11. Warranties

Estimated future direct warranty costs are accrued and charged to cost of home sales revenues in the period when the related home sales revenues are recognized. Amounts accrued, which are included in Accrued expenses and other liabilities on the Consolidated Balance Sheets, are based upon historical experience rates. We subsequently assess the adequacy of our warranty accrual on a quarterly basis through an internal model that incorporates historical payment trends and adjust the amounts recorded if necessary. Based on favorable warranty payment trends relative to our estimates at the time of home closing, we reduced our warranty reserve by $3.4 million, $1.5 million and $1.4 million during the years ended December 31, 2018, 2017 and 2016, respectively, which is included as a reduction to Cost of homes sales revenues on our Consolidated Statements of Operations. Changes in our warranty accrual for the years ended December 31, 2018, 2017, and 2016 are detailed in the table below (in thousands):


	Year ended December 31,
	2018		2017		2016
Beginning balance	$	8,531	$	2,479	$	2,622
Warranty reserve assumed in business combination		397		5,327		—
Warranty expense provisions		6,686		4,709		2,873
Payments		(4,204)		(2,526)		(1,610)
Warranty adjustment		(3,440)		(1,458)		(1,406)
Ending balance	$	7,970	$	8,531	$	2,479