Meritage Homes Corporation Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

REAL ESTATE AND CAPITALIZED INTEREST

REAL ESTATE AND CAPITALIZED INTEREST

9 Months Ended

Sep. 30, 2020

Real estate consists of the following (in thousands):


	As of
	September 30, 2020		December 31, 2019
Homes under contract under construction ⁽¹⁾	$	967,222	$	564,762
Unsold homes, completed and under construction ⁽¹⁾	395,151		686,948
Model homes ⁽¹⁾	86,933		121,340
Finished home sites and home sites under development ⁽²⁾	1,291,710		1,371,311
Total	$	2,741,016	$	2,744,361

(1)Includes the allocated land and land development costs associated with each lot for these homes.

(2)Includes raw land, land held for development and land held for sale, less impairments, if any. Land held for development primarily reflects land and land development costs related to land where development activity is not currently underway but is expected to begin in the future. For these parcels, we have chosen not to currently develop certain land holdings as they typically represent a portion or phases of a larger land parcel that we plan to build out over several years. We do not capitalize interest for inactive assets, and all ongoing costs of land ownership (i.e. property taxes, homeowner association dues, etc.) are expensed as incurred.

We capitalize our development period interest costs incurred to applicable qualifying assets in connection with our real estate development and construction activities. Capitalized interest is allocated to active real estate when incurred and charged to cost of closings when the related property is delivered. A summary of our capitalized interest is as follows (in thousands):


	Three Months Ended September 30,						Nine Months Ended September 30,
	2020		2019		2020		2019
Capitalized interest, beginning of period	$	72,882	$	88,307	$	82,014	$	88,454
Interest incurred	16,103		21,319		50,188		64,227
Interest expensed	(55)		(1,068)		(2,176)		(8,350)
Interest amortized to cost of home and land closings	(21,380)		(20,363)		(62,476)		(56,136)
Capitalized interest, end of period	$	67,550	$	88,195	$	67,550	$	88,195