Inventories

6 Months Ended

Jun. 30, 2022

Inventories consist of finished lots, construction in process (“CIP”) and finished homes, including capitalized interest. In addition, lot option fees related to off-balance sheet arrangements and due diligence costs related to land development are also capitalized into inventories – finished lots and land. Finished lots are purchased with the intent of building and selling a home, and are generally purchased just-in-time for construction. CIP represents the homebuilding activity associated with homes to be sold and speculative homes. CIP includes the cost of the finished lot and all of the direct costs incurred to build the home. The cost of the home is expensed on a specific identification basis.

Interest is capitalized and included within each inventory category above. Capitalized interest activity is summarized in the table below for the three and six months ended June 30, 2022 and 2021 (in thousands):


	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2022		2021		2022		2021
Capitalized interest at the beginning of the period	$	49,392	$	18,842	$	33,266	$	21,091
Interest incurred	25,447		7,329		50,433		13,997
Interest expensed	(13)		(16)		(26)		(658)
Interest charged to homebuilding cost of sales	(12,790)		(7,365)		(21,637)		(15,640)
Capitalized interest at the end of the period	$	62,036	$	18,791	$	62,036	$	18,791