Inventory and Capitalized Interest

Inventory

Inventory is recorded at cost, unless events and circumstances indicate that the carrying value of the land is impaired, at which point the inventory is written down to fair value (see Note 4 for additional details relating to our procedures for evaluating our inventories for impairment). Inventory includes the costs of land acquisition, land development and home construction, capitalized interest, real estate taxes, direct overhead costs incurred during development and home construction, and common costs that benefit the entire community, less impairments, if any.

A summary of the Company’s inventory as of September 30, 2017 and December 31, 2016 is as follows:



(In thousands)	September 30, 2017		December 31, 2016
Single-family lots, land and land development costs	$	663,170	$	602,528
Land held for sale	12,330		12,155
Homes under construction	645,816		494,664
Model homes and furnishings - at cost (less accumulated depreciation: September 30, 2017 - $12,929; December 31, 2016 - $11,835)	75,618		68,727
Community development district infrastructure	5,298		476
Land purchase deposits	31,374		29,856
Consolidated inventory not owned	22,203		7,528
Total inventory	$	1,455,809	$	1,215,934

Single-family lots, land and land development costs include raw land that the Company has purchased to develop into lots, costs incurred to develop the raw land into lots, and lots for which development has been completed, but which have not yet been used to start construction of a home.

Homes under construction include homes that are in various stages of construction. As of September 30, 2017 and December 31, 2016, we had 1,168 homes (with a carrying value of $238.9 million) and 996 homes (with a carrying value of $199.4 million), respectively, included in homes under construction that were not subject to a sales contract.

Model homes and furnishings include homes that are under construction or have been completed and are being used as sales models. The amount also includes the net book value of furnishings included in our model homes. Depreciation on model home furnishings is recorded using an accelerated method over the estimated useful life of the assets, which is typically three years.

We own lots in certain communities in Florida that have Community Development Districts (“CDDs”). The Company records a liability for the estimated developer obligations that are probable and estimable and user fees that are required to be paid or transferred at the time the parcel or unit is sold to an end user. The Company reduces this liability at the time of closing and the transfer of the property. The Company recorded a $5.3 million and $0.5 million liability related to these CDD bond obligations as of September 30, 2017 and December 31, 2016, respectively, along with the related inventory infrastructure.

Land purchase deposits include both refundable and non-refundable amounts paid to third party sellers relating to the purchase of land. On an ongoing basis, the Company evaluates the land option agreements relating to the land purchase deposits. In the period during which the Company makes the decision not to proceed with the purchase of land under an agreement, the Company expenses any deposits and accumulated pre-acquisition costs relating to such agreement.

Capitalized Interest

The Company capitalizes interest during land development and home construction. Capitalized interest is charged to land and housing costs and expensed as the related inventory is delivered to a third party. The summary of capitalized interest for the three and nine months ended September 30, 2017 and 2016 is as follows:



	Three Months Ended September 30,						Nine Months Ended September 30,
(In thousands)	2017			2016			2017			2016
Capitalized interest, beginning of period	$	16,465		$	16,818		$	16,012		$	16,740
Interest capitalized to inventory	6,178			5,139			15,240			13,392
Capitalized interest charged to land and housing costs and expenses	(4,988		)	(4,963		)	(13,597		)	(13,138		)
Capitalized interest, end of period	$	17,655		$	16,994		$	17,655		$	16,994

Interest incurred	$	10,853		$	8,726		$	29,087		$	26,552