Inventory

3 Months Ended

Jan. 31, 2023

Inventory at January 31, 2023 and October 31, 2022 consisted of the following (amounts in thousands):


	January 31, 2023		October 31, 2022
Land controlled for future communities	$	229,844	$	240,751
Land owned for future communities	850,056		808,851
Operating communities	8,019,585		7,683,724
	$	9,099,485	$	8,733,326

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, which are included in home sales cost of revenues, are shown in the table below (amounts in thousands):


	Three months ended January 31,
		2023		2022
Land controlled for future communities		$	2,604	$	793
Land owned for future communities		—		1,440
Operating communities		5,400		—
		$	8,004	$	2,233

We have also recognized $13.0 million of land impairment charges on land held for sale included in land sales and other cost of revenues during the three-month period ended January 31, 2023. No similar charges were recognized during the three-month period ended January 31, 2022.

See Note 13, “Commitments and Contingencies,” for information regarding land purchase commitments.

At January 31, 2023, 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 January 31, 2023, we determined that 228 land purchase contracts, with an aggregate purchase price of $3.67 billion, on which we had made aggregate deposits totaling $408.9 million, were VIEs, and that we were not the primary beneficiary of any VIE related to our land purchase contracts. At October 31, 2022, we determined that 237 land purchase contracts, with an aggregate purchase price of $3.89 billion, on which we had made aggregate deposits totaling $417.6 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 January 31,
		2023		2022
Interest capitalized, beginning of period		$	209,468	$	253,938
Interest incurred		36,854		31,005
Interest expensed to home sales cost of revenues		(25,080)		(32,437)
Interest expensed to land sales and other cost of revenues		(3,477)		(3,409)


Interest capitalized on investments in unconsolidated entities		(2,463)		(1,290)
Previously capitalized interest transferred to investments in unconsolidated entities		(244)		—
Previously capitalized interest on investments in unconsolidated entities transferred to inventory		139		135
Interest capitalized, end of period		$	215,197	$	247,942

During the three months ended January 31, 2023 and 2022, we recognized approximately $(3.8) million and $274,000 of net (gains) losses related to our interest rate swaps which is included in accumulated other comprehensive income, respectively, and approximately $(362,000) and $76,000 of net (gains) losses were reclassified out of accumulated other comprehensive income to home sales cost of revenues, respectively.