<SUBMISSION>
<ACCESSION-NUMBER>0000950147-02-001484
<TYPE>10-Q
<PUBLIC-DOCUMENT-COUNT>6
<PERIOD>20020930
<FILING-DATE>20021114
<FILER>
<COMPANY-DATA>
<CONFORMED-NAME>MERITAGE CORP
<CIK>0000833079
<ASSIGNED-SIC>1531
<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>02826040
</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>EMERALD MORTGAGE INVESTMENTS CORP
<DATE-CHANGED>19900502
</FORMER-COMPANY>
<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>
</FILER>
<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>e-9194.txt
<DESCRIPTION>QUARTERLY REPORT FOR THE QTR ENDED 09/30/2002
<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 September 30, 2002

                                       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 of Other Jurisdiction          (I.R.S. Employer Identification No.)
    of Incorporation or Organization)


    8501 E. Princess Drive, Suite 290                      85255
           Scottsdale, Arizona                           (Zip Code)
(Address of Principal Executive Offices)


                                 (480) 609-3330
              (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 [ ]

Indicate  by check mark  whether  the  registrant  is an  accelerated  filer (as
defined in Rule 12b-2 of the Exchange Act): Yes [X] No [ ]

As of November 10, 2002,  13,554,694 shares of Meritage Corporation common stock
were outstanding.

================================================================================
<PAGE>
                              MERITAGE CORPORATION
               FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2002

                                TABLE OF CONTENTS

                                                                        PAGE NO.
PART I.         FINANCIAL INFORMATION

     ITEM 1.    FINANCIAL STATEMENTS:

                Consolidated Balance Sheets as of September 30, 2002
                  (unaudited) and December 31, 2001.........................   3

                Consolidated Statements of Earnings for the Three and Nine
                  Months ended September 30, 2002 and 2001 (unaudited)......   4

                Consolidated Statements of Cash Flows for the Nine
                  Months ended September 30, 2002 and 2001 (unaudited)......   5

                Notes to Consolidated Financial Statements (unaudited)......   6

     ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                  CONDITION AND RESULTS OF OPERATIONS.......................  14

     ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
                  MARKET RISK...............................................  17

     ITEM 4.    CONTROLS AND PROCEDURES.....................................  18

PART II.        OTHER INFORMATION

     ITEMS 1-5. NOT APPLICABLE

     ITEM 6.    EXHIBITS AND REPORTS ON FORM 8-K............................  18

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

                                       2
<PAGE>
                          PART I FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

                      MERITAGE CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                        (IN THOUSANDS, EXCEPT SHARE DATA)

                                                      (UNAUDITED)
                                                     SEPTEMBER 30,  DECEMBER 31,
                                                         2002          2001
                                                       ---------     ---------
ASSETS
  Cash and cash equivalents                            $   6,751     $   3,383
  Real estate                                            469,768       330,238
  Deposits on real estate under option or contract        63,573        45,252
  Receivables                                              4,794         5,508
  Deferred tax asset                                       2,518         2,612
  Goodwill                                                54,280        30,369
  Property and equipment, net                             12,531         9,667
  Prepaid expenses and other assets                       13,948         9,686
                                                       ---------     ---------

Total assets                                           $ 628,163     $ 436,715
                                                       =========     =========

LIABILITIES
  Accounts payable and accrued liabilities             $  95,315     $  69,029
  Home sale deposits                                      19,770        13,538
  Notes payable                                          204,235       177,561
                                                       ---------     ---------

          Total liabilities                              319,320       260,128
                                                       ---------     ---------

STOCKHOLDERS' EQUITY
  Common stock, $0.01 par value. Authorized
    50,000,000 shares; issued and outstanding
    15,191,620 and 12,613,938 shares at
    September 30, 2002 and December 31, 2001,
    respectively                                             152           126
  Additional paid-in capital                             196,758       109,412
  Retained earnings                                      124,213        78,272
  Treasury stock at cost; 1,670,926 and
    1,637,926 shares at September 30, 2002 and
    December 31, 2001, respectively                      (12,280)      (11,223)
                                                       ---------     ---------

          Total stockholders' equity                     308,843       176,587
                                                       ---------     ---------

Total liabilities and stockholders' equity             $ 628,163     $ 436,715
                                                       =========     =========

           See accompanying notes to consolidated financial statements

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

<TABLE>
<CAPTION>
                                                THREE MONTHS ENDED        NINE MONTHS ENDED
                                                   SEPTEMBER 30,             SEPTEMBER 30,
                                              ----------------------    ----------------------
                                                2002         2001         2002         2001
                                              ---------    ---------    ---------    ---------
                                                    (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                           <C>          <C>          <C>          <C>
Home sales revenue                            $ 328,514    $ 207,177    $ 744,686    $ 497,693
Land sales revenue                                  615           --        5,615        1,598
                                              ---------    ---------    ---------    ---------
                                                329,129      207,177      750,301      499,291
                                              ---------    ---------    ---------    ---------

Cost of home sales                             (264,271)    (161,468)    (598,856)    (390,876)
Cost of land sales                                 (452)          --       (5,311)      (1,474)
                                              ---------    ---------    ---------    ---------
                                               (264,723)    (161,468)    (604,167)    (392,350)
                                              ---------    ---------    ---------    ---------

Home sales gross profit                          64,243       45,709      145,830      106,817
Land sales gross profit                             163           --          304          124
                                              ---------    ---------    ---------    ---------
                                                 64,406       45,709      146,134      106,941

Commissions and other sales costs               (17,644)     (10,954)     (44,240)     (27,402)
General and administrative costs                (11,518)     (11,433)     (30,307)     (24,251)
Interest expense                                     --           --           --           (1)
Other income, net                                 1,502          669        4,008        2,030
                                              ---------    ---------    ---------    ---------

Earnings before income taxes and
  extraordinary items                            36,746       23,991       75,595       57,317
Income taxes                                    (14,309)      (9,316)     (29,654)     (22,314)
                                              ---------    ---------    ---------    ---------
Earnings before extraordinary items              22,437       14,675       45,941       35,003
Extraordinary items, net of tax effects              --          212           --         (233)
                                              ---------    ---------    ---------    ---------

Net earnings                                  $  22,437    $  14,887    $  45,941    $  34,770
                                              =========    =========    =========    =========

EARNINGS PER SHARE:

Basic:
    Earnings before extraordinary items       $    1.66    $    1.37    $    3.80    $    3.32
    Extraordinary items, net of tax effects          --         0.02           --        (0.02)
                                              ---------    ---------    ---------    ---------
          Net earnings per share              $    1.66    $    1.39    $    3.80    $    3.30
                                              =========    =========    =========    =========

Diluted:
    Earnings before extraordinary items       $    1.58    $    1.23    $    3.58    $    3.01
    Extraordinary items, net of tax effects          --         0.02           --        (0.02)
                                              ---------    ---------    ---------    ---------
        Net earnings per share                $    1.58    $    1.25    $    3.58    $    2.99
                                              =========    =========    =========    =========
</TABLE>

           See accompanying notes to consolidated financial statements

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

<TABLE>
<CAPTION>
                                                                              NINE MONTHS ENDED
                                                                                SEPTEMBER 30,
                                                                            ----------------------
                                                                              2002         2001
                                                                            ---------    ---------
                                                                                (IN THOUSANDS)
<S>                                                                         <C>          <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net earnings                                                              $  45,941    $  34,770
  Adjustments to reconcile net earnings to net cash used in
    operating activities:
      Depreciation and amortization                                             4,731        3,747
      (Increase) decrease in deferred tax asset before extraordinary item          94       (1,418)
      Tax benefit from stock option exercises                                   4,923        2,376
  Change in assets and liabilities, net of effect of acquisitions:
      Increase in real estate                                                 (73,846)     (80,425)
      Increase in deposits on real estate under option or contract            (15,245)      (7,485)
      Increase in receivables and prepaid expenses and other assets              (633)      (8,058)
      Increase in accounts payable and accrued liabilities                     17,286       22,322
      Increase in home sale deposits                                            4,222        2,509
                                                                            ---------    ---------
      Net cash used in operating activities                                   (12,527)     (31,662)
                                                                            ---------    ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Cash paid for acquisitions                                                  (83,354)     (65,759)
  Increase in goodwill                                                         (2,666)        (258)
  Purchases of property and equipment                                          (5,081)      (5,115)
                                                                            ---------    ---------
      Net cash used in investing activities                                   (91,101)     (71,132)
                                                                            ---------    ---------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Borrowings                                                                  510,188      551,809
  Repayments of debt                                                         (484,584)    (453,769)
  Proceeds from sale of common stock, net                                      79,676           --
  Purchase of treasury stock                                                   (1,057)        (207)
  Proceeds from exercises of stock options                                      2,773        2,020
                                                                            ---------    ---------
      Net cash provided by financing activities                               106,996       99,853
                                                                            ---------    ---------

Net increase (decrease) in cash and cash equivalents                            3,368       (2,941)
Cash and cash equivalents, beginning of period                                  3,383        4,397
                                                                            ---------    ---------
Cash and cash equivalents, end of period                                    $   6,751    $   1,456
                                                                            =========    =========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
  Cash paid during the period for:                                             2002         2001
                                                                            ---------    ---------
    Interest                                                                $  10,178    $   6,387
    Income taxes                                                            $  20,370    $  13,893

The acquisitions of Hammonds Homes in 2002 and Hancock Communities in
  2001 resulted in the following changes in assets and liabilities:
    Real estate                                                             $ (65,684)   $ (54,545)
    Deposits on real estate under option or contract                           (3,076)      (8,899)
    Receivables and other assets                                               (3,140)        (543)
    Accounts payable and accrued liabilities                                    9,000        6,890
    Home sale deposits                                                          2,011        2,503
    Goodwill                                                                  (21,245)     (11,423)
    Property and equipment                                                     (2,290)      (1,632)
    Borrowings                                                                  1,070        1,890
                                                                            ---------    ---------
    Net cash paid for acquisitions                                          $ (83,354)   $ (65,759)
                                                                            =========    =========
</TABLE>

           See accompanying notes to consolidated financial statements

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

NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION

     BUSINESS.  We are a leading designer and builder of single-family  homes in
the rapidly growing Sunbelt states of Texas, Arizona and California. We focus on
providing a broad range of first-time,  move-up and luxury homes to our targeted
customer base. We and our  predecessors  have operated in Arizona since 1985, in
Texas since 1987 and in Northern  California  since 1989. To expand our presence
in  Arizona,  in  2001  we  acquired  Hancock  Communities  (Hancock),   another
well-established  homebuilder  that serves the first-time and move-up markets in
the  Phoenix  area.  To expand our  presence  in Texas in July 2002 we  acquired
Hammonds Homes, a Texas-based  homebuilder that focuses on the move-up market in
the Houston, Dallas/Ft. Worth and Austin areas. We entered the Las Vegas, Nevada
market in October 2002 with our acquisition of Perma-Bilt Homes.

     BASIS OF PRESENTATION.  The accompanying  consolidated financial statements
have been prepared in accordance with accounting  principles  generally accepted
in  the  United  States  of  America,  and  include  the  accounts  of  Meritage
Corporation  and  our  wholly  owned  subsidiaries.  Intercompany  balances  and
transactions have been eliminated in consolidation and certain amounts have been
reclassified  for  comparative   purposes.  In  our  opinion,  the  accompanying
unaudited consolidated  financial statements include all adjustments,  which are
of a normal recurring nature, necessary to present fairly 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 or for any future  periods.  These  financial  statements
should be read in conjunction  with our  consolidated  financial  statements and
footnotes thereto included in our December 31, 2001 annual report on Form 10-K.

     STOCK  SPLIT.  On  April  2,  2002,  our  Board  of  Directors  declared  a
two-for-one  split  of our  common  stock  in the  form of a stock  dividend  to
stockholders of record on April 12, 2002. The additional shares were distributed
on April 26,  2002.  All share and per share  information  has been  restated to
reflect this split.

     EQUITY OFFERING. In June 2002, we sold 2,012,500 shares of our common stock
at a price of $42.00 per share.  The net  proceeds  from the  offering  of $79.7
million were used primarily for our July 2002 purchase of Hammonds  Homes,  with
the  balance  being used for  general  corporate  purposes  and our  purchase of
Perma-Bilt Homes in October 2002.

     COMMON STOCK  REPURCHASE.  In August 2002,  we announced  that our Board of
Directors  authorized the expenditure of up to $32 million to repurchase  shares
of our common stock. No date for completing the program has been determined, but
we will purchase shares subject to applicable  securities laws, and at times and
in amounts as management deems appropriate.

     GOODWILL.  In June 2001, the Financial  Accounting  Standards  Board (FASB)
issued Statements of Financial  Accounting  Standards (SFAS) No. 141,  "Business
Combinations,"  effective  July  1,  2001,  and No.  142,  "Goodwill  and  Other
Intangible  Assets,"  effective for fiscal years  beginning  after  December 15,
2001.  Under the new rules,  goodwill is no longer  amortized  but is subject to
transitional and annual impairment tests in accordance with SFAS No. 142.

     Goodwill  represents  the cost of acquired  companies in excess of the fair
value of net assets  acquired at the  acquisition  date.  The goodwill  recorded
resulting from our acquisitions is allocated to our business  operating segments
as follows:

                                                   AT SEPTEMBER 30,
                                                        2002
                                                   ----------------
                                                    (in thousands)
          First-time and volume-priced                  $51,130
          Mid- to luxury-priced                           3,150
                                                        -------
                 Total                                  $54,280
                                                        =======

     Goodwill is reviewed by management  for  impairment  annually,  or whenever
events or changes in circumstances indicate the carrying amount may be impaired.
There were no  impairment  charges to  goodwill  amounts  during the nine months
ended September 30, 2002.

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

NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION (CONT.)

     Effective  January 1, 2002,  we adopted the  nonamortization  provisions of
SFAS No. 142  related  to the  goodwill  existing  at  December  31,  2001.  The
following  table sets forth  reported net  earnings  and earnings per share,  as
adjusted to exclude goodwill  amortization  expense (dollars in thousands except
per share amounts):

<TABLE>
<CAPTION>
                                        THREE            NINE
                                        MONTHS          MONTHS                YEARS ENDED DECEMBER 31,
                                        ENDED            ENDED         -------------------------------------
                                    SEPT. 30, 2001   SEPT. 30, 2001       2001          2000         1999
                                    --------------   --------------    ----------    ----------   ----------
<S>                                   <C>              <C>             <C>           <C>          <C>
Earnings before extraordinary
  items                               $   14,675       $   35,003      $   50,892    $   35,762   $   18,945
Extraordinary items, net of tax
  effects                                    212             (233)           (233)           --           --
                                      ----------       ----------      ----------    ----------   ----------
Net earnings, as reported             $   14,887       $   34,770      $   50,659    $   35,762   $   18,945
                                      ==========       ==========      ==========    ==========   ==========

Earnings, as adjusted before
  extraordinary items                 $   14,924       $   35,615      $   51,771    $   36,434   $   19,573
Extraordinary items, net of tax
  effects                                    212             (233)           (233)           --           --
                                      ----------       ----------      ----------    ----------   ----------
Net earnings, as adjusted             $   15,136       $   35,382      $   51,538    $   36,434   $   19,573
                                      ==========       ==========      ==========    ==========   ==========

AS REPORTED:
Basic earnings per share before
  extraordinary items                 $     1.37       $     3.32      $     4.80    $     3.46   $     1.74
Extraordinary items                         0.02            (0.02)          (0.02)           --           --
                                      ----------       ----------      ----------    ----------   ----------
Basic earnings per share              $     1.39       $     3.30      $     4.78    $     3.46   $     1.74
                                      ==========       ==========      ==========    ==========   ==========

Diluted earnings per share
  before extraordinary items          $     1.23       $     3.01      $     4.32    $     3.13   $     1.57
Extraordinary items                         0.02            (0.02)          (0.02)           --           --
                                      ----------       ----------      ----------    ----------   ----------
Diluted earnings per share            $     1.25       $     2.99      $     4.30    $     3.13   $     1.57
                                      ==========       ==========      ==========    ==========   ==========

AS ADJUSTED:
Basic earnings per share before
  extraordinary items                 $     1.39       $     3.38      $     4.88    $     3.52   $     1.80
Extraordinary items                         0.02            (0.02)          (0.02)           --           --
                                      ----------       ----------      ----------    ----------   ----------
Basic earnings per share              $     1.41       $     3.36      $     4.86    $     3.52   $     1.80
                                      ==========       ==========      ==========    ==========   ==========

Diluted earnings per share
  before extraordinary items          $     1.25       $     3.06      $     4.40    $     3.19   $     1.62
Extraordinary items                         0.02            (0.02)          (0.02)           --           --
                                      ----------       ----------      ----------    ----------   ----------
Diluted earnings per share            $     1.27       $     3.04      $     4.38    $     3.19   $     1.62
                                      ==========       ==========      ==========    ==========   ==========
</TABLE>

     During the second  quarter of 2002,  we finalized the first of the required
impairment  tests of goodwill as of January 1, 2002,  and have  determined  that
goodwill is not impaired.  There were no changes in  circumstances  in the third
quarter of 2002 that would cause us to reevaluate our impairment analysis.

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

NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION (CONT.)

NEW ACCOUNTING PRONOUNCEMENTS

     In June 2002, the FASB issued SFAS No.146,  Accounting for Costs Associated
with Exit or Disposal  Activities.  SFAS 146 addresses financial  accounting and
reporting for costs  associated  with exit or disposal  activities and nullifies
EITF Issue  No.94-3,  Liability  Recognition  for Certain  Employee  Termination
Benefits and Other Costs to Exit an Activity  (including  Certain Costs Incurred
in a  Restructuring).  SFAS 146 requires  recognition  of a liability for a cost
associated with an exit or disposal activity when the liability is incurred,  as
opposed to being  recognized at the date an entity commits to an exit plan under
EITF  94-3.  SFAS 146 also  establishes  that fair  value is the  objective  for
initial measurement of the liability. SFAS 146 is effective for exit or disposal
activities that are initiated after December 31, 2002. We do not anticipate exit
or disposal  activities in the near term,  therefore the adoption of SFAS 146 is
not expected to have a material impact on our consolidated  financial statements
in the future for 2002.

     In April 2002, the FASB issued SFAS No. 145,  Rescission of SFAS Statements
No.4 (Reporting Gains and Losses from Extinguishment of Debt), No.44 (Accounting
for Intangible  Assets of Motor Carriers),  and No.64  (Extinguishments  of Debt
Made to Satisfy Sinking-Fund Requirements),  Amendment of SFAS No.13 (Accounting
for  Leases),  and  Technical  Corrections.  This  statement  also amends  other
existing  authorative  pronouncements  to make  various  technical  corrections,
clarify meanings or describe their applicability under changed conditions.  SFAS
145 is effective for  transactions  occuring after MAy 15, 2002. Our adoption of
SFAS 145 on May 15,  2002 did not have a  material  impact  on our  consolidated
financial  statements,  and is not  anticipated to have a material impact in the
future.

     In  October  2001,  the FASB  issued  SFAS  No.  144,  "Accounting  for the
Impairment  or  Disposal  of  Long-Lived  Assets,"  effective  for fiscal  years
beginning  after  December  15, 2001.  This  standard  supersedes  SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of," and provides a single accounting model for long-lived assets to
be disposed of. SFAS No. 144 provides guidance on differentiating between assets
held and used and assets to be  disposed  of.  Assets to be disposed of would be
classified  as held for sale (and  depreciation  would  cease) when  management,
having  the  authority  to  approve  the  action,  commits to a plan to sell the
asset(s) meeting all required criteria.  We adopted this statement on January 1,
2002,  which  did not  have a  material  effect  on our  earnings  or  financial
position.

NOTE 2 - REAL ESTATE AND CAPITALIZED INTEREST

The components of real estate are (in thousands):

                                          SEPTEMBER 30, 2002   DECEMBER 31, 2001
                                          ------------------   -----------------
Homes under contract, in production          $   227,594          $   135,005
Finished home sites                              111,680               81,151
Home sites under development                      66,761               57,291
Homes held for resale                             36,143               33,278
Model homes                                       14,826               18,289
Land held for development                         12,764                5,224
                                             -----------          -----------
                                             $   469,768          $   330,238
                                             ===========          ===========

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

<TABLE>
<CAPTION>
                                              THREE MONTHS ENDED      NINE MONTHS ENDED
                                                 SEPTEMBER 30,           SEPTEMBER 30,
                                             --------------------    --------------------
                                               2002        2001        2002        2001
                                             --------    --------    --------    --------
<S>                                          <C>         <C>         <C>         <C>
Beginning unamortized capitalized interest   $ 10,050    $  7,248    $  8,746    $  5,426
Interest capitalized                            4,808       5,430      14,143      11,868
Amortized to cost of home and land sales       (5,886)     (3,576)    (13,917)     (8,192)
                                             --------    --------    --------    --------
Ending unamortized capitalized interest      $  8,972    $  9,102    $  8,972    $  9,102
                                             ========    ========    ========    ========

Interest incurred                            $  4,808    $  5,430    $ 14,143    $ 11,869
Interest capitalized                           (4,808)     (5,430)    (14,143)    (11,868)
                                             --------    --------    --------    --------
Interest expensed                            $     --    $     --    $     --    $      1
                                             ========    ========    ========    ========
</TABLE>

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

NOTE 3 - NOTES PAYABLE

Notes payable consists of:

                                                     SEPTEMBER 30,  DECEMBER 31,
                                                         2002           2001
                                                     -------------  ------------
                                                           (IN THOUSANDS)
$100 million bank revolving construction line of
  credit, interest payable monthly approximating
  prime (4.75% at September 30, 2002) or LIBOR
  (rates varying from 1.819% to 1.806% at
  September 30, 2002) plus 2.0%, payable at the
  earlier of close of escrow, maturity date of
  individual homes and home sites within the
  collateral pool or over a 24-month period
  beginning June 1, 2003, secured by first deeds
  of trust on real estate                             $    6,591    $      617

$90 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 and home sites within the line or
  August 31, 2003, secured by first deeds of
  trust on real estate                                    40,207        15,590

Acquisition and development seller carry back
  financing, interest payable monthly at fixed
  rates of 9% to 10% per annum; payable at the
  maturity date of the individual projects,
  secured by first deeds of trust on land                  1,211         6,204

Senior unsecured notes, maturing June 1, 2011,
  interest only payments of 9.75% per annum,
  payable semi-annually                                  155,000       155,000

Other notes                                                1,226           150
                                                      ----------    ----------

     Total                                            $  204,235    $  177,561
                                                      ==========    ==========

     The bank credit  facilities and senior  unsecured  notes contain  covenants
which require  maintenance of certain  levels of tangible net worth,  compliance
with certain minimum  financial  ratios and place  limitations on the payment of
dividends  and  redemptions  of equity,  and limit the  incurrence of additional
indebtedness, asset dispositions,  mergers, certain investments and creations of
liens,  among  other  items.  As of  September  30,  2002 and for the year ended
December  31,  2001,  we were in  compliance  with these  covenants.  The senior
unsecured notes restrict our ability to pay dividends.

NOTE 4 - ACQUISITIONS

     On July 1, 2002,  we acquired  substantially  all of the  homebuilding  and
related assets of Hammonds  Homes.  The purchase price was  approximately  $83.4
million in cash, plus the assumption of accounts  payable,  accrued  liabilities
and home sales deposits  totaling $11.0 million and a note payable totaling $1.1
million.  This  acquisition  was  accounted  for  using the  purchase  method of
accounting.  Accordingly,  we recorded goodwill of approximately  $21.2 million,
which represents the excess of the purchase price over the fair value of the net
tangible and identifiable  intangible  assets acquired and liabilities  assumed.
This  goodwill  was  allocated  to our  first-time  and  volume-priced  business
segment.

                                       9
<PAGE>
                      MERITAGE CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                                   (UNAUDITED)

NOTE 4 - ACQUISITIONS (CONT.)

     The following  unaudited financial data for the three and nine months ended
September  30,  2002 and 2001 has been  prepared  as if the  acquisition  of the
assets and liabilities of Hammonds Homes on July 1, 2002 had occurred on January
1, 2001.  The 2001 and first nine months of 2002  unaudited pro forma  financial
data is presented  for  informational  purposes  only and is based on historical
information.  This  information  may not be indicative of our actual amounts had
the  transaction  occurred  on the date  listed  above,  nor does it  purport to
represent future periods (in thousands except per share amounts):

                                  THREE MONTHS ENDED         NINE MONTHS ENDED
                                     SEPTEMBER 30,             SEPTEMBER 30,
                                ----------------------    ----------------------
                                  2002         2001         2002         2001
                                 ACTUAL      PRO FORMA     ACTUAL      PRO FORMA
                                --------     ---------    --------     ---------
Revenue                         $329,129     $ 257,833    $829,472     $ 634,460
Net earnings                      22,437        17,777      48,859        42,432
Diluted EPS                     $   1.58     $    1.49    $   3.80     $    3.65

     On October 7, 2002, we completed the  acquisition of  substantially  all of
the homebuilding and related assets of Perma-Bilt  Homes. The purchase price was
approximately  $46.6 million,  subject to final  adjustments,  comprised of cash
paid at closing of $29.9  million  and the  repayment  of  existing  debt in the
amount of $ 16.7 million.  The  acquisition was accounted for using the purchase
method of accounting.  Accordingly,  we recorded goodwill of approximately $21.3
million.  Perma-Bilt Homes,  established in 1993, builds a wide range of quality
homes in five communities in the Las Vegas,  Nevada area with a focus on serving
the move-up housing market.

     On May 30, 2001,  we acquired  substantially  all of the  homebuilding  and
related assets of HC Builders, Inc. and Hancock Communities, L.L.C. The purchase
price was $65.8  million  in cash,  plus the  assumption  of  accounts  payable,
accrued  liabilities  and home sales  deposits  totaling $9.4 million and a note
payable  totaling $1.9  million.  In addition,  we granted to Greg Hancock,  the
founder of the company,  an earn-out payable in cash over three years, which was
equal to 20% of  Hancock's  pre-tax net income  after a 10.5% charge on capital.
This  acquisition  was  accounted for using the purchase  method of  accounting.
Accordingly,   we  recorded  goodwill  of  approximately  $11.4  million,  which
represents  the  excess of the  purchase  price  over the fair  value of the net
tangible and identifiable  intangible  assets acquired and liabilities  assumed.
This  goodwill  was  allocated  to our  first-time  and  volume-priced  business
segment.  Goodwill  is also  increased  to the  extent  of the  earn-out,  which
amounted to  approximately  $2.7 million in the first nine months of 2002. Prior
to January 1, 2002, the goodwill was being amortized over a period of 20 years.

                                       10
<PAGE>
                      MERITAGE CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                                   (UNAUDITED)

NOTE 5 - EARNINGS PER SHARE

Basic and diluted  earnings per share were  calculated as follows (in thousands,
except per share data):

<TABLE>
<CAPTION>
                                                         THREE MONTHS ENDED     NINE MONTHS ENDED
                                                            SEPTEMBER 30,         SEPTEMBER 30,
                                                         -------------------   -------------------
                                                           2002       2001       2002       2001
                                                         --------   --------   --------   --------
<S>                                                      <C>        <C>        <C>        <C>
BASIC:
Earnings before extraordinary items                      $ 22,437   $ 14,675   $ 45,941   $ 35,003
Extraordinary items, net of tax effects                        --        212         --       (233)
                                                         --------   --------   --------   --------
Net earnings                                             $ 22,437   $ 14,887   $ 45,941   $ 34,770
                                                         ========   ========   ========   ========

Weighted average number of shares outstanding-basic        13,514     10,735     12,105     10,529
                                                         --------   --------   --------   --------

Basic earnings per share before extraordinary items      $   1.66   $   1.37   $   3.80   $   3.32
Extraordinary items                                            --       0.02         --      (0.02)
                                                         --------   --------   --------   --------
Basic earnings per share                                 $   1.66   $   1.39   $   3.80   $   3.30
                                                         ========   ========   ========   ========

DILUTED:
Earnings before extraordinary items                      $ 22,437   $ 14,675   $ 45,941   $ 35,003
Extraordinary items, net of tax effects                        --        212         --       (233)
                                                         --------   --------   --------   --------
Net earnings                                             $ 22,437   $ 14,887   $ 45,941   $ 34,770
                                                         ========   ========   ========   ========

Weighted average number of shares outstanding - basic      13,514     10,735     12,105     10,529
Effect of dilutive securities:
  Options to acquire common stock                             725      1,191        736      1,091
                                                         --------   --------   --------   --------
Diluted weighted common shares outstanding                 14,239     11,926     12,841     11,620
                                                         --------   --------   --------   --------

Diluted earnings per share before extraordinary items    $   1.58   $   1.23   $   3.58   $   3.01
Extraordinary items                                            --       0.02         --      (0.02)
                                                         --------   --------   --------   --------
Diluted earnings per share                               $   1.58   $   1.25   $   3.58   $   2.99
                                                         ========   ========   ========   ========

Antidilutive stock options not included in diluted EPS        295         --        295         --
                                                         ========   ========   ========   ========
</TABLE>

                                       11
<PAGE>
                      MERITAGE CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                                   (UNAUDITED)

NOTE 6 - INCOME TAXES

Components  of  income  tax  expense  attributable  to  income  from  continuing
operations consist of (in thousands):

                            THREE MONTHS ENDED         NINE MONTHS ENDED
                               SEPTEMBER 30,             SEPTEMBER 30,
                           ---------------------     ---------------------
                             2002         2001         2002         2001
                           --------     --------     --------     --------
     Current:
          Federal          $ 10,445     $  8,743     $ 24,712     $ 20,162

          State               1,963        1,933        4,848        3,571
                           --------     --------     --------     --------
                             12,408       10,676       29,560       23,733
                           --------     --------     --------     --------
     Deferred:
          Federal             1,668       (1,178)          66       (1,212)
          State                 233         (182)          28         (207)
                           --------     --------     --------     --------

                              1,901       (1,360)          94       (1,419)
                           --------     --------     --------     --------

          Total            $ 14,309     $  9,316     $ 29,654     $ 22,314
                           ========     ========     ========     ========

NOTE 7 - SEGMENT INFORMATION

     We classify our operations into two primary management segments: first-time
and volume-priced homes and mid- to luxury-priced homes. These segments generate
revenue 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.

                                       12
<PAGE>
                      MERITAGE CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                                   (UNAUDITED)

NOTE 7 - SEGMENT INFORMATION (CONT.)

<TABLE>
<CAPTION>
                                    THREE MONTHS ENDED           NINE MONTHS ENDED
                                       SEPTEMBER 30,               SEPTEMBER 30,
                                  -----------------------     -----------------------
                                    2002          2001          2002          2001
                                  ---------     ---------     ---------     ---------
                                                     (IN THOUSANDS)
<S>                               <C>           <C>           <C>           <C>
HOME SALES REVENUE:
  First-time and volume-priced    $ 201,981     $ 126,569     $ 447,782     $ 286,769
  Mid- to luxury-priced             126,533        80,608       296,904       210,924
                                  ---------     ---------     ---------     ---------
         Total                    $ 328,514     $ 207,177     $ 744,686     $ 497,693
                                  =========     =========     =========     =========

EBIT:
  First-time and volume-priced    $  24,672     $  16,126     $  54,769     $  40,180
  Mid- to luxury-priced              19,509        12,927        38,939        28,653
  Corporate                          (1,549)       (1,486)       (4,196)       (3,323)
                                  ---------     ---------     ---------     ---------
         Total                    $  42,632     $  27,567     $  89,512     $  65,510
                                  =========     =========     =========     =========

                                                                 AT             AT
                                                            SEPTEMBER 30,  DECEMBER 31,
                                                                2002           2001
                                                            -------------  ------------
                                                                  (IN THOUSANDS)
ASSETS:
  First-time and volume-priced                                $ 425,758     $ 261,825
  Mid- to luxury-priced                                         190,967       164,156
  Corporate                                                      11,438        10,734
                                                              ---------     ---------
         Total                                                $ 628,163     $ 436,715
                                                              =========     =========
</TABLE>

                                       13
<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 include
projections of revenue, income or loss and capital expenditures; financing needs
or plans and  liquidity;  the  impact of changes in  interest  rates;  and plans
relating to our products, as well as assumptions relating to the foregoing.

     Actual   results   may   differ   materially   from  those   expressed   in
forward-looking  statements.  Risks identified in Exhibit 99.4 to this Quarterly
Report on Form  10-Q and in our  Annual  Report on Form 10-K for the year  ended
December 31, 2001,  including  under the captions  "Market for the  Registrant's
Common Stock and Related  Stockholder  Matters - Factors That May Affect  Future
Stock  Performance,"  and  "Management's  Discussion  and  Analysis of Financial
Condition and Results of Operations - Factors That May Affect Our Future Results
and Financial Condition and - Special Note of Caution Regarding  Forward-Looking
Statements"  describe factors,  among others,  that could contribute to or cause
such  differences.  These factors may also affect our business  generally.  As a
result  of  these   factors,   the  prices  of  our   securities  may  fluctuate
dramatically.

     RESULTS OF OPERATIONS

     The  following  discussion  and  analysis of financial  condition  provides
information  regarding  our results of  operations  for the three and nine month
periods  ended   September  30,  2002  and  2001.  All  material   balances  and
transactions   between  us  and  our   subsidiaries   have  been  eliminated  in
consolidation. In our 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, SALES CONTRACTS AND NET SALES BACKLOG

     The data provided  below shows  operating and financial  data regarding our
homebuilding activities (dollars in thousands).

<TABLE>
<CAPTION>
                        THREE MONTHS ENDED                   NINE MONTHS ENDED
                           SEPTEMBER 30,      PERCENTAGE       SEPTEMBER 30,
                       --------------------    INCREASE    --------------------   PERCENTAGE
HOME SALES REVENUE       2002        2001     (DECREASE)     2002        2001      INCREASE
                       --------    --------    --------    --------    --------   ----------
<S>                    <C>         <C>          <C>        <C>         <C>          <C>
TOTAL
Dollars                $328,514    $207,177       59%      $744,686    $497,693       50%
Homes closed              1,311         938       40%         3,091       2,227       39%
Average sales price    $  250.6    $  220.9       13%      $  240.9    $  223.5        8%

TEXAS
Dollars                $132,129    $ 62,306      112%      $258,571    $185,263       40%
Homes closed                692         357       94%         1,431       1,077       33%
Average sales price    $  190.9    $  174.5        9%      $  180.7    $  172.0        5%

ARIZONA
Dollars                $122,948    $100,794       22%      $296,673    $201,155       47%
Homes closed                442         469       (6)%        1,192         863       38%
Average sales price    $  278.2    $  214.9       29%      $  248.9    $  233.1        7%

CALIFORNIA
Dollars                $ 73,437    $ 44,077       67%      $189,442    $111,275       70%
Homes closed                177         112       58%           468         287       63%
Average sales price    $  414.9    $  393.5        5%      $  404.8    $  387.7        4%
</TABLE>

                                       14
<PAGE>
<TABLE>
<CAPTION>
                        THREE MONTHS ENDED                   NINE MONTHS ENDED
                           SEPTEMBER 30,      PERCENTAGE       SEPTEMBER 30,       PERCENTAGE
                       --------------------    INCREASE    --------------------     INCREASE
HOME SALES REVENUE       2002        2001     (DECREASE)     2002        2001      (DECREASE)
                       --------    --------    --------    --------    --------    --------
<S>                    <C>         <C>          <C>        <C>         <C>          <C>
TOTAL
Dollars                $304,556    $161,486       89%      $895,286    $513,237       74%
Homes ordered             1,129         723       56%         3,433       2,220       55%
Average sales price    $  269.8    $  223.4       21%      $  260.8    $  231.2       13%

TEXAS
Dollars                $130,799    $ 50,409      159%      $302,051    $193,241       56%
Homes ordered               641         297      116%         1,575       1,156       36%
Average sales price    $  204.1    $  169.7       20%      $  191.8    $  167.2       15%

ARIZONA
Dollars                $ 88,266    $ 84,197        5%      $316,361    $220,025       44%
Homes ordered               306         359      (15)%        1,200         814       47%
Average sales price    $  288.5    $  234.5       23%      $  263.6    $  270.3       (2)%

CALIFORNIA
Dollars                $ 85,491    $ 26,880      218%      $276,874    $ 99,971      177%
Homes ordered               182          67      172%           658         250      163%
Average sales price    $  469.7    $  401.2       17%      $  420.8    $  399.9        5%

                                                             AT SEPTEMBER 30,     PERCENTAGE
                                                           --------------------    INCREASE
NET SALES BACKLOG                                            2002        2001     (DECREASE)
                                                           --------    --------    --------
TOTAL
  Dollars                                                  $598,907    $432,968       38%
  Homes in backlog                                            2,292       1,849       24%
  Average sales price                                      $  261.3    $  234.2       12%

TEXAS
  Dollars                                                  $232,487    $127,542       82%
  Homes in backlog                                            1,185         774       53%
  Average sales price                                      $  196.2    $  164.8       19%

ARIZONA
  Dollars                                                  $225,674    $241,604       (7)%
  Homes in backlog                                              784         905      (13)%
  Average sales price                                      $  287.8    $  267.0        8%

CALIFORNIA
  Dollars                                                  $140,746    $ 63,822      121%
  Homes in backlog                                              323         170       90%
  Average sales price                                      $  435.7    $  375.4       16%
</TABLE>

     HOME SALES REVENUE. The increases in total home sales revenue and number of
homes closed in the third  quarter and first nine months of 2002 compared to the
same  periods of 2001  resulted  mainly  from the strong  market  conditions  in
Northern  California  and the addition of Hammonds  Homes to our  operations  in
Texas,  which was acquired on July 1, 2002.  Hammonds  contributed  235 closings
with a value of  approximately  $50 million to the third  quarter 2002 results.

                                       15
<PAGE>
     SALES  CONTRACTS.  Sales  contracts for any period  represent the aggregate
sales price of all homes ordered by customers,  net of cancellations.  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  approximating  23% of  gross  sales,  which  we  believe  is
consistent  with industry  norms.  Sales contracts for the third quarter and the
nine months ended  September 30, 2002 are up from the previous  year, due mainly
to the addition of Hammonds Homes to our operations in Texas and the strength of
the homebuilding market in California.  In addition, orders in Arizona have been
negatively  impacted by a decrease in sales in our high-end Monterey  Scottsdale
product and the early sell-out of some lower priced Hancock  communities,  ahead
of their replacements.  Hammonds  contributed 209 contracts to our third quarter
2002 results.

     NET SALES BACKLOG.  Backlog  represents  net sales  contracts that have not
closed.  Total  dollar  backlog at  September  30, 2002  increased  38% over the
September  30, 2001 amount due to an increase in the number of homes in backlog.
The number of homes in backlog at September 30, 2002 increased 24% over the same
date in the prior  year.  These  increases  resulted  mainly  from our  Hammonds
acquisition and continued strong demand for homes in California. Arizona backlog
was down due to the same factors identified in Sales Contracts above.

OTHER OPERATING INFORMATION

                                    THREE MONTHS ENDED      NINE MONTHS ENDED
                                       SEPTEMBER 30,           SEPTEMBER 30,
                                   --------------------    --------------------
                                     2002        2001        2002        2001
                                   --------    --------    --------    --------
HOME SALES GROSS PROFIT
Dollars                            $ 64,243    $ 45,709    $145,830    $106,817
Percent of home sales revenues         19.6%       22.1%       19.6%       21.5%

COMMISSIONS AND OTHER SALES COSTS
Dollars                            $ 17,644    $ 10,954    $ 44,240    $ 27,402
Percent of home sales revenue           5.4%        5.3%        5.9%        5.5%

GENERAL AND ADMINISTRATIVE COSTS
Dollars                            $ 11,518    $ 11,433    $ 30,307    $ 24,251
Percent of total revenue                3.5%        5.5%        4.0%        4.9%

INCOME TAXES
Dollars                            $ 14,309    $  9,316    $ 29,654    $ 22,314
Percent of income before taxes
  and extraordinary items              38.9%       38.8%       39.2%       38.9%

     HOME SALES GROSS  PROFIT.  Gross profit equals home sales  revenue,  net of
housing cost of sales,  which  include  developed lot costs,  home  construction
costs, amortization of common community costs (such as the cost of model complex
and  architectural,   legal  and  zoning  costs),  amortization  of  capitalized
interest,  sales tax,  warranty,  construction  overhead and closing costs.  The
dollar  increases in gross profit for the three and nine months ended  September
30, 2002 are  attributable  to the increase in the number of home closings.  The
decrease in our home sales gross profit percentage for the three and nine months
ended September 30, 2002 is attributable to more competitive  market  conditions
during the time the orders  were taken for the  current  year home  closings  as
compared to the prior year's closings. The gross margins of homes closed in 2002
were  adversely  impacted  by the use of a  greater  level of sales  incentives,
prompted by the less robust economic conditions existing at the time orders were
taken for these homes.  In addition,  the margins in the current  year's quarter
were  negatively  impacted by a fair value  adjustment  to increase the value of
homes under  construction by approximately  $2.9 million as a result of applying
purchase  accounting in the  acquisition  of Hammonds  Homes.  Approximately  $2
million  of this  amount was  expensed  as a  component  of cost of sales due to
Hammonds' closings for the quarter ended September 30, 2002.

                                       16
<PAGE>
     COMMISSIONS AND OTHER SALES COSTS.  Commissions and other sales costs, such
as advertising and sales office expenses,  were approximately  $17.6 million, or
5.4% of home sales  revenue in the three months  ended  September  30, 2002,  as
compared to approximately  $11.0 million,  or 5.3% of home sales revenue, in the
third quarter of 2001. For the first nine months of 2002,  commissions and other
sales  costs were  approximately  $44.2  million or 5.9% of home sales  revenue,
compared with $27.4 million, or 5.5% of home sales revenue,  for the nine months
of 2001.  These  increases  were  primarily due to higher sales  incentives as a
percentage  of revenue  related  to our  Monterey  and  Hancock  divisions,  and
advertising related to communities not yet or recently opened for sale.

     GENERAL AND ADMINISTRATIVE  COSTS.  General and  administrative  costs were
approximately  $11.5 million,  or 3.5% of total revenue, in the third quarter of
2002, as compared to approximately  $11.4 million,  or 5.5% of total revenue, in
2001. General and administrative costs were approximately $30.3 million, or 4.0%
of total revenue, in the first nine months of 2002, as compared to approximately
$24.3 million,  or 4.9% of total revenue,  for the same period of 2001.  General
and  administrative  costs in 2002 were lower as a  percentage  of  revenue,  in
comparison to 2001,  mainly due to the June 30, 2002  conclusion of the earn-out
payments made in accordance  with the purchase  agreement  terms of our Northern
California  division and by holding down other general and administrative  costs
while revenues increased. The earn-out was calculated based on 20 percent of the
pre-tax  earnings of the Northern  California  division  after  reduction  for a
capital charge.

     INCOME  TAXES.  Increases  in income  taxes for the quarter and nine months
ended September 30, 2002 from the prior year resulted mainly from an increase in
pre-tax income.

     LIQUIDITY AND CAPITAL RESOURCES

     Our principal uses of working capital are land  purchases,  lot development
and home construction. We use a combination of borrowings and funds generated by
operations to meet short-term  working capital  requirements and we issue equity
or debt in order to meet long-term capital requirements.

     At September 30, 2002, we had  short-term  secured  revolving  construction
loans and  acquisition and development  facilities  totaling $190.0 million,  of
which  $46.8  million  was  outstanding.  $141.5  million  of  unborrowed  funds
supported by approved collateral were available under these credit facilities at
that date,  subject to compliance  with the financial and other covenants in our
loan agreements.  This additional  borrowing was fully available under such loan
covenants  at  September  30,  2002.  We also have  $155  million  in  principal
outstanding of unsecured, 9.75% senior notes due June 1, 2011, which were issued
in May 2001.

     As  discussed  in Note  4,  Aquisitions,  approximately  $46.6  million  of
liquidity was utilized to purchase Perma-Bilt Homes on October 7, 2002.

     We believe that the current  borrowing  capacity and anticipated cash flows
from  operations are  sufficient to meet our working  capital  requirements  and
other needs for the foreseeable  future.  There is no assurance,  however,  that
future  amounts  available from our cash flows 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 notes and by the terms of our
other credit agreements.

     As a component  of our model home  construction  activities,  we enter into
lease transactions with third parties.  The total cost, including land costs, of
model  homes  leased by us and  constructed  under  these  lease  agreements  is
approximately $21.6 million,  all of which is excluded from our balance sheet as
of September 30, 2002.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     We do not enter into derivative financial instruments for trading purposes,
although we do have other financial instruments in the form of notes payable and
senior debt. 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.
The interest rate on our senior debt is at a fixed rate of 9.75%.  Except in the
event of default or upon the  occurrence  of certain  events,  we do not have an

                                       17
<PAGE>
obligation  to prepay our  fixed-rate  debt prior to maturity  and, as a result,
interest  rate risk and  changes  in fair value  should  not have a  significant
impact in our fixed-rate debt until we would be required to refinance such debt.

ITEM 4. CONTROLS AND PROCEDURES

     Meritage's  Co-Chief  Executive  Officers and Chief Financial  Officer have
concluded based on their evaluation as of a date within 90 days of the filing of
this Form 10-Q, that its disclosure controls and procedures (as defined in Rules
13a-14 and 15d-14  under the  Securities  Exchange  Act of 1934) are  effective.
There have been no significant  changes in internal controls or in other factors
that could  significantly  affect these controls subsequent to the date of their
evaluation,   including  any  corrective  actions  with  regard  to  significant
deficiencies and material weaknesses.

                           PART II - OTHER INFORMATION

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

<TABLE>
<CAPTION>
EXHIBIT                                                                         PAGE OR
NUMBER                             DESCRIPTION                              METHOD OF FILING
------                             -----------                              ----------------
<S>       <C>                                                               <C>
 10.1     Ninth Modification Agreement to Guaranty Federal Bank Loan,
          dated as of August 22, 2002                                        Filed herewith

 99.1     Certificate of Steven J. Hilton, Co-Chief Executive Officer,
          pursuant to Section 906 of the Sarbanes-Oxley Act of 2002          Filed herewith

 99.2     Certificate of John R. Landon, Co-Chief Executive Officer,
          pursuant to Section 906 of the Sarbanes-Oxley Act of 2002          Filed herewith

 99.3     Certificate of Larry W. Seay, Chief Financial Officer, pursuant
          to Section 906 of the Sarbanes-Oxley Act of 2002                   Filed herewith

 99.4     Private Securities Litigation Reform Act of 1995 Safe Harbor
          Compliance Statement for Forward-Looking Statements                Filed herewith
</TABLE>

(b)  REPORTS ON FORM 8-K

     On September  11, 2002,  we filed a Current  Report on Form 8-K/A  amending
Form 8-K dated July 12, 2002 to include the financial  statements  and pro forma
financial information of Hammonds Homes, which we acquired in July 2002.

     On October 9, 2002, we filed a Current  Report on Form 8-K  describing  the
completion of our acquisition of the homebuilding assets of Perma-Bilt Homes.

     On October 23, 2002 we filed a Current  Report on Form 8-K/A  amending Form
8-K dated  October  7, 2002 to include  transaction  documents  relating  to our
acquisition of Perma-Bilt Homes.

                                       18
<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 14th
day of November 2002.


                                        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)


                                        BY /s/ VICKI L. BIGGS
                                           -------------------------------------
                                           Vicki L. Biggs
                                           CHIEF ACCOUNTING OFFICER AND VICE
                                           PRESIDENT-CORPORATE CONTROLLER

                                       S-1
<PAGE>
                                 CERTIFICATIONS

                CERTIFICATION OF THE CO-CHIEF EXECUTIVE OFFICER

I, Steven J. Hilton, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Meritage Corporation;

2. Based on my  knowledge,  this  quarterly  report  does not contain any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made, not  misleading  with respect to the period covered by this quarterly
report;

3.  Based  on my  knowledge,  the  financial  statements,  and  other  financial
information  included in this quarterly  report,  fairly present in all material
respects the financial  condition,  results of operations  and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4.  The  registrant's  other  certifying  officers  and  I are  responsible  for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed  such  disclosure  controls and  procedures  to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others  within those  entities,  particularly  during the
period in which this quarterly report is being prepared;

b) evaluated  the  effectiveness  of the  registrant's  disclosure  controls and
procedures  as of a date  within  90  days  prior  to the  filing  date  of this
quarterly report (the "Evaluation Date"); and

c) presented in this quarterly report our conclusions about the effectiveness of
the  disclosure  controls  and  procedures  based  on our  evaluation  as of the
Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation,  to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):

a) all significant  deficiencies in the design or operation of internal controls
which  could  adversely  affect the  registrant's  ability  to record,  process,
summarize and report  financial data and have  identified  for the  registrant's
auditors any material weaknesses in internal controls; and

b) any  fraud,  whether  or not  material,  that  involves  management  or other
employees who have a significant role in the registrant's internal controls; and

6. The  registrant's  other  certifying  officers  and I have  indicated in this
quarterly  report  whether or not there  were  significant  changes in  internal
controls or in other factors that could  significantly  affect internal controls
subsequent to the date of our most recent  evaluation,  including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date: November 14, 2002

                                        /s/ Steven J. Hilton
                                        ----------------------------------------
                                        Steven J. Hilton
                                        Co-Chief Executive Officer
<PAGE>
                 CERTIFICATION OF THE CO-CHIEF EXECUTIVE OFFICER

I, John R. Landon, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Meritage Corporation;

2. Based on my  knowledge,  this  quarterly  report  does not contain any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made, not  misleading  with respect to the period covered by this quarterly
report;

3.  Based  on my  knowledge,  the  financial  statements,  and  other  financial
information  included in this quarterly  report,  fairly present in all material
respects the financial  condition,  results of operations  and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4.  The  registrant's  other  certifying  officers  and  I are  responsible  for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed  such  disclosure  controls and  procedures  to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others  within those  entities,  particularly  during the
period in which this quarterly report is being prepared;

b) evaluated  the  effectiveness  of the  registrant's  disclosure  controls and
procedures  as of a date  within  90  days  prior  to the  filing  date  of this
quarterly report (the "Evaluation Date"); and

c) presented in this quarterly report our conclusions about the effectiveness of
the  disclosure  controls  and  procedures  based  on our  evaluation  as of the
Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation,  to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):

a) all significant  deficiencies in the design or operation of internal controls
which  could  adversely  affect the  registrant's  ability  to record,  process,
summarize and report  financial data and have  identified  for the  registrant's
auditors any material weaknesses in internal controls; and

b) any  fraud,  whether  or not  material,  that  involves  management  or other
employees who have a significant role in the registrant's internal controls; and

6. The  registrant's  other  certifying  officers  and I have  indicated in this
quarterly  report  whether or not there  were  significant  changes in  internal
controls or in other factors that could  significantly  affect internal controls
subsequent to the date of our most recent  evaluation,  including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date: November 14, 2002

                                        /s/ John R. Landon
                                        ----------------------------------------
                                        John R. Landon
                                        Co-Chief Executive Officer
<PAGE>
                  CERTIFICATION OF THE CHIEF FINANCIAL OFFICER

I, Larry W. Seay, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Meritage Corporation;

2. Based on my  knowledge,  this  quarterly  report  does not contain any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made, not  misleading  with respect to the period covered by this quarterly
report;

3.  Based  on my  knowledge,  the  financial  statements,  and  other  financial
information  included in this quarterly  report,  fairly present in all material
respects the financial  condition,  results of operations  and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4.  The  registrant's  other  certifying  officers  and  I are  responsible  for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed  such  disclosure  controls and  procedures  to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others  within those  entities,  particularly  during the
period in which this quarterly report is being prepared;

b) evaluated  the  effectiveness  of the  registrant's  disclosure  controls and
procedures  as of a date  within  90  days  prior  to the  filing  date  of this
quarterly report (the "Evaluation Date"); and

c) presented in this quarterly report our conclusions about the effectiveness of
the  disclosure  controls  and  procedures  based  on our  evaluation  as of the
Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation,  to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):

a) all significant  deficiencies in the design or operation of internal controls
which  could  adversely  affect the  registrant's  ability  to record,  process,
summarize and report  financial data and have  identified  for the  registrant's
auditors any material weaknesses in internal controls; and

b) any  fraud,  whether  or not  material,  that  involves  management  or other
employees who have a significant role in the registrant's internal controls; and

6. The  registrant's  other  certifying  officers  and I have  indicated in this
quarterly  report  whether or not there  were  significant  changes in  internal
controls or in other factors that could  significantly  affect internal controls
subsequent to the date of our most recent  evaluation,  including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date: November 14, 2002

                                        /s/ Larry W. Seay
                                        ----------------------------------------
                                        Larry W. Seay
                                        Chief Financial Officer

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.1
<SEQUENCE>3
<FILENAME>ex10-1.txt
<DESCRIPTION>NINTH MODIFICATION AGREEMENT
<TEXT>
                                                                    Exhibit 10.1

                          NINTH MODIFICATION AGREEMENT

     This NINTH  MODIFICATION  AGREEMENT (this  "AGREEMENT") is made and entered
into as of August 22,  2002,  by and  between  LEGACY/MONTEREY  HOMES  L.P.,  an
Arizona  limited  partnership,   HANCOCK-MTH   COMMUNITIES,   INC.,  an  Arizona
corporation,   HANCOCK-MTH   BUILDERS,   INC.,  an  Arizona   corporation,   MTH
HOMES-TEXAS,   L.P.,  a  Texas  limited   partnership,   jointly  and  severally
(collectively,   "BORROWER"),   and  GUARANTY  BANK,  a  federal   savings  bank
("Lender").

                                   WITNESSETH:

     WHEREAS, pursuant to a certain Master Loan Agreement (the "LOAN AGREEMENT")
dated as of January 31, 1993,  between  Lender and Borrower,  Lender made a loan
(the "LOAN") to Borrower,  evidenced by a certain Revolving Promissory Note (the
"NOTE") dated as of January 31, 1993,  payable to Lender in the stated principal
amount  of  SEVENTY-FIVE  MILLION  AND  NO/100  DOLLARS  ($75,000,000.00),  with
interest and principal payable as set forth therein; and

     WHEREAS,  to secure the Note and Loan,  Master Form  Deed(s) of Trust (With
Security Agreement and Assignment of Rents and Leases) (hereinafter collectively
referred to as the "MASTER DEEDS OF TRUST,"  whether one or more),  which Master
Deeds of Trust have been  recorded in certain  counties in the State of Texas as
more particularly described on EXHIBIT A attached hereto; and which Master Deeds
of Trust are  incorporated by reference  pursuant to the terms and provisions of
certain  Deeds of Trust  Incorporating  by Reference a Master Form Deed of Trust
(With  Security  Agreement  and  Assignment  of  Rents  and  Leases)  (hereafter
collectively  referred to as the  "SUPPLEMENTAL  DEEDS OF TRUST," whether one or
more) recorded in such counties and encumbering  certain real and other property
(the  "PROPERTY")  described  in such  Supplemental  Deeds of Trust (such Master
Deeds of Trust and Supplemental Deeds of Trust hereafter  collectively  referred
to as the "DEEDS OF TRUST," whether one or more); and

     WHEREAS,  the  Deeds of Trust  were  modified  pursuant  to a  Modification
Agreement (the "FIRST Modification"), and recorded in various counties in Texas,
which First  Modification  modified  certain terms and provisions of the Loan as
set forth therein; and

     WHEREAS,  the Deeds of Trust were further pursuant to a Second Modification
Agreement (the "SECOND  MODIFICATION") dated as of May 19, 1998, and recorded in
various counties in Texas, which Second Modification  modified certain terms and
provisions of the Loan as set forth therein; and

     WHEREAS,  the Deeds of Trust were further pursuant to a Third  Modification
Agreement (the "THIRD MODIFICATION") dated as of March 30, 1999, and recorded in
various counties in Texas, which Third  Modification  modified certain terms and
provisions of the Loan as set forth therein; and

     WHEREAS,  the Deeds of Trust were further pursuant to a Fourth Modification
Agreement (the "FOURTH MODIFICATION") dated as of July 31, 1999, and recorded in

NINTH MODIFICATION AGREEMENT - Page 1
<PAGE>
various counties in Texas, which Fourth Modification  modified certain terms and
provisions of the Loan as set forth therein; and

     WHEREAS,  the Deeds of Trust were further pursuant to a Fifth  Modification
Agreement  (the "FIFTH  MODIFICATION")  dated March 24,  2000,  and  recorded in
various counties in Texas, which Fifth  Modification  modified certain terms and
provisions of the Loan as set forth therein; and

     WHEREAS,  the Deeds of Trust were further pursuant to a Sixth  Modification
Agreement (the "SIXTH  MODIFICATION") dated as of July 31, 2000, and recorded in
various counties in Texas, which Sixth  Modification  modified certain terms and
provisions of the Loan as set forth therein; and

     WHEREAS, the Deeds of Trust were further pursuant to a Seventh Modification
Agreement (the "SEVENTH MODIFICATION") dated as of _________________,  2001, and
recorded  in various  counties in Texas,  which  Seventh  Modification  modified
certain terms and provisions of the Loan as set forth therein; and

     WHEREAS,  the Deeds of Trust were further  pursuant to a  Ratification  and
Assumption Agreement (the "RATIFICATION  AGREEMENT") dated as of December _____,
2001, and recorded in various counties in Texas,  which  Ratification  Agreement
modified certain terms and provisions of the Loan as set forth therein; and

     WHEREAS,  the Deeds of Trust were further pursuant to a Eighth Modification
Agreement (the "EIGHTH  MODIFICATION") dated as of May 31, 2002, and recorded in
various counties in Texas, which Eighth Modification  modified certain terms and
provisions of the Loan as set forth therein; and

     WHEREAS,  the Deeds of Trust were further  pursuant to a  Ratification  and
Assumption  Agreement  (the "SECOND  RATIFICATION  AGREEMENT")  dated as of July
_____,   2002,  and  recorded  in  various  counties  in  Texas,   which  Second
Ratification  Agreement modified certain terms and provisions of the Loan as set
forth therein; and

     WHEREAS,  the Note and the Loan are  guaranteed  pursuant  to that  certain
Guaranty  Agreement  dated as of July ____, 2002 (the  "GUARANTY"),  executed by
MTH-Texas GP, Inc., an Arizona corporation, MTH-Texas LP, Inc., MTH-Texas GP II,
Inc., an Arizona corporation, MTH-Texas LP II, Inc., an Arizona corporation, and
Meritage Corporation, a Maryland corporation ("GUARANTOR," whether one or more);
and

     WHEREAS, the Loan Agreement,  the Note, the First Modification,  the Second
Modification,  the  Third  Modification,  the  Fourth  Modification,  the  Fifth
Modification, the Sixth Modification, the Seventh Modification, the Ratification
Agreement, the Eighth Modification, the Second Ratification Agreement, the Deeds
of  Trust  and all  other  documents  evidencing  and/or  securing  the Loan are
hereinafter collectively called the "LOAN Instruments"; and

     WHEREAS,  Lender,  the owner and  holder of the Note and the Deeds of Trust
and all rights and titles evidenced thereby,  and Borrower,  the record owner of

NINTH MODIFICATION AGREEMENT - Page 2
<PAGE>
the Property  and being  liable for the payment of the Note and Loan,  desire to
modify the Loan Instruments as herein provided.

     NOW,  THEREFORE,  in  consideration  of Ten and No/100 Dollars ($10.00) and
other good and valuable consideration,  the receipt and sufficiency of which are
hereby acknowledged, the parties hereto hereby agree as follows:

     1. The Loan is hereby increased from $75,000,000.00 to $90,000,000.00.  All
references in the Loan  Instruments to the amount of  $75,000,000.00  are hereby
increased to $90,000,000.00.

     2. Borrower shall execute and deliver to Lender a letter agreement (in form
and  substance  satisfactory  to Lender  in its sole  discretion)  (the  "LETTER
AGREEMENT")  dated  as of the date  hereof  amending  certain  other  terms  and
provisions of the Loan  Instruments.  (Hereafter,  this Agreement and the Letter
Agreement shall be included in the defined term "LOAN INSTRUMENTS.")

     3. Borrower  acknowledges and agrees, that as an accommodation to Borrower,
EXHIBIT A hereto  (which  exhibit  describes the  recording  information  of the
Master Deeds of Trust) shall be attached to this  Agreement  (and to any and all
other  documents  which may  require  the  attachment  of a  description  of the
recording  information of the Master Deeds of Trust) after Borrower's  execution
of same.  Accordingly,  Borrower hereby  authorizes and directs Lender to attach
such EXHIBIT A to this Agreement.

     4. Notwithstanding anything to the contrary in any of the Loan Instruments,
Borrower  acknowledges and agrees,  that to the extent that Lender is relying on
Chapter 303 of the Texas  Finance  Code to  determine  the  Maximum  Lawful Rate
(hereafter  defined)  payable  on  the  Note  and/or  the  Related  Indebtedness
(hereafter  defined) Lender will utilize the weekly ceiling from time to time in
effect as provided in such Chapter 303, as amended.  To the extent United States
federal law permits Lender to contract for, charge,  take,  receive or reserve a
greater  amount of  interest  than under  Texas law,  Lender will rely on United
States  federal law instead of such  Chapter 303 for the purpose of  determining
the Maximum Lawful Rate.  Additionally to the extent permitted by applicable law
now or  hereafter  in effect,  Lender  may, at its option and from time to time,
utilize any other  method of  establishing  the  Maximum  Lawful Rate under such
Chapter 303 or under other  applicable  law by giving  notice,  if required,  to
Borrower as provided  by  applicable  law now or  hereafter  in effect.  As used
herein,  the term  "MAXIMUM  LAWFUL RATE" shall mean the maximum  lawful rate of
interest which may be contracted for,  charged,  taken,  received or reserved by
Lender  in  accordance  with the  applicable  laws of the  State  of  Texas  (or
applicable  United  States  federal law to the extent that it permits  Lender to
contract for, charge, take, receive or reserve a greater amount of interest than
under Texas law), taking into account all Charges (as hereafter defined) made in
connection  with  the  transaction  evidenced  by the Note  and the  other  Loan
Instruments.  As used herein,  the term "CHARGES"  shall mean all fees,  charges
and/or any other things of value,  if any,  contracted for,  charged,  received,
taken or reserved by Lender in connection with the transactions  relating to the
Note and the  other  Loan  Instruments,  which are  treated  as  interest  under
applicable law. As used herein, the term "RELATED  INDEBTEDNESS"  shall mean any
and all  debt  paid or  payable  by  Borrower  to  Lender  pursuant  to the Loan
Instruments  or any other  communication  or writing by or between  Borrower and

NINTH MODIFICATION AGREEMENT - Page 3
<PAGE>
Lender related to the transaction or transactions  that are the subject mater of
the Loan  Instruments,  except  such debt  which has been paid or is  payable by
Borrower to Lender.

     5. Notwithstanding anything to the contrary contained in the Deeds of Trust
or other Loan Instruments,  with respect to any amendment to the Master Deeds of
Trust, the following terms and provisions shall apply:

     With respect to any amendment or  modification of the Master Deeds of Trust
     now or hereafter  executed by Borrower (or any future owner of the Property
     if different from Borrower) and duly recorded in the  appropriate  official
     public  records,  Borrower  acknowledges  and agrees that such amendment or
     modification of the Master Deeds of Trust shall  constitute an amendment or
     modification to the terms and provisions of any such Supplemental  Deeds of
     Trust (and shall be incorporated into any such Supplemental  Deeds of Trust
     and made a part  thereof  for all  purposes,  as though such  amendment  or
     modification  of the Master  Deeds of Trust  specifically  referred to such
     Supplemental  Deeds  of  Trust)  without  the  necessity  of  any  specific
     reference in such amendment or modification to any such Supplemental  Deeds
     of Trust;  and no such  amendment  or  modification  of the Master Deeds of
     Trust shall impair the obligations of Borrower under any such  Supplemental
     Deeds of Trust or any other of the Loan Instruments.

     6. Borrower hereby  expressly  promises to pay to the order of Lender,  the
principal  amount of the Note (as  modified  and  extended)  and all accrued and
unpaid  interest now or hereafter to become due and payable under the Note,  and
Borrower hereby expressly promises to perform all of the obligations of Borrower
under the Loan Instruments (as modified and extended).

     7. The liens of the Deeds of Trust are hereby  acknowledged  by Borrower to
be good,  valid and  subsisting  liens,  and such liens are hereby  renewed  and
extended  so as to secure  the  payment  of the Note and Loan (as  modified  and
extended).

     8. Borrower  hereby  represents and warrants to Lender that (a) Borrower is
the sole legal and beneficial  owner of the Property;  (b) Borrower has the full
power and authority to make the agreements  contained in this Agreement  without
joinder  or  consent  of any  other  party;  (c)  the  execution,  delivery  and
performance  of this  Agreement will not contravene or constitute an event which
itself or which  with the  passing  of time or  giving  of notice or both  would
constitute a default under any deed of trust, loan agreement, indenture or other
agreement to which  Borrower or Guarantor is a party or by which Borrower or any
of its  property  is bound;  and (d)  there  exists  no  default  under the Loan
Instruments  (as modified).  BORROWER HEREBY AGREES TO INDEMNIFY AND HOLD LENDER
HARMLESS  AGAINST  ANY LOSS,  CLAIM,  DAMAGE,  LIABILITY  OR EXPENSE  (INCLUDING
WITHOUT LIMITATION,  ATTORNEYS' FEES) INCURRED AS A RESULT OF ANY REPRESENTATION
OR  WARRANTY  MADE BY  BORROWER  HEREIN  PROVING  TO BE UNTRUE  IN ANY  MATERIAL
RESPECT.

     9. The terms and conditions hereof may not be modified, amended, altered or
otherwise  affected  except by  instrument  in  writing  executed  by Lender and
Borrower.

NINTH MODIFICATION AGREEMENT - Page 4
<PAGE>
     10.  All Loan  Instruments  are hereby  amended  and  modified  in a manner
consistent with the  modifications,  terms and/or  provisions  contained herein.
Except as  expressly  modified  hereby,  the terms  and  conditions  of the Loan
Instruments are and shall remain in full force and effect.

     11. Borrower agrees to pay to Lender,  contemporaneously with the execution
and delivery  hereof,  all costs and expenses  incurred in connection  with this
transaction,  title insurance endorsement premiums,  reasonable fees of Lender's
counsel and recording fees.

     12.  Borrower  hereby  agrees to execute and deliver to Lender such further
documents and instruments  evidencing or pertaining to the Loan, as modified and
increased hereby, as may be reasonably  requested by Lender from time to time so
as to evidence the terms and conditions hereof.

            [The balance of this page is intentionally left blank.]

NINTH MODIFICATION AGREEMENT - Page 5
<PAGE>
     EXECUTED  on the  date(s)  set forth in the  acknowledgment(s)  below to be
EFFECTIVE as of the date first above written.

                                        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: V.P.
                                                      --------------------------

                                        HANCOCK-MTH COMMUNITIES, INC.,
                                        an Arizona corporation


                                        By: /s/ Rick Morgan
                                            ------------------------------------
                                           Name: Rick Morgan
                                                 -------------------------------
                                           Title: V.P.
                                                  ------------------------------


                                        HANCOCK-MTH BUILDERS, INC.,
                                        an Arizona corporation


                                        By: /s/ Rick Morgan
                                            ------------------------------------
                                           Name: Rick Morgan
                                                 -------------------------------
                                           Title: V.P.
                                                  ------------------------------


                                        MTH HOMES-TEXAS, L.P.,
                                        an Texas limited partnership

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


                                        By: /s/ Rick Morgan
                                            ------------------------------------
                                           Name: Rick Morgan
                                                 -------------------------------
                                           Title: V.P.
                                                  ------------------------------

NINTH MODIFICATION AGREEMENT - Page 6
<PAGE>
                                        LENDER:

                                        GUARANTY BANK
                                        a federal savings bank


                                        By: /s/ Sam A. Meade
                                            ------------------------------------
                                           Name: Sam A. Meade
                                                 -------------------------------
                                           Title: Senior Vice President
                                                  ------------------------------

NINTH MODIFICATION AGREEMENT - Page 7
<PAGE>
STATE OF TEXAS      )
                    )
COUNTY OF COLLIN    )

     This instrument was  ACKNOWLEDGED  before me on August 19, 2002, by Richard
T.  Morgan,  V.P. of  MTH-TEXAS  GP, INC.,  an Arizona  corporation,  as General
Partner of LEGACY/MONTEREY HOMES L.P., an Arizona limited partnership, on behalf
of said limited partnership.


                                       /s/ Amy C. Kirkpatrick
[SEAL]                                 -----------------------------------------
                                       Notary Public

My Commission Expires:                 Amy C. Kirkpatrick
                                       -----------------------------------------
      3/2/2005                         Printed Name of Notary Public
----------------------


STATE OF TEXAS      )
                    )
COUNTY OF COLLIN    )

     This instrument was  ACKNOWLEDGED  before me on August 19, 2002, by Richard
T. Morgan, V.P. of HANCOCK-MTH  COMMUNITIES,  INC., an Arizona  corporation,  on
behalf of said corporation.

                                       /s/ Amy C. Kirkpatrick
[SEAL]                                 -----------------------------------------
                                       Notary Public

My Commission Expires:                 Amy C. Kirkpatrick
                                       -----------------------------------------
      3/2/2005                         Printed Name of Notary Public
----------------------


STATE OF TEXAS      )
                    )
COUNTY OF COLLIN    )

     This instrument was  ACKNOWLEDGED  before me on August 19, 2002, by Richard
T. Morgan, V.P. of HANCOCK-MTH BUILDERS, INC., an Arizona corporation, on behalf
of said corporation.


                                       /s/ Amy C. Kirkpatrick
[SEAL]                                 -----------------------------------------
                                       Notary Public

My Commission Expires:                 Amy C. Kirkpatrick
                                       -----------------------------------------
      3/2/2005                         Printed Name of Notary Public
----------------------

NINTH MODIFICATION AGREEMENT - Page 8
<PAGE>
STATE OF TEXAS      )
                    )
COUNTY OF COLLIN    )

     This instrument was  ACKNOWLEDGED  before me on August 19, 2002, by Richard
T. Morgan,  V.P. of MTH-TEXAS GP II, INC.,  an Arizona  corporation,  as General
Partner of MTH HOMES-TEXAS, L.P., a Texas limited partnership, on behalf of said
limited partnership.


                                       /s/ Amy C. Kirkpatrick
[SEAL]                                 -----------------------------------------
                                       Notary Public

My Commission Expires:                 Amy C. Kirkpatrick
                                       -----------------------------------------
      3/2/2005                         Printed Name of Notary Public
----------------------

STATE OF TEXAS           )
                         )
COUNTY OF DALLAS         )

     This instrument was acknowledged before me on the 22nd day of August, 2002,
by Sam A. Meade, Senior Vice President of GUARANTY BANK, a federal savings bank,
on behalf of said federal savings bank.

                                        /s/ Leslie Ruth Reynolds
                                        ----------------------------------------
                                        Notary Public in and for the
                                        above county and state

My Commission Expires:                  Leslie Ruth Reynolds
                                        ----------------------------------------
     02-04-2005                         Printed Name of Notary Public
----------------------

NINTH MODIFICATION AGREEMENT - Page 9
<PAGE>
                              CONSENT OF GUARANTOR

     Each of the undersigned,  as a guarantor ("GUARANTOR," whether one or more)
of the loan (the  "LOAN"),  evidenced  by the Note and  secured  by the Deeds of
Trust described in the foregoing Ninth Modification  Agreement (the "AGREEMENT")
to which this Consent is attached,  hereby  acknowledge and consent (jointly and
severally) to the terms of the Agreement and agree (jointly and severally)  that
the  execution  and  delivery of the  Agreement  will in no way change or modify
Guarantor's  respective  obligations under their respective Guaranty (as defined
in the  Agreement);  and each  Guarantor  acknowledges  and agrees  (jointly and
severally)  that the  Indebtedness  (as  defined in the  respective  instruments
comprising  the  Guaranty)  includes the Loan (as increased and set forth in the
Agreement),  together  with any and all  other  Indebtedness  now or at any time
hereafter  owing by  Guarantor  to  Lender;  and  each  Guarantor  (jointly  and
severally)  hereby  unconditionally  and  absolutely  guarantees  to Lender  the
payment when due of such  Indebtedness,  and hereby  acknowledge  and agree that
their  respective  Guaranty is in full force and  effect,  and that there are no
claims,  counterclaims,  offsets or defenses to their respective  Guaranty;  and
each Guarantor acknowledges and consents (jointly and severally) to the terms of
any and all prior  modifications  to the terms of the Loan  (including,  without
limitation,  any and all  extensions  of the term  thereof and  increases in the
principal thereof prior to the date hereof, if any).

     EXECUTED  on the  date(s)  set forth in the  acknowledgment(s)  below to be
EFFECTIVE as of the 22 day of August, 2002.

                                        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: V.P.
                                                  ------------------------------

NINTH MODIFICATION AGREEMENT - Page 10
<PAGE>
                                        MTH-TEXAS LP, INC.,
                                        an Arizona corporation

                                        By: /s/ Rick Morgan
                                            ------------------------------------
                                           Name: Rick Morgan
                                                 -------------------------------
                                           Title: V.P.
                                                  ------------------------------


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

                                        By: /s/ Rick Morgan
                                            ------------------------------------
                                           Name: Rick Morgan
                                                 -------------------------------
                                           Title: V.P.
                                                  ------------------------------


                                        MTH-TEXAS LP II, INC.,
                                        an Arizona corporation


                                        By: /s/ Rick Morgan
                                            ------------------------------------
                                           Name: Rick Morgan
                                                 -------------------------------
                                           Title: V.P.
                                                  ------------------------------

NINTH MODIFICATION AGREEMENT - Page 11
<PAGE>
STATE OF TEXAS     )
                   )
COUNTY OF COLLIN   )

     This instrument was  ACKNOWLEDGED  before me on August 19, 2002, by Richard
T. Morgan, V.P. of MERITAGE CORPORATION,  a Maryland  corporation,  on behalf of
said corporation.


                                       /s/ Amy C. Kirkpatrick
[SEAL]                                 -----------------------------------------
                                       Notary Public

My Commission Expires:                 Amy C. Kirkpatrick
                                       -----------------------------------------
      3/2/2005                         Printed Name of Notary Public
----------------------


STATE OF TEXAS     )
                   )
COUNTY OF COLLIN   )

     This instrument was  ACKNOWLEDGED  before me on August 19, 2002, by Richard
T. Morgan, V.P. of MTH-TEXAS GP, INC., an Arizona corporation, on behalf of said
corporation.


                                       /s/ Amy C. Kirkpatrick
[SEAL]                                 -----------------------------------------
                                       Notary Public

My Commission Expires:                 Amy C. Kirkpatrick
                                       -----------------------------------------
      3/2/2005                         Printed Name of Notary Public
----------------------


STATE OF TEXAS     )
                   )
COUNTY OF COLLIN   )

     This instrument was  ACKNOWLEDGED  before me on August 19, 2002, by Richard
T. Morgan, V.P. of MTH-TEXAS LP, INC., an Arizona corporation, on behalf of said
corporation.


                                       /s/ Amy C. Kirkpatrick
[SEAL]                                 -----------------------------------------
                                       Notary Public

My Commission Expires:                 Amy C. Kirkpatrick
                                       -----------------------------------------
      3/2/2005                         Printed Name of Notary Public
----------------------

NINTH MODIFICATION AGREEMENT - Page 12
<PAGE>
STATE OF TEXAS     )
                   )
COUNTY OF COLLIN   )

     This instrument was  ACKNOWLEDGED  before me on August 19, 2002, by Richard
T. Morgan, V.P. of MTH-TEXAS GP II, INC., an Arizona  corporation,  on behalf of
said corporation.

                                       /s/ Amy C. Kirkpatrick
[SEAL]                                 -----------------------------------------
                                       Notary Public

My Commission Expires:                 Amy C. Kirkpatrick
                                       -----------------------------------------
      3/2/2005                         Printed Name of Notary Public
----------------------



STATE OF TEXAS     )
                   )
COUNTY OF COLLIN   )

     This instrument was  ACKNOWLEDGED  before me on August 19, 2002, by Richard
T. Morgan, V.P. of MTH-TEXAS LP II, INC., an Arizona  corporation,  on behalf of
said corporation.

                                       /s/ Amy C. Kirkpatrick
[SEAL]                                 -----------------------------------------
                                       Notary Public

My Commission Expires:                 Amy C. Kirkpatrick
                                       -----------------------------------------
      3/2/2005                         Printed Name of Notary Public
----------------------

NINTH MODIFICATION AGREEMENT - Page 13
<PAGE>
                                    EXHIBIT A

                       Description of the Deed(s) of Trust

EXHIBIT A - Page 1

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.1
<SEQUENCE>4
<FILENAME>ex99-1.txt
<DESCRIPTION>CERTIFICATE OF STEVEN J. HILTON
<TEXT>
                                                                    EXHIBIT 99.1

                CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
      AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

     In  connection  with the  Quarterly  Report of  Meritage  Corporation  (the
"Company") on Form 10-Q for the period ending  September 30, 2002, as filed with
the Securities  and Exchange  Commission on the date hereof (the  "Report"),  I,
Steven J. Hilton, Co-Chief Executive Officer of the Company certify, pursuant to
18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the  Sarbanes-Oxley Act of
2002, that to my knowledge:

     (1)  The Report fully  complies with the  requirements  of Section 13(a) or
          15(d) of the Securities Exchange Act of 1934; and

     (2)  The  information  contained  in the  Report  fairly  presents,  in all
          material respects,  the financial  condition and results of operations
          of the Company.


                                        MERITAGE CORPORATION,
                                        a Maryland Corporation


                                        By /s/ Steven J. Hilton
                                           -------------------------------------
                                           Steven J. Hilton
                                           CO-CHIEF EXECUTIVE OFFICER

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.2
<SEQUENCE>5
<FILENAME>ex99-2.txt
<DESCRIPTION>CERTIFICATE OF JOHN R. LANDON
<TEXT>
                                                                    EXHIBIT 99.2

                CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
      AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

     In  connection  with the  Quarterly  Report of  Meritage  Corporation  (the
"Company") on Form 10-Q for the period ending  September 30, 2002, as filed with
the Securities  and Exchange  Commission on the date hereof (the  "Report"),  I,
John R. Landon,  Co-Chief Executive Officer of the Company certify,  pursuant to
18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the  Sarbanes-Oxley Act of
2002, that to my knowledge:

     (1)  The Report fully  complies with the  requirements  of Section 13(a) or
          15(d) of the Securities Exchange Act of 1934; and

     (2)  The  information  contained  in the  Report  fairly  presents,  in all
          material respects,  the financial  condition and results of operations
          of the Company.


                                        MERITAGE CORPORATION,
                                        a Maryland Corporation


                                        By /s/ John R. Landon
                                           -------------------------------------
                                           John R. Landon
                                           CO-CHIEF EXECUTIVE OFFICER

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.3
<SEQUENCE>6
<FILENAME>ex99-3.txt
<DESCRIPTION>CERTIFICATE OF LARRY W. SEAY
<TEXT>
                                                                    EXHIBIT 99.3

                CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
      AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

     In  connection  with the  Quarterly  Report of  Meritage  Corporation  (the
"Company") on Form 10-Q for the period ending  September 30, 2002, as filed with
the Securities  and Exchange  Commission on the date hereof (the  "Report"),  I,
Larry W. Seay, Chief Financial  Officer of the Company  certify,  pursuant to 18
U.S.C.  ss. 1350, as adopted  pursuant to ss. 906 of the  Sarbanes-Oxley  Act of
2002, that to my knowledge:

     (1)  The Report fully  complies with the  requirements  of Section 13(a) or
          15(d) of the Securities Exchange Act of 1934; and

     (2)  The  information  contained  in the  Report  fairly  presents,  in all
          material respects,  the financial  condition and results of operations
          of the Company.

                                        MERITAGE CORPORATION,
                                        a Maryland Corporation


                                        By /s/ Larry W. Seay
                                           -------------------------------------
                                           Larry W. Seay
                                           CHIEF FINANCIAL OFFICER

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.4
<SEQUENCE>7
<FILENAME>ex99-4.txt
<DESCRIPTION>1995 SAFE HARBOR COMPLIANCE STATEMENT
<TEXT>
                                                                    EXHIBIT 99.4

                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" 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.

     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 1993,  as  amended,  and
Section 21E of the Securities Exchange Act of 1934, as amended.  Forward-looking
statements in this Form 10-Q include  statements  concerning  the demand for and
the  pricing of our homes,  the  expectation  of  continued  positive  operating
results in the remainder of 2002 and beyond,  the expected  benefits of Hammonds
and other  acquisitions and our ability to continue positive  operating results.
Such statements are subject to significant risks and uncertainties.

     Important  factors  currently  known to management  that could cause actual
results to differ materially from those in forward-looking  statements, and that
could negatively affect the Company's business,  stock and bond prices, include,
but are not  limited  to,  the  following:  (i)  changes in  national  and local
economic  financial  results 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 in the  forseeable  future;  (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;  (xiii) the loss of key employees of the Company,  including Steven J.
Hilton  and John R.  Landon;  (xiv)  Meritage's  level of  indebtedness  and the
diversion of cash flow to make debt payments;  (xv) restrictions on our business
activities imposed by the agreements  governing our indebtedness;  and (xvi) our
inability to repay our indebtedness.

     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.  As a result of these  and other  factors,  the  Company's  stock and bond
prices may fluctuate dramatically.

</TEXT>
</DOCUMENT>
</SUBMISSION>
