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Note 9 - Capitalization of Interest
 6 Months Ended
Jun. 30, 2017
Notes to Financial Statements  
Home Building Interest [Text Block]
9.
Capitalization of Interest
 
We follow the practice of capitalizing interest to inventories owned during the period of development and to investments in unconsolidated homebuilding and land development joint ventures in accordance with ASC Topic
835,
Interest
("ASC
835"
). Homebuilding interest capitalized as a cost of inventories owned is included in cost of sales as related units or lots are sold. Interest capitalized to investments in unconsolidated homebuilding and land development joint ventures is included as a reduction of income from unconsolidated joint ventures when the related homes or lots are sold to
third
parties. Interest capitalized to investments in unconsolidated land development joint ventures is transferred to inventories owned if the underlying lots are purchased by us. To the extent our debt exceeds our qualified assets as defined in ASC
835,
we expense a portion of the interest incurred by us. Qualified assets represent communities that are actively selling or under development as well as investments in homebuilding and land development unconsolidated joint ventures. During the
six
months ended
June 30, 2017
and
2016,
our qualified assets exceeded our debt, and as a result, all of our homebuilding interest incurred during the
six
months ended
June 30, 2017
and
2016
was capitalized in accordance with ASC
835.
 
The following is a summary of homebuilding interest capitalized to inventories owned and investments in unconsolidated joint ventures, amortized to cost of sales and income (loss) from unconsolidated joint ventures and expensed as interest expense, for the
three
and
six
months ended
June 30, 2017
and
2016:
 
 
 
Three Months Ended June 30,
 
 
Six Months Ended June 30,
 
 
 
2017
 
 
2016
 
 
2017
 
 
2016
 
 
 
(Dollars in thousands)
 
                                 
Total interest incurred (1)
  $
52,168
    $
55,610
    $
103,873
    $
118,335
 
Less: Interest capitalized to inventories owned (1)
    
(51,338
 )    
(54,564
 )    
(102,213
 )    
(116,409
 )
Less: Interest capitalized to investments in unconsolidated joint ventures
    
(830
 )    
(1,046
 )    
(1,660
 )    
(1,926
 )
Interest expense
  $
―
    $
―
    $
―
    $
―
 
                                 
Interest previously capitalized to inventories owned, included in cost of home sales
   $
52,347
    $
40,528
    $
91,775
    $
70,731
 
Interest previously capitalized to inventories owned, included in cost of land sales
   $
―
    $
1,302
    $
―
    $
1,481
 
Interest previously capitalized to investments in unconsolidated joint ventures,
included in income (loss) from unconsolidated joint ventures
   $
8
    $
―
    $
8
    $
―
 
Interest capitalized in ending inventories owned (2)
   $
376,638
    $
350,210
    $
376,638
    $
350,210
 
Interest capitalized as a percentage of inventories owned
    
5.7
 %    
5.5
 %    
5.7
 %    
5.5
 %
Interest capitalized in ending investments in unconsolidated joint ventures (2)
   $
4,515
    $
4,313
    $
4,515
    $
4,313
 
Interest capitalized as a percentage of investments in unconsolidated joint ventures
    
3.6
 %    
2.9
 %    
3.6
 %    
2.9
 %
                                                             
 
(
1
)
Total interest incurred and interest capitalized to inventories owned during the
six
months ended
June 30, 2016
includes a
$9
million increase related to the valuation of the
1.625%
convertible senior notes that was completed during the
2016
first
quarter.
 
(
2
)
During the
three
and
six
months ended
June 30, 2017,
in connection with lot purchases from our joint ventures,
$0
and
$0.5
million, respectively, of capitalized interest was transferred from investments in unconsolidated joint ventures to inventories owned.