Inventory

9 Months Ended

Jul. 31, 2023

Inventory at July 31, 2023 and October 31, 2022 consisted of the following (amounts in thousands):


	July 31, 2023		October 31, 2022
Land controlled for future communities	$	193,051	$	240,751
Land owned for future communities	920,366		808,851
Operating communities	8,090,107		7,683,724
	$	9,203,524	$	8,733,326

Operating communities include communities offering homes for sale; communities that have sold all available home sites but have not completed delivery of the homes and communities preparing to open for sale. The carrying value attributable to operating communities includes the cost of homes under construction, land and land development costs, the carrying cost of home sites in current and future phases of these communities, and the carrying cost of model homes.

Backlog consists of homes under contract but not yet delivered to our home buyers (“backlog”).

The amounts we have provided for inventory impairment charges and the expensing of costs that we believe not to be recoverable, and which are included in home sales cost of revenues, are shown in the table below (amounts in thousands):


	Three months ended July 31,				Nine months ended July 31,
	2023		2022		2023		2022
Land controlled for future communities	$	895	$	3,848	$	9,343	$	6,833
Land owned for future communities	369		2,400		694		3,840
Operating communities	2,100		—		12,400		—
	$	3,364	$	6,248	$	22,437	$	10,673

We have also recognized $17.7 million of impairment charges on land held for sale included in land sales and other cost of revenues during the nine-month period ended July 31, 2023. No impairment charges were recognized in land sales and other

cost of revenues during the three-month period ended July 31, 2023. We recognized $1.4 million and $6.6 million of similar charges during the three-month and nine-month periods ended July 31, 2022, respectively.

See Note 14, “Commitments and Contingencies,” for information regarding land purchase commitments.

At July 31, 2023, we evaluated our land purchase contracts, including those to acquire land for apartment developments, to determine whether any of the selling entities were variable interest entities (“VIEs”) and, if they were, whether we were the primary beneficiary of any of them. Under these land purchase contracts, we do not possess legal title to the land; our risk is generally limited to deposits paid to the sellers and predevelopment costs incurred; and the creditors of the sellers generally have no recourse against us. At July 31, 2023, we determined that 247 land purchase contracts, with an aggregate purchase price of $3.78 billion, on which we had made aggregate deposits totaling $413.3 million, were VIEs, and that we were not the primary beneficiary of any VIE related to our land purchase contracts. At October 31, 2022, we determined that 237 land purchase contracts, with an aggregate purchase price of $3.89 billion, on which we had made aggregate deposits totaling $417.6 million, were VIEs and that we were not the primary beneficiary of any VIE related to our land purchase contracts.

Interest incurred, capitalized, and expensed, for the periods indicated, were as follows (amounts in thousands):


	Three months ended July 31,				Nine months ended July 31,
	2023		2022		2023		2022
Interest capitalized, beginning of period	$	211,760	$	237,333	$	209,468	$	253,938
Interest incurred	32,624		34,676		107,341		97,569
Interest expensed to home sales cost of revenues	(37,004)		(37,308)		(99,642)		(110,567)
Interest expensed to land sales and other cost of revenues	(1,258)		(1,221)		(6,086)		(4,848)


Interest capitalized on investments in unconsolidated entities	(2,271)		(1,759)		(7,432)		(4,566)
Previously capitalized interest transferred to investments in unconsolidated entities	—		—		(244)		—
Previously capitalized interest on investments in unconsolidated entities transferred to inventory	296		32		742		227
Interest capitalized, end of period	$	204,147	$	231,753	$	204,147	$	231,753