7. Inventory

At June 30, 2012 and December 31, 2011, inventory was as follows:


	June 30, 2012		December 31, 2011
	(In thousands)
Model homes	$	73,294	$	82,339
Completed homes for sale		16,140		29,703
Homes under construction		170,881		97,952
Lots available for construction		292,613		282,292
Land under development		86,899		144,070
Land held for future development		128,072		129,247
Land deposits and preacquisition costs		26,862		18,207

Total inventory	$	794,761	$	783,810

Impairment

Inventory, including all captions listed above, are stated at cost, unless the carrying amount is determined to be unrecoverable, in which case inventories are written down to fair value (see Note 2).

For the three and six months ended June 30, 2012 and 2011, inventory impairment was as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
	(Dollars in thousands)
Inventory impairment	$	0	$	9,684	$	0	$	10,302

Remaining carrying value of inventory impaired at end of period	$	0	$	8,810	$	0	$	9,840

Projects impaired		0		2		0		3

Projects evaluated for impairment ^(a)		132		150		132		150

(a)	Large land parcels not subdivided into communities are counted as one project. Once parcels are subdivided, the project count will increase accordingly.

Write-off of Deposits and Preacquisition Costs

Land deposits and preacquisition costs for potential acquisitions and land option contracts are included in inventory. When a potential acquisition or land option contract is abandoned, related deposits and preacquisition costs are written off to other income, net. For the three and six months ended June 30, 2012, write-offs of deposits and preacquisition costs were $0.2 million and $0.4 million, respectively, and no option lots were abandoned. For the three and six months ended June 30, 2011, write-offs of deposits and preacquisition costs were $0.1 million and $0.1 million, respectively, and no option lots were abandoned.

Interest Capitalization

Interest is capitalized on inventory and investments in joint ventures during development and other qualifying activities. Interest capitalized as cost of inventory is included in cost of sales as related units are closed. Interest capitalized as cost of investment in joint ventures is included in equity in income (loss) from joint venture as related units in the joint venture close.

For the three and six months ended June 30, 2012 and 2011, interest incurred, capitalized and expensed was as follows:


	Three Months Ended June 30,						Six Months Ended June 30,
	2012			2011			2012			2011
	(In thousands)
Interest incurred	$	16,660		$	17,582		$	33,320		$	37,244

Interest expensed ^(a)	$	5,909		$	4,375		$	12,197		$	8,326

Interest capitalized as a cost of inventory	$	10,550		$	12,862		$	20,745		$	28,133

Interest previously capitalized as a cost of inventory, included in cost of sales	$	(10,074	)	$	(8,342	)	$	(17,858	)	$	(14,150	)

Interest previously capitalized as a cost of inventory, transferred from investments in joint ventures	$	0		$	641		$	0		$	641

Interest capitalized in ending inventory ^(b)	$	114,323		$	120,575		$	114,323		$	120,575

Interest capitalized as a cost of investments in joint ventures	$	201		$	345		$	378		$	785

Interest previously capitalized as a cost of investments in joint ventures, included in equity in income (loss) from joint ventures	$	(201	)	$	(212	)	$	(378	)	$	(455	)

Interest previously capitalized as a cost of investments in joint ventures, transferred to inventory	$	0		$	(641	)	$	0		$	(641	)

Interest capitalized in ending investments in joint ventures	$	0		$	635		$	0		$	635

(a)	For the three and six months ended June 30, 2012 and 2011, assets qualifying for interest capitalization was less than debt; therefore, non-qualifying interest was expensed.

(b)	Inventory impairment charges were recorded against total inventory of the respective community. Capitalized interest reflects the gross amount of capitalized interest as impairment charges recognized were generally not allocated to specific components of inventory.