Inventory

9 Months Ended

Jul. 31, 2022

Inventory at July 31, 2022 and October 31, 2021 consisted of the following (amounts in thousands):


	July 31, 2022		October 31, 2021
Land controlled for future communities	$	250,313	$	185,656
Land owned for future communities	884,815		564,737
Operating communities	8,273,397		7,165,491
	$	9,408,525	$	7,915,884

Operating communities include communities offering homes for sale; communities that have sold all available home sites but have not completed delivery of the homes and communities preparing to open for sale. The carrying value attributable to operating communities includes the cost of homes under construction, land and land development costs, the carrying cost of home sites in current and future phases of these communities, and the carrying cost of model homes.

Backlog consists of homes under contract but not yet delivered to our home buyers (“backlog”).

The amounts we have provided for inventory impairment charges and the expensing of costs that we believe not to be recoverable, for the periods indicated, are shown in the table below (amounts in thousands):


	Three months ended July 31,				Nine months ended July 31,
	2022		2021		2022		2021
Land controlled for future communities	$	3,848	$	2,045	$	6,833	$	3,792
Land owned for future communities	2,400		11,105		3,840		11,105
Operating communities	—		—		—		1,100
	$	6,248	$	13,150	$	10,673	$	15,997

See Note 14, “Commitments and Contingencies,” for information regarding land purchase commitments.

At July 31, 2022, we evaluated our land purchase contracts, including those to acquire land for apartment developments, to determine whether any of the selling entities were variable interest entities (“VIEs”) and, if they were, whether we were the primary beneficiary of any of them. Under these land purchase contracts, we do not possess legal title to the land; our risk is generally limited to deposits paid to the sellers and predevelopment costs incurred; and the creditors of the sellers generally have no recourse against us. At July 31, 2022, we determined that 240 land purchase contracts, with an aggregate purchase price of $3.84 billion, on which we had made aggregate deposits totaling $378.5 million, were VIEs, and that we were not the primary beneficiary of any VIE related to our land purchase contracts. At October 31, 2021, we determined that 289 land

purchase contracts, with an aggregate purchase price of $3.67 billion, on which we had made aggregate deposits totaling $302.4 million, were VIEs and that we were not the primary beneficiary of any VIE related to our land purchase contracts.

Interest incurred, capitalized, and expensed, for the periods indicated, was as follows (amounts in thousands):


	Three months ended July 31,				Nine months ended July 31,
	2022		2021		2022		2021
Interest capitalized, beginning of period	$	237,333	$	295,145	$	253,938	$	297,975
Interest incurred	34,676		37,133		97,569		116,447
Interest expensed to home sales cost of revenues	(37,308)		(49,995)		(110,567)		(127,412)
Interest expensed to land sales and other cost of revenues	(1,221)		(1,064)		(4,848)		(3,482)

Interest reclassified to property, construction and office equipment - net	—		(1,034)		—		(1,034)
Interest capitalized on investments in unconsolidated entities	(1,759)		(1,078)		(4,566)		(3,403)

Previously capitalized interest on investments in unconsolidated entities transferred to inventory	32		76		227		92
Interest capitalized, end of period	$	231,753	$	279,183	$	231,753	$	279,183

During the three months ended July 31, 2022 and 2021, we recognized approximately $(851,000) and $265,000 of net (gains) losses related to our interest rate swaps which is included in accumulated other comprehensive income, respectively, and approximately $38,000 and $60,000 of net losses were reclassified out of accumulated other comprehensive income to home sales cost of revenues, respectively. During the nine months ended July 31, 2022 and 2021, we recognized approximately $(483,000) and $665,000 of net (gains) losses related to our interest rate swaps which is included in accumulated other comprehensive income, respectively, and approximately $220,000 and $102,000 of net losses were reclassified out of accumulated other comprehensive income to home sales cost of revenues, respectively.