Real Estate Inventory and Land Deposits

9 Months Ended

Sep. 30, 2016

REAL ESTATE INVENTORY AND LAND DEPOSITS

Inventory consists of the following (in thousands):



	As of
	September 30, 2016		December 31, 2015
Real estate developed and under development	$	2,169,321	$	2,167,771
Real estate held for development or held for sale⁽¹⁾	202,390		173,448
Operating communities ⁽²⁾	803,562		672,499
Capitalized interest	111,412		105,148
Total owned inventory	3,286,685		3,118,866
Real estate not owned under option agreements	612		7,921
Total real estate inventory	$	3,287,297	$	3,126,787

⁽¹⁾ Real estate held for development or held for sale includes properties which are not in active production. This includes raw land recently purchased or awaiting entitlement, future phases of current projects that will be developed as prior phases sell out and long-term strategic assets.

⁽²⁾ Operating communities consists of all vertical construction costs relating to homes in progress and completed homes for all active production of inventory.

The development status of our land inventory is as follows (dollars in thousands):



	As of
	September 30, 2016			December 31, 2015
	Owned Lots	Book Value of Land and Development		Owned Lots	Book Value of Land and Development
Raw	7,942	$	417,049	8,300	$	378,081
Partially developed	7,604	475,397		8,904	645,276
Finished	12,594	1,468,831		12,294	1,305,697
Long-term strategic assets	1,600	10,434		3,105	12,165
Total	29,740	$	2,371,711	32,603	$	2,341,219

Land Deposits — We provide deposits related to land options and land purchase contracts, which are capitalized when paid and classified as land deposits until the associated property is purchased.

As of September 30, 2016 and December 31, 2015, we had the right to purchase 8,581 and 8,888 lots under land option purchase contracts, respectively, for an aggregate purchase price of $720.5 million and $710.6 million as of September 30, 2016 and December 31, 2015, respectively. We do not have title to the property and the creditors generally have no recourse against the Company. As of September 30, 2016 and December 31, 2015, our exposure to loss related to our option contracts with third parties and unconsolidated entities consist of non-refundable option deposits totaling $35.1 million and $34.1 million, respectively, in land deposits related to land options and land purchase contracts.

Capitalized Interest — Interest capitalized, incurred and amortized is as follows (in thousands):



	Three Months Ended September 30,						Nine Months Ended September 30,
	2016			2015			2016			2015
Interest capitalized - beginning of period	$	111,063		$	106,470		$	105,148		$	94,880
Interest incurred	21,851			22,401			66,296			70,708
Interest amortized to cost of home closings	(21,502		)	(21,886		)	(60,032		)	(58,603		)
Interest capitalized - end of period	$	111,412		$	106,985		$	111,412		$	106,985