October 14, 1997



VIA FEDERAL EXPRESS
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Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C.  20549

         Re:      The Monterey Homes Corporation Stock Option Plan
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Ladies and Gentlemen:

         We have acted as special Maryland counsel to Monterey Homes Corporation
(the "Company"),  in connection with its Registration Statement on Form S-8 (the
"Registration  Statement")  filed under the Securities Act of 1933,  relating to
the  registration  of 225,000 and 250,000  shares of its Common Stock,  $.01 par
value  (the  "Plan  Shares"  and  "Hamberlin  Shares,"  respectively),  issuable
pursuant to the Company's Stock Option Plan (the "Plan") and to the Stock Option
Agreement dated December 21, 1995 between the Company and Alan D. Hamberlin (the
"Hamberlin Agreement"), respectively.

         In that connection, we have examined such documents, corporate records,
and other instruments as we have deemed necessary or appropriate for purposes of
this opinion.

         Based upon the  foregoing,  we are of the opinion that the Plan Shares,
when issued and sold in accordance with the terms of the Plan, and the Hamberlin
Shares,  when issued upon exercise of the Hamberlin  Agreement,  will be validly
issued, fully paid, and nonassessable.

         We hereby  consent  to the use of this  opinion  as an  exhibit  to the
Registration Statement.

                                        Very truly yours,

                                        Venable, Baetjer and Howard LLP