8.	Warranty Reserves

The Company records expenses and warranty reserves for general and structural warranty claims, as well as reserves for known, unusual warranty-related expenditures. The establishment of warranty reserves is primarily based on an actuarial study that includes known facts and interpretations of circumstances, including, among other things, the Company's trends in historical warranty payment levels and warranty payments for claims not considered to be normal and recurring. Warranty payments incurred for an individual house may differ from the related reserve established for the home at the time it was closed. The actual disbursements for warranty claims are evaluated in the aggregate to determine if an adjustment to the historical warranty reserve should be recorded.

The following table summarizes the warranty reserve activity for the three and six months ended June 30, 2011 and 2010 (in thousands).


	Three Months Ended June 30,						Six Months Ended June 30,
	2011			2010			2011			2010
Balance at beginning of period	$	33,615		$	54,054		$	34,704		$	59,022
Expense provisions		1,034			2,220			1,875			3,210
Cash payments		(1,617	)		(2,611	)		(3,116	)		(4,640	)
Adjustments		(1,832	)		(1,677	)		(2,263	)		(5,606	)

Balance at end of period	$	31,200		$	51,986		$	31,200		$	51,986

The favorable warranty adjustments that were recorded as a reduction to home cost of sales in the Consolidated Statements of Operations during the three and six months ended June 30, 2011 and 2010 were primarily the result of a continued favorable trend in the amount of warranty payments incurred on previously closed homes.