10-K

Table Of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

__________________

FORM 10-K

☒     ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2016

OR

☐     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition period from            to           

Commission file number 1-08951

_________________________

M.D.C. HOLDINGS, INC.

(Exact name of Registrant as specified in its charter)

Delaware	84-0622967
(State or other jurisdiction	(I.R.S. Employer
of incorporation or organization)	Identification No.)

4350 South Monaco Street, Suite 500	80237
Denver, Colorado	(Zip code)
(Address of principal executive offices)

(303) 773-1100

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each class	Name of each exchange on which registered
Common Stock, $.01 par value	New York Stock Exchange
5⅝% Senior Notes due February 2020	New York Stock Exchange
5½% Senior Notes due January 2024
6% Senior Notes due January 2043	New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes X No     

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes     No X

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes X No     

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes X_  No__

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. X

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, non-accelerated filer, or a smaller reporting company. See definition of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer_X_                              Accelerated Filer___

Non-Accelerated Filer __ (Do not check if a smaller reporting company)          Smaller Reporting Company__

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes      No X

As of June 30, 2016, the aggregate market value of the Registrants' common stock held by non-affiliates of the Registrants was $1.0 billion based on the closing sales price of $24.34 per share as reported on the New York Stock Exchange on June 30, 2016.

As of December 31, 2016, the number of shares outstanding of Registrant's common stock was 51,485,090.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of part III of this Form 10-K are incorporated by reference from the Registrant's 2017 definitive proxy statement to be filed with the Securities and Exchange Commission no later than 120 days after the end of the Registrant's fiscal year.

M.D.C. HOLDINGS, INC.

FORM 10-K

For the Year Ended December 31, 2016

_______________

Table of Contents

			Page No.
PART I
	ITEM 1.	Business
		(a) General Development of Business	1
		(b) Available Information	1
		(c) Financial Information About Industry Segments	2
		(d) Narrative Description of Business	2
	ITEM 1A.	Risk Factors	6
	ITEM 1B.	Unresolved Staff Comments	11
	ITEM 2.	Properties	12
	ITEM 3.	Legal Proceedings	12
	ITEM 4.	Mine Safety Disclosures	12
PART II
	ITEM 5.	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	13
	ITEM 6.	Selected Financial Data	15
	ITEM 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	16
	ITEM 7A.	Quantitative and Qualitative Disclosures About Market Risk	39
	ITEM 8.	Consolidated Financial Statements	F-1
	ITEM 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	41
	ITEM 9A.	Controls and Procedures	41
	ITEM 9B.	Other Information	43
PART III
	ITEM 10.	Directors, Executive Officers and Corporate Governance	43
	ITEM 11.	Executive Compensation	43
	ITEM 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	43
	ITEM 13.	Certain Relationships and Related Transactions, and Director Independence	43
	ITEM 14.	Principal Accountant Fees and Services	43
PART IV
	ITEM 15.	Exhibits and Financial Statement Schedules	44
	ITEM 16.	Form 10-K Summary	48
SIGNATURES			49

(i) 

Table Of Contents

M.D.C. HOLDINGS, INC.

FORM 10-K

PART I

Forward-Looking Statements

Certain statements in this Annual Report on Form 10-K, as well as statements made by us in periodic press releases, oral statements made by our officials in the course of presentations about the Company and conference calls in connection with quarterly earnings releases, constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements regarding our business, financial condition, results of operation, cash flows, strategies and prospects. These forward-looking statements may be identified by terminology such as “likely,” “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue,” or the negative of such terms and other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements contained in this Report are reasonable, we cannot guarantee future results. These statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company to be materially different from those expressed or implied by the forward-looking statements. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. However, any further disclosures made on related subjects in subsequent reports on Forms 10-K, 10-Q and 8-K should be considered.

Item 1. Business.

(a) General Development of Business

M.D.C. Holdings, Inc. is a Delaware corporation. We refer to M.D.C. Holdings, Inc. as the “Company,” “MDC,” “we” or “our” in this Annual Report on Form 10-K, and these designations include our subsidiaries unless we state otherwise. We have two primary operations, homebuilding and financial services. Our homebuilding operations consist of wholly owned subsidiary companies that generally purchase finished lots or develop lots to the extent necessary for the construction and sale primarily of single-family detached homes to first-time and first-time move-up homebuyers under the name “Richmond American Homes.” Our homebuilding operations are comprised of various homebuilding divisions that we consider to be our operating segments. For financial reporting, we have aggregated our homebuilding operating segments into reportable segments as follows: (1) West (includes operating segments located in Arizona, California, Nevada and Washington); (2) Mountain (includes operating segments located in Colorado and Utah); and (3) East (includes operating segments located in Virginia, Florida and Maryland, which includes Pennsylvania, and New Jersey).

Our financial services operations primarily consist of (1) HomeAmerican Mortgage Corporation (“HomeAmerican”), which originates mortgage loans primarily for our homebuyers, (2) Allegiant Insurance Company, Inc., A Risk Retention Group (“Allegiant”), which provides insurance coverage primarily to our homebuilding subsidiaries and most of our subcontractors for homes sold by our homebuilding subsidiaries and for work performed in completed subdivisions, (3) StarAmerican Insurance Ltd., which is a re-insurer on Allegiant claims, (4) American Home Insurance Agency, Inc., which offers third-party insurance products to our homebuyers, and (5) American Home Title and Escrow Company, which provides title agency services to our homebuilding subsidiaries and our customers in certain states. For financial reporting, we have aggregated our financial services operating segments into reportable segments as follows: (1) mortgage operations (represents HomeAmerican only) and (2) other (all remaining operating segments).

(b) Available Information

We make our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, available free of charge on our website as soon as reasonably practicable after we file or furnish the materials electronically with the Securities and Exchange Commission (“SEC”). To obtain any of this information, go to our website, www.mdcholdings.com, and select “SEC Filings” from the “Financial Reports” menu. Our website includes our: (1) Corporate Governance Guidelines; (2) Corporate Code of Conduct; (3) Rules for Senior Financial Officers; (4) Audit Committee Procedures for Handling Confidential Complaints; and (5) charters for the Audit, Compensation, Legal and Corporate Governance/Nominating Committees. These materials may also be obtained, free of charge, at www.mdcholdings.com (select “Corporate Governance”).

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(c) Financial Information About Industry Segments

Note 3 to the Consolidated Financial Statements contains information regarding our reportable segments for each of the years ended December 31, 2016, 2015 and 2014.

(d) Narrative Description of Business

Our business consists of two primary operations, homebuilding and financial services. Our homebuilding subsidiaries build and sell primarily single-family detached homes that are designed and built to meet local customer preferences. Each homebuilding subsidiary is the general contractor for its projects and retains subcontractors for land development and home construction. Our homebuilding subsidiaries build a variety of home styles in each of their markets, targeting primarily first-time and first-time move-up homebuyers.

For 2016, the percentage of our home deliveries and home sale and land sale revenues by state were as follows:

	Percentage			Percentage
	of			of Home Sale
	Deliveries			Revenues
Arizona		16	%		10	%
California		16	%		22	%
Nevada		13	%		10	%
Washington		7	%		7	%
West		52	%		49	%
Colorado		27	%		30	%
Utah		4	%		4	%
Mountain		31	%		34	%
Maryland		5	%		5	%
Virginia		5	%		6	%
Florida		7	%		6	%
East		17	%		17	%
Total		100	%		100	%

Our financial services operations include subsidiary companies that provide mortgage financing, place title insurance and homeowner insurance for our homebuyers, and provide general liability insurance for our subsidiaries and most of our subcontractors.

Homebuilding Operations

Operating Divisions. The primary functions of our homebuilding segments include land acquisition and development, home construction, sales and marketing, and customer service. Operating decisions are made by our local management teams under the oversight of our Chief Operating Decision Maker (“CODM”), or decision-making group, defined as two key executives - our Chief Executive Officer and Chief Operating Officer. Our organizational structure (i.e., the grouping and reporting of divisions) changes based upon the current needs of the Company. We had 13, 13 and 10 active homebuilding operating divisions at the end of each year ended December 31, 2016, 2015 and 2014, respectively.

Corporate Management. Our homebuilding business is managed primarily through members of senior management in our Corporate segment and our Asset Management Committees (“AMCs”). Each AMC is comprised of the Chief Operating Officer, Chief Financial Officer and one of our corporate officers.  All real estate acquisition transactions are reviewed to confirm that the transaction is projected to achieve the objectives established by our decision-making group and must be approved by one of the AMCs. Generally, the role of our senior management team and/or AMC includes:

● review and approval of division business plans and budgets;

● oversight of land and home inventory levels;

● review of major personnel decisions; and

● review of capital allocation decisions.

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Additionally, our corporate executives and corporate departments generally are responsible for establishing and monitoring compliance with our policies and procedures. Among other things, the corporate office has primary responsibility for:

● asset management and capital allocation;

● treasury;

● insurance and risk management;

● merchandising and marketing;

● national purchasing contracts;

● accounting, tax and internal audit functions;

● legal matters;

● human resources and payroll;

● information technology; and

● training and development.

Housing.  Generally, our homebuilding subsidiaries build single-family detached homes in a number of standardized series, designed to provide variety in the size and style of homes for our potential homebuyers. In certain markets, our homebuilding subsidiaries build and sell attached townhomes. Within each series of our single-family detached homes, our homebuilding subsidiaries build several different floor plans offering standard and optional features (such as upgraded appliances, cabinetry, flooring, etc.). Differences in sales prices of similar models from market-to-market depend primarily upon homebuyer demand, home prices offered by our competitors, market conditions (such as home inventory supply levels), location, cost of land, optional features and design specifications. The series of homes offered at a particular location is based on perceived customer preferences, lot size, area demographics and, in certain cases, the requirements of major land sellers and local municipalities. In general, our homebuilding subsidiaries focus on selling “to be built homes”, also referred to as “dirt sales”, and limit the level of homes started without a contract.

Land Acquisition and Development.  Our homebuilding subsidiaries acquire lots with the intention of constructing and selling homes on the acquired land. Generally, we prefer to purchase finished lots using option contracts, in phases or in bulk for cash. However, competition for finished lots has increased and therefore, approximately one-half of the lots we now purchase require some level of development. In making land purchases, we consider a number of factors, including projected rates of return, estimated gross margins from home sales, sales prices of the homes to be built, mortgage loan limits within the respective county, population and employment growth patterns, proximity to developed areas, estimated cost and complexity of development including environmental and geological factors, quality of schools, estimated levels of competition and demographic trends.  

In their option contracts, our homebuilding subsidiaries generally obtain the right to purchase lots in consideration for an option deposit in the form of cash or letters of credit. In the event they elect not to purchase the lots within a specified period of time, they may be required to forfeit the option deposit. Our option contracts do not contain provisions requiring our specific performance.

Our homebuilding subsidiaries may own or have the right under option contracts to acquire undeveloped parcels of real estate that they intend to develop into finished lots. They generally develop our land in phases in order to limit our risk in a particular subdivision and to efficiently employ available capital resources. Generally, building permits and utilities are available and zoning is suitable for the current intended use of substantially all of our undeveloped land. When developed, these lots generally will be used in our homebuilding activities. See “Forward-Looking Statements” above.

Labor and Raw Materials.  Materials used in our homebuilding operations are mainly standard items carried by major suppliers. We generally contract for our materials and labor at a fixed price for the anticipated construction period of our homes. This allows us to mitigate the risks associated with increases in the cost of building materials and labor between the time construction begins on a home and the time it is closed. Increases in the cost of building materials and subcontracted labor may reduce gross margins from home sales to the extent that market conditions prevent the recovery of increased costs through higher home sales prices. From time to time and to varying degrees, we may experience shortages in the availability of building materials and/or labor in each of our markets. These shortages and delays may result in delays in the delivery of homes under construction, reduced gross margins from home sales, or both. See “Forward-Looking Statements” above.

Warranty.  Our homebuilding subsidiaries sell their homes with limited third-party warranties that generally provide for ten years of structural coverage, two years of coverage for plumbing, electrical, heating, ventilation and air conditioning systems, and one year of coverage for workmanship and materials. Under our agreement with the issuer of the third-party warranties, our homebuilding subsidiaries perform all of the work for the first two years of the warranty coverage and pay for substantially all of the work required to be performed during years three through ten of the warranties.

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Seasonal Nature of Business.  The homebuilding industry can experience noticeable seasonality and quarter-to-quarter variability in homebuilding activity levels. The seasonal nature of our business is described in more detail in our description of Risk Factors under the heading “Because of the seasonal nature of our business, our quarterly operating results can fluctuate.”

Backlog.  At December 31, 2016 and 2015, homes under contract but not yet delivered (“backlog”) totaled 2,884 and 2,332, respectively, with an estimated sales value of $1.38 billion and $1.05 billion, respectively. We anticipate that homes in backlog at December 31, 2016 generally will close during 2017 under their existing home order contracts or through the replacement of an existing contract with a new home order contract. The estimated backlog sales value at December 31, 2016 may be impacted by, among other things, subsequent home order cancellations, incentives provided, and/or options and upgrades selected. See “Forward-Looking Statements” above.

Customer Service and Quality Control. Our homebuilding divisions are responsible for pre-closing quality control inspections and responding to customers’ post-closing needs. We have a product service and quality control program, focused on improving and/or maintaining the quality of our customers’ complete home buying and homeownership experience.

Sales and Marketing. Our sales and marketing programs are designed to attract homebuyers in a cost effective manner. We have a centralized in-house advertising and marketing department that oversees our efforts to communicate the inherent value of our homes to our prospective homebuyers and distinguish our Richmond American Homes brand from our competitors or other home buying opportunities. The main objective of this team is to generate homebuyer leads, which are actively pursued by our community sales associates. Our centralized in-house merchandising team furnishes our model homes and sales offices.

Another important part of our marketing presentation takes place in our design centers (also known as Home Galleries). Here, homebuyers are able to personalize their homes with a variety of options and upgrades. These locations also serve as an information center for prospective homebuyers and real estate agents who may opt to receive personalized attention from one of our new home specialists, resulting in a more focused and efficient home search across all of our Richmond American communities in a given market place. We believe that the services provided by our Home Galleries represent a key competitive advantage in attracting and retaining prospective homebuyers.

Competition. The homebuilding industry is fragmented and highly competitive. The competitive nature of our business is described in more detail in our description of Risk Factors.

Regulation. Our homebuilding operations are subject to compliance with applicable laws and regulations, which are described in more detail in our description of Risk Factors.

Financial Services Operations

Mortgage Lending Operations

General. HomeAmerican is a full-service mortgage lender and the principal originator of mortgage loans for our homebuyers. HomeAmerican has a centralized loan processing center where it originates mortgage loans, primarily for our homebuyers.

HomeAmerican is authorized to originate Federal National Mortgage Association (“Fannie Mae”), Federal Home Loan Mortgage Corporation (“Freddie Mac”) (together “the government-sponsored enterprises”), Federal Housing Administration-insured (“FHA”), and Veterans Administration-guaranteed (“VA”) mortgages and is an authorized issuer of Government National Mortgage Association (“Ginnie Mae”) mortgage-backed securities. Furthermore, HomeAmerican also is an authorized loan servicer for Fannie Mae, Freddie Mac and Ginnie Mae and, as such, is subject to the rules and regulations of these entities.

HomeAmerican uses a mortgage repurchase facility, internally generated funds, and temporary financing provided by its parent, to finance the origination of mortgage loans until they are sold. HomeAmerican sells originated mortgage loans to third-party purchasers on either a bulk or flow basis. Mortgage loans sold on a bulk basis include the sale of a package of substantially similar originated mortgage loans, while sales of mortgage loans on a flow basis are completed as HomeAmerican originates each loan. Mortgage loans sold to third-party purchasers include HomeAmerican’s representations and warranties with respect to certain borrower payment defaults, credit quality issues and/or misrepresentations made by HomeAmerican or our homebuyers. Substantially all of the mortgage loans originated by HomeAmerican are sold to third-party purchasers generally within 15 to 40 days of origination.

Pipeline. HomeAmerican’s mortgage loans in process for which a rate and price commitment had been made to a borrower that had not closed (the “locked pipeline”) at December 31, 2016 and 2015 had an aggregate principal balance of approximately $110.9 million and $98.4 million, respectively, and were under interest rate lock commitments at an average interest rate of 4.11% and 3.82%, respectively.

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Forward Sales Commitments.  HomeAmerican is exposed to market risks related to fluctuations in interest rates. HomeAmerican creates certain derivative instruments in the normal course of business, which primarily include commitments to originate mortgage loans (interest rate lock commitments or locked pipeline). HomeAmerican uses forward sales of mortgage-backed securities and commitments from third-parties to purchase loans to hedge the interest rate risk inherent with the locked pipeline, as well as its loan inventory held for sale. The market related risks in our business are described in more detail in our description of Risk Factors.

Competition. HomeAmerican has significant competition with other mortgage bankers to arrange financing for our homebuyers. However, in selling its originated mortgages to third parties, HomeAmerican has benefited from an increased number of smaller non-bank entities entering the third-party purchaser space, resulting in better prices and a potentially wider array of product options. The competitive nature of our mortgage business is described in more detail in our description of Risk Factors.

Regulation. Our mortgage lending operations are subject to compliance with applicable laws and regulations, which are described in more detail in our description of Risk Factors.

Insurance Operations 

General. Allegiant and StarAmerican were formed to provide insurance coverage of homebuilding risks for our homebuilding subsidiaries and most of our homebuilding subcontractors. Allegiant was organized as a risk retention group under the Federal Liability Risk Retention Act of 1981. Allegiant, which began operations in June of 2004, is licensed as a Class 3 Stock Insurance Company by the Division of Insurance of the State of Hawaii and is subject primarily to the regulations of its state of incorporation. StarAmerican is a single parent captive insurance company licensed by the Division of Insurance of the State of Hawaii. Pursuant to agreements executed on an annual basis since June of 2004, StarAmerican has re-insured Allegiant for all claims in excess of $50,000 per occurrence up to $3.0 million per occurrence, subject to various aggregate limits.

Allegiant generates premium revenue generally by providing to its customers, comprised of the Company’s homebuilding subsidiaries and most subcontractors of the Company’s homebuilding subsidiaries, general liability insurance on homes sold by our homebuilding subsidiaries and for work performed in completed subdivisions. Allegiant seeks to provide to its customers coverage and insurance rates that are competitive with other insurers. StarAmerican generates premium revenue by providing re-insurance coverage to Allegiant. Allegiant and StarAmerican incur expenses for actual losses and loss adjustment expenses and for reserves established based on actuarial studies including known facts, such as our experience with similar insurance cases and historical trends involving insurance claim payment patterns, pending levels of unpaid insurance claims, claim severity, claim frequency patterns and interpretations of circumstances including changing regulatory and legal environments.

Regulation. Allegiant and StarAmerican are licensed in the State of Hawaii and, therefore, are subject to regulation by the Hawaii Insurance Division. This regulation includes restrictions and oversight regarding: types of insurance provided; investment options; required capital and surplus; financial and information reporting; use of auditors, actuaries and other service providers; periodic examinations; and other operational items. Additionally, as a risk retention group, Allegiant is also registered in other states where certain MDC homebuilding subsidiaries do business.

Insurance Agency Operations

American Home Insurance is an insurance agency that sells primarily homeowners’ personal property and casualty insurance products in the same markets as our homebuilding subsidiaries and primarily to our homebuyers.

Title Operations

American Home Title provides title agency services to the Company and its homebuyers in Colorado, Florida, Maryland, Nevada and Virginia.

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Employees.

The table below summarizes the approximate number of employees for our combined Homebuilding, combined Financial Services and Corporate segments at December 31, 2016 and 2015.

	December 31,
	2016		2015
Homebuilding		963		906
Financial Services		135		110
Corporate		220		209
Total		1,318		1,225

Item 1A. Risk Factors.

Changes in general economic, real estate and other business conditions may have an adverse effect on the homebuilding and mortgage industries, which could have a negative impact on our business.

The homebuilding industry is cyclical and is significantly affected by changes in both industry conditions and general economic conditions such as:

• employment levels;

• availability of financing for homebuyers;

• interest rates;

• consumer confidence;

• levels of new and existing homes for sale;

• cost of land, labor and construction materials;

• demographic trends; and

• housing demand.

These conditions may exist on a national level or may affect some of the regions or markets in which we operate more than others. When adverse conditions affect any of our larger markets, they could have a proportionately greater impact on us than on some other homebuilding companies.

Changes to monetary policy or other actions by the Federal Reserve could have an adverse effect on interest rates (including mortgage interest rates), equity markets and consumer confidence. Such effects could cause us to experience declines in the market value of our inventory and the demand for our homes, resulting in a negative impact to our financial position, results of operations and cash flows.

An oversupply of alternatives to new homes, including foreclosed homes, homes held for sale by investors and speculators, other existing homes, and rental properties, can also reduce our ability to sell new homes, depress new home prices and reduce our margins on the sale of new homes. High levels of foreclosures and short-sales not only contribute to additional inventory available for sale, but also can reduce appraisal valuations for new homes, potentially resulting in lower sales prices.

Terrorist attacks, other acts of violence or threats to national security, and any corresponding response by the United States or others, or related domestic or international instability, may adversely affect general economic conditions or cause a slowdown of the economy.

As a result of the foregoing matters, potential customers may be less willing or able to buy our homes. In the future, our pricing strategies may continue to be limited by market conditions. We may be unable to change the mix of our home offerings, reduce the costs of the homes we build or offer more affordable homes to maintain our gross margins or satisfactorily address changing market conditions in other ways. In addition, cancellations of home sales contracts in backlog may increase as homebuyers choose to not honor their contracts.

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Additionally, the factors discussed above may increase our counterparty risk, which may include, among others, banks under our credit facilities and mortgage purchasers who may not be willing or able to perform on obligations to us. To the extent a third-party is unable or unwilling to meet its obligations, our financial position, results of operations and cash flows could be negatively impacted.

Our mortgage operations are closely related to our homebuilding business, as HomeAmerican originates mortgage loans principally to purchasers of the homes we build. Therefore, a decrease in the demand for our homes because of the preceding matters may also adversely affect the financial results of this segment of our business. Furthermore, any adverse changes in the economic conditions discussed previously could increase the default rate on the mortgages we originate, which may adversely affect our ability to sell the mortgages, the pricing we receive upon the sale of mortgages, or our potential exposure to recourse regarding mortgage loan sales.

These challenging conditions are complex and interrelated. We cannot predict their occurrence or severity, nor can we provide assurance that our responses would be successful.

Increased competition levels in the homebuilding and mortgage lending industries could have a negative impact on our homebuilding and mortgage operations.

The homebuilding industry is fragmented and highly competitive. Our homebuilding subsidiaries compete with numerous public and private homebuilders, including a number that are substantially larger than us and may have greater financial resources than we do. Our homebuilding subsidiaries also compete with subdivision developers and land development companies, some of which are themselves homebuilders or affiliates of homebuilders. Homebuilders compete for customers, land, building materials, subcontractor labor and desirable financing. Competition for home orders is based primarily on home sales price, location of property, home style, financing available to prospective homebuyers, quality of homes built, customer service and general reputation in the community, and may vary market-by-market and/or submarket-by-submarket. Additionally, competition within the homebuilding industry can be impacted by an excess supply of new and existing homes available for sale resulting from a number of factors, including, among other things, increases in the number of new home communities, increases in speculative homes available for sale and increases in home foreclosures. Increased competition can result in a decrease in our net new home orders, a decrease in our home sales prices and/or an increase in our home sales incentives in an effort to generate new home sales and maintain homes in backlog until they close. These competitive pressures may negatively impact our financial position, results of operations and cash flows.

Our mortgage lending subsidiary, HomeAmerican, experiences competition from numerous banks and other mortgage bankers and brokers, many of which are larger and may have greater financial resources. As a result, these competitors may be able to offer better pricing and/or mortgage loan terms, more relaxed underwriting criteria and a greater range of products, which could negatively impact the financial position, results of operations and cash flows of our mortgage operations.

If land is not available at reasonable prices or terms, we could be required to scale back our operations in a given market and/or we may operate at lower levels of profitability.

Our operations depend on our homebuilding subsidiaries’ ability to obtain land for the development of our residential communities at reasonable prices and with terms that meet our underwriting criteria. Our ability to obtain land for new residential communities may be adversely affected by changes in the general availability of land, the willingness of land sellers to sell land at reasonable prices, competition for available land, availability of financing to acquire land, zoning, regulations that limit housing density, and other market conditions. If the supply of land, and especially finished lots, appropriate for development of residential communities is limited because of these factors, or for any other reason, the number of homes that our homebuilding subsidiaries build and sell may decline. To the extent that we are unable to purchase land timely or enter into new contracts for the purchase of land at reasonable prices, due to the lag time between the time we acquire land and the time we begin selling homes, we may be required to scale back our operations in a given market and/or we may operate at lower levels of profitability. As a result, our financial position, results of operations and cash flows could be negatively impacted.

Supply shortages and other risks related to the demand for skilled labor and building materials could increase costs and delay deliveries.

The residential construction industry experiences price fluctuations and shortages in labor and materials from time to time. Shortages in labor can be due to: work stoppages, labor disputes, shortages in qualified trades people, lack of availability of adequate utility infrastructure and services, or our need to rely on local subcontractors who may not be adequately capitalized or insured. Labor and material shortages can be more severe during periods of strong demand for housing or during periods in which the markets where we operate experience natural disasters that have a significant impact on existing residential and commercial structures. Additionally, we could experience labor shortages as a result of subcontractors going out of business or leaving the residential construction market due to low levels of housing production and volumes. Pricing for labor and materials can be affected by the factors discussed above, changes in energy prices, and various other national, regional and local economic factors. Any of these circumstances could give rise to delays in the start or completion of our residential communities, increase the cost of developing one or more of our residential communities and/or increase the construction cost of our homes.

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We generally are unable to pass on increases in construction costs to customers who have already entered into sales contracts, as those sales contracts fix the price of the homes at the time the contracts are signed, which may be in advance of the construction of the home. To the extent that market conditions prevent the recovery of increased costs, including, among other things, subcontracted labor, finished lots, building materials, and other resources, through higher selling prices, our financial position, cash flows and operating results, including our gross margin from home sales, could be negatively impacted.

If mortgage interest rates rise, if down payment requirements are increased, if loan limits are decreased, or if mortgage financing otherwise becomes less available, it could adversely affect our business.

Mortgage liquidity influenced by governmental entities like the FHA, VA, USDA and Ginnie Mae or government-sponsored enterprises (“GSEs”) like Fannie Mae and Freddie Mac continue to be an important factor in marketing our homes. Financial losses or other factors may limit, restrict or otherwise curtail their ability or willingness to insure mortgage loans, offer insurance at rates and on terms that are not prohibitive, or purchase mortgage loans. Should this occur, it may negatively impact the availability of mortgage financing and our sales of new homes.

We believe that the liquidity provided by Fannie Mae, Freddie Mac and Ginnie Mae to the mortgage industry has been very important to the housing market. The future of Fannie Mae and Freddie Mac are in question and any reduction in the availability of the liquidity provided by these institutions could adversely affect interest rates, mortgage availability and our sales of new homes and mortgage loans.

Loans sold to or insured by the GSEs are subject to various loan limits. Decreases in these loan limits may require homebuyers to make larger down payments or obtain more restrictive non-conforming or “jumbo” mortgages, which could adversely impact on our financial position, results of operations and cash flows.

Even if potential customers do not need financing, changes in the availability of mortgage products may make it harder for them to sell their current homes to potential buyers who need financing.

If interest rates increase, the costs of owning a home may be affected and could result in further reductions in the demand for our homes.

Expirations, amendments or changes to tax laws, incentives or credits currently available to our customers may negatively impact our business.

Many homeowners receive substantial tax benefits in the form of tax deductions against their personal taxable income for mortgage interest and property tax payments and the loss or reduction of these deductions could affect homeowners’ net cost of owning a home. Significant changes to existing tax laws that currently benefit homebuyers, such as the ability to deduct mortgage interest and real property taxes, may result in an increase in the total cost of home ownership and may make the purchase of a home less attractive to buyers. This could adversely impact demand for and/or sales prices of new homes, which would have a negative impact on our business.

A decline in the market value of our homes or carrying value of our land would have a negative impact on our business.

Our homebuilding subsidiaries acquire land for the replacement of land inventory and/or expansion within our current markets and may, from time to time, purchase land for expansion into new markets. The fair value of our land and land under development inventory and housing completed or under construction inventory depends on market conditions. Factors that can impact our determination of the fair value of our inventory primarily include home sales prices, levels of home sales incentives and home construction and land costs. Our home sales prices and/or levels of home sales incentives can be impacted by, among other things, uncertainty in the homebuilding and mortgage industries or the United States/global economy overall, decreased demand for new homes, decreased home prices offered by our competitors, home foreclosure and short-sale levels, decreased ability of our homebuyers to obtain suitable mortgage loan financing and high levels of home order cancellations. Under such circumstances, we may be required to record impairments of our inventory. Any such inventory impairments would have a negative impact on our financial position and results of operations.

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Natural disasters could cause an increase in home construction costs, as well as delays, and could negatively impact our business.

The climates and geology of many of the markets in which we operate present increased risks of natural disasters. To the extent that hurricanes, severe storms, earthquakes, droughts, floods, heavy or prolonged precipitation, wildfires or other natural disasters or similar events occur, the financial position, results of operations and cash flows of our business may be negatively impacted.

Changes in energy prices may have an adverse effect on the economies in certain markets we operate in and our cost of building homes.

The economies of some of the markets in which we operate are impacted by the health of the energy industry. To the extent that energy prices significantly change, the economies of certain of our markets may be negatively impacted, which may adversely impact the financial position, results of operations and cash flows of our business. Furthermore, pricing offered by our suppliers and subcontractors can be adversely affected by increases in various energy costs resulting in a negative impact to our financial position, results of operations and cash flows of our business.

We have financial needs that we meet through the capital markets, including the debt and secondary mortgage markets, and disruptions in these markets could have an adverse impact on the results of our business.

We have financial needs that we meet through the capital markets, including the debt and secondary mortgage markets. Our requirements for additional capital, whether to finance operations or to service or refinance our existing indebtedness, fluctuate as market conditions and our financial performance and operations change. We cannot provide assurance that we will maintain cash reserves and generate sufficient cash flow from operations in an amount to enable us to service our debt or to fund other liquidity needs.

The availability of additional capital, whether from private capital sources or the public capital markets, fluctuates as our financial condition and market conditions in general change. There may be times when the private capital markets and the public debt or equity markets lack sufficient liquidity or when our securities cannot be sold at attractive prices, in which case we would not be able to access capital from these sources. Additionally, any reduction in our credit rankings and/or a weakening of our financial condition, could adversely affect our ability to obtain necessary funds. Even if financing is available, it could be costly or have other adverse consequences.

In addition, the sources and terms and conditions of our mortgage repurchase facility are subject to change. These changes may impact, among other things, availability of capital, cost of borrowings, collateral requirements and collateral advance rates.

Our business is subject to numerous federal, state and local laws and regulations concerning land development, construction of homes, sales, mortgage lending, environmental and other aspects of our business. These laws and regulations could give rise to additional liabilities or expenditures, or restrictions on our business.

Our operations are subject to continuing compliance requirements mandated by applicable federal, state and local statutes, ordinances, rules and regulations, including zoning and land use ordinances, building, plumbing and electrical codes, contractors’ licensing laws, state insurance laws, federal and state human resources laws and regulations, and health and safety laws and regulations. Various localities in which we operate have imposed (or may impose in the future) fees on developers to fund schools, road improvements and low and moderate-income housing.

Availability of and costs related to permit, water/sewer tap, and impact fees can impact our homebuilding operations. From time to time, various municipalities in which our homebuilding subsidiaries operate restrict or place moratoria on the availability of utilities, including water and sewer taps. Additionally, certain jurisdictions in which our homebuilding subsidiaries operate have proposed or enacted “slow growth” or “no growth” initiatives and other measures that may restrict the number of building permits available in any given year. These initiatives or other similar measures could reduce our ability to open new subdivisions and build and sell homes in the affected markets. The availability issues previously discussed and any increases in costs of these fees may negatively impact our financial position, results of operations and cash flows.

Our homebuilding operations also are affected by environmental laws and regulations pertaining to availability of water, municipal sewage treatment capacity, stormwater discharges, land use, hazardous waste disposal, dust controls, building materials, population density and preservation of endangered species, natural terrain and vegetation.

The particular environmental laws and regulations that apply to any given homebuilding project vary greatly according to a particular site’s location, the site’s environmental conditions and the present and former uses. These environmental laws may result in project delays, cause us to incur substantial compliance and other costs and/or prohibit or severely restrict homebuilding activity in certain environmentally sensitive locations. Environmental laws and regulations may also have a negative impact on the availability and price of certain raw materials, such as lumber.

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We also are subject to rules and regulations with respect to originating, processing, selling and servicing mortgage loans, which, among other things: prohibit discrimination and establish underwriting guidelines; provide for audits and inspections; require appraisals and/or credit reports on prospective borrowers and disclosure of certain information concerning credit and settlement costs; establish maximum loan amounts; prohibit predatory lending practices; and regulate the referral of business to affiliated entities.

The regulatory environment for mortgage lending is complex and ever changing and has led to an increase in the number of audits and investigations in the industry. These investigations have included the examination of consumer lending practices, sales of mortgages to financial institutions and other investors and the practices in the financial services segments of homebuilding companies. New rules and regulations or revised interpretations of existing rules and regulations applicable to our mortgage lending operations could result in more stringent compliance standards, which may substantially increase costs of compliance.

In the ordinary course of business, we are required to obtain surety bonds, the unavailability of which could adversely affect our business.

As is customary in the homebuilding industry, we often are required to provide surety bonds to secure our performance under construction contracts, development agreements and other arrangements. Our ability to obtain surety bonds primarily depends upon our credit rating, capitalization, working capital, past performance, management expertise and certain external factors, including the overall capacity of the surety market and the underwriting practices of surety bond issuers. The ability to obtain surety bonds also can be impacted by the willingness of insurance companies to issue surety bonds. If we are unable to obtain surety bonds when required, our financial position, results of operations and cash flows could be adversely impacted.

Decreases in the market value of our investments in marketable securities could have an adverse impact on our business.

We have a material amount of investments in marketable securities, the market value of which is subject to changes from period to period. Decreases in the market value of our marketable securities could have an adverse impact on our financial position, results of operations and cash flows.

Product liability litigation and warranty claims that arise in the ordinary course of business may be costly.

As a homebuilder, we are subject to construction defect and home warranty claims, as well as claims associated with the sale and financing of our homes arising in the ordinary course of business. These types of claims can be costly. The costs of insuring against or directly paying for construction defect and product liability claims can be high and the amount of coverage offered by insurance companies may be limited. If we are not able to obtain adequate insurance against these claims, we may incur additional expenses that would have a negative impact on our results of operations in future reporting periods. Additionally, changes in the facts and circumstances of our pending litigation matters could have a material impact on our financial position, results of operations and cash flows.

Repurchase requirements associated with HomeAmerican’s sale of mortgage loans, could negatively impact our business.

We are subject to risks associated with mortgage loans, including conventional mortgage loans, FHA and VA mortgage loans, second mortgage loans, high loan-to-value mortgage loans and jumbo mortgage loans (mortgage loans with principal balances that exceed various thresholds in our markets). These risks may include, among other things, compliance with mortgage loan underwriting criteria and the associated homebuyers’ performance, which could require HomeAmerican to repurchase certain of those mortgage loans or provide indemnification. Repurchased mortgage loans and/or the settlement of claims associated with such loans could have a negative impact on HomeAmerican’s financial position, results of operations and cash flows.

Because of the seasonal nature of our business, our quarterly operating results can fluctuate.

We may experience noticeable seasonality and quarter-to-quarter variability in homebuilding activity levels. In general, the number of homes delivered and the associated home sale revenues increase during the third and fourth quarters, compared with the first and second quarters. We believe that this type of seasonality reflects the historical tendency of homebuyers to purchase new homes in the spring and summer with deliveries scheduled in the fall or winter, as well as the scheduling of construction to accommodate seasonal weather conditions in certain markets.

We are dependent on the services of key employees, and the loss of their services could hurt our business.

Although we believe that we have made provision for adequately staffing current operations, because of competition for experienced homebuilding industry personnel, retaining our skilled people is an important area of focus. Our future success depends, in part, on our ability to attract, train and retain skilled personnel. If we are unable to retain our key employees or attract, train and retain other skilled personnel in the future, it could have an adverse impact on our financial position, results of operations and cash flows.

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The interests of certain controlling shareholders may be adverse to investors

Larry A. Mizel and David D. Mandarich beneficially own, directly or indirectly through their affiliates, in the aggregate, approximately 24% of our common stock. To the extent they and their affiliates vote their shares in the same manner, their combined stock ownership may effectively give them the power to influence the election of members of our board of directors and other matters reserved for our shareholders. Circumstances may occur in which the interest of these shareholders could be in conflict with your interests. In addition, such persons may have an interest in pursuing transactions that, in their judgment, enhance the value of their equity investment in us, even though such transactions may involve risks to you.

Information technology failures and data security breaches could harm our business.

We use information technology and other computer resources to carry out important operational activities and to maintain our business records. These information technology systems are dependent upon electronic systems and other aspects of the internet infrastructure. A material breach in the security of our information technology systems or other data security controls could result in third parties obtaining customer, employee or company data. Such occurrences could have a material and adverse effect on our financial position, results of operations and cash flows.

Item 1B. Unresolved Staff Comments.

None

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Item 2.   Properties.

Our corporate office is located at 4350 South Monaco Street, Denver, Colorado 80237, where we lease all 144,000 square feet of office space in the building. In some markets, our homebuilding divisions and other MDC subsidiaries lease additional office space. The table below outlines the number of office facilities that are leased and the approximate square footage leased in each market at December 31, 2016. While currently we are satisfied with the suitability and capacity of our office locations, we continue to evaluate them in view of market conditions and the size of our operations.

			Total
	Number		Square
	of Leased		Footage
	Facilities		Leased
Arizona		5		19,000
California		2		25,000
Colorado		4		153,000
Florida		2		20,000
Maryland		1		8,000
Nevada		2		16,000
Utah		1		6,000
Virginia		2		10,000
Washington		2		15,000
Total		21		272,000

Item 3.   Legal Proceedings.

Because of the nature of the homebuilding business, we and certain of our subsidiaries and affiliates have been named as defendants in various claims, complaints and other legal actions arising in the ordinary course of business, including product liability claims and claims associated with the sale and financing of our homes. In the opinion of management, the outcome of these ordinary course matters will not have a material adverse effect upon our financial condition, results of operations or cash flows.

Item 4. Mine Safety Disclosures.

   Not applicable.

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PART II

Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

At December 31, 2016, we had 574 shareholders of record. The shares of our common stock are traded on the New York Stock Exchange. The following table sets forth, for the periods indicated, the closing price ranges of our common stock. On November 21, 2016, MDC’s board of directors declared a 5% stock dividend that was distributed on December 20, 2016 to shareholders of record on December 6, 2016. In accordance with Accounting Standards Codification 260, “Earnings per Share”, basic and diluted earnings per share amounts, weighted-average shares outstanding, and dividends declared per share have been restated for all periods presented to reflect the effect of this stock dividend.

	Three Months Ended
	March 31		June 30		September 30		December 31
2016
High	$	23.87	$	24.65	$	26.01	$	27.55
Low		18.62		20.81		23.19		21.48
2015
High	$	27.14	$	29.34	$	29.59	$	27.38
Low		23.26		25.56		24.80		23.43

The table below sets forth the cash dividends declared and paid in 2016, 2015 and 2014.

					Total
	Date of	Date of	Dividend		Dividends
	Declaration	Payment	per Share		Paid
					(In thousands)
2016
First Quarter	01/25/16	02/24/16	$	0.24	$	12,252
Second Quarter	04/18/16	05/25/16		0.24		12,252
Third Quarter	07/25/16	08/24/16		0.24		12,259
Fourth Quarter	10/24/16	11/23/16		0.24		12,258
			$	0.95	$	49,021
2015
First Quarter	01/26/15	02/25/15	$	0.24	$	12,213
Second Quarter	04/27/15	05/27/15		0.24		12,212
Third Quarter	07/20/15	08/19/15		0.24		12,221
Fourth Quarter	10/19/15	11/18/15		0.24		12,222
			$	0.95	$	48,868
2014
First Quarter	01/27/14	02/26/14	$	0.24	$	12,207
Second Quarter	04/28/14	05/28/14		0.24		12,205
Third Quarter	07/21/14	08/20/14		0.24		12,204
Fourth Quarter	10/20/14	11/19/14		0.24		12,204
			$	0.95	$	48,820

On January 23, 2017, MDC’s board of directors approved the payment of a cash dividend of $0.25 per share payable February 22, 2017 to shareholders of record on February 8, 2017.

There were no shares of MDC common stock repurchased during the years ended December 31, 2016, 2015 or 2014. At December 31, 2016, we were authorized to repurchase up to 4,000,000 shares of our common stock.

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Performance Graph 

Set forth below is a graph comparing the yearly change in the cumulative total return of MDC's common stock with the cumulative total return of the Standard & Poor's 500 Stock Index and with that of a peer group of other homebuilders over the five-year period ending on December 31, 2016, weighted as of the beginning of that period.

It is assumed in the graph that $100 was invested (1) in our common stock; (2) in the stocks of the companies in the Standard & Poor’s 500 Stock Index; and (3) in the stocks of the peer group companies, just prior to the commencement of the period and that all dividends received within a quarter were reinvested in that quarter. The peer group index is composed of the following companies: Beazer Homes USA, Inc., D.R. Horton, Inc., Hovnanian Enterprises, Inc., KB Home, Lennar Corporation, M/I Homes, Inc., Meritage Homes Corporation, NVR, Inc., Pulte Homes, Inc. and Toll Brothers, Inc.

The stock price performance shown on the following graph is not indicative of future price performance. 

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Item 6.   Selected Financial Data.

The data in these tables and related footnotes should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our Consolidated Financial Statements. 

	Year Ended December 31,
	2016		2015		2014		2013		2012
	(Dollars in thousands, except per share amounts)
Income Statement Data
Home sale and land sale revenues	$	2,262,853	$	1,860,226	$	1,650,631	$	1,629,175	$	1,156,142
Financial services revenues		63,991		48,810		43,953		51,259		46,881
Total revenues	$	2,326,844	$	1,909,036	$	1,694,584	$	1,680,434	$	1,203,023
Homebuilding pretax income (loss) (2)	$	115,378	$	70,441	$	75,804	$	100,323	$	32,617
Financial services pretax income		36,403		30,983		24,671		29,502		28,498
Total income (loss) before income taxes	$	151,781	$	101,424	$	100,475	$	129,825	$	61,115
Net income (loss) (2)(3)	$	103,211	$	65,791	$	63,143	$	314,385	$	62,699
Basic earnings (loss) per share	$	2.01	$	1.28	$	1.23	$	6.13	$	1.23
Diluted earnings (loss) per share	$	2.00	$	1.28	$	1.23	$	6.08	$	1.23
Weighted Average Common Shares Outstanding:
Basic		51,286,942		51,202,616		51,046,318		50,862,241		50,043,660
Diluted		51,447,147		51,415,580		51,258,444		51,259,840		50,225,863
Balance Sheet Data
Cash and cash equivalents	$	282,909	$	180,988	$	153,825	$	199,338	$	160,095
Marketable securities	$	96,206	$	103,694	$	156,140	$	588,067	$	551,938
Total inventories	$	1,758,814	$	1,763,962	$	1,667,960	$	1,411,661	$	1,002,521
Total assets	$	2,528,589	$	2,415,899	$	2,351,456	$	2,589,619	$	1,942,800
Senior notes, net (2)	$	841,646	$	840,524	$	839,468	$	1,089,790	$	742,201
Mortgage repurchase facility	$	114,485	$	88,611	$	60,822	$	63,074	$	76,327
Stockholders' equity	$	1,320,070	$	1,256,292	$	1,228,336	$	1,213,249	$	880,897
Stockholders' equity per common share (1)	$	25.64	$	24.47	$	23.95	$	23.69	$	17.23
Cash dividends declared per share (4)	$	0.95	$	0.95	$	0.95	$	0.00	$	1.90
Operational Data
Homes delivered (units)		5,054		4,390		4,366		4,710		3,740
Average selling price	$	447	$	421	$	377	$	345	$	308
Net new orders (units)		5,606		5,203		4,623		4,327		4,342
Homes in backlog at period end (units)		2,884		2,332		1,519		1,262		1,645
Estimated backlog sales value at period end	$	1,382,000	$	1,054,000	$	663,000	$	506,000	$	579,000
Estimated average selling price of homes in backlog	$	479	$	452	$	437	$	401	$	352
Active subdivisions at period-end		164		167		159		146		148

(1) As a result of the stock dividend distributed during 2016 the stockholders’ equity per common share for the years ended December 31, 2015, 2014, 2013 and 2012 were each adjusted by 5%.

(2) During 2014, we redeemed our 5⅜% Senior Notes due December 2014 and our 5⅜% Senior Notes due July 2015. As a result of these transactions, we paid $517.7 million to extinguish $500 million in debt principal and recorded a total of $18.2 million in losses from early extinguishments of debt.

(3) Net income for the year ended December 31, 2013 includes the impact of a $187.6 million reversal of the valuation allowance against our deferred tax asset in the 2013 second quarter.

 

(4) Total dividends declared per share for the year ended December 31, 2012 include $0.95 per share representing the accelerated payment of dividends for 2013.

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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion should be read in conjunction with, and is qualified in its entirety by, the Consolidated Financial Statements and Notes thereto included elsewhere in this Annual Report on Form 10-K. This item contains forward-looking statements that involve risks and uncertainties. Actual results may differ materially from those indicated in such forward-looking statements. Factors that may cause such a difference include, but are not limited to, those discussed in “Item 1A, Risk Factors Relating to our Business.”

	Year Ended December 31,
	2016			2015			2014
	(Dollars in thousands, except per share amounts)
Homebuilding:
Home sale revenues	$	2,257,153		$	1,847,889		$	1,647,398
Land sale revenues		5,700			12,337			3,233
Total home and land sale revenues		2,262,853			1,860,226			1,650,631
Home cost of sales		(1,884,391	)		(1,539,396	)		(1,365,621	)
Land cost of sales		(4,866	)		(12,611	)		(2,559	)
Inventory impairments		(10,173	)		(9,993	)		(1,760	)
Total cost of sales		(1,899,430	)		(1,562,000	)		(1,369,940	)
Gross margin		363,423			298,226			280,691
Gross margin %		16.1	%		16.0	%		17.0	%
Selling, general and administrative expenses		(250,540	)		(226,317	)		(203,253	)
Interest and other income		7,012			6,709			26,310
Interest expense		-			-			(685	)
Other expense		(3,447	)		(4,208	)		(4,813	)
Losses from early extinguishments of debt		-			-			(18,153	)
Other-than-temporary impairment of marketable securities		(1,070	)		(3,969	)		(4,293	)
Homebuilding pretax income		115,378			70,441			75,804
Financial Services:
Revenues		63,991			48,810			43,953
Expenses		(30,920	)		(21,572	)		(22,334	)
Interest and other income		3,705			3,745			3,052
Other-than-temporary impairment of marketable securities		(373	)		-			-
Financial services pretax income		36,403			30,983			24,671
Income before income taxes		151,781			101,424			100,475
Provision for income taxes		(48,570	)		(35,633	)		(37,332	)
Net income	$	103,211		$	65,791		$	63,143
Earnings per share:
Basic	$	2.01		$	1.28		$	1.23
Diluted	$	2.00		$	1.28		$	1.23
Weighted average common shares outstanding:
Basic		51,286,942			51,202,616			51,046,318
Diluted		51,447,147			51,415,580			51,258,444
Cash dividends declared per share	$	0.95		$	0.95		$	0.95
Cash provided by (used in):
Operating Activities	$	115,917		$	215		$	(163,647	)
Investing Activities	$	9,218		$	47,362		$	423,080
Financing Activities	$	(23,214	)	$	(20,414	)	$	(304,946	)

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EXECUTIVE SUMMARY

Overview

Industry Conditions

The homebuilding industry moved along a stable, gradually climbing path throughout 2016, driven by (1) solid levels of employment, (2) improvements in consumer confidence, wages and household formation, and (3) mortgage rates that remained near record lows for the majority of the year. However, production was hindered somewhat by limited subcontractor availability in certain markets, resulting in slower build times. Additionally, we saw increased demand from first-time buyers during the year, and we responded by introducing more affordable home plans in several markets. 

Results for the Twelve Months Ended December 31, 2016

For the year ended December 31, 2016, we reported net income of $103.2 million, or $2.00 per diluted share, a 57% increase compared to net income of $65.8 million, or $1.28 per diluted share for the year earlier period. The increase was primarily due to a 22% improvement in home sale revenues, a 110 basis point improvement in our selling, general and administrative (“SG&A”) expenses as a percentage of home sale revenues (“SG&A rate”), and a 310 basis point reduction in our effective tax rate.

Home sale revenues were up from $1,847.9 million in 2015 to $2,257.2 million in 2016. This $409.3 million improvement was the result of a $25,700 increase in our average selling price of deliveries to $446,600, mostly due to a mix shift to higher-priced communities and, to a lesser extent, price increases implemented during 2015 and the first half of 2016. Our SG&A rate improved by 110 basis points to 11.1%, driven primarily by an increased ability to leverage our fixed overhead as a result of our increase in home sale revenues and, to a lesser extent, a decline in our stock-based compensation expense. Our effective tax rate declined year-over-year primarily due to the utilization of a domestic manufacturing deduction, whereas we were not eligible to take this deduction in the prior year due to our utilization of remaining federal net operating loss carryforwards to offset taxable income.

The dollar value of net new home orders increased by 12% year-over-year, as our number of net new orders and average selling price improved by 8% and 4%, respectively. The increase in the number of net new orders was primarily attributable to an increase in our absorption pace of 6% year-over-year. The improvement in our average selling price of net new orders, which was primarily the result of price increases throughout 2016 in many of our communities, was somewhat offset by a slight shift in mix to lower priced communities in certain of our markets, as we have experienced a trend toward a higher percentage of our net new orders coming from first-time homebuyers in the second half of 2016.

Our financial services pretax income was $36.4 million for the year ended December 31, 2016, a $5.4 million, or 17%, increase from $31.0 million for the year ended December 31, 2015. The increase was due to our mortgage operations segment, which had (1) increases in the dollar value of loans locked, originated, and sold and (2) higher gains on loans locked and sold.

Outlook

The dollar value of the homes in our backlog at December 31, 2016 was up 24% year-over-year to $1.4 billion, which puts us in a position to grow our home sale revenues year-over-year during the first half of 2017. However, our ability to grow revenues will be impacted by construction cycle times, which increased significantly in 2016. The introduction of our new more affordable homes, which are generally smaller and less complex to build, should have a positive impact on the Company’s overall cycle times during 2017, although they will still be a small overall portion of our unit volume. The initial consumer response to our new more affordable homes has been positive, reinforcing our belief that the first-time homebuyer may drive growth in new home sales nationwide in the coming year. However, this optimism is somewhat tempered by an increased risk for a rise in interest rates, which already increased significantly during the final quarter of 2016, and uncertainty surrounding potential changes in government policy following the 2016 Presidential Election. See "Forward-Looking Statements" above.

We ended 2016 with overall liquidity of $901.6 million and no senior note maturities until 2020. We believe that our financial position at December 31, 2016 provides us with the ability to grow operations as opportunities arise while still providing adequate protection from the historically volatile and cyclical nature of the housing market and domestic and global economies. See "Forward-Looking Statements" above.

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Homebuilding

Pretax Income (Loss)

	Year Ended December 31,
				Change								Change
	2016			Amount		%			2015			Amount			%			2014
	(Dollars in thousands)
West	$	73,594		$	8,967		14	%	$	64,627		$	1,556			2	%	$	63,071
Mountain		73,104			20,397		39	%		52,707			13,364			34	%		39,343
East		4,949			10,982		N/M			(6,033	)		(16,763	)		(156	)%		10,730
Corporate		(36,269	)		4,591		11	%		(40,860	)		(3,520	)		(9	)%		(37,340	)
Total homebuilding pretax income	$	115,378		$	44,937		64	%	$	70,441		$	(5,363	)		(7	)%	$	75,804

N/M – Not meaningful

Homebuilding pretax income for 2016 was $115.4 million, an increase of $44.9 million from $70.4 million for the year ended December 31, 2015. The increase was primarily attributable to a 22% increase in home sale revenues, coupled with a 110 basis point improvement in our SG&A rate. The year-over-year increases in pretax income for each of our West, Mountain and East segments were driven primarily by higher home sale revenues of 23%, 24% and 15%, respectively, coupled with improvements in each segment’s SG&A rate. The pretax loss for our Corporate segment was reduced from the prior year primarily as a result of an increase in interest and other income and a decrease in stock-based compensation expense.

Homebuilding pretax income for 2015 was $70.4 million, a decrease of $5.4 million from $75.8 million for the year ended December 31, 2014. Our homebuilding pretax income for the year benefited from a 12% improvement in home sale revenues and an $18.2 million reduction in charges related to the early extinguishment of debt. However, our results were negatively impacted by an 80 basis point reduction in our gross margin from homes sales and a $19.6 million decrease in interest and other income. The decrease was due to year-over-year declines in both (1) our average marketable securities balance and (2) gains on sales of marketable securities as the volume of marketable securities sold decreased.

Our Mountain segment had a $13.4 million year-over-year improvement in pretax income for 2015, due primarily to a 14% increase in home sale revenues coupled with an improved gross margin from home sales percentage. In our West segment, a $1.6 million increase in pretax income was the result of a 19% increase in home sale revenues that was mostly offset by a decline in gross margin from home sales percentage. The $16.8 million decline in pretax income in our East segment was primarily due to a 6% reduction in home sale revenues, a decline in our gross margin from home sales percentage, driven mostly by a $7.5 million increase in inventory impairments, and an increase in our SG&A rate. The additional $3.5 million of pretax loss in our Corporate segment was primarily due to the $19.6 million decrease in interest and other income discussed above and an increase in stock-based compensation expense related to a non-qualified stock option grant covering one million shares to each of our Chief Executive Officer and Chief Operating Officer, but was mostly offset by the $18.2 million reduction in charges related to the early extinguishment of debt.

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Assets

	December 31,				Change
	2016		2015		Amount			%
	(Dollars in thousands)
West	$	1,035,033	$	991,393	$	43,640			4	%
Mountain		571,139		536,831		34,308			6	%
East		256,816		324,457		(67,641	)		(21	)%
Corporate		454,507		393,712		60,795			15	%
Total homebuilding assets	$	2,317,495	$	2,246,393	$	71,102			3	%

Homebuilding assets increased slightly during the year ended December 31, 2016. The decline in homebuilding assets in our East segment is due to reduced land acquisition activity in this segment during 2016, as our returns in this segment have been lower than expected. The assets in our Corporate segment increased due to an aggregate increase in our cash, cash equivalents and investments balances, which were up as a result of our positive operating results, but was partially offset by a decline in our deferred tax asset resulting from using a significant amount of credit carryforwards to offset taxable income.

Revenues

	Year Ended December 31,
			Change							Change
	2016		Amount		%			2015		Amount			%			2014
	(Dollars in thousands)
West	$	1,128,513	$	213,254		23	%	$	915,259	$	145,208			19	%	$	770,051
Mountain		756,997		147,995		24	%		609,002		74,758			14	%		534,244
East		377,343		41,378		12	%		335,965		(10,371	)		(3	)%		346,336
Total home and land sale revenues	$	2,262,853	$	402,627		22	%	$	1,860,226	$	209,595			13	%	$	1,650,631

Home and land sale revenues increased $402.6 million for the year ended December 31, 2016, due to a 15% increase in the number of new home deliveries and a 6% increase in the average selling price of new home deliveries. For the year ended December 31, 2015, home and land sale revenues increased $209.6 million, due primarily to a 12% increase in the average selling price of new home deliveries.

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New Home Deliveries:

	Year Ended December 31,
	2016						2015						% Change
	Homes		Dollar Value		Average Price		Homes		Dollar Value		Average Price		Homes			Dollar Value			Average Price
	(Dollars in thousands)
Arizona		789	$	232,511	$	294.7		753	$	220,140	$	292.4		5	%		6	%		1	%
California		807		495,934		614.5		706		370,603		524.9		14	%		34	%		17	%
Nevada		683		238,441		349.1		575		215,479		374.7		19	%		11	%		(7	)%
Washington		345		161,628		468.5		270		109,038		403.8		28	%		48	%		16	%
West		2,624		1,128,514		430.1		2,304		915,260		397.2		14	%		23	%		8	%
Colorado		1,369		671,308		490.4		1,192		553,573		464.4		15	%		21	%		6	%
Utah		219		80,679		368.4		149		52,794		354.3		47	%		53	%		4	%
Mountain		1,588		751,987		473.5		1,341		606,367		452.2		18	%		24	%		5	%
Maryland		243		114,079		469.5		215		103,148		479.8		13	%		11	%		(2	)%
Virginia		262		135,394		516.8		216		105,593		488.9		21	%		28	%		6	%
Florida		337		127,179		377.4		314		117,521		374.3		7	%		8	%		1	%
East		842		376,652		447.3		745		326,262		437.9		13	%		15	%		2	%
Total		5,054	$	2,257,153	$	446.6		4,390	$	1,847,889	$	420.9		15	%		22	%		6	%

	Year Ended December 31,
	2015						2014						% Change
	Homes		Dollar Value		Average Price		Homes		Dollar Value		Average Price		Homes			Dollar Value			Average Price
	(Dollars in thousands)
Arizona		753	$	220,140	$	292.4		731	$	200,994	$	275.0		3	%		10	%		6	%
California		706		370,603		524.9		624		296,189		474.7		13	%		25	%		11	%
Nevada		575		215,479		374.7		564		176,371		312.7		2	%		22	%		20	%
Washington		270		109,038		403.8		267		96,496		361.4		1	%		13	%		12	%
West		2,304		915,260		397.2		2,186		770,050		352.3		5	%		19	%		13	%
Colorado		1,192		553,573		464.4		1,172		478,669		408.4		2	%		16	%		14	%
Utah		149		52,794		354.3		165		53,136		322.0		(10	)%		(1	)%		10	%
Mountain		1,341		606,367		452.2		1,337		531,805		397.8		0	%		14	%		14	%
Maryland		215		103,148		479.8		305		144,695		474.4		(30	)%		(29	)%		1	%
Virginia		216		105,593		488.9		234		115,001		491.5		(8	)%		(8	)%		(1	)%
Florida		314		117,521		374.3		304		85,847		282.4		3	%		37	%		33	%
East		745		326,262		437.9		843		345,543		409.9		(12	)%		(6	)%		7	%
Total		4,390	$	1,847,889	$	420.9		4,366	$	1,647,398	$	377.3		1	%		12	%		12	%

For the year ended December 31, 2016, the number of homes delivered for all of our markets increased compared to the prior year as our beginning backlog in 2016 was up significantly year-over-year. However, the benefit to deliveries from our higher beginning backlog was somewhat offset by extended cycle times on homes sold throughout the year primarily as a result of issues with subcontractor availability in certain of our larger markets. Our California and Washington markets, which each experienced significant increases in their average selling price, benefited from price increases in most of their communities during 2016 coupled with a shift in the mix of deliveries to higher priced communities.

For the year ended December 31, 2015, all of our markets, with the exception of Virginia, experienced year-over-year increases in the average selling price of homes delivered. The markets that experienced the most prominent percentage increases were California, Nevada, Washington, Colorado and Florida. The price increase in all of these markets was primarily driven by a shift in the mix of deliveries to higher priced communities and, to a lesser degree, by price increases implemented in most communities during the first half of the year, especially in California and Colorado. The change in homes closed during the year for the majority of our markets was mostly driven by the year-over-year change in the number of homes in beginning backlog. However, current year deliveries in most of our markets were negatively impacted by our intentional reduction of unsold home inventory, which drove decreases in the number of homes that were both sold and delivered during the year. For our Utah market, a significant year-over-year decline in the number of homes both sold and delivered during the same year, predominantly related to a decrease in available unsold home inventory, drove the 10% decline in closings, despite a 54% increase in beginning backlog.

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Gross Margin

Our gross margin from home sales percentage for the year ended December 31, 2016 decreased 10 basis points year-over-year to 16.1%, as $7.5 million in adjustments to increase our warranty accrual were mostly offset by the positive impact from a higher percentage of our deliveries coming from build-to-order sales, which typically have higher gross margins when compared to deliveries of homes that were started without a sales contract.

Our gross margin from home sales for the year ended December 31, 2015 decreased 80 basis points year-over-year. The decline was primarily due to an $8.2 million increase in inventory impairments and lower than normal margins in the first quarter of 2015 from deliveries of aged homes that were started without a contract. The lower margins were caused by higher than normal incentives utilized to reduce this aged unsold inventory. To a lesser extent, margins were also adversely impacted by higher land and construction costs and a $2.8 million year-over-year decline in positive warranty adjustments. These items were partially offset by a 70 basis point improvement in our interest in cost of sales as a percentage of home sale revenues, price increases implemented in various communities and a higher percentage of our deliveries coming from dirt sales, which typically have higher gross margins.

Inventory Impairments

During the year ended December 31, 2016, we recorded $10.2 million of inventory impairments, of which $7.6 million related to five projects in our East segment, $1.4 million related to one project in our West segment and $1.2 million related to one project in our Mountain segment. During the year ended December 31, 2015, we recorded $10.0 million of inventory impairments, of which $1.2 million was related to impairments on our land held for sale in two communities; one in our West segment and one in our Mountain segment. The remaining $8.8 million in impairments related to nine projects with the majority coming from our East segment; four in Maryland totaling $3.3 million and three in Virginia totaling $5.2 million. During the year ended December 31, 2014, we recorded $1.8 million of inventory impairments related to four projects, three of which were in our Maryland division totaling $1.0 million. The communities impaired during the three-year-period were all impaired based on their slow sales absorption rates experienced during the respective years of their impairments, as well as the estimated or actual sales price reductions required to sell the remaining lots and houses. Inventory impairments recognized by segment for the years ended December 31, 2016, 2015 and 2014 are shown in the table below.

	Year Ended December 31,
	2016		2015		2014
	(Dollars in thousands)
Housing Completed or Under Construction:
West	$	364	$	-	$	-
Mountain		574		250		234
East		1,390		1,378		1,000
Subtotal		2,328		1,628		1,234
Land and Land Under Development:
West		1,036		648		-
Mountain		589		569		526
East		6,220		7,148		-
Subtotal		7,845		8,365		526
Total Inventories	$	10,173	$	9,993	$	1,760

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The table below provides quantitative data, for the periods presented, used in determining the fair value of the impaired inventory, excluding impairments related to land held for sale.

	Impairment Data								Quantitative Data
Three Months Ended	Total Subdivisions Tested		Inventory Impairments		Fair Value of Inventory After Impairments		Number of Subdivisions Impaired		Discount Rate
	(Dollars in thousands)
March 31, 2016		14	$	-	$	-		-		N/A
June 30, 2016		17		1,600		6,415		2	12%	to	15%
September 30, 2016		25		4,700		12,295		2	15%	to	18%
December 31, 2016		40		3,873		23,657		3	12%	to	15%
Total			$	10,173	$	42,367		7
March 31, 2015		22	$	350	$	3,701		1		9%
June 30, 2015		22		-		-		-		N/A
September 30, 2015		18		3,225		14,836		5	12%	to	15%
December 31, 2015		15		5,200		19,925		3	15%	to	20%
Total			$	8,775	$	38,462		9
March 31, 2014		16	$	-	$	-		-		N/A
June 30, 2014		16		850		4,285		2	11%	to	14%
September 30, 2014		23		-		-		-		N/A
December 31, 2014		21		910		4,646		2		13%
Total			$	1,760	$	8,931		4

Selling, General and Administrative Expenses

	Year Ended December 31,
	2016			Change		2015			Change		2014
General and administrative expenses	$	118,076		$	5,942	$	112,134		$	9,723	$	102,411
General and administrative expenses as a percentage of home sale revenues		5.2	%	(90) bps			6.1	%	(10) bps			6.2	%
Marketing expenses	$	58,778		$	6,361	$	52,417		$	6,536	$	45,881
Marketing expenses as a percentage of home sale revenues		2.6	%	(20) bps			2.8	%	0 bps			2.8	%
Commissions expenses	$	73,686		$	11,920	$	61,766		$	6,805	$	54,961
Commissions expenses as a percentage of home sale revenues		3.3	%	0 bps			3.3	%	0 bps			3.3	%
Total selling, general and administrative expenses	$	250,540		$	24,223	$	226,317		$	23,064	$	203,253
Total selling, general and administrative expenses as a percentage of home sale revenues (SG&A Rate)		11.1	%	(110) bps			12.2	%	(10) bps			12.3	%

For the year ended December 31, 2016, our SG&A expenses were up $24.2 million to $250.5 million, while our SG&A rate improved 110 basis points year-over-year. The improvement in our SG&A rate was driven primarily by an increased ability to leverage our fixed overhead as a result of our 22% increase in home sale revenues and, to a lesser extent, a decline in our stock-based compensation expense.

For the year ended December 31, 2015, our SG&A expenses were up $23.1 million to $226.3 million, while our SG&A rate improved 10 basis points year-over-year. The slight improvement in our SG&A rate was driven primarily by an increased ability to leverage our fixed overhead as a result of our 12% increase in home sale revenues, but was mostly offset by an $8.2 million increase in compensation-related expenses, which included $6.2 million of expense related to a non-qualified stock option grant covering one million shares to each of our Chief Executive Officer and Chief Operating Officer.

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Early Extinguishments of Debt

During the 2014 first quarter, we redeemed our 5⅜% Senior Notes due December 2014 and, in the 2014 fourth quarter, we redeemed our 5⅜% Senior Notes due July 2015. As a result of these transactions, we paid $517.7 million to extinguish $500 million in debt principal and recorded a total of $18.2 million in losses on early extinguishments of debt. We used available cash balances to fund the Senior Notes due December 2014 and for the redemption of the Senior Notes due July 2015, we used available cash balances in addition to proceeds from the sale of certain marketable securities.

Other-Than-Temporary Impairment of Marketable Securities

As of December 31, 2016, 2015 and 2014, our marketable securities were in net unrealized gain positions totaling $12.5 million, $5.9 million and $4.5 million, respectively. Included in those net unrealized gain positions were certain marketable securities that individually were in an unrealized loss position. In accordance with GAAP, we recognized $1.4 million, $4.0 million and $4.3 million of impairments for the years ended December 31, 2016, 2015 and 2014, respectively, on certain equity securities based on our determination that the unrealized loss on certain of our equity securities no longer met the criteria to be considered temporary.

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Other Homebuilding Operating Data

Net New Orders:

	Year Ended December 31,
	2016								2015								% Change
	Homes		Dollar Value		Average Price		Monthly Absorption Rate *		Homes		Dollar Value		Average Price		Monthly Absorption Rate *		Homes			Dollar Value			Average Price			Monthly Absorption Rate *
	(Dollars in thousands)
Arizona		790	$	243,358	$	308.0		2.21		843	$	241,192	$	286.1		2.07		(6	)%		1	%		8	%		7	%
California		946		582,460		615.7		3.88		856		506,445		591.6		3.55		11	%		15	%		4	%		9	%
Nevada		795		282,198		355.0		3.09		615		227,560		370.0		3.62		29	%		24	%		(4	)%		(15	)%
Washington		403		199,011		493.8		2.57		394		173,071		439.3		2.50		2	%		15	%		12	%		3	%
West		2,934		1,307,027		445.5		2.89		2,708		1,148,268		424.0		2.77		8	%		14	%		5	%		4	%
Colorado		1,511		730,924		483.7		3.69		1,435		687,695		479.2		2.97		5	%		6	%		1	%		24	%
Utah		215		84,455		392.8		2.18		217		79,203		365.0		2.58		(1	)%		7	%		8	%		(16	)%
Mountain		1,726		815,379		472.4		3.39		1,652		766,898		464.2		2.91		4	%		6	%		2	%		16	%
Maryland		245		116,813		476.8		1.73		237		116,010		489.5		2.02		3	%		1	%		(3	)%		(14	)%
Virginia		272		143,680		528.2		2.75		227		114,713		505.3		2.12		20	%		25	%		5	%		30	%
Florida		429		176,862		412.3		2.14		379		143,594		378.9		2.18		13	%		23	%		9	%		(2	)%
East		946		437,355		462.3		2.15		843		374,317		444.0		2.12		12	%		17	%		4	%		1	%
Total		5,606	$	2,559,761	$	456.6		2.85		5,203	$	2,289,483	$	440.0		2.68		8	%		12	%		4	%		6	%

	Year Ended December 31,
	2015								2014								% Change
	Homes		Dollar Value		Average Price		Monthly Absorption Rate *		Homes		Dollar Value		Average Price		Monthly Absorption Rate *		Homes			Dollar Value			Average Price			Monthly Absorption Rate
	(Dollars in thousands)
Arizona		843	$	241,192	$	286.1		2.07		802	$	235,041	$	293.1		2.04		5	%		3	%		(2	)%		1	%
California		856		506,445		591.6		3.55		669		327,248		489.2		3.22		28	%		55	%		21	%		10	%
Nevada		615		227,560		370.0		3.62		579		192,708		332.8		2.93		6	%		18	%		11	%		24	%
Washington		394		173,071		439.3		2.50		276		102,795		372.4		2.30		43	%		68	%		18	%		9	%
West		2,708		1,148,268		424.0		2.77		2,326		857,792		368.8		2.54		16	%		34	%		15	%		9	%
Colorado		1,435		687,695		479.2		2.97		1,334		576,322		432.0		2.88		8	%		19	%		11	%		3	%
Utah		217		79,203		365.0		2.58		179		59,304		331.3		2.55		21	%		34	%		10	%		1	%
Mountain		1,652		766,898		464.2		2.91		1,513		635,626		420.1		2.84		9	%		21	%		10	%		2	%
Maryland		237		116,010		489.5		2.02		244		117,646		482.2		1.43		(3	)%		(1	)%		2	%		41	%
Virginia		227		114,713		505.3		2.12		221		111,068		502.6		1.96		3	%		3	%		1	%		8	%
Florida		379		143,594		378.9		2.18		319		109,141		342.1		1.85		19	%		32	%		11	%		18	%
East		843		374,317		444.0		2.12		784		337,855		430.9		1.72		8	%		11	%		3	%		23	%
Total		5,203	$	2,289,483	$	440.0		2.68		4,623	$	1,831,273	$	396.1		2.43		13	%		25	%		11	%		10	%

* Calculated as total net new orders in period ÷ average active communities during period ÷ number of months in period

During the year ended December 31, 2016, we experienced year-over-year improvements in the dollar value of net new orders in all of our markets, resulting in a total year-over-year increase to the dollar value of net new orders of 12% or $270.3 million. Washington experienced the largest increase in average selling price percentage due to both a shift in mix to higher priced communities and price increases implemented in selling communities throughout 2016. Our Nevada and Virginia markets each experienced the largest percentage improvement in the number of net new orders. In our Virginia market, this was due to an increased monthly sales absorption pace resulting from certain communities that opened late in 2015 having a full year of strong sales activity in 2016. A 50% year-over-year increase in the number of average active communities drove the improvement in Nevada. However, the impact on net new orders from this higher average active community count was slightly offset by a year-over-year decline in monthly sales absorption pace as the 2015 monthly sales absorption pace was at unusually high levels during the first half of 2015. The absorption paces for our Colorado and California markets continue to be among the strongest in the Company, with robust demand in each market.

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For the year ended December 31, 2015, the dollar value of net new orders increased 25% compared to the prior year as both units and average selling price improved in most of our markets. A mix shift to higher priced communities, coupled with price increases implemented during 2015 in most of our communities, notably those in California and Colorado, drove the year-over-year increase in average selling price of net new home orders. Our West segment experienced the largest improvement in the number of net new orders as the result of a 7% increase in average active subdivisions coupled with an improved absorption pace, notably in California, Washington, and Nevada, despite the price increases implemented during most of 2015 as discussed above. The improvement in net new orders in our Mountain segment was primarily the result of a 4% increase in average active subdivisions coupled with a slight improvement in our monthly sales absorption pace. Our East segment had the largest increase in absorption pace, but the impact on net new orders was significantly dampened by an 11% decline in average active community count.

Active Subdivisions:

	Active Subdivisions												Average Active Subdivisions
	December 31,												Year Ended December 31,
	2016		% Change			2015		% Change			2014		2016		2015		% Change
Arizona		28		(13	)%		32		(11	)%		36		30		34		(12	)%
California		20		0	%		20		5	%		19		20		20		0	%
Nevada		21		5	%		20		25	%		16		21		14		50	%
Washington		14		0	%		14		40	%		10		13		13		0	%
West		83		(3	)%		86		6	%		81		84		81		4	%
Colorado		38		(5	)%		40		0	%		40		34		40		(15	)%
Utah		9		29	%		7		17	%		6		8		7		14	%
Mountain		47		0	%		47		2	%		46		42		47		(11	)%
Maryland		10		(9	)%		11		22	%		9		12		10		20	%
Virginia		7		(22	)%		9		(10	)%		10		8		9		(11	)%
Florida		17		21	%		14		8	%		13		17		14		21	%
East		34		0	%		34		6	%		32		37		33		12	%
Total		164		(2	)%		167		5	%		159		163		161		1	%

At December 31, 2016, we had 164 active subdivisions, a 2% decrease from 167 active subdivisions at the end of 2015. At December 31, 2015, we had 167 active subdivisions, up 5% from 159 active subdivisions at the end of 2014. In Arizona, as a result of limited land acquisition activity during 2014 and 2015, our active subdivision count has experienced year-over-year declines in both 2016 and 2015. In Virginia and Maryland, we have tempered our land acquisition activity over the past two years as our recent returns in this segment have been lower than expected. For all remaining markets, the year-over-year changes were primarily driven by the timing of opening new communities versus closing out older ones.

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Cancellation Rate:

	Cancellations As a Percentage of Gross Sales
	Year Ended December 31,
	2016			Change			2015			Change			2014
Arizona		27	%		3	%		24	%		0	%		24	%
California		24	%		3	%		21	%		(3	)%		24	%
Nevada		18	%		0	%		18	%		(2	)%		20	%
Washington		18	%		(1	)%		19	%		(1	)%		20	%
West		22	%		1	%		21	%		(2	)%		23	%
Colorado		20	%		(1	)%		21	%		1	%		20	%
Utah		22	%		6	%		16	%		(2	)%		18	%
Mountain		20	%		(1	)%		21	%		1	%		20	%
Maryland		26	%		8	%		18	%		(6	)%		24	%
Virginia		20	%		(5	)%		25	%		(2	)%		27	%
Florida		27	%		0	%		27	%		1	%		26	%
East		25	%		1	%		24	%		(2	)%		26	%
Total		22	%		1	%		21	%		(1	)%		22	%

Our cancellations as a percentage of gross sales in total and on an individual market-by-market basis have been relatively consistent between the years ended December 31, 2016, 2015 and 2014.

Backlog:

	At December 31,
	2016						2015						% Change
	Homes		Dollar Value		Average Price		Homes		Dollar Value		Average Price		Homes			Dollar Value			Average Price
	(Dollars in thousands)
Arizona		322	$	104,899	$	325.8		321	$	89,464	$	278.7		0	%		17	%		17	%
California		481		314,305		653.4		342		220,755		645.5		41	%		42	%		1	%
Nevada		307		108,720		354.1		195		67,901		348.2		57	%		60	%		2	%
Washington		237		120,305		507.6		179		80,134		447.7		32	%		50	%		13	%
West		1,347		648,229		481.2		1,037		458,254		441.9		30	%		41	%		9	%
Colorado		964		466,565		484.0		822		390,635		475.2		17	%		19	%		2	%
Utah		104		41,689		400.9		108		38,549		356.9		(4	)%		8	%		12	%
Mountain		1,068		508,254		475.9		930		429,184		461.5		15	%		18	%		3	%
Maryland		92		45,160		490.9		90		43,317		481.3		2	%		4	%		2	%
Virginia		111		60,701		546.9		101		52,622		521.0		10	%		15	%		5	%
Florida		266		119,305		448.5		174		70,837		407.1		53	%		68	%		10	%
East		469		225,166		480.1		365		166,776		456.9		28	%		35	%		5	%
Total		2,884	$	1,381,649	$	479.1		2,332	$	1,054,214	$	452.1		24	%		31	%		6	%

At December 31, 2016, we experienced significant year-over-year growth in the number of homes in backlog driven primarily by (1) a year-over-year increase in net new orders, (2) a higher percent of those sales coming from dirt sales, which are generally in backlog for a longer period of time, and (3) lower closings than expected for 2016 as a result of increased construction cycle times in most of our larger markets due to limited subcontractor availability.

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Homes Completed or Under Construction:

	December 31,
	2016		2015		% Change
Unsold:
Completed		115		189		(39	)%
Under construction		279		334		(16	)%
Total unsold started homes		394		523		(25	)%
Sold homes under construction or completed		2,186		1,697		29	%
Model homes under construction or completed		302		281		7	%
Total homes completed or under construction		2,882		2,501		15	%

At the beginning of 2015, we increased our focus on build-to-order sales and started fewer unsold homes, giving our customers the best opportunity to personalize their homes. As a result, our supply of unsold started homes has declined by 25% year-over-year from December 31, 2015. However, this decline was more than offset by a 29% increase in sold homes under construction or completed as a result of our higher backlog, and a 7% increase in our model homes, resulting in a 15% increase in our total homes completed or under construction.

Lots Owned and Optioned (including homes completed or under construction):

	December 31, 2016						December 31, 2015
	Lots Owned		Lots Optioned		Total		Lots Owned		Lots Optioned		Total		Total % Change
Arizona		1,521		287		1,808		1,735		201		1,936		(7	)%
California		1,702		298		2,000		1,759		352		2,111		(5	)%
Nevada		1,934		65		1,999		2,240		100		2,340		(15	)%
Washington		862		-		862		832		107		939		(8	)%
West		6,019		650		6,669		6,566		760		7,326		(9	)%
Colorado		3,982		1,683		5,665		4,086		832		4,918		15	%
Utah		306		30		336		442		-		442		(24	)%
Mountain		4,288		1,713		6,001		4,528		832		5,360		12	%
Maryland		221		62		283		368		219		587		(52	)%
Virginia		367		19		386		562		158		720		(46	)%
Florida		910		421		1,331		1,078		230		1,308		2	%
East		1,498		502		2,000		2,008		607		2,615		(24	)%
Total		11,805		2,865		14,670		13,102		2,199		15,301		(4	)%

Our total owned and optioned lots were down slightly from December 31, 2015. The decline in lots controlled in our Maryland and Virginia markets is primarily due to reduced land acquisition activity during 2016, as our returns in these markets have been lower than expected. We ended 2016 with a total lot supply of approximately 2.9 years (based on our last-twelve months of deliveries), which is within our stated strategic range.

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Financial Services

	Year Ended December 31,
			Change								Change
	2016		Amount			%			2015		Amount		%			2014
	(Dollars in thousands)
Financial services revenues
Mortgage operations	$	41,585	$	11,309			37	%	$	30,276	$	4,389		17	%	$	25,887
Other		22,406		3,872			21	%		18,534		468		3	%		18,066
Total financial services revenues	$	63,991	$	15,181			31	%	$	48,810	$	4,857		11	%	$	43,953
Financial services pretax income
Mortgage operations	$	23,845	$	6,615			38	%	$	17,230	$	3,196		23	%	$	14,034
Other		12,558		(1,195	)		(9	)%		13,753		3,116		29	%		10,637
Total financial services pretax income	$	36,403	$	5,420			17	%	$	30,983	$	6,312		26	%	$	24,671

For the year ended December 31, 2016, our financial services pretax income was up 17% from the prior year. The increase was primarily due to our mortgage operations segment, which had (1) increases in the dollar value of loans locked, originated, and sold and (2) higher gains on loans locked and sold.

For the year ended December 31, 2015, our financial services pretax income was up 26% from the prior year. The increase was primarily due to (1) an increase in the dollar value of loans locked, originated and sold, (2) higher per unit origination income, (3) increased gains on loans locked and sold compared to a year ago in our mortgage operations segment and (4) a $2.5 million adjustment recorded during 2015 in our other financial services segment to reduce insurance reserves as the result of a decline in insurance claim payment severity and frequency relative to prior period estimates.

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The table below sets forth information for our mortgage operations relating to mortgage loans originated and capture rate.

	Year Ended December 31,
	2016			% or Percentage Change			2015			% or Percentage Change			2014
	(Dollars in thousands)
Total Originations:
Loans		3,191			28	%		2,487			3	%		2,422
Principal	$	1,110,344			32	%	$	838,061			10	%	$	759,082
Capture Rate Data:
Capture rate as % of all homes delivered		62	%		6	%		56	%		1	%		55	%
Capture rate as % of all homes delivered (excludes cash sales)		66	%		6	%		60	%		1	%		59	%
Mortgage Loan Origination Product Mix:
FHA loans		20	%		2	%		18	%		3	%		15	%
Other government loans (VA & USDA)		23	%		(3	)%		26	%		(3	)%		29	%
Total government loans		43	%		(1	)%		44	%		0	%		44	%
Conventional loans		57	%		1	%		56	%		0	%		56	%
		100	%		0	%		100	%		0	%		100	%
Loan Type:
Fixed rate		97	%		1	%		96	%		3	%		93	%
ARM		3	%		(1	)%		4	%		(3	)%		7	%
Credit Quality:
Average FICO Score		735			(0	)%		736			(0	)%		738
Other Data:
Average Combined LTV ratio		84	%		0	%		84	%		(1	)%		85	%
Full documentation loans		100	%		0	%		100	%		0	%		100	%
Loans Sold to Third Parties:
Loans		3,128			30	%		2,414			(2	)%		2,453
Principal	$	1,084,347			34	%	$	809,535			6	%	$	762,633

Income Taxes

We recorded income tax expense of $48.6 million, $35.6 million and $37.3 million for the years ended December 31, 2016, 2015 and 2014, respectively, resulting in effective income tax rates of 32.0%, 35.1% and 37.2%, respectively.

The year-over-year improvement in our effective tax rate from 2015 to 2016 is primarily the result of (1) a domestic manufacturing deduction, whereas we were not eligible to take this deduction in the prior year due to our utilization of remaining federal net operating loss carryforwards to offset taxable income, and (2) a higher estimated percentage of our homes delivered qualifying for energy credits.

The year-over-year improvement in our effective tax rate from 2014 to 2015 is primarily the result of (1) the reversal of a previously established uncertain tax position and (2) a year-over-year decrease in the write-offs of certain unused state net operating losses.

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LIQUIDITY AND CAPITAL RESOURCES

We use our liquidity and capital resources to (1) support our operations, including the purchase of land, land development and construction of homes; (2) provide working capital; and (3) provide mortgage loans for our homebuyers. Our liquidity includes our cash and cash equivalents, marketable securities, Revolving Credit Facility (as defined below) and Mortgage Repurchase Facility (as defined below). Additionally, we have an existing effective shelf registration statement that allows us to issue equity, debt or hybrid securities up to $1.50 billion.

We have marketable equity securities that consist primarily of holdings in corporate equities, preferred stocks and exchange traded funds.

Capital Resources

Our capital structure is primarily a combination of (1) permanent financing, represented by stockholders’ equity; (2) long-term financing, represented by our 5⅝% senior notes due 2020, 5½% senior notes due 2024 and our 6% senior notes due 2043; (3) our Revolving Credit Facility and (4) our Mortgage Repurchase Facility. Because of our current balance of cash, cash equivalents, marketable securities, ability to access the capital markets, and available capacity under both our Revolving Credit Facility and Mortgage Repurchase Facility, we believe that our capital resources are adequate to satisfy our short and long-term capital requirements, including meeting future payments on our senior notes as they become due. See “Forward-Looking Statements” above.

We may, from time to time, seek to retire or purchase our outstanding senior notes through cash purchases, whether through open market purchases, privately negotiated transactions or otherwise. Such repurchases, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.

Senior Notes, Revolving Credit Facility and Mortgage Repurchase Facility

Senior Notes.  Our senior notes are not secured and, while the senior note indentures contain some restrictions on secured debt and other transactions, they do not contain financial covenants. Our senior notes are fully and unconditionally guaranteed on an unsecured basis, jointly and severally, by most of our homebuilding segment subsidiaries. We believe that we are in compliance with the representations, warranties and covenants in the senior note indentures.

Revolving Credit Facility. We have an unsecured revolving credit agreement (“Revolving Credit Facility”) with a group of lenders which may be used for general corporate purposes. This agreement has an aggregate commitment of $550 million (the “Commitment”) and was amended on December 18, 2015 to extend the maturity to December 18, 2020. Each lender may issue letters of credit in an amount up to 50% of its commitment. The facility permits an increase in the maximum Commitment amount to $1.0 billion upon our request, subject to receipt of additional commitments from existing or additional lenders and the consent of the designated agent and the co-administrative agent. As defined in the Revolving Credit Facility agreement, interest rates on outstanding borrowings are equal to the highest of (1) 0.0% or (2) a specified eurocurrency rate, federal funds effective rate or prime rate, plus a margin that is determined based on our credit ratings and leverage ratio. At any time at which our leverage ratio, as of the last day of the most recent calendar quarter, exceeds 55%, the aggregate principal amount of all consolidated senior debt borrowings outstanding may not exceed the borrowing base. There is no borrowing base requirement if our leverage ratio, as of the last day of the most recent calendar quarter, is 55% or less.

The Revolving Credit Facility is fully and unconditionally guaranteed, jointly and severally, by most of our homebuilding segment subsidiaries. The facility contains various representations, warranties and covenants that we believe are customary for agreements of this type. The financial covenants include a consolidated tangible net worth test and a leverage test, along with a consolidated tangible net worth covenant, all as defined in the facility agreement. A failure to satisfy the foregoing tests does not constitute an event of default, but can trigger a “term-out” of the facility. A breach of the consolidated tangible net worth covenant (but not the consolidated tangible net worth test) or a violation of anti-corruption or sanctions laws would result in an event of default.

The Revolving Credit Facility is subject to acceleration upon certain specified events of default, including breach of the consolidated tangible net worth covenant, a violation of anti-corruption or sanctions laws, failure to make timely payments, breaches of certain representations or covenants, failure to pay other material indebtedness, or another person becoming beneficial owner of 50% or more of our outstanding common stock. We believe we were in compliance with the representations, warranties and covenants included in the Revolving Credit Facility as of December 31, 2016.

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As of December 31, 2016, we had $15.0 million in borrowings and $23.0 million in letters of credit outstanding under the Revolving Credit Facility, leaving remaining borrowing capacity of $512.0 million.

Mortgage Repurchase Facility. HomeAmerican entered into an Amended and Restated Master Repurchase Agreement (the “Mortgage Repurchase Facility”) with U.S. Bank National Association(“USBNA”), effective September 16, 2016. The Mortgage Repurchase Facility amends and restates the prior Master Repurchase Agreement with USBNA dated as of November 12, 2008, as amended, which contained similar terms. The Mortgage Repurchase Facility increases the facility amount from $50 million to $75 million, extends the expiration date to September 15, 2017, adjusts the facility’s sublimits, expands the types of eligible loans, and reduces the facility fee. The Mortgage Repurchase Facility provides liquidity to HomeAmerican by providing for the sale of eligible mortgage loans to USBNA with an agreement by HomeAmerican to repurchase the mortgage loans at a future date. Until such mortgage loans are transferred back to HomeAmerican, the documents relating to such loans are held by USBNA, as custodian, pursuant to the Custody Agreement (“Custody Agreement”), dated as of November 12, 2008, by and between HomeAmerican and USBNA. In the event that an eligible mortgage loan becomes ineligible, as defined under the Mortgage Repurchase Facility, HomeAmerican may be required to repurchase the ineligible mortgage loan immediately. The maximum aggregate commitment of the Mortgage Repurchase Facility was temporarily increased on December 27, 2016 from $75 million to $125 million and was effective through January 25, 2017. The Mortgage Repurchase Facility also had a temporary increase in the maximum aggregate commitment from $50 million to $90 million from December 23, 2015 through January 31, 2016. At December 31, 2016 and December 31, 2015, HomeAmerican had $114.5 million and $88.6 million, respectively, of mortgage loans that HomeAmerican was obligated to repurchase under the Mortgage Repurchase Facility. Mortgage loans that HomeAmerican is obligated to repurchase under the Mortgage Repurchase Facility are accounted for as a debt financing arrangement and are reported as mortgage repurchase facility in the consolidated balance sheets. Advances under the Mortgage Repurchase Facility carry a price range that is LIBOR-based. The Mortgage Repurchase Facility contains various representations, warranties and affirmative and negative covenants that we believe are customary for agreements of this type. The negative covenants include, among others, (i) a minimum Adjusted Tangible Net Worth requirement, (ii) a maximum Adjusted Tangible Net Worth ratio, (iii) a minimum adjusted net income requirement, and (iv) a minimum Liquidity requirement. The foregoing capitalized terms are defined in the Mortgage Repurchase Facility. We believe HomeAmerican was in compliance with the representations, warranties and covenants included in the Mortgage Repurchase Facility as of December 31, 2016.

Dividends

In each of the years ended December 31, 2016, 2015 and 2014, we paid dividends of $0.95 per share. In addition to the cash dividends paid during 2016,on November 21, 2016, MDC’s board of directors declared a 5% stock dividend that was distributed on December 20, 2016 to shareholders of record on December 6, 2016.

MDC Common Stock Repurchase Program

At December 31, 2016, we were authorized to repurchase up to 4,000,000 shares of our common stock. We did not repurchase any shares of our common stock during the year ended December 31, 2016.

Consolidated Cash Flow

Our operating cash flows are primarily impacted by: (1) land purchases and construction of homes; (2) closing homes and the associated timing of collecting receivables from home closings; (3) sales of mortgage loans originated by HomeAmerican; (4) payments on accounts payables and accrued liabilities; and (5) funding for payroll. When we close on the sale of a house, our homebuilding subsidiaries will generally receive the proceeds from the sale of the homes within a few days of the home being closed. Therefore, our home sales receivable balance can increase or decrease from period to period based upon the timing of our home closings. Additionally, the amount of mortgage loans held-for-sale can be impacted period to period based upon the number of mortgage loans that were originated by HomeAmerican that have not been sold to third party purchasers and by the timing of fundings by third party mortgage purchasers. Accordingly, mortgage loans held-for-sale may increase if HomeAmerican originates more homes towards the end of one reporting period when compared with the same period in the previous year. HomeAmerican will generally sell mortgage loans it originates within 15 to 40 days after origination.

Year Ended December 31, 2016. We generated $115.9 million in cash from operating activities during the year ended December 31, 2016, primarily resulting from net income of $103.2 million, a $16.1 million decrease in our deferred tax assets due to the use of net operating loss carryforwards to reduce our current taxes payable, a $21.9 million increase in accounts payable and accrued liabilities due to the timing of invoices received, and non-cash reconciling items such as (1) impairments of marketable securities and homebuilding inventories totaling $11.6 million and (2) stock-based compensation expense of $7.5 million. These increases were partially offset by changes in receivables and mortgage loans held for sale of $20.4 million and $23.1 million, respectively, due to closing more homes in our 2016 fourth quarter as compared to the same quarter in 2015.

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We generated $9.2 million in cash from investing activities during the year ended December 31, 2016, primarily attributable to the sale of marketable securities that increased our cash by $61.7 million. The cash generated was mostly offset by the purchasing of $48.1 million of marketable securities and $4.5 million of property and equipment.

We used $23.2 million of cash for financing activities during the year ended December 31, 2016, primarily related to dividend payments totaling $49.1 million, which was partially offset by net advances of $25.9 million on our mortgage repurchase facility.

Year Ended December 31, 2015. We generated $0.2 million in cash from operating activities during the year ended December 31, 2015, primarily resulting from net income of $65.8 million, a $33.3 million decrease in our deferred tax assets due to the use of net operating loss carryforwards to reduce our current taxes payable, and other non-cash reconciling items such as stock-based compensation expense of $10.1 million and impairments of marketable securities and homebuilding inventories totaling $14.0 million. These items were mostly offset by increasing our inventory by $104.9 million and a $27.3 million increase in our mortgage loans held-for-sale.

We generated $47.4 million in cash from investing activities during the year ended December 31, 2015, primarily attributable to the maturity and sale of marketable securities that increased our cash by $102.7 million. The cash generated was significantly offset by the purchasing of $53.8 million of marketable securities.

We used $20.4 million of cash for financing activities during the year ended December 31, 2015, primarily attributable to the $48.9 million of dividend payments, which was partially offset by a $27.8 million increase in advances on the mortgage repurchase facility.

Year Ended December 31, 2014. We used $163.6 million in cash for operating activities during the year ended December 31, 2014, primarily resulting from increasing our inventory from December 31, 2013, which resulted in the use of $257.4 million in cash. This use of cash was partially offset by a $4.2 million decrease in mortgage loans held-for-sale, net income of $63.1 million, and the use of net operating loss carryforwards to reduce our current taxes payable.

We generated $423.1 million in cash from investing activities during the year ended December 31, 2014, primarily attributable to the maturity and sale of marketable securities that increased our cash by $855.0 million. The cash generated was significantly offset by the purchasing of $428.7 million of marketable securities.

We used $304.9 million of cash from financing activities during the year ended December 31, 2014, primarily attributable to the redemption of $500 million of Senior Notes for a total use of $517.7 million and from $48.8 million of dividend payments. The cash used was partially offset by $248.4 million generated from the issuance of our 10-year 5½% Senior Notes.

Off-Balance Sheet Arrangements

Lot Option Purchase Contracts. In the ordinary course of business, we enter into lot option purchase contracts in order to procure lots for the construction of homes. Lot option contracts enable us to control lot positions with a minimal capital investment, which substantially reduces the risks associated with land ownership and development. At December 31, 2016, we had deposits of $8.0 million in the form of cash and $2.0 million in the form of letters of credit that secured option contracts to purchase 2,865 lots for a total estimated purchase price of $280.8 million.

Surety Bonds and Letters of Credit. At December 31, 2016, we had outstanding surety bonds and letters of credit totaling $178.8 million and $52.6 million, respectively, including $29.6 million in letters of credit issued by HomeAmerican. The estimated cost to complete obligations related to these bonds and letters of credit were approximately $48.7 million and $18.2 million, respectively. We expect that the obligations secured by these performance bonds and letters of credit generally will be performed in the ordinary course of business and in accordance with the applicable contractual terms. To the extent that the obligations are performed, the related performance bonds and letters of credit should be released and we should not have any continuing obligations. However, in the event any such performance bonds or letters of credit are called, our indemnity obligations could require us to reimburse the issuer of the performance bond or letter of credit.

We have made no material guarantees with respect to third-party obligations.

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Contractual Obligations

The table below summarizes our known contractual obligations at December 31, 2016.

	Payments due by Period (in thousands)
	Total		Less than 1 Year		1 - 3 Years		4 - 5 Years		After 5 Years
Senior notes	$	850,000	$	-	$	-	$	250,000	$	600,000
Interest on senior notes		708,844		48,813		97,625		76,531		485,875
Operating leases		47,092		6,008		10,216		9,302		21,566
Total (1)	$	1,605,936	$	54,821	$	107,841	$	335,833	$	1,107,441

(1) The table above excludes $114.5 million of mortgage loans that we are obligated to repurchase under our Mortgage Repurchase Facility since it is not long-term indebtedness. Additionally, there were outstanding performance bonds and letters of credit totaling approximately $178.8 million and $52.6 million, respectively, at December 31, 2016, which have been excluded from the table above due to the uncertainty as to whether any payments may be made.

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CRITICAL ACCOUNTING ESTIMATES AND POLICIES

The preparation of financial statements in conformity with accounting policies generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Management evaluates such estimates and judgments on an on-going basis and makes adjustments as deemed necessary. Actual results could differ from these estimates using different estimates and assumptions, or if conditions are significantly different in the future. See “Forward-Looking Statements” above.

Listed below are those estimates and policies that we believe are critical and require the use of complex judgment in their application. Our critical accounting estimates and policies are as follows and should be read in conjunction with the Notes to our Consolidated Financial Statements.

Homebuilding Inventory Valuation.  Refer to Note 1, Summary of Significant Accounting Policies, in the notes to the financial statements for information on the composition of the inventory balances.

In accordance with Accounting Standards Codification (“ASC”) Topic 360, Property, Plant, and Equipment (“ASC 360”), homebuilding inventories, excluding those classified as held for sale, are carried at cost unless events and circumstances indicate that the carrying value of the underlying subdivision may not be recoverable. We evaluate inventories for impairment at each quarter end on a subdivision level basis as each subdivision represents the lowest level of identifiable cash flows. In making this determination, we review, among other things, the following for each subdivision:

• actual and trending “Operating Margin” (which is defined as home sale revenues less home cost of sales and all incremental costs associated directly with the subdivision, including sales commissions and marketing costs);

• estimated future undiscounted cash flows and Operating Margin;

• forecasted Operating Margin for homes in backlog;

• actual and trending net home orders;

• homes available for sale;

• market information for each sub-market, including competition levels, home foreclosure levels, the size and style of homes currently being offered for sale and lot size; and

• known or probable events indicating that the carrying value may not be recoverable.

If events or circumstances indicate that the carrying value of our inventory may not be recoverable, assets are reviewed for impairment by comparing the undiscounted estimated future cash flows from an individual subdivision to its carrying value. We generally determine the estimated fair value of each subdivision by determining the present value of the estimated future cash flows at discount rates, which are Level 3 inputs (see Note 6, Fair Value Measurements, in the notes to the financial statements for definitions of fair value inputs), that are commensurate with the risk of the subdivision under evaluation. The evaluation for the recoverability of the carrying value of the assets for each individual subdivision can be impacted significantly by our estimates of future home sale revenues, home construction costs, and development costs per home, all of which are Level 3 inputs. These estimates of undiscounted future cash flows are dependent on specific market or sub-market conditions for each subdivision. While we consider available information to determine what we believe to be our best estimates as of the end of a reporting period, these estimates are subject to change in future reporting periods as facts and circumstances change. Local market-specific conditions that may impact these estimates for a subdivision include:

• historical subdivision results, and actual and trending Operating Margin, base selling prices and home sales incentives;

• forecasted Operating Margin for homes in backlog;

• the intensity of competition within a market or sub-market, including publicly available home sales prices and home sales incentives offered by our competitors;

• increased levels of home foreclosures;

• the current sales pace for active subdivisions;

• subdivision specific attributes, such as location, availability and size of lots in the sub-market, desirability and uniqueness of subdivision location and the size and style of homes currently being offered;

• potential for alternative home styles to respond to local market conditions;

• changes by management in the sales strategy of a given subdivision; and

• current local market economic and demographic conditions and related trends and forecasts.

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These and other local market-specific conditions that may be present are considered by personnel in our homebuilding divisions as they prepare or update the forecasted assumptions for each subdivision. Quantitative and qualitative factors other than home sales prices could significantly impact the potential for future impairments. The sales objectives can differ among subdivisions, even within a given sub-market. For example, facts and circumstances in a given subdivision may lead us to price our homes with the objective of yielding a higher sales absorption pace, while facts and circumstances in another subdivision may lead us to price our homes to minimize deterioration in our gross margins from home sales, even though this could result in a slower sales absorption pace. Furthermore, the key assumptions included in our estimated future undiscounted cash flows may be interrelated. For example, a decrease in estimated base sales price or an increase in home sales incentives may result in a corresponding increase in sales absorption pace. Additionally, a decrease in the average sales price of homes to be sold and closed in future reporting periods for one subdivision that has not been generating what management believes to be an adequate sales absorption pace may impact the estimated cash flow assumptions of a nearby subdivision. Changes in our key assumptions, including estimated construction and land development costs, absorption pace and selling strategies could materially impact future cash flow and fair value estimates. Due to the number of possible scenarios that would result from various changes in these factors, we do not believe it is possible to develop a sensitivity analysis with a level of precision that would be meaningful to an investor.

If the undiscounted future cash flows of a subdivision are less than its carrying value, the carrying value of the subdivision is written down to its then estimated fair value. We determine the estimated fair value of each subdivision either: (1) 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; or (2) assessing the market value of the land 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 we believe are indicators of fair value. The estimated future cash flows are the same for both our recoverability and fair value assessments. Factors we consider when determining the discount rate to be used for each subdivision include, among others:

• the number of lots in a given subdivision;

• the amount of future land development costs to be incurred;

• risks associated with the home construction process, including the stage of completion for the entire subdivision and the number of owned lots under construction; and

• the estimated remaining lifespan of the subdivision.

We allocate the impairments recorded between housing completed or under construction and land and land under development for each impaired subdivision based upon the status of construction of a home on each lot (i.e., if the lot is in housing completed or under construction, the impairment for that lot is recorded against housing completed or under construction). The allocation of impairment is the same with respect to each lot in a given subdivision. Changes in management’s estimates, particularly the timing and amount of the estimated future cash inflows and outflows and forecasted average selling prices of homes to be sold and closed can materially affect any impairment calculation. Because our forecasted cash flows are impacted significantly by changes in market conditions, it is reasonably possible that actual results could differ significantly from those estimates. Please see the “Inventory Impairments” section for a detailed discussion and analysis of our asset impairments.

If land is classified as held for sale, we measure it at the lower of the carrying value or fair value less estimated costs to sell. In determining fair value, we primarily rely upon the most recent negotiated price. If a negotiated price is not available, we will consider several factors including, but not limited to, current market conditions, recent comparable sales transactions and market analysis studies. If the fair value less estimated costs to sell is lower than the current carrying value, the land is impaired down to its estimated fair value less costs to sell.

Warranty Accrual. Our homes are sold with limited third-party warranties. We record expenses and warranty accruals for general and structural warranty claims, as well as accruals for known, unusual warranty-related expenditures. A warranty accrual is recorded for each home closed 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. It is possible that changes in the warranty payment experience used in estimating our ultimate warranty losses could have a material impact on our warranty accrual balances.

Insurance Reserves. The establishment of reserves for estimated losses associated with insurance policies issued by Allegiant and re-insurance agreements issued by StarAmerican are based on actuarial studies that include known facts and interpretations of circumstances, including our experience with similar cases and historical trends involving claim payment patterns, pending levels of unpaid claims, product mix or concentration, claim severity, frequency patterns depending on the business conducted, and changing regulatory and legal environments. It is possible that changes in the insurance payment experience used in estimating our ultimate insurance losses could have a material impact on our insurance reserves.

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Reserves for Construction Defect Claims. The establishment of reserves for estimated losses to be incurred by our homebuilding subsidiaries associated with (1) the self-insured retention (“SIR”) portion of construction defect claims that are expected to be covered under insurance policies with Allegiant and (2) the entire cost of any construction defect claims that are not expected to be covered by insurance policies with Allegiant are based on actuarial studies that include known facts similar to those established for our insurance reserves. It is possible that changes in the payment experience used in estimating our ultimate losses for construction defect claims could have a material impact on our reserves.

Litigation Accruals. In the normal course of business, we are a defendant in claims primarily relating to premises liability, product liability and personal injury claims. These claims seek relief from us under various theories, including breach of implied and express warranty, negligence, strict liability, misrepresentation and violation of consumer protection statutes. We have accrued for losses that may be incurred with respect to legal claims based upon information provided by our legal counsel, including counsel’s on-going evaluation of the merits of the claims and defenses and the level of estimated insurance coverage. Due to uncertainties in the estimation process, actual results could vary from those accruals and could have a material impact on our results of operations.

Income Taxes—Valuation Allowance. A valuation allowance is recorded against a deferred tax asset if, based on the weight of available evidence, it is more-likely-than-not (a likelihood of more than 50%) that some portion, or all, of the deferred tax asset will not be realized. The realization of a deferred tax asset ultimately depends on the existence of sufficient taxable income in either the carryback or carryforward periods under federal tax law (generally 2 and 20 years, respectively) or state tax law, which range depends on the state (generally 2 and 20 years, respectively). The four sources of taxable income to be considered in determining whether a valuation allowance is required include:

• future reversals of existing taxable temporary differences;

• taxable income in prior carryback years;

• tax planning strategies; and

• future taxable income exclusive of reversing temporary differences and carryforwards.

Determining whether a valuation allowance for deferred tax assets is necessary requires an analysis of both positive and negative evidence regarding realization of the deferred tax assets. Examples of positive evidence may include:

• a strong earnings history exclusive of the loss that created the deductible temporary differences, coupled with evidence indicating that the loss is the result of an aberration rather than a continuing condition;

• an excess of appreciated asset value over the tax basis of a company’s net assets in an amount sufficient to realize the deferred tax asset; and

• existing backlog that will produce sufficient taxable income to realize the deferred tax asset based on existing sales prices and cost structures.

Examples of negative evidence may include:

• the existence of “cumulative losses” (generally defined as a pretax cumulative loss for the current and previous two years);

• an expectation of being in a cumulative loss position in a future reporting period;

• a carryback or carryforward period that is so brief that it would limit the realization of tax benefits;

• a history of operating loss or tax credit carryforwards expiring unused; and

• unsettled circumstances that, if unfavorably resolved, would adversely affect future operations and profit levels on a continuing basis.

The weight given to the potential effect of negative and positive evidence should be commensurate with the extent to which it can be objectively verified. A company must use judgment in considering the relative impact of positive and negative evidence. In the future, changes in our valuation allowance may result from, among other things, pretax operating losses resulting in increases in our valuation allowance or pretax operating income resulting in decreases in our valuation allowance.

Revenue Recognition. We recognize revenue from home deliveries and land sales when: (1) the closing has occurred; (2) title has passed to the buyer; (3) possession and other attributes of ownership have been transferred to the buyer; (4) we are not obligated to perform significant additional activities after closing and delivery; and (5) the buyer demonstrates a commitment to pay for the property through an adequate initial and continuing investment. The buyer’s initial investment shall include: (1) cash paid as a down payment; (2) the buyer’s notes supported by irrevocable letters of credit; (3) payments made by the buyer to third-parties to reduce existing indebtedness on the property; and (4) other amounts paid by the buyer that are part of the sales value of the property. Revenue from a home delivery includes the base sales price and any purchased options and upgrades and is reduced for any sales price incentives.

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Revenues recorded by HomeAmerican primarily reflect (1) origination fees and (2) the corresponding sale, or expected future sale, of a loan, which will include the estimated earnings from either the release or retention of a loan’s servicing rights.  Origination fees are recognized when a loan is originated.  When an interest rate lock commitment is made to a customer, we record the expected gain on sale of the mortgage, plus the estimated earnings from the expected sale of the associated servicing rights, adjusted for a pull-through percentage (which is defined as the likelihood that an interest rate lock commitment will be originated), as revenue.  As the interest rate lock commitment gets closer to being originated, the expected gain on the sale of that loan plus its servicing rights is updated to reflect current market value and the increase or decrease in the fair value of that interest rate lock commitment is recorded through revenues.  At the same time, the expected pull-through percentage of the interest rate lock commitment to be originated is updated (typically an increase as the interest lock commitment gets closer to origination) and, if there has been a change, revenues are adjusted as necessary.  After origination, our mortgage loans, generally including their servicing rights, are sold to third-party purchasers in accordance with sale agreements entered into by us with a third-party purchaser of the loans. We make representations and warranties with respect to the status of loans transferred in the sale agreements. The sale agreements generally include statements acknowledging the transfer of the loans is intended by both parties to constitute a sale. Sale of a mortgage loan has occurred when the following criteria, among others, have been met: (1) fair consideration has been paid for transfer of the loan by a third party in an arms-length transaction, (2) all the usual risks and rewards of ownership that are in substance a sale have been transferred by us to the third party purchaser; and (3) we do not have a substantial continuing involvement with the mortgage loan.

We carry interest rate lock commitments and mortgage loans held-for-sale at fair value.

Home Cost of Sales. Refer to the Note 1, Summary of Significant Accounting Policies, in the notes to the financial statements for information on the composition of home cost of sales. When a home is closed, we generally have not yet paid or incurred all costs necessary to complete the construction of the home and certain land development costs. At the time of a home closing, we compare the home construction budgets to actual recorded costs to determine the additional estimated costs remaining to be paid on each closed home. For amounts not incurred or paid as of the time of closing a home, we record an estimated accrual associated with certain home construction and land development costs. Generally, these accruals are established based upon contracted work which has yet to be paid, open work orders not paid at the time of home closing, as well as land completion costs more likely than not to be incurred, and represent estimates believed to be adequate to cover the expected remaining home construction and land development costs. We monitor the adequacy of these accruals on a house-by-house basis and in the aggregate on both a market-by-market and consolidated basis.

Stock-Based Compensation. ASC Topic 718, Compensation—Stock Compensation (“ASC 718”) requires that share-based compensation expense be measured and recognized at an amount equal to the fair value of share-based payments granted under compensation arrangements. Determining the appropriate fair value model and calculating the fair value of stock option awards requires judgment, including estimating stock price volatility, annual forfeiture rates and the expected life of an award. For stock option awards granted with just service and/or performance conditions, we estimate the fair value using a Black-Scholes option pricing model. For any stock option awards granted that contain a market condition, we estimate the fair value using a Monte Carlo simulation model. Both the Black-Scholes option pricing model and Monte Carlo simulation utilize the following inputs to calculate the estimated fair value of stock options: (1) closing price of our common stock on the measurement date (generally the date of grant); (2) exercise price; (3) expected stock option life; (4) expected volatility; (5) risk-free interest rate; and (6) expected dividend yield rate. The expected life of employee stock options represents the period for which the stock options are expected to remain outstanding and is derived primarily from historical exercise patterns. The expected volatility is determined based on our review of the implied volatility that is derived from the price of exchange traded options of the Company. The risk-free interest rate assumption is determined based upon observed interest rates appropriate for the expected term of our employee stock options. The expected dividend yield assumption is based on our historical dividend payouts. We determine the estimated fair value of the stock option awards on the date they were granted. The fair values of previously granted stock option awards are not adjusted as subsequent changes in the foregoing assumptions occur; for example, an increase or decrease in the price of our common stock. However, changes in the foregoing inputs, particularly the price of our common stock, expected stock option life and expected volatility, significantly change the estimated fair value of future grants of stock options.

An annual forfeiture rate is estimated at the time of grant, and revised if necessary, in subsequent periods if the actual forfeiture rate differs from our estimate.

Segment Reporting. The application of segment reporting requires significant judgment in determining our operating segments. Operating segments are defined as a component of an enterprise for which discrete financial information is available and is reviewed regularly by the chief operating decision-maker, or decision-making group, to evaluate performance and make operating decisions. We have identified our Chief Operating Decision-Maker (“CODM”) as two key executives—the Chief Executive Officer and Chief Operating Officer.

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We have identified each homebuilding division as an operating segment as each homebuilding division engages in business activities from which it earns revenue, primarily from the sale of single-family detached homes, generally to first-time and first-time move-up homebuyers. Divisions in the reportable segments noted below have been aggregated because they are similar in the following regards: (1) economic characteristics; (2) housing products; (3) class of homebuyer; (4) regulatory environments; and (5) methods used to manage the construction and sale of homes. In making the determination of whether or not our markets demonstrate similar economic characteristics, we review, among other things, actual and trending gross margins from home sales for homes closed within each market and forecasted gross margins from home sales. Accordingly, we may be required to reclassify our reportable segments if markets that currently are being aggregated do not continue to demonstrate similar economic characteristics.

Our homebuilding reportable segments are as follows:

•     West (Arizona, California, Nevada and Washington);

•     Mountain (Colorado and Utah); and

•     East (Virginia, Florida and Maryland, which includes Pennsylvania and New Jersey)

Our financial services operating segments are as follows: (1) HomeAmerican Mortgage Corporation ("HomeAmerican"); (2) Allegiant Insurance Company, Inc., A Risk Retention Group (“Allegiant”); (3) StarAmerican Insurance Ltd. (“StarAmerican”); (4) American Home Insurance Agency, Inc.; and (5) American Home Title and Escrow Company. Due to its contributions to consolidated pretax income we consider HomeAmerican to be a reportable segment (“mortgage operations”). The remaining operating segments have been aggregated into one reportable segment (“other”) because they do not individually exceed 10 percent of: (1) consolidated revenue; (2) the greater of (A) the combined reported profit of all operating segments that did not report a loss or (B) the positive value of the combined reported loss of all operating segments that reported losses; or (3) consolidated assets.

RECENTLY ISSUED ACCOUNTING STANDARDS

See Note 1 in our consolidated financial statements.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Our cash and investment policy and strategy is to achieve an appropriate investment return while preserving principal and managing risk. Our cash and cash equivalents may include immediately available commercial bank deposits, commercial paper, money market funds, certificates of deposit and time deposits. Our marketable securities consist primarily of holdings in mutual fund securities, which invest mostly in floating and fixed rate debt securities, and direct holdings in corporate equities. The market value and/or income derived from our equity securities can be negatively impacted by a number of market risk factors, including changes in interest rates, general economic conditions and equity markets. For the year ended December 31, 2016, we recorded quarterly impairments totaling $1.4 million on certain of our marketable securities that were in a loss position at each quarter end. For the remaining marketable securities in unrealized loss positions totaling $0.5 million, there can be no assurances that the cost basis of these securities will be recovered in the future. If we elect to sell, or are otherwise were required to sell these securities, we could be required to record losses if the market values do not increase prior to any sales. Such losses, if any, would be recorded as a component of our results of operations.

We are exposed to market risks related to fluctuations in interest rates on mortgage loans held-for-sale, mortgage interest rate lock commitments and debt. Derivative instruments utilized in the normal course of business by HomeAmerican include interest rate lock commitments and forward sales of mortgage-backed securities, which are used to manage the price risk on fluctuations in interest rates on our mortgage loans in inventory and interest rate lock commitments to originate mortgage loans. Such contracts are the only significant financial derivative instruments utilized by MDC. HomeAmerican’s mortgage loans in process for which a rate and price commitment had been made to a borrower that had not closed at December 31, 2016 had an aggregate principal balance of approximately $110.9 million, all of which were under interest rate lock commitments at an average interest rate of 4.11%. In addition, HomeAmerican had mortgage loans held-for-sale with an aggregate principal balance of $136.8 million at December 31, 2016, of which $42.3 million had not yet been committed to a mortgage purchaser and had an average interest rate of 3.82%. In order to hedge the changes in fair value of interest rate lock commitments and mortgage loans held-for-sale which had not yet been committed to a mortgage purchaser, HomeAmerican had forward sales of securities totaling $108.0 million and $84.5 million at December 31, 2016 and 2015, respectively.

HomeAmerican provides mortgage loans that generally are sold forward and subsequently delivered to a third-party purchaser between 15 and 40 days. Forward commitments are used for non-trading purposes to sell mortgage loans and hedge price risk due to fluctuations in interest rates on rate-locked mortgage loans in process that have not closed. Due to this economic hedging philosophy, the market risk associated with these mortgages is limited. For forward sales commitments, as well as commitments to originate mortgage loans that are still outstanding at the end of a reporting period, we record the fair value of the derivatives in the consolidated statements of operations and comprehensive income with an offset to either derivative assets or liabilities, depending on the nature of the change.

We utilize our Revolving Credit Facility, our Mortgage Repurchase Facility and senior notes in our financing strategy. For fixed rate debt, changes in interest rates generally affect the fair value of the debt instrument, but do not affect our earnings or cash flows. We do not have an obligation to prepay our senior notes prior to maturity and, as a result, interest rate risk and changes in fair value do not have an impact on our financial position, results of operations or cash flows. For variable rate debt such as our Revolving Credit Facility and Mortgage Repurchase Facility, changes in interest rates generally do not affect the fair value of the outstanding borrowing on the debt facilities, but does affect our earnings and cash flows. See “Forward-Looking Statements” above.

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At December 31, 2016, we had $114.5 million of mortgage loans that HomeAmerican is obligated to repurchase under the Mortgage Repurchase Facility. Mortgage loans that HomeAmerican is obligated to repurchase under the Mortgage Repurchase Facility are accounted for as a debt financing arrangement and are reported under Mortgage Repurchase Facility in the consolidated balance sheets. The following table provides the maturities, average interest rate and estimated fair value of significant financial instruments that are sensitive to changes in interest rates at December 31, 2016.

	Maturities through December 31,																		Estimated
	2017			2018		2019		2020			2021		Thereafter			Total			Fair Value
	(Dollars in thousands)
Assets:
Mortgage loans held for sale (1)
Fixed Rate	$	131,194		$	-	$	-	$	-		$	-	$	-		$	131,194		$	132,847
Average interest rate		3.84	%														3.84	%
Variable Interest Rate		5,650		$	-	$	-	$	-		$	-	$	-		$	5,650		$	5,729
Average interest rate		3.51	%														3.51	%
Liabilities:
Fixed rate debt	$	-		$	-	$	-	$	250,000		$	-	$	600,000		$	850,000		$	821,498
Average interest rate									5.63	%				5.79	%		5.74	%
Mortgage facility	$	114,485		$	-	$	-	$	-		$	-	$	-		$	114,485		$	114,485
Average interest rate		3.06	%														3.06	%
Derivative Financial Instruments:
Commitments to originate mortgage loans
Notional amount	$	110,867		$	-	$	-	$	-		$	-	$	-		$	110,867		$	3,242
Average interest rate		4.11	%														4.11	%
Forward sales of mortgage backed securities
Notional amount	$	108,000		$	-	$	-	$	-		$	-	$	-		$	108,000		$	514
Average interest rate		3.30	%														3.30	%

(1) All the amounts in this line reflect the expected 2017 disposition of these loans rather than the actual scheduled maturity dates of these mortgages.

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Item 8. Consolidated Financial Statements.

M.D.C. HOLDINGS, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page
Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheets at December 31, 2016 and December 31, 2015	F-3
Consolidated Statements of Operations and Comprehensive Income for each of the Three Years in the Period Ended December 31, 2016	F-4
Consolidated Statements of Stockholders' Equity for each of the Three Years in the Period Ended December 31, 2016	F-5
Consolidated Statements of Cash Flows for each of the Three Years in the Period Ended December 31, 2016	F-6
Notes to Consolidated Financial Statements	F-7

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Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders of

M.D.C. Holdings, Inc.

We have audited the accompanying consolidated balance sheets of M.D.C. Holdings, Inc. (the “Company”) as of December 31, 2016 and 2015, and the related consolidated statements of operations and comprehensive income, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2016. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of M.D.C. Holdings, Inc. at December 31, 2016 and 2015, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2016, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), M.D.C. Holdings, Inc.’s internal control over financial reporting as of December 31, 2016, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 1, 2017 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

Denver, Colorado

February 1, 2017

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M.D.C. HOLDINGS, INC.

Consolidated Balance Sheets

	December 31,		December 31,
	2016		2015
	(Dollars in thousands, except
	per share amounts)
ASSETS
Homebuilding:
Cash and cash equivalents	$	259,087	$	144,342
Marketable securities		59,770		92,387
Restricted cash		3,778		3,750
Trade and other receivables		42,492		23,314
Inventories:
Housing completed or under construction		874,199		747,036
Land and land under development		884,615		1,016,926
Total inventories		1,758,814		1,763,962
Property and equipment, net		28,041		28,226
Deferred tax assets, net		74,888		99,107
Metropolitan district bond securities (related party)		30,162		25,911
Prepaid and other assets		60,463		65,394
Total homebuilding assets		2,317,495		2,246,393
Financial Services:
Cash and cash equivalents		23,822		36,646
Marketable securities		36,436		11,307
Mortgage loans held-for-sale, net		138,774		115,670
Other assets		12,062		5,883
Total financial services assets		211,094		169,506
Total Assets	$	2,528,589	$	2,415,899
LIABILITIES AND EQUITY
Homebuilding:
Accounts payable	$	42,088	$	40,472
Accrued liabilities		144,566		122,886
Revolving credit facility		15,000		15,000
Senior notes, net		841,646		840,524
Total homebuilding liabilities		1,043,300		1,018,882
Financial Services:
Accounts payable and accrued liabilities		50,734		52,114
Mortgage repurchase facility		114,485		88,611
Total financial services liabilities		165,219		140,725
Total Liabilities		1,208,519		1,159,607
Stockholders' Equity
Preferred stock, $0.01 par value; 25,000,000 shares authorized; none issued or outstanding		-		-
Common stock, $0.01 par value; 250,000,000 shares authorized; 51,485,090 and 48,888,424 issued and outstanding at December 31, 2016 and December 31, 2015, respectively		515		489
Additional paid-in-capital		983,532		915,746
Retained earnings		313,952		324,342
Accumulated other comprehensive income		22,071		15,715
Total Stockholders' Equity		1,320,070		1,256,292
Total Liabilities and Stockholders' Equity	$	2,528,589	$	2,415,899

The accompanying Notes are an integral part of these Consolidated Financial Statements.

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M.D.C. HOLDINGS, INC.

Consolidated Statements of Operations and Comprehensive Income

	Year Ended December 31,
	2016			2015			2014
	(Dollars in thousands, except per share amounts)
Homebuilding:
Home sale revenues	$	2,257,153		$	1,847,889		$	1,647,398
Land sale revenues		5,700			12,337			3,233
Total home and land sale revenues		2,262,853			1,860,226			1,650,631
Home cost of sales		(1,884,391	)		(1,539,396	)		(1,365,621	)
Land cost of sales		(4,866	)		(12,611	)		(2,559	)
Inventory impairments		(10,173	)		(9,993	)		(1,760	)
Total cost of sales		(1,899,430	)		(1,562,000	)		(1,369,940	)
Gross margin		363,423			298,226			280,691
Selling, general and administrative expenses		(250,540	)		(226,317	)		(203,253	)
Interest and other income		7,012			6,709			26,310
Interest expense		-			-			(685	)
Other expense		(3,447	)		(4,208	)		(4,813	)
Losses on early extinguishments of debt		-			-			(18,153	)
Other-than-temporary impairment of marketable securities		(1,070	)		(3,969	)		(4,293	)
Homebuilding pretax income		115,378			70,441			75,804
Financial Services:
Revenues		63,991			48,810			43,953
Expenses		(30,920	)		(21,572	)		(22,334	)
Interest and other income		3,705			3,745			3,052
Other-than-temporary impairment of marketable securities		(373	)		-			-
Financial services pretax income		36,403			30,983			24,671
Income before income taxes		151,781			101,424			100,475
Provision for income taxes		(48,570	)		(35,633	)		(37,332	)
Net income	$	103,211		$	65,791		$	63,143
Other comprehensive income (loss) related to available-for-sale securities, net of tax		6,356			5,260			(1,120	)
Comprehensive income	$	109,567		$	71,051		$	62,023
Earnings per share:
Basic	$	2.01		$	1.28		$	1.23
Diluted	$	2.00		$	1.28		$	1.23
Weighted average common shares outstanding
Basic		51,286,942			51,202,616			51,046,318
Diluted		51,447,147			51,415,580			51,258,444

The accompanying Notes are an integral part of these Consolidated Financial Statements.

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M.D.C. HOLDINGS, INC.

Consolidated Statements of Stockholders' Equity

(Dollars in thousands, except share amounts)

												Accumulated
						Additional						Other
	Common Stock					Paid-in			Retained			Comprehensive
	Shares			Amount		Capital			Earnings			Income			Total
Balance at December 31, 2013		48,788,887		$	488	$	908,090		$	293,096		$	11,575		$	1,213,249
Net Income		-			-		-			63,143			-			63,143
Other comprehensive loss, net of tax		-			-		-			-			(1,120	)		(1,120	)
Total comprehensive income																62,023
Shares issued upon exercise of stock options and awards of restricted stock		57,021			-		374			-			-			374
Cash dividends declared		-			-		-			(48,820	)		-			(48,820	)
Stock-based compensation expense		-			-		5,979			-			-			5,979
Forfeiture of restricted stock		(14,269	)		-		-			-			-			-
Net income tax deficiency from share-based compensation		-			-		(4,469	)		-			-			(4,469	)
Balance at December 31, 2014		48,831,639			488		909,974			307,419			10,455			1,228,336
Net Income		-			-		-			65,791			-			65,791
Other comprehensive income, net of tax		-			-		-			-			5,260			5,260
Total comprehensive income																71,051
Shares issued upon exercise of stock options and awards of restricted stock		66,721			1		665			-			-			666
Cash dividends declared		-			-		-			(48,868	)		-			(48,868	)
Stock-based compensation expense		-			-		10,066			-			-			10,066
Forfeiture of restricted stock		(9,936	)		-		-			-			-			-
Net income tax deficiency from share-based compensation		-			-		(4,959	)		-			-			(4,959	)
Balance at December 31, 2015		48,888,424			489		915,746			324,342			15,715			1,256,292
Net Income		-			-		-			103,211			-			103,211
Other comprehensive income, net of tax		-			-		-			-			6,356			6,356
Total comprehensive income																109,567
Shares issued upon exercise of stock options and awards of restricted stock		147,455			1		(1	)		-			-			-
Cash dividends declared		-			-		-			(49,021	)		-			(49,021	)
Stock dividend declared		2,449,211			25		64,488			(64,580	)					(67	)
Stock-based compensation expense		-			-		7,477			-			-			7,477
Net income tax deficiency from share-based compensation		-			-		(4,178	)		-			-			(4,178	)
Balance at December 31, 2016		51,485,090		$	515	$	983,532		$	313,952		$	22,071		$	1,320,070

The accompanying Notes are an integral part of these Consolidated Financial Statements.

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M.D.C. HOLDINGS, INC.

Consolidated Statements of Cash Flows

	Year Ended December 31,
	2016			2015			2014
	(Dollars in thousands)
Operating Activities:
Net income	$	103,211		$	65,791		$	63,143
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Losses on early extinguishments of debt		-			-			18,153
Stock-based compensation expense		7,477			10,066			5,978
Depreciation and amortization		5,132			4,069			3,928
Inventory impairments		10,173			9,993			1,760
Other-than-temporary impairment of marketable securities		1,443			3,969			4,293
Net realized loss (gain) on sale of marketable securities		(1,074	)		911			(7,310	)
Amortization of discount / premiums on marketable debt securities		-			100			566
Deferred income tax expense		16,145			33,333			34,226
Excess tax benefits from stock-based compensation		-			-			(26	)
Net changes in assets and liabilities:
Restricted cash		(28	)		(934	)		(621	)
Trade and other receivables		(20,424	)		5,247			(6,638	)
Mortgage loans held-for-sale		(23,104	)		(27,278	)		4,186
Housing completed or under construction		(128,525	)		(15,551	)		(96,936	)
Land and land under development		124,622			(89,388	)		(160,463	)
Prepaid expenses and other assets		(1,036	)		(7,648	)		(11,873	)
Accounts payable and accrued liabilities		21,905			7,535			(16,013	)
Net cash provided by (used in) operating activities		115,917			215			(163,647	)
Investing Activities:
Purchases of marketable securities		(48,050	)		(53,822	)		(428,709	)
Maturities of marketable securities		-			1,510			167,339
Sales of marketable securities		61,736			101,165			687,692
Purchases of property and equipment		(4,468	)		(1,491	)		(3,242	)
Net cash provided by investing activities		9,218			47,362			423,080
Financing Activities:
Advances (payments) on mortgage repurchase facility, net		25,874			27,789			(2,252	)
Proceeds from issuance of senior notes		-			-			248,375
Repayment of senior notes		-			-			(517,650	)
Advances on revolving credit facility, net		-			-			15,000
Dividend payments		(49,088	)		(48,868	)		(48,820	)
Excess tax benefits from stock-based compensation		-			-			26
Proceeds from exercise of stock options		-			665			375
Net cash used in financing activities		(23,214	)		(20,414	)		(304,946	)
Net increase (decrease) in cash and cash equivalents		101,921			27,163			(45,513	)
Cash and cash equivalents:
Beginning of year		180,988			153,825			199,338
End of year	$	282,909		$	180,988		$	153,825

The accompanying Notes are an integral part of these Consolidated Financial Statements.

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1.     Summary of Significant Accounting Policies

Principles of Consolidation.  The Consolidated Financial Statements of M.D.C. Holdings, Inc. ("MDC," “the Company," “we,” “us,” or “our” which refers to M.D.C. Holdings, Inc. and its subsidiaries) include the accounts of MDC and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. Certain prior year balances have been reclassified to conform to the current year’s presentation.

Description of Business.  We have homebuilding operations in Arizona, California, Colorado, Florida, Maryland, (which includes Maryland, Pennsylvania and New Jersey), Nevada, Utah, Virginia and Washington. The primary functions of our homebuilding operations include land acquisition and development, home construction, purchasing, marketing, merchandising, sales and customer service. We build and sell primarily single-family detached homes, which are designed and built to meet local customer preferences. We are the general contractor for all of our projects and retain subcontractors for site development and home construction.

Our financial services operations consist of HomeAmerican Mortgage Corporation (“HomeAmerican”), which originates mortgage loans, primarily for our homebuyers, American Home Insurance Agency, Inc. (“American Home Insurance”), which offers third-party insurance products to our homebuyers, and American Home Title and Escrow Company (“American Home Title”), which provides title agency services to the Company and our homebuyers in Colorado, Florida, Maryland, Nevada and Virginia. The financial services operations also include Allegiant Insurance Company, Inc., A Risk Retention Group (“Allegiant”), which provides insurance coverage primarily to our homebuilding subsidiaries and most of our subcontractors for homes sold by our homebuilding subsidiaries and for work performed in completed subdivisions, and StarAmerican Insurance Ltd. (“StarAmerican”), a wholly owned subsidiary of MDC, which is a re-insurer of Allegiant claims.

Presentation.  Our balance sheet presentation is unclassified due to the fact that certain assets and liabilities have both short and long-term characteristics.

Use of Accounting Estimates.  The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents.  The Company periodically invests funds in highly liquid investments with an original maturity of three months or less, such as commercial paper, money market funds and time deposits, which are included in cash and cash equivalents in the consolidated balance sheets and consolidated statements of cash flows.

Marketable Securities. All of our marketable securities were treated as available-for-sale investments as of December 31, 2016 and 2015. As such, we have recorded all of our marketable securities at fair value with changes in fair value initially being recorded as a component of accumulated other comprehensive income (“AOCI”). However, in accordance with Accounting Standards Codification (“ASC”) Topic 320, Investments (“ASC 320”), if the unrealized loss is determined to be other-than-temporary, an other-than-temporary impairment (“OTTI”) is recorded in the consolidated statements of operations and comprehensive income. When a security is sold, we use the first-in first-out method to determine the cost of the security sold or the amount reclassified out of AOCI.

Restricted Cash.  We receive cash earnest money deposits from our customers who enter into home sale contracts. In certain states we are restricted from using such deposits for general purposes, unless we take measures to release state imposed restrictions on such deposits received from homebuyers, which may include posting blanket surety bonds. We had $3.8 million and $3.8 million in restricted cash related to homebuyer deposits at December 31, 2016 and 2015, respectively.

Trade and Other Receivables.  Trade and other receivables primarily includes home sale receivables, which reflects cash to be received from title companies or outside brokers associated with closed homes. Generally, we will receive cash from title companies and outside brokers within a few days of the home being closed.

Mortgage Loans Held-for-Sale, net.  Mortgage loans held-for-sale are recorded at fair value based on quoted market prices and estimated market prices received from a third-party. Using fair value allows an offset of the changes in fair values of the mortgage loans and the derivative instruments used to hedge them without the burden of complying with the requirements for hedge accounting.

Inventories. Our inventories are primarily associated with communities where we intend to construct and sell homes, including models and unsold homes. Costs capitalized to land and land under development primarily include: (1) land costs; (2) land development costs; (3) entitlement costs; (4) capitalized interest; (5) engineering fees; and (6) title insurance, real property taxes and closing costs directly related to the purchase of the land parcel. Components of housing completed or under construction primarily include: (1) land costs transferred from land and land under development; (2) direct construction costs associated with a house; (3) real property taxes, engineering fees, permits and other fees; (4) capitalized interest; and (5) indirect construction costs, which include field construction management salaries and benefits, utilities and other construction related costs. Land costs are transferred from land and land under development to housing completed or under construction at the point in time that construction of a home on an owned lot begins.

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In accordance with ASC Topic 360, Property, Plant, and Equipment (“ASC 360”), homebuilding inventories, excluding those classified as held for sale, are carried at cost unless events and circumstances indicate that the carrying value of the underlying subdivision may not be recoverable. We evaluate inventories for impairment at each quarter end on a subdivision level basis as each such subdivision represents the lowest level of identifiable cash flows. In making this determination, we review, among other things, the following for each subdivision:

• actual and trending “Operating Margin” (which is defined as home sale revenues less home cost of sales and all incremental costs associated directly with the subdivision, including sales commissions and marketing costs);

• estimated future undiscounted cash flows and Operating Margin;

• forecasted Operating Margin for homes in backlog;

• actual and trending net home orders;

• homes available for sale;

• market information for each sub-market, including competition levels, home foreclosure levels, the size and style of homes currently being offered for sale and lot size; and

• known or probable events indicating that the carrying value may not be recoverable.

If events or circumstances indicate that the carrying value of our inventory may not be recoverable, assets are reviewed for impairment by comparing the undiscounted estimated future cash flows from an individual subdivision (including capitalized interest) to its carrying value. If the undiscounted future cash flows are less than the subdivision’s carrying value, the carrying value of the subdivision is written down to its then estimated fair value. We generally determine the estimated fair value of each subdivision by determining the present value of the estimated future cash flows at discount rates, which are Level 3 inputs (see Note 6, Fair Value Measurements, in the notes to the financial statements for definitions of fair value inputs), that are commensurate with the risk of the subdivision under evaluation. The evaluation for the recoverability of the carrying value of the assets for each individual subdivision can be impacted significantly by our estimates of future home sale revenues, home construction costs, and development costs per home, all of which are Level 3 inputs.

If land is classified as held for sale, in accordance with ASC 360, we measure it at the lower of the carrying value or fair value less estimated costs to sell. In determining fair value, we primarily rely upon the most recent negotiated price which is a Level 2 input (see Note 6, Fair Value Measurements, for definitions of fair value inputs). If a negotiated price is not available, we will consider several factors including, but not limited to, current market conditions, recent comparable sales transactions and market analysis studies. If the fair value less estimated costs to sell is lower than the current carrying value, the land is impaired down to its estimated fair value less costs to sell.

Property and Equipment, net.   Property and equipment is carried at cost less accumulated depreciation and amortization. Depreciation and amortization is computed using the straight-line method over the estimated useful lives of the related assets, which range from 2 to 29 years. Depreciation and amortization expense for property and equipment of our homebuilding operations was $4.6 million, $3.9 million and $3.8 million for the years ended December 31, 2016, 2015 and 2014, respectively.

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The following table sets forth the cost and carrying value of our homebuilding property and equipment by major asset category.

			Accumulated
			Depreciation and		Carrying
	Cost		Amortization		Value
	(Dollars in thousands)
December 31, 2016:
Airplane	$	29,497	$	8,250	$	21,247
Computer software and equipment		23,909		20,329		3,580
Leasehold improvements		11,530		9,370		2,160
Other		2,410		1,356		1,054
Total	$	67,346	$	39,305	$	28,041
December 31, 2015:
Airplane	$	28,997	$	7,701	$	21,296
Computer software and equipment		21,393		16,599		4,794
Leasehold improvements		10,207		8,317		1,890
Other		2,199		1,953		246
Total	$	62,796	$	34,570	$	28,226

Deferred Tax Assets, net.   Deferred income taxes reflect the net tax effects of temporary differences between (1) the carrying amounts of the assets and liabilities for financial reporting purposes and (2) the amounts used for income tax purposes. Deferred tax assets and liabilities are measured using current enacted tax rates in effect in the years in which those temporary differences are expected to reverse. A valuation allowance is recorded against a deferred tax asset if, based on the weight of available evidence, it is more-likely-than-not (a likelihood of more than 50%) that some portion, or all, of the deferred tax asset will not be realized.

Deferred Marketing Costs. Certain marketing costs related to model homes and sales offices are capitalized as they are: (1) reasonably expected to be recovered from the sale of the project; and (2) incurred for (a) tangible assets that are used directly throughout the selling period to aid in the sale of the project or (b) services that have been performed to obtain regulatory approval of sales. Capitalized marketing costs are included in prepaid and other assets in the homebuilding section of the consolidated balance sheets and the associated amortization expense is included in selling, general and administrative (“SG&A”) in the homebuilding section of the consolidated statements of operations and comprehensive income as the homes in the related subdivision are delivered. We allocate all capitalized marketing costs equally to each house within a subdivision and record expense as homes close over the life of a subdivision. All other marketing costs are expensed as incurred.

Variable Interest Entities.  In accordance with ASC Topic 810, Consolidation (“ASC 810”), we analyze our land option contracts and other contractual arrangements to determine whether the corresponding land sellers are variable interest entities (“VIEs”) and, if so, whether we are the primary beneficiary. Although we do not have legal title to the optioned land, ASC 810 requires a company to consolidate a VIE if the company is determined to be the primary beneficiary. In determining whether we are the primary beneficiary, we consider, among other things, whether we have the power to direct the activities of the VIE that most significantly impact VIE’s economic performance, including, but not limited to, determining or limiting the scope or purpose of the VIE, selling or transferring property owned or controlled by the VIE, or arranging financing for the VIE. We also consider whether we have the obligation to absorb losses of the VIE or the right to receive benefits from the VIE. We have concluded that, as of December 31, 2016, we were not the primary beneficiary of any VIEs from which we are purchasing land under land option contracts.

Related Party Assets. Our related party assets are debt security bonds acquired from a quasi-municipal corporation in the state of Colorado. See Note 14 to the Consolidated Financial Statements.

Goodwill. In accordance with ASC Topic 350, Intangibles–Goodwill and Other (“ASC 350”), we evaluate goodwill for possible impairment annually or more frequently if events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. We use a three step process to assess the realizability of goodwill. The first step is a qualitative assessment that analyzes current economic indicators associated with a particular reporting unit. For example, we analyze changes in economic, market and industry conditions, business strategy, cost factors, and financial performance, among others, to determine if there are indicators of a significant decline in the fair value of a particular reporting unit. If the qualitative assessment indicates a stable or improved fair value, no further testing is required.

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If a qualitative assessment indicates it is more likely than not that the fair value of a reporting unit is less than its carrying amount, we will proceed to the second step where we calculate the fair value of a reporting unit based on discounted future probability-weighted cash flows. If this step indicates that the carrying value of a reporting unit is in excess of its fair value, we will proceed to the third step where the fair value of the reporting unit will be allocated to assets and liabilities as they would in a business combination. Impairment occurs when the carrying amount of goodwill exceeds its estimated fair value calculated in the third step.

Based on our analysis, we have concluded as of December 31, 2016, our goodwill was not impaired.

Liability for Unrecognized Tax Benefits. ASC Topic 740, Income Taxes, regarding liabilities for unrecognized tax benefits provides guidance for the recognition and measurement in financial statements of uncertain tax positions taken or expected to be taken in a tax return.

The evaluation of a tax position is a two-step process, the first step being recognition. We determine whether it is more-likely-than-not that a tax position will be sustained upon tax examination, including resolution of any related appeals or litigation, based on the technical merits of the position. The technical merits of a tax position derive from both statutory and judicial authority (legislation and statutes, legislative intent, regulations, rulings, and case law) and their applicability to the facts and circumstances of the tax position. If a tax position does not meet the more-likely-than-not recognition threshold, the benefit of that position is not recognized in the financial statements.

The second step is measurement. A tax position that meets the more-likely-than-not recognition threshold is measured to determine the amount of benefit to recognize in the financial statements. The tax position is measured as the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate resolution with a taxing authority. Once the gross unrecognized tax benefit is determined, we also accrue for any interest and penalties, as well as any offsets expected from resultant amendments to federal or state tax returns. We record the aggregate effect of these items in income tax expense in the consolidated statements of operations and comprehensive income. To the extent this tax position would be offset against a similar deferred tax asset for a net operating loss carryforward, a similar tax loss or a tax credit carryforward if such settlement is required or expected in the event the uncertain tax position is disallowed, the liability is treated as a reduction to the related deferred tax asset for a net operating loss carryforward, a similar tax loss or a tax credit carryforward. Otherwise, we record the corresponding liability in accrued liabilities in the homebuilding section of our consolidated balance sheets.

Warranty Accrual. Our homes are sold with limited third-party warranties. 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. 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.

Warranty payments are recorded against the warranty accrual. Additional reserves may be established for known, unusual warranty-related expenditures not covered through the independent warranty accrual analysis performed by us. 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 accrual should be recorded.

We assess the reasonableness and adequacy of the reserve and the per-unit reserve amount originally included in home cost of sales, as well as the timing of the reversal of any excess reserve on a quarterly basis, using historical payment data and other relevant information. Warranty accrual is included in accrued 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.

Insurance Reserves. The establishment of reserves for estimated losses associated with insurance policies issued by Allegiant and re-insurance agreements issued by StarAmerican are based on actuarial studies that include known facts and interpretations of circumstances, including our experience with similar cases and historical trends involving claim payment patterns, pending levels of unpaid claims, product mix or concentration, claim severity, frequency patterns depending on the business conducted, and changing regulatory and legal environments. It is possible that changes in the insurance payment experience used in estimating our ultimate insurance losses could have a material impact on our insurance reserves.

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Reserves for Construction Defect Claims. The establishment of reserves for estimated losses to be incurred by our homebuilding subsidiaries associated with (1) the self-insured retention (“SIR”) portion of construction defect claims that are expected to be covered under insurance policies with Allegiant and (2) the entire cost of any construction defect claims that are not expected to be covered by insurance policies with Allegiant are based on actuarial studies that include known facts similar to those established for our insurance reserves. It is possible that changes in the payment experience used in estimating our ultimate losses for construction defect claims could have a material impact on our reserves.

Litigation Reserves. We and certain of our subsidiaries have been named as defendants in various cases. We reserve for estimated exposure with respect to these cases based upon currently available information on each case. See Note 16 to the Consolidated Financial Statements.

Derivative Financial Instruments. The derivative instruments we utilize in the normal course of business are interest rate lock commitments and forward sales of mortgage-backed securities, both of which typically are short-term in nature. Forward sales of mortgage-backed securities are utilized to hedge changes in fair value of our interest rate lock commitments as well as mortgage loans held-for-sale not under commitments to sell. For forward sales of mortgage-backed securities, as well as interest rate lock commitments that are still outstanding at the end of a reporting period, we record the changes in fair value of the derivatives in revenues in the financial services section of our consolidated statements of operations and comprehensive income with an offset to other assets or accounts payable and accrued liabilities in the financial services section of our consolidated balance sheets, depending on the nature of the change.

At December 31, 2016 and 2015, we had interest rate lock commitments with aggregate principal balances of approximately $110.9 million and $98.4 million, respectively, at average interest rates of 4.11% and 3.82%, respectively. In addition, we had $42.6 million and $23.1 million of mortgage loans held-for-sale at December 31, 2016 and 2015, respectively, that had not yet been committed to a mortgage purchaser. In order to hedge the changes in fair value of our interest rate lock commitments and mortgage loans held-for-sale which had not yet been committed to a mortgage purchaser, we had forward sales of securities totaling $108.0 million and $84.5 million at December 31, 2016 and 2015, respectively.

For the years ended December 31, 2016, 2015 and 2014, we recorded net gains (losses) on our derivatives of $1.5 million, $1.5 million and $(0.8) million, respectively. For further discussion of our policies regarding interest rate lock commitments, see our “Revenue Recognition for HomeAmerican” accounting policy section below.

Revenue Recognition for Homebuilding Segments. We recognize revenue from home deliveries and land sales when: (1) the closing has occurred; (2) title has passed to the buyer; (3) possession and other attributes of ownership have been transferred to the buyer; (4) we are not obligated to perform significant additional activities after closing and delivery; and (5) the buyer demonstrates a commitment to pay for the property through an adequate initial and continuing investment. The buyer’s initial investment shall include: (1) cash paid as a down payment; (2) the buyer’s notes supported by irrevocable letters of credit; (3) payments made by the buyer to third-parties to reduce existing indebtedness on the property; and (4) other amounts paid by the buyer that are part of the sales value of the property. Revenue from a home delivery includes the base sales price and any purchased options and upgrades and is reduced for any sales price incentives.

We defer Operating Margin related to the sale of a home if all of the following criteria are present: (1) HomeAmerican originates the mortgage loan; (2) HomeAmerican has not sold the mortgage loan, or loans, as of the end of the pertinent reporting period; and (3) the homebuyer’s down payment does not meet the initial or continuing investment criteria. The deferral is subsequently recognized at the time HomeAmerican sells the homebuyer’s mortgage loan, or loans, to a third-party purchaser. In the event the Operating Margin is a loss, we recognize such loss at the time the home is closed. We did not have any loans in inventory at December 31, 2016, 2015 or 2014 that failed to meet the continuing investment criteria.

Revenue Recognition for HomeAmerican.  Revenues recorded by HomeAmerican primarily reflect (1) origination fees and (2) the corresponding sale, or expected future sale, of a loan, which will include the estimated earnings from either the release or retention of a loan’s servicing rights.  Origination fees are recognized when a loan is originated.  When an interest rate lock commitment is made to a customer, we record the expected gain on sale of the mortgage, plus the estimated earnings from the expected sale of the associated servicing rights, adjusted for a pull-through percentage (which is defined as the likelihood that an interest rate lock commitment will be originated), as revenue.  As the interest rate lock commitment gets closer to being originated, the expected gain on the sale of that loan plus its servicing rights is updated to reflect current market value and the increase or decrease in the fair value of that interest rate lock commitment is recorded through revenues.  At the same time, the expected pull-through percentage of the interest rate lock commitment to be originated is updated (typically an increase as the interest lock commitment gets closer to origination) and, if there has been a change, revenues are adjusted as necessary.  After origination, our mortgage loans, generally including their servicing rights, are sold to third-party purchasers in accordance with sale agreements entered into by us with a third-party purchaser of the loans. We make representations and warranties with respect to the status of loans transferred in the sale agreements. The sale agreements generally include statements acknowledging the transfer of the loans is intended by both parties to constitute a sale. Sale of a mortgage loan has occurred when the following criteria, among others, have been met: (1) fair consideration has been paid for transfer of the loan by a third party in an arms-length transaction, (2) all the usual risks and rewards of ownership that are in substance a sale have been transferred by us to the third party purchaser; and (3) we do not have a substantial continuing involvement with the mortgage loan.

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We measure mortgage loans held-for-sale at fair value with the changes in fair value being reported in earnings at each reporting date. The impact of recording changes in fair value to earnings did not have a material impact on our financial position, results of operations or cash flows during the years ended December 31, 2016, 2015 or 2014. Our net gains on the sale of mortgage loans were $34.0 million, $17.8 million and $15.5 million for the years ended December 31, 2016, 2015 and 2014, respectively, and are included as a component of revenues in the financial services section of the consolidated statements of operations and comprehensive income.

Home Cost of Sales. Home cost of sales includes the specific construction costs of each home and all applicable land acquisition, land development and related costs, both incurred and estimated to be incurred, warranty costs and finance and closing costs, including closing cost incentives. We use the specific identification method for the purpose of accumulating home construction costs and allocate costs to each lot within a subdivision associated with land acquisition and land development based upon relative fair value of the lots prior to home construction. Lots within a subdivision typically have comparable fair values, and, as such, we generally allocate costs equally to each lot within a subdivision. We record all home cost of sales when a home is closed on a house-by-house basis.

When a home is closed, we generally have not yet paid or incurred all costs necessary to complete the construction of the home and certain land development costs. At the time of a home closing, we compare the home construction budgets to actual recorded costs to determine the additional estimated costs remaining to be paid on each closed home. For amounts not incurred or paid as of the time of closing a home, we record an estimated accrual associated with certain home construction and land development costs. Generally, these accruals are established based upon contracted work which has yet to be paid, open work orders not paid at the time of home closing, as well as land completion costs more likely than not to be incurred, and represent estimates believed to be adequate to cover the expected remaining home construction and land development costs. We monitor the adequacy of these accruals on a house-by-house basis and in the aggregate on a subdivision-by-subdivision basis. At December 31, 2016 and 2015, we had $8.7 million and $11.5 million, respectively, of land development and home construction accruals for closed homes. Actual results could differ from such estimates.

Stock-Based Compensation Expense. In accordance with ASC Topic 718, Compensation—Stock Compensation (“ASC 718”), stock-based compensation expense for all share-based payment awards is based on the grant date fair value. For stock option awards granted with just service and/or performance conditions, we estimate the fair value using a Black-Scholes option pricing model. For any stock option awards granted that contain a market condition, we estimate the fair value using a Monte Carlo simulation model. We recognize expense for share-based payment awards based on their varying vesting conditions as follows:

● Awards with service conditions only – Expense recognized on a straight-line basis over the requisite service period of the award.

● Awards with performance conditions – Expense recognized on a straight-line basis for each performance criteria tranche (if applicable) over the period between the date that it is determined the performance conditions related to each tranche (if applicable) are probable to be met and the date the award vests

● Awards with market conditions (“Market-Based”) – Expense recognized on a straight-line basis over the requisite service period, which is the lesser of the derived service period or the explicit service period, if one is present. However, if the market condition is satisfied prior to the end of the requisite service period, we will accelerate all remaining expense to be recognized.

Earnings (Loss) Per Common Share. For purposes of calculating earnings (loss) per share (“EPS”), a company that has participating security holders (for example, holders of unvested restricted stock that has nonforfeitable dividend rights) is required to utilize the two-class method for calculating earnings per share unless the treasury stock method results in lower EPS. The two-class method is an allocation of earnings/(loss) between the holders of common stock and a company’s participating security holders. Under the two-class method, earnings/(loss) for the reporting period are allocated between common shareholders and other security holders based on their respective rights to receive distributed earnings (i.e., dividends) and undistributed earnings (i.e., net income/(loss)). Our common shares outstanding are comprised of shareholder owned common stock and participating security holders consisting of shareholders of unvested restricted stock. Basic EPS is calculated by dividing income or loss attributable to common stockholders by the weighted average number of shares of common stock outstanding, excluding participating shares in accordance with ASC 260. To calculate diluted EPS, basic EPS is further adjusted to include the effect of potential dilutive stock options outstanding.

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Recently Issued Accounting Standards. In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers ("ASU 2014-09"), which is a comprehensive new revenue recognition model. Under ASU 2014-09, a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods and services. ASU 2014-09 is effective for our interim and annual reporting periods beginning January 1, 2018, and is to be adopted using either a full retrospective or modified retrospective transition method. Early adoption is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. We do not plan to early adopt the guidance. We expect to adopt the new standard under the modified retrospective approach. Although we are still in the process of evaluating our contracts, we do not believe the adoption of ASU 2014-09 will have a material impact on the amount or timing of our revenues. Although we are still evaluating the accounting for marketing costs under ASC 606, there is a possibility that the adoption of ASU 2014-09 will impact the timing of recognition and classification in our consolidated financial statements of certain marketing costs we incur to obtain sales contracts from our customers. For example, there are various marketing costs that we currently capitalize and amortize with each home delivered in a community. Under the new guidance, these costs may need to be expensed immediately. We are continuing to evaluate the exact impact the update will have on recording revenue and our marketing costs in our consolidated financial statements and related disclosures.

In February 2015, the FASB issued ASU 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis (“ASU 2015-02”), which amends the consolidation requirements in ASC Topic 810, Consolidation, primarily related to limited partnerships and variable interest entities. ASU 2015-02 was effective for our interim and annual reporting periods beginning January 1, 2016 and did not have a material impact on our consolidated financial statements.

In January 2016, the FASB issued ASU 2016-01, Financial Instruments–Overall: Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”), which makes a number of changes to the current GAAP model, including changes to the accounting for equity investments and financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. Under ASU 2016-01, we will primarily be impacted by the changes to accounting for equity instruments with readily determinable fair values as they will no longer be permitted to be classified as available-for-sale (changes in fair value reported through other comprehensive income) and instead, all changes in fair value will be reported in earnings. ASU 2016-01 is effective for our interim and annual reporting periods beginning January 1, 2018 and is to be applied using a modified retrospective transition method. Early adoption of the applicable guidance from ASU 2016-01 is not permitted. Given the significant amount of our investments in equity securities, and assuming we still have a similar level of investments when this guidance is adopted, we would expect that the impact to our consolidated statements of operations and comprehensive income from this update could be material. Furthermore, depending on trends in the stock market, we may see increased volatility in our consolidated statements of operations and comprehensive income.

In February 2016, the FASB issued ASU 2016-02, Leases (“ASU 2016-02”), which requires a lessee to recognize a right-of-use asset and a corresponding lease liability for virtually all leases. The liability will be equal to the present value of lease payments while the right-of-use asset will be based on the liability, subject to adjustment, such as for initial direct costs. In addition, ASU 2016-02 expands the disclosure requirements for lessees. Upon adoption, we will be required to record a lease asset and lease liability related to our operating leases. ASU 2016-02 is effective for our interim and annual reporting periods beginning January 1, 2019 and is to be applied using a modified retrospective transition method. Early adoption is permitted. We do not plan to early adopt the guidance and we are currently evaluating the impact the update will have on our consolidated financial statements and related disclosures.

In March 2016, the FASB issued ASU 2016-09, Compensation - Stock Compensation: Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”), which amends ASC Topic 718. The standard is intended to simplify several areas of accounting for share-based compensation arrangements, including the accounting for income taxes, classification of excess tax benefits on the statement of cash flows, forfeitures, statutory tax withholding requirements, classification of awards as either equity or liabilities, and classification of employee taxes paid on the statement of cash flows when an employer withholds shares for tax-withholding purposes. ASU 2016-09 is effective for our interim and annual reporting periods beginning January 1, 2017, and is to be applied using a retrospective transition method. Though permitted, we did not early adopt the guidance. The primary impact from this guidance on our consolidated financial statements will be to our tax provision line item as any excess tax benefits or deficiencies from (1) the exercise or expiration of options or (2) the vesting of stock awards will now be recognized through our income tax provision as opposed to additional paid-in capital (to the extent we had a sufficient pool of windfall tax benefits). As of December 31, 2016, we had options covering 540,000 shares with exercise prices above the MDC closing share price at December 31, 2016 and the ability to exercise those options will expire at some point during 2017. If the exercise price continues to be greater than the share price of MDC throughout 2017, these options will likely expire unexercised and as a result, we could recognize an additional $2.6 million expense in our tax provision for 2017. We are continuing to evaluate additional impacts the update will have on our consolidated financial statements and related disclosures.

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In June 2016, the FASB issued ASU 2016-13,Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments(“ASU 2016-13”), which requires measurement and recognition of expected credit losses for financial assets held. The amendments in ASU 2016-13 eliminate the probable threshold for initial recognition of a credit loss in current GAAP and reflect an entity’s current estimate of all expected credit losses. ASU 2016-13 is effective for our interim and annual reporting periods beginning January 1, 2021, and is to be applied using a modified retrospective transition method. Earlier adoption is permitted. We do not plan to early adopt the guidance and we are currently evaluating the impact the update will have on our consolidated financial statements and related disclosures.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force) (“ASU 2016-15”), which amends ASC Topic 230, Statement of Cash Flows, to clarify guidance on the classification of certain cash receipts and payments in the statement of cash flows. The amendments in ASU 2016-15 are intended to reduce diversity in practice in how certain transactions are classified in the statement of cash flows. ASU 2016-15 is effective for our interim and annual reporting periods beginning January 1, 2018, and is to be applied using a retrospective transition method. Earlier adoption is permitted. We do not plan to early adopt the guidance and do not believe the guidance will have a material impact on our financial statements upon adoption.

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (a consensus of the FASB Emerging Issues Task Force (“ASU 2016-18”), which requires restricted cash to be included with cash and cash equivalents when reconciling the beginning and ending amounts on the statement of cash flows. ASU 2016-18 is effective for our interim and annual reporting periods beginning January 1, 2018, and is to be applied using a retrospective transition method. Earlier adoption is permitted. We do not plan to early adopt the guidance and do not believe the guidance will have a material impact on our financial statements upon adoption.

2.            Supplemental Cash Flow Disclosure

The table below sets forth supplemental disclosures of cash flow information and non-cash investing and financing activities.

	Year Ended December 31,
	2016		2015		2014
Cash paid for:	(Dollars in thousands)
Interest, net of interest capitalized	$	717	$	286	$	1,843
Income taxes	$	29,144	$	3,023	$	2,793
Non-cash investing and financing activities:
Unrealized holding gains (losses) on marketable securities, net of tax	$	6,356	$	5,260	$	(1,120	)

3.             Segment Reporting

An operating segment is defined as a component of an enterprise for which discrete financial information is available and is reviewed regularly by the Chief Operating Decision Maker (“CODM”), or decision-making group, to evaluate performance and make operating decisions. We have identified our CODM as two key executives—the Chief Executive Officer and the Chief Operating Officer.

We have identified each homebuilding division as an operating segment. Our homebuilding operating segments have been aggregated into the reportable segments noted below because they are similar in the following regards: (1) economic characteristics; (2) housing products; (3) class of homebuyer; (4) regulatory environments; and (5) methods used to construct and sell homes. Our homebuilding reportable segments are as follows:

● West (Arizona, California, Nevada and Washington)

● Mountain (Colorado and Utah)

● East (Virginia, Florida and Maryland, which includes Pennsylvania and New Jersey)

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Our financial services business consists of the operations of the following operating segments: (1) HomeAmerican; (2) Allegiant; (3) StarAmerican; (4) American Home Insurance Agency, Inc.; and (5) American Home Title and Escrow Company. Due to its contributions to consolidated pretax income we consider HomeAmerican to be a reportable segment (“mortgage operations”). The remaining operating segments have been aggregated into one reportable segment (“other”) because they do not individually exceed 10 percent of: (1) consolidated revenue; (2) the greater of (a) the combined reported profit of all operating segments that did not report a loss or (b) the positive value of the combined reported loss of all operating segments that reported losses; or (3) consolidated assets.

Corporate is a non-operating segment that develops and implements strategic initiatives and supports our operating divisions by centralizing key administrative functions such as finance, treasury, information technology, insurance, risk management, litigation and human resources. Corporate also provides the necessary administrative functions to support MDC as a publicly traded company. A portion of the expenses incurred by Corporate are allocated to the homebuilding operating segments based on their respective percentages of assets, and to a lesser degree, a portion of Corporate expenses are allocated to the financial services segments. A majority of Corporate’s personnel and resources are primarily dedicated to activities relating to the homebuilding segments, and, therefore, the balance of any unallocated Corporate expenses is included in the homebuilding operations section of our consolidated statements of operations and comprehensive income.

The following table summarizes home and land sale revenues for our homebuilding operations and revenues for our financial services operations. 

	Year Ended December 31,
	2016		2015		2014
	(Dollars in thousands)
Homebuilding
West	$	1,128,513	$	915,259	$	770,051
Mountain		756,997		609,002		534,244
East		377,343		335,965		346,336
Total home and land sale revenues	$	2,262,853	$	1,860,226	$	1,650,631
Financial Services
Mortgage operations	$	41,585	$	30,276	$	25,887
Other		22,406		18,534		18,066
Total financial services revenues	$	63,991	$	48,810	$	43,953
Total revenues	$	2,326,844	$	1,909,036	$	1,694,584

The following table summarizes pretax income (loss) for our homebuilding and financial services operations.

	Year Ended December 31,
	2016			2015			2014
	(Dollars in thousands)
Homebuilding
West	$	73,594		$	64,627		$	63,071
Mountain		73,104			52,707			39,343
East		4,949			(6,033	)		10,730
Corporate		(36,269	)		(40,860	)		(37,340	)
Total homebuilding pretax income	$	115,378		$	70,441		$	75,804
Financial Services
Mortgage operations	$	23,845		$	17,230		$	14,034
Other		12,558			13,753			10,637
Total financial services pretax income	$	36,403		$	30,983		$	24,671
Total pretax income	$	151,781		$	101,424		$	100,475

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The following table summarizes total assets for our homebuilding and financial services operations. The assets in our West, Mountain and East segments consist primarily of inventory while the assets in our Corporate segment primarily include cash and cash equivalents, marketable securities, and our deferred tax assets. The assets in our financial services segment consist mostly of cash and cash equivalents, marketable securities and mortgage loans held-for-sale.

	December 31,
	2016		2015
	(Dollars in thousands)
Homebuilding assets
West	$	1,035,033	$	991,393
Mountain		571,139		536,831
East		256,816		324,457
Corporate		454,507		393,712
Total homebuilding assets	$	2,317,495	$	2,246,393
Financial services assets
Mortgage operations	$	153,182	$	123,176
Other		57,912		46,330
Total financial services assets	$	211,094	$	169,506
Total assets	$	2,528,589	$	2,415,899

4.             Earnings Per Share

On November 21, 2016, MDC’s board of directors declared a 5% stock dividend that was distributed on December 20, 2016 to shareholders of record on December 6, 2016. In accordance with ASC 260, basic and diluted earnings per share amounts, weighted-average shares outstanding, and dividends declared per share have been restated for all periods presented to reflect the effect of this stock dividend. The following table shows our basic and diluted EPS calculations:

	Year Ended December 31,
	2016			2015			2014
	(Dollars in thousands, except per share amounts)
Numerator
Net income	$	103,211		$	65,791		$	63,143
Less: distributed earnings allocated to participating securities		(163	)		(98	)		(196	)
Less: undistributed earnings allocated to participating securities		(179	)		(37	)		(60	)
Net income attributable to common stockholders (numerator for basic earnings per share)		102,869			65,656			62,887
Add back: undistributed earnings allocated to participating securities		179			37			60
Less: undistributed earnings reallocated to participating securities		(179	)		(37	)		(60	)
Numerator for diluted earnings per share under two class method	$	102,869		$	65,656		$	62,887
Denominator
Weighted-average common shares outstanding		51,286,942			51,202,616			51,046,318
Add: dilutive effect of stock options		160,205			212,964			212,126
Denominator for diluted earnings per share under two class method		51,447,147			51,415,580			51,258,444
Basic Earnings Per Common Share	$	2.01		$	1.28		$	1.23
Diluted Earnings Per Common Share	$	2.00		$	1.28		$	1.23

Diluted EPS for the years ended December 31, 2016, 2015 and 2014 excluded options to purchase approximately 5.6 million, 6.2 million and 4.7 million shares, respectively, of common stock because the effect of their inclusion would be anti-dilutive.

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5.             Accumulated Other Comprehensive Income

The following table sets forth our changes in accumulated other comprehensive income:

	Year Ended December 31,
	2016			2015		2014
	(Dollars in thousands)
Unrealized gains (losses) on available-for-sale marketable securities (1) :
Beginning balance	$	3,657		$	2,775	$	7,655
Other comprehensive income (loss) before reclassifications		4,738			322		(3,025	)
Amounts reclassified from AOCI (2)		(665	)		560		(1,855	)
Ending balance	$	7,730		$	3,657	$	2,775
Unrealized gains on available-for-sale metropolitan district bond securities (1) :
Beginning balance	$	12,058		$	7,680	$	3,920
Other comprehensive income before reclassifications		2,283			4,378		3,760
Ending balance	$	14,341		$	12,058	$	7,680
Total ending AOCI	$	22,071		$	15,715	$	10,455

(1) All amounts net-of-tax.

(2) See separate table below for details about these reclassifications.

The following table sets forth the activity related to reclassifications out of accumulated other comprehensive income (loss) related to available for sale securities:

	Year Ended December 31,
Affected Line Item in the Statements of Operations	2016			2015			2014
	(Dollars in thousands)
Homebuilding: Interest and other income	$	2,049		$	2,690		$	7,210
Homebuilding: Other-than-temporary impairment of marketable securities		(1,070	)		(3,969	)		(4,293	)
Financial services: Interest and other income		467			368			100
Financial services: Other-than-temporary impairment of marketable securities		(373	)		-			-
Income before income taxes		1,073			(911	)		3,017
Provision for income taxes		(408	)		351			(1,162	)
Net income	$	665		$	(560	)	$	1,855

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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, 2016		December 31, 2015
		(Dollars in thousands)
Marketable equity securities (available-for-sale)	Level 1	$	96,206	$	103,694
Mortgage loans held-for-sale, net	Level 2	$	138,774	$	115,670
Metropolitan district bond securities (related party) (available-for-sale)	Level 3	$	30,162	$	25,911

The following methods and assumptions were used to estimate the fair value of each class of financial instruments as of December 31, 2016 and 2015.

Cash and cash equivalents, restricted cash, trade and other receivables, prepaid and other assets, accounts payable, accrued liabilities and borrowings on our revolving credit facility. Fair value approximates carrying value.

Marketable Securities.  As of December 31, 2016 and 2015, we only held marketable equity securities. However, during 2015, we also held marketable debt securities. Our debt securities consisted primarily of fixed and floating rate interest earning debt securities, which included, among others, United States government and government agency debt and corporate debt. As of December 31, 2016 our equity securities consist of holdings in corporate equities, preferred stock and exchange traded funds. As of December 31, 2015, we also invested in holdings in mutual fund securities (which were primarily invested in debt securities). As of December 31, 2016 and 2015, all of our equity securities were treated as available-for-sale investments and as such, were recorded at fair value with all changes in fair value initially recorded through AOCI, subject to an assessment to determine if an unrealized loss, if applicable, is other-than-temporary.

Each quarter we assess all of our securities in an unrealized loss position for a potential OTTI. For the years ended December 31, 2016, 2015 and 2014, we recorded pretax OTTIs of $1.4 million, $4.0 million and $4.3 million, respectively, for certain equity investments that were in an unrealized loss position as of the end of each respective period. The OTTIs are included in other-than-temporary impairment of marketable securities in the homebuilding or financial services sections of our consolidated statements of operations and comprehensive income.

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

	December 31, 2016
	Amortized Cost		OTTI			Net Amortized Cost		Fair Value
	(Dollars in thousands)
Homebuilding equity securities	$	49,295	$	(1,070	)	$	48,225	$	59,770
Financial services equity securities		35,885		(373	)		35,512		36,436
Total marketable equity securities	$	85,180	$	(1,443	)	$	83,737	$	96,206

	December 31, 2015
	Amortized Cost		OTTI			Net Amortized Cost		Fair Value
	(Dollars in thousands)
Homebuilding equity securities	$	89,738	$	(3,969	)	$	85,769	$	92,387
Financial services equity securities		12,026		-			12,026		11,307
Total marketable equity securities	$	101,764	$	(3,969	)	$	97,795	$	103,694

As of December 31, 2016 and 2015, our marketable equity securities were in net unrealized gain positions totaling $12.5 million and $5.9 million, respectively. Our individual marketable equity securities that were in unrealized loss positions, excluding those that were impaired as part of any OTTI, aggregated to an unrealized loss of $0.5 million and $0.9 million as of December 31, 2016 and 2015, respectively. The table below sets forth the aggregated unrealized losses for individual equity securities that were in unrealized loss positions but did not have OTTIs recognized. We do not believe the decline in the value of these marketable securities as of December 31, 2016 is other-than-temporary.

	December 31, 2016							December 31, 2015
	Number of Securities in Loss Position		Average Loss Position			Aggregate Fair Value of Securities in a Loss Position		Number of Securities in Loss Position		Average Loss Position			Aggregate Fair Value of Securities in a Loss Position
	(Dollars in thousands)
Marketable equity securities		5	$	(457	)	$	6,045		4	$	(882	)	$	6,116

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The following table sets forth gross realized gains and losses from the sale of available-for-sale marketable securities. We record the net amount of these gains and losses to either other expense or interest and other income, dependent upon whether there is a net realized loss or gain, respectively, in the homebuilding section or financial services section of our consolidated statements of operations and comprehensive income.

	Year Ended December 31,
	2016			2015			2014
	(Dollars in thousands)
Gross realized gains on sales of available-for-sale securities
Equity securities	$	2,669		$	1,854		$	7,719
Debt securities		-			417			2,432
Total	$	2,669		$	2,271		$	10,151
Gross realized losses on sales of available-for-sale securities
Equity securities	$	(1,596	)	$	(2,949	)	$	(6,183	)
Debt securities		-			(233	)		(952	)
Total	$	(1,596	)	$	(3,182	)	$	(7,135	)
Net realized gain (loss) on sales of available-for-sale securities	$	1,073		$	(911	)	$	3,016

Mortgage Loans Held-for-Sale, Net.  Our mortgage loans held-for-sale, which are measured at fair value on a recurring basis include (1) mortgage loans held-for-sale that are under commitments to sell and (2) mortgage loans held-for-sale that are not under commitments to sell. At December 31, 2016 and December 31, 2015, we had $96.2 million and $92.6 million, respectively, of mortgage loans held-for-sale under commitments to sell. The fair value for those loans was based on quoted market prices for those mortgage loans, which are Level 2 fair value inputs. At December 31, 2016 and 2015, we had $42.6 million and $23.1 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.

Metropolitan District Bond Securities (Related Party).  The Metropolitan District Bond Securities (the “Metro Bonds”) are included in the homebuilding section of our consolidated balance sheets. Refer to Note 14 for details on how these bonds were acquired. Cash flows received by the Company from these securities reflect principal and interest payments from the Metro District, which are generally received in the fourth quarter, and are supported by an annual levy on the taxable assessed value of real estate and personal property within the Metro District’s boundaries. 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 in perpetuity until the unpaid principal and accrued interest is paid in full.

In accordance with ASC 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality (“ASC 310-30”), we adjust the bond principal balance 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 update its fair value on a quarterly basis, with the adjustment being recorded through AOCI. The fair value is based upon a discounted future cash flow model, which uses Level 3 inputs. The primary unobservable inputs used in our discounted cash flow model are (1) the forecasted number of homes to be closed, as they drive increases to the tax paying base for the Metro District, (2) the forecasted assessed value of those closed homes and (3) the discount rate. Cash receipts, which are scheduled to be received in the fourth quarter, reduce the carrying value of the Metro Bonds. The increases in the value of the Metro Bonds during the past two years are primarily based on a larger percentage of future cash flows coming from homes that have closed, which utilize a lower discount rate as those cash flows have a reduced amount of risk. The table below provides quantitative data, as of December 31, 2016, 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
Number of homes closed per year	0	to	159		107		Increase	Decrease
Average sales price	$445,000	to	$870,000	$	548,000		Increase	Decrease
Discount rates	5%	to	12%		8.2	%	Decrease	Increase

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

	Year Ended December 31,
	2016			2015
	(Dollars in thousands)
Balance at beginning of period	$	25,911		$	18,203
Increase in fair value (recorded in other comprehensive income)		3,683			6,961
Change due to accretion of principal		1,747			1,427
Cash receipts		(1,179	)		(680	)
Balance at end of period	$	30,162		$	25,911

Mortgage Repurchase Facility. The debt associated with our Mortgage Repurchase Facility (see Note 15 for further discussion) is at floating 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, which primarily reflect estimated prices for our senior notes which were provided by multiple sources.

	December 31, 2016				December 31, 2015
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
	(Dollars in thousands)
$250 Million 5⅝% Senior Notes due February 2020, net	$	246,915	$	265,611	$	246,032	$	257,813
$250 Million 5½% Senior Notes due January 2024, net		248,391		258,800		248,209		252,188
$350 Million 6% Senior Notes due January 2043, net		346,340		297,087		346,283		276,938
Total	$	841,646	$	821,498	$	840,524	$	786,939

7.            Inventories

The table below sets forth, by reportable segment, information relating to our homebuilding inventories. Included in land and land under development at December 31, 2015 was $1.7 million of land held for sale. We did not have any land held for sale at December 31, 2016.

	December 31,		December 31,
	2016		2015
	(Dollars in thousands)
Housing Completed or Under Construction:
West	$	470,503	$	365,867
Mountain		277,922		253,578
East		125,774		127,591
Subtotal		874,199		747,036
Land and Land Under Development:
West		499,186		580,682
Mountain		271,252		259,484
East		114,177		176,760
Subtotal		884,615		1,016,926
Total Inventories	$	1,758,814	$	1,763,962

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Inventory impairments recognized by segment for the years ended December 31, 2016, 2015 and 2014 are shown in the table below.

	Year Ended December 31,
	2016		2015		2014
	(Dollars in thousands)
Housing Completed or Under Construction:
West	$	364	$	-	$	-
Mountain		574		250		234
East		1,390		1,378		1,000
Subtotal		2,328		1,628		1,234
Land and Land Under Development:
West		1,036		648		-
Mountain		589		569		526
East		6,220		7,148		-
Subtotal		7,845		8,365		526
Total Inventories	$	10,173	$	9,993	$	1,760

During the year ended December 31, 2016, we recorded $10.2 million of inventory impairments, of which $7.6 million related to five projects in our East segment, $1.4 million related to one project in our West segment and $1.2 million related to one project in our Mountain segment.

During the year ended December 31, 2015, we recorded $10.0 million of inventory impairments, of which $1.2 million was related to impairments on our land held for sale in two communities, one in our West segment and one in our Mountain segment, each of which the Company was actively marketing and planning on selling in the next 12 months. The remaining $8.8 million in impairments related to nine projects with the majority coming from our East segment; four in Maryland totaling $3.3 million and three in Virginia totaling $5.2 million.

During the year ended December 31, 2014, we recorded $1.8 million of inventory impairments related to four projects, three of which were in our Maryland division totaling $1 million.

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The table below provides quantitative data, for the periods presented, used in determining the fair value of the impaired inventory, excluding impairments related to land held for sale.

	Impairment Data								Quantitative Data
Three Months Ended	Total Subdivisions Tested		Inventory Impairments		Fair Value of Inventory After Impairments		Number of Subdivisions Impaired		Discount Rate
	(Dollars in thousands)
March 31, 2016		14	$	-	$	-		-			N/A
June 30, 2016		17		1,600		6,415		2		12%	to	15%
September 30, 2016		25		4,700		12,295		2		15%	to	18%
December 31, 2016		40		3,873		23,657		3		12%	to	15%
Total			$	10,173	$	42,367		7
March 31, 2015		22	$	350	$	3,701		1			9%
June 30, 2015		22		-		-		-			N/A
September 30, 2015		18		3,225		14,836		5		12%	to	15%
December 31, 2015		15		5,200		19,925		3		15%	to	20%
Total			$	8,775	$	38,462		9
March 31, 2014		16	$	-	$	-		-			N/A
June 30, 2014		16		850		4,285		2		11%	to	14%
September 30, 2014		23		-		-		-			N/A
December 31, 2014		21		910		4,646		2			13%
Total			$	1,760	$	8,931		4

8. Capitalization of Interest

We capitalize interest to inventories during the period of development in accordance with ASC Topic 835, Interest (“ASC 835”). Homebuilding interest capitalized as a cost of inventories is included in cost of sales during the period that related units or lots are delivered. To the extent our homebuilding debt exceeds our qualified assets as defined in ASC 835, we expense a portion of the interest incurred. Qualified homebuilding assets consist of all lots and homes, excluding finished unsold homes or finished models, within projects that are actively selling or under development. The table set forth below summarizes homebuilding interest activity.

The homebuilding interest expensed in the table below relates to the portion of interest incurred where our homebuilding debt exceeded our qualified inventory for such periods in accordance with ASC 835.

	Year Ended December 31,
	2016			2015			2014
	(Dollars in thousands)
Homebuilding interest incurred	$	52,681		$	53,061		$	66,269
Less: Interest capitalized		(52,681	)		(53,061	)		(65,584	)
Homebuilding interest expensed	$	-		$	-		$	685
Interest capitalized, beginning of period	$	77,541		$	79,231		$	74,155
Plus: Interest capitalized during period		52,681			53,061			65,584
Less: Previously capitalized interest included in home and land cost of sales		(62,137	)		(54,751	)		(60,508	)
Interest capitalized, end of period	$	68,085		$	77,541		$	79,231

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9. Homebuilding Prepaid and Other Assets

The following table sets forth the components of homebuilding prepaid and other assets.

	December 31,
	2016		2015
	(Dollars in thousands)
Land option deposits	$	8,683	$	11,997
Deferred marketing costs		35,313		31,152
Prepaid expenses		4,735		6,500
Goodwill		6,008		6,008
Deferred debt issuance costs on revolving credit facility, net		4,340		5,570
Other		1,384		4,167
Total	$	60,463	$	65,394

10. Homebuilding Accrued Liabilities and Financial Services Accounts Payable and Accrued Liabilities

The following table sets forth information relating to homebuilding accrued liabilities.

	December 31,
	2016		2015
	(Dollars in thousands)
Accrued compensation and related expenses	$	27,830	$	25,492
Accrued interest		23,234		23,234
Warranty accrual		20,678		15,328
Customer and escrow deposits		27,183		20,717
Land development and home construction accruals		8,695		11,465
Other accrued liabilities		36,946		26,650
Total accrued liabilities	$	144,566	$	122,886

The following table sets forth information relating to financial services accounts payable and accrued liabilities.

	December 31,
	2016		2015
	(Dollars in thousands)
Insurance reserves	$	42,204	$	45,811
Accounts payable and other accrued liabilities		8,530		6,303
Total accounts payable and accrued liabilities	$	50,734	$	52,114

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11. Warranty Accrual

The table set forth below summarizes accrual, adjustment and payment activity related to our warranty accrual for the years ended December 31, 2016, 2015 and 2014. During 2016 and 2015, we recorded $7.5 million and $0.2 million, respectively, in adjustments to increase our warranty accrual. The adjustments were primarily due to unexpected warranty related expenditures, which began during the second half of 2015 and continued through most of 2016. During 2014, as a result of favorable warranty payment experience relative to our estimates at the time of home closing, we reduced our warranty accrual by $2.6 million. Additionally, from time to time, we change our warranty accrual rates based on payment trends. Any changes made to those rates did not materially affect our warranty expense or gross margin from home sales for the years ended December 31, 2016, 2015 and 2014.

	Year Ended December 31,
	2016			2015			2014
	(Dollars in thousands)
Balance at beginning of period	$	15,328		$	18,346		$	22,238
Expense provisions		8,905			6,303			4,834
Cash payments		(11,017	)		(9,510	)		(6,126	)
Adjustments		7,462			189			(2,600	)
Balance at end of period	$	20,678		$	15,328		$	18,346

12. Insurance and Construction Defect Claim Reserves

The following table summarizes our insurance and defect claim reserves activity for the years ended December 31, 2016, 2015 and 2014. These reserves are included as a component of accrued liabilities in either the financial services or homebuilding sections of the consolidated balance sheets.

	December 31,
	2016			2015			2014
	(Dollars in thousands)
Balance at beginning of period	$	47,061		$	51,720		$	50,887
Expense provisions		7,531			6,452			6,316
Cash payments, net of recoveries		(3,638	)		(8,611	)		(5,483	)
Adjustments		-			(2,500	)		-
Balance at end of period	$	50,954		$	47,061		$	51,720

During 2015, we recorded a $2.5 million adjustment to decrease our insurance and construction defect claim reserves. The adjustments primarily resulted from a decrease in the severity of our insurance claim experience relative to prior period estimates. No such adjustments were required for the years ended December 31, 2016 and 2014.

In the ordinary course of business, we make payments from our insurance and construction defect claim reserves to settle litigation claims arising primarily from our homebuilding activities. These payments are irregular in both their timing and their magnitude. As a result, the cash payments, net of recoveries shown for the years ended December 31, 2016, 2015, and 2014, are not necessarily indicative of what future cash payments will be for subsequent periods.

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13. Income Taxes

Our provision for (benefit from) income taxes for the years ended December 31, 2016, 2015 and 2014 consisted of the following:

	Year Ended December 31,
	2016		2015			2014
	(Dollars in thousands)
Current tax provision (benefit)
Federal	$	32,102	$	2,549		$	1,631
State		323		(249	)		1,475
Total current		32,425		2,300			3,106
Deferred tax provision:
Federal		10,960		30,268			28,630
State		5,185		3,065			5,596
Total deferred		16,145		33,333			34,226
Provision for income taxes	$	48,570	$	35,633		$	37,332

The provision for (benefit from) income taxes differs from the amount that would be computed by applying the statutory federal income tax rate of 35% to income before income taxes as a result of the following:

	Year Ended December 31,
	2016			2015			2014
	(Dollars in thousands)
Tax expense computed at federal statutory rate	$	53,123		$	35,498		$	35,166
State income tax expense, net of federal benefit		4,553			3,043			3,340
Other permanent differences		(647	)		(935	)		(1,435	)
Domestic manufacturing deduction		(5,563	)		(39	)		-
Expiration of state net operating loss		-			336			3,030
Tax expense (benefit) related to an increase (decrease) in unrecognized tax benefits		75			(479	)		559
Charitable contributions statute expiration		-			-			181
Federal energy credits		(3,428	)		(1,058	)		(1,131	)
Rate changes		-			48			866
Change in valuation allowance		253			(549	)		(1,665	)
Other		204			(232	)		(1,579	)
Provision for income taxes	$	48,570		$	35,633		$	37,332
Effective tax (benefit) rate		32.0	%		35.1	%		37.2	%

The year-over-year improvement in our effective tax rate from 2015 to 2016 is primarily the result of (1) a domestic manufacturing deduction, whereas we were not eligible to take this deduction in the prior year due to our utilization of remaining federal net operating loss carryforwards to offset taxable income, and (2) a higher estimated percentage of our homes delivered qualifying for energy credits.

The year-over-year improvement in our effective tax rate from 2014 to 2015 is primarily the result of (1) the reversal of a previously established uncertain tax position and (2) a year-over-year decrease in the write-offs of certain unused state net operating losses.

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Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of the assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The tax effects of significant temporary differences that give rise to the net deferred tax asset are as follows: 

	December 31,
	2016			2015
	(Dollars in thousands)
Deferred tax assets:
State net operating loss carryforwards	$	26,015		$	31,292
Alternative minimum tax and other tax credit carryforwards		12,325			31,993
Stock-based compensation expense		18,228			20,068
Warranty, litigation and other reserves		14,155			9,470
Receivables from related party		7,626			8,342
Accrued compensation		7,330			7,241
Asset impairment charges		6,456			5,049
Inventory, additional costs capitalized for tax purposes		6,498			5,894
Other, net		2,993			2,429
Total deferred tax assets		101,626			121,778
Valuation allowance		(13,803	)		(12,868	)
Total deferred tax assets, net of valuation allowance		87,823			108,910
Deferred tax liabilities:
Property, equipment and other assets		4,276			4,739
Deferred revenue		1,400			2,312
Unrealized gain on marketable securities		4,676			671
Other, net		2,583			2,081
Total deferred tax liabilities		12,935			9,803
Net deferred tax asset	$	74,888		$	99,107

At December 31, 2016, all federal net operating loss carryforwards had been used. Additionally, we had $26.0 million in tax-effected state net operating loss carryforwards. The operating loss carryforwards, if unused, will begin to expire in 2019.

At December 31, 2016 we had a valuation allowance of $13.8 million, an increase of $0.9 million from the prior year. $6.1 million of the total valuation allowance is related to various state net operating loss carryforwards where realization is more uncertain at this time due to the more limited carryforward periods that exist in certain states. The remaining $7.7 million is related to the amount by which the carrying value of our Metro Bonds for tax purposes exceeds our carrying value for book purposes that we believe realization is more uncertain at this time.

At December 31, 2016 and 2015, our total liability for uncertain tax positions was $0.4 million and $0.4 million, respectively, which has been offset against our state net operating loss carryforward deferred tax asset. The following table summarizes activity for the gross unrecognized tax benefit component of our total liability for uncertain tax positions for the years ended December 31, 2016, 2015 and 2014:

	Year Ended December 31,
	2016			2015			2014
	(Dollars in thousands)
Gross unrecognized tax benefits at beginning of year	$	488		$	905		$	371
Increases related to prior year tax positions		156			139			633
Decreases related to prior year tax positions		-			(475	)		(85	)
Lapse of applicable statute of limitations		(67	)		(81	)		(14	)
Gross unrecognized tax benefits at end of year	$	577		$	488		$	905

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Our liability for gross unrecognized tax benefits was $0.6million and $0.5 million at December 31, 2016 and 2015, respectively, all of which, if recognized, would reduce our effective tax rate.

The net expense for interest and penalties reflected in the consolidated statements of operations and comprehensive income for the years ended December 31, 2016, 2015 and 2014 was $0.3 million, $0 and $0.2 million, respectively. The corresponding liabilities in the consolidated balance sheets were $0 and $0 at December 31, 2016 and 2015, respectively.

We have taken positions in certain taxing jurisdictions for which it is reasonably possible that the total amounts of unrecognized tax benefits may decrease within the next twelve months. The possible decrease could result from the expiration of various statutes of limitation and the finalization of various state income tax matters. The estimated range of the reasonably possible decrease is $0.1 million to $0. 

The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction and various state jurisdictions. We are subject to U.S. federal income tax examination for calendar tax years ending 2013 through 2016. Additionally, we are subject to various state income tax examinations for the 2012 through 2017 calendar tax years.

14. Related Party Transactions

On January 30, 2017, the Company entered into a sublease agreement with CVentures, Inc. Larry A. Mizel, the Chief Executive Officer of the Company, is the President of CVentures, Inc. The sublease is for space CVentures, Inc. has continuously leased from the Company as disclosed in the Form 8-K filed July 27, 2005 and the Form 8-K filed March 28, 2006. The sublease term commenced November 1, 2016 and will continue through October 31, 2021, with an option to extend to October 31, 2026. The sublease agreement is for approximately 5,437 rentable square feet at a base rent that increases over the initial term from $26.50 to $28.68 per rentable square foot per year, and increasing over the extension term from $29.26 to $31.67 per rentable square foot per year. The sublease rent is an allocation of the rent under the master lease agreement based on the sublease square footage.

We previously entered into a transaction (the “Transaction”) with The Villages at Castle Rock Metropolitan District No. 6 (the “District”). The District is a quasi-municipal corporation and political subdivision of the State of Colorado. The Board of Directors of the District currently is comprised of employees of the Company. The District was formed to provide funding for certain land development costs associated with the construction of homes in our Cobblestone subdivision. Pursuant to the terms of the Transaction, the District sold to the Company approximately $22.5 million in Limited Tax General Obligation Capital Appreciation Bonds Series 2007 (the “Metro Bonds”) and a $1.6 million Limited Tax General Obligation Subordinate Bond (the “Subordinate Bond”) in exchange for title to approximately $28.6 million in land development improvements to the District.

During the years ended December 31, 2016, 2015 and 2014, we received payments from the Metro District in the amount of $1.2 million, $0.7 million and $2.0 million, respectively, and recorded $1.7 million, $1.4 million and $1.4 million, respectively, in interest income. The interest income amounts are included in interest and other income in the homebuilding section of our consolidated statements of operations and comprehensive income.

We contributed $1.0 million in cash to the MDC/Richmond American Homes Foundation (the “Foundation”) for each of the years ended December 31, 2016, 2015, and 2014. The Foundation is a Delaware non-profit corporation that was incorporated on September 30, 1999.

The Foundation is a non-profit organization operated exclusively for charitable, educational and other purposes beneficial to social welfare within the meaning of Section 501(c)(3) of the Internal Revenue Code. The following Directors and/or officers of the Company served as directors of the Foundation at December 31, 2016, all of whom serve without compensation:

Name	MDC Title
Larry A. Mizel	Chairman and Chief Executive Officer
David D. Mandarich	President

Three other individuals, who are independent of the Company, also serve as directors of the Foundation. All directors of the Foundation serve without compensation.

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15. Lines of Credit and Total Debt Obligations

Revolving Credit Facility. We have an unsecured revolving credit agreement (“Revolving Credit Facility”) with a group of lenders which may be used for general corporate purposes. This agreement has an aggregate commitment of $550 million (the “Commitment”) and was amended on December 18, 2015 to extend the maturity to December 18, 2020. Each lender may issue letters of credit in an amount up to 50% of its commitment. The facility permits an increase in the maximum Commitment amount to $1.0 billion upon our request, subject to receipt of additional commitments from existing or additional lenders and the consent of the designated agent and the co-administrative agent. As defined in the Revolving Credit Facility agreement, interest rates on outstanding borrowings are equal to the highest of (1) 0.0% or (2) a specified eurocurrency rate, federal funds effective rate or prime rate, plus a margin that is determined based on our credit ratings and leverage ratio. At any time at which our leverage ratio, as of the last day of the most recent calendar quarter, exceeds 55%, the aggregate principal amount of all consolidated senior debt borrowings outstanding may not exceed the borrowing base. There is no borrowing base requirement if our leverage ratio, as of the last day of the most recent calendar quarter, is 55% or less.

The Revolving Credit Facility is fully and unconditionally guaranteed, jointly and severally, by most of our homebuilding segment subsidiaries. The facility contains various representations, warranties and covenants that we believe are customary for agreements of this type. The financial covenants include a consolidated tangible net worth test and a leverage test, along with a consolidated tangible net worth covenant, all as defined in the facility agreement. A failure to satisfy the foregoing tests does not constitute an event of default, but can trigger a “term-out” of the facility. A breach of the consolidated tangible net worth covenant (but not the consolidated tangible net worth test) or a violation of anti-corruption or sanctions laws would result in an event of default.

The Revolving Credit Facility is subject to acceleration upon certain specified events of default, including breach of the consolidated tangible net worth covenant, a violation of anti-corruption or sanctions laws, failure to make timely payments, breaches of certain representations or covenants, failure to pay other material indebtedness, or another person becoming beneficial owner of 50% or more of our outstanding common stock. We believe we were in compliance with the representations, warranties and covenants included in the Revolving Credit Facility as of December 31, 2016.

We incur costs associated with unused commitment fees pursuant to the terms of the Revolving Credit Facility. At December 31, 2016 and 2015, there were $23.0 million and $22.5 million, respectively, in letters of credit outstanding, which reduced the amounts available to be borrowed under the Revolving Credit Facility. We had $15.0 million outstanding under the Revolving Credit Facility as of December 31, 2016 and 2015. As of December 31, 2016, availability under the Revolving Credit Facility was approximately $512.0 million.

Mortgage Repurchase Facility. HomeAmerican entered into an Amended and Restated Master Repurchase Agreement (the “Mortgage Repurchase Facility”) with U.S. Bank National Association(“USBNA”), effective September 16, 2016. The Mortgage Repurchase Facility amends and restates the prior Master Repurchase Agreement with USBNA dated as of November 12, 2008, as amended, which contained similar terms. The Mortgage Repurchase Facility increases the facility amount from $50 million to $75 million, extends the expiration date to September 15, 2017, adjusts the facility’s sublimits, expands the types of eligible loans, and reduces the facility fee. The Mortgage Repurchase Facility provides liquidity to HomeAmerican by providing for the sale of eligible mortgage loans to USBNA with an agreement by HomeAmerican to repurchase the mortgage loans at a future date. Until such mortgage loans are transferred back to HomeAmerican, the documents relating to such loans are held by USBNA, as custodian, pursuant to the Custody Agreement (“Custody Agreement”), dated as of November 12, 2008, by and between HomeAmerican and USBNA. In the event that an eligible mortgage loan becomes ineligible, as defined under the Mortgage Repurchase Facility, HomeAmerican may be required to repurchase the ineligible mortgage loan immediately. The maximum aggregate commitment of the Mortgage Repurchase Facility was temporarily increased on December 27, 2016 from $75 million to $125 million and was effective through January 25, 2017. The Mortgage Repurchase Facility also had a temporary increase in the maximum aggregate commitment from $50 million to $90 million from December 23, 2015 through January 31, 2016. At December 31, 2016 and December 31, 2015, HomeAmerican had $114.5 million and $88.6 million, respectively, of mortgage loans that HomeAmerican was obligated to repurchase under the Mortgage Repurchase Facility. Mortgage loans that HomeAmerican is obligated to repurchase under the Mortgage Repurchase Facility are accounted for as a debt financing arrangement and are reported as mortgage repurchase facility in the consolidated balance sheets. Advances under the Mortgage Repurchase Facility carry a price range that is LIBOR-based. The Mortgage Repurchase Facility contains various representations, warranties and affirmative and negative covenants that we believe are customary for agreements of this type. The negative covenants include, among others, (i) a minimum Adjusted Tangible Net Worth requirement, (ii) a maximum Adjusted Tangible Net Worth ratio, (iii) a minimum adjusted net income requirement, and (iv) a minimum Liquidity requirement. The foregoing capitalized terms are defined in the Mortgage Repurchase Facility. We believe HomeAmerican was in compliance with the representations, warranties and covenants included in the Mortgage Repurchase Facility as of December 31, 2016.

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Senior Notes. Our senior notes are not secured and, while the senior note indentures contain some restrictions on secured debt and other transactions, they do not contain financial covenants. Our senior notes are fully and unconditionally guaranteed on an unsecured basis, jointly and severally, by most of our homebuilding segment subsidiaries. We believe that we are in compliance with the representations, warranties and covenants in the senior note indentures.

On January 15, 2014, we issued $250 million of 5½% Senior Notes due 2024 (the “5½% Notes”). The 5½% Notes, which pay interest semi-annually in arrears on January 15 and July 15 of each year, with payments commencing July 15, 2014, are general unsecured obligations of MDC and rank equally and ratably with our other general unsecured and unsubordinated indebtedness. We received proceeds of $248.4 million, net of underwriting fees of $1.6 million.

During the 2014 first quarter, we redeemed our 5⅜% Senior Notes due December 2014 and, in the 2014 fourth quarter, we redeemed our 5⅜% Senior Notes due July 2015. As a result of these transactions, we paid $517.7 million to extinguish $500 million in debt principal and recorded a total of $18.2 million in losses on early extinguishments of debt.

Our debt obligations at December 31, 2016 and 2015, net of any unamortized debt issuance costs or discount, were as follows:

	December 31,
	2016		2015
	(Dollars in thousands)
$250 Million 5⅝% Senior Notes due February 2020, net	$	246,915	$	246,032
$250 Million 5½% Senior Notes due January 2024, net		248,391		248,209
$350 Million 6% Senior Notes due January 2043, net		346,340		346,283
Total	$	841,646	$	840,524

16. Commitments and Contingencies

Surety Bonds and Letters of Credit. We are required to obtain surety bonds and letters of credit in support of our obligations for land development and subdivision improvements, homeowner association dues, warranty work, contractor license fees and earnest money deposits. At December 31, 2016, we had outstanding surety bonds and letters of credit totaling $178.8 million and $52.6 million, respectively, including $29.6 million in letters of credit issued by HomeAmerican. The estimated cost to complete obligations related to these bonds and letters of credit were approximately $48.7 million and $18.2 million, respectively. All letters of credit as of December 31, 2016, excluding those issued by HomeAmerican, were issued under our unsecured Revolving Credit Facility (see Note 15 for further discussion of the Revolving Credit Facility). We expect that the obligations secured by these performance bonds and letters of credit generally will be performed in the ordinary course of business and in accordance with the applicable contractual terms. To the extent that the obligations are performed, the related performance bonds and letters of credit should be released and we should not have any continuing obligations. However, in the event any such performance bonds or letters of credit are called, our indemnity obligations could require us to reimburse the issuer of the performance bond or letter of credit.

We have made no material guarantees with respect to third-party obligations.

Litigation Reserves. Because of the nature of the homebuilding business, we have been named as defendants in various claims, complaints and other legal actions arising in the ordinary course of business, including product liability claims and claims associated with the sale and financing of homes. In the opinion of management, the outcome of these ordinary course matters will not have a material adverse effect upon our financial condition, results of operations or cash flows. At December 31, 2016 and 2015, respectively, we had $1.9 million and $3.6 million of legal accruals.

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Operating Leases.  We have non-cancelable operating leases primarily associated with our office facilities. Rent expense under cancelable and non-cancelable operating leases totaled $5.4 million, $5.0 million and $4.9 million in 2016, 2015 and 2014, respectively, and is included in either selling, general and administrative expenses in the homebuilding section or expenses in the financial services section of our consolidated statements of operations and comprehensive income. The table below shows the future minimum payments under non-cancelable operating leases at December 31, 2016.

	Year Ended
	December 31,
	(Dollars in thousands)
2017	$	6,008
2018		5,293
2019		4,923
2020		4,735
2021		4,567
Thereafter		21,566
Total	$	47,092

17. Concentration of Third-Party Mortgage Purchasers

The following table sets forth the percent of mortgage loans sold by HomeAmerican to its primary third party purchasers during 2016, 2015 and 2014. No other third parties purchased greater than 10 percent of our mortgage loans during 2016, 2015 or 2014.

	Year Ended December 31,
	2016			2015			2014
Wells Fargo Funding, Inc.		26	%		10	%		37	%
PennyMac Loan Services, LLC		15	%		14	%		23	%
Fannie Mae		10	%		7	%		10	%
JP Morgan Chase Bank, N.A.		8	%		32	%		20	%

18. Stockholders' Equity

Stock Dividends. On November 21, 2016 MDC’s board of directors declared a 5% stock dividend that was distributed on December 20, 2016 to shareholders of record on December 6, 2016.

Common Stock Repurchase Program. At December 31, 2016, we were authorized to repurchase up to 4,000,000 shares of our common stock. We did not repurchase any shares of our common stock during the years ended December 31, 2016, 2015 or 2014. We did not hold any treasury stock at December 31, 2016.

19. Equity Incentive and Employee Benefit Plans

A summary of our equity incentive plans follows. All share amounts have been adjusted for the stock dividend during distributed during 2016, as applicable.

Employee Equity Incentive Plans. Effective March 2001, we adopted the M.D.C. Holdings, Inc. 2001 Equity Incentive Plan (the “2001 Equity Incentive Plan”). Non-qualified option awards previously granted generally vested over periods of up to seven years and expire ten years after the date of grant. Restricted stock awards generally were granted with vesting terms of up to five years. On March 26, 2011, the 2001 Equity Incentive Plan terminated and all stock option grants and restricted stock awards outstanding at the time of the plan termination may continue to be exercised, or become free of restrictions, in accordance with their terms. A total of 1.7 million shares of MDC common stock were reserved for issuance under the 2001 Equity Incentive Plan as of December 31, 2016.

On April 27, 2011, our shareholders approved the M.D.C Holdings, Inc. 2011 Equity Incentive Plan (the “2011 Equity Incentive Plan”), which provides for the grant of non-qualified stock options, incentive stock options, stock appreciation rights, restricted stock, restricted stock units and other equity awards to employees of the Company. Stock options granted under the 2011 Equity Incentive Plan have an exercise price that is at least equal to the fair market value of our common stock on the date the stock option is granted, generally vest in periods up to five years and expire ten years after the date of grant. At December 31, 2016, a total of 4.1 million shares of MDC common stock were reserved for issuance under the 2011 Equity Incentive Plan, of which 0.2 million shares remained available for grant under this plan as of December 31, 2016.

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Director Equity Incentive Plans. Effective March 2001, we adopted the M.D.C. Holdings, Inc. Stock Option Plan for Non-Employee Directors (the “2001 Director Stock Option Plan”). Each option granted under the Director Stock Option Plan vested immediately and expires ten years from the date of grant. The 2001 Director Stock Option Plan terminated on May 21, 2012 and stock options outstanding at the time of plan termination may continue to be exercised in accordance with their terms. A total of 0.4 million shares of MDC common stock were reserved for issuance under the 2001 Director Stock Option Plan as of December 31, 2016.

Effective April 27, 2011, our shareholders approved the M.D.C. Holdings, Inc. 2011 Stock Option Plan for Non-Employee Directors (the “2011 Director Stock Option Plan”), which provides for the grant of non-qualified stock options to non-employee directors of the Company. Effective March 29, 2016, our shareholders approved an amendment to the 2011 Director Stock Option Plan to provide the non-employee directors with an alternative to elect to receive an award of restricted stock in lieu of a stock option. Pursuant to the 2011 Director Stock Option Plan as amended, on August 1 of each year, each non-employee director is granted either (1) an option to purchase 25,000 shares of MDC common stock or (2) shares of restricted stock having an expense to the Company that is equivalent to the stock option. Each option granted under the 2011 Director Stock Option Plan vests immediately, becomes exercisable six months after grant, and expires ten years from the date of grant. The option exercise price must be equal to the fair market value (as defined in the plan) of our common stock on the date of grant of the option. Each restricted stock award granted under the 2011 Director Stock Option Plan vests seven months after the grant date. At December 31, 2016, a total of 1.2 million shares of MDC common stock were reserved for issuance under the 2011 Director Stock Option Plan and 0.6 million shares remained available for grant under this plan as of December 31, 2016.

Employee Benefit Plan. We have a defined contribution plan pursuant to Section 401(k) of the Internal Revenue Code where each employee may elect to make before-tax contributions up to the current tax limits. We match employee contributions on a discretionary basis and, as of December 31, 2016, we had accrued $1.3 million related to the match that is expected to be contributed in the first quarter of 2017 for 2016 activity. At December 31, 2015, we had accrued $1.0 million related to the match that was contributed during the first quarter of 2016 for 2015 activity. At December 31, 2014, we had accrued $0.9 million related to the match that was contributed during the first quarter of 2015 for 2014 activity.

20.          Stock Based Compensation

All share and per share amounts, as applicable, have been adjusted for the stock dividend distributed in December 2016.

Determining Fair Value of Share-Based Payment Awards.  Most options that we grant contain only a service condition (“Service-Based” option) and therefore vest over a specified number of years as long as the employee is employed by the Company. For Service-Based options, we use the Black-Scholes option pricing model to determine the grant date fair value. During 2015, we also granted 1 million Market-Based options to each of the Chief Executive Officer and the Chief Operating Officer. These options were valued using a Monte Carlo simulation model. Refer to the “Market-Based Stock Option Awards” section below.

The fair values for Service-Based options granted for the years ended December 31, 2016, 2015 and 2014 were estimated using the Black-Scholes option pricing model with the below weighted-average assumptions.

	Year Ended December 31,
	2016			2015			2014
Expected lives of options (in years)		5.0			3.9			4.0
Expected volatility		32.1	%		29.6	%		43.2	%
Risk free interest rate		1.6	%		1.2	%		1.3	%
Dividend yield rate		4.4	%		3.5	%		3.5	%

Based on calculations using the Black-Scholes option pricing model, the weighted-average grant date fair valuesof stock options granted during 2016, 2015 and 2014 were $4.04, $4.55 and $7.12, respectively. The expected life of options in the table above represents the weighted-average period for which the options are expected to remain outstanding and are derived primarily from historical exercise patterns. The expected volatility is determined based on our review of the implied volatility that is derived from the price of exchange traded options of the Company. The risk-free interest rate assumption is determined based upon observed interest rates appropriate for the expected term of our employee stock options. The dividend yield assumption is based on our history of dividend payouts.

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An annual forfeiture rate is estimated at the time of grant for all share-based payment awards which contain service and/or performance conditions. That rate is revised, if necessary, in subsequent periods if the actual forfeiture rate differs from our estimate.

Stock Option Award Activity.  Stock option activity under our option plans, restated as applicable for stock dividends, for the years ended December 31, 2016, 2015 and 2014 were as follows.

	Year Ended December 31,
	2016					2015					2014
				Weighted-					Weighted-					Weighted-
				Average					Average					Average
	Number of			Exercise		Number of			Exercise		Number of			Exercise
	Shares			Price		Shares			Price		Shares			Price
Outstanding Stock Option Activity
Outstanding, beginning of year		6,706,123		$	30.46		5,054,623		$	35.91		5,469,948		$	38.03
Granted (1)		42,000			21.68		2,359,500			27.05		268,625			26.96
Exercised		-			-		(31,250	)		21.21		(18,000	)		20.82
Forfeited		(10,000	)		29.80		(121,250	)		28.61		(23,750	)		25.16
Cancelled		(586,000	)		53.26		(555,500	)		66.51		(642,200	)		62.43
Outstanding, end of year		6,152,123		$	28.23		6,706,123		$	30.46		5,054,623		$	35.91

	Year Ended December 31,
	2016					2015					2014
				Weighted-					Weighted-					Weighted-
	Number of			Average		Number of			Average		Number of			Average
	Shares			Fair Value		Shares			Fair Value		Shares			Fair Value
Unvested Stock Option Activity
Outstanding, beginning of year		2,344,061		$	5.63		483,312		$	9.20		872,468		$	8.09
Granted (1)		42,000			4.04		2,359,500			5.26		268,625			7.17
Vested		(85,095	)		8.13		(377,501	)		6.76		(634,031	)		8.30
Forfeited		(10,000	)		6.61		(121,250	)		9.33		(23,750	)		7.60
Unvested, end of year		2,290,966		$	5.50		2,344,061		$	5.63		483,312		$	9.20

⁽¹⁾ Total options granted in 2015 include a total of 2,100,000 Market-Based options granted to our CEO and COO. See further discussion regarding these grants in the “Market-Based Stock Option Awards” section below.

The total intrinsic value of options (difference between price per share as of the exercise date and the exercise price, times the number of options outstanding) exercised during the years ended December 31, 2015 and 2014 was $0.2 million and $0.1 million, respectively. No options were exercised during the year ended December 31, 2016.

The following table provides data for our stock options that are vested or expected to vest as of December 31, 2016.

Exercisable or expected to vest
Number outstanding		6,098,279
Weighted-average exercise price	$	28.25
Aggregate intrinsic value (in thousands)	$	3,149
Weighted-average remaining contractual term (years)		5.59
Exercisable
Number outstanding		3,861,157
Weighted-average exercise price	$	28.96
Aggregate intrinsic value (in thousands)	$	2,970
Weighted-average remaining contractual term (years)		4.01

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The aggregate intrinsic values in the tables above represent the total pretax intrinsic values (the difference between the closing price of MDC’s common stock on the last trading day of fiscal 2016 and the exercise price, multiplied by the number of in-the-money stock option shares) that would have been received by the option holders had all in-the-money outstanding stock options been exercised on December 31, 2016.

The following table summarizes information associated with outstanding and exercisable stock options at December 31, 2016.

			Options Outstanding						Options Exercisable
					Weighted-						Weighted-
					Average						Average
					Remaining		Weighted-				Remaining		Weighted-
					Contractual		Average				Contractual		Average
			Number		Life (in		Exercise		Number		Life (in		Exercise
Range of Exercise Price			Outstanding		years)		Price		Outstanding		years)		Price
$ 15.01	-	$ 20.00		42,000		5.07	$	19.95		42,000		5.07	$	19.95
$ 20.01	-	$ 25.00		1,215,375		5.44		23.21		1,119,346		5.21		23.25
$ 25.01	-	$ 30.00		3,424,748		7.08		27.47		1,249,937		4.88		28.16
$ 30.01	-	$ 35.00		863,625		3.14		31.82		862,312		3.14		31.82
$ 35.01	-	$ 40.00		606,375		1.23		38.02		587,562		1.08		38.04
Total				6,152,123		5.61	$	28.23		3,861,157		4.01	$	28.96

Total compensation expense relating to stock options was $5.6 million, $8.1 million and $3.3 million for the years ended December 31, 2016, 2015 and 2014, respectively. Our recognized tax benefit from this expense for the years ended December 31, 2016, 2015 and 2014 was $2.1 million, $3.1 million and $1.3 million, respectively.

As of December 31, 2016, $0.7 million of total unrecognized compensation cost related to stock options was expected to be recognized as an expense by the Company in the future over a weighted-average period of approximately 2.0 years.

Our realized tax benefit from stock options exercised for the years ended December 31, 2015 and 2014 was $0.1 million and $0, respectively. No stock options were exercised during the year ended December 31, 2016.

Market-Based Stock Option Awards. On May 18, 2015, the Company’s Compensation Committee granted a non-qualified stock option to each of the Chief Executive Officer and the Chief Operating Officer for 1,050,000 shares of common stock under the Company’s 2011 Equity Incentive Plan. The terms of each option provide that, over a five year period, one third of the option shares will vest as of each of the third, fourth, and fifth anniversary dates of the grant of the option; provided that all unvested option shares will vest immediately in the event the closing price of the Company’s stock, as reported by the New York Stock Exchange, in any 20 out of 30 consecutive trading days closes at a price equal to or greater than 120% of the closing price on the date of grant (the “market-based condition”). The option exercise price is equal to the closing price of the Company’s common stock on the date of grant, which was $27.10 and the expiration date of each option is May 18, 2025. As of December 31, 2016, no shares are exercisable.

In accordance with ASC 718, the market-based awards were assigned a fair value of $5.35 per share (total value of $11.2 million) on the date of grant using a Monte Carlo simulation model and, as calculated under that model, all expense was recorded on a straight-line basis through the end of the 2016 second quarter. The following assumptions were used in the model.

Expected volatility	27.8	%
Risk free interest rate	2.2	%
Dividend yield rate	3.5	%

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Restricted and Unrestricted Stock Award Activity. Non-vested restricted stock awards, restated as applicable for stock dividends, at December 31, 2016, 2015 and 2014 and changes during those years were as follows:

	Year Ended December 31,
	2016					2015					2014
				Weighted-					Weighted-					Weighted-
				Average					Average					Average
	Number of			Grant Date		Number of			Grant Date		Number of			Grant Date
	Shares			Fair Value		Shares			Fair Value		Shares			Fair Value
Unvested, beginning of year		99,442		$	29.75		184,201		$	32.26		298,991		$	32.87
Granted		154,703		$	22.06		36,896			26.44		39,381			30.85
Vested		(64,535	)	$	30.71		(111,719	)		32.86		(141,454	)		33.08
Forfeited		-			N/A		(9,936	)		29.11		(12,717	)		33.05
Unvested, end of year		189,610		$	23.15		99,442		$	29.75		184,201		$	32.26

Total compensation expense relating to restricted stock awards was $1.9 million, $2.0 million and $2.7 million for the years ended December 31, 2016, 2015 and 2014, respectively. Our recognized tax benefit from this expense for the years ended December 31, 2016, 2015 and 2014 was $0.7 million, $0.8 million and $1.0 million, respectively.

At December 31, 2016, there was $2.5 million of unrecognized compensation expense related to non-vested restricted stock awards that is expected to be recognized as an expense by us in the future over a weighted-average period of approximately 2.9 years. The total intrinsic value of unvested restricted stock awards (the closing price of MDC’s common stock on the last trading day of fiscal 2016 multiplied by the number of unvested awards) at December 31, 2016 was $4.9 million. The total intrinsic value of restricted stock which vested during each of the years ended December 31, 2016, 2015 and 2014 was $1.3 million, $2.9 million and $4.2 million, respectively.

Performance Stock Unit Awards. On July 25, 2016, the Company’s Compensation Committee granted long term performance stock unit awards (“PSUs”) to each of the Chief Executive Officer, the Chief Operating Officer, and the Chief Financial Officer under the Company’s 2011 Equity Incentive Plan. The PSUs will be earned based upon the Company’s performance, over a three year period commencing July 1, 2016 and ending June 30, 2019 (the “Performance Period”), measured by increasing average home sale revenues over the Base Period. The “Base Period” for the awards is July 1, 2015 to June 30, 2016. The awards are conditioned upon the Company achieving a minimum average gross margin from home sales percentage (excluding impairments) of at least fifteen percent (15%) over the Performance Period. Target goals of 105,000 shares for each of the Chief Executive Officer and the Chief Operating Officer and 26,250 shares for the Chief Financial Officer (the “Target Goals”) will be earned if the Company’s three year average home sale revenues during the Performance Period (“Performance Revenues”) exceed the home sale revenues during the Base Period (“Base Revenues”) by at least 10% but less than 20%. If Performance Revenues exceed the Base Revenues by at least 5% but less than 10%, fifty percent of the Target Goals will be earned. If Performance Revenues exceed the Base Revenues by at least 20%, twice the Target Goals will be earned.

In accordance with ASC 718, the PSUs are valued at the fair value on the date of grant. The grant date fair value of these awards was $22.93 per share and the maximum potential expense that could be recognized by the Company if the maximum of the performance targets were met would be approximately $10.8 million. ASC 718 prohibits recognition of expense associated with performance based stock awards until achievement of the performance targets are probable of occurring. As of December 31, 2016, the Company concluded that achievement of the performance targets remains substantially uncertain and the level of probability required to record compensation expense were not met.

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21. Results of Quarterly Operations (Unaudited) (Restated for Stock Dividends)

	Quarter
	First			Second			Third			Fourth
2016	(Dollars in thousands, except per share amounts)
Total revenue	$	407,761		$	587,334		$	595,420		$	736,329
Home sales revenue	$	394,420		$	571,195		$	575,722		$	715,816
Asset impairments	$	-		$	(1,600	)	$	(4,700	)	$	(3,873	)
Gross margin from home sales (including impairments)		16.3	%		16.4	%		15.5	%		16.1	%
Homebuilding selling, general and administrative expenses	$	56,277		$	64,440		$	61,904		$	67,919
Income before income taxes	$	14,273		$	40,458		$	38,052		$	58,998
Net income	$	9,563		$	26,913		$	26,359		$	40,376
Earnings per share:
Basic	$	0.19		$	0.52		$	0.51		$	0.78
Diluted	$	0.19		$	0.52		$	0.51		$	0.78
2015
Total revenue	$	388,510		$	473,128		$	468,487		$	578,911
Home sales revenue	$	377,009		$	461,708		$	454,740		$	554,432
Asset impairments	$	(350	)	$	-		$	(4,351	)	$	(5,292	)
Gross margin from home sales (including impairments)		15.4	%		16.6	%		16.4	%		16.1	%
Homebuilding selling, general and administrative expenses	$	50,532		$	54,781		$	57,444		$	63,560
Income before income taxes	$	13,326		$	31,882		$	23,658		$	32,558
Net income	$	8,420		$	19,998		$	14,778		$	22,595
Earnings per share:
Basic	$	0.16		$	0.39		$	0.29		$	0.44
Diluted	$	0.16		$	0.39		$	0.29		$	0.44

22.   Supplemental Guarantor Information

Our senior notes are fully and unconditionally guaranteed on an unsecured basis, jointly and severally, by the following subsidiaries (collectively, the "Guarantor Subsidiaries"), which are 100%-owned subsidiaries of the Company.

● M.D.C. Land Corporation

● RAH of Florida, Inc.

● Richmond American Construction, Inc.

● Richmond American Homes of Arizona, Inc.

● Richmond American Homes of Colorado, Inc.

● Richmond American Homes of Delaware, Inc.

● Richmond American Homes of Florida, LP

● Richmond American Homes of Illinois, Inc.

● Richmond American Homes of Maryland, Inc.

● Richmond American Homes of Nevada, Inc.

● Richmond American Homes of New Jersey, Inc.

● Richmond American Homes of Pennsylvania, Inc.

● Richmond American Homes of Utah, Inc.

● Richmond American Homes of Virginia, Inc.

● Richmond American Homes of Washington, Inc.

The senior note indentures do not provide for a suspension of the guarantees, but do provide that any Guarantor may be released from its guarantee so long as (1) no default or event of default exists or would result from release of such guarantee, (2) the Guarantor being released has consolidated net worth of less than 5% of the Company’s consolidated net worth as of the end of the most recent fiscal quarter, (3) the Guarantors released from their guarantees in any year-end period comprise in the aggregate less than 10% (or 15% if and to the extent necessary to permit the cure of a default) of the Company’s consolidated net worth as of the end of the most recent fiscal quarter, (4) such release would not have a material adverse effect on the homebuilding business of the Company and its subsidiaries and (5) the Guarantor is released from its guarantee(s) under all Specified Indebtedness (other than by reason of payment under its guarantee of Specified Indebtedness). Upon delivery of an officers’ certificate and an opinion of counsel stating that all conditions precedent provided for in the indenture relating to such transactions have been complied with and the release is authorized, the guarantee will be automatically and unconditionally released. “Specified Indebtedness” means indebtedness under the senior notes, the Company’s Indenture dated as of December 3, 2002, the Revolving Credit Facility, and any refinancing, extension, renewal or replacement of any of the foregoing.

We have determined that separate, full financial statements of the Guarantor Subsidiaries would not be material to investors and, accordingly, supplemental financial information for the Guarantor and Non-Guarantor Subsidiaries is presented below.

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M.D.C. Holdings, Inc.

Supplemental Condensed Combining Balance Sheet

	December 31, 2016
					Non-
			Guarantor		Guarantor		Eliminating			Consolidated
	MDC		Subsidiaries		Subsidiaries		Entries			MDC
	Dollars in thousands
ASSETS
Homebuilding:
Cash and cash equivalents	$	255,679	$	3,408	$	-	$	-		$	259,087
Marketable securities		59,770		-		-		-			59,770
Restricted cash		-		3,778		-		-			3,778
Trade and other receivables		5,380		39,247		-		(2,135	)		42,492
Inventories:
Housing completed or under construction		-		874,199		-		-			874,199
Land and land under development		-		884,615		-		-			884,615
Total inventories		-		1,758,814		-		-			1,758,814
Intercompany receivables		1,475,291		2,803		5,289		(1,483,383	)		-
Investment in subsidiaries		295,214		-		-		(295,214	)		-
Property and equipment, net		25,495		2,546		-		-			28,041
Deferred tax assets, net		74,119		-		-		769			74,888
Metropolitan district bond securities (related party)		30,162		-		-		-			30,162
Other assets		5,267		55,196		-		-			60,463
Total Homebuilding Assets		2,226,377		1,865,792		5,289		(1,779,963	)		2,317,495
Financial Services:
Cash and cash equivalents		-		-		23,822		-			23,822
Marketable securities		-		-		36,436		-			36,436
Intercompany receivables		-		-		40,042		(40,042	)		-
Mortgage loans held-for-sale, net		-		-		138,774		-			138,774
Other assets		-		-		12,831		(769	)		12,062
Total Financial Services Assets		-		-		251,905		(40,811	)		211,094
Total Assets	$	2,226,377	$	1,865,792	$	257,194	$	(1,820,774	)	$	2,528,589
LIABILITIES AND EQUITY
Homebuilding:
Accounts payable	$	-	$	42,088	$	-	$	-		$	42,088
Accrued liabilities		1,527		136,615		143		6,281			144,566
Advances and notes payable to parent and subsidiaries		48,134		1,445,276		26,266		(1,519,676	)		-
Revolving credit facility		15,000		-		-		-			15,000
Senior notes, net		841,646		-		-		-			841,646
Total Homebuilding Liabilities		906,307		1,623,979		26,409		(1,513,395	)		1,043,300
Financial Services:
Accounts payable and accrued liabilities		-		-		59,150		(8,416	)		50,734
Advances and notes payable to parent and subsidiaries		-		-		3,749		(3,749	)		-
Mortgage repurchase facility		-		-		114,485		-			114,485
Total Financial Services Liabilities		-		-		177,384		(12,165	)		165,219
Total Liabilities		906,307		1,623,979		203,793		(1,525,560	)		1,208,519
Equity:
Total Stockholders' Equity		1,320,070		241,813		53,401		(295,214	)		1,320,070
Total Liabilities and Stockholders' Equity	$	2,226,377	$	1,865,792	$	257,194	$	(1,820,774	)	$	2,528,589

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M.D.C. Holdings, Inc.

Supplemental Condensed Combining Balance Sheet

	December 31, 2015
					Non-
			Guarantor		Guarantor			Eliminating			Consolidated
	MDC		Subsidiaries		Subsidiaries			Entries			MDC
	(Dollars in thousands)
ASSETS
Homebuilding:
Cash and cash equivalents	$	141,245	$	3,097	$	-		$	-		$	144,342
Marketable securities		92,387		-		-			-			92,387
Restricted cash		-		3,750		-			-			3,750
Trade and other receivables		5,304		20,297		-			(2,287	)		23,314
Inventories:
Housing completed or under construction		-		747,036		-			-			747,036
Land and land under development		-		1,016,926		-			-			1,016,926
Total inventories		-		1,763,962		-			-			1,763,962
Intercompany receivables		1,509,551		2,850		5,291			(1,517,692	)		-
Investment in subsidiaries		267,191		-		-			(267,191	)		-
Property and equipment, net		26,073		2,153		-			-			28,226
Deferred tax assets, net		97,083		-		-			2,024			99,107
Metropolitan district bond securities (related party)		25,911		-		-			-			25,911
Other assets, net		5,973		59,421		-			-			65,394
Total Homebuilding Assets		2,170,718		1,855,530		5,291			(1,785,146	)		2,246,393
Financial Services:
Cash and cash equivalents		-		-		36,646			-			36,646
Marketable securities		-		-		11,307			-			11,307
Intercompany receivables		-		-		39,234			(39,234	)		-
Mortgage loans held-for-sale, net		-		-		115,670			-			115,670
Other assets, net		-		-		7,907			(2,024	)		5,883
Total Financial Services Assets		-		-		210,764			(41,258	)		169,506
Total Assets	$	2,170,718	$	1,855,530	$	216,055		$	(1,826,404	)	$	2,415,899
LIABILITIES AND EQUITY
Homebuilding:
Accounts payable	$	-	$	40,472	$	-		$	-		$	40,472
Accrued liabilities		11,527		108,445		(33	)		2,947			122,886
Advances and notes payable to parent and subsidiaries		47,375		1,480,589		25,536			(1,553,500	)		-
Revolving credit facility		15,000		-		-			-			15,000
Senior notes, net		840,524		-		-			-			840,524
Total Homebuilding Liabilities		914,426		1,629,506		25,503			(1,550,553	)		1,018,882
Financial Services:
Accounts payable and accrued liabilities		-		-		57,348			(5,234	)		52,114
Advances and notes payable to parent and subsidiaries		-		-		3,426			(3,426	)		-
Mortgage repurchase facility		-		-		88,611			-			88,611
Total Financial Services Liabilities		-		-		149,385			(8,660	)		140,725
Total Liabilities		914,426		1,629,506		174,888			(1,559,213	)		1,159,607
Equity:
Total Stockholders' Equity		1,256,292		226,024		41,167			(267,191	)		1,256,292
Total Liabilities and Stockholders' Equity	$	2,170,718	$	1,855,530	$	216,055		$	(1,826,404	)	$	2,415,899

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M.D.C. Holdings, Inc.

Supplemental Condensed Combining Statements of Operations and Comprehensive Income

	Year Ended December 31, 2016
							Non-
				Guarantor			Guarantor			Eliminating			Consolidated
	MDC			Subsidiaries			Subsidiaries			Entries			MDC
	(Dollars in thousands)
Homebuilding:
Revenues	$	-		$	2,262,853		$	-		$	-		$	2,262,853
Cost of Sales		-			(1,888,957	)		(300	)		-			(1,889,257	)
Inventory impairments		-			(10,173	)		-			-			(10,173	)
Gross margin		-			363,723			(300	)		-			363,423
Selling, general, and administrative expenses		(39,632	)		(210,546	)		-			(362	)		(250,540	)
Equity income of subsidiaries		125,431			-			-			(125,431	)		-
Interest and other income		5,236			2,188			5			(417	)		7,012
Other expense		1			(3,448	)		-			-			(3,447	)
Other-than-temporary impairment of marketable securities		(1,070	)		-			-			-			(1,070	)
Homebuilding pretax income (loss)		89,966			151,917			(295	)		(126,210	)		115,378
Financial Services:
Financial services pretax income		-			-			35,624			779			36,403
Income before income taxes		89,966			151,917			35,329			(125,431	)		151,781
Provision for income taxes		13,245			(48,613	)		(13,202	)		-			(48,570	)
Net income	$	103,211		$	103,304		$	22,127		$	(125,431	)	$	103,211
Other comprehensive income related to available-for-sale securities, net of tax		6,356			-			1,084			(1,084	)		6,356
Comprehensive income	$	109,567		$	103,304		$	23,211		$	(126,515	)	$	109,567

	Year Ended December 31, 2015
							Non-
				Guarantor			Guarantor			Eliminating			Consolidated
	MDC			Subsidiaries			Subsidiaries			Entries			MDC
	(Dollars in thousands)
Homebuilding:
Revenues	$	-		$	1,860,226		$	-		$	-		$	1,860,226
Cost of Sales		-			(1,551,907	)		(100	)		-			(1,552,007	)
Inventory impairments		-			(9,993	)		-			-			(9,993	)
Gross margin		-			298,326			(100	)		-			298,226
Selling, general, and administrative expenses		(40,356	)		(185,403	)		-			(558	)		(226,317	)
Equity income of subsidiaries		91,079			-			-			(91,079	)		-
Interest and other income		4,635			2,651			8			(585	)		6,709
Other expense		(6	)		(4,202	)		-			-			(4,208	)
Other-than-temporary impairment of marketable securities		(3,969	)		-			-			-			(3,969	)
Homebuilding pretax income (loss)		51,383			111,372			(92	)		(92,222	)		70,441
Financial Services:
Financial services pretax income		-			-			29,840			1,143			30,983
Income before income taxes		51,383			111,372			29,748			(91,079	)		101,424
Provision for income taxes		14,408			(39,128	)		(10,913	)		-			(35,633	)
Net income	$	65,791		$	72,244		$	18,835		$	(91,079	)	$	65,791
Other comprehensive income related to available-for-sale securities, net of tax		5,260			-			(674	)		674			5,260
Comprehensive income	$	71,051		$	72,244		$	18,161		$	(90,405	)	$	71,051

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M.D.C. Holdings, Inc.

Supplemental Condensed Combining Statement of Operations and Comprehensive Income

	Year Ended December 31, 2014
							Non-
				Guarantor			Guarantor			Eliminating			Consolidated
	MDC			Subsidiaries			Subsidiaries			Entries			MDC
	(Dollars in thousands)
Homebuilding:
Revenues	$	-		$	1,650,631		$	-		$	-		$	1,650,631
Cost of Sales		-			(1,368,140	)		(40	)		-			(1,368,180	)
Inventory impairments		-			(1,760	)		-			-			(1,760	)
Gross margin		-			280,731			(40	)		-			280,691
Selling, general, and administrative expenses		(38,290	)		(164,287	)		-			(676	)		(203,253	)
Equity income of subsidiaries		86,223			-			-			(86,223	)		-
Interest and other income		24,824			1,517			15			(46	)		26,310
Interest expense		(685	)		-			-			-			(685	)
Other expense		(8	)		(4,805	)		-			-			(4,813	)
Losses from early extinguishments of debt		(18,153	)		-			-			-			(18,153	)
Other-than-temporary impairment of marketable securities		(4,293	)		-			-			-			(4,293	)
Homebuilding pretax income (loss)		49,618			113,156			(25	)		(86,945	)		75,804
Financial Services:
Financial services pretax income		-			-			23,949			722			24,671
Income before income taxes		49,618			113,156			23,924			(86,223	)		100,475
Provision for income taxes		13,525			(42,044	)		(8,813	)		-			(37,332	)
Net income	$	63,143		$	71,112		$	15,111		$	(86,223	)	$	63,143
Other comprehensive income related to available-for-sale securities, net of tax		(1,120	)		-			(22	)		22			(1,120	)
Comprehensive income	$	62,023		$	71,112		$	15,089		$	(86,201	)	$	62,023

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M.D.C. Holdings, Inc.

Supplemental Condensed Combining Statement of Cash Flows

	Year Ended December 31, 2016
							Non-
				Guarantor			Guarantor			Eliminating			Consolidated
	MDC			Subsidiaries			Subsidiaries			Entries			MDC
	(Dollars in thousands)
Net cash provided by (used in) operating activities	$	(4,807	)	$	124,929		$	(4,205	)	$	-		$	115,917
Net cash provided by (used in) investing activities		168,329			(1,481	)		(23,779	)		(133,851	)		9,218
Financing activities:
Payments from (advances to) subsidiaries		-			(123,137	)		(10,714	)		133,851			-
Advances on mortgage repurchase facility, net		-			-			25,874			-			25,874
Proceeds from issuance of senior notes		-			-			-			-			-
Repayment of senior notes		-			-			-			-			-
Advances on revolving credit facility, net		-			-			-			-			-
Dividend payments		(49,088	)		-			-			-			(49,088	)
Excess tax benefits from stock-based compensation		-			-			-			-			-
Proceeds from exercise of stock options		-			-			-			-			-
Net cash provided by (used in) financing activities		(49,088	)		(123,137	)		15,160			133,851			(23,214	)
Net increase (decrease) in cash and cash equivalents		114,434			311			(12,824	)		-			101,921
Cash and cash equivalents:
Beginning of period		141,245			3,097			36,646			-			180,988
End of period	$	255,679		$	3,408		$	23,822		$	-		$	282,909

	Year Ended December 31, 2015
							Non-
				Guarantor			Guarantor			Eliminating			Consolidated
	MDC			Subsidiaries			Subsidiaries			Entries			MDC
	(Dollars in thousands)
Net cash provided by (used in) operating activities	$	31,030		$	(16,109	)	$	(14,706	)	$	-		$	215
Net cash provided by (used in) investing activities		38,467			(811	)		3,260			6,446			47,362
Financing activities:
Payments from (advances to) subsidiaries		-			17,326			(10,880	)		(6,446	)		-
Advances on mortgage repurchase facility, net		-			-			27,789			-			27,789
Proceeds from issuance of senior notes		-			-			-			-			-
Repayment of senior notes		-			-			-			-			-
Advances on revolving credit facility, net		-			-			-			-			-
Dividend payments		(48,868	)		-			-			-			(48,868	)
Excess tax benefits from stock-based compensation		-			-			-			-			-
Proceeds from exercise of stock options		665			-			-			-			665
Net cash provided by (used in) financing activities		(48,203	)		17,326			16,909			(6,446	)		(20,414	)
Net increase (decrease) in cash and cash equivalents		21,294			406			5,463			-			27,163
Cash and cash equivalents:
Beginning of period		119,951			2,691			31,183			-			153,825
End of period	$	141,245		$	3,097		$	36,646		$	-		$	180,988

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M.D.C. Holdings, Inc.

Supplemental Condensed Combining Statement of Cash Flows

	Year Ended December 31, 2014
							Non-
				Guarantor			Guarantor			Eliminating			Consolidated
	MDC			Subsidiaries			Subsidiaries			Entries			MDC
	(Dollars in thousands)
Net cash provided by (used in) operating activities	$	(62,289	)	$	(124,317	)	$	22,959		$	-		$	(163,647	)
Net cash provided by (used in) investing activities		339,754			(1,093	)		3,692			80,727			423,080
Financing activities:
Payments from (advances to) subsidiaries		-			124,647			(43,920	)		(80,727	)		-
Advances on mortgage repurchase facility, net		-			-			(2,252	)		-			(2,252	)
Proceeds from the issuance of senior notes		248,375			-			-			-			248,375
Repayment of senior notes		(517,650	)		-			-			-			(517,650	)
Advances on revolving credit facility, net		15,000			-			-			-			15,000
Dividend payments		(48,820	)		-			-			-			(48,820	)
Excess tax benefit from share-based awards		26			-			-			-			26
Proceeds from the exercise of stock options		375			-			-			-			375
Net cash provided by (used in) financing activities		(302,694	)		124,647			(46,172	)		(80,727	)		(304,946	)
Net increase (decrease) in cash and cash equivalents		(25,229	)		(763	)		(19,521	)		-			(45,513	)
Cash and cash equivalents:
Beginning of period		145,180			3,454			50,704			-			199,338
End of period	$	119,951		$	2,691		$	31,183		$	-		$	153,825

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Table Of Contents

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

Item 9A. Controls and Procedures.

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

An evaluation of the effectiveness of the design and operation of our disclosure controls and procedures was performed under the supervision, and with the participation, of our management, including the principal executive officer and the principal financial officer. Based on that evaluation, our management, including the principal executive officer and principal financial officer, concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.

Management's Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting. Under the supervision and with the participation of our management, including the principal executive officer and the principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in the Internal Control—Integrated Framework (2013 framework) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under this framework, management concluded that our internal control over financial reporting was effective at December 31, 2016.

Ernst & Young LLP, the independent registered public accounting firm that audited the consolidated financial statements included in this annual report on Form 10-K, has issued an attestation report on our internal control over financial reporting, which is included herein.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the fourth quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders of

M.D.C. Holdings, Inc.

We have audited M.D.C. Holdings, Inc.’s (the “Company”) internal control over financial reporting as of December 31, 2016, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). The Company’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, M.D.C. Holdings, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2016, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of M.D.C. Holdings, Inc. as of December 31, 2016 and 2015, and the related consolidated statements of operations and comprehensive income, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2016, and our report dated February 1, 2017 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

Denver, Colorado

February 1, 2017

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Item 9B. Other Information.

On January 30, 2017, the Company entered into a sublease agreement with CVentures, Inc. Larry A. Mizel, the Chief Executive Officer of the Company, is the President of CVentures, Inc. The sublease is for space CVentures, Inc. has continuously leased from the Company as disclosed in the Form 8-K filed July 27, 2005 and the Form 8-K filed March 28, 2006. The sublease term commenced November 1, 2016 and will continue through October 31, 2021, with an option to extend to October 31, 2026. The sublease agreement is for approximately 5,437 rentable square feet at a base rent that increases over the initial term from $26.50 to $28.68 per rentable square foot per year, and increasing over the extension term from $29.26 to $31.67 per rentable square foot per year. The sublease rent is an allocation of the rent under the master lease agreement based on the sublease square footage.

PART III

Item 10. Directors. Executive Officers and Corporate Governance.

Information not disclosed below that is required with respect to directors, executive officers, filings under Section 16(a) of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”) and corporate governance is incorporated herein by reference, when filed, from our proxy statement (the “Proxy Statement”) for the Annual Meeting of Shareholders to be held on or about April 24, 2017, to be filed with the Securities and Exchange Commission pursuant to Regulation 14A under the Exchange Act.

We will provide to any shareholders or other person without charge, upon request, a copy of our Corporate Code of Conduct, Corporate Governance Guidelines, code of ethics applicable to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions (collectively “senior financial officers”) and the charters for our Audit Committee, Compensation Committee, Legal Committee and Corporate Governance/Nominating Committee. You may obtain these documents on our website at www.mdcholdings.com, under our Investor Relations section or by contacting our Investor Relations department at 1-866-424-3395. Our intention is to post on our website any amendments to or waivers from our code of ethics applicable to our senior financial officers if such disclosure is required.

Item 11. Executive Compensation.

Information required to be set forth hereunder has been omitted and will be incorporated by reference, when filed, from our Proxy Statement.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

Information required to be set forth hereunder has been omitted and will be incorporated by reference, when filed, from our Proxy Statement 

Item 13. Certain Relationships and Related Transactions, and Director Independence.

Information required to be set forth hereunder has been omitted and will be incorporated by reference, when filed, from our Proxy Statement.

Item 14. Principal Accountant Fees and Services.

Information required to be set forth hereunder has been omitted and will be incorporated by reference, when filed, from our Proxy Statement.

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PART IV

Item 15. Exhibits, Financial Statement Schedules.

(a)(1) Financial Statements.

The following Consolidated Financial Statements of the Company and its subsidiaries are included in Part II, Item 8.

	Page
M.D.C. Holdings, Inc. and Subsidiaries
Report of Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheets at December 31, 2016 and December 31, 2015	F-3
Consolidated Statements of Operations and Comprehensive Income for each of the Three Years in the Period Ended December 31, 2016	F-4
Consolidated Statements of Stockholders' Equity for each of the Three Years in the Period Ended December 31, 2016	F-5
Consolidated Statements of Cash Flows for each of the Three Years in the Period Ended December 31, 2016	F-6
Notes to Consolidated Financial Statements	F-7

(a)(2) Financial Statement Schedules.

All schedules are omitted because they are not applicable, not material, not required or the required information is included in the applicable Consolidated Financial Statements or notes thereto.

(a)(3) Exhibits.

INDEX TO EXHIBITS

Exhibit
Number	Description
3.1	Certificate of Amendment to the Certificate of Incorporation of M.D.C. Holdings, Inc. (hereinafter sometimes referred to as "MDC", the "Company" or the "Registrant"), filed with the Delaware Secretary of State on April 27, 2006, and Certificate of Incorporation, dated May 17, 1985, as amended (incorporated by reference to Exhibit 3.1 of the Company's Quarterly Report on Form 10-Q dated March 31, 2006). *
3.2	Form of Bylaws of MDC, as amended (incorporated by reference to Exhibit 3.2(b) of the Company's Quarterly Report on Form 10-Q dated June 30, 1987). *
3.3	Form of Amendment to the Bylaws of MDC regarding indemnification adopted by its board of directors and effective as of March 20, 1987 (incorporated by reference to Exhibit 3.2(a) of the Company's Quarterly Report on Form 10-Q dated June 30, 1987). *
4.1	Indenture dated as of December 3, 2002, by and among MDC and U.S. Bank National Association (incorporated by reference to Exhibit 4.2 of the Company's Form S-3/A filed September 1, 2004). *
4.2	Supplemental Indenture (5.625% Senior Notes due 2020), dated as of January 15, 2010, among the Company, the guarantors named therein and U.S. Bank National Association, as Trustee (incorporated by reference to Exhibit 4.1 of the Company's Current Report on Form 8-K filed January 15, 2010). *
4.3	Second Supplemental Indenture (5.625% Senior Notes due 2020), dated as of January 3, 2013, by and among the Company, U.S. Bank National Association, as Trustee, and Richmond American Homes of Washington, Inc., a wholly owned subsidiary of the Company, as Additional Guarantor, including the form of Guaranty signed by the Additional Guarantor (incorporated by reference to Exhibit 4.9 of the Company's Annual Report on Form 10-K dated December 31, 2012). *

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4.4	Supplemental Indenture (6.000% Senior Notes due 2043), dated as of January 10, 2013, among the Company, the guarantors named therein and U.S. Bank National Association, as Trustee (incorporated by reference to Exhibit 4.1 of the Company's Current Report on Form 8-K filed January 10, 2013). *
4.5	Supplemental Indenture (5.500% Senior Notes due 2024), dated as of January 15, 2014, among the Company, the guarantors named therein and U.S. Bank National Association, as Trustee (incorporated by reference to Exhibit 4.2 of the Company's Current Report on Form 8-K filed January 15, 2014). *
10.1	Credit Agreement by and among M.D.C. Holding, Inc., U.S. Bank National Association, as designated agent and co-administrative agent, Citibank, N.A., as co-administrative agent, and the other Lenders identified therein, dated as of December 13, 2013 (incorporated by reference to Exhibit 10.1 to the Company's Form 8-K filed December 16, 2013). *
10.2	First Amendment to Credit Agreement and Increasing Lenders Supplement among M.D.C. Holding, Inc., U.S. Bank National Association, as designated agent, and the other Lenders identified therein, dated as of December 17, 2014 (incorporated by reference to Exhibit 10.1 to the Company's Form 8-K filed December 17, 2014). *
10.3	Second Amendment to Credit Agreement, dated as of December 18, 2015 (incorporated by reference to Exhibit 10.1 to the Company's Form 8-K filed December 21, 2015). *
10.4	Master Repurchase Agreement among HomeAmerican Mortgage Corporation, U.S. Bank National Association as Agent, and the other Buyers party thereto, dated as of November 12, 2008 (incorporated by reference to Exhibit 10.1 to the Company's Form 8-K filed November 17, 2008). *
10.5	First Amendment to Master Repurchase Agreement between HomeAmerican Mortgage Corporation, as Seller, and U.S. Bank National Association, as Agent and Buyer, dated as of October 29, 2009 (incorporated by reference to Exhibit 10.3 of the Company's Quarterly Report on Form 10-Q dated September 30, 2009). *
10.6	Second Amendment to Master Repurchase Agreement between HomeAmerican Mortgage Corporation, as Seller, and U.S. Bank National Association, as Agent and Buyer, dated as of October 21, 2010 (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed October 25, 2010). *
10.7	Third Amendment to Master Repurchase Agreement between HomeAmerican Mortgage Corporation, as Seller, and U.S. Bank National Association, as Agent and Buyer, dated as of September 14, 2011 (incorporated by reference to Exhibit 10.1 of the Company's Quarterly Report on Form 10-Q dated September 30, 2011). *
10.8	Fourth Amendment to Master Repurchase Agreement between HomeAmerican Mortgage Corporation, as Seller, and U.S. Bank National Association, as Agent and Buyer, dated as of September 29, 2011 (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed September 30, 2011).*
10.9	Fifth Amendment to Master Repurchase Agreement between HomeAmerican Mortgage Corporation, as Seller, and U.S. Bank National Association, as Agent and Buyer, dated as of January 31, 2012 (incorporated by reference to Exhibit 10.1 of the Company's Quarterly Report on Form 10-Q dated September 30, 2012). *
10.10	Sixth Amendment to Master Repurchase Agreement between HomeAmerican Mortgage Corporation, as Seller, and U.S. Bank National Association, as Agent and Buyer, dated as of September 21, 2012 (incorporated by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K filed September 24, 2012).*
10.11	Seventh Amendment to Master Repurchase Agreement between HomeAmerican Mortgage Corporation, as Seller, and U.S. Bank National Association, as Agent and Buyer, dated as of December 21, 2012 (incorporated by reference to Exhibit 10.8 of the Company's Annual Report on Form 10-K dated December 31, 2012). *
10.12	Eighth Amendment to Master Repurchase Agreement between HomeAmerican Mortgage Corporation, as Seller, and U.S. Bank National Association, as Agent and Buyer, dated as of September 20, 2013 (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed September 20, 2013). *

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10.13	Ninth Amendment to Master Repurchase Agreement between HomeAmerican Mortgage Corporation, as Seller, and U.S. Bank National Association, as Agent and Buyer, dated as of December 31, 2013 (incorporated by reference to Exhibit 10.11of the Company's Annual Report on Form 10-K dated December 31, 2013). *
10.14	Tenth Amendment to Master Repurchase Agreement between HomeAmerican Mortgage Corporation, as Seller, and U.S. Bank National Association, as Agent and Buyer, dated as of September 19, 2014 (incorporated by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K filed September 22, 2014). *
10.15	Eleventh Amendment to Master Repurchase Agreement between HomeAmerican Mortgage Corporation, as Seller, and U.S. Bank National Association, as Agent and Buyer, dated as of December 19, 2014 (incorporated by reference to Exhibit 10.14 of the Company's Annual Report on Form 10-K dated December 31, 2014). *
10.16	Twelfth Amendment to Master Repurchase Agreement between HomeAmerican Mortgage Corporation, as Seller, and U.S. Bank National Association, as Agent and Buyer, dated as of September 18, 2015 (incorporated by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K filed September 22, 2015). *
10.17	Amended and Restated Master Repurchase Agreement among HomeAmerican Mortgage Corporation and U.S. Bank National Association as Agent and a Buyer, dated as of September 16, 2016 (incorporated by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K filed September 19, 2016). *
10.18	Custody Agreement by and between HomeAmerican Mortgage Corporation and U.S. Bank National Association as Agent and Custodian, dated as of November 12, 2008 (incorporated by reference to Exhibit 10.2 to the Company's Form 8-K filed November 17, 2008). *
10.19	M.D.C. Holdings, Inc. 2001 Equity Incentive Plan Effective March 26, 2001 (incorporated by reference to Exhibit B of the Company's Proxy Statement dated March 31, 2001 relating to the 2001 Annual Meeting of Stockholders). *
10.20	First Amendment to M.D.C. Holdings, Inc. 2001 Equity Incentive Plan, effective April 28, 2003 (incorporated by reference to Exhibit 10.2 of the Company's Quarterly Report on Form 10-Q dated March 31, 2003). *
10.21	Second Amendment to M.D.C. Holdings, Inc. 2001 Equity Incentive Plan, effective April 29, 2008 (incorporated by reference to Exhibit 10.2 to the Company's Form 8-K filed May 1, 2008). *
10.22	Third Amendment to M.D.C. Holdings, Inc. 2001 Equity Incentive Plan, effective April 29, 2008 (incorporated by reference to Exhibit 10.3 to the Company's Form 8-K filed May 1, 2008). *
10.23	Fourth Amendment to M.D.C. Holdings, Inc. 2001 Equity Incentive Plan, dated December 31, 2008 (incorporated by reference to Exhibit 10.11 of the Company's Annual Report on Form 10-K dated December 31, 2008). *
10.24	Form of Non-Qualified Stock Option Certificate (2001 Equity Incentive Plan) (incorporated by reference to Exhibit 10.10 of the Company's Annual Report on Form 10-K dated December 31, 2004). *
10.25	M.D.C. Holdings, Inc. Stock Option Plan for Non-Employee Directors Effective March 26, 2001 (incorporated by reference to Exhibit C of the Company's Proxy Statement dated March 31, 2001 relating to the 2001 Annual Meeting of Stockholders). *
10.26	First Amendment to M.D.C. Holdings, Inc. Stock Option Plan for Non-Employee Directors, October 20, 2003 (incorporated by reference to Exhibit 10.13 of the Company's Annual Report on Form 10-K dated December 31, 2004). *
10.27	Second Amendment to M.D.C. Holdings, Inc. Stock Option Plan for Non-Employee Directors, dated December 16, 2008 (incorporated by reference to Exhibit 10.16 of the Company's Annual Report on Form 10-K dated December 31, 2008). *
10.28	Form of Non-Qualified Stock Option Agreement (Stock Option Plan for Non-Employee Directors) (incorporated by reference to Exhibit 10.14 of the Company's Annual Report on Form 10-K dated December 31, 2004). *

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10.29	M.D.C. Holdings, Inc. 2011 Equity Incentive Plan, effective April 27, 2011 (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed April 29, 2011). *
10.30	First Amendment to the M.D.C. Holdings, Inc. 2011 Equity Incentive Plan (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed March 19, 2013).*
10.31	Second Amendment to the M.D.C. Holdings, Inc. 2011 Equity Incentive Plan (incorporated by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K filed March 24, 2015). *
10.32	Form of 2011 Stock Option Agreement (2011 Equity Incentive Plan) (incorporated by reference to Exhibit 10.3 of the Company's Quarterly Report on Form 10-Q dated June 30, 2011). *
10.33	Form of 2011 Restricted Stock Agreement (2011 Equity Incentive Plan) (incorporated by reference to Exhibit 10.4 of the Company's Quarterly Report on Form 10-Q dated June 30, 2011). *
10.34	Form of 2015 Restricted Stock Agreement (2011 Equity Incentive Plan) (incorporated by reference to Exhibit 10.34 of the Company's Annual Report on Form 10-K dated December 31, 2015). *
10.35	Form of Executive Officer Stock Option Agreement under the 2011 Equity Incentive Plan (incorporated by reference to Exhibit 10.3 of the Company's Current Report on Form 8-K filed March 9, 2012).*
10.36	Form of Executive Officer Stock Option Agreement under the 2011 Equity Incentive Plan (May 18, 2015 grants) (incorporated by reference to Exhibit 10.1 of the Company's Quarterly Report on Form 10-Q dated June 30, 2015). *
10.37	Form of Performance Share Unit Grant Agreement (2011 Equity Incentive Plan) (incorporated by reference to Exhibit 10.1 of the Company's Quarterly Report on Form 10-Q dated September 30, 2016). *
10.38	M.D.C. Holdings, Inc. 2011 Stock Option Plan for Non-Employee Directors effective April 27, 2011 (incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K filed April 29, 2011). *
10.39	First Amendment to the M.D.C. Holdings, Inc. 2011 Stock Option Plan for Non-Employee Directors (incorporated by reference to Exhibit 10.2 of the Company's Current Report on Form 8-K filed March 24, 2015). *
10.40	Second Amendment to the M.D.C. Holdings, Inc. 2011 Stock Option Plan for Non-Employee Directors (incorporated by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K filed April 1, 2016). *
10.41	Form of Stock Option Agreement (2011 Stock Option Plan for Non-Employee Directors) (incorporated by reference to Exhibit 10.2 of the Company's Quarterly Report on Form 10-Q dated June 30, 2011). *
10.42	Form of Restricted Stock Award Agreement (2011 Stock Option Plan for Non-Employee Directors) (incorporated by reference to Exhibit 10.2 of the Company's Quarterly Report on Form 10-Q dated June 30, 2016). *
10.43	Form of Indemnification Agreement entered into between the Company and members of its Board of Directors (incorporated by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K filed October 26, 2006).*
10.44	Form of Indemnification Agreement entered into between the Company and certain of its officers (incorporated by reference to Exhibit 10.2 of the Company's Current Report on Form 8-K filed October 26, 2006).*
10.45	M.D.C. Holdings, Inc. 2013 Executive Officer Performance-Based Compensation Plan, approved March 18, 2013 (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed March 19, 2013). *
10.46	Employment Agreement, Larry A. Mizel, amended and restated as of August 1, 2008 (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed September 26, 2008). *
10.47	Amendment to Employment Agreement of Larry A. Mizel, dated March 8, 2012 (incorporated by reference to Exhibit 10.4 of the Company's Current Report on Form 8-K filed March 9, 2012).*

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10.48	Second Amendment to Employment Agreement of Larry A. Mizel, dated October 18, 2013 (incorporated by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K filed October 18, 2013).*
10.49	Employment Agreement, David D. Mandarich, amended and restated as of August 1, 2008 (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed September 26, 2008). *
10.50	Amendment to Employment Agreement of David D. Mandarich, dated March 8, 2012 (incorporated by reference to Exhibit 10.5 of the Company's Current Report on Form 8-K filed March 9, 2012).*
10.51	Second Amendment to Employment Agreement of David D. Mandarich, dated October 18, 2013 (incorporated by reference to Exhibit 10.2 of the Company's Current Report on Form 8-K filed October 18, 2013).*
10.52	Lease Agreement among MDC, Richmond American Homes of Colorado, Inc. and Larry A. Mizel, August 2, 2007 (incorporated by reference to Exhibit 10.4 of the Company's Quarterly Report on Form 10-Q dated June 30, 2007). *
10.53	Lease Agreement among MDC, Richmond American Homes of Colorado, Inc. and David D. Mandarich, August 2, 2007 (incorporated by reference to Exhibit 10.5 of the Company's Quarterly Report on Form 10-Q dated June 30, 2007). *
10.54	Change in Control and Separation Agreement between the Company and Michael Touff, dated as of July 30, 2008 (incorporated by reference to Exhibit 10.8 of the Company's Quarterly Report on Form 10-Q filed July 31, 2008). *
10.55	Change in Control Agreement between the Company and Robert N. Martin, dated as of May 23, 2015 (incorporated by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K filed May 19, 2015).*
10.56	Form of Change in Control Agreement between the Company and certain employees of M.D.C. Holdings, Inc. (incorporated by reference to Exhibit 10.3 of the Company's Current Report on Form 8-K filed March 27, 1998). *
10.57	Independent Contractor Agreement between Mizel Design and Decorating Company and the Company effective as of January 1, 2005 (incorporated by reference to Exhibit 10.26 of the Company's Annual Report on Form 10-K dated December 31, 2004). *
10.58	Sub-Sublease agreement between MDC and CVentures, Inc., executed July 25, 2005 (incorporated by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K filed July 27, 2005). *
10.59	First Amendment to Sub-Sublease agreement between MDC and CVentures, Inc., executed on March 28, 2006 (incorporated by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K filed March 29, 2006). *
10.60	Sublease agreement between MDC and CVentures, Inc., executed January 30, 2017.
12	Ratio of Earnings to Fixed Charges Schedule.
21	Subsidiaries of the Company.
23	Consent of Ernst & Young LLP.
31.1	Certification of principal executive officer required by 17 CFR 240.13a-14(a), pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of principal financial officer required by 17 CFR 240.13a-14(a), pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of principal executive officer required by 17 CFR 240.13a-14(b), pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of principal financial officer required by 17 CFR 240.13a-14(b), pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101	The following financial statements, formatted in XBRL (Extensible Business Reporting Language): (i) Consolidated Balance Sheets at December 31, 2016 and December 31, 2015, (ii) Consolidated Statements of Operations for each of the three years in the period ended December 31, 2016, (iii) Consolidated Statements of Stockholders’ Equity for each of the three years in the period ended December 31, 2016, (iv) Consolidated Statements of Cash Flows for each of the three years in the period ended December 31, 2016; and (iv) Notes to the Consolidated Financial Statements, tagged as blocks of text.

____________________

*Incorporated by reference.

Item 16. Form 10-K Summary.

Not applicable.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	M.D.C. HOLDINGS, INC. (Registrant)
Date: February 1, 2017	By:	/s/ Robert N. Martin
		Robert N. Martin
		Senior Vice President, Chief Financial Officer and Principal Accounting Officer (duly authorized officer)

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that the undersigned officers and/or directors of the Registrant, by virtue of their signatures to this report, appearing below, hereby constitute and appoint Larry A. Mizel and David D. Mandarich, or any one of them, with full power of substitution, as attorneys-in-fact in their names, places and steads to execute any and all amendments to this report in the capacities set forth opposite their names and hereby ratify all that said attorneys-in-fact do by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Signature	Title	Date
/s/ Larry A. Mizel	Chairman of the Board of Directors	February 1, 2017
Larry A. Mizel	and Chief Executive Officer
	(principal executive officer)
/s/ David D. Mandarich	Director, President and Chief	February 1, 2017
David D. Mandarich	Operating Officer
/s/ Robert N. Martin
Robert N. Martin	Senior Vice President, Chief Financial	February 1, 2017
	Officer & Principal Accounting Officer (principal financial officer and principal accounting officer)
/s/ Raymond T. Baker	Director	February 1, 2017
Raymond T. Baker
/s/ Michael A. Berman	Director	February 1, 2017
Michael A. Berman
/s/ David E. Blackford	Director	February 1, 2017
David E. Blackford
/s/ Herbert T. Buchwald	Director	February 1, 2017
Herbert T. Buchwald
/s/ Paris G. Reece III	Director	February 1, 2017
Paris G. Reece III
/s/ David Siegel	Director	February 1, 2017
David Siegel

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INDEX TO EXHIBITS

Exhibit
Number	Description
3.1	Certificate of Amendment to the Certificate of Incorporation of M.D.C. Holdings, Inc. (hereinafter sometimes referred to as "MDC", the "Company" or the "Registrant"), filed with the Delaware Secretary of State on April 27, 2006, and Certificate of Incorporation, dated May 17, 1985, as amended (incorporated by reference to Exhibit 3.1 of the Company's Quarterly Report on Form 10-Q dated March 31, 2006). *
3.2	Form of Bylaws of MDC, as amended (incorporated by reference to Exhibit 3.2(b) of the Company's Quarterly Report on Form 10-Q dated June 30, 1987). *
3.3	Form of Amendment to the Bylaws of MDC regarding indemnification adopted by its board of directors and effective as of March 20, 1987 (incorporated by reference to Exhibit 3.2(a) of the Company's Quarterly Report on Form 10-Q dated June 30, 1987). *
4.1	Indenture dated as of December 3, 2002, by and among MDC and U.S. Bank National Association (incorporated by reference to Exhibit 4.2 of the Company's Form S-3/A filed September 1, 2004). *
4.2	Supplemental Indenture (5.625% Senior Notes due 2020), dated as of January 15, 2010, among the Company, the guarantors named therein and U.S. Bank National Association, as Trustee (incorporated by reference to Exhibit 4.1 of the Company's Current Report on Form 8-K filed January 15, 2010). *
4.3	Second Supplemental Indenture (5.625% Senior Notes due 2020), dated as of January 3, 2013, by and among the Company, U.S. Bank National Association, as Trustee, and Richmond American Homes of Washington, Inc., a wholly owned subsidiary of the Company, as Additional Guarantor, including the form of Guaranty signed by the Additional Guarantor (incorporated by reference to Exhibit 4.9 of the Company's Annual Report on Form 10-K dated December 31, 2012). *
4.4	Supplemental Indenture (6.000% Senior Notes due 2043), dated as of January 10, 2013, among the Company, the guarantors named therein and U.S. Bank National Association, as Trustee (incorporated by reference to Exhibit 4.1 of the Company's Current Report on Form 8-K filed January 10, 2013). *
4.5	Supplemental Indenture (5.500% Senior Notes due 2024), dated as of January 15, 2014, among the Company, the guarantors named therein and U.S. Bank National Association, as Trustee (incorporated by reference to Exhibit 4.2 of the Company's Current Report on Form 8-K filed January 15, 2014). *
10.1	Credit Agreement by and among M.D.C. Holding, Inc., U.S. Bank National Association, as designated agent and co-administrative agent, Citibank, N.A., as co-administrative agent, and the other Lenders identified therein, dated as of December 13, 2013 (incorporated by reference to Exhibit 10.1 to the Company's Form 8-K filed December 16, 2013). *
10.2	First Amendment to Credit Agreement and Increasing Lenders Supplement among M.D.C. Holding, Inc., U.S. Bank National Association, as designated agent, and the other Lenders identified therein, dated as of December 17, 2014 (incorporated by reference to Exhibit 10.1 to the Company's Form 8-K filed December 17, 2014). *
10.3	Second Amendment to Credit Agreement, dated as of December 18, 2015 (incorporated by reference to Exhibit 10.1 to the Company's Form 8-K filed December 21, 2015). *
10.4	Master Repurchase Agreement among HomeAmerican Mortgage Corporation, U.S. Bank National Association as Agent, and the other Buyers party thereto, dated as of November 12, 2008 (incorporated by reference to Exhibit 10.1 to the Company's Form 8-K filed November 17, 2008). *
10.5	First Amendment to Master Repurchase Agreement between HomeAmerican Mortgage Corporation, as Seller, and U.S. Bank National Association, as Agent and Buyer, dated as of October 29, 2009 (incorporated by reference to Exhibit 10.3 of the Company's Quarterly Report on Form 10-Q dated September 30, 2009). *

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10.6	Second Amendment to Master Repurchase Agreement between HomeAmerican Mortgage Corporation, as Seller, and U.S. Bank National Association, as Agent and Buyer, dated as of October 21, 2010 (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed October 25, 2010). *
10.7	Third Amendment to Master Repurchase Agreement between HomeAmerican Mortgage Corporation, as Seller, and U.S. Bank National Association, as Agent and Buyer, dated as of September 14, 2011 (incorporated by reference to Exhibit 10.1 of the Company's Quarterly Report on Form 10-Q dated September 30, 2011). *
10.8	Fourth Amendment to Master Repurchase Agreement between HomeAmerican Mortgage Corporation, as Seller, and U.S. Bank National Association, as Agent and Buyer, dated as of September 29, 2011 (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed September 30, 2011).*
10.9	Fifth Amendment to Master Repurchase Agreement between HomeAmerican Mortgage Corporation, as Seller, and U.S. Bank National Association, as Agent and Buyer, dated as of January 31, 2012 (incorporated by reference to Exhibit 10.1 of the Company's Quarterly Report on Form 10-Q dated September 30, 2012). *
10.10	Sixth Amendment to Master Repurchase Agreement between HomeAmerican Mortgage Corporation, as Seller, and U.S. Bank National Association, as Agent and Buyer, dated as of September 21, 2012 (incorporated by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K filed September 24, 2012).*
10.11	Seventh Amendment to Master Repurchase Agreement between HomeAmerican Mortgage Corporation, as Seller, and U.S. Bank National Association, as Agent and Buyer, dated as of December 21, 2012 (incorporated by reference to Exhibit 10.8 of the Company's Annual Report on Form 10-K dated December 31, 2012). *
10.12	Eighth Amendment to Master Repurchase Agreement between HomeAmerican Mortgage Corporation, as Seller, and U.S. Bank National Association, as Agent and Buyer, dated as of September 20, 2013 (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed September 20, 2013). *
10.13	Ninth Amendment to Master Repurchase Agreement between HomeAmerican Mortgage Corporation, as Seller, and U.S. Bank National Association, as Agent and Buyer, dated as of December 31, 2013 (incorporated by reference to Exhibit 10.11of the Company's Annual Report on Form 10-K dated December 31, 2013). *
10.14	Tenth Amendment to Master Repurchase Agreement between HomeAmerican Mortgage Corporation, as Seller, and U.S. Bank National Association, as Agent and Buyer, dated as of September 19, 2014 (incorporated by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K filed September 22, 2014). *
10.15	Eleventh Amendment to Master Repurchase Agreement between HomeAmerican Mortgage Corporation, as Seller, and U.S. Bank National Association, as Agent and Buyer, dated as of December 19, 2014 (incorporated by reference to Exhibit 10.14 of the Company's Annual Report on Form 10-K dated December 31, 2014). *
10.16	Twelfth Amendment to Master Repurchase Agreement between HomeAmerican Mortgage Corporation, as Seller, and U.S. Bank National Association, as Agent and Buyer, dated as of September 18, 2015 (incorporated by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K filed September 22, 2015). *
10.17	Amended and Restated Master Repurchase Agreement among HomeAmerican Mortgage Corporation and U.S. Bank National Association as Agent and a Buyer, dated as of September 16, 2016 (incorporated by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K filed September 19, 2016). *
10.18	Custody Agreement by and between HomeAmerican Mortgage Corporation and U.S. Bank National Association as Agent and Custodian, dated as of November 12, 2008 (incorporated by reference to Exhibit 10.2 to the Company's Form 8-K filed November 17, 2008). *
10.19	M.D.C. Holdings, Inc. 2001 Equity Incentive Plan Effective March 26, 2001 (incorporated by reference to Exhibit B of the Company's Proxy Statement dated March 31, 2001 relating to the 2001 Annual Meeting of Stockholders). *
10.20	First Amendment to M.D.C. Holdings, Inc. 2001 Equity Incentive Plan, effective April 28, 2003 (incorporated by reference to Exhibit 10.2 of the Company's Quarterly Report on Form 10-Q dated March 31, 2003). *

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10.21	Second Amendment to M.D.C. Holdings, Inc. 2001 Equity Incentive Plan, effective April 29, 2008 (incorporated by reference to Exhibit 10.2 to the Company's Form 8-K filed May 1, 2008). *
10.22	Third Amendment to M.D.C. Holdings, Inc. 2001 Equity Incentive Plan, effective April 29, 2008 (incorporated by reference to Exhibit 10.3 to the Company's Form 8-K filed May 1, 2008). *
10.23	Fourth Amendment to M.D.C. Holdings, Inc. 2001 Equity Incentive Plan, dated December 31, 2008 (incorporated by reference to Exhibit 10.11 of the Company's Annual Report on Form 10-K dated December 31, 2008). *
10.24	Form of Non-Qualified Stock Option Certificate (2001 Equity Incentive Plan) (incorporated by reference to Exhibit 10.10 of the Company's Annual Report on Form 10-K dated December 31, 2004). *
10.25	M.D.C. Holdings, Inc. Stock Option Plan for Non-Employee Directors Effective March 26, 2001 (incorporated by reference to Exhibit C of the Company's Proxy Statement dated March 31, 2001 relating to the 2001 Annual Meeting of Stockholders). *
10.26	First Amendment to M.D.C. Holdings, Inc. Stock Option Plan for Non-Employee Directors, October 20, 2003 (incorporated by reference to Exhibit 10.13 of the Company's Annual Report on Form 10-K dated December 31, 2004). *
10.27	Second Amendment to M.D.C. Holdings, Inc. Stock Option Plan for Non-Employee Directors, dated December 16, 2008 (incorporated by reference to Exhibit 10.16 of the Company's Annual Report on Form 10-K dated December 31, 2008). *
10.28	Form of Non-Qualified Stock Option Agreement (Stock Option Plan for Non-Employee Directors) (incorporated by reference to Exhibit 10.14 of the Company's Annual Report on Form 10-K dated December 31, 2004). *
10.29	M.D.C. Holdings, Inc. 2011 Equity Incentive Plan, effective April 27, 2011 (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed April 29, 2011). *
10.30	First Amendment to the M.D.C. Holdings, Inc. 2011 Equity Incentive Plan (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed March 19, 2013).*
10.31	Second Amendment to the M.D.C. Holdings, Inc. 2011 Equity Incentive Plan (incorporated by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K filed March 24, 2015). *
10.32	Form of 2011 Stock Option Agreement (2011 Equity Incentive Plan) (incorporated by reference to Exhibit 10.3 of the Company's Quarterly Report on Form 10-Q dated June 30, 2011). *
10.33	Form of 2011 Restricted Stock Agreement (2011 Equity Incentive Plan) (incorporated by reference to Exhibit 10.4 of the Company's Quarterly Report on Form 10-Q dated June 30, 2011). *
10.34	Form of 2015 Restricted Stock Agreement (2011 Equity Incentive Plan) (incorporated by reference to Exhibit 10.34 of the Company's Annual Report on Form 10-K dated December 31, 2015). *
10.35	Form of Executive Officer Stock Option Agreement under the 2011 Equity Incentive Plan (incorporated by reference to Exhibit 10.3 of the Company's Current Report on Form 8-K filed March 9, 2012).*
10.36	Form of Executive Officer Stock Option Agreement under the 2011 Equity Incentive Plan (May 18, 2015 grants) (incorporated by reference to Exhibit 10.1 of the Company's Quarterly Report on Form 10-Q dated June 30, 2015). *
10.37	Form of Performance Share Unit Grant Agreement (2011 Equity Incentive Plan) (incorporated by reference to Exhibit 10.1 of the Company's Quarterly Report on Form 10-Q dated September 30, 2016). *
10.38	M.D.C. Holdings, Inc. 2011 Stock Option Plan for Non-Employee Directors effective April 27, 2011 (incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K filed April 29, 2011). *

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10.39	First Amendment to the M.D.C. Holdings, Inc. 2011 Stock Option Plan for Non-Employee Directors (incorporated by reference to Exhibit 10.2 of the Company's Current Report on Form 8-K filed March 24, 2015). *
10.40	Second Amendment to the M.D.C. Holdings, Inc. 2011 Stock Option Plan for Non-Employee Directors (incorporated by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K filed April 1, 2016). *
10.41	Form of Stock Option Agreement (2011 Stock Option Plan for Non-Employee Directors) (incorporated by reference to Exhibit 10.2 of the Company's Quarterly Report on Form 10-Q dated June 30, 2011). *
10.42	Form of Restricted Stock Award Agreement (2011 Stock Option Plan for Non-Employee Directors) (incorporated by reference to Exhibit 10.2 of the Company's Quarterly Report on Form 10-Q dated June 30, 2016). *
10.43	Form of Indemnification Agreement entered into between the Company and members of its Board of Directors (incorporated by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K filed October 26, 2006).*
10.44	Form of Indemnification Agreement entered into between the Company and certain of its officers (incorporated by reference to Exhibit 10.2 of the Company's Current Report on Form 8-K filed October 26, 2006).*
10.45	M.D.C. Holdings, Inc. 2013 Executive Officer Performance-Based Compensation Plan, approved March 18, 2013 (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed March 19, 2013). *
10.46	Employment Agreement, Larry A. Mizel, amended and restated as of August 1, 2008 (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed September 26, 2008). *
10.47	Amendment to Employment Agreement of Larry A. Mizel, dated March 8, 2012 (incorporated by reference to Exhibit 10.4 of the Company's Current Report on Form 8-K filed March 9, 2012).*
10.48	Second Amendment to Employment Agreement of Larry A. Mizel, dated October 18, 2013 (incorporated by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K filed October 18, 2013).*
10.49	Employment Agreement, David D. Mandarich, amended and restated as of August 1, 2008 (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed September 26, 2008). *
10.50	Amendment to Employment Agreement of David D. Mandarich, dated March 8, 2012 (incorporated by reference to Exhibit 10.5 of the Company's Current Report on Form 8-K filed March 9, 2012).*
10.51	Second Amendment to Employment Agreement of David D. Mandarich, dated October 18, 2013 (incorporated by reference to Exhibit 10.2 of the Company's Current Report on Form 8-K filed October 18, 2013).*
10.52	Lease Agreement among MDC, Richmond American Homes of Colorado, Inc. and Larry A. Mizel, August 2, 2007 (incorporated by reference to Exhibit 10.4 of the Company's Quarterly Report on Form 10-Q dated June 30, 2007). *
10.53	Lease Agreement among MDC, Richmond American Homes of Colorado, Inc. and David D. Mandarich, August 2, 2007 (incorporated by reference to Exhibit 10.5 of the Company's Quarterly Report on Form 10-Q dated June 30, 2007). *
10.54	Change in Control and Separation Agreement between the Company and Michael Touff, dated as of July 30, 2008 (incorporated by reference to Exhibit 10.8 of the Company's Quarterly Report on Form 10-Q filed July 31, 2008). *
10.55	Change in Control Agreement between the Company and Robert N. Martin, dated as of May 23, 2015 (incorporated by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K filed May 19, 2015).*
10.56	Form of Change in Control Agreement between the Company and certain employees of M.D.C. Holdings, Inc. (incorporated by reference to Exhibit 10.3 of the Company's Current Report on Form 8-K filed March 27, 1998). *
10.57	Independent Contractor Agreement between Mizel Design and Decorating Company and the Company effective as of January 1, 2005 (incorporated by reference to Exhibit 10.26 of the Company's Annual Report on Form 10-K dated December 31, 2004). *

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10.58	Sub-Sublease agreement between MDC and CVentures, Inc., executed July 25, 2005 (incorporated by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K filed July 27, 2005). *
10.59	First Amendment to Sub-Sublease agreement between MDC and CVentures, Inc., executed on March 28, 2006 (incorporated by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K filed March 29, 2006). *
10.60	Sublease agreement between MDC and CVentures, Inc., executed January 30, 2017.
12	Ratio of Earnings to Fixed Charges Schedule.
21	Subsidiaries of the Company.
23	Consent of Ernst & Young LLP.
31.1	Certification of principal executive officer required by 17 CFR 240.13a-14(a), pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of principal financial officer required by 17 CFR 240.13a-14(a), pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of principal executive officer required by 17 CFR 240.13a-14(b), pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of principal financial officer required by 17 CFR 240.13a-14(b), pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101	The following financial statements, formatted in XBRL (Extensible Business Reporting Language): (i) Consolidated Balance Sheets at December 31, 2016 and December 31, 2015, (ii) Consolidated Statements of Operations for each of the three years in the period ended December 31, 2016, (iii) Consolidated Statements of Stockholders’ Equity for each of the three years in the period ended December 31, 2016, (iv) Consolidated Statements of Cash Flows for each of the three years in the period ended December 31, 2016; and (iv) Notes to the Consolidated Financial Statements, tagged as blocks of text.

____________________

*Incorporated by reference.

54

EX-10.60

Exhibit 10.60

SUBLEASE AGREEMENT

THIS SUBLEASE AGREEMENT (the “Sublease”) is made effective as of the 1st day of November, 2016 by and between M.D.C Holdings, Inc., a Delaware corporation (“Sublandlord”) and CVentures, Inc., a Delaware corporation (“Subtenant”).

RECITALS

A.     By Office Lease dated October 3, 2014 (the “Master Lease”) by and between Sublandlord, as Tenant and CLF South Monaco Denver LLC, a Delaware limited liability company (“Master Lessor”), as Landlord, Master Lessor leased to Sublandlord approximately 144,048 of rentable square feet located on floors 1-6 of the building (the “Building”) located at 4350 South Monaco Street, Denver, Colorado;

B.     Subtenant desires to sublease from Sublandlord and Sublandlord desires to sublease to Subtenant a portion of the Building subject to the terms and conditions hereof.

C.     Pursuant to Section 9.1 of the Master Lease, no consent of Master Lessor is required to this Sublease.

AGREEMENTS:

1.     Demised Premises. Sublandlord does hereby sublease to Subtenant, and Subtenant does hereby sublease from Sublandlord, for the Term (as hereinafter defined) and upon the conditions hereinafter commencing on the Commencement Date as defined in Section 3 below, approximately 5,437 square feet of rentable area on the fifth (5^th) floor of the Building, as more particularly described on Exhibit A attached hereto and incorporated herein (such area being the “Premises”). Sublandlord and Subtenant agree that the rentable area of the Premises shall not be subject to revision if the actual square footage of the Premises differs from that set forth above and for all purposes of this Sublease, Base Rent, Subtenant’s Additional Rent or other amounts set forth in this Sublease shall not be subject to revision if the actual square footage of the Premises differs from 5,437 square feet. By occupying the Premises, Subtenant represents that it has thoroughly examined the Building and the Premises and accepts the same on the Commencement Date in its “as-is” condition on the date of occupancy, subject to latent defects.

2.     Term. The term (the “Term”) of the Sublease shall commence on November 1, 2016 (the “Commencement Date”) and shall end on the date which is 60 full calendar months thereafter (the “Expiration Date”), subject to the Option to Extend, set forth below, or on such earlier date upon which said Term may expire or be terminated pursuant to any of the conditions or limitations or other provisions of this Sublease or pursuant to law. This Sublease shall automatically terminate upon the termination of the Master Lease if such termination occurs prior to the Expiration Date. Notwithstanding the foregoing, Sublandlord may terminate this Sublease by giving Subtenant at least 180 days’ notice of the date of termination. On the date of termination, the rights and obligations of Sublandlord and Subtenant that have not accrued or that do not survive the Sublease by its terms or by law will end. If the termination date is not the last day of a month, Base Rent and all other charges for the month in which the termination occurs will be prorated on a per diem basis.

3.     Rent. Subtenant shall timely pay base rent (the “Base Rent”) to Sublandlord, in advance on the first day of each calendar month of the Term as follows:

November 1, 2016 through October 31, 2017 @ $26.50 per rentable square foot

November 1, 2017 through October 31, 2018 @ 27.03 per rentable square foot

November 1, 2018 through October 31, 2019 @ 27.57 per rentable square foot

November 1, 2019 through October 31, 2020 @ 28.12 per rentable square foot

November 1, 2020 through October 31, 2021 @ 28.68 per rentable square foot

The Base Rent, Additional Rent and any other charges payable by Subtenant shall be paid to Sublandlord at its offices in the Building, or at such other place as Sublandlord may designate in writing, in lawful money of the United States of America without demand, deduction, setoff or abatement except as expressly provided in this Sublease. Any Base Rent or Subtenant’s Additional Rent not paid when due shall bear interest at a per annum rate (the “Default Rate”) equal to the lesser of (i) two percent (2%) above the announced Wall Street Journal “prime” rate as of the date of such default; or (ii) the maximum rate of interest which may be collected under Colorado usury law. In addition to all other rights and remedies available, if any monthly installment of Base Rent or Subtenant’s Additional Rent hereunder is not paid when due, a service charge equal to ten percent (10%) of the past due amount shall become immediately due and payable. It is agreed that such service charge represents a fair and reasonable estimate of the additional administrative, processing and accounting costs that will be incurred by Sublandlord as a result of a late payment by Subtenant.

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4.     Subtenant’s Additional Rent. Beginning on November 1, 2017, Subtenant shall pay to Sublandlord, as additional rent (the “Subtenant’s Additional Rent”), an amount equal to its proportionate share of the Additional Rent Sublandlord is required to pay under the Master Lease. The proportionate share to be paid by Subtenant shall be a fraction, the numerator of which is the rentable area of the Premises (5,437 square feet) and the denominator of which is the rentable Area of the Building (144,048 square feet) and is equal to 3.77%. Subtenant’s Additional Rent shall be prorated to reflect any partial year or month that the Premises are subject to this Sublease. Sublandlord shall give Subtenant copies of all relevant statements and bills received by Sublandlord pursuant to the applicable provisions of the Master Lease, together with a statement of the amount of Subtenant’s Additional Rent, if any, which Subtenant is required to pay. Subtenant shall pay all such Subtenant’s Additional Rent within thirty (30) days of receipt of such statement. Subtenant shall also pay to Sublandlord, as Subtenant’s Additional Rent, all charges for any additional services provided to Subtenant, including, without limitation, charges and fees for alterations, if any, and after hours heating and air conditioning services. Subtenant’s obligations to pay Subtenant’s Additional Rent shall survive the termination or expiration of this Sublease.

5.     Option to Extend Term. So long as Subtenant is not then in default under this Sublease, Subtenant shall have the option to extend the Term of this Sublease for an additional 60 month term (“Extension Term”), with written notification to Sublandlord not less than 180 days prior to the Expiration Date, whereupon the Expiration Date shall be the end of the Extension Term. The Base Rent during the Extension Term shall be as follows:

November 1, 2021 through October 31, 2022 @ 29.26 per rentable square foot

November 1, 2022 through October 31, 2023 @ 29.84 per rentable square foot

November 1, 2023 through October 31, 2024 @ 30.44 per rentable square foot

November 1, 2024 through October 31, 2025 @ 31.05 per rentable square foot

November 1, 2025 through October 31, 2026 @ 31.67 per rentable square foot

6.     Sublandlord’s Work. Subtenant acknowledges and agrees that Sublandlord is delivering the Premises to Subtenant in its “AS-IS” condition as of the date of occupancy subject to latent defects, without representation or warranty whatsoever and without any obligation of Sublandlord to perform any alterations or improvements to the Premises.

7.     Use. Subtenant will use and occupy the Premises solely for general office purposes in accordance with the use permitted under the Master Lease. Without the prior written consent of Master Lessor and Sublandlord, the Premises will not be used for any other purpose. Subtenant covenants that it will not use the Premises for any use prohibited under the Master Lease.

8.     Alterations.

a.     Subtenant shall not make any alteration or physical addition (the “Alterations”) in or to the Premises, without in each instance, obtaining the prior written consent of Sublandlord and Master Lessor (if required pursuant to the Master Lease). Any requests by Subtenant to make Alterations must be provided to Sublandlord in writing together with a detail of all Alterations to be made to the Premises. If any Alterations are made without consent, Sublandlord may remove the same, and may repair and restore the Premises and any damage arising from such removal and Subtenant shall be liable for any and all costs and expenses incurred by Sublandlord in the performance of this work.

b.     Following approval thereof as described in Section 7(a) above, Subtenant may have any Alterations performed by contractors of its own choice, at its expense, provided that Subtenant has obtained written approval of the contractor by Sublandlord and Master Lessor (if required pursuant to the Master Lease). The design of all Alterations undertaken by Subtenant shall be subject to prior written approval of Sublandlord and Master Lessor (if required pursuant to the Master Lease) and shall not be commenced until such approval is obtained. Sublandlord shall at all times have the right during normal business hours to inspect the work performed by Subtenant. Any work performed by Subtenant shall be done in each case in a good and workmanlike manner in full compliance with all applicable laws, regulations, permits and codes and otherwise in compliance with all terms and conditions of the Master Lease and, in addition, all insurance coverage related to such Alterations shall name Sublandlord and Master Lessor as additional insureds and certificate holders.

c.     Subtenant shall, at the end of the Term hereof, upon request of Sublandlord or Master Lessor, remove the Alterations, repair all damage resulting from such removal, and restore the Premises to the condition as of the date possession was delivered to Subtenant. If Subtenant fails or refuses to remove such Alterations, or fails to repair or restore the Premises, Master Lessor or Sublandlord may cause the same to be removed and repairs and restoration to be made, in which event Subtenant shall reimburse to the party who caused said Alterations to be removed and repairs made, the cost of such removal, repairs and restoration, together with any and all damages which Master Lessor or Sublandlord may sustain by reason of Subtenant’s failure or refusal to remove the Alterations.

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9.     Terms of Master Lease. All of the terms, provisions, covenants and conditions of both the Master Lease are incorporated herein and are superior to this Sublease, except as otherwise expressly provided, and except that Subtenant shall be obligated to pay only the Base Rent and Subtenant’s Additional Rent provided for in this Sublease. Subtenant agrees to comply with all applicable terms and conditions of the Master Lease. In the event of any inconsistency between the terms of the Master Lease and this Sublease, the terms of the Master Lease shall control. As between the parties hereto, Subtenant hereby assumes all of the obligations of the Sublandlord, as tenant, under the Master Lease, but only to the extent they are applicable to the Premises. Sublandlord shall have all of the rights and remedies of landlord under the Master Lease as against Subtenant. Notwithstanding anything in this Sublease to the contrary, Subtenant agrees that Sublandlord shall not be obligated to furnish for Subtenant any services of any nature, including without limitation, the furnishing of heat, electrical energy, air conditioning, elevator service, cleaning, window washing or rubbish removal services; however, Sublandlord shall be obligated to take all action available to Sublandlord to obtain the performance of and furnishing of such services for the Premises by Master Lessor pursuant to the terms of the Master Lease, provided, however, Sublandlord shall not be liable to Subtenant in damages or otherwise, if, after reasonable diligence on the part of Sublandlord, Master Lessor shall fail to perform such obligations. Subtenant acknowledges that it has received a true copy of the Master Lease, that it has reviewed the Master Lease, that it is familiar with the contents thereof and that the Master Lease shall be held by Subtenant, its partners and employees in strict confidence.

10.     Subtenant’s Covenants. Subtenant covenants and agrees that Subtenant will not do or omit to do anything which would constitute a default under the Master Lease.

11.     Indemnification. Subtenant shall defend, indemnify and hold Sublandlord harmless from and against any and all actions, claims, demands, damages, liabilities and expenses (including, without limitation, reasonable attorneys’ fees) asserted against, imposed upon or incurred by Sublandlord by reason of (a) any violation caused, suffered or permitted by Subtenant, its agents, servants, employees or invitees of any of the terms, covenants or conditions of the Master Lease or this Sublease; or (b) any damage or injury to persons or property occurring upon or in connection with the use or occupancy of the Premises, except damage or injury which arises as a direct result of the gross negligence or willful misconduct of Sublandlord, or its agents, employees or invitees. Subtenant hereby assumes all risk of loss of or damage to property in, upon or about the Premises from theft or patent or latent defects in the Premises or otherwise (which shall include, without limitation, any injury or damage to persons or property resulting from flood, fire, explosion, falling plaster, steam, gas, electricity, electrical disturbance, water, rain, snow, leaks from any part of the Premises or from the pipes or appliances), and Subtenant hereby waives all claims in respect thereof against Sublandlord except claims based solely on the gross negligence or willful misconduct of Sublandlord or its agents, servants or employees, as applicable, and agrees to defend and save Sublandlord harmless from and against any claims by others.

12.     Assignment and Sublease. Subtenant agrees not to assign, mortgage, pledge or otherwise encumber this Sublease, nor to sublet the Premises or any part thereof, without in each instance obtaining the prior written consent of Sublandlord or Master Lessor (if required under the terms of the Master Lease), which consent of any of such consenting parties may be withheld in its sole discretion.

13.     Hazardous Substances. Subtenant shall not cause or permit any Hazardous Materials to be brought upon, kept, treated, disposed of, generated or used in or about the Premises by Subtenant or its agents, employees, contractors, invitees, subtenants or licensees or in violation of applicable laws, codes, or ordinances and hereby agrees to indemnify, defend and hold harmless Sublandlord from violation under this provision.

14.     Brokers. Sublandlord and Subtenant represent that neither has engaged a broker in connection with this Sublease, and that to the best of Sublandlord’s and Subtenant’s knowledge, no broker negotiated or participated in the negotiations of this Sublease or is entitled to any commission in connection herewith. Sublandlord and Subtenant each hereby indemnifies, and holds harmless the other from and against any and all actions, claims, demands, damages, liabilities, and expenses (including, without limitation, reasonable attorneys’ fees) of any type or nature whatsoever arising by reason of the breach of the aforesaid representations and warranties.

15.     Entire Agreement. This Sublease contains all of the covenants, agreements, terms, provisions, conditions, warranties and understandings relating to the leasing of the Premises and Sublandlord’s obligations in connection therewith, and neither Sublandlord nor any agent or representative of Sublandlord has made or is making, and Subtenant in executing and delivering this Sublease is not relying upon any warranties, representations, promises or statements whatsoever, except to the extent expressly set forth in this Sublease. All prior understandings and agreements, if any, are merged in this Sublease, which alone fully and completely expresses the agreement of the parties.

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16.     No Waiver. The failure of Sublandlord to insist in any instance upon the strict keeping, observance, or performance of any covenant, agreement, term, provision or condition of this Sublease shall not be construed as a waiver or relinquishment for the future of such covenant, agreements, term, provision, or condition, but the same shall continue and remain in full force and effect. No waiver or modification of any covenant, agreement, term, provision or condition of this Sublease shall be deemed to have been made unless expressed in writing and signed by Sublandlord and Subtenant. No surrender of possession of the Premises or of any part thereof shall release Subtenant from any of its obligations hereunder unless released by Sublandlord in writing. The receipt and retention by Sublandlord of Base Rent or Subtenant’s Additional Rent from anyone other than Subtenant shall not be deemed as the acceptance of such other person as a tenant or the release of Subtenant from further keeping, observance, or performance by Subtenant of the covenants, agreements, terms, provisions and conditions of this Sublease. The receipt and retention by Sublandlord of Base Rent or Subtenant’s Additional Rent with knowledge of the breach of any covenant, agreement, term, provision, or condition of this Sublease shall not be deemed a waiver of such breach.

17.     Insurance. The Subtenant shall carry insurance of such kinds and as are required to be carried by Sublandlord, as tenant, under the terms and conditions of the Master Lease, including without limitation, Section 6.2 thereof. All such policies shall name Sublandlord and Master Lessor as additional insureds. Subtenant shall deliver certificates of insurance to Sublandlord prior to the Commencement Date and not later than thirty (30) days prior to the expiration of such policy. In the event Subtenant fails to furnish certificates of insurance, Sublandlord may obtain such insurance and the premiums on such insurance shall be deemed Subtenant’s Additional Rent to be paid upon demand.

18.     Waiver of Subrogation. Sublandlord and Subtenant each releases and discharges the other from all claims and liability arising from or caused by any casualty or hazard covered or required hereunder to be covered in whole or in part by insurance on the Premises or in connection with property or activities conducted on the Premises, and waive any right of subrogation which might otherwise exist in or accrue to any person on account thereof.

19.     Surrender of Premises. Upon the expiration or earlier termination of this Sublease, Subtenant shall peacefully surrender the Premises, broom clean, consistent with Subtenant’s duty to make repairs as required herein and in accordance with the Master Lease; provided, however, that to the extent permitted under the Master Lease, any trade fixtures, signs and other personal property of Subtenant not permanently affixed to the Premises shall remain the property of Subtenant and may be removed from the Premises by Subtenant; and provided further that Subtenant shall remove, at its sole cost and expense, any alterations or fixtures that Sublandlord shall request Subtenant to remove in accordance with the Master Lease. Subtenant shall, at its sole cost and expense, repair any damage caused to the Premises by reason of the removal of any such property. Subtenant’s obligations under this provision shall survive the expiration or earlier termination of this Sublease. All Subtenant property which is not removed upon vacation of the Premises shall conclusively be deemed to be abandoned by Subtenant and Sublandlord shall be entitled to dispose of such property at the sole cost of Subtenant without incurring any liability to Subtenant.

20.     Holding Over. Subtenant shall not remain in possession of the Premises after the expiration or earlier termination of the Sublease Term without the express written consent of Sublandlord. Should Subtenant hold over without the express written consent of Sublandlord, such tenancy shall be at sufferance and not a renewal of the Term, and in such case, Base Rent due pursuant to this Sublease shall be payable at one hundred fifty percent (150%) the amount payable during the last month of the Term subject to every other term, covenant and provision of this Sublease and the Master Lease. In the event Subtenant holds over, Subtenant shall be liable for all of Sublandlord’s direct damages, which shall include, without limitation, costs, fees, expenses, damages and attorneys’ fees incurred by Sublandlord as a result of Subtenant’s holding over, and damages and expenses incurred by Sublandlord for its inability to deliver possession of the Premises to Master Lessor.

21.     Default by Subtenant. The occurrence of any one or more of the following events (sometimes referred to as an “Event of Default”) shall constitute a default and breach of this Sublease by Subtenant:

(a)     If Subtenant fails to pay Base Rent or any other amount within five (5) days of when due and payable;

(b)     If Subtenant fails to perform any of Subtenant’s nonmonetary obligations under this Sublease for a period of twenty (20) days after written notice of such failure, or if such default is of a nature which cannot be cured within such twenty (20) day period, then Subtenant’s failure to commence to cure such default within such twenty (20) day period and diligently purse the same to complete.

(c)     If (i) Subtenant makes a general assignment or general arrangement for the benefit of creditors; (ii) a petition of bankruptcy or for reorganization or rearrangement is filed by or against Subtenant which is not discharged in 60 days; (iii) a trustee or receiver is appointed to take possession of substantially all of Subtenant’s assets located at the Premises or of Subtenant’s interest in this Sublease which is not discharged in 60 days; or (iv) substantially all of Subtenant’s assets located at the Premises or of Subtenant’s interest in this Sublease is subjected to attachment, execution or other judicial or non-judicial seizure.

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(d)     If Subtenant fails to comply with any of the terms and provisions of the Master Lease applicable to the Premises or causes or permits any default under the Master Lease.

Upon occurrence of an Event of Default by Subtenant, and at any time thereafter, upon notice or demand and without limiting Sublandlord in the exercise of any other right or remedy which Sublandlord may have, Sublandlord shall be entitled to exercise the following rights and remedies:

(i)     Sublandlord may terminate Subtenant’s right to possession of the Premises by any lawful means (in which case this Sublease shall not terminate unless Sublandlord gives written notice to Subtenant of its intention to terminate this Sublease), in which event Subtenant shall immediately surrender possession of the Premises to Sublandlord.

(ii)     At any time after an Event of default, whether or not Sublandlord shall have terminated this Sublease, Sublandlord shall be entitled to recover from Subtenant, and Subtenant shall pay to Sublandlord, on demand, for damages for Subtenant’s default, an amount equal to the then present worth of: (A) the aggregate of the Base Rent and any other charges to be paid by Subtenant hereunder for the unexpired portion of the Term assuming this Sublease has not been terminated, less the fair market rental value of the Premises during such period; and (B) all other damages suffered by Sublandlord, which shall include, without limitation, all costs of renovating the Premises and reletting the same and reasonable attorneys’ fees.

All rights, options and remedies of Sublandlord contained in this Sublease shall be construed and held to be cumulative, no one of them shall be exclusive of the other, and Sublandlord shall have the right to purse any one or all of such remedies or any other remedy or relief which may be provided by law or equity whether or not stated in this Sublease.

22.     Confidentiality. Subtenant and its shareholders, partners, members, officers, directors, employees, agents and representatives will not disclose the terms of this Sublease or the Master Lease unless Subtenant obtains Sublandlord’s or Master Lessor’s prior written consent thereto, as the case may be, which written consent may be withheld in the Sublandlord’s or Master Lessor’s sole discretion; provided, however, the provisions of this Section shall not apply to any disclosure required by legal authorities or any disclosure to Subtenant’s lenders, architects, accountants and attorneys.

23.     Substitution of Premises. Notwithstanding anything herein to the contrary, Sublandlord shall have the right at any time and from time to time to substitute other premises (“Substitute Premises”) located within the Building for the Premises subject to the same terms and conditions set forth herein; provided, however that the Substitute Premises shall contain at least as much square footage as originally subleased without any increase in the then rental rate. In connection therewith, Sublandlord agrees to pay all reasonable moving expenses of Subtenant. Subtenant shall be required to move into such Substitute Premises within 30 days of notice from Sublandlord of its exercise of this right.

24.     Successors and Assigns. Subject to the provisions of Section 11 above, the obligations of this Sublease shall bind and benefit the successors and permitted assigns of the parties with the same effect as if mentioned in each instance where a party hereto is named or referred to.

25.     Notices. Any and all communications delivered hereunder shall be sent via first-class mail, confirmed facsimile, over-night delivery or by hand delivery: if to Sublandlord at 4350 South Monaco Street, Denver, Colorado 80237, Attn: General Counsel, and if to Subtenant, at CVentures, 4350 South Monaco Street, Denver, Colorado 80237, Attn: CFO. All such communications shall be deemed to be given when hand delivered or sent via facsimile or on the next business day following deposit with an over-night delivery service or three days following delivery in the United States mail.

26.     Directory. Sublandlord agrees to place the name of Subtenant in the building directory.

27.     Parking. Subtenant shall be entitled to use, free of charge, up to 21 unassigned, non-reserved, and non-designated parking spaces in the parking structure and surface parking area of the Project, as such term is defined in the Master Lease, for the Term of this Sublease.

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IN WITNESS WHEREOF THE PARTIES HAVE EXECUTED THIS SUBLEASE, intending to be bound thereby, on the dates set forth below.

SUBLANDLORD

M.D.C. HOLDINGS, INC.,

a Delaware corporation

By:  /s/ Michael Touff                      

Name: Michael Touff                        

Title: Senior Vice President             

Date: January 30, 2017

SUBTENANT

CVENTURES, INC., a Colorado corporation

By: /s/ Carrie Delima                         

Name:  Carrie DeLima                       

Title:  Treasurer                                 

Date: January 30, 2017

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EXHIBIT A

PREMISES

[Attached]

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EX-12

Exhibit 12

M.D.C. HOLDINGS, INC.

RATIO OF EARNINGS (LOSS) TO FIXED CHARGES

	Year Ended December 31,
	2016			2015			2014			2013			2012
	(Dollars in thousands)
Earnings	$	216,687		$	158,372		$	163,686		$	187,953		$	95,914
Fixed charges	$	55,450		$	55,258		$	68,287		$	63,775		$	45,200
Earnings to fixed charges	$	3.91		$	2.87		$	2.40		$	2.95		$	2.12
Earnings (Loss):
Income before income taxes	$	151,781		$	101,424		$	100,475		$	129,825		$	61,115
Add: fixed charges		55,450			55,258			68,287			63,775			45,200
Less: capitalized interest		(52,681	)		(53,061	)		(65,584	)		(59,908	)		(41,507	)
Add: amortization of previously capitalized interest		62,137			54,751			60,508			54,261			31,106
Total earnings	$	216,687		$	158,372		$	163,686		$	187,953		$	95,914
Fixed Charges:
Homebuilding and corporate interest expense (1)	$	-		$	-		$	685		$	1,726		$	808
Mortgage lending interest expense		714			342			200			282			607
Interest component of rent expense		2,055			1,855			1,818			1,859			2,278
Capitalized interest		52,681			53,061			65,584			59,908			41,507
Total fixed charges	$	55,450		$	55,258		$	68,287		$	63,775		$	45,200

_____________________________________________

(1) Includes the amortization and expensing of debt expenses that were not capitalized during period

In computing the ratio of earnings to fixed charges, fixed charges consist of homebuilding and corporate interest expense which includes the amortization and expensing of debt expenses that were not capitalized during period, mortgage lending interest expense, interest component of rent expense, and capitalized interest. Earnings are computed by adding fixed charges (except capitalized interest) and amortization of previously capitalized interest during the period to (loss) earnings before income taxes.

EX-21

Exhibit 21

SUBSIDIARIES OF M.D.C. HOLDINGS, INC.

Name	State of Organization	Assumed Names
Allegiant Insurance Company, A Risk Retention Group	Hawaii
American Home Insurance Agency, Inc.	Colorado	AHI Insurance Agency
American Home Title and Escrow Company	Colorado
HomeAmerican Mortgage Corporation	Colorado	Home American Mortgage Corporation
M.D.C. Land Corporation	Colorado	MDC Land Flight Operations Co. Richmond Developments Limited
MDC/Wood, Inc.	Delaware
RAH of Florida, Inc.	Colorado
RAH Texas Holdings, LLC	Colorado
Richmond American Construction, Inc.	Delaware
Richmond American Homes Corporation	Colorado
Richmond American Homes of Arizona, Inc.	Delaware
Richmond American Homes of Colorado, Inc.	Delaware
Richmond American Homes of Delaware, Inc.	Colorado
Richmond American Homes of Florida, LP	Colorado
Richmond American Homes of Illinois, Inc.	Colorado
Richmond American Homes of Maryland, Inc.	Maryland	Richmond American Homes of California, Inc.
Richmond American Homes of Nevada, Inc.	Colorado
Richmond American Homes of New Jersey, Inc.	Colorado
Richmond American Homes of Pennsylvania, Inc.	Colorado
Richmond American Homes of Texas, Inc.	Colorado
Richmond American Homes of Utah, Inc.	Colorado
Richmond American Homes of Virginia, Inc.	Virginia
Richmond American Homes of Washington, Inc.	Colorado
Richmond American Homes Three, Inc.	Colorado
Richmond American Homes Four, Inc.	Colorado
Richmond American Homes Five, Inc.	Colorado
Richmond American Homes Six, Inc.	Colorado
Richmond American Homes Seven, Inc.	Colorado
Richmond Realty, Inc.	Colorado
Richmond Realty of Washington, Inc.	Colorado
StarAmerican Insurance Ltd.	Hawaii
RAH Aviation, LLC	Colorado
Yosemite Financial, Inc.	Colorado

EX-23

Exhibit 23

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in the following Registration Statements:

(1) Registration Statement (Form S-3 No. 333-212146) of M.D.C. Holdings, Inc. and related Prospectus for the registration of $1,500,000,000 in common stock, preferred stock, and debt securities; and

(2) Registration Statements (Form S-8 No. 333-103192 and Form S-8 No. 333-145066) pertaining to the M.D.C. Holdings, Inc. 2001 Equity Incentive Plan and M.D.C. Holdings, Inc. Stock Option Plan for Non-Employee Directors; and

(3) Registration Statements (Form S-8 No. 333-174110, Form S-8 No. 333-188311, Form S-8 No. 333-203863, and S-8 No. 333-203864) pertaining to the M.D.C. Holdings, Inc. 2011 Equity Incentive Plan and the M.D.C. Holdings, Inc. 2011 Stock Option Plan for Non-Employee Directors;

of our reports dated February 1, 2017, with respect to the consolidated financial statements of M.D.C. Holdings, Inc., and the effectiveness of internal control over financial reporting of M.D.C. Holdings, Inc. included in this Annual Report (Form 10-K) for the year ended December 31, 2016.

/s/ Ernst & Young LLP

Denver, Colorado

February 1, 2017

EX-31.1

Exhibit 31.1

CERTIFICATIONS

I, Larry A. Mizel, certify that:

1. I have reviewed this report on Form 10-K of M.D.C. Holdings, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: February 1, 2017	/s/ Larry A. Mizel
	Larry A. Mizel
	Chairman of the Board of Directors and Chief Executive Officer
	(principal executive officer)

EX-31.2

Exhibit 31.2

CERTIFICATIONS

I, Robert N. Martin, certify that:

1. I have reviewed this report on Form 10-K of M.D.C. Holdings, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: February 1, 2017	/s/ Robert N. Martin
	Robert N. Martin
	Senior Vice President, Chief Financial Officer and Principal Accounting Officer
	(principal financial officer)

EX-32.1

Exhibit 32.1

CERTIFICATION

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned Chief Executive Officer of M.D.C. Holdings, Inc. (the "Company") hereby certifies that the Report on Form 10-K of the Company for the period ended December 31, 2016 accompanying this certification, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in the periodic report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: February 1, 2017	/s/ Larry A. Mizel
	Larry A. Mizel
	Chief Executive Officer
	(principal executive officer)

The foregoing certification is being furnished solely pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934 and Section 1350 of Title 18, United States Code, and is not being filed as part of the report or as a separate disclosure document.

EX-32.2

Exhibit 32.2

CERTIFICATION

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned Chief Financial Officer of M.D.C. Holdings, Inc. (the "Company") hereby certifies that the Report on Form 10-K of the Company for the period ended December 31, 2016 accompanying this certification, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in the periodic report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: February 1, 2017	/s/ Robert N. Martin
	Robert N. Martin
	Senior Vice President, Chief Financial Officer and  Principal Accounting Officer
	(principal financial officer)

The foregoing certification is being furnished solely pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934 and Section 1350 of Title 18, United States Code, and is not being filed as part of the report or as a separate disclosure document.

XML

Document And Entity Information - USD ($) $ in Billions	12 Months Ended
	Dec. 31, 2016	Jun. 30, 2016
Document Information [Line Items]
Entity Registrant Name	MDC HOLDINGS INC
Entity Central Index Key	0000773141
Trading Symbol	mdc
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	Yes
Entity Common Stock, Shares Outstanding (in shares)	51,485,090
Entity Public Float		$ 1
Document Type	10-K
Document Period End Date	Dec. 31, 2016
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	FY
Amendment Flag	false

XML

Consolidated Balance Sheets - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
ASSETS
Cash and cash equivalents	$ 282,909	$ 180,988
Inventories:
Property and equipment, net	28,041	28,226
Deferred tax assets, net	74,888	99,107
Total Assets	2,528,589	2,415,899
Cash and cash equivalents	282,909	180,988
Mortgage loans held-for-sale, net	42,600	23,100
Total Assets	2,528,589	2,415,899
LIABILITIES AND EQUITY
Total Liabilities	1,208,519	1,159,607
Total Liabilities	1,208,519	1,159,607
Stockholders' Equity
Preferred stock, $0.01 par value; 25,000,000 shares authorized; none issued or outstanding
Common stock, $0.01 par value; 250,000,000 shares authorized; 51,485,090 and 48,888,424 issued and outstanding at December 31, 2016 and December 31, 2015, respectively	515	489
Additional paid-in-capital	983,532	915,746
Retained earnings	313,952	324,342
Accumulated other comprehensive income	22,071	15,715
Total Stockholders' Equity	1,320,070	1,256,292
Total Liabilities and Stockholders' Equity	2,528,589	2,415,899
Homebuilding Segment [Member]
ASSETS
Cash and cash equivalents	259,087	144,342
Marketable securities	59,770	92,387
Restricted cash	3,778	3,750
Trade and other receivables	42,492	23,314
Inventories:
Housing Completed or Under Construction	874,199	747,036
Land and land under development	884,615	1,016,926
Total inventories	1,758,814	1,763,962
Property and equipment, net	28,041	28,226
Deferred tax assets, net	74,888	99,107
Metropolitan district bond securities (related party)	30,162	25,911
Prepaid and other assets	60,463	65,394
Total Assets	2,317,495	2,246,393
Cash and cash equivalents	259,087	144,342
Marketable securities	59,770	92,387
Total Assets	2,317,495	2,246,393
LIABILITIES AND EQUITY
Accounts payable	42,088	40,472
Accrued liabilities	144,566	122,886
Revolving credit facility	15,000	15,000
Senior notes, net	841,646	840,524
Total Liabilities	1,043,300	1,018,882
Total Liabilities	1,043,300	1,018,882
Financial Services Segment [Member]
ASSETS
Cash and cash equivalents	23,822	36,646
Marketable securities	36,436	11,307
Inventories:
Prepaid and other assets	12,062	5,883
Total Assets	211,094	169,506
Cash and cash equivalents	23,822	36,646
Marketable securities	36,436	11,307
Mortgage loans held-for-sale, net	138,774	115,670
Other assets	12,062	5,883
Total Assets	211,094	169,506
LIABILITIES AND EQUITY
Total Liabilities	165,219	140,725
Total accounts payable and accrued liabilities	50,734	52,114
Mortgage repurchase facility	114,485	88,611
Total Liabilities	$ 165,219	$ 140,725

XML

Consolidated Balance Sheets (Parentheticals) - $ / shares	Dec. 31, 2016	Dec. 31, 2015
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized (in shares)	25,000,000	25,000,000
Preferred stock, shares issued (in shares)	0	0
Preferred stock, shares outstanding (in shares)	0	0
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	250,000,000	250,000,000
Common stock, shares issued (in shares)	51,485,090	48,888,424
Common stock, shares outstanding (in shares)	51,485,090	48,888,424

XML

Consolidated Statements of Operations and Comprehensive Income - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Inventory impairments	$ (10,173)	$ (8,775)	$ (1,760)
Interest expense			(685)
Losses on early extinguishments of debt			(18,153)
Other-than-temporary impairment of marketable securities	(1,443)	(3,969)	(4,293)
Pretax income	151,781	101,424	100,475
Income before income taxes	151,781	101,424	100,475
Provision for income taxes	(48,570)	(35,633)	(37,332)
Net income	103,211	65,791	63,143
Other comprehensive income (loss) related to available-for-sale securities, net of tax	6,356	5,260	(1,120)
Comprehensive income	$ 109,567	$ 71,051	$ 62,023
Earnings per share:
Basic (in dollars per share)	$ 2.01	$ 1.28	$ 1.23
Diluted (in dollars per share)	$ 2	$ 1.28	$ 1.23
Weighted average common shares outstanding
Basic (in shares)	51,286,942	51,202,616	51,046,318
Diluted (in shares)	51,447,147	51,415,580	51,258,444
Homebuilding Segment [Member]
Home sales revenue	$ 2,257,153	$ 1,847,889	$ 1,647,398
Land sale revenues	5,700	12,337	3,233
Total home and land sale revenues	2,262,853	1,860,226	1,650,631
Home cost of sales	(1,884,391)	(1,539,396)	(1,365,621)
Land cost of sales	(4,866)	(12,611)	(2,559)
Inventory impairments	(10,173)	(9,993)	(1,760)
Total cost of sales	(1,899,430)	(1,562,000)	(1,369,940)
Gross margin	363,423	298,226	280,691
Selling, general and administrative expenses	(250,540)	(226,317)	(203,253)
Interest and other income	7,012	6,709	26,310
Interest expense			(685)
Other expense	(3,447)	(4,208)	(4,813)
Losses on early extinguishments of debt			(18,153)
Other-than-temporary impairment of marketable securities	(1,070)	(3,969)	(4,293)
Pretax income	115,378	70,441	75,804
Income before income taxes	115,378	70,441	75,804
Financial Services Segment [Member]
Other-than-temporary impairment of marketable securities	(373)
Pretax income	36,403	30,983	24,671
Revenues	63,991	48,810	43,953
Expenses	(30,920)	(21,572)	(22,334)
Interest and other income	3,705	3,745	3,052
Income before income taxes	$ 36,403	$ 30,983	$ 24,671

XML

Consolidated Statements of Stockholders' Equity - USD ($) $ in Thousands	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	AOCI Attributable to Parent [Member]	Total
Balance (in shares) at Dec. 31, 2013	48,788,887
Balance at Dec. 31, 2013	$ 488	$ 908,090	$ 293,096	$ 11,575	$ 1,213,249
Net Income			63,143		63,143
Other comprehensive loss, net of tax				(1,120)	(1,120)
Total comprehensive income					62,023
Shares issued upon exercise of stock options and awards of restricted stock (in shares)	57,021
Shares issued upon exercise of stock options and awards of restricted stock		374			374
Cash dividends declared			(48,820)		(48,820)
Stock-based compensation expense		5,979			5,979
Forfeiture of restricted stock (in shares)	(14,269)
Net income tax deficiency from share-based compensation		(4,469)			(4,469)
Balance (in shares) at Dec. 31, 2014	48,831,639
Balance at Dec. 31, 2014	$ 488	909,974	307,419	10,455	1,228,336
Net Income			65,791		65,791
Other comprehensive loss, net of tax				5,260	5,260
Total comprehensive income					71,051
Shares issued upon exercise of stock options and awards of restricted stock (in shares)	66,721
Shares issued upon exercise of stock options and awards of restricted stock	$ 1	665			666
Cash dividends declared			(48,868)		(48,868)
Stock-based compensation expense		10,066			10,066
Forfeiture of restricted stock (in shares)	(9,936)
Net income tax deficiency from share-based compensation		(4,959)			(4,959)
Balance (in shares) at Dec. 31, 2015	48,888,424
Balance at Dec. 31, 2015	$ 489	915,746	324,342	15,715	1,256,292
Net Income			103,211		103,211
Other comprehensive loss, net of tax				6,356	6,356
Total comprehensive income					109,567
Shares issued upon exercise of stock options and awards of restricted stock (in shares)	147,455
Shares issued upon exercise of stock options and awards of restricted stock	$ 1	(1)
Cash dividends declared			(49,021)		(49,021)
Stock-based compensation expense		7,477			7,477
Net income tax deficiency from share-based compensation		(4,178)			(4,178)
Balance (in shares) at Dec. 31, 2016	51,485,090
Balance at Dec. 31, 2016	$ 515	983,532	313,952	22,071	1,320,070
Stock dividend declared (in shares)	2,449,211
Stock dividend declared	$ 25	$ 64,488	$ (64,580)		$ (67)

XML

Consolidated Statements of Cash Flows - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Operating Activities:
Net income	$ 103,211	$ 65,791	$ 63,143
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Losses on early extinguishments of debt			18,153
Stock-based compensation expense	7,477	10,066	5,978
Depreciation and amortization	5,132	4,069	3,928
Inventory impairments	10,173	9,993	1,760
Other-than-temporary impairment of marketable securities	1,443	3,969	4,293
Net realized loss (gain) on sale of marketable securities	(1,074)	911	(7,310)
Amortization of discount / premiums on marketable debt securities		100	566
Deferred income tax expense	16,145	33,333	34,226
Excess tax benefits from stock-based compensation			(26)
Net changes in assets and liabilities:
Restricted cash	(28)	(934)	(621)
Trade and other receivables	(20,424)	5,247	(6,638)
Mortgage loans held-for-sale	(23,104)	(27,278)	4,186
Prepaid expenses and other assets	(1,036)	(7,648)	(11,873)
Accounts payable and accrued liabilities	21,905	7,535	(16,013)
Net cash provided by (used in) operating activities	115,917	215	(163,647)
Investing Activities:
Purchases of marketable securities	(48,050)	(53,822)	(428,709)
Maturities of marketable securities		1,510	167,339
Sales of marketable securities	61,736	101,165	687,692
Purchases of property and equipment	(4,468)	(1,491)	(3,242)
Net cash provided by investing activities	9,218	47,362	423,080
Financing Activities:
Advances (payments) on mortgage repurchase facility, net	25,874	27,789	(2,252)
Proceeds from issuance of senior notes			248,375
Repayment of senior notes			(517,650)
Advances on revolving credit facility, net			15,000
Dividend payments	(49,088)	(48,868)	(48,820)
Excess tax benefits from stock-based compensation			26
Proceeds from exercise of stock options		665	375
Net cash used in financing activities	(23,214)	(20,414)	(304,946)
Net increase (decrease) in cash and cash equivalents	101,921	27,163	(45,513)
Cash and cash equivalents:
Beginning of year	180,988	153,825	199,338
End of year	282,909	180,988	153,825
Housing Completed or Under Construction [Member]
Net changes in assets and liabilities:
Housing completed or under construction	(128,525)	(15,551)	(96,936)
Land and Land Under Development [Member]
Net changes in assets and liabilities:
Housing completed or under construction	$ 124,622	$ (89,388)	$ (160,463)

XML

Note 1 - Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Significant Accounting Policies [Text Block]

1.

   

  Summary

of Significant Accounting

Policies

Principles of Consolidation

.  The Consolidated Financial Statements of M.D.C. Holdings, Inc. ("MDC," “the Company," “we,” “us,” or “our” which refers to M.D.C. Holdings, Inc. and its subsidiaries) include the accounts of MDC and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. Certain prior year balances have been reclassified to conform to the current year’s presentation.

Description of Business

.  We have homebuilding operations in Arizona, California, Colorado, Florida, Maryland, (which includes Maryland, Pennsylvania and New Jersey), Nevada, Utah, Virginia and Washington. The primary functions of our homebuilding operations include land acquisition and development, home construction, purchasing, marketing, merchandising, sales and customer service. We build and sell primarily single-family detached homes, which are designed and built to meet local customer preferences. We are the general contractor for all of our projects and retain subcontractors for site development and home construction.

Our financial services operations consist of HomeAmerican Mortgage Corporation (“HomeAmerican”), which originates mortgage loans, primarily for our homebuyers, American Home Insurance Agency, Inc. (“American Home Insurance”), which offers

third

-party insurance products to our homebuyers, and American Home Title and Escrow Company (“American Home Title”), which provides title agency services to the Company and our homebuyers in Colorado, Florida, Maryland, Nevada and Virginia. The financial services operations also include Allegiant Insurance Company, Inc., A Risk Retention Group (“Allegiant”), which provides insurance coverage primarily to our homebuilding subsidiaries and most of our subcontractors for homes sold by our homebuilding subsidiaries and for work performed in completed subdivisions, and StarAmerican Insurance Ltd. (“StarAmerican”), a wholly owned subsidiary of MDC, which is a re-insurer of Allegiant claims.

Presentation

.  Our balance sheet presentation is unclassified due to the fact that certain assets and liabilities have both short and long-term characteristics.

Use of Accounting Estimates

.  The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents

.  The Company periodically invests funds in highly liquid investments with an original maturity of

three

months or less, such as commercial paper, money market funds and time deposits, which are included in cash and cash equivalents in the consolidated balance sheets and consolidated statements of cash flows.

Marketable Securities

. All of our marketable securities were treated as available-for-sale investments as of

December

31,

2016

and

2015.

As such, we have recorded all of our marketable securities at fair value with changes in fair value initially being recorded as a component of accumulated other comprehensive income (“AOCI”). However, in accordance with Accounting Standards Codification (“ASC”) Topic

320,

Investments

(“ASC

320”),

if the unrealized loss is determined to be other-than-temporary, an other-than-temporary impairment (“OTTI”) is recorded in the consolidated statements of operations and comprehensive income. When a security is sold, we use the

first

-in

first

-out method to determine the cost of the security sold or the amount reclassified out of AOCI.

Restricted Cash

.  We receive cash earnest money deposits from our customers who enter into home sale contracts. In certain states we are restricted from using such deposits for general purposes, unless we take measures to release state imposed restrictions on such deposits received from homebuyers, which

may

include posting blanket surety bonds. We had

$3.8

million and

$3.8

million in restricted cash related to homebuyer deposits at

December

31,

2016

and

2015,

respectively.

Trade and Other

Receivables

.  Trade and other receivables primarily includes home sale receivables, which reflects cash to be received from title companies or outside brokers associated with closed homes. Generally, we will receive cash from title companies and outside brokers within a few days of the home being closed.

Mortgage Loans Held-for-Sale, net

.  Mortgage loans held-for-sale are recorded at fair value based on quoted market prices and estimated market prices received from a

third

-party. Using fair value allows an offset of the changes in fair values of the mortgage loans and the derivative instruments used to hedge them without the burden of complying with the requirements for hedge accounting.

Inventories

.

Our inventories are primarily associated with communities where we intend to construct and sell homes, including models and unsold homes. Costs capitalized to land and land under development primarily include:

(1)

land costs;

(2)

land development costs;

(3)

entitlement costs;

(4)

capitalized interest;

(5)

engineering fees; and

(6)

title insurance, real property taxes and closing costs directly related to the purchase of the land parcel. Components of housing completed or under construction primarily include:

(1)

land costs transferred from land and land under development;

(2)

direct construction costs associated with a house;

(3)

real property taxes, engineering fees, permits and other fees;

(4)

capitalized interest; and

(5)

indirect construction costs, which include field construction management salaries and benefits, utilities and other construction related costs. Land costs are transferred from land and land under development to housing completed or under construction at the point in time that construction of a home on an owned lot begins.

In accordance with ASC

Topic

360,

Property, Plant, and Equipment

(“ASC

360”),

h

omebuilding inventories,

excluding those classified as held for sale,

are carried at cost unless events and circumstances indicate that the carrying value of the underlying subdivision

may

not be recoverable. We evaluate inventories for impairment at each quarter end on a subdivision level basis as each such subdivision represents the lowest level of identifiable cash flows. In making this determination, we review, among other things, the following for each subdivision:

• actual and trending “Operating Margin” (which is defined as home sale revenues less home cost of sales and all incremental costs associated directly with the subdivision, including sales commissions and marketing costs);

• estimated future undiscounted cash flows and Operating Margin;

• forecasted Operating Margin for homes in backlog;

• actual and trending net home orders;

• homes available for sale;

• market information for each sub-market, including competition levels, home foreclosure levels, the size and style of homes currently being offered for sale and lot size; and

• known or probable events indicating that the carrying value may not be recoverable.

If events or circumstances indicate that the carrying value of our inventory

may

not be recoverable, assets are reviewed for impairment by comparing the undiscounted estimated future cash flows from an individual subdivision (including capitalized interest) to its carrying value. If the undiscounted future cash flows are less than the subdivision’s carrying value, the carrying value of the subdivision is written down to its then estimated fair value. We generally determine the estimated fair value of each subdivision by determining the present value of the estimated future cash flows at discount rates, which are Level

3

inputs (see Note

6,

Fair Value Measurements

,

in the notes to the financial statements for definitions of fair value inputs), that are commensurate with the risk of the subdivision under evaluation. The evaluation for the recoverability of the carrying value of the assets for each individual subdivision can be impacted significantly by our estimates of future home sale revenues, home construction costs, and development costs per home, all of which are Level

3

inputs.

If land is classified as held for sale, in accordance with ASC

360,

we measure it at the lower of the carrying value or fair value less estimated costs to sell. In determining fair value, we primarily rely upon the most recent negotiated price which is a Level

2

input (see Note

6,

Fair Value

Measurements

, for definitions of fair value inputs)

. If a negotiated price is not available, we will consider several factors including, but not limited to, current market conditions, recent comparable sales transactions and market analysis studies. If the fair value less estimated costs to sell is lower than the current carrying value, the land is impaired down to its estimated fair value less costs to sell.

Property and Equipment, net

.   Property and equipment is carried at cost less accumulated depreciation and amortization. Depreciation and amortization is computed using the straight-line method over the estimated useful lives of the related assets, which range from

2

to

29

years. Depreciation and amortization expense for property and equipment of our homebuilding operations was

$4.6

million,

$3.9

million and

$3.8

million for the years ended

December

31,

2016,

2015

and

2014,

respectively.

The following table sets forth the cost and carrying value of our homebuilding property and equipment by major asset category.

			Accumulated
			Depreciation and		Carrying
	Cost		Amortization		Value
	(Dollars in thousands)
December 31, 2016:
Airplane	$	29,497	$	8,250	$	21,247
Computer software and equipment		23,909		20,329		3,580
Leasehold improvements		11,530		9,370		2,160
Other		2,410		1,356		1,054
Total	$	67,346	$	39,305	$	28,041
December 31, 2015:
Airplane	$	28,997	$	7,701	$	21,296
Computer software and equipment		21,393		16,599		4,794
Leasehold improvements		10,207		8,317		1,890
Other		2,199		1,953		246
Total	$	62,796	$	34,570	$	28,226

Deferred Tax Asset

s

, net

.   Deferred income taxes reflect the net tax effects of temporary differences between

(1)

the carrying amounts of the assets and liabilities for financial reporting purposes and

(2)

the amounts used for income tax purposes. Deferred tax assets and liabilities are measured using current enacted tax rates in effect in the years in which those temporary differences are expected to reverse. A valuation allowance is recorded against a deferred tax asset if, based on the weight of available evidence, it is more-likely-than-not (a likelihood of more than

50%)

that some portion, or all, of the deferred tax asset will not be realized.

Deferred Marketing Costs

. Certain marketing costs related to model homes and sales offices are capitalized as they are:

(1)

 reasonably expected to be recovered from the sale of the project; and

(2)

 incurred for (a) tangible assets that are used directly throughout the selling period to aid in the sale of the project or (b) services that have been performed to obtain regulatory approval of sales. Capitalized marketing costs are included in prepaid and other assets in the homebuilding section of the consolidated balance sheets and the associated amortization expense is included in selling, general and administrative (“SG&A”) in the homebuilding section of the

consolidated statements of operations and comprehensive income

as the homes in the related subdivision are delivered. We allocate all capitalized marketing costs equally to each house within a subdivision and record expense as homes close over the life of a subdivision. All other marketing costs are expensed as incurred.

Variable Interest Entities

.  In accordance with ASC Topic

810,

Consolidation

(“ASC

810”),

we analyze our land option contracts and other contractual arrangements to determine whether the corresponding land sellers are variable interest entities (“VIEs”) and, if so, whether we are the primary beneficiary. Although we do not have legal title to the optioned land, ASC

810

requires a company to consolidate a VIE if the company is determined to be the primary beneficiary. In determining whether we are the primary beneficiary, we consider, among other things, whether we have the power to direct the activities of the VIE that most significantly impact VIE’s economic performance, including, but not limited to, determining or limiting the scope or purpose of the VIE, selling or transferring property owned or controlled by the VIE, or arranging financing for the VIE. We also consider whether we have the obligation to absorb losses of the VIE or the right to receive benefits from the VIE. We have concluded that, as of

December

31,

2016,

we were not the primary beneficiary of any VIEs from which we are purchasing land under land option contracts.

Related Party Assets.

Our related party assets are debt security bonds acquired from a quasi-municipal corporation in the state of Colorado. See Note

14

to the Consolidated Financial Statements.

Goodwill.

In accordance with ASC Topic

350,

Intangibles–Goodwill and Other (“ASC

350”)

, we evaluate goodwill for possible impairment annually or more frequently if events or changes in circumstances indicate that the carrying amount of such assets

may

not be recoverable. We use a

three

step process to assess the realizability of goodwill. The

first

step is a qualitative assessment that analyzes current economic indicators associated with a particular reporting unit. For example, we analyze changes in economic, market and industry conditions, business strategy, cost factors, and financial performance, among others, to determine if there are indicators of a significant decline in the fair value of a particular reporting unit. If the qualitative assessment indicates a stable or improved fair value, no further testing is required.

If a qualitative assessment indicates it is more likely than not that the fair value of a reporting unit is less than its carrying amount, we will proceed to the

second

step where we calculate the fair value of a reporting unit based on discounted future probability-weighted cash flows. If this step indicates that the carrying value of a reporting unit is in excess of its fair value, we will proceed to the

third

step where the fair value of the reporting unit will be allocated to assets and liabilities as they would in a business combination. Impairment occurs when the carrying amount of goodwill exceeds its estimated fair value calculated in the

third

step.

Based on our analysis, we have concluded as of

December

31,

2016,

our goodwill was

not

impaired.

Liability for Unrecognized Tax Benefits.

 ASC Topic

740,

Income Taxes

, regarding liabilities for unrecognized tax benefits provides guidance for the recognition and measurement in financial statements of uncertain tax positions taken or expected to be taken in a tax return.

The evaluation of a tax position is a

two

-step process, the

first

step being recognition. We determine whether it is more-likely-than-not that a tax position will be sustained upon tax examination, including resolution of any related appeals or litigation, based on the technical merits of the position. The technical merits of a tax position derive from both statutory and judicial authority (legislation and statutes, legislative intent, regulations, rulings, and case law) and their applicability to the facts and circumstances of the tax position. If a tax position does not meet the more-likely-than-not recognition threshold, the benefit of that position is not recognized in the financial statements.

The

second

step is measurement. A tax position that meets the more-likely-than-not recognition threshold is measured to determine the amount of benefit to recognize in the financial statements. The tax position is measured as the largest amount of benefit that is greater than

50

percent likely of being realized upon ultimate resolution with a taxing authority. Once the gross unrecognized tax benefit is determined, we also accrue for any interest and penalties, as well as any offsets expected from resultant amendments to federal or state tax returns. We record the aggregate effect of these items in income tax expense in the consolidated statements of operations and comprehensive income. To the extent this tax position would be offset against a similar deferred tax asset for a net operating loss carryforward, a similar tax loss or a tax credit carryforward if such settlement is required or expected in the event the uncertain tax position is disallowed, the liability is treated as a reduction to the related deferred tax asset for a net operating loss carryforward, a similar tax loss or a tax credit carryforward. Otherwise, we record the corresponding liability in accrued liabilities in the homebuilding section of our consolidated balance sheets.

Warranty Accrual

. Our homes are sold with limited

third

-party warranties. 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. 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.

Warranty payments are recorded against the warranty accrual. Additional reserves

may

be established for known, unusual warranty-related expenditures not covered through the independent warranty accrual analysis performed by us. 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 accrual should be recorded.

We assess the reasonableness and adequacy of the reserve and the per-unit reserve amount originally included in home cost of sales, as well as the timing of the reversal of any excess reserve on a quarterly basis, using historical payment data and other relevant information. Warranty accrual is included in accrued 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

.

Insurance Reserves. 

The establishment of reserves for estimated losses associated with insurance policies issued by Allegiant and re-insurance agreements issued by StarAmerican are based on actuarial studies that include known facts and interpretations of circumstances, including our experience with similar cases and historical trends involving claim payment patterns, pending levels of unpaid claims, product mix or concentration, claim severity, frequency patterns depending on the business conducted, and changing regulatory and legal environments. It is possible that changes in the insurance payment experience used in estimating our ultimate insurance losses could have a material impact on our insurance reserves.

Reserves

for Construction Defect Claims

. 

The establishment of reserves for estimated losses to be incurred by our homebuilding subsidiaries associated with

(1)

the self-insured retention (“SIR”) portion of construction defect claims that are expected to be covered under insurance policies with Allegiant and

(2)

the entire cost of any construction defect claims that are not expected to be covered by insurance policies with Allegiant are based on actuarial studies that include known facts similar to those established for our insurance reserves. It is possible that changes in the payment experience used in estimating our ultimate losses for construction defect claims could have a material impact on our reserves.

Litigation Reserves. 

We and certain of our subsidiaries have been named as defendants in various cases. We reserve for estimated exposure with respect to these cases based upon currently available information on each case. See Note

16

to the Consolidated Financial Statements.

Derivative Financial Instruments

. The derivative instruments we utilize in the normal course of business are

interest rate lock commitment

s and forward sales of mortgage-backed securities, both of which typically are short-term in nature. Forward sales of mortgage-backed securities are utilized to hedge changes in fair value of our

interest rate lock commitment

s as well as

mortgage loans held-for-sale not under commitments to sell

.

For forward sales of mortgage-backed securities, as well as interest rate lock commitments that are still outstanding at the end of a reporting period, we record the changes in fair value of the derivatives in revenues in the financial services section of our consolidated statements of operations and comprehensive income with an offset to other assets or accounts payable and accrued liabilities in the financial services section of our consolidated balance sheets, depending on the nature of the change.

At

December

31,

2016

and

2015,

we had interest rate lock commitments with aggregate principal balances of approximately

$110.9

million

and $

98.4

million, respectively, at average interest rates of

4.11

%

and

3.82

%, respectively. In addition, we had

$42.6

million and

$23.1

million of mortgage loans held-for-sale at

December

31,

2016

and

2015,

respectively, that had not yet been committed to a mortgage purchaser. In order to hedge the changes in fair value of our interest rate lock commitments and mortgage loans held-for-sale which had not yet been committed to a mortgage purchaser, we had forward sales of securities totaling

$108.0

million and

$84.5

million at

December

31,

2016

and

2015,

respectively.

For the years ended

December

31,

2016,

2015

and

2014,

we recorded net gains (losses) on our derivatives of

$1.5

million,

$1.5

million and

$(0.8)

million, respectively. For further discussion of our policies regarding interest rate lock commitments, see our “Revenue Recognition for HomeAmerican” accounting policy section below.

Revenue Recognition

for Homebuilding Segments

. We recognize revenue from home deliveries and land sales when:

(1)

 the closing has occurred;

(2)

 title has passed to the buyer;

(3)

 possession and other attributes of ownership have been transferred to the buyer;

(4)

 we are not obligated to perform significant additional activities after closing and delivery; and

(5)

 the buyer demonstrates a commitment to pay for the property through an adequate initial and continuing investment. The buyer’s initial investment shall include:

(1)

 cash paid as a down payment;

(2)

 the buyer’s notes supported by irrevocable letters of credit;

(3)

 payments made by the buyer to

third

-parties to reduce existing indebtedness on the property; and

(4)

 other amounts paid by the buyer that are part of the sales value of the property. Revenue from a home delivery includes the base sales price and any purchased options and upgrades and is reduced for any sales price incentives.

We defer Operating Margin related to the sale of a home if all of the following criteria are present:

(1)

 HomeAmerican originates the mortgage loan;

(2)

 HomeAmerican has not sold the mortgage loan, or loans, as of the end of the pertinent reporting period; and

(3)

 the homebuyer’s down payment does not meet the initial or continuing investment criteria. The deferral is subsequently recognized at the time HomeAmerican sells the homebuyer’s mortgage loan, or loans, to a

third

-party purchaser. In the event the Operating Margin is a loss, we recognize such loss at the time the home is closed. We did not have any loans in inventory at

December

31,

2016,

2015

or

2014

that failed to meet the continuing investment criteria.

Revenue Recognition for HomeAmerican

.  Revenues recorded by HomeAmerican primarily reflect

(1)

origination fees and

(2)

the corresponding sale, or expected future sale, of a loan, which will include the estimated earnings from either the release or retention of a loan’s servicing rights.  Origination fees are recognized when a loan is originated.  When an interest rate lock commitment is made to a customer, we record the expected gain on sale of the mortgage, plus the estimated earnings from the expected sale of the associated servicing rights, adjusted for a pull-through percentage (which is defined as the likelihood that an interest rate lock commitment will be originated), as revenue.  As the interest rate lock commitment gets closer to being originated, the expected gain on the sale of that loan plus its servicing rights is updated to reflect current market value and the increase or decrease in the fair value of that interest rate lock commitment is recorded through revenues.  At the same time, the expected pull-through percentage of the interest rate lock commitment to be originated is updated (typically an increase as the interest lock commitment gets closer to origination) and, if there has been a change, revenues are adjusted as necessary.  After origination, our mortgage loans, generally including their servicing rights, are sold to

third

-party purchasers in accordance with sale agreements entered into by us with a

third

-party purchaser of the loans. We make representations and warranties with respect to the status of loans transferred in the sale agreements. The sale agreements generally include statements acknowledging the transfer of the loans is intended by both parties to constitute a sale. Sale of a mortgage loan has occurred when the following criteria, among others, have been met:

(1)

 fair consideration has been paid for transfer of the loan by a

third

party in an arms-length transaction,

(2)

 all the usual risks and rewards of ownership that are in substance a sale have been transferred by us to the

third

party purchaser; and

(3)

 we do not have a substantial continuing involvement with the mortgage loan.

We measure mortgage loans held-for-sale at fair value with the changes in fair value being reported in earnings at each reporting date. The impact of recording changes in fair value to earnings did not have a material impact on our financial position, results of operations or cash flows during the years ended

December

31,

2016,

2015

or

2014.

Our net gains on the sale of mortgage loans were

$34.0

million,

$17.8

million and

$

15.5

million for the years ended

December

31,

2016,

2015

and

2014,

respectively, and are included as a component of revenues in the financial services section of the

consolidated statements of operations and comprehensive income

.

Home Cost of Sales

. Home cost of sales includes the specific construction costs of each home and all applicable land acquisition, land development and related costs, both incurred and estimated to be incurred, warranty costs and finance and closing costs, including closing cost incentives. We use the specific identification method for the purpose of accumulating home construction costs and allocate costs to each lot within a subdivision associated with land acquisition and land development based upon relative fair value of the lots prior to home construction. Lots within a subdivision typically have comparable fair values, and, as such, we generally allocate costs equally to each lot within a subdivision. We record all home cost of sales when a home is closed on a house-by-house basis.

When a home is closed, we generally have not yet paid

or incurred

all costs necessary to complete the construction of the home and certain land development costs. At the time of a home closing, we compare the home construction budgets to actual recorded costs to determine the additional estimated costs remaining to be paid on each closed home. For amounts not incurred or paid as of the time of closing a home, we record an estimated accrual associated with certain home construction and land development costs. Generally, these accruals are established based upon contracted work which has yet to be paid, open work orders not paid at the time of home closing, as well as land completion costs more likely than not to be incurred, and represent estimates believed to be adequate to cover the expected remaining home construction and land development costs. We monitor the adequacy of these accruals on a house-by-house basis and in the aggregate on a subdivision-by-subdivision basis. At

December

31,

2016

and

2015,

we had

$8.7

million and

$11.5

million, respectively, of land development and home construction accruals for closed homes. Actual results could differ from such estimates.

Stock-Based Compensation Expense

. In accordance with

ASC Topic

718,

Compensation—Stock Compensation

(“ASC

718”)

, stock-based compensation expense for all share-based payment awards is based on the grant date fair value.

For stock option awards granted with just service and/or performance conditions, we estimate the fair value using a Black-Scholes option pricing model. For any stock option awards granted that contain a market condition, we estimate the fair value using

a Monte Carlo simulation model

. We recognize expense for share-based payment awards based on their varying vesting conditions as follows:

● Awards with service conditions only – Expense recognized on a straight-line basis over the requisite service period of the award.

● Awards with performance conditions – Expense recognized on a straight-line basis for each performance criteria tranche (if applicable) over the period between the date that it is determined the performance conditions related to each tranche (if applicable) are probable to be met and the date the award vests

● Awards with market conditions (“Market-Based”) – Expense recognized on a straight-line basis over the requisite service period, which is the lesser of the derived service period or the explicit service period, if one is present. However, if the market condition is satisfied prior to the end of the requisite service period, we will accelerate all remaining expense to be recognized.

Earnings (Loss) Per Common Share.

For purposes of calculating earnings (loss) per share (“EPS”), a company that has participating security holders (for example, holders of unvested restricted stock that has nonforfeitable dividend rights) is required to utilize the

two

-class method for calculating earnings per share unless the treasury stock method results in lower EPS. The

two

-class method is an allocation of earnings/(loss) between the holders of common stock and a company’s participating security holders. Under the

two

-class method, earnings/(loss) for the reporting period are allocated between common shareholders and other security holders based on their respective rights to receive distributed earnings (i.e., dividends) and undistributed earnings (i.e., net income/(loss)). Our common shares outstanding are comprised of shareholder owned common stock and participating security holders consisting of shareholders of unvested restricted stock. Basic EPS is calculated by dividing income or loss attributable to common stockholders by the weighted average number of shares of common stock outstanding, excluding participating shares in accordance with ASC

260.

To

calculate diluted EPS, basic EPS is further adjusted to include the effect of potential dilutive stock options outstanding.

Recently Issued Accounting Standards

. In

May

2014,

the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)

2014

-

09,

Revenue from Contracts with Customers

("ASU

2014

-

09"),

which is a comprehensive new revenue recognition model. Under ASU

2014

-

09,

a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods and services. ASU

2014

-

09

is effective for our interim and annual reporting periods beginning

January

1,

2018,

and is to be adopted using either a full retrospective or modified retrospective transition method. Early adoption is permitted only as of annual reporting periods beginning after

December

15,

2016,

including interim reporting periods within that reporting period. We do not plan to early adopt the guidance. We expect to adopt the new standard under the modified retrospective approach. Although we are still in the process of evaluating our contracts, we do not believe the adoption of ASU

2014

-

09

will have a material impact on the amount or timing of our revenues. Although we are still evaluating the accounting for marketing costs under ASC

606,

there is a possibility that the adoption of ASU

2014

-

09

will impact the timing of recognition and classification in our consolidated financial statements of certain marketing costs we incur to obtain sales contracts from our customers. For example, there are various marketing costs that we currently capitalize and amortize with each home delivered in a community. Under the new guidance, these costs

may

need to be expensed immediately. We are continuing to evaluate the exact impact the update will have on recording revenue and our marketing costs in our consolidated financial statements and related disclosures.

In

February

2015,

the FASB issued ASU

2015

-

02,

Consolidation

(Topic

810)

: Amendments to the Consolidation Analysis

(“ASU

2015

-

02”),

which amends the consolidation requirements in ASC Topic

810,

Consolidation

, primarily related to limited partnerships and variable interest entities. ASU

2015

-

02

was effective for our interim and annual reporting periods beginning

January

1,

2016

and did not have a material impact on our consolidated financial statements.

In

January

2016,

the FASB issued ASU

2016

-

01,

Financial Instruments–Overall: Recognition and Measurement of Financial Assets and Financial Liabilities

(“ASU

2016

-

01”),

which makes a number of changes to the current GAAP model, including changes to the accounting for equity investments and financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. Under ASU

2016

-

01,

we will primarily be impacted by the changes to accounting for equity instruments with readily determinable fair values as they will no longer be permitted to be classified as available-for-sale (changes in fair value reported through other comprehensive income) and instead, all changes in fair value will be reported in earnings. ASU

2016

-

01

is effective for our interim and annual reporting periods beginning

January

1,

2018

and is to be applied using a modified retrospective transition method. Early adoption of the applicable guidance from ASU

2016

-

01

is not permitted. Given the significant amount of our investments in equity securities, and assuming we still have a similar level of investments when this guidance is adopted, we would expect that the impact to our consolidated statements of operations and comprehensive income from this update could be material. Furthermore, depending on trends in the stock market, we

may

see increased volatility in our consolidated statements of operations and comprehensive income.

In

February

2016,

the FASB issued ASU

2016

-

02,

Leases

(“ASU

2016

-

02”),

which requires a lessee to recognize a right-of-use asset and a corresponding lease liability for virtually all leases. The liability will be equal to the present value of lease payments while the right-of-use asset will be based on the liability, subject to adjustment, such as for initial direct costs. In addition, ASU

2016

-

02

expands the disclosure requirements for lessees. Upon adoption, we will be required to record a lease asset and lease liability related to our operating leases. ASU

2016

-

02

is effective for our interim and annual reporting periods beginning

January

1,

2019

and is to be applied using a modified retrospective transition method. Early adoption is permitted. We do not plan to early adopt the guidance and we are currently evaluating the impact the update will have on our consolidated financial statements and related disclosures.

I

n

March

2016,

the FASB issued ASU

2016

-

09,

Compensation - Stock Compensation: Improvements to Employee Share-Based Payment Accounting

(“ASU

2016

-

09”),

which amends ASC Topic

718.

The standard is intended to simplify several areas of accounting for share-based compensation arrangements, including the accounting for income taxes, classification of excess tax benefits on the statement of cash flows, forfeitures, statutory tax withholding requirements, classification of awards as either equity or liabilities, and classification of employee taxes paid on the statement of cash flows when an employer withholds shares for tax-withholding purposes. ASU

2016

-

09

is effective for our interim and annual reporting periods beginning

January

1,

2017,

and is to be applied using a retrospective transition method. Though permitted, we

did not early adopt the guidance. The primary impact from this guidance on our consolidated financial statements will be to our tax provision line item as any excess tax benefits or deficiencies from

(1)

the exercise or expiration of options or

(2)

the vesting of stock awards will now be recognized through our income tax provision as opposed to additional paid-in capital (to the extent we had a sufficient pool of windfall tax benefits). As of

December

31,

2016,

we had options covering

540,000

shares with exercise prices above the MDC closing share price at

December

31,

2016

and the ability to exercise those options will expire at some point during

2017.

If the exercise price continues to be greater than the share price of MDC throughout

2017,

these options will likely expire unexercised and as a result, we could recognize an additional

$2.6

million expense in our tax provision for

2017.

We are continuing to evaluate additional impacts the update will have on our consolidated financial statements and related disclosures.

In

June

2016,

 the FASB issued ASU

2016

-

13,

Financial Instruments—Credit Losses (Topic

326):

 

Measurement of Credit Losses on Financial Instruments

(“ASU

2016

-

13”),

which requires measurement and recognition of expected credit losses for financial assets held. The amendments in ASU

2016

-

13

eliminate the probable threshold for initial recognition of a credit loss in current GAAP and reflect an entity’s current estimate of all expected credit losses. ASU

2016

-

13

is effective for our interim and annual reporting periods beginning

January

1,

2021,

and is to be applied using a modified retrospective transition method. Earlier adoption is permitted.

 We do not plan to early adopt the guidance and we are currently evaluating the impact the update will have on our consolidated financial statements and related disclosures.

In

August

2016,

the FASB issued ASU

2016

-

15,

S

tatement of Cash Flows (Topic

230):

Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force)

(“ASU

2016

-

15”),

which amends ASC Topic

230

, Statement of Cash Flows

, to clarify guidance on the classification of certain cash receipts and payments in the statement of cash flows. The amendments in ASU

2016

-

15

are intended to reduce diversity

in practice in how certain transactions are classified in the statement of cash flows

. ASU

2016

-

15

is effective for our interim and annual reporting periods beginning

January

1,

2018,

and is to be applied using a retrospective transition method. Earlier adoption is permitted.

 We do not plan to early adopt the guidance and do not believe the guidance will have a material impact on our financial statements upon adoption.

In

November

2016,

the FASB issued ASU

2016

-

18,

Statement of Cash Flows (Topic

230):

Restricted Cash

(a

consensus of the

FASB

Emerging Issues Task Force

(“ASU

2016

-

18”),

which requires restricted cash to be included with cash and cash equivalents when reconciling the beginning and ending amounts on the statement of cash flows. ASU

2016

-

18

is effective for our interim and annual reporting periods beginning

January

1,

2018,

and is to be applied using a retrospective transition method. Earlier adoption is permitted.

 We do not plan to early adopt the guidance and do not believe the guidance will have a material impact on our financial statements upon adoption.

XML

Note 2 - Supplemental Cash Flow Disclosure

12 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Cash Flow, Supplemental Disclosures [Text Block]

2.

           Supplemental Cash Flow Disclosure

The table below sets forth supplemental disclosures of cash flow information and non-cash investing and financing activities.

	Year Ended December 31,
	2016		2015		2014
Cash paid for:	(Dollars in thousands)
Interest, net of interest capitalized	$	717	$	286	$	1,843
Income taxes	$	29,144	$	3,023	$	2,793
Non-cash investing and financing activities:
Unrealized holding gains (losses) on marketable securities, net of tax	$	6,356	$	5,260	$	(1,120	)

XML

Note 3 - Segment Reporting

12 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Segment Reporting Disclosure [Text Block]

3

.             Segment Reporting

An operating segment is defined as a component of an enterprise for which discrete financial information is available and is reviewed regularly by the Chief Operating Decision Maker (“CODM”), or decision-making group, to evaluate performance and make operating decisions. We have identified our CODM as

two

key executives—the Chief Executive Officer and the Chief Operating Officer.

We have identified each homebuilding division as an operating segment. Our homebuilding operating segments have been aggregated into the reportable segments noted below because they are similar in the following regards:

(1)

 economic characteristics;

(2)

 housing products;

(3)

 class of homebuyer;

(4)

 regulatory environments; and

(5)

methods used to construct and sell homes

. Our homebuilding reportable segments are as follows:

● West (Arizona, California, Nevada and Washington)

● Mountain (Colorado and Utah)

● East (Virginia, Florida and Maryland, which includes Pennsylvania and New Jersey)

Our financial services business consists of the operations of the following operating segments:

(1)

 HomeAmerican;

(2)

 Allegiant;

(3)

 StarAmerican;

(4)

 American Home Insurance Agency, Inc.; and

(5)

 American Home Title and Escrow Company. Due to its contributions to consolidated pretax income we consider HomeAmerican to be a reportable segment (“mortgage operations”)

. The remaining operating segments have been aggregated into

one

reportable segment (“other”) because they do not individually exceed

10

percent of:

(1)

 consolidated revenue;

(2)

 the greater of (a) the combined reported profit of all operating segments that did not report a loss or (b) the positive value of the combined reported loss of all operating segments that reported losses; or

(3)

 consolidated assets.

Corporate is a non-operating segment that develops and implements strategic initiatives and supports our operating divisions by centralizing key administrative functions such as finance, treasury, information technology, insurance, risk management, litigation and human resources. Corporate also provides the necessary administrative functions to support MDC as a publicly traded company. A portion of the expenses incurred by Corporate are allocated to the homebuilding operating segments based on their respective percentages of assets, and to a lesser degree, a portion of Corporate expenses are allocated to the financial services segments. A majority of Corporate’s personnel and resources are primarily dedicated to activities relating to the homebuilding segments, and, therefore, the balance of any unallocated Corporate expenses is included in the homebuilding operations section of our consolidated statements of operations and comprehensive income

.

The following table summarizes home and land sale revenues for our homebuilding operations and revenues for our financial services operations. 

	Year Ended December 31,
	2016		2015		2014
	(Dollars in thousands)
Homebuilding
West	$	1,128,513	$	915,259	$	770,051
Mountain		756,997		609,002		534,244
East		377,343		335,965		346,336
Total home and land sale revenues	$	2,262,853	$	1,860,226	$	1,650,631
Financial Services
Mortgage operations	$	41,585	$	30,276	$	25,887
Other		22,406		18,534		18,066
Total financial services revenues	$	63,991	$	48,810	$	43,953
Total revenues	$	2,326,844	$	1,909,036	$	1,694,584

The following table summarizes pretax income (loss) for our homebuilding and financial services operations.

	Year Ended December 31,
	2016			2015			2014
	(Dollars in thousands)
Homebuilding
West	$	73,594		$	64,627		$	63,071
Mountain		73,104			52,707			39,343
East		4,949			(6,033	)		10,730
Corporate		(36,269	)		(40,860	)		(37,340	)
Total homebuilding pretax income	$	115,378		$	70,441		$	75,804
Financial Services
Mortgage operations	$	23,845		$	17,230		$	14,034
Other		12,558			13,753			10,637
Total financial services pretax income	$	36,403		$	30,983		$	24,671
Total pretax income	$	151,781		$	101,424		$	100,475

The following table summarizes total assets for our homebuilding and financial services operations. The assets in our West, Mountain and East segments consist primarily of inventory while the assets in our Corporate segment primarily include cash and cash equivalents, marketable securities, and our deferred tax assets. The assets in our financial services segment consist mostly of cash and cash equivalents, marketable securities and mortgage loans held-for-sale.

	December 31,
	2016		2015
	(Dollars in thousands)
Homebuilding assets
West	$	1,035,033	$	991,393
Mountain		571,139		536,831
East		256,816		324,457
Corporate		454,507		393,712
Total homebuilding assets	$	2,317,495	$	2,246,393
Financial services assets
Mortgage operations	$	153,182	$	123,176
Other		57,912		46,330
Total financial services assets	$	211,094	$	169,506
Total assets	$	2,528,589	$	2,415,899

XML

Note 4 - Earnings Per Share

12 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Earnings Per Share [Text Block]

4.

             Earnings

Per Shar

e

On

November

21,

2016

,

MDC’s board of directors declared a

5%

stock dividend that was distributed on

December

20,

2016

to shareholders of record on

December

6,

2016

.

In accordance with ASC

260,

basic and diluted earnings per share amounts, weighted-average shares outstanding, and dividends declared per share have been restated for all periods presented to reflect the effect of this stock dividend

. The following table shows our basic and diluted EPS calculations:

	Year Ended December 31,
	2016			2015			2014
	(Dollars in thousands, except per share amounts)
Numerator
Net income	$	103,211		$	65,791		$	63,143
Less: distributed earnings allocated to participating securities		(163	)		(98	)		(196	)
Less: undistributed earnings allocated to participating securities		(179	)		(37	)		(60	)
Net income attributable to common stockholders (numerator for basic earnings per share)		102,869			65,656			62,887
Add back: undistributed earnings allocated to participating securities		179			37			60
Less: undistributed earnings reallocated to participating securities		(179	)		(37	)		(60	)
Numerator for diluted earnings per share under two class method	$	102,869		$	65,656		$	62,887
Denominator
Weighted-average common shares outstanding		51,286,942			51,202,616			51,046,318
Add: dilutive effect of stock options		160,205			212,964			212,126
Denominator for diluted earnings per share under two class method		51,447,147			51,415,580			51,258,444
Basic Earnings Per Common Share	$	2.01		$	1.28		$	1.23
Diluted Earnings Per Common Share	$	2.00		$	1.28		$	1.23

Diluted EPS for the years ended

December

31,

2016,

2015

and

2014

excluded options to purchase approximately

5.6

million,

6.2

million and

4.7

million shares, respectively, of common stock because the effect of their inclusion would be anti-dilutive.

XML

Note 5 - Accumulated Other Comprehensive Income

12 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Comprehensive Income (Loss) Note [Text Block]

5.

      

Accumulated Other Comprehensive Income

The following table sets forth our changes in accumulated other comprehensive income:

	Year Ended December 31,
	2016			2015		2014
	(Dollars in thousands)
Unrealized gains (losses) on available-for-sale marketable securities (1) :
Beginning balance	$	3,657		$	2,775	$	7,655
Other comprehensive income (loss) before reclassifications		4,738			322		(3,025	)
Amounts reclassified from AOCI (2)		(665	)		560		(1,855	)
Ending balance	$	7,730		$	3,657	$	2,775
Unrealized gains on available-for-sale metropolitan district bond securities (1) :
Beginning balance	$	12,058		$	7,680	$	3,920
Other comprehensive income before reclassifications		2,283			4,378		3,760
Ending balance	$	14,341		$	12,058	$	7,680
Total ending AOCI	$	22,071		$	15,715	$	10,455

(1) All amounts net-of-tax.

(2) See separate table below for details about these reclassifications.

The following table sets forth the activity related to reclassifications out of accumulated other comprehensive income (loss) related to available for sale securities:

	Year Ended December 31,
Affected Line Item in the Statements of Operations	2016			2015			2014
	(Dollars in thousands)
Homebuilding: Interest and other income	$	2,049		$	2,690		$	7,210
Homebuilding: Other-than-temporary impairment of marketable securities		(1,070	)		(3,969	)		(4,293	)
Financial services: Interest and other income		467			368			100
Financial services: Other-than-temporary impairment of marketable securities		(373	)		-			-
Income before income taxes		1,073			(911	)		3,017
Provision for income taxes		(408	)		351			(1,162	)
Net income	$	665		$	(560	)	$	1,855

XML

Note 6 - Fair Value Measurements

12 Months Ended

Dec. 31, 2016

Notes to Financial Statements

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, 2016		December 31, 2015
		(Dollars in thousands)
Marketable equity securities (available-for-sale)	Level 1	$	96,206	$	103,694
Mortgage loans held-for-sale, net	Level 2	$	138,774	$	115,670
Metropolitan district bond securities (related party) (available-for-sale)	Level 3	$	30,162	$	25,911

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

December

31,

2016

and

2015.

Cash and cash equivalents, restricted cash, trade and other receivables, prepaid and other assets, accounts payable, accrued liabilities and borrowings on our revolving credit facility.

Fair value approximates carrying value.

Marketable Securities

.  As of

December

31,

2016

and

2015,

we only held

marketable equity securities. However, during

2015,

we also held marketable debt securities. Our debt securities consisted primarily of fixed and floating rate interest earning debt securities, which included, among others, United States government and government agency debt and corporate debt. As of

December

31,

2016

our equity securities consist of holdings in corporate equities, preferred stock and exchange traded funds. As of

December

31,

2015,

we also invested in holdings in mutual fund securities (which were primarily invested in debt securities). As of

December

31,

2016

and

2015,

all of our equity securities were treated as available-for-sale investments and as such, were recorded at fair value with all changes in fair value initially recorded through AOCI, subject to an assessment to determine if an unrealized loss, if applicable, is other-than-temporary.

Each quarter we assess all of our securities in an unrealized loss position for a potential OTTI. For the years ended

December

31,

2016,

2015

and

2014,

we recorded pretax OTTIs of

$1.4

million,

$4.0

million and

$4.3

million, respectively, for certain equity investments that were in an unrealized loss position as of the end of each respective period. The OTTIs are included in other-than-temporary impairment of marketable securities in the homebuilding or financial services sections of our

consolidated statements of operations and comprehensive income

.

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

	December 31, 2016
	Amortized Cost		OTTI			Net Amortized Cost		Fair Value
	(Dollars in thousands)
Homebuilding equity securities	$	49,295	$	(1,070	)	$	48,225	$	59,770
Financial services equity securities		35,885		(373	)		35,512		36,436
Total marketable equity securities	$	85,180	$	(1,443	)	$	83,737	$	96,206

	December 31, 2015
	Amortized Cost		OTTI			Net Amortized Cost		Fair Value
	(Dollars in thousands)
Homebuilding equity securities	$	89,738	$	(3,969	)	$	85,769	$	92,387
Financial services equity securities		12,026		-			12,026		11,307
Total marketable equity securities	$	101,764	$	(3,969	)	$	97,795	$	103,694

As of

December

31,

2016

and

2015,

our marketable equity securities were in net unrealized gain positions totaling

$12.5

millionand

$5.9

million, respectively.Our individual marketable equity securities that were in unrealized loss positions, excluding those that were impaired as part of any OTTI, aggregated to an unrealized loss of

$0.5

million and

$0.9

million as of

December

31,

2016

and

2015,

respectively.

The table below sets forth the aggregated unrealized losses for individual equity securities that were in unrealized loss positions but did not have OTTIs recognized

. We do not believe the decline in the value of these marketable securities as of

December

31,

2016

is other-than-temporary.

	December 31, 2016							December 31, 2015
	Number of Securities in Loss Position		Average Loss Position			Aggregate Fair Value of Securities in a Loss Position		Number of Securities in Loss Position		Average Loss Position			Aggregate Fair Value of Securities in a Loss Position
	(Dollars in thousands)
Marketable equity securities		5	$	(457	)	$	6,045		4	$	(882	)	$	6,116

The following table sets forth gross realized gains and losses from the sale of available-for-sale marketable securities. We record the net amount of these gains and losses to either other expense or interest and other income, dependent upon whether there is a net realized loss or gain, respectively, in the homebuilding section or financial services section of our consolidated statements of operations and comprehensive income.

	Year Ended December 31,
	2016			2015			2014
	(Dollars in thousands)
Gross realized gains on sales of available-for-sale securities
Equity securities	$	2,669		$	1,854		$	7,719
Debt securities		-			417			2,432
Total	$	2,669		$	2,271		$	10,151
Gross realized losses on sales of available-for-sale securities
Equity securities	$	(1,596	)	$	(2,949	)	$	(6,183	)
Debt securities		-			(233	)		(952	)
Total	$	(1,596	)	$	(3,182	)	$	(7,135	)
Net realized gain (loss) on sales of available-for-sale securities	$	1,073		$	(911	)	$	3,016

Mortgage Loans Held-for-Sale, Net.  

O

ur mortgage loans held-for-sale, which are measured at fair value on a recurring basis include

(1)

 mortgage loans held-for-sale that are under commitments to sell and

(2)

 mortgage loans held-for-sale that are not under commitments to sell.

At

December

31,

2016

and

December

 

31,

2015,

we had

$96.2

million and

$92.6

million,

respectively, of mortgage loans held-for-sale under commitments to sell. The fair value for those loans was based on quoted market prices for those mortgage loans, which are Level

2

fair value inputs.

At

December

31,

2016

and

2015,

we had

$42.6

million and

$23.1

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.

Metropolitan District Bond Securities (Related Party).

  The Metropolitan District Bond Securities (the “Metro Bonds”) are included in the homebuilding section of our consolidated balance sheets. Refer to Note

14

for details on how these bonds were acquired. Cash flows received by the Company from these securities reflect principal and interest payments from the Metro District, which are generally received in the

fourth

quarter, and are supported by an annual levy on the taxable assessed value of real estate and personal property within the Metro District’s boundaries. 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 in perpetuity until the unpaid principal and accrued interest is paid in full.

In accordance with ASC

310

-

30,

Loans and Debt Securities Acquired with Deteriorated Credit Quality

(“ASC

310

-

30”),

we adjust the bond principal balance 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 update its fair value on a quarterly basis, with the adjustment being recorded through AOCI. The fair value is based upon a discounted future cash flow model, which uses Level

3

inputs. The primary unobservable inputs used in our discounted cash flow model are

(1)

the forecasted number of homes to be closed, as they drive increases to the tax paying base for the Metro District,

(2)

the forecasted assessed value of those closed homes and

(3)

the discount rate. Cash receipts, which are scheduled to be received in the

fourth

quarter, reduce the carrying value of the Metro Bonds. The increases in the value of the Metro Bonds during the past

two

years are primarily based on a larger percentage of future cash flows coming from homes that have closed, which utilize a lower discount rate as those cash flows have a reduced amount of risk. The table below provides quantitative data, as of

December

31,

2016,

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
Number of homes closed per year	0	to	159		107		Increase	Decrease
Average sales price	$445,000	to	$870,000	$	548,000		Increase	Decrease
Discount rates	5%	to	12%		8.2	%	Decrease	Increase

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

	Year Ended December 31,
	2016			2015
	(Dollars in thousands)
Balance at beginning of period	$	25,911		$	18,203
Increase in fair value (recorded in other comprehensive income)		3,683			6,961
Change due to accretion of principal		1,747			1,427
Cash receipts		(1,179	)		(680	)
Balance at end of period	$	30,162		$	25,911

Mortgage Repurchase Facility.

The debt associated with our Mortgage Repurchase Facility (see Note

15

for further discussion) is at floating 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, which primarily reflect estimated prices for our senior notes which were provided by multiple sources.

	December 31, 2016				December 31, 2015
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
	(Dollars in thousands)
$250 Million 5⅝% Senior Notes due February 2020, net	$	246,915	$	265,611	$	246,032	$	257,813
$250 Million 5½% Senior Notes due January 2024, net		248,391		258,800		248,209		252,188
$350 Million 6% Senior Notes due January 2043, net		346,340		297,087		346,283		276,938
Total	$	841,646	$	821,498	$	840,524	$	786,939

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Note 7 - Inventories

12 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Inventory Disclosure [Text Block]

7.

            Inventories

The table below sets forth, by reportable segment, information relating to our homebuilding inventories. Included in land and land under development at

December

31,

2015

was

$1.7

million of land held for sale. We did not have any land held for sale at

December

31,

2016.

	December 31,		December 31,
	2016		2015
	(Dollars in thousands)
Housing Completed or Under Construction:
West	$	470,503	$	365,867
Mountain		277,922		253,578
East		125,774		127,591
Subtotal		874,199		747,036
Land and Land Under Development:
West		499,186		580,682
Mountain		271,252		259,484
East		114,177		176,760
Subtotal		884,615		1,016,926
Total Inventories	$	1,758,814	$	1,763,962

Inventory impairments recognized by segment for the years ended

December

31,

2016,

2015

and

2014

are shown in the table below.

	Year Ended December 31,
	2016		2015		2014
	(Dollars in thousands)
Housing Completed or Under Construction:
West	$	364	$	-	$	-
Mountain		574		250		234
East		1,390		1,378		1,000
Subtotal		2,328		1,628		1,234
Land and Land Under Development:
West		1,036		648		-
Mountain		589		569		526
East		6,220		7,148		-
Subtotal		7,845		8,365		526
Total Inventories	$	10,173	$	9,993	$	1,760

During the year ended

December

31,

2016,

we recorded

$10.2

million of inventory impairments, of which

$7.6

million related to

five

projects in our East segment,

$1.4

million related to

one

project in our West segment and

$1.2

million related to

one

project in our Mountain segment.

During the year ended

December

31,

2015,

we recorded

$10.0

million of inventory impairments, of which

$1.2

million was related to impairments on our land held for sale in

two

communities,

one

in our West segment and

one

in our Mountain segment, each of which the Company was actively marketing and planning on selling in the next

12

months. The remaining

$8.8

million in impairments related to

nine

projects with the majority coming from our East segment;

four

in Maryland totaling

$3.3

million and

three

in Virginia totaling

$5.2

million.

During the year ended

December

31,

2014,

we recorded

$1.8

million of inventory impairments related to

four

projects,

three

of which were in our Maryland division totaling

$1

million.

The table below provides quantitative data, for the periods presented, used in determining the fair value of the impaired inventory, excluding impairments related to land held for sale.

	Impairment Data								Quantitative Data
Three Months Ended	Total Subdivisions Tested		Inventory Impairments		Fair Value of Inventory After Impairments		Number of Subdivisions Impaired		Discount Rate
	(Dollars in thousands)
March 31, 2016		14	$	-	$	-		-			N/A
June 30, 2016		17		1,600		6,415		2		12%	to	15%
September 30, 2016		25		4,700		12,295		2		15%	to	18%
December 31, 2016		40		3,873		23,657		3		12%	to	15%
Total			$	10,173	$	42,367		7
March 31, 2015		22	$	350	$	3,701		1			9%
June 30, 2015		22		-		-		-			N/A
September 30, 2015		18		3,225		14,836		5		12%	to	15%
December 31, 2015		15		5,200		19,925		3		15%	to	20%
Total			$	8,775	$	38,462		9
March 31, 2014		16	$	-	$	-		-			N/A
June 30, 2014		16		850		4,285		2		11%	to	14%
September 30, 2014		23		-		-		-			N/A
December 31, 2014		21		910		4,646		2			13%
Total			$	1,760	$	8,931		4

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Note 8 - Capitalization of Interest

12 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Capitalization Disclosure [Text Block]

8. Capitalization of Interest

We capitalize interest to inventories during the period of development in accordance with ASC Topic

835,

Interest

(“ASC

835”).

Homebuilding interest capitalized as a cost of inventories is included in cost of sales during the period that related units or lots are delivered. To the extent our homebuilding debt exceeds our qualified assets as defined in ASC

835,

we expense a portion of the interest incurred.

Qualified homebuilding assets consist of all lots and homes, excluding finished unsold homes or finished models, within projects that are actively selling or under development. The table set forth below summarizes homebuilding interest activity.

The homebuilding interest expensed in the table below relates to the portion of interest incurred where our homebuilding debt exceeded our qualified inventory for such periods in accordance with ASC

835.

	Year Ended December 31,
	2016			2015			2014
	(Dollars in thousands)
Homebuilding interest incurred	$	52,681		$	53,061		$	66,269
Less: Interest capitalized		(52,681	)		(53,061	)		(65,584	)
Homebuilding interest expensed	$	-		$	-		$	685
Interest capitalized, beginning of period	$	77,541		$	79,231		$	74,155
Plus: Interest capitalized during period		52,681			53,061			65,584
Less: Previously capitalized interest included in home and land cost of sales		(62,137	)		(54,751	)		(60,508	)
Interest capitalized, end of period	$	68,085		$	77,541		$	79,231

XML

Note 9 - Homebuilding Prepaid and Other Assets

12 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Other Assets Disclosure [Text Block]

9. Homebuilding Prepaid and Other Assets

The following table sets forth the components of homebuilding prepaid and other assets.

	December 31,
	2016		2015
	(Dollars in thousands)
Land option deposits	$	8,683	$	11,997
Deferred marketing costs		35,313		31,152
Prepaid expenses		4,735		6,500
Goodwill		6,008		6,008
Deferred debt issuance costs on revolving credit facility, net		4,340		5,570
Other		1,384		4,167
Total	$	60,463	$	65,394

XML

Note 10 - Homebuilding Accrued Liabilities and Financial Services Accounts Payable and Accrued Liabilities

12 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Accounts Payable and Accrued Liabilities Disclosure [Text Block]

10. Homebuilding Accrued Liabilities and Financial Services Accounts Payable and Accrued Liabilities

The following table sets forth information relating to homebuilding accrued liabilities.

	December 31,
	2016		2015
	(Dollars in thousands)
Accrued compensation and related expenses	$	27,830	$	25,492
Accrued interest		23,234		23,234
Warranty accrual		20,678		15,328
Customer and escrow deposits		27,183		20,717
Land development and home construction accruals		8,695		11,465
Other accrued liabilities		36,946		26,650
Total accrued liabilities	$	144,566	$	122,886

The following table sets forth information relating to financial services accounts payable and accrued liabilities.

	December 31,
	2016		2015
	(Dollars in thousands)
Insurance reserves	$	42,204	$	45,811
Accounts payable and other accrued liabilities		8,530		6,303
Total accounts payable and accrued liabilities	$	50,734	$	52,114

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Note 11 - Warranty Accrual

12 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Product Warranty Disclosure [Text Block]

11. Warranty Accrual

The table set forth below summarizes accrual, adjustment and payment activity related to our warranty accrual for the years ended

December

31,

2016,

2015

and

2014.

During

2016

and

2015,

we recorded

$7.5

million and

$0.2

million, respectively, in adjustments to increase our warranty accrual. The adjustments were primarily due to unexpected warranty related expenditures, which began during the

second

half of

2015

and continued through most of

2016.

During

2014,

as a result of favorable warranty payment experience relative to our estimates at the time of home closing, we reduced our warranty accrual by

$2.6

million. Additionally, from time to time, we change our warranty accrual rates based on payment trends. Any changes made to those rates did not materially affect our warranty expense or gross margin from home sales for the years ended

December

31,

2016,

2015

and

2014.

	Year Ended December 31,
	2016			2015			2014
	(Dollars in thousands)
Balance at beginning of period	$	15,328		$	18,346		$	22,238
Expense provisions		8,905			6,303			4,834
Cash payments		(11,017	)		(9,510	)		(6,126	)
Adjustments		7,462			189			(2,600	)
Balance at end of period	$	20,678		$	15,328		$	18,346

XML

Note 12 - Insurance and Construction Defect Claim Reserves

12 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Liability for Future Policy Benefits and Unpaid Claims Disclosure [Text Block]

12. Insurance and Construction Defect Claim Reserves

The following table summarizes our insurance and defect claim reserves activity for the years ended

December

31,

2016,

2015

and

2014.

These reserves are included as a component of accrued liabilities in either the financial services or homebuilding sections of the consolidated balance sheets.

	December 31,
	2016			2015			2014
	(Dollars in thousands)
Balance at beginning of period	$	47,061		$	51,720		$	50,887
Expense provisions		7,531			6,452			6,316
Cash payments, net of recoveries		(3,638	)		(8,611	)		(5,483	)
Adjustments		-			(2,500	)		-
Balance at end of period	$	50,954		$	47,061		$	51,720

During

2015,

we recorded a

$2.5

million adjustment to decrease our insurance and construction defect claim reserves. The adjustments primarily resulted from a decrease in the severity of our insurance claim experience relative to prior period estimates.

No

such adjustments were required for the years ended

December

31,

2016

and

2014.

In the ordinary course of business, we make payments from our insurance and construction defect claim reserves to settle litigation claims arising primarily from our homebuilding activities. These payments are irregular in both their timing and their magnitude. As a result, the cash payments, net of recoveries shown for the years ended

December

31,

2016,

2015,

and

2014,

are not necessarily indicative of what future cash payments will be for subsequent periods.

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Note 13 - Income Taxes

12 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Income Tax Disclosure [Text Block]

1 3 . Income Taxes

Our provision for (benefit from) income taxes for the years ended

December

31,

2016,

2015

and

2014

consisted of the following:

	Year Ended December 31,
	2016		2015			2014
	(Dollars in thousands)
Current tax provision (benefit)
Federal	$	32,102	$	2,549		$	1,631
State		323		(249	)		1,475
Total current		32,425		2,300			3,106
Deferred tax provision:
Federal		10,960		30,268			28,630
State		5,185		3,065			5,596
Total deferred		16,145		33,333			34,226
Provision for income taxes	$	48,570	$	35,633		$	37,332

The provision for (benefit from) income taxes differs from the amount that would be computed by applying the statutory federal income tax rate of

35%

to income before income taxes as a result of the following:

	Year Ended December 31,
	2016			2015			2014
	(Dollars in thousands)
Tax expense computed at federal statutory rate	$	53,123		$	35,498		$	35,166
State income tax expense, net of federal benefit		4,553			3,043			3,340
Other permanent differences		(647	)		(935	)		(1,435	)
Domestic manufacturing deduction		(5,563	)		(39	)		-
Expiration of state net operating loss		-			336			3,030
Tax expense (benefit) related to an increase (decrease) in unrecognized tax benefits		75			(479	)		559
Charitable contributions statute expiration		-			-			181
Federal energy credits		(3,428	)		(1,058	)		(1,131	)
Rate changes		-			48			866
Change in valuation allowance		253			(549	)		(1,665	)
Other		204			(232	)		(1,579	)
Provision for income taxes	$	48,570		$	35,633		$	37,332
Effective tax (benefit) rate		32.0	%		35.1	%		37.2	%

The year-over-year improvement in our effective tax rate from

2015

to

2016

is primarily the result of

(1)

a domestic manufacturing deduction,

whereas we were not eligible to take this deduction in the prior year due to our utilization of remaining federal net operating loss carryforwards to offset taxable income

, and

(2)

a higher estimated percentage of our homes delivered qualifying for energy credits.

The year-over-year improvement in our effective tax rate from

2014

to

2015

is primarily the result of

(1)

the reversal of a previously established uncertain tax position and

(2)

a year-over-year decrease in the write-offs of certain unused state net operating losses.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of the assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The tax effects of significant temporary differences that give rise to the net deferred tax asset are as follows: 

	December 31,
	2016			2015
	(Dollars in thousands)
Deferred tax assets:
State net operating loss carryforwards	$	26,015		$	31,292
Alternative minimum tax and other tax credit carryforwards		12,325			31,993
Stock-based compensation expense		18,228			20,068
Warranty, litigation and other reserves		14,155			9,470
Receivables from related party		7,626			8,342
Accrued compensation		7,330			7,241
Asset impairment charges		6,456			5,049
Inventory, additional costs capitalized for tax purposes		6,498			5,894
Other, net		2,993			2,429
Total deferred tax assets		101,626			121,778
Valuation allowance		(13,803	)		(12,868	)
Total deferred tax assets, net of valuation allowance		87,823			108,910
Deferred tax liabilities:
Property, equipment and other assets		4,276			4,739
Deferred revenue		1,400			2,312
Unrealized gain on marketable securities		4,676			671
Other, net		2,583			2,081
Total deferred tax liabilities		12,935			9,803
Net deferred tax asset	$	74,888		$	99,107

At

December

31,

2016,

all federal net operating loss carryforwards had been used. Additionally, we had

$26.0

million in tax-effected state net operating loss carryforwards. The operating loss carryforwards, if unused, will begin to expire in

2019.

At

December

31,

2016

we had a valuation allowance of

$13.8

million, an increase of

$0.9

million from the prior year.

$6.1

million of the total valuation allowance is related to various state net operating loss carryforwards where realization is more uncertain at this time due to the more limited carryforward periods that exist in certain states. The remaining

$7.7

million is related to the amount by which the carrying value of our Metro Bonds for tax purposes exceeds our carrying value for book purposes that we believe realization is more uncertain at this time.

At

December

31,

2016

and

2015,

our total liability for uncertain tax positions was

$0.4

million and

$0.4

million, respectively, which has been offset against our state net operating loss carryforward deferred tax asset. The following table summarizes activity for the gross unrecognized tax benefit component of our total liability for uncertain tax positions for the years ended

December

31,

2016,

2015

and

2014:

	Year Ended December 31,
	2016			2015			2014
	(Dollars in thousands)
Gross unrecognized tax benefits at beginning of year	$	488		$	905		$	371
Increases related to prior year tax positions		156			139			633
Decreases related to prior year tax positions		-			(475	)		(85	)
Lapse of applicable statute of limitations		(67	)		(81	)		(14	)
Gross unrecognized tax benefits at end of year	$	577		$	488		$	905

Our liability for gross unrecognized tax benefits was

$0.6

million and

$0.5

million at

December

31,

2016

and

2015,

respectively, all of which, if recognized, would reduce our effective tax rate.

The net expense for interest and penalties reflected in the

consolidated statements of operations and comprehensive income

for the years ended

December

31,

2016,

2015

and

2014

was

$0.3

million,

$0

and

$0.2

million, respectively. The corresponding liabilities in the consolidated balance sheets were

$0

and

$0

at

December

31,

2016

and

2015,

respectively.

We have taken positions in certain taxing jurisdictions for which it is reasonably possible that the total amounts of unrecognized tax benefits

may

decrease within the next

twelve

months. The possible decrease could result from the expiration of various statutes of limitation and the finalization of various state income tax matters. The estimated range of the reasonably possible decrease is

$0.1

million to

$0.

 

The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction and various state jurisdictions. We are subject to U.S. federal income tax examination for calendar tax years ending

2013

through

2016.

Additionally, we are subject to various state income tax examinations for the

2012

through

2017

calendar tax years.

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Note 14 - Related Party Transactions

12 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Related Party Transactions Disclosure [Text Block]

14 . Related Party Transactions

On

January

30,

2017,

the Company entered into a sublease agreement with CVentures, Inc. Larry A. Mizel, the Chief Executive Officer of the Company, is the President of CVentures, Inc. The sublease is for space CVentures, Inc. has continuously leased from the Company as disclosed in the Form

8

-K filed

July

27,

2005

and the Form

8

-K filed

March

28,

2006.

The sublease term commenced

November

1,

2016

and will continue through

October

31,

2021,

with an option to extend to

October

31,

2026.

The sublease agreement is for approximately

5,437

rentable square feet at a base rent that increases over the initial term from

$26.50

to

$28.68

per rentable square foot per year, and increasing over the extension term from

$29.26

to

$31.67

per rentable square foot per year. The sublease rent is an allocation of the rent under the master lease agreement based on the sublease square footage.

We previously entered into a transaction (the “Transaction”) with The Villages at Castle Rock Metropolitan District No. 

6

(the “District”). The District is a quasi-municipal corporation and political subdivision of the State of Colorado. The Board of Directors of the District currently is comprised of employees of the Company. The District was formed to provide funding for certain land development costs associated with the construction of homes in our Cobblestone subdivision. Pursuant to the terms of the Transaction, the District sold to the Company approximately

$22.5

million in Limited Tax General Obligation Capital Appreciation Bonds Series

2007

(the “Metro Bonds”) and a

$1.6

million Limited Tax General Obligation Subordinate Bond (the “Subordinate Bond”) in exchange for title to approximately

$28.6

million in land development improvements to the District.

During the years ended

December

31,

2016,

2015

and

2014,

we received payments from the Metro District in the amount of

$1.2

million,

$0.7

million

and

$2.0

million

, respectively, and

recorded

$1.7

million,

$1.4

million and

$1.4

million, respectively, in interest income. The interest income amounts are included in interest and other income in the homebuilding section of our consolidated statements of operations and comprehensive income.

We contributed

$

1

.0

million in cash to the MDC/Richmond American Homes Foundation (the “Foundation”) for each of the years ended

December

31,

2016,

2015,

and

2014.

The Foundation is a Delaware non-profit corporation that was incorporated on

September

 

30,

1999.

The Foundation is a non-profit organization operated exclusively for charitable, educational and other purposes beneficial to social welfare within the meaning of Section 

501(c)(3)

of the Internal Revenue Code. The following Directors and/or officers of the Company served as directors of the Foundation at

December

31,

2016,

all of whom serve without compensation:

Name	MDC Title
Larry A. Mizel	Chairman and Chief Executive Officer
David D. Mandarich	President

Three other individuals, who are independent of the Company, also serve as directors of the Foundation. All directors of the Foundation serve without compensation.

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Note 15 - Lines of Credit and Total Debt Obligations

12 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Debt Disclosure [Text Block]

15 . Lines of Credit and Total Debt Obligations

Revolving Credit Facility.

We have an unsecured revolving credit agreement (“Revolving Credit Facility”) with a group of lenders which

may

be used for general corporate purposes.

This agreement has an

aggregate commitment of

$550

million (the “Commitment”)

and was amended on

December

18,

2015

to extend the maturity to

December

18,

2020.

Each lender

may

issue letters of credit in an amount up to

50%

of its commitment. The facility permits an increase in the maximum Commitment amount to

$1.0

billion upon our request, subject to receipt of additional commitments from existing or additional lenders and the consent of the designated agent and the co-administrative agent. As defined in the Revolving Credit Facility agreement, interest rates on outstanding borrowings are equal to the highest of

(1)

0.0%

or

(2)

a specified eurocurrency rate, federal funds effective rate or prime rate, plus a margin that is determined based on our credit ratings and leverage ratio. At any time at which our leverage ratio, as of the last day of the most recent calendar quarter, exceeds

55%,

the aggregate principal amount of all consolidated senior debt borrowings outstanding

may

not exceed the borrowing base. There is no borrowing base requirement if our leverage ratio, as of the last day of the most recent calendar quarter, is

55%

or less.

The Revolving Credit Facility is fully and unconditionally guaranteed, jointly and severally, by most of our homebuilding segment subsidiaries. The facility contains various representations, warranties and covenants that we believe are customary for agreements of this type. The financial covenants include a consolidated tangible net worth test and a leverage test, along with a consolidated tangible net worth covenant, all as defined in the facility agreement. A failure to satisfy the foregoing tests does not constitute an event of default, but can trigger a “term-out” of the facility. A breach of the consolidated tangible net worth covenant (but not the consolidated tangible net worth test) or a violation of anti-corruption or sanctions laws would result in an event of default.

The Revolving Credit Facility is subject to acceleration upon certain specified events of default, including breach of the consolidated tangible net worth covenant, a violation of anti-corruption or sanctions laws, failure to make timely payments, breaches of certain representations or covenants, failure to pay other material indebtedness, or another person becoming beneficial owner of

50%

or more of our outstanding common stock. We believe we were in compliance with the representations, warranties and covenants included in the Revolving Credit Facility as of

December

31,

2016.

We incur costs associated with unused commitment fees pursuant to the terms of the Revolving Credit Facility. At

December

31,

2016

and

2015,

there were

$23.0

million

and

$22.5

million, respectively, in letters of credit outstanding, which reduced the amounts available to be borrowed under the Revolving Credit Facility. We had

$15.0

million outstanding under the Revolving Credit Facility as of

December

31,

2016

and

2015.

As of

December

31,

2016,

availability under the Revolving Credit Facility was approximately

$512.0

million.

Mortgage Repurchase Facility.

HomeAmerican

entered into an Amended and Restated Master Repurchase Agreement (the “Mortgage Repurchase Facility”) with U.S. Bank National Association

(“USBNA”), effective

September

16,

2016

.

The Mortgage Repurchase Facility amends and restates the prior Master Repurchase Agreement with USBNA dated as of

November

12,

2008,

as amended, which contained similar terms. The Mortgage Repurchase Facility increases the facility amount from

$50

million to

$75

million, extends the expiration date to

September

15,

2017,

adjusts the facility’s sublimits, expands the types of eligible loans, and reduces the facility fee.

The Mortgage Repurchase Facility provides liquidity to HomeAmerican by providing for the sale of eligible mortgage loans to USBNA with an agreement by HomeAmerican to repurchase the mortgage loans at a future date. Until such mortgage loans are transferred back to HomeAmerican, the documents relating to such loans are held by USBNA, as custodian, pursuant to the Custody Agreement (“Custody Agreement”), dated as of

November

12,

2008,

by and between HomeAmerican and USBNA. In the event that an eligible mortgage loan becomes ineligible, as defined under the Mortgage Repurchase Facility, HomeAmerican

may

be required to repurchase the ineligible mortgage loan immediately. The maximum aggregate commitment of the Mortgage Repurchase Facility was temporarily increased on

December

27,

2016

from

$75

million to

$125

million and was effective through

January

25,

2017.

The Mortgage Repurchase Facility also had a temporary increase in the maximum aggregate commitment from

$50

million to

$90

million from

December

23,

2015

through

January

31,

2016.

At

December

31,

2016

and

December

31,

2015,

HomeAmerican had

$114.5

million and

$88.6

million, respectively, of mortgage loans that HomeAmerican was obligated to repurchase under the Mortgage Repurchase Facility. Mortgage loans that HomeAmerican is obligated to repurchase under the Mortgage Repurchase Facility are accounted for as a debt financing arrangement and are reported as mortgage repurchase facility in the consolidated balance sheets. Advances under the Mortgage Repurchase Facility carry a price range that is LIBOR-based. The Mortgage Repurchase Facility contains various representations, warranties and affirmative and negative covenants that we believe are customary for agreements of this type. The negative covenants include, among others, (i) a minimum Adjusted Tangible Net Worth requirement, (ii) a maximum Adjusted Tangible Net Worth ratio, (iii) a minimum adjusted net income requirement, and (iv) a minimum Liquidity requirement. The foregoing capitalized terms are defined in the Mortgage Repurchase Facility. We believe HomeAmerican was in compliance with the representations, warranties and covenants included in the Mortgage Repurchase Facility as of

December

31,

2016.

Senior Notes.

Our senior notes are not secured and, while the senior note indentures contain some restrictions on secured debt and other transactions, they do not contain financial covenants. Our senior notes are fully and unconditionally guaranteed on an unsecured basis, jointly and severally, by most of our homebuilding segment subsidiaries. We believe that we are in compliance with the representations, warranties and covenants in the senior note indentures.

On

January

15,

2014,

we issued

$250

million of

5½%

Senior Notes due

2024

(the

“5½%

Notes”). The

5½%

Notes, which pay interest semi-annually in arrears on

January

15

and

July

15

of each year, with payments commencing

July

15,

2014,

are general unsecured obligations of MDC and rank equally and ratably with our other general unsecured and unsubordinated indebtedness. We received proceeds of

$248.4

million, net of underwriting fees of

$1.6

million.

During the

2014

first

quarter, we redeemed our

5⅜%

Senior Notes due

December

2014

and, in the

2014

fourth

quarter, we redeemed our

5⅜%

Senior Notes due

July

2015.

As a result of these transactions, we paid

$517.7

million to extinguish

$500

million in debt principal and recorded a total of

$18.2

million in losses on early extinguishments of debt.

Our debt obligations at

December

31,

2016

and

2015,

net of any unamortized debt issuance costs or discount, were as follows:

	December 31,
	2016		2015
	(Dollars in thousands)
$250 Million 5⅝% Senior Notes due February 2020, net	$	246,915	$	246,032
$250 Million 5½% Senior Notes due January 2024, net		248,391		248,209
$350 Million 6% Senior Notes due January 2043, net		346,340		346,283
Total	$	841,646	$	840,524

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Note 16 - Commitments and Contingencies

12 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Commitments and Contingencies Disclosure [Text Block]

16 . Commitments and Contingencies

Surety Bonds and Letters of

Credit

.

We are required to obtain surety bonds and letters of credit in support of our obligations for land development and subdivision improvements, homeowner association dues, warranty work, contractor license fees and earnest money deposits.

At

December

31,

2016,

we had outstanding surety bonds and letters of credit totaling $

178.8

million

and

$52.6

million

, respectively, including

$29.6

million in letters of credit issued by HomeAmerican. The estimated cost to complete obligations related to these bonds and letters of credit were approximately

$48.7

million

and

$18.2

million

, respectively.

All letters of credit as of

December

31,

2016,

excluding those issued by HomeAmerican, were issued under

our unsecured Revolving Credit Facility (see Note

15

for further discussion of the Revolving Credit Facility)

. We expect that the obligations secured by these performance bonds and letters of credit generally will be performed in the ordinary course of business and in accordance with the applicable contractual terms. To the extent that the obligations are performed, the related performance bonds and letters of credit should be released and we should not have any continuing obligations. However, in the event any such performance bonds or letters of credit are called, our indemnity obligations could require us to reimburse the issuer of the performance bond or letter of credit.

We have made no material guarantees with respect to

third

-party obligations.

Litigation Reserves

.

Because of the nature of the homebuilding business, we have been named as defendants in various claims, complaints and other legal actions arising in the ordinary course of business, including product liability claims and claims associated with the sale and financing of homes. In the opinion of management, the outcome of these ordinary course matters will not have a material adverse effect upon our financial condition, results of operations or cash flows. At

December

31,

2016

and

2015,

respectively, we had

$1.9

million and

$3.6

million of legal accruals.

Operating Leases.  

We have non-cancelable operating leases primarily associated with our office facilities. Rent expense under cancelable and non-cancelable operating leases totaled

$5.4

million,

$5.0

million and

$4.9

million in

2016,

2015

and

2014,

respectively, and is included in either selling, general and administrative expenses in the homebuilding section or expenses in the financial services section of our consolidated statements of operations and comprehensive income. The table below shows the future minimum payments under non-cancelable operating leases at

December

31,

2016.

	Year Ended
	December 31,
	(Dollars in thousands)
2017	$	6,008
2018		5,293
2019		4,923
2020		4,735
2021		4,567
Thereafter		21,566
Total	$	47,092

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Note 17 - Concentration of Third-party Mortgage Purchasers

12 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Concentration Risk Disclosure [Text Block]

17

.

Concentration of Third-Party Mortgage Purchasers

The following table sets forth the percent of mortgage loans sold by HomeAmerican to its primary

third

party purchasers during

2016,

2015

and

2014.

 No other

third

parties purchased greater than

10

percent of our mortgage loans during

2016,

2015

or

2014.

	Year Ended December 31,
	2016			2015			2014
Wells Fargo Funding, Inc.		26	%		10	%		37	%
PennyMac Loan Services, LLC		15	%		14	%		23	%
Fannie Mae		10	%		7	%		10	%
JP Morgan Chase Bank, N.A.		8	%		32	%		20	%

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Note 18 - Stockholders' Equity

12 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Stockholders' Equity Note Disclosure [Text Block]

18

. Stockholders' Equity

Stock Dividends.

On

November

21,

2016

MDC’s board of directors declared a

5%

stock dividend that was distributed on

December

20,

2016

to shareholders of record on

December

6,

2016

.

Common Stock Repurchase Program

. At

December

31,

2016,

we were authorized to repurchase up to

4,000,000

shares of our common stock. We did

not

repurchase any shares of our common stock during the years ended

December

31,

2016,

2015

or

2014.

We did

not

hold any treasury stock at

December

31,

2016

.

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Note 19 - Equity Incentive and Employee Benefit Plans

12 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Equity Incentive Plans [Text Block]

19

. Equity Incentive and Employee Benefit Plans

A summary of our equity incentive plans follows. All share amounts have been adjusted for the stock dividend during distributed during

2016,

as applicable.

Employee Equity Incentive Plans.

Effective

March

2001,

we adopted the M.D.C. Holdings, Inc.

2001

Equity Incentive Plan (the

“2001

Equity Incentive Plan”). Non-qualified option awards previously granted generally vested over periods of up to

seven

years and expire

ten

years after the date of grant. Restricted stock awards generally were granted with vesting terms of up to

five

years. On

March

26,

2011,

the

2001

Equity Incentive Plan terminated and all stock option grants and restricted stock awards outstanding at the time of the plan termination

may

continue to be exercised, or become free of restrictions, in accordance with their terms. A total of

1.7

millionshares of MDC common stock were reserved for issuance under the

2001

Equity Incentive Plan as of

December

31,

2016

.

On

April

27,

2011,

our shareholders approved the M.D.C Holdings, Inc.

2011

Equity Incentive Plan (the

“2011

Equity Incentive Plan”), which provides for the grant of non-qualified stock options, incentive stock options, stock appreciation rights, restricted stock, restricted stock units and other equity awards to employees of the Company. Stock options granted under the

2011

Equity Incentive Plan have an exercise price that is at least equal to the fair market value of our common stock on the date the stock option is granted, generally vest in periods up to

five

years and expire

ten

years after the date of grant. At

December

31,

2016,

a total of

4.1

million shares of MDC common stock were reserved for issuance under the

2011

Equity Incentive Plan, of which

0.2

million shares remained available for grant under this plan as of

December

31,

2016

.

Director Equity Incentive Plans

. Effective

March

2001,

we adopted the M.D.C. Holdings, Inc. Stock Option Plan for Non-Employee Directors (the

“2001

Director Stock Option Plan”). Each option granted under the Director Stock Option Plan vested immediately and expires

ten

years from the date of grant. The

2001

Director Stock Option Plan terminated on

May

21,

2012

and stock options outstanding at the time of plan termination

may

continue to be exercised in accordance with their terms. A total of

0.4

millionshares of MDC common stock were reserved for issuance under the

2001

Director Stock Option Plan as of

December

31,

2016

.

Effective

April

27,

2011,

our shareholders approved the M.D.C. Holdings, Inc.

2011

Stock Option Plan for Non-Employee Directors (the

“2011

Director Stock Option Plan”), which provides for the grant of non-qualified stock options to non-employee directors of the Company

. Effective

March

29,

2016,

our shareholders approved an amendment to the

2011

Director Stock Option Plan to provide the non-employee directors with an alternative to elect to receive an award of restricted stock in lieu of a stock option. Pursuant to the

2011

Director Stock Option Plan as amended, on

August

1

of each year, each non-employee director is granted either

(1)

an option to purchase

25,000

shares of MDC common stock or

(2)

shares of restricted stock having an expense to the Company that is equivalent to the stock option. Each option granted under the

2011

Director Stock Option Plan vests immediately, becomes exercisable

six

months after grant, and expires

ten

years from the date of grant. The option exercise price must be equal to the fair market value (as defined in the plan) of our common stock on the date of grant of the option. Each restricted stock award granted under the

2011

Director Stock Option Plan vests

seven

months after the grant date. At

December

31,

2016,

a total of

1.2

million shares of MDC common stock were reserved for issuance under the

2011

Director Stock Option Plan and

0.6

million shares remained available for grant under this plan as of

December

31,

2016

.

Employee Benefit Plan

. We have a defined contribution plan pursuant to Section

401(k)

of the Internal Revenue Code where each employee

may

elect to make before-tax contributions up to the current tax limits. We match employee contributions on a discretionary basis and, as of

December

31,

2016,

we had accrued

$1.3

million related to the match that is expected to be contributed in the

first

quarter of

2017

for

2016

activity. At

December

31,

2015,

we had accrued

$1.0

million related to the match that was contributed during the

first

quarter of

2016

for

2015

activity. At

December

31,

2014,

we had accrued

$0.9

million related to the match that was contributed during the

first

quarter of

2015

for

2014

activity.

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Note 20 - Stock Based Compensation

12 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

20

.          Stock Based Compensation

All share and per share amounts, as applicable, have been adjusted for the stock dividend distributed in

December

2016.

Determining Fair Value of Share-Based Payment Awards

.  Most options that we grant contain only a service condition (“Service-Based” option) and therefore vest over a specified number of years as long as the employee is employed by the Company. For Service-Based options, we use the Black-Scholes option pricing model to determine the grant date fair value. During

2015,

we also granted

1

million Market-Based options

to each of the Chief Executive Officer and the Chief Operating Officer. These options were valued using a Monte Carlo simulation model. Refer to the “Market-Based Stock Option Awards” section below.

The fair values for Service-Based options granted for the years ended

December

31,

2016,

2015

and

2014

were estimated using the Black-Scholes option pricing model with the below weighted-average assumptions.

	Year Ended December 31,
	2016			2015			2014
Expected lives of options (in years)		5.0			3.9			4.0
Expected volatility		32.1	%		29.6	%		43.2	%
Risk free interest rate		1.6	%		1.2	%		1.3	%
Dividend yield rate		4.4	%		3.5	%		3.5	%

Based on calculations using the Black-Scholes option pricing model, the weighted-average grant date fair values

of stock options granted during

2016,

2015

and

2014

were

$4.04,

$4.55

and

$7.12

, respectively. The expected life of options in the table above represents the weighted-average period for which the options are expected to remain outstanding and are derived primarily from historical exercise patterns.

The expected volatility is determined based on our review of the implied volatility that is derived from the price of exchange traded options of the Company

. The risk-free interest rate assumption is determined based upon observed interest rates appropriate for the expected term of our employee stock options. The dividend yield assumption is based on our history of dividend payouts.

An annual forfeiture rate is estimated at the time of grant for all share-based payment awards which contain service and/or performance conditions. That rate is revised, if necessary, in subsequent periods if the actual forfeiture rate differs from our estimate.

Stock Option Award Activity

.  Stock option activity under our option plans, restated as applicable for stock dividends, for the years ended

December

31,

2016,

2015

and

2014

were as follows.

	Year Ended December 31,
	2016					2015					2014
				Weighted-					Weighted-					Weighted-
				Average					Average					Average
	Number of			Exercise		Number of			Exercise		Number of			Exercise
	Shares			Price		Shares			Price		Shares			Price
Outstanding Stock Option Activity
Outstanding, beginning of year		6,706,123		$	30.46		5,054,623		$	35.91		5,469,948		$	38.03
Granted (1)		42,000			21.68		2,359,500			27.05		268,625			26.96
Exercised		-			-		(31,250	)		21.21		(18,000	)		20.82
Forfeited		(10,000	)		29.80		(121,250	)		28.61		(23,750	)		25.16
Cancelled		(586,000	)		53.26		(555,500	)		66.51		(642,200	)		62.43
Outstanding, end of year		6,152,123		$	28.23		6,706,123		$	30.46		5,054,623		$	35.91

	Year Ended December 31,
	2016					2015					2014
				Weighted-					Weighted-					Weighted-
	Number of			Average		Number of			Average		Number of			Average
	Shares			Fair Value		Shares			Fair Value		Shares			Fair Value
Unvested Stock Option Activity
Outstanding, beginning of year		2,344,061		$	5.63		483,312		$	9.20		872,468		$	8.09
Granted (1)		42,000			4.04		2,359,500			5.26		268,625			7.17
Vested		(85,095	)		8.13		(377,501	)		6.76		(634,031	)		8.30
Forfeited		(10,000	)		6.61		(121,250	)		9.33		(23,750	)		7.60
Unvested, end of year		2,290,966		$	5.50		2,344,061		$	5.63		483,312		$	9.20

(1) Total options granted in 2015 include a total of 2,100,000 Market-Based options granted to our CEO and COO. See further discussion regarding these grants in the “Market-Based Stock Option Awards” section below.

The total intrinsic value of options (difference between price per share as of the exercise date and the exercise price, times the number of options outstanding) exercised during the years ended

December

31,

2015

and 

2014

was

$0.2

million and

$0.1

million

, respectively. No options were exercised during the year ended

December

31,

2016.

The following table provides data for our stock options that are vested or expected to vest as of

December

31,

2016.

Exercisable or expected to vest
Number outstanding		6,098,279
Weighted-average exercise price	$	28.25
Aggregate intrinsic value (in thousands)	$	3,149
Weighted-average remaining contractual term (years)		5.59
Exercisable
Number outstanding		3,861,157
Weighted-average exercise price	$	28.96
Aggregate intrinsic value (in thousands)	$	2,970
Weighted-average remaining contractual term (years)		4.01

The aggregate intrinsic values in the tables above represent the total pretax intrinsic values (the difference between the closing price of MDC’s common stock on the last trading day of fiscal

2016

and the exercise price, multiplied by the number of in-the-money stock option shares) that would have been received by the option holders had all in-the-money outstanding stock options been exercised on

December

31,

2016.

The following table summarizes information associated with outstanding and exercisable stock options at

December

31,

2016.

			Options Outstanding						Options Exercisable
					Weighted-						Weighted-
					Average						Average
					Remaining		Weighted-				Remaining		Weighted-
					Contractual		Average				Contractual		Average
			Number		Life (in		Exercise		Number		Life (in		Exercise
Range of Exercise Price			Outstanding		years)		Price		Outstanding		years)		Price
$ 15.01	-	$ 20.00		42,000		5.07	$	19.95		42,000		5.07	$	19.95
$ 20.01	-	$ 25.00		1,215,375		5.44		23.21		1,119,346		5.21		23.25
$ 25.01	-	$ 30.00		3,424,748		7.08		27.47		1,249,937		4.88		28.16
$ 30.01	-	$ 35.00		863,625		3.14		31.82		862,312		3.14		31.82
$ 35.01	-	$ 40.00		606,375		1.23		38.02		587,562		1.08		38.04
Total				6,152,123		5.61	$	28.23		3,861,157		4.01	$	28.96

Total compensation expense relating to stock options was

$5.6

million,

$8.1

million and

$3.3

million

for the years ended

December

31,

2016,

2015

and

2014,

respectively. Our recognized tax benefit from this expense for the years ended

December

31,

2016,

2015

and

2014

was

$2.1

million,

$3.1

million and

$1.3

million, respectively.

As of

December

31,

2016,

$0.7

million of total unrecognized compensation cost related to stock options was expected to be recognized as an expense by the Company in the future over a weighted-average period of approximately

2.0

years.

Our realized tax benefit from stock options exercised for the years ended

December

31,

2015

and

2014

was

$0.1

million and

$0,

respectively.

No

stock options were exercised during the year ended

December

31,

2016.

Marke

t-

Based Stock

Option Awards

.

On

May

18,

2015,

the Company’s Compensation Committee granted a non-qualified stock option to each of the Chief Executive Officer and the Chief Operating Officer for

1,050,000

shares of common stock under the Company’s

2011

Equity Incentive Plan. The terms of each option provide that, over a

five

year period,

one

third

of the option shares will vest as of each of the

third,

fourth,

and

fifth

anniversary dates of the grant of the option; provided that all unvested option shares will vest immediately in the event the closing price of the Company’s stock, as reported by the New York Stock Exchange, in any

20

out of

30

consecutive trading days closes at a price equal to or greater than

120%

of the closing price on the date of grant (the “market-based condition”). The option exercise price is equal to the closing price of the Company’s common stock on the date of grant, which was

$27.10

and the expiration date of each option is

May

18,

2025.

As of

December

31,

2016,

no shares are exercisable.

In accordance with ASC

718,

the market-based awards were assigned a fair value of

$5.35

per share (total value of

$11.2

million) on the date of grant using a Monte Carlo simulation model and, as calculated under that model, all expense was recorded on a straight-line basis through the end of the

2016

second

quarter. The following assumptions were used in the model.

Expected volatility	27.8	%
Risk free interest rate	2.2	%
Dividend yield rate	3.5	%

Restricted and Unrestricted Stock Award Activity

. Non-vested restricted stock awards, restated as applicable for stock dividends, at

December

31,

2016,

2015

and

2014

and changes during those years were as follows:

	Year Ended December 31,
	2016					2015					2014
				Weighted-					Weighted-					Weighted-
				Average					Average					Average
	Number of			Grant Date		Number of			Grant Date		Number of			Grant Date
	Shares			Fair Value		Shares			Fair Value		Shares			Fair Value
Unvested, beginning of year		99,442		$	29.75		184,201		$	32.26		298,991		$	32.87
Granted		154,703		$	22.06		36,896			26.44		39,381			30.85
Vested		(64,535	)	$	30.71		(111,719	)		32.86		(141,454	)		33.08
Forfeited		-			N/A		(9,936	)		29.11		(12,717	)		33.05
Unvested, end of year		189,610		$	23.15		99,442		$	29.75		184,201		$	32.26

Total compensation expense relating to restricted stock awards was

$1.9

million,

$2.0

million and

$2.7

million

for the years ended

December

31,

2016,

2015

and

2014,

respectively. Our recognized tax benefit from this expense for the years ended

December

31,

2016,

2015

and

2014

was

$0.7

million,

$0.8

million and

$1.0

million, respectively.

At

December

31,

2016,

there was

$2.5

million

of unrecognized compensation expense related to non-vested restricted stock awards that is expected to be recognized as an expense by us in the future over a weighted-average period of approximately

2.9

years. The total intrinsic value of unvested restricted stock awards (the closing price of MDC’s common stock on the last trading day of fiscal

2016

multiplied by the number of unvested awards) at

December

31,

2016

was $

4.9

million. The total intrinsic value of restricted stock which vested during each of the years ended

December

31,

2016,

2015

and

2014

was

$1.3

million,

$2.9

million and

$4.2

million, respectively.

Performance

Stock

Unit Awards

.

On

July

25,

2016,

the Company’s Compensation Committee granted long term performance stock unit awards (“PSUs”) to each of the Chief Executive Officer, the Chief Operating Officer, and the Chief Financial Officer under the Company’s

2011

Equity Incentive Plan. The PSUs will be earned based upon the Company’s performance, over a

three

year period commencing

July

1,

2016

and ending

June

30,

2019

(the “Performance Period”), measured by increasing average home sale revenues over the Base Period. The “Base Period” for the awards is

July

1,

2015

to

June

30,

2016.

The awards are conditioned upon the Company achieving a minimum average gross margin from home sales percentage (excluding impairments) of at least

fifteen

percent

(15%)

over the Performance Period. Target goals of

105,000

shares for each of the Chief Executive Officer and the Chief Operating Officer and

26,250

shares for the Chief Financial Officer (the “Target Goals”) will be earned if the Company’s

three

year average home sale revenues during the Performance Period (“Performance Revenues”) exceed the home sale revenues during the Base Period (“Base Revenues”) by at least

10%

but less than

20%.

If Performance Revenues exceed the Base Revenues by at least

5%

but less than

10%,

fifty

percent of the Target Goals will be earned. If Performance Revenues exceed the Base Revenues by at least

20%,

twice the Target Goals will be earned.

In accordance with ASC

718,

the PSUs are valued at the fair value on the date of grant. The grant date fair value of these awards was

$22.93

per share and the maximum potential expense that could be recognized by the Company if the maximum of the performance targets were met would be approximately

$10.8

million. ASC

718

prohibits recognition of expense associated with performance based stock awards until achievement of the performance targets are probable of occurring. As of

December

31,

2016,

the Company concluded that achievement of the performance targets remains substantially uncertain and the level of probability required to record compensation expense were not met.

XML

Note 21 - Results of Quarterly Operations (Unaudited) (Restated for Stock Dividends)

12 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Quarterly Financial Information [Text Block]

2 1 . Results of Quarterly Operat ions (Unaudited) (Restated for Stock D ividends)

	Quarter
	First			Second			Third			Fourth
2016	(Dollars in thousands, except per share amounts)
Total revenue	$	407,761		$	587,334		$	595,420		$	736,329
Home sales revenue	$	394,420		$	571,195		$	575,722		$	715,816
Asset impairments	$	-		$	(1,600	)	$	(4,700	)	$	(3,873	)
Gross margin from home sales (including impairments)		16.3	%		16.4	%		15.5	%		16.1	%
Homebuilding selling, general and administrative expenses	$	56,277		$	64,440		$	61,904		$	67,919
Income before income taxes	$	14,273		$	40,458		$	38,052		$	58,998
Net income	$	9,563		$	26,913		$	26,359		$	40,376
Earnings per share:
Basic	$	0.19		$	0.52		$	0.51		$	0.78
Diluted	$	0.19		$	0.52		$	0.51		$	0.78
2015
Total revenue	$	388,510		$	473,128		$	468,487		$	578,911
Home sales revenue	$	377,009		$	461,708		$	454,740		$	554,432
Asset impairments	$	(350	)	$	-		$	(4,351	)	$	(5,292	)
Gross margin from home sales (including impairments)		15.4	%		16.6	%		16.4	%		16.1	%
Homebuilding selling, general and administrative expenses	$	50,532		$	54,781		$	57,444		$	63,560
Income before income taxes	$	13,326		$	31,882		$	23,658		$	32,558
Net income	$	8,420		$	19,998		$	14,778		$	22,595
Earnings per share:
Basic	$	0.16		$	0.39		$	0.29		$	0.44
Diluted	$	0.16		$	0.39		$	0.29		$	0.44

XML

Note 22 - Supplemental Guarantor Information

12 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Supplemental Guarantor Information [Text Block]

2

2

.   Supplemental Guarantor Information

Our senior notes are fully and unconditionally guaranteed on an unsecured basis, jointly and severally, by the following subsidiaries (collectively, the "Guarantor Subsidiaries"), which are

100%

-owned subsidiaries of the Company.

● M.D.C. Land Corporation

● RAH of Florida, Inc.

● Richmond American Construction, Inc.

● Richmond American Homes of Arizona, Inc.

● Richmond American Homes of Colorado, Inc.

● Richmond American Homes of Delaware, Inc.

● Richmond American Homes of Florida, LP

● Richmond American Homes of Illinois, Inc.

● Richmond American Homes of Maryland, Inc.

● Richmond American Homes of Nevada, Inc.

● Richmond American Homes of New Jersey, Inc.

● Richmond American Homes of Pennsylvania, Inc.

● Richmond American Homes of Utah, Inc.

● Richmond American Homes of Virginia, Inc.

● Richmond American Homes of Washington, Inc.

The senior note indentures do not provide for a suspension of the guarantees, but do provide that any Guarantor

may

be released from its guarantee so long as

(1)

no default or event of default exists or would result from release of such guarantee,

(2)

the Guarantor being released has consolidated net worth of less than

5%

of the Company’s consolidated net worth as of the end of the most recent fiscal quarter,

(3)

the Guarantors released from their guarantees in any year-end period comprise in the aggregate less than

10%

(or

15%

if and to the extent necessary to permit the cure of a default) of the Company’s consolidated net worth as of the end of the most recent fiscal quarter,

(4)

such release would not have a material adverse effect on the homebuilding business of the Company and its subsidiaries and

(5)

the Guarantor is released from its guarantee(s) under all Specified Indebtedness (other than by reason of payment under its guarantee of Specified Indebtedness). Upon delivery of an officers’ certificate and an opinion of counsel stating that all conditions precedent provided for in the indenture relating to such transactions have been complied with and the release is authorized, the guarantee will be automatically and unconditionally released. “Specified Indebtedness” means indebtedness under the senior notes, the Company’s Indenture dated as of

December

3,

2002,

the Revolving Credit Facility, and any refinancing, extension, renewal or replacement of any of the foregoing.

We have determined that separate, full financial statements of the Guarantor Subsidiaries would not be material to investors and, accordingly, supplemental financial information for the Guarantor and Non-Guarantor Subsidiaries is presented below.

M.D.C. Holding

s, Inc.

Supplemental

Condensed

Combining Balance Sheet

	December 31, 2016
					Non-
			Guarantor		Guarantor		Eliminating			Consolidated
	MDC		Subsidiaries		Subsidiaries		Entries			MDC
	Dollars in thousands
ASSETS
Homebuilding:
Cash and cash equivalents	$	255,679	$	3,408	$	-	$	-		$	259,087
Marketable securities		59,770		-		-		-			59,770
Restricted cash		-		3,778		-		-			3,778
Trade and other receivables		5,380		39,247		-		(2,135	)		42,492
Inventories:
Housing completed or under construction		-		874,199		-		-			874,199
Land and land under development		-		884,615		-		-			884,615
Total inventories		-		1,758,814		-		-			1,758,814
Intercompany receivables		1,475,291		2,803		5,289		(1,483,383	)		-
Investment in subsidiaries		295,214		-		-		(295,214	)		-
Property and equipment, net		25,495		2,546		-		-			28,041
Deferred tax assets, net		74,119		-		-		769			74,888
Metropolitan district bond securities (related party)		30,162		-		-		-			30,162
Other assets		5,267		55,196		-		-			60,463
Total Homebuilding Assets		2,226,377		1,865,792		5,289		(1,779,963	)		2,317,495
Financial Services:
Cash and cash equivalents		-		-		23,822		-			23,822
Marketable securities		-		-		36,436		-			36,436
Intercompany receivables		-		-		40,042		(40,042	)		-
Mortgage loans held-for-sale, net		-		-		138,774		-			138,774
Other assets		-		-		12,831		(769	)		12,062
Total Financial Services Assets		-		-		251,905		(40,811	)		211,094
Total Assets	$	2,226,377	$	1,865,792	$	257,194	$	(1,820,774	)	$	2,528,589
LIABILITIES AND EQUITY
Homebuilding:
Accounts payable	$	-	$	42,088	$	-	$	-		$	42,088
Accrued liabilities		1,527		136,615		143		6,281			144,566
Advances and notes payable to parent and subsidiaries		48,134		1,445,276		26,266		(1,519,676	)		-
Revolving credit facility		15,000		-		-		-			15,000
Senior notes, net		841,646		-		-		-			841,646
Total Homebuilding Liabilities		906,307		1,623,979		26,409		(1,513,395	)		1,043,300
Financial Services:
Accounts payable and accrued liabilities		-		-		59,150		(8,416	)		50,734
Advances and notes payable to parent and subsidiaries		-		-		3,749		(3,749	)		-
Mortgage repurchase facility		-		-		114,485		-			114,485
Total Financial Services Liabilities		-		-		177,384		(12,165	)		165,219
Total Liabilities		906,307		1,623,979		203,793		(1,525,560	)		1,208,519
Equity:
Total Stockholders' Equity		1,320,070		241,813		53,401		(295,214	)		1,320,070
Total Liabilities and Stockholders' Equity	$	2,226,377	$	1,865,792	$	257,194	$	(1,820,774	)	$	2,528,589

M.D.C. Holdings, Inc.

Supplemental

Condensed

Combining Balance Sheet

	December 31, 2015
					Non-
			Guarantor		Guarantor			Eliminating			Consolidated
	MDC		Subsidiaries		Subsidiaries			Entries			MDC
	(Dollars in thousands)
ASSETS
Homebuilding:
Cash and cash equivalents	$	141,245	$	3,097	$	-		$	-		$	144,342
Marketable securities		92,387		-		-			-			92,387
Restricted cash		-		3,750		-			-			3,750
Trade and other receivables		5,304		20,297		-			(2,287	)		23,314
Inventories:
Housing completed or under construction		-		747,036		-			-			747,036
Land and land under development		-		1,016,926		-			-			1,016,926
Total inventories		-		1,763,962		-			-			1,763,962
Intercompany receivables		1,509,551		2,850		5,291			(1,517,692	)		-
Investment in subsidiaries		267,191		-		-			(267,191	)		-
Property and equipment, net		26,073		2,153		-			-			28,226
Deferred tax assets, net		97,083		-		-			2,024			99,107
Metropolitan district bond securities (related party)		25,911		-		-			-			25,911
Other assets, net		5,973		59,421		-			-			65,394
Total Homebuilding Assets		2,170,718		1,855,530		5,291			(1,785,146	)		2,246,393
Financial Services:
Cash and cash equivalents		-		-		36,646			-			36,646
Marketable securities		-		-		11,307			-			11,307
Intercompany receivables		-		-		39,234			(39,234	)		-
Mortgage loans held-for-sale, net		-		-		115,670			-			115,670
Other assets, net		-		-		7,907			(2,024	)		5,883
Total Financial Services Assets		-		-		210,764			(41,258	)		169,506
Total Assets	$	2,170,718	$	1,855,530	$	216,055		$	(1,826,404	)	$	2,415,899
LIABILITIES AND EQUITY
Homebuilding:
Accounts payable	$	-	$	40,472	$	-		$	-		$	40,472
Accrued liabilities		11,527		108,445		(33	)		2,947			122,886
Advances and notes payable to parent and subsidiaries		47,375		1,480,589		25,536			(1,553,500	)		-
Revolving credit facility		15,000		-		-			-			15,000
Senior notes, net		840,524		-		-			-			840,524
Total Homebuilding Liabilities		914,426		1,629,506		25,503			(1,550,553	)		1,018,882
Financial Services:
Accounts payable and accrued liabilities		-		-		57,348			(5,234	)		52,114
Advances and notes payable to parent and subsidiaries		-		-		3,426			(3,426	)		-
Mortgage repurchase facility		-		-		88,611			-			88,611
Total Financial Services Liabilities		-		-		149,385			(8,660	)		140,725
Total Liabilities		914,426		1,629,506		174,888			(1,559,213	)		1,159,607
Equity:
Total Stockholders' Equity		1,256,292		226,024		41,167			(267,191	)		1,256,292
Total Liabilities and Stockholders' Equity	$	2,170,718	$	1,855,530	$	216,055		$	(1,826,404	)	$	2,415,899

M.D.C. Holdings, Inc.

Supplemental

Condensed

Combining Statements

of

Operations and Comprehensive Income

	Year Ended December 31, 2016
							Non-
				Guarantor			Guarantor			Eliminating			Consolidated
	MDC			Subsidiaries			Subsidiaries			Entries			MDC
	(Dollars in thousands)
Homebuilding:
Revenues	$	-		$	2,262,853		$	-		$	-		$	2,262,853
Cost of Sales		-			(1,888,957	)		(300	)		-			(1,889,257	)
Inventory impairments		-			(10,173	)		-			-			(10,173	)
Gross margin		-			363,723			(300	)		-			363,423
Selling, general, and administrative expenses		(39,632	)		(210,546	)		-			(362	)		(250,540	)
Equity income of subsidiaries		125,431			-			-			(125,431	)		-
Interest and other income		5,236			2,188			5			(417	)		7,012
Other expense		1			(3,448	)		-			-			(3,447	)
Other-than-temporary impairment of marketable securities		(1,070	)		-			-			-			(1,070	)
Homebuilding pretax income (loss)		89,966			151,917			(295	)		(126,210	)		115,378
Financial Services:
Financial services pretax income		-			-			35,624			779			36,403
Income before income taxes		89,966			151,917			35,329			(125,431	)		151,781
Provision for income taxes		13,245			(48,613	)		(13,202	)		-			(48,570	)
Net income	$	103,211		$	103,304		$	22,127		$	(125,431	)	$	103,211
Other comprehensive income related to available-for-sale securities, net of tax		6,356			-			1,084			(1,084	)		6,356
Comprehensive income	$	109,567		$	103,304		$	23,211		$	(126,515	)	$	109,567

	Year Ended December 31, 2015
							Non-
				Guarantor			Guarantor			Eliminating			Consolidated
	MDC			Subsidiaries			Subsidiaries			Entries			MDC
	(Dollars in thousands)
Homebuilding:
Revenues	$	-		$	1,860,226		$	-		$	-		$	1,860,226
Cost of Sales		-			(1,551,907	)		(100	)		-			(1,552,007	)
Inventory impairments		-			(9,993	)		-			-			(9,993	)
Gross margin		-			298,326			(100	)		-			298,226
Selling, general, and administrative expenses		(40,356	)		(185,403	)		-			(558	)		(226,317	)
Equity income of subsidiaries		91,079			-			-			(91,079	)		-
Interest and other income		4,635			2,651			8			(585	)		6,709
Other expense		(6	)		(4,202	)		-			-			(4,208	)
Other-than-temporary impairment of marketable securities		(3,969	)		-			-			-			(3,969	)
Homebuilding pretax income (loss)		51,383			111,372			(92	)		(92,222	)		70,441
Financial Services:
Financial services pretax income		-			-			29,840			1,143			30,983
Income before income taxes		51,383			111,372			29,748			(91,079	)		101,424
Provision for income taxes		14,408			(39,128	)		(10,913	)		-			(35,633	)
Net income	$	65,791		$	72,244		$	18,835		$	(91,079	)	$	65,791
Other comprehensive income related to available-for-sale securities, net of tax		5,260			-			(674	)		674			5,260
Comprehensive income	$	71,051		$	72,244		$	18,161		$	(90,405	)	$	71,051

M.D.C. Holdings, Inc.

Supplemental

Condensed

Combining Statement

of

Operations and Comprehensive Income

	Year Ended December 31, 2014
							Non-
				Guarantor			Guarantor			Eliminating			Consolidated
	MDC			Subsidiaries			Subsidiaries			Entries			MDC
	(Dollars in thousands)
Homebuilding:
Revenues	$	-		$	1,650,631		$	-		$	-		$	1,650,631
Cost of Sales		-			(1,368,140	)		(40	)		-			(1,368,180	)
Inventory impairments		-			(1,760	)		-			-			(1,760	)
Gross margin		-			280,731			(40	)		-			280,691
Selling, general, and administrative expenses		(38,290	)		(164,287	)		-			(676	)		(203,253	)
Equity income of subsidiaries		86,223			-			-			(86,223	)		-
Interest and other income		24,824			1,517			15			(46	)		26,310
Interest expense		(685	)		-			-			-			(685	)
Other expense		(8	)		(4,805	)		-			-			(4,813	)
Losses from early extinguishments of debt		(18,153	)		-			-			-			(18,153	)
Other-than-temporary impairment of marketable securities		(4,293	)		-			-			-			(4,293	)
Homebuilding pretax income (loss)		49,618			113,156			(25	)		(86,945	)		75,804
Financial Services:
Financial services pretax income		-			-			23,949			722			24,671
Income before income taxes		49,618			113,156			23,924			(86,223	)		100,475
Provision for income taxes		13,525			(42,044	)		(8,813	)		-			(37,332	)
Net income	$	63,143		$	71,112		$	15,111		$	(86,223	)	$	63,143
Other comprehensive income related to available-for-sale securities, net of tax		(1,120	)		-			(22	)		22			(1,120	)
Comprehensive income	$	62,023		$	71,112		$	15,089		$	(86,201	)	$	62,023

M.D.C. Holdings, Inc.

Supplementa

l Condensed Combining Statement

of Cash Flows

	Year Ended December 31, 2016
							Non-
				Guarantor			Guarantor			Eliminating			Consolidated
	MDC			Subsidiaries			Subsidiaries			Entries			MDC
	(Dollars in thousands)
Net cash provided by (used in) operating activities	$	(4,807	)	$	124,929		$	(4,205	)	$	-		$	115,917
Net cash provided by (used in) investing activities		168,329			(1,481	)		(23,779	)		(133,851	)		9,218
Financing activities:
Payments from (advances to) subsidiaries		-			(123,137	)		(10,714	)		133,851			-
Advances on mortgage repurchase facility, net		-			-			25,874			-			25,874
Proceeds from issuance of senior notes		-			-			-			-			-
Repayment of senior notes		-			-			-			-			-
Advances on revolving credit facility, net		-			-			-			-			-
Dividend payments		(49,088	)		-			-			-			(49,088	)
Excess tax benefits from stock-based compensation		-			-			-			-			-
Proceeds from exercise of stock options		-			-			-			-			-
Net cash provided by (used in) financing activities		(49,088	)		(123,137	)		15,160			133,851			(23,214	)
Net increase (decrease) in cash and cash equivalents		114,434			311			(12,824	)		-			101,921
Cash and cash equivalents:
Beginning of period		141,245			3,097			36,646			-			180,988
End of period	$	255,679		$	3,408		$	23,822		$	-		$	282,909

	Year Ended December 31, 2015
							Non-
				Guarantor			Guarantor			Eliminating			Consolidated
	MDC			Subsidiaries			Subsidiaries			Entries			MDC
	(Dollars in thousands)
Net cash provided by (used in) operating activities	$	31,030		$	(16,109	)	$	(14,706	)	$	-		$	215
Net cash provided by (used in) investing activities		38,467			(811	)		3,260			6,446			47,362
Financing activities:
Payments from (advances to) subsidiaries		-			17,326			(10,880	)		(6,446	)		-
Advances on mortgage repurchase facility, net		-			-			27,789			-			27,789
Proceeds from issuance of senior notes		-			-			-			-			-
Repayment of senior notes		-			-			-			-			-
Advances on revolving credit facility, net		-			-			-			-			-
Dividend payments		(48,868	)		-			-			-			(48,868	)
Excess tax benefits from stock-based compensation		-			-			-			-			-
Proceeds from exercise of stock options		665			-			-			-			665
Net cash provided by (used in) financing activities		(48,203	)		17,326			16,909			(6,446	)		(20,414	)
Net increase (decrease) in cash and cash equivalents		21,294			406			5,463			-			27,163
Cash and cash equivalents:
Beginning of period		119,951			2,691			31,183			-			153,825
End of period	$	141,245		$	3,097		$	36,646		$	-		$	180,988

M.D.C. Holdings, Inc.

Supplementa

l Condensed Combining Statement

of Cash Flows

	Year Ended December 31, 2014
							Non-
				Guarantor			Guarantor			Eliminating			Consolidated
	MDC			Subsidiaries			Subsidiaries			Entries			MDC
	(Dollars in thousands)
Net cash provided by (used in) operating activities	$	(62,289	)	$	(124,317	)	$	22,959		$	-		$	(163,647	)
Net cash provided by (used in) investing activities		339,754			(1,093	)		3,692			80,727			423,080
Financing activities:
Payments from (advances to) subsidiaries		-			124,647			(43,920	)		(80,727	)		-
Advances on mortgage repurchase facility, net		-			-			(2,252	)		-			(2,252	)
Proceeds from the issuance of senior notes		248,375			-			-			-			248,375
Repayment of senior notes		(517,650	)		-			-			-			(517,650	)
Advances on revolving credit facility, net		15,000			-			-			-			15,000
Dividend payments		(48,820	)		-			-			-			(48,820	)
Excess tax benefit from share-based awards		26			-			-			-			26
Proceeds from the exercise of stock options		375			-			-			-			375
Net cash provided by (used in) financing activities		(302,694	)		124,647			(46,172	)		(80,727	)		(304,946	)
Net increase (decrease) in cash and cash equivalents		(25,229	)		(763	)		(19,521	)		-			(45,513	)
Cash and cash equivalents:
Beginning of period		145,180			3,454			50,704			-			199,338
End of period	$	119,951		$	2,691		$	31,183		$	-		$	153,825

XML

Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2016

Accounting Policies [Abstract]

Consolidation, Policy [Policy Text Block]

Principles of Consolidation

.  The Consolidated Financial Statements of M.D.C. Holdings, Inc. ("MDC," “the Company," “we,” “us,” or “our” which refers to M.D.C. Holdings, Inc. and its subsidiaries) include the accounts of MDC and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. Certain prior year balances have been reclassified to conform to the current year’s presentation.

Business Description, Policy [Policy Text Block]

Description of Business

.  We have homebuilding operations in Arizona, California, Colorado, Florida, Maryland, (which includes Maryland, Pennsylvania and New Jersey), Nevada, Utah, Virginia and Washington. The primary functions of our homebuilding operations include land acquisition and development, home construction, purchasing, marketing, merchandising, sales and customer service. We build and sell primarily single-family detached homes, which are designed and built to meet local customer preferences. We are the general contractor for all of our projects and retain subcontractors for site development and home construction.

Our financial services operations consist of HomeAmerican Mortgage Corporation (“HomeAmerican”), which originates mortgage loans, primarily for our homebuyers, American Home Insurance Agency, Inc. (“American Home Insurance”), which offers

third

-party insurance products to our homebuyers, and American Home Title and Escrow Company (“American Home Title”), which provides title agency services to the Company and our homebuyers in Colorado, Florida, Maryland, Nevada and Virginia. The financial services operations also include Allegiant Insurance Company, Inc., A Risk Retention Group (“Allegiant”), which provides insurance coverage primarily to our homebuilding subsidiaries and most of our subcontractors for homes sold by our homebuilding subsidiaries and for work performed in completed subdivisions, and StarAmerican Insurance Ltd. (“StarAmerican”), a wholly owned subsidiary of MDC, which is a re-insurer of Allegiant claims.

Finance, Loan and Lease Receivables, Held-for-investment, Policy [Policy Text Block]

Presentation

.  Our balance sheet presentation is unclassified due to the fact that certain assets and liabilities have both short and long-term characteristics.

Use of Estimates, Policy [Policy Text Block]

Use of Accounting Estimates

.  The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents, Policy [Policy Text Block]

Cash and Cash Equivalents

.  The Company periodically invests funds in highly liquid investments with an original maturity of

three

months or less, such as commercial paper, money market funds and time deposits, which are included in cash and cash equivalents in the consolidated balance sheets and consolidated statements of cash flows.

Marketable Securities, Policy [Policy Text Block]

Marketable Securities

. All of our marketable securities were treated as available-for-sale investments as of

December

31,

2016

and

2015.

As such, we have recorded all of our marketable securities at fair value with changes in fair value initially being recorded as a component of accumulated other comprehensive income (“AOCI”). However, in accordance with Accounting Standards Codification (“ASC”) Topic

320,

Investments

(“ASC

320”),

if the unrealized loss is determined to be other-than-temporary, an other-than-temporary impairment (“OTTI”) is recorded in the consolidated statements of operations and comprehensive income. When a security is sold, we use the

first

-in

first

-out method to determine the cost of the security sold or the amount reclassified out of AOCI.

Cash and Cash Equivalents, Restricted Cash and Cash Equivalents, Policy [Policy Text Block]

Restricted Cash

.  We receive cash earnest money deposits from our customers who enter into home sale contracts. In certain states we are restricted from using such deposits for general purposes, unless we take measures to release state imposed restrictions on such deposits received from homebuyers, which

may

include posting blanket surety bonds. We had

$3.8

million and

$3.8

million in restricted cash related to homebuyer deposits at

December

31,

2016

and

2015,

respectively.

Receivables, Policy [Policy Text Block]

Trade and Other

Receivables

.  Trade and other receivables primarily includes home sale receivables, which reflects cash to be received from title companies or outside brokers associated with closed homes. Generally, we will receive cash from title companies and outside brokers within a few days of the home being closed.

Finance, Loan and Lease Receivables, Held-for-sale, Policy [Policy Text Block]

Mortgage Loans Held-for-Sale, net

.  Mortgage loans held-for-sale are recorded at fair value based on quoted market prices and estimated market prices received from a

third

-party. Using fair value allows an offset of the changes in fair values of the mortgage loans and the derivative instruments used to hedge them without the burden of complying with the requirements for hedge accounting.

Inventory, Real Estate, Policy [Policy Text Block]

Inventories

.

Our inventories are primarily associated with communities where we intend to construct and sell homes, including models and unsold homes. Costs capitalized to land and land under development primarily include:

(1)

land costs;

(2)

land development costs;

(3)

entitlement costs;

(4)

capitalized interest;

(5)

engineering fees; and

(6)

title insurance, real property taxes and closing costs directly related to the purchase of the land parcel. Components of housing completed or under construction primarily include:

(1)

land costs transferred from land and land under development;

(2)

direct construction costs associated with a house;

(3)

real property taxes, engineering fees, permits and other fees;

(4)

capitalized interest; and

(5)

indirect construction costs, which include field construction management salaries and benefits, utilities and other construction related costs. Land costs are transferred from land and land under development to housing completed or under construction at the point in time that construction of a home on an owned lot begins.

In accordance with ASC

Topic

360,

Property, Plant, and Equipment

(“ASC

360”),

h

omebuilding inventories,

excluding those classified as held for sale,

are carried at cost unless events and circumstances indicate that the carrying value of the underlying subdivision

may

not be recoverable. We evaluate inventories for impairment at each quarter end on a subdivision level basis as each such subdivision represents the lowest level of identifiable cash flows. In making this determination, we review, among other things, the following for each subdivision:

• actual and trending “Operating Margin” (which is defined as home sale revenues less home cost of sales and all incremental costs associated directly with the subdivision, including sales commissions and marketing costs);

• estimated future undiscounted cash flows and Operating Margin;

• forecasted Operating Margin for homes in backlog;

• actual and trending net home orders;

• homes available for sale;

• market information for each sub-market, including competition levels, home foreclosure levels, the size and style of homes currently being offered for sale and lot size; and

• known or probable events indicating that the carrying value may not be recoverable.

If events or circumstances indicate that the carrying value of our inventory

may

not be recoverable, assets are reviewed for impairment by comparing the undiscounted estimated future cash flows from an individual subdivision (including capitalized interest) to its carrying value. If the undiscounted future cash flows are less than the subdivision’s carrying value, the carrying value of the subdivision is written down to its then estimated fair value. We generally determine the estimated fair value of each subdivision by determining the present value of the estimated future cash flows at discount rates, which are Level

3

inputs (see Note

6,

Fair Value Measurements

,

in the notes to the financial statements for definitions of fair value inputs), that are commensurate with the risk of the subdivision under evaluation. The evaluation for the recoverability of the carrying value of the assets for each individual subdivision can be impacted significantly by our estimates of future home sale revenues, home construction costs, and development costs per home, all of which are Level

3

inputs.

If land is classified as held for sale, in accordance with ASC

360,

we measure it at the lower of the carrying value or fair value less estimated costs to sell. In determining fair value, we primarily rely upon the most recent negotiated price which is a Level

2

input (see Note

6,

Fair Value

Measurements

, for definitions of fair value inputs)

. If a negotiated price is not available, we will consider several factors including, but not limited to, current market conditions, recent comparable sales transactions and market analysis studies. If the fair value less estimated costs to sell is lower than the current carrying value, the land is impaired down to its estimated fair value less costs to sell.

Property, Plant and Equipment, Policy [Policy Text Block]

Property and Equipment, net

.   Property and equipment is carried at cost less accumulated depreciation and amortization. Depreciation and amortization is computed using the straight-line method over the estimated useful lives of the related assets, which range from

2

to

29

years. Depreciation and amortization expense for property and equipment of our homebuilding operations was

$4.6

million,

$3.9

million and

$3.8

million for the years ended

December

31,

2016,

2015

and

2014,

respectively.

The following table sets forth the cost and carrying value of our homebuilding property and equipment by major asset category.

			Accumulated
			Depreciation and		Carrying
	Cost		Amortization		Value
	(Dollars in thousands)
December 31, 2016:
Airplane	$	29,497	$	8,250	$	21,247
Computer software and equipment		23,909		20,329		3,580
Leasehold improvements		11,530		9,370		2,160
Other		2,410		1,356		1,054
Total	$	67,346	$	39,305	$	28,041
December 31, 2015:
Airplane	$	28,997	$	7,701	$	21,296
Computer software and equipment		21,393		16,599		4,794
Leasehold improvements		10,207		8,317		1,890
Other		2,199		1,953		246
Total	$	62,796	$	34,570	$	28,226

Income Tax, Policy [Policy Text Block]

Deferred Tax Asset

s

, net

.   Deferred income taxes reflect the net tax effects of temporary differences between

(1)

the carrying amounts of the assets and liabilities for financial reporting purposes and

(2)

the amounts used for income tax purposes. Deferred tax assets and liabilities are measured using current enacted tax rates in effect in the years in which those temporary differences are expected to reverse. A valuation allowance is recorded against a deferred tax asset if, based on the weight of available evidence, it is more-likely-than-not (a likelihood of more than

50%)

that some portion, or all, of the deferred tax asset will not be realized.

Deferred Marketing Costs [Policy Text Block]

Deferred Marketing Costs

. Certain marketing costs related to model homes and sales offices are capitalized as they are:

(1)

 reasonably expected to be recovered from the sale of the project; and

(2)

 incurred for (a) tangible assets that are used directly throughout the selling period to aid in the sale of the project or (b) services that have been performed to obtain regulatory approval of sales. Capitalized marketing costs are included in prepaid and other assets in the homebuilding section of the consolidated balance sheets and the associated amortization expense is included in selling, general and administrative (“SG&A”) in the homebuilding section of the

consolidated statements of operations and comprehensive income

as the homes in the related subdivision are delivered. We allocate all capitalized marketing costs equally to each house within a subdivision and record expense as homes close over the life of a subdivision. All other marketing costs are expensed as incurred.

Consolidation, Variable Interest Entity, Policy [Policy Text Block]

Variable Interest Entities

.  In accordance with ASC Topic

810,

Consolidation

(“ASC

810”),

we analyze our land option contracts and other contractual arrangements to determine whether the corresponding land sellers are variable interest entities (“VIEs”) and, if so, whether we are the primary beneficiary. Although we do not have legal title to the optioned land, ASC

810

requires a company to consolidate a VIE if the company is determined to be the primary beneficiary. In determining whether we are the primary beneficiary, we consider, among other things, whether we have the power to direct the activities of the VIE that most significantly impact VIE’s economic performance, including, but not limited to, determining or limiting the scope or purpose of the VIE, selling or transferring property owned or controlled by the VIE, or arranging financing for the VIE. We also consider whether we have the obligation to absorb losses of the VIE or the right to receive benefits from the VIE. We have concluded that, as of

December

31,

2016,

we were not the primary beneficiary of any VIEs from which we are purchasing land under land option contracts.

Related Party Assets [Policy Text Block]

Related Party Assets.

Our related party assets are debt security bonds acquired from a quasi-municipal corporation in the state of Colorado. See Note

14

to the Consolidated Financial Statements.

Goodwill and Intangible Assets, Goodwill, Policy [Policy Text Block]

Goodwill.

In accordance with ASC Topic

350,

Intangibles–Goodwill and Other (“ASC

350”)

, we evaluate goodwill for possible impairment annually or more frequently if events or changes in circumstances indicate that the carrying amount of such assets

may

not be recoverable. We use a

three

step process to assess the realizability of goodwill. The

first

step is a qualitative assessment that analyzes current economic indicators associated with a particular reporting unit. For example, we analyze changes in economic, market and industry conditions, business strategy, cost factors, and financial performance, among others, to determine if there are indicators of a significant decline in the fair value of a particular reporting unit. If the qualitative assessment indicates a stable or improved fair value, no further testing is required.

If a qualitative assessment indicates it is more likely than not that the fair value of a reporting unit is less than its carrying amount, we will proceed to the

second

step where we calculate the fair value of a reporting unit based on discounted future probability-weighted cash flows. If this step indicates that the carrying value of a reporting unit is in excess of its fair value, we will proceed to the

third

step where the fair value of the reporting unit will be allocated to assets and liabilities as they would in a business combination. Impairment occurs when the carrying amount of goodwill exceeds its estimated fair value calculated in the

third

step.

Based on our analysis, we have concluded as of

December

31,

2016,

our goodwill was

not

impaired.

Income Tax Uncertainties, Policy [Policy Text Block]

Liability for Unrecognized Tax Benefits.

 ASC Topic

740,

Income Taxes

, regarding liabilities for unrecognized tax benefits provides guidance for the recognition and measurement in financial statements of uncertain tax positions taken or expected to be taken in a tax return.

The evaluation of a tax position is a

two

-step process, the

first

step being recognition. We determine whether it is more-likely-than-not that a tax position will be sustained upon tax examination, including resolution of any related appeals or litigation, based on the technical merits of the position. The technical merits of a tax position derive from both statutory and judicial authority (legislation and statutes, legislative intent, regulations, rulings, and case law) and their applicability to the facts and circumstances of the tax position. If a tax position does not meet the more-likely-than-not recognition threshold, the benefit of that position is not recognized in the financial statements.

The

second

step is measurement. A tax position that meets the more-likely-than-not recognition threshold is measured to determine the amount of benefit to recognize in the financial statements. The tax position is measured as the largest amount of benefit that is greater than

50

percent likely of being realized upon ultimate resolution with a taxing authority. Once the gross unrecognized tax benefit is determined, we also accrue for any interest and penalties, as well as any offsets expected from resultant amendments to federal or state tax returns. We record the aggregate effect of these items in income tax expense in the consolidated statements of operations and comprehensive income. To the extent this tax position would be offset against a similar deferred tax asset for a net operating loss carryforward, a similar tax loss or a tax credit carryforward if such settlement is required or expected in the event the uncertain tax position is disallowed, the liability is treated as a reduction to the related deferred tax asset for a net operating loss carryforward, a similar tax loss or a tax credit carryforward. Otherwise, we record the corresponding liability in accrued liabilities in the homebuilding section of our consolidated balance sheets.

Standard Product Warranty, Policy [Policy Text Block]

Warranty Accrual

. Our homes are sold with limited

third

-party warranties. 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. 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.

Warranty payments are recorded against the warranty accrual. Additional reserves

may

be established for known, unusual warranty-related expenditures not covered through the independent warranty accrual analysis performed by us. 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 accrual should be recorded.

We assess the reasonableness and adequacy of the reserve and the per-unit reserve amount originally included in home cost of sales, as well as the timing of the reversal of any excess reserve on a quarterly basis, using historical payment data and other relevant information. Warranty accrual is included in accrued 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

.

Liability Reserve Estimate, Policy [Policy Text Block]

Insurance Reserves. 

The establishment of reserves for estimated losses associated with insurance policies issued by Allegiant and re-insurance agreements issued by StarAmerican are based on actuarial studies that include known facts and interpretations of circumstances, including our experience with similar cases and historical trends involving claim payment patterns, pending levels of unpaid claims, product mix or concentration, claim severity, frequency patterns depending on the business conducted, and changing regulatory and legal environments. It is possible that changes in the insurance payment experience used in estimating our ultimate insurance losses could have a material impact on our insurance reserves.

Self Insurance Reserve [Policy Text Block]

Reserves

for Construction Defect Claims

. 

The establishment of reserves for estimated losses to be incurred by our homebuilding subsidiaries associated with

(1)

the self-insured retention (“SIR”) portion of construction defect claims that are expected to be covered under insurance policies with Allegiant and

(2)

the entire cost of any construction defect claims that are not expected to be covered by insurance policies with Allegiant are based on actuarial studies that include known facts similar to those established for our insurance reserves. It is possible that changes in the payment experience used in estimating our ultimate losses for construction defect claims could have a material impact on our reserves.

Commitments and Contingencies, Policy [Policy Text Block]

Litigation Reserves. 

We and certain of our subsidiaries have been named as defendants in various cases. We reserve for estimated exposure with respect to these cases based upon currently available information on each case. See Note

16

to the Consolidated Financial Statements.

Derivatives, Policy [Policy Text Block]

Derivative Financial Instruments

. The derivative instruments we utilize in the normal course of business are

interest rate lock commitment

s and forward sales of mortgage-backed securities, both of which typically are short-term in nature. Forward sales of mortgage-backed securities are utilized to hedge changes in fair value of our

interest rate lock commitment

s as well as

mortgage loans held-for-sale not under commitments to sell

.

For forward sales of mortgage-backed securities, as well as interest rate lock commitments that are still outstanding at the end of a reporting period, we record the changes in fair value of the derivatives in revenues in the financial services section of our consolidated statements of operations and comprehensive income with an offset to other assets or accounts payable and accrued liabilities in the financial services section of our consolidated balance sheets, depending on the nature of the change.

At

December

31,

2016

and

2015,

we had interest rate lock commitments with aggregate principal balances of approximately

$110.9

million

and $

98.4

million, respectively, at average interest rates of

4.11

%

and

3.82

%, respectively. In addition, we had

$42.6

million and

$23.1

million of mortgage loans held-for-sale at

December

31,

2016

and

2015,

respectively, that had not yet been committed to a mortgage purchaser. In order to hedge the changes in fair value of our interest rate lock commitments and mortgage loans held-for-sale which had not yet been committed to a mortgage purchaser, we had forward sales of securities totaling

$108.0

million and

$84.5

million at

December

31,

2016

and

2015,

respectively.

For the years ended

December

31,

2016,

2015

and

2014,

we recorded net gains (losses) on our derivatives of

$1.5

million,

$1.5

million and

$(0.8)

million, respectively. For further discussion of our policies regarding interest rate lock commitments, see our “Revenue Recognition for HomeAmerican” accounting policy section below.

Revenue Recognition, Policy [Policy Text Block]

Revenue Recognition

for Homebuilding Segments

. We recognize revenue from home deliveries and land sales when:

(1)

 the closing has occurred;

(2)

 title has passed to the buyer;

(3)

 possession and other attributes of ownership have been transferred to the buyer;

(4)

 we are not obligated to perform significant additional activities after closing and delivery; and

(5)

 the buyer demonstrates a commitment to pay for the property through an adequate initial and continuing investment. The buyer’s initial investment shall include:

(1)

 cash paid as a down payment;

(2)

 the buyer’s notes supported by irrevocable letters of credit;

(3)

 payments made by the buyer to

third

-parties to reduce existing indebtedness on the property; and

(4)

 other amounts paid by the buyer that are part of the sales value of the property. Revenue from a home delivery includes the base sales price and any purchased options and upgrades and is reduced for any sales price incentives.

We defer Operating Margin related to the sale of a home if all of the following criteria are present:

(1)

 HomeAmerican originates the mortgage loan;

(2)

 HomeAmerican has not sold the mortgage loan, or loans, as of the end of the pertinent reporting period; and

(3)

 the homebuyer’s down payment does not meet the initial or continuing investment criteria. The deferral is subsequently recognized at the time HomeAmerican sells the homebuyer’s mortgage loan, or loans, to a

third

-party purchaser. In the event the Operating Margin is a loss, we recognize such loss at the time the home is closed. We did not have any loans in inventory at

December

31,

2016,

2015

or

2014

that failed to meet the continuing investment criteria.

Revenue Recognition for HomeAmerican

.  Revenues recorded by HomeAmerican primarily reflect

(1)

origination fees and

(2)

the corresponding sale, or expected future sale, of a loan, which will include the estimated earnings from either the release or retention of a loan’s servicing rights.  Origination fees are recognized when a loan is originated.  When an interest rate lock commitment is made to a customer, we record the expected gain on sale of the mortgage, plus the estimated earnings from the expected sale of the associated servicing rights, adjusted for a pull-through percentage (which is defined as the likelihood that an interest rate lock commitment will be originated), as revenue.  As the interest rate lock commitment gets closer to being originated, the expected gain on the sale of that loan plus its servicing rights is updated to reflect current market value and the increase or decrease in the fair value of that interest rate lock commitment is recorded through revenues.  At the same time, the expected pull-through percentage of the interest rate lock commitment to be originated is updated (typically an increase as the interest lock commitment gets closer to origination) and, if there has been a change, revenues are adjusted as necessary.  After origination, our mortgage loans, generally including their servicing rights, are sold to

third

-party purchasers in accordance with sale agreements entered into by us with a

third

-party purchaser of the loans. We make representations and warranties with respect to the status of loans transferred in the sale agreements. The sale agreements generally include statements acknowledging the transfer of the loans is intended by both parties to constitute a sale. Sale of a mortgage loan has occurred when the following criteria, among others, have been met:

(1)

 fair consideration has been paid for transfer of the loan by a

third

party in an arms-length transaction,

(2)

 all the usual risks and rewards of ownership that are in substance a sale have been transferred by us to the

third

party purchaser; and

(3)

 we do not have a substantial continuing involvement with the mortgage loan.

We measure mortgage loans held-for-sale at fair value with the changes in fair value being reported in earnings at each reporting date. The impact of recording changes in fair value to earnings did not have a material impact on our financial position, results of operations or cash flows during the years ended

December

31,

2016,

2015

or

2014.

Our net gains on the sale of mortgage loans were

$34.0

million,

$17.8

million and

$

15.5

million for the years ended

December

31,

2016,

2015

and

2014,

respectively, and are included as a component of revenues in the financial services section of the

consolidated statements of operations and comprehensive income

.

Cost of Sales, Policy [Policy Text Block]

Home Cost of Sales

. Home cost of sales includes the specific construction costs of each home and all applicable land acquisition, land development and related costs, both incurred and estimated to be incurred, warranty costs and finance and closing costs, including closing cost incentives. We use the specific identification method for the purpose of accumulating home construction costs and allocate costs to each lot within a subdivision associated with land acquisition and land development based upon relative fair value of the lots prior to home construction. Lots within a subdivision typically have comparable fair values, and, as such, we generally allocate costs equally to each lot within a subdivision. We record all home cost of sales when a home is closed on a house-by-house basis.

When a home is closed, we generally have not yet paid

or incurred

all costs necessary to complete the construction of the home and certain land development costs. At the time of a home closing, we compare the home construction budgets to actual recorded costs to determine the additional estimated costs remaining to be paid on each closed home. For amounts not incurred or paid as of the time of closing a home, we record an estimated accrual associated with certain home construction and land development costs. Generally, these accruals are established based upon contracted work which has yet to be paid, open work orders not paid at the time of home closing, as well as land completion costs more likely than not to be incurred, and represent estimates believed to be adequate to cover the expected remaining home construction and land development costs. We monitor the adequacy of these accruals on a house-by-house basis and in the aggregate on a subdivision-by-subdivision basis. At

December

31,

2016

and

2015,

we had

$8.7

million and

$11.5

million, respectively, of land development and home construction accruals for closed homes. Actual results could differ from such estimates.

Share-based Compensation, Option and Incentive Plans Policy [Policy Text Block]

Stock-Based Compensation Expense

. In accordance with

ASC Topic

718,

Compensation—Stock Compensation

(“ASC

718”)

, stock-based compensation expense for all share-based payment awards is based on the grant date fair value.

For stock option awards granted with just service and/or performance conditions, we estimate the fair value using a Black-Scholes option pricing model. For any stock option awards granted that contain a market condition, we estimate the fair value using

a Monte Carlo simulation model

. We recognize expense for share-based payment awards based on their varying vesting conditions as follows:

● Awards with service conditions only – Expense recognized on a straight-line basis over the requisite service period of the award.

● Awards with performance conditions – Expense recognized on a straight-line basis for each performance criteria tranche (if applicable) over the period between the date that it is determined the performance conditions related to each tranche (if applicable) are probable to be met and the date the award vests

● Awards with market conditions (“Market-Based”) – Expense recognized on a straight-line basis over the requisite service period, which is the lesser of the derived service period or the explicit service period, if one is present. However, if the market condition is satisfied prior to the end of the requisite service period, we will accelerate all remaining expense to be recognized.

Earnings Per Share, Policy [Policy Text Block]

Earnings (Loss) Per Common Share.

For purposes of calculating earnings (loss) per share (“EPS”), a company that has participating security holders (for example, holders of unvested restricted stock that has nonforfeitable dividend rights) is required to utilize the

two

-class method for calculating earnings per share unless the treasury stock method results in lower EPS. The

two

-class method is an allocation of earnings/(loss) between the holders of common stock and a company’s participating security holders. Under the

two

-class method, earnings/(loss) for the reporting period are allocated between common shareholders and other security holders based on their respective rights to receive distributed earnings (i.e., dividends) and undistributed earnings (i.e., net income/(loss)). Our common shares outstanding are comprised of shareholder owned common stock and participating security holders consisting of shareholders of unvested restricted stock. Basic EPS is calculated by dividing income or loss attributable to common stockholders by the weighted average number of shares of common stock outstanding, excluding participating shares in accordance with ASC

260.

To

calculate diluted EPS, basic EPS is further adjusted to include the effect of potential dilutive stock options outstanding.

New Accounting Pronouncements, Policy [Policy Text Block]

Recently Issued Accounting Standards

. In

May

2014,

the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)

2014

-

09,

Revenue from Contracts with Customers

("ASU

2014

-

09"),

which is a comprehensive new revenue recognition model. Under ASU

2014

-

09,

a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods and services. ASU

2014

-

09

is effective for our interim and annual reporting periods beginning

January

1,

2018,

and is to be adopted using either a full retrospective or modified retrospective transition method. Early adoption is permitted only as of annual reporting periods beginning after

December

15,

2016,

including interim reporting periods within that reporting period. We do not plan to early adopt the guidance. We expect to adopt the new standard under the modified retrospective approach. Although we are still in the process of evaluating our contracts, we do not believe the adoption of ASU

2014

-

09

will have a material impact on the amount or timing of our revenues. Although we are still evaluating the accounting for marketing costs under ASC

606,

there is a possibility that the adoption of ASU

2014

-

09

will impact the timing of recognition and classification in our consolidated financial statements of certain marketing costs we incur to obtain sales contracts from our customers. For example, there are various marketing costs that we currently capitalize and amortize with each home delivered in a community. Under the new guidance, these costs

may

need to be expensed immediately. We are continuing to evaluate the exact impact the update will have on recording revenue and our marketing costs in our consolidated financial statements and related disclosures.

In

February

2015,

the FASB issued ASU

2015

-

02,

Consolidation

(Topic

810)

: Amendments to the Consolidation Analysis

(“ASU

2015

-

02”),

which amends the consolidation requirements in ASC Topic

810,

Consolidation

, primarily related to limited partnerships and variable interest entities. ASU

2015

-

02

was effective for our interim and annual reporting periods beginning

January

1,

2016

and did not have a material impact on our consolidated financial statements.

In

January

2016,

the FASB issued ASU

2016

-

01,

Financial Instruments–Overall: Recognition and Measurement of Financial Assets and Financial Liabilities

(“ASU

2016

-

01”),

which makes a number of changes to the current GAAP model, including changes to the accounting for equity investments and financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. Under ASU

2016

-

01,

we will primarily be impacted by the changes to accounting for equity instruments with readily determinable fair values as they will no longer be permitted to be classified as available-for-sale (changes in fair value reported through other comprehensive income) and instead, all changes in fair value will be reported in earnings. ASU

2016

-

01

is effective for our interim and annual reporting periods beginning

January

1,

2018

and is to be applied using a modified retrospective transition method. Early adoption of the applicable guidance from ASU

2016

-

01

is not permitted. Given the significant amount of our investments in equity securities, and assuming we still have a similar level of investments when this guidance is adopted, we would expect that the impact to our consolidated statements of operations and comprehensive income from this update could be material. Furthermore, depending on trends in the stock market, we

may

see increased volatility in our consolidated statements of operations and comprehensive income.

In

February

2016,

the FASB issued ASU

2016

-

02,

Leases

(“ASU

2016

-

02”),

which requires a lessee to recognize a right-of-use asset and a corresponding lease liability for virtually all leases. The liability will be equal to the present value of lease payments while the right-of-use asset will be based on the liability, subject to adjustment, such as for initial direct costs. In addition, ASU

2016

-

02

expands the disclosure requirements for lessees. Upon adoption, we will be required to record a lease asset and lease liability related to our operating leases. ASU

2016

-

02

is effective for our interim and annual reporting periods beginning

January

1,

2019

and is to be applied using a modified retrospective transition method. Early adoption is permitted. We do not plan to early adopt the guidance and we are currently evaluating the impact the update will have on our consolidated financial statements and related disclosures.

I

n

March

2016,

the FASB issued ASU

2016

-

09,

Compensation - Stock Compensation: Improvements to Employee Share-Based Payment Accounting

(“ASU

2016

-

09”),

which amends ASC Topic

718.

The standard is intended to simplify several areas of accounting for share-based compensation arrangements, including the accounting for income taxes, classification of excess tax benefits on the statement of cash flows, forfeitures, statutory tax withholding requirements, classification of awards as either equity or liabilities, and classification of employee taxes paid on the statement of cash flows when an employer withholds shares for tax-withholding purposes. ASU

2016

-

09

is effective for our interim and annual reporting periods beginning

January

1,

2017,

and is to be applied using a retrospective transition method. Though permitted, we

did not early adopt the guidance. The primary impact from this guidance on our consolidated financial statements will be to our tax provision line item as any excess tax benefits or deficiencies from

(1)

the exercise or expiration of options or

(2)

the vesting of stock awards will now be recognized through our income tax provision as opposed to additional paid-in capital (to the extent we had a sufficient pool of windfall tax benefits). As of

December

31,

2016,

we had options covering

540,000

shares with exercise prices above the MDC closing share price at

December

31,

2016

and the ability to exercise those options will expire at some point during

2017.

If the exercise price continues to be greater than the share price of MDC throughout

2017,

these options will likely expire unexercised and as a result, we could recognize an additional

$2.6

million expense in our tax provision for

2017.

We are continuing to evaluate additional impacts the update will have on our consolidated financial statements and related disclosures.

In

June

2016,

 the FASB issued ASU

2016

-

13,

Financial Instruments—Credit Losses (Topic

326):

 

Measurement of Credit Losses on Financial Instruments

(“ASU

2016

-

13”),

which requires measurement and recognition of expected credit losses for financial assets held. The amendments in ASU

2016

-

13

eliminate the probable threshold for initial recognition of a credit loss in current GAAP and reflect an entity’s current estimate of all expected credit losses. ASU

2016

-

13

is effective for our interim and annual reporting periods beginning

January

1,

2021,

and is to be applied using a modified retrospective transition method. Earlier adoption is permitted.

 We do not plan to early adopt the guidance and we are currently evaluating the impact the update will have on our consolidated financial statements and related disclosures.

In

August

2016,

the FASB issued ASU

2016

-

15,

S

tatement of Cash Flows (Topic

230):

Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force)

(“ASU

2016

-

15”),

which amends ASC Topic

230

, Statement of Cash Flows

, to clarify guidance on the classification of certain cash receipts and payments in the statement of cash flows. The amendments in ASU

2016

-

15

are intended to reduce diversity

in practice in how certain transactions are classified in the statement of cash flows

. ASU

2016

-

15

is effective for our interim and annual reporting periods beginning

January

1,

2018,

and is to be applied using a retrospective transition method. Earlier adoption is permitted.

 We do not plan to early adopt the guidance and do not believe the guidance will have a material impact on our financial statements upon adoption.

In

November

2016,

the FASB issued ASU

2016

-

18,

Statement of Cash Flows (Topic

230):

Restricted Cash

(a

consensus of the

FASB

Emerging Issues Task Force

(“ASU

2016

-

18”),

which requires restricted cash to be included with cash and cash equivalents when reconciling the beginning and ending amounts on the statement of cash flows. ASU

2016

-

18

is effective for our interim and annual reporting periods beginning

January

1,

2018,

and is to be applied using a retrospective transition method. Earlier adoption is permitted.

 We do not plan to early adopt the guidance and do not believe the guidance will have a material impact on our financial statements upon adoption.

XML

Note 1 - Summary of Significant Accounting Policies (Tables)

12 Months Ended

Dec. 31, 2016

Notes Tables

Property, Plant and Equipment [Table Text Block]

			Accumulated
			Depreciation and		Carrying
	Cost		Amortization		Value
	(Dollars in thousands)
December 31, 2016:
Airplane	$	29,497	$	8,250	$	21,247
Computer software and equipment		23,909		20,329		3,580
Leasehold improvements		11,530		9,370		2,160
Other		2,410		1,356		1,054
Total	$	67,346	$	39,305	$	28,041
December 31, 2015:
Airplane	$	28,997	$	7,701	$	21,296
Computer software and equipment		21,393		16,599		4,794
Leasehold improvements		10,207		8,317		1,890
Other		2,199		1,953		246
Total	$	62,796	$	34,570	$	28,226

XML

Note 2 - Supplemental Cash Flow Disclosure (Tables)

12 Months Ended

Dec. 31, 2016

Notes Tables

Schedule of Cash Flow, Supplemental Disclosures [Table Text Block]

	Year Ended December 31,
	2016		2015		2014
Cash paid for:	(Dollars in thousands)
Interest, net of interest capitalized	$	717	$	286	$	1,843
Income taxes	$	29,144	$	3,023	$	2,793
Non-cash investing and financing activities:
Unrealized holding gains (losses) on marketable securities, net of tax	$	6,356	$	5,260	$	(1,120	)

XML

Note 3 - Segment Reporting (Tables)

12 Months Ended

Dec. 31, 2016

Notes Tables

Reconciliation of Revenue from Segments to Consolidated [Table Text Block]

	Year Ended December 31,
	2016		2015		2014
	(Dollars in thousands)
Homebuilding
West	$	1,128,513	$	915,259	$	770,051
Mountain		756,997		609,002		534,244
East		377,343		335,965		346,336
Total home and land sale revenues	$	2,262,853	$	1,860,226	$	1,650,631
Financial Services
Mortgage operations	$	41,585	$	30,276	$	25,887
Other		22,406		18,534		18,066
Total financial services revenues	$	63,991	$	48,810	$	43,953
Total revenues	$	2,326,844	$	1,909,036	$	1,694,584

Reconciliation of Operating Profit (Loss) from Segments to Consolidated [Table Text Block]

	Year Ended December 31,
	2016			2015			2014
	(Dollars in thousands)
Homebuilding
West	$	73,594		$	64,627		$	63,071
Mountain		73,104			52,707			39,343
East		4,949			(6,033	)		10,730
Corporate		(36,269	)		(40,860	)		(37,340	)
Total homebuilding pretax income	$	115,378		$	70,441		$	75,804
Financial Services
Mortgage operations	$	23,845		$	17,230		$	14,034
Other		12,558			13,753			10,637
Total financial services pretax income	$	36,403		$	30,983		$	24,671
Total pretax income	$	151,781		$	101,424		$	100,475

Reconciliation of Assets from Segment to Consolidated [Table Text Block]

	December 31,
	2016		2015
	(Dollars in thousands)
Homebuilding assets
West	$	1,035,033	$	991,393
Mountain		571,139		536,831
East		256,816		324,457
Corporate		454,507		393,712
Total homebuilding assets	$	2,317,495	$	2,246,393
Financial services assets
Mortgage operations	$	153,182	$	123,176
Other		57,912		46,330
Total financial services assets	$	211,094	$	169,506
Total assets	$	2,528,589	$	2,415,899

XML

Note 4 - Earnings Per Share (Tables)

12 Months Ended

Dec. 31, 2016

Notes Tables

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

	Year Ended December 31,
	2016			2015			2014
	(Dollars in thousands, except per share amounts)
Numerator
Net income	$	103,211		$	65,791		$	63,143
Less: distributed earnings allocated to participating securities		(163	)		(98	)		(196	)
Less: undistributed earnings allocated to participating securities		(179	)		(37	)		(60	)
Net income attributable to common stockholders (numerator for basic earnings per share)		102,869			65,656			62,887
Add back: undistributed earnings allocated to participating securities		179			37			60
Less: undistributed earnings reallocated to participating securities		(179	)		(37	)		(60	)
Numerator for diluted earnings per share under two class method	$	102,869		$	65,656		$	62,887
Denominator
Weighted-average common shares outstanding		51,286,942			51,202,616			51,046,318
Add: dilutive effect of stock options		160,205			212,964			212,126
Denominator for diluted earnings per share under two class method		51,447,147			51,415,580			51,258,444
Basic Earnings Per Common Share	$	2.01		$	1.28		$	1.23
Diluted Earnings Per Common Share	$	2.00		$	1.28		$	1.23

XML

Note 5 - Accumulated Other Comprehensive Income (Tables)

12 Months Ended

Dec. 31, 2016

Notes Tables

Schedule of Accumulated Other Comprehensive Income (Loss) [Table Text Block]

	Year Ended December 31,
	2016			2015		2014
	(Dollars in thousands)
Unrealized gains (losses) on available-for-sale marketable securities (1) :
Beginning balance	$	3,657		$	2,775	$	7,655
Other comprehensive income (loss) before reclassifications		4,738			322		(3,025	)
Amounts reclassified from AOCI (2)		(665	)		560		(1,855	)
Ending balance	$	7,730		$	3,657	$	2,775
Unrealized gains on available-for-sale metropolitan district bond securities (1) :
Beginning balance	$	12,058		$	7,680	$	3,920
Other comprehensive income before reclassifications		2,283			4,378		3,760
Ending balance	$	14,341		$	12,058	$	7,680
Total ending AOCI	$	22,071		$	15,715	$	10,455

Reclassification out of Accumulated Other Comprehensive Income [Table Text Block]

	Year Ended December 31,
Affected Line Item in the Statements of Operations	2016			2015			2014
	(Dollars in thousands)
Homebuilding: Interest and other income	$	2,049		$	2,690		$	7,210
Homebuilding: Other-than-temporary impairment of marketable securities		(1,070	)		(3,969	)		(4,293	)
Financial services: Interest and other income		467			368			100
Financial services: Other-than-temporary impairment of marketable securities		(373	)		-			-
Income before income taxes		1,073			(911	)		3,017
Provision for income taxes		(408	)		351			(1,162	)
Net income	$	665		$	(560	)	$	1,855

XML

Note 6 - Fair Value Measurements (Tables)

12 Months Ended

Dec. 31, 2016

Notes Tables

Fair Value, Assets Measured on Recurring Basis [Table Text Block]

		Fair Value
Financial Instrument	Hierarchy	December 31, 2016		December 31, 2015
		(Dollars in thousands)
Marketable equity securities (available-for-sale)	Level 1	$	96,206	$	103,694
Mortgage loans held-for-sale, net	Level 2	$	138,774	$	115,670
Metropolitan district bond securities (related party) (available-for-sale)	Level 3	$	30,162	$	25,911

Available-for-sale Securities [Table Text Block]

	December 31, 2016
	Amortized Cost		OTTI			Net Amortized Cost		Fair Value
	(Dollars in thousands)
Homebuilding equity securities	$	49,295	$	(1,070	)	$	48,225	$	59,770
Financial services equity securities		35,885		(373	)		35,512		36,436
Total marketable equity securities	$	85,180	$	(1,443	)	$	83,737	$	96,206

	December 31, 2015
	Amortized Cost		OTTI			Net Amortized Cost		Fair Value
	(Dollars in thousands)
Homebuilding equity securities	$	89,738	$	(3,969	)	$	85,769	$	92,387
Financial services equity securities		12,026		-			12,026		11,307
Total marketable equity securities	$	101,764	$	(3,969	)	$	97,795	$	103,694

Schedule of Unrealized Loss on Investments [Table Text Block]

	December 31, 2016							December 31, 2015
	Number of Securities in Loss Position		Average Loss Position			Aggregate Fair Value of Securities in a Loss Position		Number of Securities in Loss Position		Average Loss Position			Aggregate Fair Value of Securities in a Loss Position
	(Dollars in thousands)
Marketable equity securities		5	$	(457	)	$	6,045		4	$	(882	)	$	6,116

Realized Gain (Loss) on Investments [Table Text Block]

	Year Ended December 31,
	2016			2015			2014
	(Dollars in thousands)
Gross realized gains on sales of available-for-sale securities
Equity securities	$	2,669		$	1,854		$	7,719
Debt securities		-			417			2,432
Total	$	2,669		$	2,271		$	10,151
Gross realized losses on sales of available-for-sale securities
Equity securities	$	(1,596	)	$	(2,949	)	$	(6,183	)
Debt securities		-			(233	)		(952	)
Total	$	(1,596	)	$	(3,182	)	$	(7,135	)
Net realized gain (loss) on sales of available-for-sale securities	$	1,073		$	(911	)	$	3,016

Fair Value Inputs, Assets, Quantitative Information [Table Text Block]

	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
Number of homes closed per year	0	to	159		107		Increase	Decrease
Average sales price	$445,000	to	$870,000	$	548,000		Increase	Decrease
Discount rates	5%	to	12%		8.2	%	Decrease	Increase

Schedule of Principal Amounts and Fair Values of Debt Instruments [Table Text Block]

	Year Ended December 31,
	2016			2015
	(Dollars in thousands)
Balance at beginning of period	$	25,911		$	18,203
Increase in fair value (recorded in other comprehensive income)		3,683			6,961
Change due to accretion of principal		1,747			1,427
Cash receipts		(1,179	)		(680	)
Balance at end of period	$	30,162		$	25,911

Fair Value of Senior Notes [Table Text Block]

	December 31, 2016				December 31, 2015
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
	(Dollars in thousands)
$250 Million 5⅝% Senior Notes due February 2020, net	$	246,915	$	265,611	$	246,032	$	257,813
$250 Million 5½% Senior Notes due January 2024, net		248,391		258,800		248,209		252,188
$350 Million 6% Senior Notes due January 2043, net		346,340		297,087		346,283		276,938
Total	$	841,646	$	821,498	$	840,524	$	786,939

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Note 7 - Inventories (Tables)

12 Months Ended

Dec. 31, 2016

Notes Tables

Schedule of Inventory [Table Text Block]

	December 31,		December 31,
	2016		2015
	(Dollars in thousands)
Housing Completed or Under Construction:
West	$	470,503	$	365,867
Mountain		277,922		253,578
East		125,774		127,591
Subtotal		874,199		747,036
Land and Land Under Development:
West		499,186		580,682
Mountain		271,252		259,484
East		114,177		176,760
Subtotal		884,615		1,016,926
Total Inventories	$	1,758,814	$	1,763,962

Schedule of Inventory Impairments [Table Text Block]

	Year Ended December 31,
	2016		2015		2014
	(Dollars in thousands)
Housing Completed or Under Construction:
West	$	364	$	-	$	-
Mountain		574		250		234
East		1,390		1,378		1,000
Subtotal		2,328		1,628		1,234
Land and Land Under Development:
West		1,036		648		-
Mountain		589		569		526
East		6,220		7,148		-
Subtotal		7,845		8,365		526
Total Inventories	$	10,173	$	9,993	$	1,760

Quantitative Data for Fair Value of the Impaired Inventory [Table Text Block]

	Impairment Data								Quantitative Data
Three Months Ended	Total Subdivisions Tested		Inventory Impairments		Fair Value of Inventory After Impairments		Number of Subdivisions Impaired		Discount Rate
	(Dollars in thousands)
March 31, 2016		14	$	-	$	-		-			N/A
June 30, 2016		17		1,600		6,415		2		12%	to	15%
September 30, 2016		25		4,700		12,295		2		15%	to	18%
December 31, 2016		40		3,873		23,657		3		12%	to	15%
Total			$	10,173	$	42,367		7
March 31, 2015		22	$	350	$	3,701		1			9%
June 30, 2015		22		-		-		-			N/A
September 30, 2015		18		3,225		14,836		5		12%	to	15%
December 31, 2015		15		5,200		19,925		3		15%	to	20%
Total			$	8,775	$	38,462		9
March 31, 2014		16	$	-	$	-		-			N/A
June 30, 2014		16		850		4,285		2		11%	to	14%
September 30, 2014		23		-		-		-			N/A
December 31, 2014		21		910		4,646		2			13%
Total			$	1,760	$	8,931		4

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Note 8 - Capitalization of Interest (Tables)

12 Months Ended

Dec. 31, 2016

Notes Tables

Capitalization of Interest [Table Text Block]

	Year Ended December 31,
	2016			2015			2014
	(Dollars in thousands)
Homebuilding interest incurred	$	52,681		$	53,061		$	66,269
Less: Interest capitalized		(52,681	)		(53,061	)		(65,584	)
Homebuilding interest expensed	$	-		$	-		$	685
Interest capitalized, beginning of period	$	77,541		$	79,231		$	74,155
Plus: Interest capitalized during period		52,681			53,061			65,584
Less: Previously capitalized interest included in home and land cost of sales		(62,137	)		(54,751	)		(60,508	)
Interest capitalized, end of period	$	68,085		$	77,541		$	79,231

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Note 9 - Homebuilding Prepaid and Other Assets (Tables)

12 Months Ended

Dec. 31, 2016

Notes Tables

Schedule of Other Assets [Table Text Block]

	December 31,
	2016		2015
	(Dollars in thousands)
Land option deposits	$	8,683	$	11,997
Deferred marketing costs		35,313		31,152
Prepaid expenses		4,735		6,500
Goodwill		6,008		6,008
Deferred debt issuance costs on revolving credit facility, net		4,340		5,570
Other		1,384		4,167
Total	$	60,463	$	65,394

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Note 10 - Homebuilding Accrued Liabilities and Financial Services Accounts Payable and Accrued Liabilities (Tables)

12 Months Ended

Dec. 31, 2016

Notes Tables

Schedule of Accrued Liabilities [Table Text Block]

	December 31,
	2016		2015
	(Dollars in thousands)
Accrued compensation and related expenses	$	27,830	$	25,492
Accrued interest		23,234		23,234
Warranty accrual		20,678		15,328
Customer and escrow deposits		27,183		20,717
Land development and home construction accruals		8,695		11,465
Other accrued liabilities		36,946		26,650
Total accrued liabilities	$	144,566	$	122,886

Schedule of Accounts Payable and Accrued Liabilities [Table Text Block]

	December 31,
	2016		2015
	(Dollars in thousands)
Insurance reserves	$	42,204	$	45,811
Accounts payable and other accrued liabilities		8,530		6,303
Total accounts payable and accrued liabilities	$	50,734	$	52,114

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Note 11 - Warranty Accrual (Tables)

12 Months Ended

Dec. 31, 2016

Notes Tables

Schedule of Product Warranty Liability [Table Text Block]

	Year Ended December 31,
	2016			2015			2014
	(Dollars in thousands)
Balance at beginning of period	$	15,328		$	18,346		$	22,238
Expense provisions		8,905			6,303			4,834
Cash payments		(11,017	)		(9,510	)		(6,126	)
Adjustments		7,462			189			(2,600	)
Balance at end of period	$	20,678		$	15,328		$	18,346

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Note 12 - Insurance and Construction Defect Claim Reserves (Tables)

12 Months Ended

Dec. 31, 2016

Notes Tables

Schedule of Liability for Unpaid Claims and Claims Adjustment Expense [Table Text Block]

	December 31,
	2016			2015			2014
	(Dollars in thousands)
Balance at beginning of period	$	47,061		$	51,720		$	50,887
Expense provisions		7,531			6,452			6,316
Cash payments, net of recoveries		(3,638	)		(8,611	)		(5,483	)
Adjustments		-			(2,500	)		-
Balance at end of period	$	50,954		$	47,061		$	51,720

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Note 13 - Income Taxes (Tables)

12 Months Ended

Dec. 31, 2016

Notes Tables

Schedule of Components of Income Tax Expense (Benefit) [Table Text Block]

	Year Ended December 31,
	2016		2015			2014
	(Dollars in thousands)
Current tax provision (benefit)
Federal	$	32,102	$	2,549		$	1,631
State		323		(249	)		1,475
Total current		32,425		2,300			3,106
Deferred tax provision:
Federal		10,960		30,268			28,630
State		5,185		3,065			5,596
Total deferred		16,145		33,333			34,226
Provision for income taxes	$	48,570	$	35,633		$	37,332

Schedule of Effective Income Tax Rate Reconciliation [Table Text Block]

	Year Ended December 31,
	2016			2015			2014
	(Dollars in thousands)
Tax expense computed at federal statutory rate	$	53,123		$	35,498		$	35,166
State income tax expense, net of federal benefit		4,553			3,043			3,340
Other permanent differences		(647	)		(935	)		(1,435	)
Domestic manufacturing deduction		(5,563	)		(39	)		-
Expiration of state net operating loss		-			336			3,030
Tax expense (benefit) related to an increase (decrease) in unrecognized tax benefits		75			(479	)		559
Charitable contributions statute expiration		-			-			181
Federal energy credits		(3,428	)		(1,058	)		(1,131	)
Rate changes		-			48			866
Change in valuation allowance		253			(549	)		(1,665	)
Other		204			(232	)		(1,579	)
Provision for income taxes	$	48,570		$	35,633		$	37,332
Effective tax (benefit) rate		32.0	%		35.1	%		37.2	%

Schedule of Deferred Tax Assets and Liabilities [Table Text Block]

	December 31,
	2016			2015
	(Dollars in thousands)
Deferred tax assets:
State net operating loss carryforwards	$	26,015		$	31,292
Alternative minimum tax and other tax credit carryforwards		12,325			31,993
Stock-based compensation expense		18,228			20,068
Warranty, litigation and other reserves		14,155			9,470
Receivables from related party		7,626			8,342
Accrued compensation		7,330			7,241
Asset impairment charges		6,456			5,049
Inventory, additional costs capitalized for tax purposes		6,498			5,894
Other, net		2,993			2,429
Total deferred tax assets		101,626			121,778
Valuation allowance		(13,803	)		(12,868	)
Total deferred tax assets, net of valuation allowance		87,823			108,910
Deferred tax liabilities:
Property, equipment and other assets		4,276			4,739
Deferred revenue		1,400			2,312
Unrealized gain on marketable securities		4,676			671
Other, net		2,583			2,081
Total deferred tax liabilities		12,935			9,803
Net deferred tax asset	$	74,888		$	99,107

Schedule of Unrecognized Tax Benefits Roll Forward [Table Text Block]

	Year Ended December 31,
	2016			2015			2014
	(Dollars in thousands)
Gross unrecognized tax benefits at beginning of year	$	488		$	905		$	371
Increases related to prior year tax positions		156			139			633
Decreases related to prior year tax positions		-			(475	)		(85	)
Lapse of applicable statute of limitations		(67	)		(81	)		(14	)
Gross unrecognized tax benefits at end of year	$	577		$	488		$	905

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Note 15 - Lines of Credit and Total Debt Obligations (Tables)

12 Months Ended

Dec. 31, 2016

Notes Tables

Schedule of Debt [Table Text Block]

	December 31,
	2016		2015
	(Dollars in thousands)
$250 Million 5⅝% Senior Notes due February 2020, net	$	246,915	$	246,032
$250 Million 5½% Senior Notes due January 2024, net		248,391		248,209
$350 Million 6% Senior Notes due January 2043, net		346,340		346,283
Total	$	841,646	$	840,524

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Note 16 - Commitments and Contingencies (Tables)

12 Months Ended

Dec. 31, 2016

Notes Tables

Schedule of Future Minimum Rental Payments for Operating Leases [Table Text Block]

	Year Ended
	December 31,
	(Dollars in thousands)
2017	$	6,008
2018		5,293
2019		4,923
2020		4,735
2021		4,567
Thereafter		21,566
Total	$	47,092

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Note 17 - Concentration of Third-party Mortgage Purchasers (Tables)

12 Months Ended

Dec. 31, 2016

Notes Tables

Schedules of Concentration of Risk, by Risk Factor [Table Text Block]

	Year Ended December 31,
	2016			2015			2014
Wells Fargo Funding, Inc.		26	%		10	%		37	%
PennyMac Loan Services, LLC		15	%		14	%		23	%
Fannie Mae		10	%		7	%		10	%
JP Morgan Chase Bank, N.A.		8	%		32	%		20	%

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Note 20 - Stock Based Compensation (Tables)

12 Months Ended

Dec. 31, 2016

Notes Tables

Schedule of Share-based Compensation, Stock Options, Activity [Table Text Block]

	Year Ended December 31,
	2016					2015					2014
				Weighted-					Weighted-					Weighted-
				Average					Average					Average
	Number of			Exercise		Number of			Exercise		Number of			Exercise
	Shares			Price		Shares			Price		Shares			Price
Outstanding Stock Option Activity
Outstanding, beginning of year		6,706,123		$	30.46		5,054,623		$	35.91		5,469,948		$	38.03
Granted (1)		42,000			21.68		2,359,500			27.05		268,625			26.96
Exercised		-			-		(31,250	)		21.21		(18,000	)		20.82
Forfeited		(10,000	)		29.80		(121,250	)		28.61		(23,750	)		25.16
Cancelled		(586,000	)		53.26		(555,500	)		66.51		(642,200	)		62.43
Outstanding, end of year		6,152,123		$	28.23		6,706,123		$	30.46		5,054,623		$	35.91

Schedule of Nonvested Share Activity [Table Text Block]

	Year Ended December 31,
	2016					2015					2014
				Weighted-					Weighted-					Weighted-
	Number of			Average		Number of			Average		Number of			Average
	Shares			Fair Value		Shares			Fair Value		Shares			Fair Value
Unvested Stock Option Activity
Outstanding, beginning of year		2,344,061		$	5.63		483,312		$	9.20		872,468		$	8.09
Granted (1)		42,000			4.04		2,359,500			5.26		268,625			7.17
Vested		(85,095	)		8.13		(377,501	)		6.76		(634,031	)		8.30
Forfeited		(10,000	)		6.61		(121,250	)		9.33		(23,750	)		7.60
Unvested, end of year		2,290,966		$	5.50		2,344,061		$	5.63		483,312		$	9.20

Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested and Expected to Vest, Outstanding and Exercisable [Table Text Block]

Exercisable or expected to vest
Number outstanding		6,098,279
Weighted-average exercise price	$	28.25
Aggregate intrinsic value (in thousands)	$	3,149
Weighted-average remaining contractual term (years)		5.59
Exercisable
Number outstanding		3,861,157
Weighted-average exercise price	$	28.96
Aggregate intrinsic value (in thousands)	$	2,970
Weighted-average remaining contractual term (years)		4.01

Schedule of Share-based Compensation, Shares Authorized under Stock Option Plans, by Exercise Price Range [Table Text Block]

			Options Outstanding						Options Exercisable
					Weighted-						Weighted-
					Average						Average
					Remaining		Weighted-				Remaining		Weighted-
					Contractual		Average				Contractual		Average
			Number		Life (in		Exercise		Number		Life (in		Exercise
Range of Exercise Price			Outstanding		years)		Price		Outstanding		years)		Price
$ 15.01	-	$ 20.00		42,000		5.07	$	19.95		42,000		5.07	$	19.95
$ 20.01	-	$ 25.00		1,215,375		5.44		23.21		1,119,346		5.21		23.25
$ 25.01	-	$ 30.00		3,424,748		7.08		27.47		1,249,937		4.88		28.16
$ 30.01	-	$ 35.00		863,625		3.14		31.82		862,312		3.14		31.82
$ 35.01	-	$ 40.00		606,375		1.23		38.02		587,562		1.08		38.04
Total				6,152,123		5.61	$	28.23		3,861,157		4.01	$	28.96

Schedule of Nonvested Restricted Stock Units Activity [Table Text Block]

	Year Ended December 31,
	2016					2015					2014
				Weighted-					Weighted-					Weighted-
				Average					Average					Average
	Number of			Grant Date		Number of			Grant Date		Number of			Grant Date
	Shares			Fair Value		Shares			Fair Value		Shares			Fair Value
Unvested, beginning of year		99,442		$	29.75		184,201		$	32.26		298,991		$	32.87
Granted		154,703		$	22.06		36,896			26.44		39,381			30.85
Vested		(64,535	)	$	30.71		(111,719	)		32.86		(141,454	)		33.08
Forfeited		-			N/A		(9,936	)		29.11		(12,717	)		33.05
Unvested, end of year		189,610		$	23.15		99,442		$	29.75		184,201		$	32.26

Market-Based Awards [Member]

Notes Tables

Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions [Table Text Block]

Expected volatility	27.8	%
Risk free interest rate	2.2	%
Dividend yield rate	3.5	%

Employee Stock Option [Member]

Notes Tables

Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions [Table Text Block]

	Year Ended December 31,
	2016			2015			2014
Expected lives of options (in years)		5.0			3.9			4.0
Expected volatility		32.1	%		29.6	%		43.2	%
Risk free interest rate		1.6	%		1.2	%		1.3	%
Dividend yield rate		4.4	%		3.5	%		3.5	%

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Note 21 - Results of Quarterly Operations (Unaudited) (Restated for Stock Dividends) (Tables)

12 Months Ended

Dec. 31, 2016

Notes Tables

Quarterly Financial Information [Table Text Block]

	Quarter
	First			Second			Third			Fourth
2016	(Dollars in thousands, except per share amounts)
Total revenue	$	407,761		$	587,334		$	595,420		$	736,329
Home sales revenue	$	394,420		$	571,195		$	575,722		$	715,816
Asset impairments	$	-		$	(1,600	)	$	(4,700	)	$	(3,873	)
Gross margin from home sales (including impairments)		16.3	%		16.4	%		15.5	%		16.1	%
Homebuilding selling, general and administrative expenses	$	56,277		$	64,440		$	61,904		$	67,919
Income before income taxes	$	14,273		$	40,458		$	38,052		$	58,998
Net income	$	9,563		$	26,913		$	26,359		$	40,376
Earnings per share:
Basic	$	0.19		$	0.52		$	0.51		$	0.78
Diluted	$	0.19		$	0.52		$	0.51		$	0.78
2015
Total revenue	$	388,510		$	473,128		$	468,487		$	578,911
Home sales revenue	$	377,009		$	461,708		$	454,740		$	554,432
Asset impairments	$	(350	)	$	-		$	(4,351	)	$	(5,292	)
Gross margin from home sales (including impairments)		15.4	%		16.6	%		16.4	%		16.1	%
Homebuilding selling, general and administrative expenses	$	50,532		$	54,781		$	57,444		$	63,560
Income before income taxes	$	13,326		$	31,882		$	23,658		$	32,558
Net income	$	8,420		$	19,998		$	14,778		$	22,595
Earnings per share:
Basic	$	0.16		$	0.39		$	0.29		$	0.44
Diluted	$	0.16		$	0.39		$	0.29		$	0.44

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Note 22 - Supplemental Guarantor Information (Tables)

12 Months Ended

Dec. 31, 2016

Notes Tables

Condensed Balance Sheet [Table Text Block]

	December 31, 2016
					Non-
			Guarantor		Guarantor		Eliminating			Consolidated
	MDC		Subsidiaries		Subsidiaries		Entries			MDC
	Dollars in thousands
ASSETS
Homebuilding:
Cash and cash equivalents	$	255,679	$	3,408	$	-	$	-		$	259,087
Marketable securities		59,770		-		-		-			59,770
Restricted cash		-		3,778		-		-			3,778
Trade and other receivables		5,380		39,247		-		(2,135	)		42,492
Inventories:
Housing completed or under construction		-		874,199		-		-			874,199
Land and land under development		-		884,615		-		-			884,615
Total inventories		-		1,758,814		-		-			1,758,814
Intercompany receivables		1,475,291		2,803		5,289		(1,483,383	)		-
Investment in subsidiaries		295,214		-		-		(295,214	)		-
Property and equipment, net		25,495		2,546		-		-			28,041
Deferred tax assets, net		74,119		-		-		769			74,888
Metropolitan district bond securities (related party)		30,162		-		-		-			30,162
Other assets		5,267		55,196		-		-			60,463
Total Homebuilding Assets		2,226,377		1,865,792		5,289		(1,779,963	)		2,317,495
Financial Services:
Cash and cash equivalents		-		-		23,822		-			23,822
Marketable securities		-		-		36,436		-			36,436
Intercompany receivables		-		-		40,042		(40,042	)		-
Mortgage loans held-for-sale, net		-		-		138,774		-			138,774
Other assets		-		-		12,831		(769	)		12,062
Total Financial Services Assets		-		-		251,905		(40,811	)		211,094
Total Assets	$	2,226,377	$	1,865,792	$	257,194	$	(1,820,774	)	$	2,528,589
LIABILITIES AND EQUITY
Homebuilding:
Accounts payable	$	-	$	42,088	$	-	$	-		$	42,088
Accrued liabilities		1,527		136,615		143		6,281			144,566
Advances and notes payable to parent and subsidiaries		48,134		1,445,276		26,266		(1,519,676	)		-
Revolving credit facility		15,000		-		-		-			15,000
Senior notes, net		841,646		-		-		-			841,646
Total Homebuilding Liabilities		906,307		1,623,979		26,409		(1,513,395	)		1,043,300
Financial Services:
Accounts payable and accrued liabilities		-		-		59,150		(8,416	)		50,734
Advances and notes payable to parent and subsidiaries		-		-		3,749		(3,749	)		-
Mortgage repurchase facility		-		-		114,485		-			114,485
Total Financial Services Liabilities		-		-		177,384		(12,165	)		165,219
Total Liabilities		906,307		1,623,979		203,793		(1,525,560	)		1,208,519
Equity:
Total Stockholders' Equity		1,320,070		241,813		53,401		(295,214	)		1,320,070
Total Liabilities and Stockholders' Equity	$	2,226,377	$	1,865,792	$	257,194	$	(1,820,774	)	$	2,528,589

	December 31, 2015
					Non-
			Guarantor		Guarantor			Eliminating			Consolidated
	MDC		Subsidiaries		Subsidiaries			Entries			MDC
	(Dollars in thousands)
ASSETS
Homebuilding:
Cash and cash equivalents	$	141,245	$	3,097	$	-		$	-		$	144,342
Marketable securities		92,387		-		-			-			92,387
Restricted cash		-		3,750		-			-			3,750
Trade and other receivables		5,304		20,297		-			(2,287	)		23,314
Inventories:
Housing completed or under construction		-		747,036		-			-			747,036
Land and land under development		-		1,016,926		-			-			1,016,926
Total inventories		-		1,763,962		-			-			1,763,962
Intercompany receivables		1,509,551		2,850		5,291			(1,517,692	)		-
Investment in subsidiaries		267,191		-		-			(267,191	)		-
Property and equipment, net		26,073		2,153		-			-			28,226
Deferred tax assets, net		97,083		-		-			2,024			99,107
Metropolitan district bond securities (related party)		25,911		-		-			-			25,911
Other assets, net		5,973		59,421		-			-			65,394
Total Homebuilding Assets		2,170,718		1,855,530		5,291			(1,785,146	)		2,246,393
Financial Services:
Cash and cash equivalents		-		-		36,646			-			36,646
Marketable securities		-		-		11,307			-			11,307
Intercompany receivables		-		-		39,234			(39,234	)		-
Mortgage loans held-for-sale, net		-		-		115,670			-			115,670
Other assets, net		-		-		7,907			(2,024	)		5,883
Total Financial Services Assets		-		-		210,764			(41,258	)		169,506
Total Assets	$	2,170,718	$	1,855,530	$	216,055		$	(1,826,404	)	$	2,415,899
LIABILITIES AND EQUITY
Homebuilding:
Accounts payable	$	-	$	40,472	$	-		$	-		$	40,472
Accrued liabilities		11,527		108,445		(33	)		2,947			122,886
Advances and notes payable to parent and subsidiaries		47,375		1,480,589		25,536			(1,553,500	)		-
Revolving credit facility		15,000		-		-			-			15,000
Senior notes, net		840,524		-		-			-			840,524
Total Homebuilding Liabilities		914,426		1,629,506		25,503			(1,550,553	)		1,018,882
Financial Services:
Accounts payable and accrued liabilities		-		-		57,348			(5,234	)		52,114
Advances and notes payable to parent and subsidiaries		-		-		3,426			(3,426	)		-
Mortgage repurchase facility		-		-		88,611			-			88,611
Total Financial Services Liabilities		-		-		149,385			(8,660	)		140,725
Total Liabilities		914,426		1,629,506		174,888			(1,559,213	)		1,159,607
Equity:
Total Stockholders' Equity		1,256,292		226,024		41,167			(267,191	)		1,256,292
Total Liabilities and Stockholders' Equity	$	2,170,718	$	1,855,530	$	216,055		$	(1,826,404	)	$	2,415,899

Condensed Income Statement [Table Text Block]

	Year Ended December 31, 2016
							Non-
				Guarantor			Guarantor			Eliminating			Consolidated
	MDC			Subsidiaries			Subsidiaries			Entries			MDC
	(Dollars in thousands)
Homebuilding:
Revenues	$	-		$	2,262,853		$	-		$	-		$	2,262,853
Cost of Sales		-			(1,888,957	)		(300	)		-			(1,889,257	)
Inventory impairments		-			(10,173	)		-			-			(10,173	)
Gross margin		-			363,723			(300	)		-			363,423
Selling, general, and administrative expenses		(39,632	)		(210,546	)		-			(362	)		(250,540	)
Equity income of subsidiaries		125,431			-			-			(125,431	)		-
Interest and other income		5,236			2,188			5			(417	)		7,012
Other expense		1			(3,448	)		-			-			(3,447	)
Other-than-temporary impairment of marketable securities		(1,070	)		-			-			-			(1,070	)
Homebuilding pretax income (loss)		89,966			151,917			(295	)		(126,210	)		115,378
Financial Services:
Financial services pretax income		-			-			35,624			779			36,403
Income before income taxes		89,966			151,917			35,329			(125,431	)		151,781
Provision for income taxes		13,245			(48,613	)		(13,202	)		-			(48,570	)
Net income	$	103,211		$	103,304		$	22,127		$	(125,431	)	$	103,211
Other comprehensive income related to available-for-sale securities, net of tax		6,356			-			1,084			(1,084	)		6,356
Comprehensive income	$	109,567		$	103,304		$	23,211		$	(126,515	)	$	109,567

	Year Ended December 31, 2015
							Non-
				Guarantor			Guarantor			Eliminating			Consolidated
	MDC			Subsidiaries			Subsidiaries			Entries			MDC
	(Dollars in thousands)
Homebuilding:
Revenues	$	-		$	1,860,226		$	-		$	-		$	1,860,226
Cost of Sales		-			(1,551,907	)		(100	)		-			(1,552,007	)
Inventory impairments		-			(9,993	)		-			-			(9,993	)
Gross margin		-			298,326			(100	)		-			298,226
Selling, general, and administrative expenses		(40,356	)		(185,403	)		-			(558	)		(226,317	)
Equity income of subsidiaries		91,079			-			-			(91,079	)		-
Interest and other income		4,635			2,651			8			(585	)		6,709
Other expense		(6	)		(4,202	)		-			-			(4,208	)
Other-than-temporary impairment of marketable securities		(3,969	)		-			-			-			(3,969	)
Homebuilding pretax income (loss)		51,383			111,372			(92	)		(92,222	)		70,441
Financial Services:
Financial services pretax income		-			-			29,840			1,143			30,983
Income before income taxes		51,383			111,372			29,748			(91,079	)		101,424
Provision for income taxes		14,408			(39,128	)		(10,913	)		-			(35,633	)
Net income	$	65,791		$	72,244		$	18,835		$	(91,079	)	$	65,791
Other comprehensive income related to available-for-sale securities, net of tax		5,260			-			(674	)		674			5,260
Comprehensive income	$	71,051		$	72,244		$	18,161		$	(90,405	)	$	71,051

	Year Ended December 31, 2014
							Non-
				Guarantor			Guarantor			Eliminating			Consolidated
	MDC			Subsidiaries			Subsidiaries			Entries			MDC
	(Dollars in thousands)
Homebuilding:
Revenues	$	-		$	1,650,631		$	-		$	-		$	1,650,631
Cost of Sales		-			(1,368,140	)		(40	)		-			(1,368,180	)
Inventory impairments		-			(1,760	)		-			-			(1,760	)
Gross margin		-			280,731			(40	)		-			280,691
Selling, general, and administrative expenses		(38,290	)		(164,287	)		-			(676	)		(203,253	)
Equity income of subsidiaries		86,223			-			-			(86,223	)		-
Interest and other income		24,824			1,517			15			(46	)		26,310
Interest expense		(685	)		-			-			-			(685	)
Other expense		(8	)		(4,805	)		-			-			(4,813	)
Losses from early extinguishments of debt		(18,153	)		-			-			-			(18,153	)
Other-than-temporary impairment of marketable securities		(4,293	)		-			-			-			(4,293	)
Homebuilding pretax income (loss)		49,618			113,156			(25	)		(86,945	)		75,804
Financial Services:
Financial services pretax income		-			-			23,949			722			24,671
Income before income taxes		49,618			113,156			23,924			(86,223	)		100,475
Provision for income taxes		13,525			(42,044	)		(8,813	)		-			(37,332	)
Net income	$	63,143		$	71,112		$	15,111		$	(86,223	)	$	63,143
Other comprehensive income related to available-for-sale securities, net of tax		(1,120	)		-			(22	)		22			(1,120	)
Comprehensive income	$	62,023		$	71,112		$	15,089		$	(86,201	)	$	62,023

Condensed Cash Flow Statement [Table Text Block]

	Year Ended December 31, 2016
							Non-
				Guarantor			Guarantor			Eliminating			Consolidated
	MDC			Subsidiaries			Subsidiaries			Entries			MDC
	(Dollars in thousands)
Net cash provided by (used in) operating activities	$	(4,807	)	$	124,929		$	(4,205	)	$	-		$	115,917
Net cash provided by (used in) investing activities		168,329			(1,481	)		(23,779	)		(133,851	)		9,218
Financing activities:
Payments from (advances to) subsidiaries		-			(123,137	)		(10,714	)		133,851			-
Advances on mortgage repurchase facility, net		-			-			25,874			-			25,874
Proceeds from issuance of senior notes		-			-			-			-			-
Repayment of senior notes		-			-			-			-			-
Advances on revolving credit facility, net		-			-			-			-			-
Dividend payments		(49,088	)		-			-			-			(49,088	)
Excess tax benefits from stock-based compensation		-			-			-			-			-
Proceeds from exercise of stock options		-			-			-			-			-
Net cash provided by (used in) financing activities		(49,088	)		(123,137	)		15,160			133,851			(23,214	)
Net increase (decrease) in cash and cash equivalents		114,434			311			(12,824	)		-			101,921
Cash and cash equivalents:
Beginning of period		141,245			3,097			36,646			-			180,988
End of period	$	255,679		$	3,408		$	23,822		$	-		$	282,909

	Year Ended December 31, 2015
							Non-
				Guarantor			Guarantor			Eliminating			Consolidated
	MDC			Subsidiaries			Subsidiaries			Entries			MDC
	(Dollars in thousands)
Net cash provided by (used in) operating activities	$	31,030		$	(16,109	)	$	(14,706	)	$	-		$	215
Net cash provided by (used in) investing activities		38,467			(811	)		3,260			6,446			47,362
Financing activities:
Payments from (advances to) subsidiaries		-			17,326			(10,880	)		(6,446	)		-
Advances on mortgage repurchase facility, net		-			-			27,789			-			27,789
Proceeds from issuance of senior notes		-			-			-			-			-
Repayment of senior notes		-			-			-			-			-
Advances on revolving credit facility, net		-			-			-			-			-
Dividend payments		(48,868	)		-			-			-			(48,868	)
Excess tax benefits from stock-based compensation		-			-			-			-			-
Proceeds from exercise of stock options		665			-			-			-			665
Net cash provided by (used in) financing activities		(48,203	)		17,326			16,909			(6,446	)		(20,414	)
Net increase (decrease) in cash and cash equivalents		21,294			406			5,463			-			27,163
Cash and cash equivalents:
Beginning of period		119,951			2,691			31,183			-			153,825
End of period	$	141,245		$	3,097		$	36,646		$	-		$	180,988

	Year Ended December 31, 2014
							Non-
				Guarantor			Guarantor			Eliminating			Consolidated
	MDC			Subsidiaries			Subsidiaries			Entries			MDC
	(Dollars in thousands)
Net cash provided by (used in) operating activities	$	(62,289	)	$	(124,317	)	$	22,959		$	-		$	(163,647	)
Net cash provided by (used in) investing activities		339,754			(1,093	)		3,692			80,727			423,080
Financing activities:
Payments from (advances to) subsidiaries		-			124,647			(43,920	)		(80,727	)		-
Advances on mortgage repurchase facility, net		-			-			(2,252	)		-			(2,252	)
Proceeds from the issuance of senior notes		248,375			-			-			-			248,375
Repayment of senior notes		(517,650	)		-			-			-			(517,650	)
Advances on revolving credit facility, net		15,000			-			-			-			15,000
Dividend payments		(48,820	)		-			-			-			(48,820	)
Excess tax benefit from share-based awards		26			-			-			-			26
Proceeds from the exercise of stock options		375			-			-			-			375
Net cash provided by (used in) financing activities		(302,694	)		124,647			(46,172	)		(80,727	)		(304,946	)
Net increase (decrease) in cash and cash equivalents		(25,229	)		(763	)		(19,521	)		-			(45,513	)
Cash and cash equivalents:
Beginning of period		145,180			3,454			50,704			-			199,338
End of period	$	119,951		$	2,691		$	31,183		$	-		$	153,825

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Note 1 - Summary of Significant Accounting Policies (Details Textual) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Earnest Money Deposits		$ 3,800	$ 3,800
Depreciation, Depletion and Amortization		4,600	3,900	$ 3,800
Goodwill, Impairment Loss		0
Derivative, Notional Amount		108,000	84,500
Loans Receivable Held-for-sale, Net, Not Part of Disposal Group, Mortgage		42,600	23,100
Derivative, Gain (Loss) on Derivative, Net		1,500	1,500	(800)
Gain (Loss) on Sale of Mortgage Loans		34,000	17,800	15,500
Land Development and Home Construction Accruals, Current and Noncurrent		$ 8,700	11,500
Stock Options, Number of Shares With Exercise Prices Below the Closing Share Price		540,000
Income Tax Expense (Benefit)		$ 48,570	35,633	$ 37,332
Expense from Expiration of Stock Options [Member] | Scenario, Forecast [Member]
Income Tax Expense (Benefit)	$ 2,600
Interest Rate Lock Commitments [Member]
Derivative, Notional Amount		$ 110,900	$ 98,400
Derivative, Average Fixed Interest Rate		4.11%	3.82%
Minimum [Member]
Property, Plant and Equipment, Useful Life		2 years
Maximum [Member]
Property, Plant and Equipment, Useful Life		29 years

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Note 1 - Summary of Significant Accounting Policies - Cost and Carrying Value of Property and Equipment (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Cost	$ 67,346	$ 62,796
Accumulated Depreciation and Amortization	39,305	34,570
Property and equipment, net	28,041	28,226
Airplane [Member]
Cost	29,497	28,997
Accumulated Depreciation and Amortization	8,250	7,701
Property and equipment, net	21,247	21,296
Computer, Software and Equipment [Member]
Cost	23,909	21,393
Accumulated Depreciation and Amortization	20,329	16,599
Property and equipment, net	3,580	4,794
Leasehold Improvements [Member]
Cost	11,530	10,207
Accumulated Depreciation and Amortization	9,370	8,317
Property and equipment, net	2,160	1,890
Other Capitalized Property Plant and Equipment [Member]
Cost	2,410	2,199
Accumulated Depreciation and Amortization	1,356	1,953
Property and equipment, net	$ 1,054	$ 246

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Note 2 - Supplemental Cash Flow Disclosure - Supplemental Disclosures of Cash Flow Information and Non-cash Investing and Financing Activities (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Interest, net of interest capitalized	$ 717	$ 286	$ 1,843
Income taxes	29,144	3,023	2,793
Non-cash investing and financing activities:
Unrealized holding gains (losses) on marketable securities, net of tax	$ 6,356	$ 5,260	$ (1,120)

XML

Note 3 - Segment Reporting (Details Textual)	12 Months Ended
	Dec. 31, 2016
Other Segments [Member]
Number of Reportable Segments	1

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Note 3 - Segment Reporting - Reconciliation of Revenue From Segments to Consolidated (Details) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Total revenue	$ 736,329	$ 595,420	$ 587,334	$ 407,761	$ 578,911	$ 468,487	$ 473,128	$ 388,510	$ 2,326,844	$ 1,909,036	$ 1,694,584
Homebuilding Segment [Member]
Home and land sale revenues									2,262,853	1,860,226	1,650,631
Total revenue									2,262,853	1,860,226	1,650,631
Homebuilding Segment [Member] | Reportable Segment, West [Member]
Home and land sale revenues									1,128,513	915,259	770,051
Homebuilding Segment [Member] | Reportable Segment, Mountain [Member]
Home and land sale revenues									756,997	609,002	534,244
Homebuilding Segment [Member] | Reportable Segment, East [Member]
Home and land sale revenues									377,343	335,965	346,336
Financial Services Segment [Member]
Revenues									63,991	48,810	43,953
Financial Services Segment [Member] | Mortgage Operations [Member]
Revenues									41,585	30,276	25,887
Financial Services Segment [Member] | Other Financial Services [Member]
Revenues									$ 22,406	$ 18,534	$ 18,066

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Note 3 - Segment Reporting - Reconciliation of Pretax Operating Income From Segments to Consolidated (Details) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Income before income taxes	$ 58,998	$ 38,052	$ 40,458	$ 14,273	$ 32,558	$ 23,658	$ 31,882	$ 13,326	$ 151,781	$ 101,424	$ 100,475
Homebuilding Segment [Member]
Income before income taxes									115,378	70,441	75,804
Homebuilding Segment [Member] | Corporate, Non-Segment [Member]
Income before income taxes									(36,269)	(40,860)	(37,340)
Homebuilding Segment [Member] | Reportable Segment, West [Member] | Operating Segments [Member]
Income before income taxes									73,594	64,627	63,071
Homebuilding Segment [Member] | Reportable Segment, Mountain [Member] | Operating Segments [Member]
Income before income taxes									73,104	52,707	39,343
Homebuilding Segment [Member] | Reportable Segment, East [Member] | Operating Segments [Member]
Income before income taxes									4,949	(6,033)	10,730
Financial Services Segment [Member]
Income before income taxes									36,403	30,983	24,671
Financial Services Segment [Member] | Mortgage Operations [Member] | Operating Segments [Member]
Income before income taxes									23,845	17,230	14,034
Financial Services Segment [Member] | Other Financial Services [Member] | Operating Segments [Member]
Income before income taxes									$ 12,558	$ 13,753	$ 10,637

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Note 3 - Segment Reporting - Total Assets (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Assets	$ 2,528,589	$ 2,415,899
Homebuilding Segment [Member]
Assets	2,317,495	2,246,393
Homebuilding Segment [Member] | Corporate, Non-Segment [Member]
Assets	454,507	393,712
Homebuilding Segment [Member] | Reportable Segment, West [Member] | Operating Segments [Member]
Assets	1,035,033	991,393
Homebuilding Segment [Member] | Reportable Segment, Mountain [Member] | Operating Segments [Member]
Assets	571,139	536,831
Homebuilding Segment [Member] | Reportable Segment, East [Member] | Operating Segments [Member]
Assets	256,816	324,457
Financial Services Segment [Member]
Assets	211,094	169,506
Financial Services Segment [Member] | Mortgage Operations [Member] | Operating Segments [Member]
Assets	153,182	123,176
Financial Services Segment [Member] | Other Financial Services [Member] | Operating Segments [Member]
Assets	$ 57,912	$ 46,330

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Note 4 - Earnings Per Share (Details Textual) - shares shares in Millions			12 Months Ended
	Dec. 20, 2016	Nov. 21, 2016	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Stock Dividend Rate, Percentage		5.00%
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount			5.6	6.2	4.7
Stock Dividend [Member]
Dividends Payable, Date Declared		Nov. 21, 2016
Dividends Payable, Date of Record	Dec. 06, 2016

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Note 4 - Earnings Per Share - Basic and Diluted Loss Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Net income	$ 40,376	$ 26,359	$ 26,913	$ 9,563	$ 22,595	$ 14,778	$ 19,998	$ 8,420	$ 103,211	$ 65,791	$ 63,143
Less: distributed earnings allocated to participating securities									(163)	(98)	(196)
Less: undistributed earnings allocated to participating securities									(179)	(37)	(60)
Net income attributable to common stockholders (numerator for basic earnings per share)									102,869	65,656	62,887
Add back: undistributed earnings allocated to participating securities									179	37	60
Less: undistributed earnings reallocated to participating securities									(179)	(37)	(60)
Numerator for diluted earnings per share under two class method									$ 102,869	$ 65,656	$ 62,887
Weighted-average common shares outstanding (in shares)									51,286,942	51,202,616	51,046,318
Denominator for diluted earnings per share under two class method (in shares)									51,447,147	51,415,580	51,258,444
Basic Earnings Per Common Share (in dollars per share)	$ 0.78	$ 0.51	$ 0.52	$ 0.19	$ 0.44	$ 0.29	$ 0.39	$ 0.16	$ 2.01	$ 1.28	$ 1.23
Diluted Earnings Per Common Share (in dollars per share)	$ 0.78	$ 0.51	$ 0.52	$ 0.19	$ 0.44	$ 0.29	$ 0.39	$ 0.16	$ 2	$ 1.28	$ 1.23
Employee Stock Option [Member]
Add: dilutive effect of stock options (in shares)									160,205	212,964	212,126

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Note 5 - Accumulated Other Comprehensive Income - Changes in AOCI (Details) - USD ($) $ in Thousands		12 Months Ended
		Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Beginning balance		$ 15,715
Ending balance		22,071	$ 15,715
Ending balance		22,071	15,715
Accumulated Net Investment Gain (Loss) Attributable to Parent [Member]
Beginning balance	[1]	15,715	10,455
Ending balance	[1]	22,071	15,715	$ 10,455
Ending balance	[1]	22,071	15,715	10,455
Accumulated Net Investment Gain (Loss) Attributable to Parent [Member] | Metropolitan District Bond Securities [Member]
Beginning balance	[1]	12,058	7,680	3,920
Other comprehensive income (loss) before reclassifications	[1]	2,283	4,378	3,760
Ending balance	[1]	14,341	12,058	7,680
Ending balance	[1]	12,058	12,058	7,680
Accumulated Net Investment Gain (Loss) Attributable to Parent [Member] | Marketable Securities [Member]
Beginning balance	[1]	3,657	2,775	7,655
Other comprehensive income (loss) before reclassifications	[1]	4,738	322	(3,025)
Amounts reclassified from AOCI	[1],[2]	(665)	560	(1,855)
Ending balance	[1]	7,730	3,657	2,775
Ending balance	[1]	$ 3,657	$ 3,657	$ 2,775

[1] All amounts net-of-tax.

[2] See separate table below for details about these reclassifications.

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Note 5 - Accumulated Other Comprehensive Income - Reclassifications Out of AOCI (Details) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Other-than-temporary impairment of marketable securities									$ (1,443)	$ (3,969)	$ (4,293)
Income before income taxes	$ 58,998	$ 38,052	$ 40,458	$ 14,273	$ 32,558	$ 23,658	$ 31,882	$ 13,326	151,781	101,424	100,475
Provision for income taxes									(48,570)	(35,633)	(37,332)
Net income	$ 40,376	$ 26,359	$ 26,913	$ 9,563	$ 22,595	$ 14,778	$ 19,998	$ 8,420	103,211	65,791	63,143
Homebuilding Segment [Member]
Interest and other income									7,012	6,709	26,310
Other-than-temporary impairment of marketable securities									(1,070)	(3,969)	(4,293)
Income before income taxes									115,378	70,441	75,804
Financial Services Segment [Member]
Other-than-temporary impairment of marketable securities									(373)
Income before income taxes									36,403	30,983	24,671
Reclassification out of Accumulated Other Comprehensive Income [Member] | Accumulated Net Investment Gain (Loss) Attributable to Parent [Member]
Income before income taxes									1,073	(911)	3,017
Provision for income taxes									(408)	351	(1,162)
Net income									665	(560)	1,855
Reclassification out of Accumulated Other Comprehensive Income [Member] | Homebuilding Segment [Member] | Accumulated Net Investment Gain (Loss) Attributable to Parent [Member]
Interest and other income									2,049	2,690	7,210
Other-than-temporary impairment of marketable securities									(1,070)	(3,969)	(4,293)
Reclassification out of Accumulated Other Comprehensive Income [Member] | Financial Services Segment [Member] | Accumulated Net Investment Gain (Loss) Attributable to Parent [Member]
Interest and other income									467	368	100
Other-than-temporary impairment of marketable securities									$ (373)

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Note 6 - Fair Value Measurements (Details Textual) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Other than Temporary Impairment Losses, Investments, Portion Recognized in Earnings, Net	$ 1,443	$ 3,969	$ 4,293
Available-for-sale Securities, Accumulated Gross Unrealized Gain (Loss), before Tax	12,500	5,900
Available-for-sale Securities, Continuous Unrealized Loss Position, Accumulated Loss	457	882
Loans Receivable Held-for-sale, Net, Not Part of Disposal Group, Mortgage	$ 42,600	23,100
Minimum [Member]
Short Term Borrowings Maturity Period	30 days
Fair Value, Inputs, Level 2 [Member]
Loans Receivable Held-for-sale, Net, Not Part of Disposal Group, Mortgage	$ 138,774	115,670
Fair Value, Inputs, Level 2 [Member] | Under Commitment to Sell [Member]
Loans Receivable Held-for-sale, Net, Not Part of Disposal Group, Mortgage	96,200	92,600
Fair Value, Inputs, Level 2 [Member] | Not Under Commitment to Sell [Member]
Loans Receivable Held-for-sale, Net, Not Part of Disposal Group, Mortgage	$ 42,600	$ 23,100

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Note 6 - Fair Value Measurements - Fair Value Methods Used for Measuring Fair Values of Financial Instruments on Recurring Basis (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Mortgage loans held-for-sale, net	$ 42,600	$ 23,100
Metropolitan District Bond Securities [Member]
Metropolitan district bond securities (related party) (available-for-sale)	30,162	25,911	$ 18,203
Fair Value, Inputs, Level 1 [Member]
Marketable equity securities (available-for-sale)	96,206	103,694
Fair Value, Inputs, Level 2 [Member]
Mortgage loans held-for-sale, net	138,774	115,670
Fair Value, Inputs, Level 3 [Member] | Metropolitan District Bond Securities [Member]
Metropolitan district bond securities (related party) (available-for-sale)	$ 30,162	$ 25,911

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Note 6 - Fair Value Measurements - Amortized Cost and Estimated Fair Value of Available-for-sale Marketable Securities (Details) - Equity Securities [Member] - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Amortized Cost	$ 85,180	$ 101,764
OTTI	(1,443)	(3,969)
Net Amortized Cost	83,737	97,795
Fair Value	96,206	103,694
Homebuilding Segment [Member]
Amortized Cost	49,295	89,738
OTTI	(1,070)	(3,969)
Net Amortized Cost	48,225	85,769
Fair Value	59,770	92,387
Financial Services Segment [Member]
Amortized Cost	35,885	12,026
OTTI	(373)
Net Amortized Cost	35,512	12,026
Fair Value	$ 36,436	$ 11,307

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Note 6 - Fair Value Measurements - Aggregate Fair Value of Securities in Unrealized Loss Positions (Details) $ in Thousands	Dec. 31, 2016 USD ($)	Dec. 31, 2015 USD ($)
Number of Securities in Loss Position	5	4
Aggregate Loss Position	$ (457)	$ (882)
Aggregate Fair Value of Securities in a Loss Position	$ 6,045	$ 6,116

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Note 6 - Fair Value Measurements - Gross Realized Gains and Gross Realized Losses (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Gross realized gains on sales of available-for-sale securities	$ 2,669	$ 2,271	$ 10,151
Gross realized losses on sales of available-for-sale securities	(1,596)	(3,182)	(7,135)
Net realized gain (loss) on sales of available-for-sale securities	1,073	(911)	3,016
Equity Securities [Member]
Gross realized gains on sales of available-for-sale securities	2,669	1,854	7,719
Gross realized losses on sales of available-for-sale securities	(1,596)	(2,949)	(6,183)
Debt Securities [Member]
Gross realized gains on sales of available-for-sale securities		417	2,432
Gross realized losses on sales of available-for-sale securities		$ (233)	$ (952)

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Note 6 - Fair Value Measurements - Quantitative Data Regarding Unobservable Inputs and Sensitivity Analysis (Details)	3 Months Ended								12 Months Ended
	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Dec. 31, 2015	Sep. 30, 2015	Mar. 31, 2015	Dec. 31, 2014	Jun. 30, 2014	Dec. 31, 2016
Number of homes closed per year									Increase
Number of homes closed per year									Decrease
Average sales price									Increase
Average sales price									Decrease
Discount rates						9.00%	13.00%
Discount rates									Decrease
Discount rates									Increase
Minimum [Member]
Number of homes closed per year									0
Average sales price									445,000
Discount rates	12.00%	15.00%	12.00%	15.00%	12.00%			11.00%	5.00%
Maximum [Member]
Number of homes closed per year									159
Average sales price									870,000
Discount rates	15.00%	18.00%	15.00%	20.00%	15.00%			14.00%	12.00%
Weighted Average [Member]
Number of homes closed per year									107
Average sales price									548,000
Discount rates									8.20%

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Note 6 - Fair Value Measurements - Summary of Activity for Metro Bonds (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Change due to accretion of principal	$ 1,700	$ 1,400	$ 1,400
Metropolitan District Bond Securities [Member]
Balance at beginning of period	25,911	18,203
Increase in fair value (recorded in other comprehensive income)	3,683	6,961
Change due to accretion of principal	1,747	1,427
Cash receipts	(1,179)	(680)
Balance at end of period	$ 30,162	$ 25,911	$ 18,203

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Note 6 - Fair Value Measurements - Estimated Fair Value of Senior Notes (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Carrying Amount	$ 841,646	$ 840,524
Fair Value	821,498	786,939
5.625% Senior Notes Due February 2020 [Member]
Carrying Amount	246,915	246,032
Fair Value	265,611	257,813
Senior Notes 5.5% Due 2024 [Member]
Carrying Amount	248,391	248,209
Fair Value	258,800	252,188
Senior Notes 6.00% Due January 2043 [Member]
Carrying Amount	346,340	346,283
Fair Value	$ 297,087	$ 276,938

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Note 6 - Fair Value Measurements - Estimated Fair Value of Senior Notes (Details) (Parentheticals) - USD ($) $ in Millions	Dec. 31, 2016	Dec. 31, 2015
5.625% Senior Notes Due February 2020 [Member]
Senior Notes, interest rate	5.625%	5.625%
Senior Notes, face amount	$ 250	$ 250
Senior Notes 5.5% Due 2024 [Member]
Senior Notes, interest rate	5.50%	5.50%
Senior Notes, face amount	$ 250	$ 250
Senior Notes 6.00% Due January 2043 [Member]
Senior Notes, interest rate	6.00%	6.00%
Senior Notes, face amount	$ 350	$ 350

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Note 7 - Inventories (Details Textual) $ in Thousands	3 Months Ended												12 Months Ended
	Dec. 31, 2016 USD ($)	Sep. 30, 2016 USD ($)	Jun. 30, 2016 USD ($)	Mar. 31, 2016 USD ($)	Dec. 31, 2015 USD ($)	Sep. 30, 2015 USD ($)	Jun. 30, 2015 USD ($)	Mar. 31, 2015 USD ($)	Dec. 31, 2014 USD ($)	Sep. 30, 2014 USD ($)	Jun. 30, 2014 USD ($)	Mar. 31, 2014 USD ($)	Dec. 31, 2016 USD ($)	Dec. 31, 2015 USD ($)	Dec. 31, 2014 USD ($)
Inventory Write-down	$ 3,873	$ 4,700	$ 1,600		$ 5,200	$ 3,225		$ 350	$ 910		$ 850		$ 10,173	$ 8,775	$ 1,760
Number of Projects or Properties With Inventory Impairments During Period															4
Maryland Division [Member]
Inventory Write-down															$ 1,000
Number of Projects or Properties With Inventory Impairments During Period															3
Reportable Segment, East [Member]
Inventory Write-down													$ 7,600
Number of Projects or Properties With Inventory Impairments During Period													5
Reportable Segment, West [Member]
Inventory Write-down													$ 1,400
Number of Projects or Properties With Inventory Impairments During Period													1
Reportable Segment, Mountain [Member]
Inventory Write-down													$ 1,200
Number of Projects or Properties With Inventory Impairments During Period													1
Land Held for Sale [Member]
Inventory, Real Estate, Land and Land Development Costs					$ 1,700									1,700
Inventory Write-down														$ 1,200
Number of Projects or Properties With Inventory Impairments During Period														2
Land Held for Sale [Member] | Reportable Segment, West [Member]
Number of Projects or Properties With Inventory Impairments During Period														1
Land Held for Sale [Member] | Reportable Segment, Mountain [Member]
Number of Projects or Properties With Inventory Impairments During Period														1
Other Than Land Held for Sale [Member]
Inventory Write-down														$ 8,800
Other Than Land Held for Sale [Member] | Maryland Division [Member]
Inventory Write-down														$ 3,300
Number of Projects or Properties With Inventory Impairments During Period														4
Other Than Land Held for Sale [Member] | Virginia Division [Member]
Inventory Write-down														$ 5,200
Number of Projects or Properties With Inventory Impairments During Period														3
Other Than Land Held for Sale [Member] | Reportable Segment, East [Member] | Majority from the East [Member]
Number of Projects or Properties With Inventory Impairments During Period														9

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Note 7 - Inventories - Summary of Inventory (Details) - Homebuilding Segment [Member] - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Housing Completed or Under Construction:
Housing Completed or Under Construction	$ 874,199	$ 747,036
Land and Land Under Development:
Land and Land Under Development	884,615	1,016,926
Total Inventories	1,758,814	1,763,962
Reportable Segment, West [Member]
Housing Completed or Under Construction:
Housing Completed or Under Construction	470,503	365,867
Land and Land Under Development:
Land and Land Under Development	499,186	580,682
Reportable Segment, Mountain [Member]
Housing Completed or Under Construction:
Housing Completed or Under Construction	277,922	253,578
Land and Land Under Development:
Land and Land Under Development	271,252	259,484
Reportable Segment, East [Member]
Housing Completed or Under Construction:
Housing Completed or Under Construction	125,774	127,591
Land and Land Under Development:
Land and Land Under Development	$ 114,177	$ 176,760

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Note 7 - Inventories - Inventory Impairments (Details) - USD ($) $ in Thousands	3 Months Ended												12 Months Ended
	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2014	Sep. 30, 2014	Jun. 30, 2014	Mar. 31, 2014	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Impairment Data; Inventory Impairments	$ 3,873	$ 4,700	$ 1,600		$ 5,200	$ 3,225		$ 350	$ 910		$ 850		$ 10,173	$ 8,775	$ 1,760
Reportable Segment, West [Member]
Impairment Data; Inventory Impairments													1,400
Reportable Segment, Mountain [Member]
Impairment Data; Inventory Impairments													1,200
Reportable Segment, East [Member]
Impairment Data; Inventory Impairments													7,600
Homebuilding Segment [Member]
Impairment Data; Inventory Impairments													10,173	9,993	1,760
Homebuilding Segment [Member] | Housing Completed or Under Construction [Member]
Impairment Data; Inventory Impairments													2,328	1,628	1,234
Homebuilding Segment [Member] | Land and Land Under Development [Member]
Impairment Data; Inventory Impairments													7,845	8,365	526
Homebuilding Segment [Member] | Reportable Segment, West [Member] | Housing Completed or Under Construction [Member]
Impairment Data; Inventory Impairments													364
Homebuilding Segment [Member] | Reportable Segment, West [Member] | Land and Land Under Development [Member]
Impairment Data; Inventory Impairments													1,036	648
Homebuilding Segment [Member] | Reportable Segment, Mountain [Member] | Housing Completed or Under Construction [Member]
Impairment Data; Inventory Impairments													574	250	234
Homebuilding Segment [Member] | Reportable Segment, Mountain [Member] | Land and Land Under Development [Member]
Impairment Data; Inventory Impairments													589	569	526
Homebuilding Segment [Member] | Reportable Segment, East [Member] | Housing Completed or Under Construction [Member]
Impairment Data; Inventory Impairments													1,390	1,378	1,000
Homebuilding Segment [Member] | Reportable Segment, East [Member] | Land and Land Under Development [Member]
Impairment Data; Inventory Impairments													$ 6,220	$ 7,148

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Note 7 - Inventories - Fair Value of Impaired Inventory (Details) $ in Thousands	3 Months Ended												12 Months Ended
	Dec. 31, 2016 USD ($)	Sep. 30, 2016 USD ($)	Jun. 30, 2016 USD ($)	Mar. 31, 2016 USD ($)	Dec. 31, 2015 USD ($)	Sep. 30, 2015 USD ($)	Jun. 30, 2015 USD ($)	Mar. 31, 2015 USD ($)	Dec. 31, 2014 USD ($)	Sep. 30, 2014 USD ($)	Jun. 30, 2014 USD ($)	Mar. 31, 2014 USD ($)	Dec. 31, 2016 USD ($)	Dec. 31, 2015 USD ($)	Dec. 31, 2014 USD ($)
Impairment Data; Total Subdivisions Tested	40	25	17	14	15	18	22	22	21	23	16	16
Impairment Data; Inventory Impairments	$ 3,873	$ 4,700	$ 1,600		$ 5,200	$ 3,225		$ 350	$ 910		$ 850		$ 10,173	$ 8,775	$ 1,760
Impairment Data; Fair Value of Inventory After Impairments	$ 23,657	$ 12,295	$ 6,415		$ 19,925	$ 14,836		$ 3,701	$ 4,646		$ 4,285		$ 42,367	$ 38,462	$ 8,931
Impairment Data; Number of Subdivisions Impaired	3	2	2		3	5		1	2		2		7	9	4
Quantitative Data; Discount Rate								9.00%	13.00%
Minimum [Member]
Quantitative Data; Discount Rate	12.00%	15.00%	12.00%		15.00%	12.00%					11.00%		5.00%
Maximum [Member]
Quantitative Data; Discount Rate	15.00%	18.00%	15.00%		20.00%	15.00%					14.00%		12.00%

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Note 8 - Capitalization of Interest - Interest Activity (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Homebuilding interest incurred	$ 52,681	$ 53,061	$ 66,269
Less: Interest capitalized	(52,681)	(53,061)	(65,584)
Homebuilding interest expensed			685
Interest capitalized, beginning of period	77,541	79,231	74,155
Plus: Interest capitalized during period	52,681	53,061	65,584
Less: Previously capitalized interest included in home and land cost of sales	(62,137)	(54,751)	(60,508)
Interest capitalized, end of period	$ 68,085	$ 77,541	$ 79,231

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Note 9 - Homebuilding Prepaid and Other Assets - Summary of Homebuilding Prepaid and Other Assets (Details) - Homebuilding Segment [Member] - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Land option deposits	$ 8,683	$ 11,997
Deferred marketing costs	35,313	31,152
Prepaid expenses	4,735	6,500
Goodwill	6,008	6,008
Deferred debt issuance costs on revolving credit facility, net	4,340	5,570
Other	1,384	4,167
Total	$ 60,463	$ 65,394

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Note 10 - Homebuilding Accrued Liabilities and Financial Services Accounts Payable and Accrued Liabilities - Homebuilding Accrued Liabilities (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Warranty accrual	$ 20,678	$ 15,328	$ 18,346	$ 22,238
Homebuilding Segment [Member]
Accrued compensation and related expenses	27,830	25,492
Accrued interest	23,234	23,234
Warranty accrual	20,678	15,328
Customer and escrow deposits	27,183	20,717
Land development and home construction accruals	144,566	122,886
Other accrued liabilities	36,946	26,650
Homebuilding Segment [Member] | Land Development and Home Construction Accruals [Member]
Land development and home construction accruals	$ 8,695	$ 11,465

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Note 10 - Homebuilding Accrued Liabilities and Financial Services Accounts Payable and Accrued Liabilities - Financial Services Accounts Payable and Accrued Liabilities (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Insurance reserves	$ 50,954	$ 47,061	$ 51,720	$ 50,887
Financial Services Segment [Member]
Insurance reserves	42,204	45,811
Accounts payable and other accrued liabilities	8,530	6,303
Total accounts payable and accrued liabilities	$ 50,734	$ 52,114

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Note 11 - Warranty Accrual (Details Textual) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Standard and Extended Product Warranty Accrual, Increase (Decrease) for Preexisting Warranties	$ 7,462	$ 189	$ (2,600)

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Note 11 - Warranty Accrual - Warranty Accrual and Payment Activity (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Balance at beginning of period	$ 15,328	$ 18,346	$ 22,238
Expense provisions	8,905	6,303	4,834
Cash payments	(11,017)	(9,510)	(6,126)
Standard and Extended Product Warranty Accrual, Increase (Decrease) for Preexisting Warranties	7,462	189	(2,600)
Balance at end of period	$ 20,678	$ 15,328	$ 18,346

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Note 12 - Insurance and Construction Defect Claim Reserves (Details Textual) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Increase (Decrease) in Self Insurance Reserve	$ 0	$ (2,500)	$ 0

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Note 12 - Insurance and Construction Defect Claim Reserves - Summary of Insurance and Defect Claim Reserves Activity (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Balance at beginning of period	$ 47,061	$ 51,720	$ 50,887
Expense provisions	7,531	6,452	6,316
Cash payments, net of recoveries	(3,638)	(8,611)	(5,483)
Adjustments	0	(2,500)	0
Balance at end of period	$ 50,954	$ 47,061	$ 51,720

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Note 13 - Income Taxes (Details Textual) - USD ($)	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent	35.00%
Deferred Tax Assets, Operating Loss Carryforwards, State and Local	$ 26,015,000	$ 31,292,000
Deferred Tax Assets, Valuation Allowance	13,803,000	12,868,000
Valuation Allowance, Deferred Tax Asset, Increase (Decrease), Amount	900,000
Liability for Uncertainty in Income Taxes, Current	400,000	400,000
Unrecognized Tax Benefits that Would Impact Effective Tax Rate	600,000	500,000
Unrecognized Tax Benefits, Income Tax Penalties and Interest Expense	300,000	0	$ 200,000
Unrecognized Tax Benefits, Interest on Income Taxes Accrued	$ 0	$ 0
Domestic Tax Authority [Member] | Earliest Tax Year [Member] | Internal Revenue Service (IRS) [Member]
Open Tax Year	2013
Domestic Tax Authority [Member] | Latest Tax Year [Member] | Internal Revenue Service (IRS) [Member]
Open Tax Year	2016
State and Local Jurisdiction [Member] | Earliest Tax Year [Member]
Open Tax Year	2012
State and Local Jurisdiction [Member] | Latest Tax Year [Member]
Open Tax Year	2017
Maximum [Member]
Decrease in Unrecognized Tax Benefits is Reasonably Possible	$ 100,000
Minimum [Member]
Decrease in Unrecognized Tax Benefits is Reasonably Possible	0
Operating Loss Carryforwards [Member]
Deferred Tax Assets, Valuation Allowance	6,100,000
Metropolitan District Bond Securities [Member]
Deferred Tax Assets, Valuation Allowance	$ 7,700,000

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Note 13 - Income Taxes - Summary of Income Tax Expense (Benefit) (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Current tax provision (benefit)
Federal	$ 32,102	$ 2,549	$ 1,631
State	323	(249)	1,475
Total current	32,425	2,300	3,106
Deferred tax provision:
Federal	10,960	30,268	28,630
State	5,185	3,065	5,596
Total deferred	16,145	33,333	34,226
Provision for income taxes	$ 48,570	$ 35,633	$ 37,332

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Note 13 - Income Taxes - Summary of Effective Income Tax Rate Reconciliation (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Tax expense computed at federal statutory rate	$ 53,123	$ 35,498	$ 35,166
State income tax expense, net of federal benefit	4,553	3,043	3,340
Other permanent differences	(647)	(935)	(1,435)
Domestic manufacturing deduction	(5,563)	(39)
Expiration of state net operating loss		336	3,030
Tax expense (benefit) related to an increase (decrease) in unrecognized tax benefits	75	(479)	559
Charitable contributions statute expiration			181
Federal energy credits	(3,428)	(1,058)	(1,131)
Rate changes		48	866
Change in valuation allowance	253	(549)	(1,665)
Other	204	(232)	(1,579)
Income Tax Expense (Benefit)	$ 48,570	$ 35,633	$ 37,332
Effective tax (benefit) rate	32.00%	35.10%	37.20%

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Note 13 - Income Taxes - Components of Deferred Tax Assets and Liabilities (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Deferred tax assets:
State net operating loss carryforwards	$ 26,015	$ 31,292
Alternative minimum tax and other tax credit carryforwards	12,325	31,993
Stock-based compensation expense	18,228	20,068
Warranty, litigation and other reserves	14,155	9,470
Receivables from related party	7,626	8,342
Accrued compensation	7,330	7,241
Asset impairment charges	6,456	5,049
Inventory, additional costs capitalized for tax purposes	6,498	5,894
Other, net	2,993	2,429
Total deferred tax assets	101,626	121,778
Valuation allowance	(13,803)	(12,868)
Total deferred tax assets, net of valuation allowance	87,823	108,910
Deferred tax liabilities:
Property, equipment and other assets	4,276	4,739
Deferred revenue	1,400	2,312
Unrealized gain on marketable securities	4,676	671
Other, net	2,583	2,081
Total deferred tax liabilities	12,935	9,803
Net deferred tax asset	$ 74,888	$ 99,107

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Note 13 - Income Taxes - Liability Associated With Unrecognized Tax Benefits (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Gross unrecognized tax benefits at beginning of year	$ 488	$ 905	$ 371
Increases related to prior year tax positions	156	139	633
Decreases related to prior year tax positions		(475)	(85)
Lapse of applicable statute of limitations	(67)	(81)	(14)
Gross unrecognized tax benefits at end of year	$ 577	$ 488	$ 905

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Note 14 - Related Party Transactions (Details Textual) $ in Millions					12 Months Ended
	Oct. 31, 2026 $ / ft²	Nov. 01, 2020 $ / ft²	Oct. 31, 2020 $ / ft²	Jan. 30, 2017 ft² $ / ft²	Dec. 31, 2016 USD ($)	Dec. 31, 2015 USD ($)	Dec. 31, 2014 USD ($)
Debt Instrument, Fair Value Adjustments					$ 1.7	$ 1.4	$ 1.4
Cash Contribution Committed to Charitable Foundation					1.0	1.0	1.0
District [Member]
Bond Receivable, Amount in Exchange of Land Development Improvement						28.6
Debt Instrument, Cash Receipts					$ (1.2)	(0.7)	$ (2.0)
District [Member] | Capital Appreciation Bonds [Member]
Investment Owned, at Cost						22.5
District [Member] | Subordinate Bond [Member]
Investment Owned, at Cost						$ 1.6
Sublease Agreement [Member] | CVentures, Inc. [Member] | Scenario, Forecast [Member]
Operating Leases, Yearly Rental Rate Per Rentable Square Foot | $ / ft²	31.67	29.26	28.68
Sublease Agreement [Member] | CVentures, Inc. [Member] | Subsequent Event [Member]
Area of Real Estate Property | ft²				5,437
Operating Leases, Yearly Rental Rate Per Rentable Square Foot | $ / ft²				26.5

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Note 15 - Lines of Credit and Total Debt Obligations (Details Textual) - USD ($) $ in Thousands		3 Months Ended	12 Months Ended
	Jan. 15, 2014	Mar. 31, 2014	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014	Dec. 27, 2016	Dec. 26, 2016	Sep. 16, 2016	Dec. 23, 2015	Dec. 22, 2015	Dec. 18, 2015	Nov. 12, 2008
Letters of Credit Outstanding, Amount			$ 52,600
Proceeds from Issuance of Senior Long-term Debt					$ 248,375
Gain (Loss) on Extinguishment of Debt					$ (18,153)
5.5 % Senior Notes Due 2024 [Member]
Debt Instrument, Face Amount	$ 250,000
Proceeds from Issuance of Senior Long-term Debt	248,400
Payments of Financing Costs	$ 1,600
5.375% Senior Notes Due December 2014 [Member]
Debt Instrument, Face Amount		$ 500,000
Extinguishment of Debt, Amount		517,700
Gain (Loss) on Extinguishment of Debt		$ (18,200)
Revolving Credit Facility [Member]
Line of Credit Facility, Maximum Borrowing Capacity			$ 1,000,000								$ 550,000
Debt Instrument, Interest Rate, Stated Percentage			0.00%
Debt Instrument, Covenant, Maximum Leverage Ratio			55.00%
Debt Instrument, Covenant, Minimum Common Stock Outstanding Ownership, Percentage			50.00%
Long-term Line of Credit			$ 15,000
Line of Credit Facility, Remaining Borrowing Capacity			$ 512,000
Standby Letters of Credit [Member]
Line of Credit Facility Maximum Borrowing Capacity Percentage			50.00%
Letters of Credit Outstanding, Amount			$ 23,000	22,500
Mortgage Repurchase Facility [Member] | Warehouse Agreement Borrowings [Member]
Line of Credit Facility, Maximum Borrowing Capacity						$ 125,000	$ 75,000	$ 75,000	$ 90,000	$ 50,000		$ 50,000
Long-term Line of Credit			$ 114,500	$ 88,600

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Note 15 - Lines of Credit and Total Debt Obligations - Carrying Amount of Senior Notes (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Senior Notes	$ 841,646	$ 840,524
5.625% Senior Notes Due February 2020 [Member]
Senior Notes	246,915	246,032
Senior Notes 5.5% Due 2024 [Member]
Senior Notes	248,391	248,209
Senior Notes 6.00% Due January 2043 [Member]
Senior Notes	$ 346,340	$ 346,283

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Note 15 - Lines of Credit and Total Debt Obligations - Carrying Amount of Senior Notes (Details) (Parentheticals) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
5.625% Senior Notes Due February 2020 [Member]
Senior Notes, interest rate	5.625%	5.625%
Senior notes, maturity date	Feb. 28, 2020	Feb. 28, 2020
Senior Notes, face amount	$ 250	$ 250
Senior Notes 5.5% Due 2024 [Member]
Senior Notes, interest rate	5.50%	5.50%
Senior notes, maturity date	Jan. 31, 2024	Jan. 31, 2024
Senior Notes, face amount	$ 250	$ 250
Senior Notes 6.00% Due January 2043 [Member]
Senior Notes, interest rate	6.00%	6.00%
Senior notes, maturity date	Jan. 31, 2043	Jan. 31, 2043
Senior Notes, face amount	$ 350	$ 350

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Note 16 - Commitments and Contingencies (Details Textual) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Surety Bonds, Outstanding, Amount	$ 178.8
Letters of Credit Outstanding, Amount	52.6
Estimated Cost Related to Bonds	48.7
Estimated Cost Related to Letters of Credit	18.2
Estimated Litigation Liability	1.9	$ 3.6
Selling, General and Administrative Expenses [Member]
Operating Leases, Rent Expense	5.4	$ 5.0	$ 4.9
HomeAmerican [Member]
Letters of Credit Outstanding, Amount	$ 29.6

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Note 16 - Commitments and Contingencies - Summary of Non-cancelable Operating Leases (Details) $ in Thousands	Dec. 31, 2016 USD ($)
2017	$ 6,008
2018	5,293
2019	4,923
2020	4,735
2021	4,567
Thereafter	21,566
Total	$ 47,092

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Note 17 - Concentration of Third-party Mortgage Purchasers - Percent of Mortgage Loans Sold to Third-party Purchasers (Details) - Customer Concentration Risk [Member]	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Wells Fargo Funding, Inc. [Member]
Percentage of mortgage loans sold to third-party purchasers	26.00%	10.00%	37.00%
PennyMac Loan Services, LLC [Member]
Percentage of mortgage loans sold to third-party purchasers	15.00%	14.00%	23.00%
Fannie Mae [Member]
Percentage of mortgage loans sold to third-party purchasers	10.00%	7.00%	10.00%
JPMorgan Chase Bank, N.A. [Member]
Percentage of mortgage loans sold to third-party purchasers	8.00%	32.00%	20.00%

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Note 18 - Stockholders' Equity (Details Textual) - shares			12 Months Ended
	Dec. 20, 2016	Nov. 21, 2016	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Stock Dividend Rate, Percentage		5.00%
Stock Repurchase Program, Number of Shares Authorized to be Repurchased			4,000,000
Treasury Stock, Shares, Acquired			0	0	0
Treasury Stock, Shares			0
Stock Dividend [Member]
Dividends Payable, Date Declared		Nov. 21, 2016
Dividends Payable, Date of Record	Dec. 06, 2016

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Note 19 - Equity Incentive and Employee Benefit Plans (Details Textual) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Defined Contribution Plan, Cost Recognized	$ 1.3
Defined Contribution Plan, Employer Discretionary Contribution Amount		$ 1.0	$ 0.9
Equity Incentive Plan 2001 [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period	10 years
Common Stock, Capital Shares Reserved for Future Issuance	1,700,000
Equity Incentive Plan 2011 [Member]
Common Stock, Capital Shares Reserved for Future Issuance	4,100,000
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant	200,000
Equity Incentive Plan 2011 [Member] | Employee Stock Option [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period	5 years
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period	10 years
Director Stock Option Plan 2001 [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period	10 years
Common Stock, Capital Shares Reserved for Future Issuance	400,000
2011 Director Stock Option Plan [Member]
Common Stock, Capital Shares Reserved for Future Issuance	1,200,000
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant	600,000
2011 Director Stock Option Plan [Member] | Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period	210 days
2011 Director Stock Option Plan [Member] | Nonqualified Stock Option [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period	10 years
Share-based Compensation Arrangement by Share-based Payment Award, Maximum Number of Shares Per Employee	25,000
2011 Director Stock Option Plan [Member] | Stock Options [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award, Award Exercisable Period	180 days
Maximum [Member] | Equity Incentive Plan 2001 [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period	7 years
Maximum [Member] | Equity Incentive Plan 2001 [Member] | Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period	5 years

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Note 20 - Stock Based Compensation (Details Textual) - USD ($)			12 Months Ended
		May 18, 2015	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Weighted Average Grant Date Fair Value	[1]		$ 4.04	$ 5.26	$ 7.17
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross	[1],[2]		42,000	2,359,500	268,625
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercises in Period, Intrinsic Value				$ 200,000	$ 100,000
Employee Service Share-based Compensation, Tax Benefit from Compensation Expense			$ 700,000
Employee Service Share-based Compensation, Nonvested Awards, Compensation Not yet Recognized, Stock Options			$ 700,000
Share Price		$ 27.10
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Weighted Average Grant Date Fair Value			$ 23.15	$ 29.75	$ 32.26	$ 32.87
Employee Stock Option [Member]
Allocated Share-based Compensation Expense			$ 5,600,000	$ 8,100,000	$ 3,300,000
Employee Service Share-based Compensation, Tax Benefit from Compensation Expense			$ 2,100,000	3,100,000	1,300,000
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition			2 years
Employee Service Share-based Compensation, Tax Benefit Realized from Exercise of Stock Options			$ 0	100,000	0
Employee Stock Option [Member] | Equity Incentive Plan 2011 [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period			5 years
Restricted Stock [Member]
Allocated Share-based Compensation Expense			$ 1,900,000	2,000,000	2,700,000
Employee Service Share-based Compensation, Tax Benefit from Compensation Expense				$ 800,000	$ 1,000,000
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition			2 years 328 days
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized			$ 2,500,000
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Intrinsic Value, Amount Per Share			$ 4,900,000
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Vested in Period, Intrinsic Value, Amount Per Share			$ 1,300,000	$ 2,900,000	$ 4,200,000
Performance Shares [Member] | Equity Incentive Plan 2011 [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period			3 years
Share-based Compensation Arrangement by Share-based Payment Award, Average Gross Margin of Home Sales, Percentage, Minimum			15.00%
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Weighted Average Grant Date Fair Value			$ 22.93
Performance Shares [Member] | Equity Incentive Plan 2011 [Member] | Pro Forma [Member]
Allocated Share-based Compensation Expense			$ 10,800,000
Performance Shares [Member] | Equity Incentive Plan 2011 [Member] | 5% to 10% Vesting Threshold [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Percentage of Target Goal Number of Shares			50.00%
Performance Shares [Member] | Equity Incentive Plan 2011 [Member] | Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Percentage of Performance Revenues that Exceed Base Revenues			10.00%
Performance Shares [Member] | Equity Incentive Plan 2011 [Member] | Minimum [Member] | 5% to 10% Vesting Threshold [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Percentage of Performance Revenues that Exceed Base Revenues			5.00%
Performance Shares [Member] | Equity Incentive Plan 2011 [Member] | Minimum [Member] | 20% Vesting Threshold [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Percentage of Performance Revenues that Exceed Base Revenues			20.00%
Performance Shares [Member] | Equity Incentive Plan 2011 [Member] | Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Percentage of Performance Revenues that Exceed Base Revenues			20.00%
Performance Shares [Member] | Equity Incentive Plan 2011 [Member] | Maximum [Member] | 5% to 10% Vesting Threshold [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Percentage of Performance Revenues that Exceed Base Revenues			10.00%
CEO and COO [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross				2,100,000
CEO and COO [Member] | Nonqualified Stock Option [Member] | Equity Incentive Plan 2011 [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Weighted Average Grant Date Fair Value		$ 5.35
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period		5 years
Sharebased Compensation Arrangement by Sharebased Payment Award Expected to Vest Immediately Threshold Trading Days		20 days
Sharebased Compensation Arrangement by Sharebased Payment Award Expected to Vest Immediately threshold Consecutive Trading Days		30 days
Sharebased Compensation Arrangement by Sharebased Payment Award Expected to Vest Immediately Threshold Percentage of Stock Price Trigger		120.00%
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized		$ 11,200,000
Chief Executive Officer [Member] | Nonqualified Stock Option [Member] | Equity Incentive Plan 2011 [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross		1,050,000
Chief Executive Officer [Member] | Performance Shares [Member] | Equity Incentive Plan 2011 [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Target Goal Number of Shares			105,000
Chief Operating Officer [Member] | Performance Shares [Member] | Equity Incentive Plan 2011 [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Target Goal Number of Shares			105,000
Chief Financial Officer [Member] | Performance Shares [Member] | Equity Incentive Plan 2011 [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Target Goal Number of Shares			26,250
Black-Scholes Option Pricing Model [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Weighted Average Grant Date Fair Value			$ 4.04	$ 4.55	$ 7.12

[1] Total options granted in 2015 include a total of 2,100,000 Market-Based options granted to our CEO and COO. See further discussion regarding these grants in the "Market-Based Stock Option Awards" section below.

[2] Total options granted in 2015 include a total of 2,100,000 Market-Based options granted to our CEO and COO. See further discussion regarding these grants in the "Market-Based Stock Option Awards" section below.

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Note 20 - Stock Based Compensation - Fair Value of Share-based Payment Awards (Details) - Employee Stock Option [Member]	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Expected lives of options (in years) (Year)	5 years	3 years 328 days	4 years
Expected volatility	32.10%	29.60%	43.20%
Risk free interest rate	1.60%	1.20%	1.30%
Dividend yield rate	4.40%	3.50%	3.50%

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Note 20 - Stock Based Compensation - Stock Option Award Activity (Details) - $ / shares		12 Months Ended
		Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Outstanding, beginning of year (in shares)		6,706,123	5,054,623	5,469,948
Outstanding, weighted average exercise price, beginning of year (in dollars per share)		$ 30.46	$ 35.91	$ 38.03
Granted (in shares)	[1],[2]	42,000	2,359,500	268,625
Granted, weighted-average exercise price (in dollars per share)	[1]	$ 21.68	$ 27.05	$ 26.96
Exercised (in shares)			(31,250)	(18,000)
Exercised, weighted-average exercise price (in dollars per share)			$ 21.21	$ 20.82
Forfeited (in shares)		(10,000)	(121,250)	(23,750)
Forfeited, weighted-average exercise price (in dollars per share)		$ 29.80	$ 28.61	$ 25.16
Cancelled (in shares)		(586,000)	(555,500)	(642,200)
Cancelled, weighted-average exercise price (in dollars per share)		$ 53.26	$ 66.51	$ 62.43
Outstanding, end of year (in shares)		6,152,123	6,706,123	5,054,623
Outstanding, end of year (in dollars per share)		$ 28.23	$ 30.46	$ 35.91

[1] Total options granted in 2015 include a total of 2,100,000 Market-Based options granted to our CEO and COO. See further discussion regarding these grants in the "Market-Based Stock Option Awards" section below.

[2] Total options granted in 2015 include a total of 2,100,000 Market-Based options granted to our CEO and COO. See further discussion regarding these grants in the "Market-Based Stock Option Awards" section below.

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Note 20 - Share Based Compensation - Unvested Stock Award Activity (Details) - $ / shares		12 Months Ended
		Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Outstanding, beginning of year (in shares)		2,344,061	483,312	872,468
Outstanding, weigted-average fair value, beginning of year (in dollars per share)		$ 5.63	$ 9.20	$ 8.09
Granted (in shares)	[1],[2]	42,000	2,359,500	268,625
Granted, weighted-average fair value (in dollars per share)	[2]	$ 4.04	$ 5.26	$ 7.17
Vested (in shares)		(85,095)	(377,501)	(634,031)
Vested, weighted-average fair value (in dollars per share)		$ 8.13	$ 6.76	$ 8.30
Forfeited (in shares)		(10,000)	(121,250)	(23,750)
Forfeited, weighted-average fair value (in dollars per share)		$ 6.61	$ 9.33	$ 7.60
Unvested, end of year (in shares)		2,290,966	2,344,061	483,312
Unvested, end of year (in dollars per share)		$ 5.50	$ 5.63	$ 9.20

[1] Total options granted in 2015 include a total of 2,100,000 Market-Based options granted to our CEO and COO. See further discussion regarding these grants in the "Market-Based Stock Option Awards" section below.

[2] Total options granted in 2015 include a total of 2,100,000 Market-Based options granted to our CEO and COO. See further discussion regarding these grants in the "Market-Based Stock Option Awards" section below.

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Note 20 - Stock Based Compensation - Options Vested and Expected to Vest (Details) $ / shares in Units, $ in Thousands	12 Months Ended
	Dec. 31, 2016 USD ($) $ / shares shares
Number outstanding (in shares) | shares	6,098,279
Weighted-average exercise price (in dollars per share) | $ / shares	$ 28.25
Aggregate intrinsic value (in thousands) | $	$ 3,149
Weighted-average remaining contractual term (years) (Year)	5 years 215 days
Number outstanding (in shares) | shares	3,861,157
Weighted-average exercise price (in dollars per share) | $ / shares	$ 28.96
Aggregate intrinsic value (in thousands) | $	$ 2,970
Weighted-average remaining contractual term (years) (Year)	4 years 3 days

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Note 20 - Stock Based Compensation - Outstanding and Exercisable Stock Options (Details)	12 Months Ended
	Dec. 31, 2016 $ / shares shares
Options Outstanding Number Outstanding (in shares) | shares	6,152,123
Options Outstanding Weighted Average Remaining Contractual Life (Year)	5 years 222 days
Options Outstanding Weighted Average Exercise Price (in dollars per share)	$ 28.23
Options Exercisable Number Outstanding (in shares) | shares	3,861,157
Options Exercisable Weighted Average Remaining Contractual Life (Year)	4 years 3 days
Options Exercisable Weighted Average Exercise Price (in dollars per share)	$ 28.96
Exercise Price Range 1 [Member]
Range of Exercise Price, Lower (in dollars per share)	15.01
Range of Exercise Price, Upper (in dollars per share)	$ 20
Options Outstanding Number Outstanding (in shares) | shares	42,000
Options Outstanding Weighted Average Remaining Contractual Life (Year)	5 years 25 days
Options Outstanding Weighted Average Exercise Price (in dollars per share)	$ 19.95
Options Exercisable Number Outstanding (in shares) | shares	42,000
Options Exercisable Weighted Average Remaining Contractual Life (Year)	5 years 25 days
Options Exercisable Weighted Average Exercise Price (in dollars per share)	$ 19.95
Exercise Price Range 2 [Member]
Range of Exercise Price, Lower (in dollars per share)	20.01
Range of Exercise Price, Upper (in dollars per share)	$ 25
Options Outstanding Number Outstanding (in shares) | shares	1,215,375
Options Outstanding Weighted Average Remaining Contractual Life (Year)	5 years 160 days
Options Outstanding Weighted Average Exercise Price (in dollars per share)	$ 23.21
Options Exercisable Number Outstanding (in shares) | shares	1,119,346
Options Exercisable Weighted Average Remaining Contractual Life (Year)	5 years 76 days
Options Exercisable Weighted Average Exercise Price (in dollars per share)	$ 23.25
Exercise Price Range 3 [Member]
Range of Exercise Price, Lower (in dollars per share)	25.01
Range of Exercise Price, Upper (in dollars per share)	$ 30
Options Outstanding Number Outstanding (in shares) | shares	3,424,748
Options Outstanding Weighted Average Remaining Contractual Life (Year)	7 years 29 days
Options Outstanding Weighted Average Exercise Price (in dollars per share)	$ 27.47
Options Exercisable Number Outstanding (in shares) | shares	1,249,937
Options Exercisable Weighted Average Remaining Contractual Life (Year)	4 years 321 days
Options Exercisable Weighted Average Exercise Price (in dollars per share)	$ 28.16
Exercise Price Range 4 [Member]
Range of Exercise Price, Lower (in dollars per share)	30.01
Range of Exercise Price, Upper (in dollars per share)	$ 35
Options Outstanding Number Outstanding (in shares) | shares	863,625
Options Outstanding Weighted Average Remaining Contractual Life (Year)	3 years 51 days
Options Outstanding Weighted Average Exercise Price (in dollars per share)	$ 31.82
Options Exercisable Number Outstanding (in shares) | shares	862,312
Options Exercisable Weighted Average Remaining Contractual Life (Year)	3 years 51 days
Options Exercisable Weighted Average Exercise Price (in dollars per share)	$ 31.82
Exercise Price Range 5 [Member]
Range of Exercise Price, Lower (in dollars per share)	35.01
Range of Exercise Price, Upper (in dollars per share)	$ 40
Options Outstanding Number Outstanding (in shares) | shares	606,375
Options Outstanding Weighted Average Remaining Contractual Life (Year)	1 year 83 days
Options Outstanding Weighted Average Exercise Price (in dollars per share)	$ 38.02
Options Exercisable Number Outstanding (in shares) | shares	587,562
Options Exercisable Weighted Average Remaining Contractual Life (Year)	1 year 29 days
Options Exercisable Weighted Average Exercise Price (in dollars per share)	$ 38.04

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Note 20 - Stock Based Compensation - Fair Value of Market-based Awards (Details) - Market-Based Awards [Member]	12 Months Ended
	Dec. 31, 2016
Expected volatility	27.80%
Risk free interest rate	2.20%
Dividend yield rate	3.50%

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Note 20 - Stock Based Compensation - Restricted and Unrestricted Stock Award Activity (Details) - $ / shares	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Unvested, beginning of year (in shares)	99,442	184,201	298,991
Unvested, beginning of year (in dollars per share)	$ 29.75	$ 32.26	$ 32.87
Granted (in shares)	154,703	36,896	39,381
Granted (in dollars per share)	$ 22.06	$ 26.44	$ 30.85
Vested (in shares)	(64,535)	(111,719)	(141,454)
Vested (in dollars per share)	$ 30.71	$ 32.86	$ 33.08
Forfeited (in shares)		(9,936)	(12,717)
Forfeited (in dollars per share)		$ 29.11	$ 33.05
Unvested, end of year (in shares)	189,610	99,442	184,201
Unvested, end of year (in dollars per share)	$ 23.15	$ 29.75	$ 32.26

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Note 21 - Results of Quarterly Operations (Unaudited) (Restated for Stock Dividends) - Results of Quarterly Operations (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Total revenue	$ 736,329	$ 595,420	$ 587,334	$ 407,761	$ 578,911	$ 468,487	$ 473,128	$ 388,510	$ 2,326,844	$ 1,909,036	$ 1,694,584
Home sales revenue	715,816	575,722	571,195	394,420	554,432	454,740	461,708	377,009
Asset impairments	$ (3,873)	$ (4,700)	$ (1,600)		$ (5,292)	$ (4,351)		$ (350)
Gross margin from home sales (including impairments)	16.10%	15.50%	16.40%	16.30%	16.10%	16.40%	16.60%	15.40%
Homebuilding selling, general and administrative expenses	$ 67,919	$ 61,904	$ 64,440	$ 56,277	$ 63,560	$ 57,444	$ 54,781	$ 50,532
Income before income taxes	58,998	38,052	40,458	14,273	32,558	23,658	31,882	13,326	151,781	101,424	100,475
Net income	$ 40,376	$ 26,359	$ 26,913	$ 9,563	$ 22,595	$ 14,778	$ 19,998	$ 8,420	$ 103,211	$ 65,791	$ 63,143
Basic (in dollars per share)	$ 0.78	$ 0.51	$ 0.52	$ 0.19	$ 0.44	$ 0.29	$ 0.39	$ 0.16	$ 2.01	$ 1.28	$ 1.23
Diluted (in dollars per share)	$ 0.78	$ 0.51	$ 0.52	$ 0.19	$ 0.44	$ 0.29	$ 0.39	$ 0.16	$ 2	$ 1.28	$ 1.23

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Note 22 - Supplemental Guarantor Information (Details Textual)	12 Months Ended
	Dec. 31, 2016
Maximum Percentage of Consolidated Net Worth of Guarantor for Suspension of Guarantee	5.00%
Maximum Aggregate Percentage of Consolidated Net Worth of All Guarantors for Suspension of Guarantee	10.00%
Maximum Aggregate Percentage of Consolidated Net Worth of All Guarantors for Suspension of Guarantee to Permit Cure of Default	15.00%
Guarantor Subsidiaries [Member]
Equity Method Investment, Ownership Percentage	100.00%

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Note 22 - Supplemental Guarantor Information - Supplemental Condensed Combining Balance Sheet (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Cash and cash equivalents	$ 282,909	$ 180,988	$ 153,825	$ 199,338
Property and equipment, net	28,041	28,226
Deferred tax assets, net	74,888	99,107
Total Homebuilding Assets	2,528,589	2,415,899
Mortgage loans held-for-sale, net	42,600	23,100
Total Homebuilding Liabilities	1,208,519	1,159,607
Total Stockholders' Equity	1,320,070	1,256,292
Total Liabilities and Stockholders' Equity	2,528,589	2,415,899
Homebuilding Segment [Member]
Cash and cash equivalents	259,087	144,342
Marketable securities	59,770	92,387
Restricted cash	3,778	3,750
Trade and other receivables	42,492	23,314
Housing completed or under construction	874,199	747,036
Land and land under development	884,615	1,016,926
Total inventories	1,758,814	1,763,962
Intercompany receivables
Investment in subsidiaries
Property and equipment, net	28,041	28,226
Deferred tax assets, net	74,888	99,107
Metropolitan district bond securities (related party)	30,162	25,911
Other assets	60,463	65,394
Total Homebuilding Assets	2,317,495	2,246,393
Accounts payable	42,088	40,472
Accrued liabilities	144,566	122,886
Advances and notes payable to parent and subsidiaries
Revolving credit facility	15,000	15,000
Senior notes, net	841,646	840,524
Total Homebuilding Liabilities	1,043,300	1,018,882
Financial Services Segment [Member]
Cash and cash equivalents	23,822	36,646
Marketable securities	36,436	11,307
Intercompany receivables
Other assets	12,062	5,883
Total Homebuilding Assets	211,094	169,506
Mortgage loans held-for-sale, net	138,774	115,670
Advances and notes payable to parent and subsidiaries
Total Homebuilding Liabilities	165,219	140,725
Accounts payable and accrued liabilities	50,734	52,114
Mortgage repurchase facility	114,485	88,611
Consolidation, Eliminations [Member]
Cash and cash equivalents
Total Homebuilding Assets	(1,820,774)	(1,826,404)
Total Homebuilding Liabilities	(1,525,560)	(1,559,213)
Total Stockholders' Equity	(295,214)	(267,191)
Total Liabilities and Stockholders' Equity	(1,820,774)	(1,826,404)
Consolidation, Eliminations [Member] | Homebuilding Segment [Member]
Cash and cash equivalents
Marketable securities
Restricted cash
Trade and other receivables	(2,135)	(2,287)
Housing completed or under construction
Land and land under development
Total inventories
Intercompany receivables	(1,483,383)	(1,517,692)
Investment in subsidiaries	(295,214)	(267,191)
Property and equipment, net
Deferred tax assets, net	769	2,024
Metropolitan district bond securities (related party)
Other assets
Total Homebuilding Assets	(1,779,963)	(1,785,146)
Accounts payable
Accrued liabilities	6,281	2,947
Advances and notes payable to parent and subsidiaries	(1,519,676)	(1,553,500)
Revolving credit facility
Senior notes, net
Total Homebuilding Liabilities	(1,513,395)	(1,550,553)
Consolidation, Eliminations [Member] | Financial Services Segment [Member]
Cash and cash equivalents
Marketable securities
Intercompany receivables	(40,042)	(39,234)
Other assets	(769)	(2,024)
Total Homebuilding Assets	(40,811)	(41,258)
Mortgage loans held-for-sale, net
Advances and notes payable to parent and subsidiaries	(3,749)	(3,426)
Total Homebuilding Liabilities	(12,165)	(8,660)
Accounts payable and accrued liabilities	(8,416)	(5,234)
Mortgage repurchase facility
MDC Holdings [Member] | Reportable Legal Entities [Member]
Cash and cash equivalents	255,679	141,245	119,951	145,180
Total Homebuilding Assets	2,226,377	2,170,718
Total Homebuilding Liabilities	906,307	914,426
Total Stockholders' Equity	1,320,070	1,256,292
Total Liabilities and Stockholders' Equity	2,226,377	2,170,718
MDC Holdings [Member] | Reportable Legal Entities [Member] | Homebuilding Segment [Member]
Cash and cash equivalents	255,679	141,245
Marketable securities	59,770	92,387
Restricted cash
Trade and other receivables	5,380	5,304
Housing completed or under construction
Land and land under development
Total inventories
Intercompany receivables	1,475,291	1,509,551
Investment in subsidiaries	295,214	267,191
Property and equipment, net	25,495	26,073
Deferred tax assets, net	74,119	97,083
Metropolitan district bond securities (related party)	30,162	25,911
Other assets	5,267	5,973
Total Homebuilding Assets	2,226,377	2,170,718
Accounts payable
Accrued liabilities	1,527	11,527
Advances and notes payable to parent and subsidiaries	48,134	47,375
Revolving credit facility	15,000	15,000
Senior notes, net	841,646	840,524
Total Homebuilding Liabilities	906,307	914,426
MDC Holdings [Member] | Reportable Legal Entities [Member] | Financial Services Segment [Member]
Cash and cash equivalents
Marketable securities
Intercompany receivables
Other assets
Total Homebuilding Assets
Mortgage loans held-for-sale, net
Advances and notes payable to parent and subsidiaries
Total Homebuilding Liabilities
Accounts payable and accrued liabilities
Mortgage repurchase facility
Guarantor Subsidiaries [Member] | Reportable Legal Entities [Member]
Cash and cash equivalents	3,408	3,097	2,691	3,454
Total Homebuilding Assets	1,865,792	1,855,530
Total Homebuilding Liabilities	1,623,979	1,629,506
Total Stockholders' Equity	241,813	226,024
Total Liabilities and Stockholders' Equity	1,865,792	1,855,530
Guarantor Subsidiaries [Member] | Reportable Legal Entities [Member] | Homebuilding Segment [Member]
Cash and cash equivalents	3,408	3,097
Marketable securities
Restricted cash	3,778	3,750
Trade and other receivables	39,247	20,297
Housing completed or under construction	874,199	747,036
Land and land under development	884,615	1,016,926
Total inventories	1,758,814	1,763,962
Intercompany receivables	2,803	2,850
Investment in subsidiaries
Property and equipment, net	2,546	2,153
Deferred tax assets, net
Metropolitan district bond securities (related party)
Other assets	55,196	59,421
Total Homebuilding Assets	1,865,792	1,855,530
Accounts payable	42,088	40,472
Accrued liabilities	136,615	108,445
Advances and notes payable to parent and subsidiaries	1,445,276	1,480,589
Revolving credit facility
Senior notes, net
Total Homebuilding Liabilities	1,623,979	1,629,506
Guarantor Subsidiaries [Member] | Reportable Legal Entities [Member] | Financial Services Segment [Member]
Cash and cash equivalents
Marketable securities
Intercompany receivables
Other assets
Total Homebuilding Assets
Mortgage loans held-for-sale, net
Advances and notes payable to parent and subsidiaries
Total Homebuilding Liabilities
Accounts payable and accrued liabilities
Mortgage repurchase facility
Non-Guarantor Subsidiaries [Member] | Reportable Legal Entities [Member]
Cash and cash equivalents	23,822	36,646	$ 31,183	$ 50,704
Total Homebuilding Assets	257,194	216,055
Total Homebuilding Liabilities	203,793	174,888
Total Stockholders' Equity	53,401	41,167
Total Liabilities and Stockholders' Equity	257,194	216,055
Non-Guarantor Subsidiaries [Member] | Reportable Legal Entities [Member] | Homebuilding Segment [Member]
Cash and cash equivalents
Marketable securities
Restricted cash
Trade and other receivables
Housing completed or under construction
Land and land under development
Total inventories
Intercompany receivables	5,289	5,291
Investment in subsidiaries
Property and equipment, net
Deferred tax assets, net
Metropolitan district bond securities (related party)
Other assets
Total Homebuilding Assets	5,289	5,291
Accounts payable
Accrued liabilities	143	(33)
Advances and notes payable to parent and subsidiaries	26,266	25,536
Revolving credit facility
Senior notes, net
Total Homebuilding Liabilities	26,409	25,503
Non-Guarantor Subsidiaries [Member] | Reportable Legal Entities [Member] | Financial Services Segment [Member]
Cash and cash equivalents	23,822	36,646
Marketable securities	36,436	11,307
Intercompany receivables	40,042	39,234
Other assets	12,831	7,907
Total Homebuilding Assets	251,905	210,764
Mortgage loans held-for-sale, net	138,774	115,670
Advances and notes payable to parent and subsidiaries	3,749	3,426
Total Homebuilding Liabilities	177,384	149,385
Accounts payable and accrued liabilities	59,150	57,348
Mortgage repurchase facility	$ 114,485	$ 88,611

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Note 22 - Supplemental Guarantor Information - Supplemental Condensed Combining Statements of Operations and Comprehensive Income (Details) - USD ($) $ in Thousands	3 Months Ended												12 Months Ended
	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2014	Sep. 30, 2014	Jun. 30, 2014	Mar. 31, 2014	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Revenues	$ 736,329	$ 595,420	$ 587,334	$ 407,761	$ 578,911	$ 468,487	$ 473,128	$ 388,510					$ 2,326,844	$ 1,909,036	$ 1,694,584
Inventory impairments	(3,873)	(4,700)	(1,600)		(5,200)	(3,225)		(350)	$ (910)		$ (850)		(10,173)	(8,775)	(1,760)
Selling, general, and administrative expenses	(67,919)	(61,904)	(64,440)	(56,277)	(63,560)	(57,444)	(54,781)	(50,532)
Other-than-temporary impairment of marketable securities													(1,443)	(3,969)	(4,293)
Homebuilding pretax income (loss)													151,781	101,424	100,475
Provision for income taxes													(48,570)	(35,633)	(37,332)
Net income	$ 40,376	$ 26,359	$ 26,913	$ 9,563	$ 22,595	$ 14,778	$ 19,998	$ 8,420					103,211	65,791	63,143
Other comprehensive income related to available-for-sale securities, net of tax													6,356	5,260	(1,120)
Comprehensive income													109,567	71,051	62,023
Interest expense															(685)
Gain (Loss) on Extinguishment of Debt															(18,153)
Homebuilding Segment [Member]
Revenues													2,262,853	1,860,226	1,650,631
Cost of Sales													(1,889,257)	(1,552,007)	(1,368,180)
Inventory impairments													(10,173)	(9,993)	(1,760)
Gross margin													363,423	298,226	280,691
Selling, general, and administrative expenses													(250,540)	(226,317)	(203,253)
Equity income of subsidiaries
Interest and other income													7,012	6,709	26,310
Other expense													(3,447)	(4,208)	(4,813)
Other-than-temporary impairment of marketable securities													(1,070)	(3,969)	(4,293)
Homebuilding pretax income (loss)													115,378	70,441	75,804
Cost of Sales													(1,889,257)	(1,552,007)	(1,368,180)
Interest expense															(685)
Gain (Loss) on Extinguishment of Debt															(18,153)
Financial Services Segment [Member]
Other-than-temporary impairment of marketable securities													(373)
Homebuilding pretax income (loss)													36,403	30,983	24,671
Consolidation, Eliminations [Member]
Homebuilding pretax income (loss)													(125,431)	(91,079)	(86,223)
Provision for income taxes
Net income													(125,431)	(91,079)	(86,223)
Other comprehensive income related to available-for-sale securities, net of tax													(1,084)	674	22
Comprehensive income													(126,515)	(90,405)	(86,201)
Consolidation, Eliminations [Member] | Homebuilding Segment [Member]
Revenues
Cost of Sales
Inventory impairments
Gross margin
Selling, general, and administrative expenses													(362)	(558)	(676)
Equity income of subsidiaries													(125,431)	(91,079)	(86,223)
Interest and other income													(417)	(585)	(46)
Other expense
Other-than-temporary impairment of marketable securities
Homebuilding pretax income (loss)													(126,210)	(92,222)	(86,945)
Cost of Sales
Interest expense
Gain (Loss) on Extinguishment of Debt
Consolidation, Eliminations [Member] | Financial Services Segment [Member]
Homebuilding pretax income (loss)													779	1,143	722
MDC Holdings [Member] | Reportable Legal Entities [Member]
Homebuilding pretax income (loss)													89,966	51,383	49,618
Provision for income taxes													13,245	14,408	13,525
Net income													103,211	65,791	63,143
Other comprehensive income related to available-for-sale securities, net of tax													6,356	5,260	(1,120)
Comprehensive income													109,567	71,051	62,023
MDC Holdings [Member] | Reportable Legal Entities [Member] | Homebuilding Segment [Member]
Revenues
Cost of Sales
Inventory impairments
Gross margin
Selling, general, and administrative expenses													(39,632)	(40,356)	(38,290)
Equity income of subsidiaries													125,431	91,079	86,223
Interest and other income													5,236	4,635	24,824
Other expense													1	(6)	(8)
Other-than-temporary impairment of marketable securities													(1,070)	(3,969)	(4,293)
Homebuilding pretax income (loss)													89,966	51,383	49,618
Cost of Sales
Interest expense															(685)
Gain (Loss) on Extinguishment of Debt															(18,153)
MDC Holdings [Member] | Reportable Legal Entities [Member] | Financial Services Segment [Member]
Homebuilding pretax income (loss)
Guarantor Subsidiaries [Member] | Reportable Legal Entities [Member]
Homebuilding pretax income (loss)													151,917	111,372	113,156
Provision for income taxes													(48,613)	(39,128)	(42,044)
Net income													103,304	72,244	71,112
Other comprehensive income related to available-for-sale securities, net of tax
Comprehensive income													103,304	72,244	71,112
Guarantor Subsidiaries [Member] | Reportable Legal Entities [Member] | Homebuilding Segment [Member]
Revenues													2,262,853	1,860,226	1,650,631
Cost of Sales													(1,888,957)	(1,551,907)	(1,368,140)
Inventory impairments													(10,173)	(9,993)	(1,760)
Gross margin													363,723	298,326	280,731
Selling, general, and administrative expenses													(210,546)	(185,403)	(164,287)
Equity income of subsidiaries
Interest and other income													2,188	2,651	1,517
Other expense													(3,448)	(4,202)	(4,805)
Other-than-temporary impairment of marketable securities
Homebuilding pretax income (loss)													151,917	111,372	113,156
Cost of Sales													(1,888,957)	(1,551,907)	(1,368,140)
Interest expense
Gain (Loss) on Extinguishment of Debt
Guarantor Subsidiaries [Member] | Reportable Legal Entities [Member] | Financial Services Segment [Member]
Homebuilding pretax income (loss)
Non-Guarantor Subsidiaries [Member] | Reportable Legal Entities [Member]
Homebuilding pretax income (loss)													35,329	29,748	23,924
Provision for income taxes													(13,202)	(10,913)	(8,813)
Net income													22,127	18,835	15,111
Other comprehensive income related to available-for-sale securities, net of tax													1,084	(674)	(22)
Comprehensive income													23,211	18,161	15,089
Non-Guarantor Subsidiaries [Member] | Reportable Legal Entities [Member] | Homebuilding Segment [Member]
Revenues
Cost of Sales													(300)	(100)	(40)
Inventory impairments
Gross margin													(300)	(100)	(40)
Selling, general, and administrative expenses
Equity income of subsidiaries
Interest and other income													5	8	15
Other expense
Other-than-temporary impairment of marketable securities
Homebuilding pretax income (loss)													(295)	(92)	(25)
Cost of Sales													(300)	(100)	(40)
Interest expense
Gain (Loss) on Extinguishment of Debt
Non-Guarantor Subsidiaries [Member] | Reportable Legal Entities [Member] | Financial Services Segment [Member]
Homebuilding pretax income (loss)													$ 35,624	$ 29,840	$ 23,949

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Note 22 - Supplemental Guarantor Information - Supplemental Condensed Combining Statements of Cash Flows (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Net cash provided by (used in) operating activities	$ 115,917	$ 215	$ (163,647)
Net cash provided by (used in) investing activities	9,218	47,362	423,080
Payments from (advances to) subsidiaries
Advances on mortgage repurchase facility, net	25,874	27,789	(2,252)
Proceeds from Issuance of Senior Long-term Debt			248,375
Repayment of senior notes			(517,650)
Advances on revolving credit facility, net			15,000
Dividend payments	(49,088)	(48,868)	(48,820)
Excess tax benefits from stock-based compensation			26
Proceeds from exercise of stock options		665	375
Net cash provided by (used in) financing activities	(23,214)	(20,414)	(304,946)
Net increase (decrease) in cash and cash equivalents	101,921	27,163	(45,513)
Beginning of year	180,988	153,825	199,338
End of year	282,909	180,988	153,825
Consolidation, Eliminations [Member]
Net cash provided by (used in) operating activities
Net cash provided by (used in) investing activities	(133,851)	6,446	80,727
Payments from (advances to) subsidiaries	133,851	(6,446)	(80,727)
Advances on mortgage repurchase facility, net
Proceeds from Issuance of Senior Long-term Debt
Repayment of senior notes
Advances on revolving credit facility, net
Dividend payments
Excess tax benefits from stock-based compensation
Proceeds from exercise of stock options
Net cash provided by (used in) financing activities	133,851	(6,446)	(80,727)
Net increase (decrease) in cash and cash equivalents
Beginning of year
End of year
MDC Holdings [Member] | Reportable Legal Entities [Member]
Net cash provided by (used in) operating activities	(4,807)	31,030	(62,289)
Net cash provided by (used in) investing activities	168,329	38,467	339,754
Payments from (advances to) subsidiaries
Advances on mortgage repurchase facility, net
Proceeds from Issuance of Senior Long-term Debt			248,375
Repayment of senior notes			(517,650)
Advances on revolving credit facility, net			15,000
Dividend payments	(49,088)	(48,868)	(48,820)
Excess tax benefits from stock-based compensation			26
Proceeds from exercise of stock options		665	375
Net cash provided by (used in) financing activities	(49,088)	(48,203)	(302,694)
Net increase (decrease) in cash and cash equivalents	114,434	21,294	(25,229)
Beginning of year	141,245	119,951	145,180
End of year	255,679	141,245	119,951
Guarantor Subsidiaries [Member] | Reportable Legal Entities [Member]
Net cash provided by (used in) operating activities	124,929	(16,109)	(124,317)
Net cash provided by (used in) investing activities	(1,481)	(811)	(1,093)
Payments from (advances to) subsidiaries	(123,137)	17,326	124,647
Advances on mortgage repurchase facility, net
Proceeds from Issuance of Senior Long-term Debt
Repayment of senior notes
Advances on revolving credit facility, net
Dividend payments
Excess tax benefits from stock-based compensation
Proceeds from exercise of stock options
Net cash provided by (used in) financing activities	(123,137)	17,326	124,647
Net increase (decrease) in cash and cash equivalents	311	406	(763)
Beginning of year	3,097	2,691	3,454
End of year	3,408	3,097	2,691
Non-Guarantor Subsidiaries [Member] | Reportable Legal Entities [Member]
Net cash provided by (used in) operating activities	(4,205)	(14,706)	22,959
Net cash provided by (used in) investing activities	(23,779)	3,260	3,692
Payments from (advances to) subsidiaries	(10,714)	(10,880)	(43,920)
Advances on mortgage repurchase facility, net	25,874	27,789	(2,252)
Proceeds from Issuance of Senior Long-term Debt
Repayment of senior notes
Advances on revolving credit facility, net
Dividend payments
Excess tax benefits from stock-based compensation
Proceeds from exercise of stock options
Net cash provided by (used in) financing activities	15,160	16,909	(46,172)
Net increase (decrease) in cash and cash equivalents	(12,824)	5,463	(19,521)
Beginning of year	36,646	31,183	50,704
End of year	$ 23,822	$ 36,646	$ 31,183