Owned Inventory

3 Months Ended

Dec. 31, 2024

The components of our owned inventory are as follows as of December 31, 2024 and September 30, 2024:


in thousands	As of December 31, 2024		As of September 30, 2024
Homes under construction	$	815,757	$	754,705
Land under development	1,085,063		1,023,188
Land held for future development	19,879		19,879
Land held for sale	16,880		19,086
Capitalized interest	130,433		124,182
Model homes	96,062		99,600
Total owned inventory	$	2,164,074	$	2,040,640

Homes under construction include homes substantially finished and ready for delivery and homes in various stages of construction, including costs of the underlying lot, direct construction costs and capitalized indirect costs. As of December 31, 2024, we had 2,435 homes under construction, including 1,219 speculative (spec) homes totaling $395.7 million (894 in-process spec homes totaling $257.3 million, and 325 finished spec homes totaling $138.4 million). As of September 30, 2024, we had 2,315 homes under construction, including 1,154 spec homes totaling $360.9 million (827 in-process spec homes totaling $231.4 million, and 327 finished spec units totaling $129.5 million).

Land under development consists principally of land acquisition, land development and other common costs. These land related costs are allocated to individual lots on a pro-rata basis, and the lot costs are transferred to homes under construction when home construction begins for the respective lots. Certain of the fully developed lots in this category are reserved by a customer deposit or sales contract.

Land held for future development consists of communities for which construction and development activities are expected to occur in the future or have been idled and are stated at cost unless facts and circumstances indicate that the carrying value of the assets may not be recoverable. All applicable carrying costs, such as interest and real estate taxes, are expensed as incurred.

Land held for sale includes land and lots that do not fit within our homebuilding programs or strategic plans in certain markets, and land is classified as held for sale once certain criteria are met (refer to Note 2 to the consolidated financial statements within our 2024 Annual Report). These assets are recorded at the lower of the carrying value or fair value less costs to sell (net realizable value).

The amount of interest we are able to capitalize depends on our qualified inventory balance, which considers the status of our inventory holdings. Our qualified inventory balance includes the majority of our homes under construction and land under development but excludes land held for future development and land held for sale (see Note 5 for additional information on capitalized interest).

Total owned inventory by reportable segment is presented in the table below as of December 31, 2024 and September 30, 2024:


in thousands	Projects in Progress(a)		Land Held for Future Development		Land Held for Sale		Total Owned Inventory
December 31, 2024
West	$	1,084,056	$	3,483	$	13,043	$	1,100,582
East	441,945		10,888		1,060		453,893
Southeast	390,546		5,508		2,777		398,831
Corporate and unallocated(b)	210,768		—		—		210,768
Total	$	2,127,315	$	19,879	$	16,880	$	2,164,074
September 30, 2024
West	$	1,023,140	$	3,483	$	17,110	$	1,043,733
East	411,914		10,888		1,300		424,102
Southeast	365,676		5,508		676		371,860
Corporate and unallocated(b)	200,945		—		—		200,945
Total	$	2,001,675	$	19,879	$	19,086	$	2,040,640

(a) Projects in progress include homes under construction, land under development, capitalized interest, and model home categories from the preceding table.

(b) Projects in progress amount includes capitalized interest and indirect costs that are maintained within our Corporate and unallocated segment.

Inventory Impairments

Inventory assets are assessed for recoverability periodically in accordance with the policies described in Notes 2 and 4 to the consolidated financial statements within our 2024 Annual Report.

Projects in Progress Impairments

Projects in progress inventory includes homes under construction and land under development grouped together as communities. Projects in progress are stated at cost unless facts and circumstances indicate that the carrying value of the assets may not be recoverable.

We assess our projects in progress inventory for indicators of impairment at the community level on a quarterly basis. If indicators of impairment are present for a community with more than ten homes remaining to close, we perform a recoverability test by comparing the expected undiscounted cash flows for the community to its carrying value. If the aggregate undiscounted cash flows are in excess of the carrying value, the asset is considered to be recoverable and is not impaired. If the carrying value exceeds the aggregate undiscounted cash flows, we perform a discounted cash flow analysis to determine the fair value of the community, and impairment charges are recorded if the fair value of the community's inventory is less than its carrying value.

No project in progress impairments were recognized during the three months ended December 31, 2024 and 2023.

Land Held for Sale Impairments

We evaluate the net realizable value (fair value less cost to sell) of a land held for sale asset when indicators of impairment are present. Impairments on land held for sale generally represent write downs of these properties to net realizable value based on sales contracts, letters of intent, current market conditions, and recent comparable land sale transactions, as applicable. Absent an executed sales contract, our assumptions related to land sales prices require significant judgment because the real estate market is highly sensitive to changes in economic conditions, and our estimates of sale prices could differ significantly from actual results.

No land held for sale impairments were recognized during the three months ended December 31, 2024 and 2023.

Abandonments

From time to time, we may determine to abandon lots or not exercise certain option agreements that are not projected to produce adequate results or no longer fit with our long-term strategic plan. Additionally, in certain limited instances, we are forced to abandon lots due to seller non-performance, permitting or other regulatory issues that do not allow us to build on those lots. If we intend to no longer pursue the purchase of property, we record an abandonment charge to earnings for the non-refundable deposit amount and any related capitalized costs in the period such decision is made.

No abandonment charges were recognized during the three months ended December 31, 2024 and 2023. As we grow our business in the years ahead, the dollar value of abandonment charges may also grow.

Lot Option Agreements

In addition to purchasing land directly, we utilize lot option agreements that enable us to defer acquiring portions of properties owned by third parties and unconsolidated entities until we have determined whether to exercise our lot option. The majority of our lot option agreements require a non-refundable cash deposit or issuance of an irrevocable letter of credit or surety bond based on a percentage of the purchase price of the land for the right to acquire lots during a specified period at a specified price. Purchase of the properties under these agreements is contingent upon satisfaction of certain requirements by us and the sellers. Under lot option agreements, our liability is generally limited to forfeiture of the non-refundable deposits, letters of credit or surety bonds, and other non-refundable amounts incurred. If the Company cancels a lot option agreement, the cancellation would result in a write-off of the related deposits and pre-acquisition costs, but would not expose the Company to the overall risks or losses of the applicable entity we are purchasing from. We expect to exercise, subject to market conditions and seller satisfaction of contract terms, most of our remaining option agreements. Various factors, some of which are beyond our control, such as market conditions, weather conditions, and the timing of the completion of development activities, will have a significant impact on the timing of option exercises or whether lot options will be exercised at all.

The following table provides a summary of our interests in lot option agreements as of December 31, 2024 and September 30, 2024:


	As of December 31, 2024		As of September 30, 2024
in thousands


Deposits and non-refundable pre-acquisition costs incurred(a)	$	297,803	$	227,770

Remaining purchase price if lot option agreements are exercised	$	1,598,199	$	1,458,679

(a) Amount is included as a component of land under development within our owned inventory in the condensed consolidated balance sheets.