Note 8 - Inventories

3 Months Ended

Jun. 30, 2011

Inventory Disclosure [Text Block]

8.       Inventories

          a. Inventories Owned

Inventories owned consisted of the following at:

	June 30, 2011
	California		Southwest		Southeast		Total
	(Dollars in thousands)
Land and land under development	$	557,304	$	193,193	$	178,148	$	928,645
Homes completed and under construction		219,547		62,182		65,581		347,310
Model homes		78,080		11,621		17,088		106,789
Total inventories owned	$	854,931	$	266,996	$	260,817	$	1,382,744
	December 31, 2010
	California		Southwest		Southeast		Total
	(Dollars in thousands)
Land and land under development	$	492,501	$	158,324	$	150,856	$	801,681
Homes completed and under construction		164,237		51,382		66,161		281,780
Model homes		70,579		13,085		14,572		98,236
Total inventories owned	$	727,317	$	222,791	$	231,589	$	1,181,697

In accordance with ASC Topic 360, Property, Plant, and Equipment (“ASC 360”), we record impairment losses on inventories when events and circumstances indicate that they may be impaired, and the future undiscounted cash flows estimated to be generated by those assets are less than their carrying amounts.  Inventories that are determined to be impaired are written down to their estimated fair value.  We calculate the fair value of a project under a land residual value analysis and in certain cases in conjunction with a discounted cash flow analysis.  During the six months ended June 30, 2011 and 2010, the total number of projects included in inventories-owned and reviewed for impairment were 251 and 214, respectively.  Based on the impairment review, we recorded $6.0 million of inventory impairments during the three and six months ended June 30, 2011 related to homes completed and under construction.  We did not record any inventory impairments during the three and six months ended June 30, 2010.

b. Inventories Not Owned

Inventories not owned consisted of the following at:

	June 30,		December 31,
	2011		2010
	(Dollars in thousands)
Land purchase and lot option deposits	$	26,125	$	18,499
Other lot option contracts, net of deposits		35,461		500
Total inventories not owned	$	61,586	$	18,999

Under ASC Topic 810, Consolidation (“ASC 810”), a non-refundable deposit paid to an entity is deemed to be a variable interest that will absorb some or all of the entity’s expected losses if they occur.  Our option deposits generally represent our maximum exposure to the land seller if we elect not to purchase the optioned property.  In some instances, we may also expend funds for due diligence, development and construction activities with respect to optioned land prior to takedown, which we would have to write off should we not exercise the option.  Therefore, whenever we enter into a land option or purchase contract with an entity and make a non-refundable deposit, a variable interest entity (“VIE”) may have been created.  As of June 30, 2011, we were not required to consolidate any VIEs.  In accordance with ASC 810, we perform ongoing reassessments of whether we are the primary beneficiary of a VIE.

Other lot option contracts noted in the table above represent specific performance obligations to purchase lots that we have with various land sellers.  In certain instances, the land option contract contains a binding obligation requiring us to complete the lot purchases.  In other instances, the land option contract does not obligate us to complete the lot purchases but, due to the magnitude of our capitalized preacquisition costs, development and construction expenditures, we are considered economically compelled to complete the lot purchases.