Note 6 - Fair Value Measurements

12 Months Ended

Dec. 31, 2013

Fair Value Disclosures [Abstract]

Fair Value Disclosures [Text Block]

6.             Fair Value Measurements

ASC Topic 820, Fair Value Measurements (“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 table sets forth the fair values and methods used for measuring the fair values of financial instruments on a recurring basis: 

		Fair Value
Financial Instrument	Hierarchy	December 31, 2013		December 31, 2012
		(Dollars in thousands)
Marketable securities (available-for-sale)
Equity securities	Level 1	$	389,323	$	208,818
Debt securities - maturity less than 1 year	Level 2		72,577		54,388
Debt securities - maturity 1 to 5 years	Level 2		106,566		277,514
Debt securities - maturity greater than 5 years	Level 2		19,601		11,218
Total available-for-sale securities		$	588,067	$	551,938
Mortgage loans held-for-sale, net	Level 2	$	92,578	$	119,953
Metropolitan district bond securities (available-for-sale) (1)	Level 3	$	12,729	$	12,920

(1) These securities were recorded at their cost-basis at December 31, 2012 as they were still under the cost recovery method of accounting. As such, the fair value presented for December 31, 2012 does not equal the amount we have recorded in our accompanying consolidated balance sheets.

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

The fair value of our cash and cash equivalents, restricted cash, trade and other receivables, inventories, prepaid and other assets, accounts payable, and accrued liabilities approximate their carrying value.

Marketable Securities.  We have marketable debt and equity securities.  Our debt securities consist primarily of fixed and floating rate interest earning debt securities, which may include, among others, United States government and government agency debt and corporate debt. Our equity securities consist primarily of holdings in mutual fund securities, which invest mostly in debt securities. The remaining equity securities in our investment portfolio are holdings in corporate equities. As of December 31, 2013 and December 31, 2012, all of our marketable securities were treated as available-for-sale investments and, as such, we have recorded all of our marketable securities at fair value with changes in fair value being recorded as a component of accumulated other comprehensive income (loss).

The following tables set forth the amortized cost and estimated fair value of our available-for-sale marketable securities. 

	December 31, 2013				December 31, 2012
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(Dollars in thousands)
Homebuilding:
Equity securities	$	375,142	$	385,303	$	208,279	$	208,818
Debt securities		181,635		183,718		306,793		310,647
Total homebuilding available-for-sale securities	$	556,777	$	569,021	$	515,072	$	519,465
Financial Services:
Equity securities	$	4,000	$	4,020	$	-	$	-
Debt securities		14,721		15,026		32,028		32,473
Total financial services available-for-sale debt securities	$	18,721	$	19,046	$	32,028	$	32,473
Total available-for-sale marketable securities	$	575,498	$	588,067	$	547,100	$	551,938

As of December 31, 2013 and 2012, our marketable securities, were in unrealized gain positions, totaling $12.6 millionand $4.8 million, respectively. Our marketable securities which were in unrealized loss positions aggregated to unrealized losses of $1.1 million and $2.7 million as of December 31, 2013 and 2012, respectively. The table below sets forth the debt and equity securities that were in an aggregate loss position. We do not believe that the aggregate unrealized loss related to our debt or equity securities as of December 31, 2013 is material to our operations.

	Year Ended December 31, 2013							Year Ended December 31, 2012
	Number of Securities in Loss Position		Aggregate Loss Position			Aggregate Fair Value of Securities in a Loss Position		Number of Securities in Loss Position		Aggregate Loss Position			Aggregate Fair Value of Securities in a Loss Position
	(Dollars in thousands)
Type of Investment
Debt		72	$	(430	)	$	46,440		88	$	(594	)	$	103,684
Equity		7		(713	)		14,174		1		(2,060	)		52,988
Total		79	$	(1,143	)	$	60,614		89	$	(2,654	)	$	156,672

The followings table sets forth gross realized gains and gross realized losses from the sale of available-for-sale marketable securities, which were included in either interest income in the Homebuilding section or interest and other income in the Financial Services section of our consolidated statements of operations.

	Year Ended December 31,
	2013			2012			2011
	(Dollars in thousands)
Gross realized gains on sales of available-for-sale securities
Equity securities	$	1,251		$	-		$	-
Debt securities		83			608			1,246
Total	$	1,334		$	608		$	1,246
Gross realized losses on sales of available-for-sale securities
Equity securities	$	-		$	-		$	-
Debt securities		(3,794	)		(1,287	)		(1,231	)
Total	$	(3,794	)	$	(1,287	)	$	(1,231	)
Net realized gain (loss) on sales of available-for-sale securities	$	(2,460	)	$	(679	)	$	15

Mortgage Loans Held-for-Sale, Net.  As of December 31, 2013, the primary components of our 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, 2013 and December 31, 2012, we had $65.1 million and $108.3 million, respectively, of mortgage loans held-for-sale under commitments to sell for which fair value was based upon Level 2 inputs, which were the quoted market prices for those mortgage loans. At December 31, 2013 and December 31, 2012, we had $25.9 million and $11.7 million, respectively, of mortgage loans held-for-sale that were not under commitments to sell. The fair value for those loans was primarily based upon the estimated market price received from an outside party, which is a Level 2 fair value input.

Metro District Bond Securities (Related Party).  The Metro District Bond Securities are included in other assets in the Homebuilding section of our accompanying consolidated balance sheets. We acquired the Metro District Bonds from a quasi-municipal corporation in the state of Colorado (the “Metro District”), which was formed to help fund and maintain the infrastructure associated with a master-planned community being developed by our Company. See Note 15 for further discussion related to the acquisition of these securities. Cash flows received by the Company from these securities reflect principal and interest payments from the Metro District that are supported by an annual levy on the taxable value of real estate and personal property within the Metropolitan District’s boundaries and a one-time fee assessed on permits obtained by MDC in the Metro District. The stated year of maturity for the Metro Bonds is 2037. However, if the unpaid principal and all accrued interest are not paid off by the year 2037, the Company will continue to receive principal and interest payments into perpetuity until the unpaid principal and accrued interest is paid in full. Since 2007 and through the first quarter of 2013, we accounted for these securities under the cost recovery method and they were not carried at fair value in accordance with ASC Topic 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality (“ASC 310-30”).

In the second quarter of 2013, we determined that these securities no longer were required to be accounted for under the cost recovery method due to an increase in the number of new homes delivered in the community coupled with the stabilization of property values within the Metro District. In accordance with ASC 310-30, we will adjust the bond principal balance on a prospective basis using an interest accretion model that utilizes future cash flows expected to be collected. Furthermore, as this investment is accounted for as an available-for-sale asset, we will continue to update its fair value on a quarterly basis, with the adjustment being recorded through other comprehensive income. The fair value is based upon a discounted future cash flow model, which uses Level 3 inputs. The two primary unobservable inputs used in our discounted cash flow model are the forecasted number of homes to be closed, as they drive any increases to the tax base for the Metropolitan District, and the discount rate. The table below provides quantitative data regarding each unobservable input and the sensitivity of fair value to potential changes in those unobservable inputs.

	Quantitative Data					Sensitivity Analysis
Unobservable Input	Range			Weighted Average		Movement in Fair Value from Increase in Input		Movement in Fair Value from Decrease in Input
Discount rate	6%	to	16%		10%		Decrease		Increase
Number of homes closed per year	0	to	155		88		Increase		Decrease

The table set forth below summarizes the activity for our Metro Bonds.

	Year Ended December 31,
	2013			2012
	(Dollars in thousands)
Balance at beginning of period	$	5,818		$	6,663
Increase in fair value (recorded in other comprehensive income)		6,373			-
Change due to accretion of principal		1,192			-
Cash receipts		(654	)		(845	)
Balance at end of period	$	12,729		$	5,818

Mortgage Repurchase Facility. The debt associated with our Mortgage Repurchase Facility is at floating rates or at fixed rates that approximate current market rates and have relatively short-term maturities, generally within 30 days. The fair value approximates carrying value and is based on Level 2 inputs.

Senior Notes. The estimated values of the senior notes in the following table are based on Level 2 inputs, including market prices of other homebuilder bonds.

	December 31, 2013				December 31, 2012
	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
	(Dollars in thousands)
5⅜% Senior Notes due December 2014, net	$	249,814	$	258,750	$	249,621	$	267,208
5⅜% Senior Notes due July 2015, net		249,935		262,562		249,895		268,867
5⅝% Senior Notes due February 2020, net		245,871		259,688		245,326		273,125
6% Senior Notes due January 2043		350,000		305,083		-		-
Total	$	1,095,620	$	1,086,083	$	744,842	$	809,200

Inventories.  The table below sets forth the carrying value, at each year end, of all inventories that were impaired during each year presented.

	Carrying Value of Impaired Inventory at
	December 31, 2013		December 31, 2012
	(Dollars in thousands)
West		-		-
Mountain		-		-
East		4,187		2,775
Total	$	4,187	$	2,775

Inventories with carrying values prior to impairment of $5.8 and $3.8 million were determined to be impaired during the years ended December 31, 2013 and 2012, respectively. The carrying value for some of these inventories at their respective year ends may not represent the fair value they were impaired to due to activities that occurred subsequent to the measurement date. The fair values of impaired inventories were determined using Level 3 inputs. We generally determine the estimated fair value of each subdivision by determining the present value of the estimated future cash flows at discount rates that are commensurate with the risk of the subdivision under evaluation.