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Owned Inventory | 3 Months Ended
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Dec. 31, 2023
Inventory Disclosure [Abstract] |
Owned Inventory | Owned Inventory The components of our owned inventory are as follows as of December 31, 2023 and September 30, 2023:
in thousands | As of December 31, 2023 |  | As of September 30, 2023
Homes under construction | $ | 766,090 |  |  | $ | 644,363 |
Land under development | 940,022 |  |  | 870,740 |
Land held for future development | 19,879 |  |  | 19,879 |
Land held for sale | 17,461 |  |  | 18,579 |
Capitalized interest | 119,596 |  |  | 112,580 |
Model homes | 90,550 |  |  | 90,062 |
Total owned inventory | $ | 1,953,598 |  |  | $ | 1,756,203 |
Homes under construction include homes substantially finished and ready for delivery and homes in various stages of construction, including costs of the underlying lot, direct construction costs and capitalized indirect costs. As of December 31, 2023, we had 2,495 homes under construction, including 982 spec homes totaling $292.4 million (789 in-process spec homes totaling $211.7 million, and 193 finished spec homes totaling $80.7 million). As of September 30, 2023, we had 2,163 homes under construction, including 779 spec homes totaling $218.0 million (645 in-process spec homes totaling $162.0 million, and 134 finished spec units totaling $56.0 million). The increase in spec homes reflects the impact of community count growth and our decision to start more spec units given the declining mortgage interest rates and improving sales environment. Land under development consists principally of land acquisition, land development and other common costs. These land related costs are allocated to individual lots on a pro-rata basis, and the lot costs are transferred to homes under construction when home construction begins for the respective lots. Certain of the fully developed lots in this category are reserved by a customer deposit or sales contract. Land held for future development consists of communities for which construction and development activities are expected to occur in the future or have been idled and are stated at cost unless facts and circumstances indicate that the carrying value of the assets may not be recoverable. All applicable carrying costs, such as interest and real estate taxes, are expensed as incurred. Land held for sale includes land and lots that do not fit within our homebuilding programs and strategic plans in certain markets, and land is classified as held for sale once certain criteria are met (refer to Note 2 to the consolidated financial statements within our 2023 Annual Report). These assets are recorded at the lower of the carrying value or fair value less costs to sell (net realizable value). The amount of interest we are able to capitalize depends on our qualified inventory balance, which considers the status of our inventory holdings. Our qualified inventory balance includes the majority of our homes under construction and land under development but excludes land held for future development and land held for sale (see Note 5 for additional information on capitalized interest). Total owned inventory by reportable segment is presented in the table below as of December 31, 2023 and September 30, 2023:
in thousands | Projects in Progress(a) |  | Land Held for Future Development |  | Land Held for Sale |  | Total Owned Inventory
December 31, 2023 |  |  |  |  |  |  |
West | $ | 1,031,135 |  |  | $ | 3,483 |  |  | $ | 13,303 |  |  | $ | 1,047,921 |
East | 371,485 |  |  | 10,888 |  |  | 3,482 |  |  | 385,855 |
Southeast | 320,127 |  |  | 5,508 |  |  | 676 |  |  | 326,311 |
Corporate and unallocated(b) | 193,511 |  |  | — |  |  | — |  |  | 193,511 |
Total | $ | 1,916,258 |  |  | $ | 19,879 |  |  | $ | 17,461 |  |  | $ | 1,953,598 |
September 30, 2023 |  |  |  |  |  |  |
West | $ | 914,908 |  |  | $ | 3,483 |  |  | $ | 14,702 |  |  | $ | 933,093 |
East | 325,395 |  |  | 10,888 |  |  | 3,201 |  |  | 339,484 |
Southeast | 297,142 |  |  | 5,508 |  |  | 676 |  |  | 303,326 |
Corporate and unallocated(b) | 180,300 |  |  | — |  |  | — |  |  | 180,300 |
Total | $ | 1,717,745 |  |  | $ | 19,879 |  |  | $ | 18,579 |  |  | $ | 1,756,203 |
(a) Projects in progress include homes under construction, land under development, capitalized interest, and model home categories from the preceding table. (b) Projects in progress amount includes capitalized interest and indirect costs that are maintained within our Corporate and unallocated segment. Inventory Impairments Inventory assets are assessed for recoverability periodically in accordance with the policies described in Notes 2 and 4 to the consolidated financial statements within our 2023 Annual Report. The following table presents, by reportable segment, our total impairment and abandonment charges for the periods presented:
| Three Months Ended December 31, |  |
in thousands | 2023 |  | 2022 |  |  |  |
Abandonments: |  |  |  |  |  |  |
West | $ | — |  |  | $ | 36 |  |  |  |  |
East | — |  |  | 154 |  |  |  |  |
Total abandonments charges | $ | — |  |  | $ | 190 |  |  |  |  |
Total impairment and abandonment charges | $ | — |  |  | $ | 190 |  |  |  |  |
Projects in Progress Impairments Projects in progress inventory includes homes under construction and land under development grouped together as communities. Projects in progress are stated at cost unless facts and circumstances indicate that the carrying value of the assets may not be recoverable. We assess our projects in progress inventory for indicators of impairment at the community level on a quarterly basis. If indicators of impairment are present for a community with more than ten homes remaining to close, we perform a recoverability test by comparing the expected undiscounted cash flows for the community to its carrying value. If the aggregate undiscounted cash flows are in excess of the carrying value, the asset is considered to be recoverable and is not impaired. If the carrying value exceeds the aggregate undiscounted cash flows, we perform a discounted cash flow analysis to determine the fair value of the community, and impairment charges are recorded if the fair value of the community's inventory is less than its carrying value. No project in progress impairments were recognized during the three months ended December 31, 2023 and 2022. Land Held for Sale Impairments We evaluate the net realizable value (fair value less cost to sell) of a land held for sale asset when indicators of impairment are present. Impairments on land held for sale generally represent write downs of these properties to net realizable value based on sales contracts, letters of intent, current market conditions, and recent comparable land sale transactions, as applicable. Absent an executed sales contract, our assumptions related to land sales prices require significant judgment because the real estate market is highly sensitive to changes in economic conditions, and our estimates of sale prices could differ significantly from actual results. No land held for sale impairments were recognized during the three months ended December 31, 2023 and 2022. Abandonments From time to time, we may determine to abandon lots or not exercise certain option agreements that are not projected to produce adequate results or no longer fit with our long-term strategic plan. Additionally, in certain limited instances, we are forced to abandon lots due to seller non-performance, permitting or other regulatory issues that do not allow us to build on those lots. If we intend to abandon or walk away from a property, we record an abandonment charge to earnings for the non-refundable deposit amount and any related capitalized costs in the period such decision is made. We recognized no abandonment charges during the three months ended December 31, 2023. We recognized $0.2 million abandonment charges during the three months ended December 31, 2022. As we grow our business in the years ahead, the dollar value of abandonment charges may also grow. Lot Option Agreements In addition to purchasing land directly, we utilize lot option agreements that enable us to defer acquiring portions of properties owned by third parties and unconsolidated entities until we have determined whether to exercise our lot option. The majority of our lot option agreements require a non-refundable cash deposit or issuance of an irrevocable letter of credit or surety bond based on a percentage of the purchase price of the land for the right to acquire lots during a specified period at a specified price. Purchase of the properties under these agreements is contingent upon satisfaction of certain requirements by us and the sellers. Under lot option agreements, our liability is generally limited to forfeiture of the non-refundable deposits, letters of credit or surety bonds, and other non-refundable amounts incurred. If the Company cancels a lot option agreement, the cancellation would result in a write-off of the related deposits and pre-acquisition costs, but would not expose the Company to the overall risks or losses of the applicable entity we are purchasing from. We expect to exercise, subject to market conditions and seller satisfaction of contract terms, most of our remaining option agreements. Various factors, some of which are beyond our control, such as market conditions, weather conditions, and the timing of the completion of development activities, will have a significant impact on the timing of option exercises or whether lot options will be exercised at all. The following table provides a summary of our interests in lot option agreements as of December 31, 2023 and September 30, 2023:
| As of December 31, 2023 |  | As of September 30, 2023 |  |
in thousands |  |  |  |  |
Deposits and non-refundable pre-acquisition costs incurred(a) | $ | 166,394 |  |  | $ | 165,371 |  |  |
Remaining purchase price if lot option agreements are exercised | $ | 924,764 |  |  | $ | 949,447 |  |  |
(a) Amount is included as a component of land under development within our owned inventory in the condensed consolidated balance sheets.

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- Definition The entire disclosure for inventory. Includes, but is not limited to, the basis of stating inventory, the method of determining inventory cost, the classes of inventory, and the nature of the cost elements included in inventory. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 330 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//330/tableOfContent + Details
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