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Real Estate and Capitalized Interest | 6 Months Ended
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Jun. 30, 2012
Real Estate and Capitalized Interest [Abstract] |
REAL ESTATE AND CAPITALIZED INTEREST | NOTE 2 — REAL ESTATE AND CAPITALIZED INTEREST Real estate consists of the following (in thousands):
|  | At June 30, 2012 |  |  | At December 31, 2011 |
Homes under contract under construction (1) |  | $ | 188,006 |  |  | $ | 101,445 |
Unsold homes, completed and under construction (1) |  |  | 95,027 |  |  |  | 97,246 |
Model homes (1) |  |  | 52,655 |  |  |  | 49,892 |
Finished home sites and home sites under development |  |  | 494,782 |  |  |  | 441,242 |
Land held for development (2) |  |  | 54,472 |  |  |  | 55,143 |
Land held for sale |  |  | 29,733 |  |  |  | 29,908 |
Communities in mothball status (3) |  |  | 40,558 |  |  |  | 40,549 |
|  | $ | 955,233 |  |  | $ | 815,425 |
(1) | Includes the allocated land and land development costs associated with each lot for these homes.
(2) | Land held for development primarily reflects land and land development costs related to land where development activity is not currently underway but is expected to begin in the future. In these cases, we may have chosen not to currently develop certain land holdings as they typically represent a portion of a large land parcel that we plan to build out over several years.
(3) | Represents communities where we have decided to cease operations (mothball) as we have determined that their economic performance would be maximized by deferring development. In the future, some of these communities may be re-opened while others may be sold to third parties. If we deem our carrying value to not be fully recoverable, we adjust our carrying value for these assets to fair value at the time they are placed into mothball status. As of June 30, 2012, we had three mothballed communities with a carrying value of $11.3 million in our West Region and eight mothballed communities with a carrying value of $29.3 million in our Central Region. During the six months ended June 30, 2012, we did not place any additional communities into mothball status. We do not capitalize interest for such mothballed assets, and all ongoing costs of land ownership (i.e. property taxes, homeowner association dues, etc.) are also expensed as incurred.
As previously noted, in accordance with ASC 360-10, each of our land inventory and related real estate assets is reviewed for recoverability when impairment indicators are present as our inventory is considered “long-lived” in accordance with GAAP. Due to the current economic environment, we evaluate all of our real estate assets for impairment on a quarterly basis. ASC 360-10 requires impairment charges to be recorded if the asset is not deemed fully recoverable and the fair value of such assets is less than their carrying amounts. Our determination of fair value is based on projections and estimates. We also evaluate alternative product offerings in communities where impairment indicators are present and other strategies for the land exist, such as selling the land or holding the land for sale in the future. Based on these reviews of all our communities, we recorded the following contract termination and real-estate impairment charges during the three and six months ended June 30, 2012 and 2011 (in thousands):
|  | Three Months Ended June 30, |  |  | Six Months Ended June 30, |
|  | 2012 |  |  | 2011 |  |  | 2012 |  |  | 2011 |
Terminated option/purchase contracts and related pre-acquisition costs: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
West |  | $ | 0 |  |  | $ | 0 |  |  | $ | 0 |  |  | $ | 0 |
Central |  |  | 0 |  |  |  | 2 |  |  |  | 83 |  |  |  | 2 |
East |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |
Total |  | $ | 0 |  |  | $ | 2 |  |  | $ | 83 |  |  | $ | 2 |
Real estate inventory impairments (1): |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
West |  | $ | 116 |  |  | $ | 57 |  |  | $ | 242 |  |  | $ | 257 |
Central |  |  | 71 |  |  |  | 432 |  |  |  | 143 |  |  |  | 767 |
East |  |  | 7 |  |  |  | 99 |  |  |  | 19 |  |  |  | 228 |
Total |  | $ | 194 |  |  | $ | 588 |  |  | $ | 404 |  |  | $ | 1,252 |
Impairments of land held for sale: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
West |  | $ | 669 |  |  | $ | 0 |  |  | $ | 669 |  |  | $ | 0 |
Central |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |
East |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |
Total |  | $ | 669 |  |  | $ | 0 |  |  | $ | 669 |  |  | $ | 0 |
Total impairments: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
West |  | $ | 785 |  |  | $ | 57 |  |  | $ | 911 |  |  | $ | 257 |
Central |  |  | 71 |  |  |  | 434 |  |  |  | 226 |  |  |  | 769 |
East |  |  | 7 |  |  |  | 99 |  |  |  | 19 |  |  |  | 228 |
Total |  | $ | 863 |  |  | $ | 590 |  |  | $ | 1,156 |  |  | $ | 1,254 |
(1) | Included in the real estate inventory impairments are impairments of individual homes in a community where the underlying community was not also impaired, as follows (in thousands):
|  | Three Months Ended June 30, |  |  | Six Months Ended June 30, |
|  | 2012 |  |  | 2011 |  |  | 2012 |  |  | 2011 |
Individual home impairments: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
West |  | $ | 116 |  |  | $ | 57 |  |  | $ | 242 |  |  | $ | 257 |
Central |  |  | 71 |  |  |  | 121 |  |  |  | 143 |  |  |  | 456 |
East |  |  | 7 |  |  |  | 99 |  |  |  | 19 |  |  |  | 228 |
Total |  | $ | 194 |  |  | $ | 277 |  |  | $ | 404 |  |  | $ | 941 |
The table below reflects the number of communities with real estate inventory impairments for the three- and six-month periods ended June 30, 2011, excluding home-specific impairments (as noted above) and the fair value of these communities as of June 30, 2011 (dollars in thousands). There were no such impairments recorded for the three and six month periods ended June 30, 2012.
|  | Three and Six Months Ended June 30, 2011 |
|  | Number of Communities Impaired |  |  | Impairment Charges |  |  | Fair Value of Communities Impaired (Carrying Value less Impairments) |
West |  |  | 0 |  |  | $ | 0 |  |  | $ | N/A |
Central |  |  | 2 |  |  |  | 311 |  |  |  | 6,827 |
East |  |  | 0 |  |  |  | 0 |  |  |  | N/A |
Total |  |  | 2 |  |  | $ | 311 |  |  | $ | 6,827 |
In the latter part of 2011, we announced our intent to wind-down operations in the Las Vegas, Nevada market. As of June 30, 2012, we had 53 lots remaining to sell and close in our two remaining actively selling Nevada communities. The value of those lots and any associated homes inventory was $6.0 million as of June 30, 2012. Based on our current orders pace, we expect to complete our construction operations within 12 to 18 months. The remaining $23.2 million of our Nevada assets relate to properties that we are not currently developing and which we are either actively marketing for sale or which we have mothballed. Of that amount, $6.5 million relates to a parcel of land under contract with a third party as of June 30, 2012, of which approximately $3.3 million was received in July 2012, with the remaining payment due to us January 2013. The entire $669,000 of impairments recorded on land held for sale during the three months ended June 30, 2012 is attributable to the sale and associated writedown of land positions in Nevada. Subject to sufficient qualifying assets, we capitalize interest incurred in connection with the development and construction of real estate. Completed homes and land not actively under development do not qualify for interest capitalization. Capitalized interest is allocated to real estate when incurred and charged to cost of closings when the related property is delivered. To the extent our debt exceeds our qualified assets base, we expense a proportionate share of the interest incurred. A summary of our capitalized interest is as follows (in thousands):
|  | Three Months Ended June 30, |  |  | Six Months Ended June 30, |
|  | 2012 |  |  | 2011 |  |  | 2012 |  |  | 2011 |
Capitalized interest, beginning of period |  | $ | 15,908 |  |  | $ | 12,309 |  |  | $ | 14,810 |  |  | $ | 11,679 |
Interest incurred |  |  | 11,318 |  |  |  | 10,848 |  |  |  | 22,165 |  |  |  | 21,697 |
Interest expensed |  |  | (6,338 | ) |  |  | (7,496 | ) |  |  | (13,709 | ) |  |  | (15,519 | )
Interest amortized to cost of home, land closings and impairments |  |  | (3,052 | ) |  |  | (2,456 | ) |  |  | (5,430 | ) |  |  | (4,652 | )
Capitalized interest, end of period (1) |  | $ | 17,836 |  |  | $ | 13,205 |  |  | $ | 17,836 |  |  | $ | 13,205 |
(1) | Approximately $750,000 of the capitalized interest is related to our joint venture investments and is a component of “Investments in unconsolidated entities” on our consolidated balance sheets as of June 30, 2012 and December 31, 2011.

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- Definition The entire disclosure for inventory. This may include, but is not limited to, the basis of stating inventory, the method of determining inventory cost, the major classes of inventory, and the nature of the cost elements included in inventory. If inventory is stated above cost, accrued net losses on firm purchase commitments for inventory and losses resulting from valuing inventory at the lower-of-cost-or-market may also be included. For LIFO inventory, may disclose the amount and basis for determining the excess of replacement or current cost over stated LIFO value and the effects of a LIFO quantities liquidation that impacts net income. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 02 -Paragraph 6 -Subparagraph a, b, c -Article 5 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 210 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6361739&loc=d3e7789-107766 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Accounting Research Bulletin (ARB) -Number 43 -Section A -Paragraph 9 -Chapter 3 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 210 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.5-02.6) -URI http://asc.fasb.org/extlink&oid=6877327&loc=d3e13212-122682 + Details
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