Warranty Accrual

3 Months Ended

Mar. 31, 2022

Product Warranties Disclosures [Abstract]

Our homes are sold with limited third-party warranties and, under our agreement with the issuer of the third-party warranties, we are responsible for performing all of the work for the first two years of the warranty coverage and paying for substantially all of the work required to be performed during years three through ten of the warranties. We record accruals for general and structural warranty claims, as well as accruals for known, unusual warranty-related expenditures. Our warranty accrual is recorded based upon historical payment experience in an amount estimated to be adequate to cover expected costs of materials and outside labor during warranty periods. The determination of the warranty accrual rate for closed homes and the evaluation of our warranty accrual balance at period end are based on an internally developed analysis that includes known facts and interpretations of circumstances, including, among other things, our trends in historical warranty payment levels and warranty payments for claims not considered to be normal and recurring.

Our warranty accrual is included in accrued and other liabilities in the homebuilding section of our consolidated balance sheets and adjustments to our warranty accrual are recorded as an increase or reduction to home cost of sales in the homebuilding section of our consolidated statements of operations and comprehensive income.

The table set forth below summarizes accrual, adjustment and payment activity related to our warranty accrual for the three months ended March 31, 2022 and 2021. The warranty accrual increased due to the increase in the number of home closings as well as a $2.4 million adjustment to increase our warranty accrual during the three months ended March 31, 2022. This adjustment was due to higher general warranty related expenditures. There was no warranty adjustment during the three months ended March 31, 2021.


	Three Months Ended March 31,
		2022		2021

		(Dollars in thousands)
Balance at beginning of period		$	37,491	$	33,664
Expense provisions		5,832		4,385
Cash payments		(4,817)		(4,176)
Adjustments		2,440		—

Balance at end of period		$	40,946	$	33,873