7 .	Inventories

The following table sets forth, by reportable segment, information relating to our homebuilding inventories:

	March 31,		December 31,
	2019		2018
	(Dollars in thousands)
Housing completed or under construction:
West	$	516,900	$	521,960
Mountain		356,177		347,738
East		77,197		82,738
Subtotal		950,274		952,436
Land and land under development:
West		699,704		705,591
Mountain		420,155		402,657
East		78,965		72,310
Subtotal		1,198,824		1,180,558
Total inventories	$	2,149,098	$	2,132,994

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: (

) land costs; (

) land development costs; (

) entitlement costs; (

) capitalized interest; (

) engineering fees; and (

) 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: (

) land costs transferred from land and land under development; (

) direct construction costs associated with a house; (

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

) capitalized interest; and (

) 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”

), 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

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

inputs.

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

360

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

input. 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, which are considered Level

inputs. 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.

Impairments of homebuilding inventory by segment for the

three

months ended

March 31, 2019

and

2018

are shown in the table below.

	Three Months Ended
	March 31,
	2019		2018
	(Dollars in thousands)
West	$	-	$	375
Mountain		400		175
East		210		-
Total inventory impairments	$	610	$	550

The table below provides quantitative data, for the periods presented, used in determining the fair value of the impaired inventory.

	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, 2019		16	$	610	$	10,476		2		N/A
March 31, 2018		24	$	550	$	5,223		2		12	%