The Company capitalizes interest costs incurred to inventory during active development and construction (active inventory). Capitalized interest is charged to cost of sales as the related inventory is delivered to the buyer. During periods in which the Company’s active inventory is lower than its debt level, a portion of the interest incurred is reflected as interest expense in the period incurred. During the first six months of fiscal 2026 and fiscal 2025, the Company’s active inventory exceeded its debt level, and all interest incurred was capitalized to inventory.

The following table summarizes the Company’s interest costs incurred, capitalized and expensed during the three and six months ended March 31, 2026 and 2025:


	Three Months Ended March 31,				Six Months Ended March 31,
	2026		2025		2026		2025
	(In millions)
Capitalized interest, beginning of period	$	463.9	$	371.5	$	438.7	$	355.1
Interest incurred (1)	60.0		55.2		116.5		101.9
Interest charged to cost of sales	(38.1)		(32.2)		(69.4)		(62.5)
Capitalized interest, end of period	$	485.8	$	394.5	$	485.8	$	394.5

(1) Interest incurred includes (a) interest on the Company’s mortgage repurchase facilities of $4.2 million and $8.9 million in the three and six months ended March 31, 2026, respectively, and $7.4 million and $15.5 million in the prior year periods; (b) Forestar interest of $12.4 million and $25.0 million in the three and six months ended March 31, 2026, respectively, and $10.6 million and $18.8 million in the prior year periods; and (c) interest on the rental revolving credit facility of $10.3 million and $19.4 million in the three and six months ended March 31, 2026, respectively, and $16.4 million and $28.8 million in the prior year periods.