Inventory and Capitalized Interest

6 Months Ended

Jun. 30, 2024

Inventory

Inventory is recorded at cost, unless events and circumstances indicate that the carrying value of the inventory is impaired, at which point the inventory is written down to fair value (see Note 4 to our financial statements 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 June 30, 2024 and December 31, 2023 is as follows:


(In thousands)	June 30, 2024		December 31, 2023
Single-family lots, land and land development costs	$	1,467,961	$	1,446,576
Land held for sale	4,235		6,932
Homes under construction	1,306,650		1,177,101
Model homes and furnishings - at cost (less accumulated depreciation: June 30, 2024 - $11,693; December 31, 2023 - $10,940)	77,621		68,696
Community development district infrastructure	17,517		19,339
Land purchase deposits	62,946		51,608
Consolidated inventory not owned	1,534		26,899
Total inventory	$	2,938,464	$	2,797,151

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 June 30, 2024 and December 31, 2023, we had 2,150 homes (with a carrying value of $426.8 million) and 2,023 homes (with a carrying value of $424.2 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 $17.5 million liability and a $19.3 million liability related to these CDD bond obligations as of June 30, 2024 and December 31, 2023, 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. The Company expenses any deposits and accumulated pre-acquisition costs relating to such agreements in the period when the Company makes the decision not to proceed with the purchase of land under an agreement.

Capitalized Interest

The Company capitalizes interest during land development and home construction. Capitalized interest is charged to land and housing costs and expenses as the related inventory is delivered to a third party. A summary of capitalized interest for the three and six months ended June 30, 2024 and 2023 is as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
(In thousands)	2024		2023		2024		2023
Capitalized interest, beginning of period	$	32,792	$	30,609	$	32,144	$	29,625
Interest capitalized to inventory	9,004		8,925		17,954		17,949
Capitalized interest charged to land and housing costs and expenses	(7,938)		(8,734)		(16,240)		(16,774)
Capitalized interest, end of period	$	33,858	$	30,800	$	33,858	$	30,800

Interest incurred - net	$	1,656	$	4,255	$	3,686	$	11,890