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Inventories
9 Months Ended
Sep. 30, 2024
Inventory Disclosure [Abstract]  
Inventories Inventories
Inventories consist of construction in process (“CIP”) and finished homes, including capitalized interest costs incurred under certain of our debt obligations discussed in Note 3, owned land and lots and pre-acquisition land costs. CIP represents homes under construction or completed, including sold, speculative (“spec”) and model homes. CIP includes the cost of finished lots and all direct costs incurred to build homes. The cost of homes is expensed on a specific identification basis when the home is delivered to the customer. Finished lots are generally purchased just-in-time for construction, whether for spec or sold homes, and are included within owned land and lots until construction begins when the finished lot cost is transferred to CIP. Costs related to finished lots or land under development held by third-party land bank partners incurred prior to the Company’s purchase of the land, including lot option fees, property taxes and due diligence costs are capitalized into pre-acquisition land costs.
Inventories consisted of the following as of September 30, 2024 and December 31, 2023 (in thousands):
As of
September 30, 2024
As of
December 31, 2023
Construction in process and finished homes$1,849,736 $1,251,767 
Owned land and lots 130,674 119,675 
Pre-acquisition land costs79,758 68,807 
Inventories$2,060,168 $1,440,249 
Capitalized interest activity related to our construction lines of credit and senior unsecured notes, net is summarized in the table below for the three and nine months ended September 30, 2024 and 2023 (in thousands):
Three Months Ended
September 30,
Nine Months Ended
September 30,
2024 202320242023
Capitalized interest as of beginning of the period$36,598  $27,921 $27,311 $27,682 
Interest incurred28,520  19,425 75,696 57,809 
Interest charged to homebuilding cost of sales(20,719)(19,337)(58,608)(57,482)
Capitalized interest as of end of the period$44,399  $28,009 $44,399 $28,009 
The Company reviews the performance and outlook of its inventories for indicators of potential impairment on a quarterly basis at the community level. In addition to considering market and economic conditions, the Company assesses current sales absorption levels and recent profitability. The Company looks for instances where sales prices for a home in backlog or potential sales prices for a future sold home would be at a level at which the carrying value of the home may not be recoverable. There were no inventory impairment charges recorded for the three and nine months ended September 30, 2024, and $1.4 million and $2.0 million in inventory impairment charges recorded for the three and nine months ended September 30, 2023, respectively. The Company reviews lot deposits for impairment on a quarterly basis and will record an impairment charge if it believes it will forfeit its deposit on an individual or portfolio of lots. The Company recorded $1.0 million and $1.2 million of lot deposit impairments for the three and nine months ended September 30, 2024, respectively, and $1.5 million and $3.1 million of lot deposit impairments for the three and nine months ended September 30, 2023, respectively.