Owned Inventory

12 Months Ended

Sep. 30, 2021

Inventory

The components of our owned inventory are as follows as of September 30, 2021 and September 30, 2020:


in thousands	September 30, 2021		September 30, 2020
Homes under construction	$	648,283	$	525,021
Land under development	648,404		589,763
Land held for future development	19,879		28,531
Land held for sale	9,179		12,622
Capitalized interest	106,985		119,659
Model homes	68,872		75,142
Total owned inventory	$	1,501,602	$	1,350,738

Homes under construction include homes substantially finished and ready for delivery and homes in various stages of construction, including costs of the underlying lot, direct construction costs and capitalized indirect costs. As of September 30, 2021, we had 2,912 homes under construction, including 576 spec homes totaling $116.4 million (542 in-process spec homes totaling $105.2 million, and 34 finished spec homes totaling $11.2 million). As of September 30, 2020, we had 2,562 homes under construction, including 649 spec homes totaling $135.7 million (516 in-process spec units totaling $93.5 million, and 133 finished spec units totaling $42.2 million).

Land under development consist principally of land acquisition, land development and other common costs. These land related costs are allocated to individual lots on a pro-rata basis, and the lot costs are transferred to homes under construction when home construction begins for the respective lots. Certain of the fully developed lots in this category are reserved by a customer deposit or sales contract.

Land held for future development consists of communities for which construction and development activities are expected to occur in the future or have been idled and are stated at cost unless facts and circumstances indicate that the carrying value of the assets may not be recoverable. All applicable carrying costs, such as interest and real estate taxes, are expensed as incurred.

Land held for sale includes land and lots that do not fit within our homebuilding programs and strategic plans in certain markets, and land is classified as held for sale once certain criteria are met (refer to Note 2). These assets are recorded at the lower of the carrying value or fair value less costs to sell (net realizable value).

The amount of interest we are able to capitalize depends on our qualified inventory balance, which considers the status of our inventory holdings. Our qualified inventory balance includes the majority of our homes under construction and land under development but excludes land held for future development and land held for sale (see Note 6 for additional information on capitalized interest).

Total owned inventory by reportable segment is presented in the table below as of September 30, 2021 and September 30, 2020:


in thousands	Projects in Progress (a)		Land Held for Future Development		Land Held for Sale		Total Owned Inventory
September 30, 2021
West	$	781,036	$	3,483	$	4,478	$	788,997
East	264,991		10,888		584		276,463
Southeast	269,738		5,508		4,117		279,363
Corporate and unallocated (b)	156,779		—		—		156,779
Total	$	1,472,544	$	19,879	$	9,179	$	1,501,602
September 30, 2020
West	$	627,986	$	3,483	$	4,516	$	635,985
East	241,799		14,077		3,702		259,578
Southeast	266,905		10,971		4,404		282,280
Corporate and unallocated (b)	172,895		—		—		172,895
Total	$	1,309,585	$	28,531	$	12,622	$	1,350,738

(a) Projects in progress include homes under construction, land under development, capitalized interest, and model home categories from the preceding table.

(b) Projects in progress amount includes capitalized interest and indirect costs that are maintained within our Corporate and unallocated segment.

Inventory Impairments

The following table presents, by reportable segment, our total impairment and abandonment charges for the periods presented:


	Fiscal Year Ended September 30,
in thousands	2021		2020		2019
Projects in Progress:
West	$	—	$	—	$	92,912

Southeast	—		—		858
Corporate and unallocated (a)	—		—		16,260
Total impairment charges on projects in progress	$	—	$	—	$	110,030
Land Held for Sale:
West	$	—	$	89	$	37,963

Southeast	—		8		—
Corporate and unallocated (a)	—		1,160		625
Total impairment charges on land held for sale	$	—	$	1,257	$	38,588
Abandonments:
West	$	—	$	923	$	—
East	465		82		—
Southeast	388		641		—

Total abandonment charges	$	853	$	1,646	$	—






Total impairment and abandonment charges	$	853	$	2,903	$	148,618

(a) Amount represents capitalized interest and indirects balance that was impaired. Capitalized interest and indirects are maintained within our Corporate and unallocated segment.

Projects in Progress Impairments

We assess our projects in progress inventory for indicators of impairment at the community level on a quarterly basis. If indicators of impairment are present for a community with more than ten homes remaining to close, we perform a recoverability test by comparing the expected undiscounted cash flows for the community to its carrying value. If the aggregate undiscounted cash flows are in excess of the carrying value, the asset is considered to be recoverable and is not impaired. If the carrying value exceeds the aggregate undiscounted cash flows, we perform a discounted cash flow analysis to determine the fair value of the community, and impairment charges are recorded if the fair value of the community's inventory is less than its carrying value.

During the years ended September 30, 2021 and September 30, 2020, we performed our quarterly projects in progress impairment assessments and determined that no community required an undiscounted cash flow analysis. No project in progress impairments were recognized during fiscal 2021 and 2020.

During the year ended September 30, 2019, we performed discounted cash flow analyses on ten communities, nine in the West segment and one in the Southeast segment, and recognized a total of $110.0 million impairment charges related to our projects in progress.

The table below presents, by reportable segment, details of the impairment charges taken on projects in progress for fiscal 2019:


	Results of Discounted Cash Flow Analyses Prepared
$ in thousands	# of Communities Impaired	# of Lots Impaired	Impairment Charge		Estimated Fair Value of Impaired Inventory at Time of Impairment








Year Ended September 30, 2019
West	9	839	$	92,912	$	69,449

Southeast	1	15	858		1,367
Corporate and unallocated (a)	—	—	16,260		14,166


Total	10	854	$	110,030	$	84,982

(a) Amount represents the capitalized interest and indirect cost that were impaired. Capitalized interest and indirect costs are maintained within our Corporate and unallocated segment.

During the second quarter of fiscal 2019, we recognized impairment charges of $147.6 million related to fifteen communities in our California submarkets, all of which were previously land held for future development assets. As of the beginning of the quarter, nine of these communities were included in projects in progress due to their activation for development in prior periods, while the remaining six communities were classified as land held for future development and were subsequently reclassified to land held for sale during the second quarter of fiscal 2019 (refer to below section titled "Land Held for Sale Impairments" for further discussion). We performed discounted cash flow analyses for the nine communities in projects in progress and recognized $109.0 million impairment charges, principally due to a reduction in price that is other than temporary based on competitive and market dynamics. Valuation assumptions for communities tested for impairment are specific to each community. The discount rate used depends on the development stage and expected duration of the project, local market conditions, and other specific factors. The estimated future cash flows for each community were determined based on the expected pace of closings and average sales price of the community less expected costs for land acquisition and land development, direct construction, overhead, and interest.

The table below presents the ranges or values of significant quantitative unobservable inputs we used in determining the fair value of the communities impaired during fiscal 2019:



Unobservable Inputs
Average selling price (in thousands)																		$350 - $615
Closings per community per month																		1 - 4
Discount rate																		14.7% - 16.8%

Land Held for Sale Impairments

Impairments on land held for sale generally represent write downs of these properties to net realizable value based on sales contracts, letters of intent, current market conditions and recent comparable land sale transactions, as applicable. Absent an executed sales contract, our assumptions related to land sales prices require significant judgment because the real estate market is highly sensitive to changes in economic conditions, and our estimates of sale prices could differ significantly from actual results.

During the fiscal year ended September 30, 2021, we recognized no land held for sales impairment charges compared to $1.3 million land held for sales impairment charges recognized during the fiscal year ended September 30, 2020.

During the second quarter of fiscal 2019, concurrent with the California projects in progress impairment analyses described above, we performed a strategic review of our remaining land held for future development assets in California and determined to sell these parcels. As a consequence of change in strategy with respect to the future use of these assets, we recognized land held for sale impairments totaling $38.6 million for six communities in our West segment.

AbandonmentsFrom time-to-time, we may determine to abandon lots or not exercise certain option contracts that are not projected to produce adequate results, or no longer fit with our long-term strategic plan. Additionally, in certain limited instances, we are forced to abandon lots due to seller non-performance, or permitting or other regulatory issues that do not allow us to build on those lots. If we intend to abandon or walk away from a property, we record an abandonment charge to earnings for the deposit amount and any related capitalized costs in the period such decision is made. During the fiscal year ended September 30, 2021 and September 30, 2020, we recognized $0.9 million and $1.6 million abandonment charges, respectively. There were no abandonment charges recognized during our fiscal year ended September 30, 2019.