INVENTORY

Inventory consists primarily of land in the process of development, undeveloped land, developed lots, completed homes, and raw land scheduled for development, primarily in Texas and Georgia. Inventory is valued at cost unless the carrying value is determined to be not recoverable in which case the affected inventory is written down to fair value. Cost includes any related pre-acquisition costs that are directly identifiable with a specific property so long as those pre-acquisition costs are recoverable at the sale of the property.

A summary of inventory is as follows (in thousands):



	September 30, 2015		December 31, 2014
Completed home inventory and residential lots held for sale	$	80,181	$	47,048
Work in process	213,849		203,756
Undeveloped land	6,193		16,220
Land not owned under option agreements	17,804		7,279
Total Inventory	$	318,027	$	274,303

We capitalize interest costs incurred to inventory during active development and other qualifying activities. Interest capitalized as cost of inventory is charged to cost of sales as related homes, land and/or lots are closed. Interest incurred on undeveloped land is directly expensed and included in interest expense in our consolidated statements of income.

Interest costs incurred, capitalized and expensed were as follows (in thousands):



	Three Months Ended September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014
Interest capitalized at beginning of period	$	9,854		$	1,082		$	3,713		$	1,065
Interest incurred	1,890			308			9,238			1,138
Interest charged to cost of sales	(1,389		)	—			(2,315		)	(105		)
Interest charged to interest expense	—			(308		)	(281		)	(1,016		)
Interest capitalized at end of period	$	10,355		$	1,082		$	10,355		$	1,082