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

defined as observable inputs such as quoted prices in active markets; Level

defined as inputs, other than quoted prices in active markets, that are either directly or indirectly observable; and Level

defined as unobservable inputs for which little or

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	September 30, 2018		December 31, 2017
		(Dollars in thousands)
Cash and cash equivalents
Debt securities (available-for-sale)	Level 1	$	34,882	$	99,863

Marketable securities
Equity securities	Level 1	$	49,006	$	42,004
Debt securities (available-for-sale)	Level 1		-		49,634
Total marketable securities		$	49,006	$	91,638

Mortgage loans held-for-sale, net	Level 2	$	114,836	$	138,114

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

September 30, 2018

and

December 31, 2017.

Cash and cash equivalents

(excluding debt securities with an original maturity of

three

months or less)

, 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.

quity

ecurities

. Our equity securities consist of holdings in common stock, preferred stock and exchange traded funds. As of

September 30, 2018,

all of our equity securities were recorded at fair value with all changes in fair value recorded to either interest and other income or other expense, dependent upon whether there was a net gain or loss, respectively, in the homebuilding section or financial services section of our consolidated statements of operations and comprehensive income. As of

December 31, 2017,

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, was other-than-temporary. See Note

for further discussion of adoption of new accounting standards.

Debt

securities

. Our debt securities consist of U.S. government securities. As of

September 30, 2018

and

December 31, 2017,

all of our debt securities were treated as available-for-sale investments and, as such, are recorded at fair value with all changes in fair value initially recorded through AOCI, subject to an assessment to determine if any unrealized loss, if applicable, is other-than-temporary.

Each quarter we assess all of our securities in an unrealized loss position (excluding marketable equity securities subsequent to the adoption of ASU

2016

– see Note

for further discussion of adoption of new accounting standards) for a potential other-than-temporary impairment (“OTTI”). If the unrealized loss is determined to be other-than-temporary, an OTTI is recorded in other-than-temporary impairment of marketable securities in the homebuilding or financial services sections of our consolidated statements of operations and comprehensive income. During the

three

and

nine

months ended

September 30, 2017,

we recorded pretax OTTI’s of

$0.0

million and

$0.2

million, respectively.

such impairments were recorded during the

three

and

nine

months ended

September 30, 2018.

The following tables set forth the cost and estimated fair value of our available for sale debt securities:

	September 30, 2018
	Amortized Cost Basis		OTTI		Net Amortized Cost		Fair Value
	(Dollars in thousands)
Financial Services
Cash and cash equivalents
Debt securities	$	34,882	$	-	$	34,882	$	34,882

	December 31, 2017
	Amortized Cost Basis		OTTI		Net Amortized Cost		Fair Value
	(Dollars in thousands)
Homebuilding
Cash and cash equivalents
Debt securities	$	99,663	$	-	$	99,663	$	99,663
Marketable securities
Debt securities	$	49,634	$	-	$	49,634	$	49,634
Financial Services
Cash and cash equivalents
Debt securities	$	200	$	-	$	200	$	200

The following table reconciles the net gain recognized during the

three

and

nine

months ended

September 30, 2018

on equity securities to the unrealized gain recognized during the periods on equity securities still held at the reporting date.

	September 30, 2018
	Three Months Ended			Nine Months Ended
	(Dollars in thousands)
Net gain recognized during the period on equity securities	$	3,004		$	3,129
Less: Net loss recognized during the period on equity securities sold during the period		(21	)		(484	)
Unrealized gain recognized during the reporting period on equity securities still held at the reporting date	$	3,025		$	3,613

Mortgage loans held-for-sale, net.

Our mortgage loans held-for-sale, which are measured at fair value on a recurring basis, include (

) mortgage loans held-for-sale that are under commitments to sell and (

) mortgage loans held-for-sale that are

not

under commitments to sell. At

September 30, 2018

and

December 31, 2017,

we had

$101.7

million and

$103.5

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

fair value inputs. At

September 30, 2018

and

December 31, 2017,

we had

$13.1

million and

$34.6

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

fair value input.

Gains on sales of mortgage loans, net, are included as a component of revenues in the financial services section of our consolidated statements of operations and comprehensive income. For the

three

and

nine

months ended

September 30, 2018,

we recorded net gains on the sales of mortgage loans of

$11.8

million and

$31.1

million, respectively, compared to

$9.8

million and

$28.5

million for the same periods in the prior year, respectively.

Mortgage Repurchase Facility.

The debt associated with our mortgage repurchase facility (see Note

for further discussion) is at floating rates that approximate current market rates and have relatively short-term maturities, generally within

days. The fair value approximates carrying value and is based on Level

inputs.

Senior Notes

. The estimated values of the senior notes in the following table are based on Level

inputs, which primarily reflect estimated prices for our senior notes which were provided by multiple sources.

	September 30, 2018				December 31, 2017
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
	(Dollars in thousands)
$250 Million 5⅝% Senior Notes due February 2020, net	$	248,595	$	256,714	$	247,853	$	261,991
$250 Million 5½% Senior Notes due January 2024, net		248,736		251,398		248,585		263,617
$500 Million 6% Senior Notes due January 2043, net		490,286		428,732		490,159		493,094
Total	$	987,617	$	936,844	$	986,597	$	1,018,702