6,824,344)
Interest expense                            (2,999)          (1,844)          (4,521)          (2,679)
Other income, net                          421,385          629,489          953,656          947,921
                                     -------------    -------------    -------------    -------------

Earnings before income taxes            13,632,643        8,334,504       21,155,488       12,119,546
Income taxes                            (5,059,633)      (3,793,701)      (7,811,595)      (5,253,701)
                                     -------------    -------------    -------------    -------------
Net earnings                         $   8,573,010    $   4,540,803    $  13,343,893    $   6,865,845
                                     =============    =============    =============    =============

Basic earnings per share             $        1.62    $         .83    $        2.52    $        1.26
                                     =============    =============    =============    =============

Diluted earnings per share           $        1.50    $         .75    $        2.31    $        1.14
                                     =============    =============    =============    =============
</TABLE>

     See accompanying notes to condensed consolidated financial statements.

                                        4
<PAGE>
                      MERITAGE CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                             Six Months Ended June 30,
                                                                       ---------------------------------
                                                                           2000                 1999
                                                                       -------------       -------------
<S>                                                                    <C>                 <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
 Net earnings                                                          $  13,343,893       $   6,865,845
 Adjustments to reconcile net earnings to net
  cash provided by operating activities:
  Depreciation and amortization                                            1,524,233           1,009,513
  (Increase) decrease in deferred tax asset                                 (135,741)          4,552,837
  Stock option compensation expense                                           73,254             296,658
  Increase in real estate under development                              (29,573,815)        (42,433,135)
  Increase in deposits on real estate under option or contract            (1,791,880)         (4,388,322)
  Decrease in receivables and other assets                                   252,788             437,135
  Increase (decrease) in accounts payable and accrued liabilities          1,690,178          (2,309,513)
  Increase in home sale deposits                                           4,055,004           3,526,024
                                                                       -------------       -------------
       Net cash used in operating activities                             (10,562,086)        (32,442,958)
                                                                       -------------       -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Cash paid for merger/acquisition                                        (5,158,006)         (6,966,890)
  Purchases of property and equipment                                     (1,431,105)         (1,713,715)
                                                                       -------------       -------------
    Net cash used in investing activities                                 (6,589,111)         (8,680,605)
                                                                       -------------       -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Borrowings                                                             196,000,554         128,447,739
  Repayment of borrowings                                               (180,183,656)        (92,986,476)
  Purchase of treasury shares                                             (2,634,686)           (112,962)
  Stock options exercised                                                      5,620             472,681
                                                                       -------------       -------------
       Net cash provided by financing activities                          13,187,832          35,820,982
                                                                       -------------       -------------

Net decrease in cash and cash equivalents                                 (3,963,365)         (5,302,581)
Cash and cash equivalents at beginning of period                          13,422,016          12,386,806
                                                                       -------------       -------------
Cash and cash equivalents at end of period                             $   9,458,651       $   7,084,225
                                                                       =============       =============
</TABLE>

      See accompanying notes to condensed consolidated financial statements

                                        5
<PAGE>
                      MERITAGE CORPORATION AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION

     We develop, construct and sell new high-quality, single-family homes in the
semi-custom  luxury,   move-up  and  entry-level  markets.  We  operate  in  the
Dallas/Fort  Worth,  Austin and Houston,  Texas markets as Legacy Homes,  in the
Phoenix and Tucson,  Arizona  metropolitan  markets under the Monterey Homes and
Meritage  Homes  of  Arizona  brand  names,  and in the  San  Francisco  Bay and
Sacramento, California markets as Meritage Homes of Northern California.

     BASIS OF PRESENTATION.  The consolidated  financial  statements include the
accounts of Meritage Corporation and its subsidiaries. Intercompany balances and
transactions  have been  eliminated  in  consolidation  and certain prior period
amounts have been reclassified to be consistent with current financial statement
presentation. In the opinion of management, the unaudited condensed consolidated
financial  statements  reflect  all  adjustments,   consisting  only  of  normal
recurring  adjustments,  necessary to fairly present our financial  position and
results of operations for the periods  presented.  The results of operations for
any interim period are not necessarily  indicative of results to be expected for
a full fiscal year.

NOTE 2 - REAL ESTATE UNDER DEVELOPMENT AND CAPITALIZED INTEREST

The components of real estate under development follow (in thousands):

                                                        June 30,    December 31,
                                                         2000          1999
                                                      -----------   -----------
Homes under contract, in production                   $   102,862   $    71,987
Finished home sites and home sites under development       68,722        63,610
Model homes and homes held for resale                      22,965        31,797
Land held for development                                   6,037         3,618
                                                      -----------   -----------
                                                      $   200,586   $   171,012
                                                      ===========   ===========

     We have  included  108 pre-sold  homes with a dollar cost of  approximately
$21.5 million,  purchased from two other Arizona builders,  in real estate under
development  and in  quarter-end  sales  backlog,  but have not included them as
sales contracts written during the quarter.

     We capitalize  certain  interest  costs  incurred  during  development  and
construction. Capitalized interest is allocated to real estate under development
and  charged to cost of sales  when the  property  is  delivered.  Summaries  of
interest capitalized and interest expensed follow (in thousands):

<TABLE>
<CAPTION>
                                                Quarter Ended         Six Months Ended
                                                   June 30,               June 30,
                                              ------------------     ------------------
                                               2000       1999        2000       1999
                                              -------    -------     -------    -------
<S>                                           <C>        <C>         <C>        <C>
Beginning unamortized capitalized interest    $ 4,274    $ 2,260     $ 3,971    $ 1,982
Interest capitalized                            2,774      1,510       4,642      2,599
Amortized in cost of home and land sales       (2,137)    (1,117)     (3,702)    (1,928)
                                              -------    -------     -------    -------
Ending unamortized capitalized interest       $ 4,911    $ 2,653     $ 4,911    $ 2,653
                                              =======    =======     =======    =======

Interest incurred                             $ 2,777    $ 1,512     $ 4,647    $ 2,602
Interest capitalized                           (2,774)    (1,510)     (4,642)    (2,599)
                                              -------    -------     -------    -------
Interest expensed                             $     3    $     2     $     5    $     3
                                              =======    =======     =======    =======
</TABLE>

                                        6
<PAGE>
                      MERITAGE CORPORATION AND SUBSIDIARIES
       NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                                   (UNAUDITED)


NOTE 3 - NOTES PAYABLE

Notes payable consist of the following (in thousands):

                                                          June 30,  December 31,
                                                            2000       1999
                                                         ---------   ---------
$100 million bank revolving construction line of
  credit, interest payable monthly approximating
  prime (9.5% at June 30, 2000) or LIBOR (30 day
  LIBOR 6.6% at June 30, 2000), plus 1.75% payable
  December 31, 2001, secured by first deeds of
  trust on real estate................................   $  62,320   $  36,180

$65 million bank revolving construction line of
  credit, interest payable monthly approximating
  prime or LIBOR plus 2.0%, payable at the earlier
  of close of escrow, maturity date of individual
  homes within the line or August 31, 2000, secured
  by first deeds of trust on real estate..............      21,321      26,104

$15 million unsecured bank revolving line of credit,
  interest payable monthly at prime, matured
  January 17, 2000....................................          --       6,000

Acquisition and development credit facilities and
  seller carry back financing totaling $5.7 million,
  interest payable monthly, ranging from prime to
  prime plus .25% or at a fixed 10% per annum rate;
  payable at the earlier of funding of construction
  financing or the maturity date of the individual
  projects, secured by first deeds of trust on land...       3,093       2,627

Senior unsecured notes, maturing September 15, 2005,
  annual interest of 9.10% payable quarterly,
  principal payable in three equal installments on
  September 15, 2003, 2004 and 2005...................      15,000      15,000

Other.................................................          19          26
                                                         ---------   ---------

     Total ...........................................   $ 101,753   $  85,937
                                                         =========   =========

                                        7
<PAGE>
                      MERITAGE CORPORATION AND SUBSIDIARIES
       NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                                   (UNAUDITED)


NOTE 4 - EARNINGS PER SHARE

     A summary of the  reconciliation  from basic  earnings per share to diluted
earnings  per share for the three and six months  ended  June 30,  2000 and 1999
follows (in thousands, except per share amounts):

<TABLE>
<CAPTION>
                                            Quarter Ended      Six Months Ended
                                              June 30,             June 30,
                                          -----------------    -----------------
                                           2000      1999       2000      1999
                                          -------   -------    -------   -------
<S>                                       <C>       <C>        <C>       <C>
Net earnings                              $ 8,573   $ 4,541    $13,344   $ 6,866
Basic EPS - Weighted average shares
 outstanding                                5,287     5,456      5,287     5,441
                                          -------   -------    -------   -------
Basic earnings per share                  $  1.62   $   .83    $  2.52   $  1.26
                                          =======   =======    =======   =======
Basic EPS - Weighted average shares
 outstanding                                5,287     5,456      5,287     5,441

Effect of dilutive securities:
  Contingent shares and warrants               --        70         37        77
  Stock options                               439       494        451       519
                                          -------   -------    -------   -------
Dilutive EPS - Weighted average shares
 outstanding                                5,726     6,020      5,775     6,037
                                          -------   -------    -------   -------
Diluted earnings per share                $  1.50   $   .75    $  2.31   $  1.14
                                          =======   =======    =======   =======
Antidilutive stock options not included
 in diluted EPS                               277       291        278       287
                                          =======   =======    =======   =======
</TABLE>

NOTE 5 - INCOME TAXES

     Components of income tax expense are (in thousands):

                                   Quarter Ended             Six Months Ended
                                      June 30,                    June 30,
                               ---------------------       ---------------------
                                2000          1999          2000          1999
                               -------       -------       -------       -------
     Current taxes:
          Federal              $ 4,520       $   157       $ 6,939       $   240
          State                    657           296         1,009           459
                               -------       -------       -------       -------
                                 5,177           453         7,948           699
                               -------       -------       -------       -------
     Deferred taxes:
          Federal                 (105)        3,254          (122)        4,467
          State                    (12)           87           (14)           88
                               -------       -------       -------       -------
                                  (117)        3,341          (136)        4,555
                               -------       -------       -------       -------
          Total                $ 5,060       $ 3,794       $ 7,812       $ 5,254
                               =======       =======       =======       =======

                                        8
<PAGE>
                      MERITAGE CORPORATION AND SUBSIDIARIES
       NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                                   (UNAUDITED)


NOTE 6 - SEGMENT INFORMATION

     We classify our operations into three primary geographic  segments:  Texas,
Arizona and California.  These segments  generate  revenues  through the sale of
homes to external customers. We are not dependent on any one major customer.

     Operational   information  relating  to  the  different  business  segments
follows.  Certain  information  has not  been  included  by  segment  due to the
immateriality  of the amount to the  segment or in total.  We  evaluate  segment
performance based on several factors,  of which the primary financial measure is
earnings  before  interest  and taxes  (EBIT).  The  accounting  policies of the
business segments are the same as those described in Notes 1 and 2. There are no
significant transactions between segments.

<TABLE>
<CAPTION>
                                            Quarter Ended           Six Months Ended
                                               June 30,                  June 30,
                                        ----------------------    ----------------------
                                          2000         1999         2000         1999
                                        ---------    ---------    ---------    ---------
                                                         (in thousands)
<S>                                     <C>          <C>          <C>          <C>
HOME SALES REVENUE:

  Texas                                 $  52,281    $  42,461    $ 101,711    $  72,795
  Arizona                                  32,257       30,056       54,199       49,684
  California                               36,264        4,130       56,545        5,474
                                        ---------    ---------    ---------    ---------
         Total                          $ 120,802    $  76,647    $ 212,455    $ 127,953
                                        =========    =========    =========    =========
EBIT:
  Texas                                 $   8,769    $   5,819    $  15,779    $   9,554
  Arizona                                   2,762        3,815        3,757        5,705
  California                                5,631        1,195        7,942          773
  Corporate and other                      (1,389)      (1,378)      (2,616)      (1,984)
                                        ---------    ---------    ---------    ---------
         Total                          $  15,773    $   9,451    $  24,862    $  14,048
                                        =========    =========    =========    =========

AMORTIZATION OF CAPITALIZED INTEREST:
  Texas                                 $     656    $     367    $   1,291    $     667
  Arizona                                     933          688        1,511        1,191
  California                                  548           62          900           70
                                        ---------    ---------    ---------    ---------
         Total                          $   2,137    $   1,117    $   3,702    $   1,928
                                        =========    =========    =========    =========

                                                                     At           At
                                                                  June 30,    December 31,
                                                                    2000         1999
                                                                  ---------    ---------
ASSETS:
   Texas                                                          $  99,228    $  97,832
   Arizona                                                          106,319       77,195
   California                                                        42,583       43,773
   Corporate                                                          5,886        7,759
                                                                  ---------    ---------
          Total                                                   $ 254,016    $ 226,559
                                                                  =========    =========
</TABLE>
                                        9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

     This Quarterly Report on Form 10-Q contains forward-looking statements. The
words "believe,"  "expect,"  "anticipate," and "project" and similar expressions
identify  forward-looking  statements,  which  speak  only  as of the  date  the
statement was made.  Such  forward-looking  statements are within the meaning of
that term in Section 27A of the Securities Act of 1933, as amended,  and Section
21E of the  Securities  Exchange Act of 1934, as amended.  Such  statements  may
include,  but are not  limited  to,  projections  of  revenues,  income or loss,
capital expenditures, plans for future operations, financing needs or plans, the
impact of inflation,  the impact of changes in interest rates, plans relating to
our products or  services,  potential  real  property  acquisitions,  and new or
planned development projects, as well as assumptions relating to the foregoing.

     Statements in Exhibit 99 to this  Quarterly  Report on Form 10-Q and in our
Annual Report on Form 10-K for the year ended  December 31, 1999,  including the
Notes to the Consolidated Financial Statements and "Management's  Discussion and
Analysis of Financial  Condition and Results of Operations,"  describe  factors,
among others,  that could  contribute to or cause such  differences.  Additional
factors  that  could  cause  actual  results  to differ  materially  from  those
expressed in such  forward-looking  statements  are described in "Business"  and
"Market for the Registrant's  Common Stock and Related  Stockholder  Matters" in
our December 31, 1999 Annual Report on Form 10-K.

     RESULTS OF OPERATIONS

     The following  discussion and analysis provides  information  regarding the
results of our  operations  for the three and six months ended June 30, 2000 and
June 30,  1999.  All  material  balances  and  transactions  between  us and our
subsidiaries have been eliminated.  In managements'  opinion,  the data reflects
all adjustments,  consisting of only normal recurring adjustments,  necessary to
fairly present our financial  position and results of operations for the periods
presented.  The results of operations for any interim period are not necessarily
indicative of results expected for a full fiscal year.

     HOME SALES REVENUE

     Home sales  revenue is the product of the number of homes closed during the
period and the average  sales  price per home.  Comparative  second  quarter and
first six months 2000 and 1999 home sales revenue follow (dollars in thousands):

<TABLE>
<CAPTION>
                         Quarter Ended                                Six Months Ended
                           June 30,        Dollar/Unit Percentage         June 30,        Dollar/Unit   Percentage
                      -------------------    Increase   Increase     -------------------    Increase     Increase
                        2000       1999     (Decrease) (Decrease)      2000       1999     (Decrease)   (Decrease)
                      --------   --------    --------   --------     --------   --------    --------     --------
<S>                   <C>        <C>         <C>        <C>          <C>        <C>         <C>          <C>
TOTAL
Dollars               $120,802   $ 76,647    $ 44,155      58%       $212,455   $127,953    $ 84,502        66%
Homes closed               525        374         151      40%            965        631         334        53%
Average sales price   $  230.1   $  204.9    $   25.2      12%       $  220.2   $  202.8    $   17.4         9%

TEXAS
Dollars               $ 52,281   $ 42,461    $  9,820      23%       $101,711   $ 72,795    $ 28,916        40%
Homes closed               303        275          28      10%            605        475         130        27%
Average sales price   $  172.5   $  154.4    $   18.1      12%       $  168.1   $  153.3    $   14.8        10%

ARIZONA
Dollars               $ 32,257   $ 30,056    $  2,201       7%       $ 54,199   $ 49,684    $  4,515         9%
Homes closed               117         88          29      33%            196        141          55        39%
Average sales price   $  275.7   $  341.5    $  (65.8)    (19)%      $  276.5   $  352.4    $  (75.9)      (22%)

CALIFORNIA
Dollars               $ 36,264   $  4,130    $ 32,134     778%       $ 56,545   $  5,474    $ 51,071       933%
Homes closed               105         11          94     855%            164         15         149       993%
Average sales price   $  345.4   $  375.5    $  (30.1)     (8)%      $  344.8   $  364.9    $  (20.1)       (6)%
</TABLE>
                                       10
<PAGE>
     The increase in total home sales revenue and number of homes closed in 2000
compared to 1999 results mainly from our strong market performances in Texas and
California.

     HOME SALES GROSS PROFIT

     Gross profit is home sales  revenue,  net of housing  cost of sales,  which
include  developed home site costs,  home  construction  costs,  amortization of
common  community costs (such as the cost of model complexes and  architectural,
legal and zoning costs),  interest,  sales tax, warranty,  construction overhead
and closing  costs.  Comparative  2000 and 1999  housing  gross  profit  follows
(dollars in thousands):

<TABLE>
<CAPTION>
                                  Quarter Ended June 30,                            Six Months Ended June 30,
                     -----------------------------------------------    -----------------------------------------------
                                               Dollar/                                            Dollar/
                                              Percentage   Percentage                            Percentage   Percentage
                                               Increase     Increase                              Increase     Increase
                       2000         1999      (Decrease)   (Decrease)     2000         1999      (Decrease)   (Decrease)
                     ---------    ---------    ---------    --------    ---------    ---------    ---------    --------
<S>                  <C>          <C>          <C>          <C>         <C>          <C>          <C>          <C>
Dollars              $  24,409    $  15,837    $   8,572       54%      $  41,105    $  25,821    $  15,284       59%
Percentage of home
 sales revenues           20.2%        20.7%         (.5)%     --            19.3%        20.2%         (.9)%     --
</TABLE>

     The dollar increase in gross profit for the three and six months ended June
30, 2000 over the prior year periods is  attributable  to the increase in number
of homes closed.  The gross profit margin decreased somewhat in both periods due
to the  increased  deliveries  of our new  lower-priced,  lower  margin  Arizona
products.

     COMMISSIONS AND OTHER SALES COSTS

     Commissions  and other sales costs,  such as advertising  and sales offices
expenses,  were approximately $6.5 million, or 5.3% of home sales revenue in the
three months ended June 30, 2000  compared  with $4.5  million,  or 5.9% of home
sales revenue in the second  quarter of 1999.  For the first six months of 2000,
commissions and other sales costs were approximately  $12.2 million,  or 5.8% of
home sales  revenue,  compared with $7.9 million,  or 6.2% of home sales revenue
for the  first  half of  1999.  The  slight  decrease  in  these  expenses  as a
percentage  of home  sales  revenue  was  caused by holding  down  increases  in
advertising and other marketing costs.

     GENERAL AND ADMINISTRATIVE EXPENSES

     General and  administrative  expenses were approximately $4.8 million (4.0%
of revenue) in the second quarter of 2000, as compared with  approximately  $3.7
million (4.8% of revenue) in 1999.  For the six months ended June 30, 2000,  G&A
expenses were approximately  $8.8 million (4.1% of revenue),  compared with $6.8
million (5.3% of revenue) for the same period of 1999.  The higher  expense as a
percentage  of  revenue  for  the  six  months  ended  June  30,  1999  includes
approximately  $600,000  related to an employment  agreement  buyout of a former
managing  director.  Operating costs in 1999 were also higher as a percentage of
revenue due to overhead increases incurred related to our California  expansion,
and the start-up of our new Meritage Division in Phoenix, Arizona.

     INCOME TAXES

     The  increases  in income tax expense for the quarter and six months  ended
June 30, 2000 from prior  year's  periods were caused by higher  taxable  income
offset by a slightly lower effective tax rate.

                                       11
<PAGE>
     SALES CONTRACTS

     Sales  contracts  for any period  represent  the number of homes ordered by
customers (net of cancellations)  multiplied by the average sales price per unit
ordered.   Comparative   2000  and  1999  sales  contracts  follow  (dollars  in
thousands):

<TABLE>
<CAPTION>
                     Quarter Ended June 30,  Dollar/Unit  Percentage  Six Months Ended June 30,  Dollar/Unit  Percentage
                     ----------------------   Increase     Increase   -------------------------   Increase     Increase
                        2000       1999      (Decrease)   (Decrease)      2000       1999        (Decrease)   (Decrease)
                      --------   --------     --------     --------     --------   --------       --------     --------
<S>                   <C>        <C>          <C>          <C>          <C>        <C>            <C>          <C>
TOTAL
Dollars               $147,770   $ 98,276     $ 49,494       50%        $296,670   $202,014       $ 94,656        47%
Units ordered              590        495           95       19%           1,219      1,050            169        16%
Average sales price   $  250.5   $  198.5     $   52.0       26%        $  243.4   $  192.4       $   51.0        27%

TEXAS
Dollars               $ 57,561   $ 55,260     $  2,301        4%        $118,481   $119,616       $ (1,135)       (1)%
Units ordered              317        346          (29)      (8)%            672        777           (105)      (14)%
Average sales price   $  181.6   $  160.0     $   21.6       14%        $  176.3   $  154.0       $   22.3        14%

ARIZONA
Dollars               $ 44,922   $ 30,246     $ 14,676       49%        $ 88,859   $ 61,238       $ 27,621        45%
Units ordered              143        113           30       27%             280        212             68        32%
Average sales price   $  314.1   $  267.7     $   46.4       17%        $  315.4   $  288.9       $   26.5         9%

CALIFORNIA
Dollars               $ 45,287   $ 12,770     $ 32,518      255%        $ 89,330   $ 21,160       $ 68,170       322%
Units Ordered              130         36           94      261%             267         61            206       338%
Average sales price   $  348.4   $  354.7     $   (6.3)      (2)%       $  334.2   $  346.9       $  (12.7)       (4)%
</TABLE>

     We do not include sales  contingent upon the sale of a customer's  existing
home as a sales contract until the contingency is removed. Historically, we have
experienced a  cancellation  rate of  approximately  25% or less of gross sales.
Total  sales  contracts  increased  in 2000  compared  to 1999 due mainly to the
expansion into  California and the start-up of our mid-priced  Meritage  Phoenix
division, along with continued economic strength in our operating markets.

     NET SALES BACKLOG

     Backlog  represents net sales  contracts that have not closed.  Comparative
June 30, 2000 and 1999 net sales backlog follows (dollars in thousands):

                                   At June 30,         Dollar/Unit   Percentage
                              ---------------------     Increase      Increase
                                2000         1999      (Decrease)    (Decrease)
                              --------     --------     --------      --------
TOTAL
  Dollars                     $305,100     $219,355     $ 85,745         39%
  Homes in backlog               1,247        1,107          140         13%
  Average sales price         $  244.7     $  198.2     $   46.5         23%

TEXAS
  Dollars                     $110,753     $123,999     $(13,246)       (11)%
  Homes in backlog                 633          805         (172)       (21)%
  Average sales price         $  175.0     $  154.0     $   21.0         14%

ARIZONA
  Dollars                     $128,978     $ 77,933     $ 51,045         65%
  Homes in backlog                 408          251          157         63%
  Average sales price         $  316.1     $  310.5     $    5.6          2%

CALIFORNIA
   Dollars                    $ 65,369     $ 17,423     $ 47,946        275%
   Homes in backlog                206           51          155        304%
   Average sales price        $  317.3     $  341.6     $  (24.3)        (7)%

                                       12
<PAGE>
     Total dollar  backlog at June 30, 2000  increased  39% over the 1999 amount
due to a  corresponding  increase in homes in backlog.  Units in backlog at June
30,  2000  increased  13% over  the same  period  in the  prior  year due to the
increase in net orders caused by expansion into California,  the start-up of our
new Meritage  Phoenix  division,  the  purchase of 108  pre-sold  homes from two
Arizona builders (see Note 2) and strong housing markets in which we operate.

     LIQUIDITY AND CAPITAL RESOURCES

     Our  principal  uses of  working  capital  are land  purchases,  home  site
development and home construction.  We use a combination of borrowings and funds
generated by operations to meet our working capital requirements.

     At June 30, 2000 we had short-term secured revolving  construction loan and
acquisition  and  development  facilities  totaling  $169.5  million,  of  which
approximately  $86.7 million was  outstanding.  An  additional  $41.0 million of
unborrowed  funds  supported by approved  collateral  were  available  under our
credit  facilities  at that  date.  We also  have  $15  million  outstanding  in
unsecured,  senior  subordinated notes due September 15, 2005, which were issued
in October 1998.

     In May 1999, we announced a stock repurchase  program in which our Board of
Directors  approved  the  buyback of up to $6 million  of  outstanding  Meritage
stock. This amount was increased to $10 million at the first quarter, 2000 board
meeting.  As of June  30,  2000,  414,685  shares  had been  repurchased  for an
aggregate price of approximately $4.5 million.

     Management  believes that the current borrowing  capacity,  cash on hand at
June 30, 2000 and anticipated  cash flows from operations are sufficient to meet
our liquidity needs for the foreseeable future. There is no assurance,  however,
that future  amounts  available from our sources of liquidity will be sufficient
to meet future capital needs. The amount and types of indebtedness that we incur
may be limited by the terms of the indenture  governing our senior  subordinated
notes and our credit agreements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     We do not trade in derivative  financial  instruments  and at June 30, 2000
had no significant derivative financial instruments.  We do have other financial
instruments  in the form of notes  payable and senior  debt,  which are at fixed
interest  rates.  Our lines of credit  and  credit  facilities  are at  variable
interest  rates and are  subject  to market  risk in the form of  interest  rate
fluctuations.

                            PART II OTHER INFORMATION

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     (a)  On May 10, 2000, we held our Annual Meeting of Shareholders,  at which
          Steven  J.  Hilton,   William  W.  Cleverly  and  Raymond  Oppel  were
          re-elected  as Class I  Directors  to serve for a two-year  term which
          expires at our Annual Meeting of Shareholders in 2002.  Voting results
          for these nominees are summarized as follows:

                                                      VOTES          VOTES
                                                       FOR          WITHHELD
                                                    ---------       --------
          Steven J. Hilton                          5,053,432        17,903
          William W. Cleverly                       5,053,549        17,786
          Raymond Oppel                             5,054,065        17,270

                                       13
<PAGE>
Additionally, the Shareholders approved an amendment to the Meritage Corporation
Stock  Option  Plan  which  increases  the  number of  shares  of  common  stock
authorized for issuance  thereunder from 475,000 to 775,000  shares,  and raises
the number of shares  that may be issued to any one  person  under the plan from
50,000 to 100,000. Voting results are as follows:

                                                    APPROVAL OF AMENDMENT TO
                                                       STOCK OPTION PLAN
                                                       -----------------
     Shares For                                            2,655,150
     Shares Against                                          834,296
     Shares Abstained                                         14,392
     Shares Not Voted By Brokers                           1,567,497

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

     (a) EXHIBITS

     EXHIBIT                                                        PAGE OR
     NUMBER                  DESCRIPTION                        METHOD OF FILING
     ------                  -----------                        ----------------
      10.1     Modification to Loan Agreement with Wells         Filed herewith
               Fargo Bank, Arizona, N.A. and California
               Bank & Trust, Dated as of May 16, 2000

      10.2     Extension of Guaranty Federal Bank Loan,          Filed herewith
               Dated as of July 31, 2000

       27      Financial Data Schedule                           Filed herewith

       99      Private Securities Reform Act of 1995 Safe        Filed herewith
               Harbor Compliance Statement for Forward-Looking
               Statements

     (b) REPORTS ON FORM 8-K

          No reports on form 8-K were filed during the quarter ended June 30,
     2000.

                                       14
<PAGE>
                                   SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934,  the registrant has duly cause this report on Form 10-Q to
be signed on its behalf by the undersigned, thereunto duly authorized, this 11th
day of August 2000.


                                       MERITAGE CORPORATION,
                                       a Maryland Corporation


                                       By /s/ Larry W. Seay
                                          --------------------------------------
                                          Larry W. Seay
                                          CHIEF FINANCIAL OFFICER AND VICE
                                          PRESIDENT-FINANCE (PRINCIPAL FINANCIAL
                                          OFFICER AND DULY AUTHORIZED OFFICER)

                                       S-1
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.1
<SEQUENCE>2
<FILENAME>0002.txt
<DESCRIPTION>FIRST MODIFICATION AGREEMENT
<TEXT>

                          FIRST MODIFICATION AGREEMENT

DATE: May 16, 2000

PARTIES: Borrower:  MHC:      MONTEREY HOMES CONSTRUCTION, INC., an Arizona
                              corporation

                    MHA:      MONTEREY HOMES ARIZONA, INC., an Arizona
                              corporation

                    Chandler: CHANDLER 110, LLC, an Arizona limited liability
                              company

                    MHNC:     MERITAGE HOMES OF NORTHERN CALIFORNIA, INC.,
                              a California corporation

         Lenders:   WELLS FARGO BANK ARIZONA, NATIONAL ASSOCIATION, a national
                    banking association, formerly known as Norwest Bank Arizona,
                    National Association

                    CALIFORNIA BANK & TRUST, a California banking corporation

         Administrative
         Agent:     WELLS FARGO BANK ARIZONA, NATIONAL ASSOCIATION, a national
                    banking association, formerly known as Norwest Bank Arizona,
                    National Association

         Documentation and
         Syndication
         Agent:     CALIFORNIA BANK & TRUST, a California banking corporation

                                    RECITALS:

     A.  Lenders  have  extended to Borrower  credit  ("Loan") in the  principal
amount of $70,000,000.00 pursuant to the Loan Agreement, dated December 29, 1999
("Loan  Agreement"),  and evidenced by two (2) Promissory Notes,  dated December
29, 1999  (collectively,  the  "Notes").  Capitalized  terms used herein and not
otherwise  defined  shall have the  meanings  ascribed to such terms in the Loan
Agreement.  The  unpaid  principal  of  the  Loan  as  of  the  date  hereof  is
$62,528,287.24.
<PAGE>
     B. The Loan is secured by, among other things, the following  (the"Deeds of
Trust"):

          (i) An  Amended  and  Restated  Deed of  Trust,  Assignment  of Rents,
     Security  Agreement and Fixture Filing  (Maricopa) dated December 29, 1999,
     by MHC and MHA, as trustor,  for the benefit of  Administrative  Agent,  as
     beneficiary,  recorded on December 30, 1999, at Recorder's No.  99-1165935,
     records  of  Maricopa  County,   Arizona,   as  thereafter  amended  and/or
     supplemented from time to time;

          (ii) A Deed of Trust,  Assignment  of Rents,  Security  Agreement  and
     Fixture Filing (Val Vista Meadows Option Property) dated December 29, 1999,
     by MHC and MHA, as trustor,  for the benefit of  Administrative  Agent,  as
     beneficiary,  recorded on December 30, 1999, at Recorder's No.  99-1165936,
     records  of  Maricopa  County,   Arizona,   as  thereafter  amended  and/or
     supplemented from time to time;

          (iii) A Deed of Trust,  Assignment  of Rents,  Security  Agreement and
     Fixture Filing (Paseo  Crossing)  dated  February 8, 2000, by Chandler,  as
     trustor, for the benefit of Administrative Agent, as beneficiary,  recorded
     on February 25, 2000, at  Recorder's  No.  00-0140216,  records of Maricopa
     County,  Arizona,  as thereafter  amended and/or  supplemented from time to
     time;

          (iv) An  Amended  and  Restated  Deed of Trust,  Assignment  of Rents,
     Security  Agreement and Fixture  Filing (Pima) dated  December 29, 1999, by
     MHC and MHA,  as  trustor,  for the  benefit of  Administrative  Agent,  as
     beneficiary,  recorded on December 30, 1999,  in Docket  11204,  page 6460,
     records of Pima County,  Arizona, as thereafter amended and/or supplemented
     from time to time;

          (v) A  Deed  of  Trust,  Assignment  of  Leases  and  Rents,  Security
     Agreement and Fixture  Filing (Black  Diamond  Knolls) dated  September 13,
     1999,  by MHNC, as trustor,  for the benefit of  Administrative  Agent,  as
     beneficiary,  recorded on October 5, 1999, as Series No. 99-264104, records
     of  Contra  Costa  County,   California,   as  thereafter   amended  and/or
     supplemented from time to time;

          (vi) A Deed  of  Trust,  Assignment  of  Leases  and  Rents,  Security
     Agreement and Fixture Filing (Black Diamond Knolls Option  Property)  dated
     September 13, 1999, by MHNC, as trustor,  for the benefit of Administrative
     Agent,  as  beneficiary,  recorded  on  October  5,  1999,  as  Series  No.
     99-264105,  records  of Contra  Costa  County,  California,  as  thereafter
     amended and/or supplemented from time to time;

          (vii) A Deed of  Trust,  Assignment  of  Leases  and  Rents,  Security
     Agreement and Fixture Filing (Black Diamond  Estates) dated April 12, 1999,
     by  MHNC,  as  trustor,  for  the  benefit  of  Administrative   Agent,  as
     beneficiary,  recorded on May 7, 1999, as Series No. 99-123453,  records of
     Contra Costa County,  California, as thereafter amended and/or supplemented
     from time to time;

                                       -2-
<PAGE>
          (viii) A Deed of Trust,  Assignment  of  Leases  and  Rents,  Security
     Agreement and Fixture Filing  (Wildhorse No. 1) dated November 18, 1998, by
     MHNC, as trustor, for the benefit of Administrative  Agent, as beneficiary,
     recorded on November 24, 1998, as  Instrument  No.  98-0034610,  records of
     Yolo County,  California,  as thereafter  amended and/or  supplemented from
     time to time;

          (ix) A Deed  of  Trust,  Assignment  of  Leases  and  Rents,  Security
     Agreement and Fixture Filing (Whitney Oaks) dated October 2, 1998, by MHNC,
     as  trustor,  for the  benefit of  Administrative  Agent,  as  beneficiary,
     recorded on November 24, 1998, as  Instrument  No.  98-0097765,  records of
     Placer County,  California,  as thereafter amended and/or supplemented from
     time to time;

          (x) A  Deed  of  Trust,  Assignment  of  Leases  and  Rents,  Security
     Agreement and Fixture  Filing  (Empire  Ranch) dated  November 15, 1999, by
     MHNC, as trustor, for the benefit of Administrative  Agent, as beneficiary,
     recorded  on  December  2, 1999,  in Book  9912-02,  page 0995,  records of
     Sacramento County,  California,  as thereafter amended and/or  supplemented
     from time to time; and

          (xi) A Deed  of  Trust,  Assignment  of  Leases  and  Rents,  Security
     Agreement  and  Fixture  Filing  (Sterling  Park - Phase I) dated April 30,
     1999,  by MHNC, as trustor,  for the benefit of  Administrative  Agent,  as
     beneficiary,  recorded on May 3, 1999, as Instrument No. 99058301,  records
     of  San  Joaquin   County,   California,   as  thereafter   amended  and/or
     supplemented from time to time.

The agreements,  documents,  and instruments securing the Loan and the Notes are
referred to individually and collectively as the "Security Documents."

     C. The Notes, the Loan Agreement,  the Security Documents,  the side letter
regarding the Agency Fee (the "Agency Fee Letter"), any environmental  indemnity
agreement,  and all other  agreements,  documents,  and instruments  evidencing,
securing,   or  otherwise  relating  to  the  Loan  are  sometimes  referred  to
individually and collectively as the "Loan Documents."

     D.  A  Continuing  Guarantee  dated  December  29,  1999  guaranteeing  all
indebtedness of Borrower to Lenders (the "Guarantee Agreement") was executed and
delivered  to Lenders by MERITAGE  CORPORATION,  a Maryland  corporation,  MTH -
TEXAS GP,  INC.,  an  Arizona  corporation,  MTH - TEXAS LP,  INC.,  an  Arizona
corporation,  LEGACY/MONTEREY  HOMES L.P., an Arizona limited  partnership,  and
TEXAS HOME MORTGAGE CORPORATION,  a Texas corporation (hereinafter  collectively
called "Guarantors").

                                       -3-
<PAGE>
     E.  Borrower  has  requested  that  Lenders,   Administrative   Agent,  and
Documentation  and  Syndication  Agent modify the Loan and the Loan Documents as
provided  herein.   Lenders,   Administrative   Agent,  and   Documentation  and
Syndication  Agent are  willing  to so modify  the Loan and the Loan  Documents,
subject to the terms and conditions herein.

                                   AGREEMENT:

     For good and valuable  consideration,  the receipt and sufficiency of which
are  hereby  acknowledged,   Borrower,   Lenders,   Administrative   Agent,  and
Documentation and Syndication Agent agree as follows:

SECTION 1. ACCURACY OF RECITALS.

     Borrower acknowledges the accuracy of the Recitals.

SECTION 2. MODIFICATION OF LOAN DOCUMENTS; OTHER AGREEMENTS.

     2.1 The  aggregate  face  amount  of the  Notes is  hereby  increased  from
$70,000,000.00 to $100,000,000.00 and the Notes are hereby amended, restated and
replaced,  all in  accordance  with the  terms and  provisions  of those two (2)
Replacement  Promissory  Notes  executed and delivered  simultaneously  with the
execution of this Agreement ("Replacement Notes").  Hereinafter,  each reference
to the  Notes  herein  and in the Loan  Documents  shall be a  reference  to the
Replacement Notes.

     2.2 Section 1.1 of the Loan  Agreement is hereby amended in its entirety to
read as follows:

          1.1 Borrower  has applied to the Banks for a revolving  line of credit
     loan  facility in the  aggregate  amount of ONE HUNDRED  MILLION AND NO/100
     DOLLARS  ($100,000,000.00)  (the "Loan")  against which  Borrower may, from
     time to time during the term hereof,  make draws,  repay all or part of the
     same and then draw additional  sums,  subject to the terms,  conditions and
     provisions set forth herein,  for the purpose of financing the  acquisition
     and development of entitled land, lots under  development,  improved single
     family  residential lots and the construction of single family  residential
     units within  subdivisions  located in the  metropolitan  areas of Phoenix,
     Tucson,  Sacramento  and  San  Francisco,  and  other  Northern  California
     metropolitan  areas, and approved by  Administrative  Agent pursuant to the
     terms hereof.

     2.3 The following  definition  set forth in Section 2 of the Loan Agreement
is hereby amended in its entirety to read as follows:

          "COMMITMENT  AMOUNT" means the lesser of (i) the  aggregate  amount of
     the Banks'  Commitment as set forth on Schedule 3.1, and (ii) the amount of
     $100,000,000.00,  as the same may be reduced from time to time  pursuant to
     Section 3.15.

                                       -4-
<PAGE>
     2.4 Section 8.1 of the Loan  Agreement is hereby amended in its entirety to
read as follows:

          8.1 Facility Fee. A fee for the Commitment (the "Facility Fee") at the
     rate  of  one-quarter  of one  percent  (.25%)  per  annum  of the  maximum
     Commitment  Amount  (i.e.,  $70,000,000.00  prior  to  May  16,  2000,  and
     $100,000,000.00  thereafter)  shall be due and payable quarterly in advance
     on each January 1, April 1, July 1 and October 1, provided that the initial
     Facility  Fee shall be payable on the date of this  Agreement  and shall be
     prorated for the period commencing on the date of this Agreement and ending
     on December 31, 1999 at the per annum rate set forth above.

     2.5 Section 19.3(a) of the Loan Agreement is hereby amended in its entirety
to read as follows:

          (a) Minimum  Liquidity.  The Meritage Group's Liquidity at any time to
     be less than $10,000,000.00.

     2.6 Schedule 3.1 to the Loan  Agreement is hereby  replaced in its entirety
with Schedule 3.1 attached hereto and by this reference  incorporated herein and
therein.

     2.7 Each of the Loan  Documents  is modified to provide  that it shall be a
default or an event of default  thereunder if Borrower shall fail to comply with
any of the covenants of Borrower herein or if any  representation or warranty by
Borrower  herein or by any  guarantor  in any related  Consent and  Agreement of
Guarantor(s) is materially incomplete,  incorrect,  or misleading as of the date
hereof.

     2.8 Each reference to the amount of the Loan,  the aggregate  amount of the
Notes and the maximum  Commitment  Amount as  $70,000,000.00  in any of the Loan
Documents  (including,  without  limitation,  the Agency  Fee  Letter) is hereby
amended to be a reference to the amount of  $100,000,000.00.  Each  reference in
the Loan  Documents  to any of the Loan  Documents  is  hereby  amended  to be a
reference to such document as modified herein.

SECTION 3. RATIFICATION OF LOAN DOCUMENTS AND COLLATERAL.

     The Loan  Documents  are ratified and affirmed by Borrower and shall remain
in full  force and  effect as  modified  herein.  Any  property  or rights to or
interests in property  granted as security in the Loan Documents shall remain as
security for the Loan and the obligations of Borrower in the Loan Documents.

                                       -5-
<PAGE>
SECTION 4. BORROWER REPRESENTATIONS AND WARRANTIES.

     Borrower  represents  and warrants to Lenders,  Administrative  Agent,  and
Documentation and Syndication Agent:

     4.1 No  default  or event of  default  under any of the Loan  Documents  as
modified herein,  nor any event,  that, with the giving of notice or the passage
of time or both,  would be a  default  or an event  of  default  under  the Loan
Documents as modified herein has occurred and is continuing.

     4.2 There has been no material adverse change in the financial condition of
Borrower,  any Guarantor or any other person whose financial  statement has been
delivered  to  Administrative  Agent in  connection  with the Loan from the most
recent financial statement received by Administrative Agent.

     4.3 Each and all  representations  and  warranties  of Borrower in the Loan
Documents are accurate on the date hereof.

     4.4  Borrower  has no claims,  counterclaims,  defenses,  or set-offs  with
respect to the Loan or the Loan Documents as modified herein.

     4.5 The Loan Documents as modified herein are the legal, valid, and binding
obligation of Borrower,  enforceable  against  Borrower in accordance with their
terms.

     4.6 Each  Borrower is validly  existing  under the laws of the State of its
formation or  organization  and has the requisite power and authority to execute
and deliver this Agreement and to perform the Loan Documents as modified herein.
The execution and delivery of this  Agreement  and the  performance  of the Loan
Documents as modified herein have been duly  authorized by all requisite  action
by or on behalf of each  Borrower.  This  Agreement  has been duly  executed and
delivered on behalf of each Borrower.

SECTION 5. BORROWER COVENANTS.

     Borrower  covenants with Lenders,  Administrative  Agent, and Documentation
and Syndication Agent:

     5.1 Borrower shall execute, deliver, and provide to Lenders, Administrative
Agent,  and  Documentation  and Syndication  Agent such  additional  agreements,
documents,  and instruments as reasonably  required by  Administrative  Agent to
effectuate the intent of this Agreement.

     5.2  Borrower  fully,  finally,  and  absolutely  and forever  releases and
discharges  Lenders,  Administrative  Agent, and  Documentation  and Syndication
Agent and their present and former directors, shareholders, officers, employees,
agents,  representatives,   successors  and  assigns,  and  their  separate  and
respective heirs, personal representatives, successors and assigns, from any and

                                       -6-
<PAGE>
all actions,  causes of action,  claims, debts, damages,  demands,  liabilities,
obligations,  and  suits,  of  whatever  kind or  nature,  in law or  equity  of
Borrower,  whether now known or unknown to Borrower,  and whether  contingent or
matured, in respect of the Loan, the Loan Documents, or the actions or omissions
of Lenders,  Administrative Agent, and/or Documentation and Syndication Agent in
respect of the Loan or the Loan Documents and which arise from events  occurring
prior to the date of this Agreement.

SECTION 6. CONDITIONS PRECEDENT.

     The agreements of Lenders,  Administrative  Agent,  and  Documentation  and
Syndication  Agent and the  modifications  contained herein shall not be binding
upon Lenders,  Administrative  Agent, and  Documentation  and Syndication  Agent
until Lenders,  Administrative  Agent, and  Documentation  and Syndication Agent
have  executed  and  delivered  this  Agreement  and  Administrative  Agent  has
received, at Borrower's expense, all of the following,  all of which shall be in
form and content  satisfactory to  Administrative  Agent and shall be subject to
approval by Administrative Agent:

     6.1 An original of this  Agreement  fully  executed by the Borrower and all
Guarantors;

     6.2 Original  Modifications of Deeds of Trust (the  "Modifications of Deeds
of Trust") fully executed by the Borrower  modifying the existing Deeds of Trust
to secure the Loan as modified hereby;

     6.3 Original Replacement Promissory Notes fully executed by Borrower;

     6.4 An original  modification  of the side  letter  executed by Borrower in
connection  with the Agency Fee, fully executed by Borrower and the payment of a
prorated Agency Fee as required therein to the effectiveness of this Agreement.

     6.5 A prorated  Facility  Fee with  respect to the  increase in  Commitment
Amount in the amount of $9,375.30.

     6.6 A legal opinion of Borrower's  counsel covering such issues as shall be
required by Administrative Agent.

     6.7 If any Borrower or any Guarantor is a  corporation,  limited  liability
company, partnership or trust, such resolutions or authorizations and such other
documents as Administrative Agent may require relating to the existence and good
standing of that  corporation,  partnership  or trust,  and the authority of any
person   executing  this  Agreement  or  other   documents  on  behalf  of  that
corporation, limited liability company, partnership or trust;

     6.8 A  commitment  from the  title  insurance  companies  that  issued  the
lender's ALTA extended coverage title insurance  policies in connection with the
Loan (the "Title  Policies")  to issue  endorsements,  in form  satisfactory  to
Administrative Agent, to the Title Policies,  increasing the aggregate amount of

                                       -7-
<PAGE>
the Title Policies to  $100,000,000.00  and insuring that the Deeds of Trust, as
modified  hereby and by the  Modifications  of Deeds of Trust,  continue to be a
first lien upon the real property described  therein,  as security for the Loan,
as modified  herein,  subject  only to those  exceptions  contained in the Title
Policies  and  to  such  additional   exceptions  as  Administrative  Agent  may
specifically approve in writing; and

     6.9 Payment of all the internal and external costs and expenses incurred by
Lenders,  Administrative  Agent,  and  Documentation  and  Syndication  Agent in
connection  with this  Agreement  (including,  without  limitation,  inside  and
outside attorneys, processing, title, filing, and recording costs, expenses, and
fees).

SECTION 7. INTEGRATION, ENTIRE AGREEMENT, CHANGE, DISCHARGE, TERMINATION, OR
           WAIVER.

     The Loan Documents as modified  herein  contain the complete  understanding
and agreement of Borrower, Lenders,  Administrative Agent, and Documentation and
Syndication   Agent  in   respect   of  the  Loan  and   supersede   all   prior
representations,   warranties,  agreements,  arrangements,  understandings,  and
negotiations.  No  provision  of the Loan  Documents  as modified  herein may be
changed,  discharged,  supplemented,  terminated,  or waived except in a writing
signed by the parties thereto.

SECTION 8. BINDING EFFECT.

     The Loan Documents as modified herein shall be binding upon and shall inure
to the benefit of Borrower, Lenders, Administrative Agent, and Documentation and
Syndication  Agent and their  successors  and assigns and the  executors,  legal
administrators,  personal representatives, heirs, devisees, and beneficiaries of
Borrower,  provided,  however,  Borrower  may not  assign  any of its  right  or
delegate  any of its  obligation  under  the Loan  Documents  and any  purported
assignment or delegation shall be void.

SECTION 9. CHOICE OF LAW.

     This  Agreement  shall be governed by and construed in accordance  with the
laws of the  State  of  Arizona,  without  giving  effect  to  conflicts  of law
principles.

SECTION 10. COUNTERPART EXECUTION.

     This Agreement may be executed in one or more  counterparts,  each of which
shall be deemed an original and all of which together  shall  constitute one and
the same document.  Signature  pages may be detached from the  counterparts  and
attached to a single copy of this Agreement to physically form one document.

                                       -8-
<PAGE>
     DATED as of the date first above stated.


                                        MONTEREY HOMES CONSTRUCTION, INC., an
                                        Arizona Corporation


                                        By: /s/ Larry W. Seay
                                           -------------------------------------
                                        Name: Larry W. Seay
                                             -----------------------------------
                                        Title: Vice President
                                              ----------------------------------


                                        MONTEREY HOMES ARIZONA, INC., an Arizona
                                        corporation


                                        By: /s/ Larry W. Seay
                                           -------------------------------------
                                        Name: Larry W. Seay
                                             -----------------------------------
                                        Title: Vice President
                                              ----------------------------------


                                        CHANDLER 110, LLC, an Arizona limited
                                        liability company

                                        BY: MONTEREY HOMES CONSTRUCTION, INC.,
                                            an Arizona corporation, Member


                                        By: /s/ Larry W. Seay
                                           -------------------------------------
                                        Name: Larry W. Seay
                                             -----------------------------------
                                        Title: Vice President
                                              ----------------------------------

                                       -9-
<PAGE>
                                        MERITAGE HOMES OF NORTHERN CALIFORNIA,
                                        INC., a California corporation


                                        By: /s/ Larry W. Seay
                                           -------------------------------------
                                        Name: Larry W. Seay
                                             -----------------------------------
                                        Title: Vice President
                                              ----------------------------------
                                                                        BORROWER


                                        WELLS FARGO BANK ARIZONA, NATIONAL
                                        ASSOCIATION, a national banking
                                        association, formerly known as Norwest
                                        Bank Arizona, National Association


                                        By: /s/ Kevin Kosan
                                           -------------------------------------
                                        Name: Kevin Kosan
                                             -----------------------------------
                                        Title: Vice President
                                              ----------------------------------


                                        ADMINISTRATIVE AGENT AND LENDER


                                        CALIFORNIA BANK & TRUST, a California
                                        banking corporation


                                        By: /s/ Mark Young
                                           -------------------------------------
                                        Name: Mark Young
                                             -----------------------------------
                                        Title: Executive Vice President
                                              ----------------------------------
                                                               DOCUMENTATION AND
                                                    SYNDICATION AGENT AND LENDER

                                      -10-
<PAGE>
                      CONSENT AND AGREEMENT OF GUARANTOR(S)

     With  respect  to the First  Modification  Agreement,  dated  May 16,  2000
("Agreement"),   between   MONTEREY   HOMES   CONSTRUCTION,   INC.,  an  Arizona
corporation, MONTEREY HOMES ARIZONA, INC., an Arizona corporation, CHANDLER 110,
LLC,  an Arizona  limited  liability  company,  and  MERITAGE  HOMES OF NORTHERN
CALIFORNIA,   INC.,  a  California   corporation  (severally  and  collectively,
"Borrower"),  WELLS FARGO BANK ARIZONA, NATIONAL ASSOCIATION, a national banking
association,  formerly known as Norwest Bank Arizona,  National  Association and
CALIFORNIA  BANK &  TRUST,  a  California  banking  corporation  (severally  and
collectively,  "Lenders"),  WELLS FARGO BANK ARIZONA,  NATIONAL  ASSOCIATION,  a
national banking association,  formerly known as Norwest Bank Arizona,  National
Association  ("Administrative Agent"), and CALIFORNIA BANK & TRUST, a California
banking  corporation  ("Documentation  and  Syndication  Agent") the undersigned
(individually and, if more than one,  collectively  "Guarantor")  agrees for the
benefit of Lenders,  Administrative  Agent,  and  Documentation  and Syndication
Agent as follows:

     1.  Guarantor  acknowledges  (i)  receiving  a  copy  of  and  reading  the
Agreement,  (ii) the  accuracy of the Recitals in the  Agreement,  and (iii) the
effectiveness  of (A) the Guarantee  Agreement as modified  herein,  and (B) any
other agreements,  documents,  or instruments  securing or otherwise relating to
the  Guarantee  Agreement  (including,  without  limitation,  any  environmental
indemnity agreement  previously  executed and delivered by the undersigned),  as
modified herein. The Guarantee  Agreement and such other agreements,  documents,
and  instruments,   as  modified  herein,   are  referred  to  individually  and
collectively as the "Guarantor Documents."

     2. Guarantor  hereby agrees that Paragraph 2 of the Guarantee  Agreement is
hereby amended in its entirety to read as follows:

          2. The  liability of Guarantor  hereunder  shall not exceed at any one
     time the sum of ONE HUNDRED  MILLION AND NO/100  DOLLARS  ($100,000,000.00)
     for principal,  plus all interest thereon and all attorneys' fees and other
     costs  and  expenses  incurred  by Lender in  collecting,  compromising  or
     enforcing the  indebtedness or in protecting or preserving any security for
     the indebtedness.  Lender may permit the indebtedness of Borrower to exceed
     such  maximum  liability  without  impairing  the  obligation  of Guarantor
     hereunder.  Any payment by Guarantor shall not reduce  Guarantor's  maximum
     obligation  hereunder,  unless  written  notice to that  effect is actually
     received by Lender at or prior to the time of such payment.  Any payment by
     or recovery from  Borrower,  any other  guarantor or any security  shall be
     credited  first to that  portion  of the  indebtedness  which  exceeds  the
     maximum obligation of Guarantor hereunder.

                                       -1-
<PAGE>
     3.  Guarantor  consents to the  modification  of the Loan Documents and all
other matters in the Agreement,  including without  limitation,  the increase in
the principal amount of the Loan to $100,000,000.00.

     4. Guarantor fully,  finally,  and forever releases and discharges Lenders,
Administrative   Agent,  and  Documentation  and  Syndication  Agent  and  their
successors, assigns, directors, officers, employees, agents, and representatives
from any and all actions, causes of action, claims, debts, demands, liabilities,
obligations,  and suits of  whatever  kind or  nature,  in law or  equity,  that
Guarantor has or in the future may have, whether known or unknown, in respect of
the Loan,  the Loan  Documents,  the  Guarantor  Documents,  or the  actions  or
omissions of Lenders, Administrative Agent, and/or Documentation and Syndication
Agent in respect of the Loan, the Loan Documents, or the Guarantor Documents and
which arise from events occurring prior to the date hereof.

     5. Guarantor  agrees that all  references,  if any, to the Notes,  the Loan
Agreement, the Deeds of Trust, the Security Documents, and the Loan Documents in
the Guarantor Documents shall be deemed to refer to such agreements,  documents,
and instruments as modified by the Agreement.

     6.  Guarantor  reaffirms  the  Guarantor  Documents  and  agrees  that  the
Guarantor  Documents  continue  in full force and  effect and remain  unchanged,
except as specifically modified by this Consent and Agreement of Guarantor(s).

     7. Guarantor agrees that the Loan Documents,  as modified by the Agreement,
and the  Guarantor  Documents,  as modified by this  Consent  and  Agreement  of
Guarantor(s),  are the legal, valid, and binding obligations of Borrower and the
undersigned,  respectively,  enforceable in accordance  with their terms against
Borrower and the undersigned, respectively.

     8. Guarantor agrees that Guarantor has no claims, counterclaims,  defenses,
or offsets with respect to the  enforcement  against  Guarantor of the Guarantor
Documents.

     9.  Guarantor  represents  and  warrants  that  there has been no  material
adverse change in the financial  condition of any Guarantor from the most recent
financial statement received by Administrative Agent.

     10. Guarantor agrees that this Consent and Agreement of Guarantor(s) may be
executed in one or more counterparts,  each of which shall be deemed an original
and all of which together shall constitute one and the same document.  Signature
and acknowledgment pages may be detached from the counterparts and attached to a
single copy of this Consent and Agreement of Guarantor(s) to physically form one
document.

                                       -2-
<PAGE>
     DATED as of the date of the Agreement.


                                        MERITAGE CORPORATION, a Maryland
                                        corporation


                                        By: /s/ Larry W. Seay
                                           -------------------------------------
                                        Name: Larry W. Seay
                                             -----------------------------------
                                        Title: Vice President
                                              ----------------------------------


                                        MTH - TEXAS GP, INC., an Arizona
                                        corporation


                                        By: /s/ Larry W. Seay
                                           -------------------------------------
                                        Name: Larry W. Seay
                                             -----------------------------------
                                        Title: Vice President
                                              ----------------------------------


                                        MTH - TEXAS LP, INC., an Arizona
                                        corporation


                                        By: /s/ Larry W. Seay
                                           -------------------------------------
                                        Name: Larry W. Seay
                                             -----------------------------------
                                        Title: Vice President
                                              ----------------------------------


                                        LEGACY/MONTEREY HOMES L.P., an Arizona
                                        limited partnership

                                        BY: MTH - TEXAS GP, INC., an Arizona
                                            corporation, General Partner


                                        By: /s/ Larry W. Seay
                                           -------------------------------------
                                        Name: Larry W. Seay
                                             -----------------------------------
                                        Title: Vice President
                                              ----------------------------------

                                       -3-
<PAGE>
                                        TEXAS HOME MORTGAGE CORPORATION, a Texas
                                        corporation


                                        By: /s/ Larry W. Seay
                                           -------------------------------------
                                        Name: Larry W. Seay
                                             -----------------------------------
                                        Title: Vice President
                                              ----------------------------------
                                                                       GUARANTOR

                                       -4-
<PAGE>
                                  SCHEDULE 3.1

                            COMMITMENTS OF THE BANKS
                                 as to the Loan
                               as of May 16, 2000


                      Bank                                 %         Commitment
                      ----                               -----      ------------
1.   Wells Fargo Bank Arizona, National Association      50.0%      $ 50,000,000

2.   California Bank & Trust                             50.0%      $ 50,000,000

     Maximum Commitment                                   100%      $100,000,000


Addresses

1.   WELLS FARGO BANK ARIZONA, NATIONAL ASSOCIATION
     100 West Washington, 11th Floor
     Phoenix, Arizona  85003
     Attention: Regional Real Estate Group, MAC S4101-110

2.   CALIFORNIA BANK & TRUST
     11622 El Camino Real, Suite 200
     San Diego, California  92130
     Attention: Peggy Standefer, Esq.

     with a copy to:

     CB&T REAL ESTATE FINANCE
     3101 North Central Avenue, Suite 520
     Phoenix, Arizona  85012
     Attention: Mark Young

                                       -1-
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.2
<SEQUENCE>3
<FILENAME>0003.txt
<DESCRIPTION>30 DAY EXTENTION LETTER AGREEMENT
<TEXT>

                               As of July 31, 2000


Guaranty Federal Bank, F.S.B.
8333 Douglas Avenue
Dallas, Texas 75225


     Re:  Modification of an existing $65,000,000.00 guidance line from Guaranty
          Federal  Bank,  F.S.B.  ("Lender") to  Legacy/Monterey  Homes L.P., an
          Arizona  corporation  ("Borrower");  such loan and other  indebtedness
          being  guaranteed  by Meritage  Corporation,  a Maryland  corporation,
          MTH-Texas GP, Inc., an Arizona  corporation and MTH-Texas LP, Inc., an
          Arizona corporation (collectively referred to as "Guarantor")


Gentlemen:

     Reference is made to that certain Master Loan Agreement dated as of January
31, 1993 (and all amendments  thereto,  if any) (the "Loan  Agreement")  between
Lender and Borrower governing a $65,000,000.00  loan (as decreased) (the "Loan")
for the acquisition  and/or  refinancing of residential  lots located in certain
counties in the State of Texas as described  therein,  and the  construction  of
single-family  residences  thereon.  Unless otherwise  expressly defined herein,
each term used herein with its initial letter capitalized shall have the meaning
given to such term in the Loan Agreement. As used in this letter agreement,  the
term "Loan Instruments" shall mean and include the "Loan Instruments" as defined
in the Loan Agreement, this letter agreement and all other documents executed in
conjunction herewith (and all amendments thereto, if any).

     Borrower and Lender desire to amend and modify certain terms and provisions
of the Loan and the Loan Instruments as follows:

     1. The stated maturity date of the Note is hereby extended to and including
August 31, 2000, when the entire unpaid principal balance of the Note,  together
with  all  accrued  and  unpaid  interest  shall be due and  payable;  provided,
however,  such  date may be  extended  as set forth in  Paragraph  9 of the Loan
Agreement (as amended hereby).

     2.  Paragraph 11 of Exhibit A to the Loan  Agreement is hereby  modified by
deleting such paragraph in its entirety and replacing it with the following:

          Paragraph 9.  MATURITY AND  EXTENSION.  The maturity  date of the Note
          shall  be the  later  of the  maturity  date as  provided  in the Note
          (August 31, 2000) (the  "Stated  Maturity  Date"),  or nine (9) months
          after the recording in the Real Property  Records of the last Mortgage
<PAGE>
Guaranty Federal Bank, F.S.B.
As of July 31, 2000
Page 2

          (the "Extended  Maturity  Date") approved by Lender and recorded prior
          to the  expiration  of the  Stated  Maturity  Date.  After the  Stated
          Maturity Date, no additional Mortgage shall be recorded.

     3. All  Loan  Instruments  hereby  are  amended  and  modified  in a manner
consistent with the  modifications,  terms and/or  provisions  contained herein.
Except as modified hereby, all the terms,  provisions and conditions of the Loan
Instruments shall remain in full force and effect.

     4. The terms and  provisions of this letter  agreement may not be modified,
amended,  altered or otherwise affected except by instrument in writing executed
by Lender and Borrower.

     5. Each  Guarantor  by its  execution  hereof agree to the  amendments  and
modifications  to the  Loan  Instruments  set  forth  herein  and  in the  prior
amendments and  modifications to the Loan Instruments and agree that all of such
modifications do not and will not waive,  release or in any manner modify either
Guarantor's obligations and liabilities under and pursuant to the Guaranty.

             (The balance of this page is intentionally left blank.)
<PAGE>
Guaranty Federal Bank, F.S.B.
As of July 31, 2000
Page 3


     If this letter  agreement  correctly  sets forth our  understanding  of the
subject matter contained  herein,  please indicate this by executing this letter
agreement in the space furnished below and then return a fully-executed  copy to
the undersigned.

                                     Very truly yours,


                                     BORROWER:

                                     LEGACY/MONTEREY HOMES L.P.,
                                     an Arizona limited partnership


                                     BY:  MTH-TEXAS GP, INC.,
                                          an Arizona corporation,
                                          General Partner


                                          By: /s/ Rick Morgan
                                              ----------------------------------
                                              Name: Rick Morgan
                                                    ----------------------------
                                              Title: Vice President
                                                     ---------------------------
<PAGE>
Guaranty Federal Bank, F.S.B.
As of July 31, 2000
Page 4


                                     GUARANTOR:

                                     MERITAGE CORPORATION,
                                     a Maryland corporation


                                     By: /s/ John Landon
                                         ---------------------------------------
                                         Name: John Landon
                                               ---------------------------------
                                         Title: Co-CEO
                                                --------------------------------


                                     MTH-TEXAS GP, INC.,
                                     an Arizona corporation,


                                     By: /s/ Rick Morgan
                                         ---------------------------------------
                                         Name: Rick Morgan
                                               ---------------------------------
                                         Title: Vice President
                                                --------------------------------


                                     MTH-TEXAS LP, INC., an Arizona corporation


                                     By: /s/ Rick Morgan
                                         ---------------------------------------
                                         Name: Rick Morgan
                                               ---------------------------------
                                         Title: Vice President
                                                --------------------------------
<PAGE>
Guaranty Federal Bank, F.S.B.
As of July 31, 2000
Page 5


ACCEPTED AND AGREED TO:

LENDER:

GUARANTY FEDERAL BANK, F.S.B.,
a federal savings bank


By:
    ---------------------------------------
    Name:
          ---------------------------------
    Title:
           --------------------------------
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-27
<SEQUENCE>4
<FILENAME>0004.txt
<DESCRIPTION>FINANCIAL DATA SCHEDULE
<TEXT>

<TABLE> <S> <C>

<ARTICLE> 5
<CURRENCY> U.S. DOLLARS

<S>                             <C>
<PERIOD-TYPE>                   6-MOS
<FISCAL-YEAR-END>                          DEC-31-2000
<PERIOD-END>                               JUN-30-2000
<EXCHANGE-RATE>                                      1
<CASH>                                       9,458,651
<SECURITIES>                                         0
<RECEIVABLES>                                1,543,645
<ALLOWANCES>                                         0
<INVENTORY>                                200,586,220
<CURRENT-ASSETS>                           230,492,626
<PP&E>                                       8,808,200
<DEPRECIATION>                               4,327,638
<TOTAL-ASSETS>                             254,015,632
<CURRENT-LIABILITIES>                       50,562,072
<BONDS>                                    101,753,499
<PREFERRED-MANDATORY>                           56,069
<PREFERRED>                                          0
<COMMON>                                             0
<OTHER-SE>                                 101,643,992
<TOTAL-LIABILITY-AND-EQUITY>               254,015,632
<SALES>                                    214,112,248
<TOTAL-REVENUES>                           214,112,248
<CGS>                                      172,820,670
<TOTAL-COSTS>                               12,236,486
<OTHER-EXPENSES>                             7,895,083
<LOSS-PROVISION>                                     0
<INTEREST-EXPENSE>                               4,521
<INCOME-PRETAX>                             21,155,488
<INCOME-TAX>                                 7,811,595
<INCOME-CONTINUING>                         13,343,893
<DISCONTINUED>                                       0
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                13,343,893
<EPS-BASIC>                                       2.52
<EPS-DILUTED>                                     2.31


</TABLE>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99
<SEQUENCE>5
<FILENAME>0005.txt
<DESCRIPTION>SAFE HABOR COMPLIANCE STATEMENT
<TEXT>

                PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
         SAFE HARBOR COMPLIANCE STATEMENT FOR FORWARD-LOOKING STATEMENTS

     In  passing  the  Private  Securities  Litigation  Reform  Act of 1995 (the
"PSLRA"),   Congress  encouraged  public  companies  to  make   "forward-looking
statements"(1)  by creating a safe-harbor to protect  companies from  securities
law liability in connection with forward-looking statements. Meritage intends to
qualify  both its written and oral  forward-looking  statements  for  protection
under the PSLRA.

     To qualify oral forward-looking  statements for protection under the PSLRA,
a readily available written document must identify  important factors that could
cause  actual  results to differ  materially  from those in the  forward-looking
statements.  Meritage provides the following  information in connection with its
continuing  effort to qualify  forward-looking  statements  for the safe  harbor
protection of the PSLRA.

     Important  factors  currently  known to management  that could cause actual
results to differ materially from those in forward-looking  statements  include,
but are not  limited  to,  the  following:  (i)  changes in  national  and local
economic  and other  conditions,  such as  employment  levels,  availability  of
mortgage financing,  interest rates,  consumer  confidence,  and housing demand;
(ii) risks inherent in homebuilding activities, including delays in construction
schedules,  cost overruns,  changes in government regulation,  increases in real
estate taxes and other local fees;  (iii)  changes in costs or  availability  of
land,  materials,  and labor; (iv)  fluctuations in real estate values;  (v) the
timing of home closings and land sales;  (vi) Meritage's  ability to continue to
acquire  additional  land or options to acquire  additional  land on  acceptable
terms;  (vii)  a  relative  lack of  geographic  diversification  of  Meritage's
operations,  especially  when real estate  analysts are predicting that new home
sales in certain markets may slow during 2000;  (viii)  Meritage's  inability to
obtain  sufficient  capital on terms  acceptable to Meritage to fund its planned
capital and other  expenditures;  (ix) changes in local, state and federal rules
and regulations  governing real estate  development and homebuilding  activities
and environmental  matters,  including "no growth" or "slow growth" initiatives,
building permit allocation ordinances and building moratoriums; (x) expansion by
Meritage into new geographic or product  markets in which Meritage has little or
no operating experience;  (xi) the inability of Meritage to identify acquisition
candidates  that will result in  successful  combinations;  (xii) the failure of
Meritage  to  make   acquisitions  on  terms  acceptable  to  Meritage,   or  to
successfully  integrate acquired operations,  into Meritage; and (xiii) the loss
of key employees of the Company, including Steven J. Hilton and John R. Landon.

     Forward-looking  statements  express  expectations  of future  events.  All
forward-looking statements are inherently uncertain as they are based on various
expectations  and assumptions  concerning  future events and they are subject to
numerous  known and unknown  risks and  uncertainties  which could cause  actual
events or  results  to differ  materially  from  those  projected.  Due to these
inherent  uncertainties,  the  investment  community is urged not to place undue
reliance on  forward-looking  statements.  In addition,  Meritage  undertakes no
obligations to update or revise  forward-looking  statements to reflect  changed
assumptions, the occurrence of anticipated events or changes to projections over
time.

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(1)  "Forward-looking  statements"  can be  identified  by use of words  such as
     "expect,"  "believe,"  "estimate,"  "project,"  "forecast,"   "anticipate,"
     "plan," and similar expressions.
</TEXT>
</DOCUMENT>
</SUBMISSION>
