15. Fair Value of Financial Instruments

Accounting Standards Codification ("ASC") ASC 820 "Fair Value Measurements and Disclosures" ("ASC 820") defines fair value, establishes guidelines for measuring fair value and expands disclosures regarding fair value measurements. ASC 820 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs for which little or no market data exists, therefore requiring an entity to develop its own assumptions.

The following methods and assumptions were used to estimate the fair value of each class of financial instruments.

Cash and Cash Equivalents. For cash and cash equivalents, the fair value approximates carrying value.

Marketable Securities. The Company's marketable securities consist of fixed rate and floating rate interest earning securities, primarily: (1) debt securities, which may include, among others, United States government and government agency debt and corporate debt; (2) holdings in mutual fund equity securities and (3) deposit securities, which may include, among others, certificates of deposit and time deposits. As of December 31, 2010, the Company classified certain marketable securities as held-to-maturity as it had, at the time of purchase, the intent and ability to hold those securities until maturity. In July 2011, the Company sold $100 million of held-to-maturity marketable securities prior to their maturity and, as a result, the Company now classifies its debt securities, which were previously accounted for as held-to-maturity, as available-for-sale.

The following table sets forth the Company's amortized cost and fair values of marketable securities, which were re-classified from held-to-maturity to available-for-sale (in thousands) during 2011. The fair values of the Company's marketable securities are based upon Level 1 and Level 2 fair value inputs.


	December 31, 2011				December 31, 2010
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Debt securities - maturity less than 1 year	$	61,200	$	61,134	$	469,318	$	469,956
Debt securities - maturity 1 to 5 years		20,365		20,244		120,078		121,406

Total	$	81,565	$	81,378	$	589,396	$	591,362

As of December 31, 2011, all of the Company's marketable securities are treated as available-for-sale investments and, as such, the Company has recorded all of its marketable securities at fair value with changes in fair value being recorded as a component of accumulated other comprehensive income during the year ended December 31, 2011. The following table sets forth the amortized cost and estimated fair value of the Company's other available-for-sale marketable securities (in thousands).


	December 31, 2011				December 31, 2010
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Equity securities	$	169,565	$	160,021	$	103,189	$	105,304
Debt securities		276,053		278,544		271,260		274,029

Total	$	445,618	$	438,565	$	374,449	$	379,333

As of December 31, 2011, the Company's marketable securities were in an unrealized loss position of $7.2 million, including three mutual fund securities that have a combined unrealized loss of $9.5 million as of December 31, 2011. The Company has evaluated the decline in the market value primarily associated with its equity securities in order to determine if this decline is other than temporary. Based upon this evaluation, the Company does not believe the decline in value is other than temporary and, as such, an impairment has not been recorded.

Mortgage Loans Held-for-Sale, Net. As of December 31, 2011, the primary components of the Company's mortgage loans held-for-sale that are measured at fair value on a recurring basis are: (1) mortgage loans held-for-sale under commitments to sell; and (2) mortgage loans held-for-sale not under commitments to sell. At December 31, 2011 and December 31, 2010, the Company had $77.5 million and $56.9 million, respectively, of mortgage loans held-for-sale under commitments to sell for which fair value was based upon a Level 2 input being the quoted market prices for those mortgage loans. At December 31, 2011 and December 31, 2010, the Company had $0.8 million and $8.2 million, respectively, of mortgage loans held-for-sale that were not under commitments to sell and, as such, their fair value was based upon Level 2 fair value inputs, primarily estimated market price received from an outside party.

Inventories. The Company records its homebuilding inventory (housing completed or under construction and land and land under development) at fair value only when the undiscounted future cash flow of a subdivision is less than its carrying value. The Company determines the estimated fair value of each subdivision either by: (1) calculating the present value of the estimated future cash flows at discount rates that are commensurate with the risk of the subdivision under evaluation; or (2) assessing what the market value of the land is in its current condition by considering the estimated price a willing buyer would pay for the land (other than in a forced liquidation), and recent land purchase transactions that the Company believes are indicators of fair value. These estimates are dependent on specific market or sub-market conditions for each subdivision. Local market-specific conditions that may impact these estimates for a subdivision include, among other things: (1) forecasted base selling prices and home sales incentives; (2) estimated land development costs and home cost of construction; (3) the current sales pace for active subdivisions; (4) changes by management in the sales strategy of a given subdivision; and (5) the level of competition within a market or sub-market, including publicly available home sales prices and home sales incentives offered by our competitors. The estimated fair values of impaired subdivisions are based upon Level 3 inputs. The fair value of the Company's inventory that was impaired at December 31, 2011 is as follows (in thousands).


	Land and Land Under Development		Housing Completed or Under Construction		Total Fair Value of Impaired Inventory
West	$	444	$	1,790	$	2,234
Mountain		248		-		248
East		-		-		-
Other Homebuilding		-		-		-

Total	$	692	$	1,790	$	2,482

Related Party Assets. The Company's related party assets are debt security bonds that it acquired from a quasi-municipal corporation in the state of Colorado. The Company has estimated the fair value of the related party assets based upon discounted cash flows as the Company does not believe there is a readily available market for such assets. The Company used a 15% discount rate in determining the present value of the estimated future cash flows from the bonds. The estimated cash flows from the bonds are ultimately based upon the Company's estimated cash flows associated with the building, selling and closing of homes in one of its Colorado subdivisions. The estimated fair values of these assets are based upon Level 3 cash flow inputs. Based upon this evaluation, the estimated fair value of the related party assets approximates its carrying value.

Mortgage Repurchase Facility. The Company's Mortgage Repurchase Facility (as defined below) is at floating rates or at fixed rates that approximate current market rates and have relatively short-term maturities. The fair value approximates carrying value.

Senior Notes. The estimated fair values of the senior notes in the following table are based on Level 2 fair value inputs pursuant to ASC 820, including market prices of bonds in the homebuilding sector (in thousands).


	December 31, 2011				December 31, 2010
	Recorded Amount		Estimated Fair Value		Recorded Amount		Estimated Fair Value
7% Senior Notes due 2012	$	-	$	-	$	149,650	$	160,493
5¹/2% Senior Notes due 2013		-		-		349,748		362,198
5³/8% Medium Term Senior Notes due 2014		249,438		254,667		249,266		255,683
5³/8% Medium Term Senior Notes due 2015		249,857		252,083		249,821		251,450
5 5/8% Medium-Term Senior Notes due 2020		244,813		227,467		244,330		244,400

Total	$	744,108	$	734,217	$	1,242,815	$	1,274,224