Good day, ladies and gentlemen, and welcome to the fourth quarter 2008 Pulte Homes Inc. earnings conference call. (Operator Instructions) I would now like to turn your presentation over to Calvin Boyd, Vice President of Investor and Corporate Communications. Please proceed.

Thank you, Eric. Good morning and thank everyone for joining us to discuss Pulte Homes financial results for the three and 12 months ended December 31, 2008. I'm Calvin Body, Vice President of Investor and Corporate Communications. You've all had a chance to review the press release we issued last night detailing Pulte's fourth quarter 2008 operating and financial performance. On the call to discuss these results are Richard Dugas, President and Chief Executive Officer, Steve Petruska, Executive Vice President and Chief Operating Officer, Roger Cregg, Executive Vice President and CFO, and Vinnie Freeze, Vice President and Controller. For those of you who have access to the Internet, a slide presentation available at www.PulteInc.com will accompany this discussion. The presentation will be archived on the site for the next 30 days for those who want to review it at a later time. As with prior conference calls, I want to alert everyone listening on the call and via the Internet that certain statements and comments made during the course of this call must be considered forward-looking statements as defined by the Securities and Exchange Reform Act of 1995. Pulte Homes believes such statements are based on reasonable assumptions, but there are no assurances that actual outcomes will not be materially different from those discussed today. All forward-looking statements are based on information available to the company on the date of this call, and the company does not undertake any obligation to publicly update or revise any forward-looking statements as a result of new information in the future. Participants in today's call should refer to Pulte's annual report on Form 10-K for the year ended December 31, 2007 and last night's press release for a detailed list of the risks and uncertainties associated with the business. As always, at the end of our prepared comments we will have time for Q&A. We will wait until then before opening the queue for questions. I will now turn over the call to Richard Dugas for his opening comments. Richard?

Thank you, Calvin, and good morning, everyone. Much has been written about the challenging market conditions that the housing industry continued to face in 2008 as this housing downturn enters its fourth year. Indeed, during the fourth quarter conditions for the industry got progressively worse. Unprecedented volatility in the stock market during the quarter, the continuation of tight mortgage availability, and a surge in unemployment across virtually every sector of our economy hit housing hard. These factors led to ongoing erosion in consumer confidence, further lowering homebuyer demand. Exceptionally soft demand, combined with continued high foreclosure rates that kept inventory high meant a further imbalance of supply and demand for housing, thus the very weak market conditions. I think the proper word to describe the overall environment for Q4 and for much of 2008 was uncertainty, and uncertainty breeds consumer inaction. Despite last year's difficult market conditions, Pulte performed at or near the top of the industry in what certainly was the most difficult housing year in our lifetime. Our often-stated 2008 focus on cash generation, overhead management and prudent balance of short-term priorities with longer-term goals guides us through these otherwise uncertain times and positions the company for long-term success. Our execution of this strategy allowed us to realize the following goals during the fourth quarter of 2008: We increased our cash position by almost $500 million during the fourth quarter and ended the period with close to $1.7 billion of cash on hand. This performance is one we are particularly proud of, especially when you consider the tremendous downward pressure on signups and closings during the fourth quarter. Our operators did a fantastic job of closing homes while simultaneously holding the line on development spending along with managing overhead costs, thus enabling us to hit our objective. I…

Thank you, Richard, and good morning, everyone. The fourth quarter homebuilding net new unit order rate decreased approximately 61% from the fourth quarter last year on approximately 28% less communities versus the same quarter last year. Revenues from home settlements for the homebuilding operations decreased approximately 45% from the prior year quarter to approximately $1.5 billion. Lower revenues reflect lower unit closings that were below prior year by approximately 37%. The average sales price decreased approximately 13% versus the prior year quarter to an average of $278,000 per home. Fourth quarter land sales generated approximately $91 million in total revenues, which is an increase of approximately $15 million versus the prior year's quarter. Homebuilding gross profits from home settlements, including homebuilding interest expense for the quarter, was a loss of approximately $84 million versus a positive margin of $3 million in the prior year quarter. Homebuilding gross margins from home settlements as a percentage of revenues was a negative 5.5% compared with a positive one-tenth of 1% in the fourth quarter of 2007. The change in margin conversion versus the prior year quarter is attributed to lower community valuation adjustments in the current quarter, offset by reduced closing volumes and increased selling incentives. Adjusting the current quarter for land and community valuation charges of approximately $205 million, the gross margins from home settlements as a percent of revenue was approximately 7.9% for the quarter. The current quarter benefited from the impact of prior quarters' land and community valuation adjustments by approximately 876 basis points or approximately $133 million. Homebuilding interest expense decreased during the quarter to approximately $61 million versus $72 million in the prior year. Included in the interest expense of $61 million is an additional $20 million of expense related to land and community valuation adjustments taken in…

Thanks, Roger, and good morning, everyone. As Richard stated earlier, the housing market deteriorated further in the fourth quarter of 2008. Although levels of unsold new and existing inventory declined during the period, the month's supply of new homes increased to new record highs by the end of 2008. With home prices falling even further in the quarter and an economic outlook that is battering their personal net worth, buyers are simply electing to sit on the sidelines until the homebuying prospects look better. Add to that the potential difficulty customers have in selling their existing homes and, in short, you get a tough market that only keeps getting more difficult. Adhering to our near-term strategy, we focused on generating cash, maintaining a lower cost structure, and managing our inventory levels. Cash generation has already been covered by Richard and Roger, so I'll provide an update on our cost structure initiatives and inventory management strategies. In the fourth quarter, we took additional steps to realign our overhead structure in response to this ever-changing demand environment. As the downward trends in housing experienced in 2008 continued into 2009, additional reductions will become necessary. We continue to weigh these unfortunate yet unavoidable moves each quarter. To date, we've been relatively successful in leveraging our overhead and we expect to be able to continue this if necessary. I can't say enough good things about the way our field and home office teams have responded. From the house cost perspective, we continue to make progress towards our long-term lean operating goals to take unnecessary costs out of the construction process. From offering smaller, more affordable homes to better scheduling, to ordering materials directly from manufacturers, to working with large box and small box distributors, to eliminating waste at the construction site and building our…

Thank you, Steve. I want to thank everyone for your time and attention on the call this morning. We're now prepared to answer your questions. So that everyone gets a chance, participants will need to be limited to one question and a follow up, after which they will have to get back into the queue. At this time, we'll open up the call to questions. Eric?

Thank you. (Operator Instructions) Your first question comes from Megan McGrath – Barclays. Megan McGrath – Barclays : I wanted to ask a little bit more about your Del Webb communities and Del in general in this environment. I'm curious if you've tried to redesign any of these communities, lower the age, anything to get sort of more folks in the door and sort of how that's been going for you?

We've done just about everything imaginable that we can do in those communities. What you've to remember is that most of those communities from a design standpoint have been approved and we have explained to the homeowners just, you know, in fact what amenities they'll be getting. We do have some leverage typically in overall lot count so what we've been doing, just like we've done in a lot of our communities is we've been increasing our lot count closer to the maximum that's allowed under our zoning. That means probably more smaller lots versus larger lots. We've certainly been looking at the size and scope of amenities and putting in smaller amenities first versus maybe some of the larger stuff. And then clearly we've been looking at different product opportunities. As I said, we've been downsizing our product across the lines, so we've offered more smaller home opportunities for our consumers out there to get our average sales price down.

And just wondering if you can give any more color - you talked a little bit about prices coming down throughout the quarter. We'd heard from some other builders that actually sequentially throughout 4Q things maybe looked a little better, with October being the worst quarter. Could you give us any more color on what you saw sequentially throughout 4Q?

It was pretty difficult through the quarter. I think maybe the more telling comment is that it's been better since the beginning of the year, but it was pretty tough through the quarter. We had a sales event in October that I think might have modified our results a little bit through the quarter vis-à-vis what some of the other builders have reported, so I don't know that necessarily we would say things got better through the quarter probably based on that event. I do think economic conditions were the worst in October, candidly, based on what we saw in the stock market and what have you. But as mentioned, we have seen an improvement in business beginning this year, but we didn't see the same trend that others did through the fourth quarter primarily, I believe, because of the focus we had in our sales event in October.

Your next question comes from Josh Levin - Citigroup.

I wanted to ask you a question about your capital structure. On the one hand you have a lot of cash and you don't have any debt coming due before 2011, and there's a proposal in Congress right now to change the tax code so that if a company buys back its debt at a discount you could spread the gain out over many years for tax purposes. So if a proposal like this was enacted, how do you think you might approach your capital structure? How would you balance your current cash balance with the opportunity to buy back some of your debt at a discount?

I think certainly we need to take a look at that but it's not just looking at the balance sheet, as you well know. It's a matter of also looking at the conditions in the marketplace, not the current conditions but also what you think the future's going to be, so you've got to balance all of those. And to be highly speculative in trying to guess at what Congress might do and then what the environment might do is very difficult at this point. But certainly we would look at all of those things and take them into consideration and try to determine what is the best value for the shareholder at the end of the day.

And a question on the impairment cycle. If you want to do a baseball analogy, what inning do you think you're in and, when you run your impairment test, what assumptions are you making about future home prices and absorption rates?

I think it's hard to project. Each time we come through a quarter we think we're at a point where we've adjusted our asset value to the market value, and as things continue to erode, we continue to have more impairments. Pricing, again, we've been very conservative in that and going out in the future. Certainly after having done this now well over three years, I think that we've not speculated on large increases in prices going out in the future, and that gave rise to some of our impairments this quarter in some of our projects that we don't even have open. As you look out in the future, you have to continue to look at the present and so, as those longer projects are out there, if you've got assumptions in pricing, the bottom can continue to fall out and you make more impairments.

One other comment on that. If you look at what happened throughout the year 2008, you saw a decline for most of the year until the fourth quarter in terms of the impairments and that's clearly indicative of the incredible calamity we saw in the market in the fourth quarter. It's obviously going to be dependent going forward on what we see. If things improve, hopefully impairments will slow down, but that's just very tough to predict.

Your next question comes from Allen Zelman - Zelman & Associates. Allen Zelman - Zelman & Associates: My first question is on the land sale, the $90 million or so. What was the original book value on those assets, your original purchase price?

I don't have that detail in front of me, Allen. Allen Zelman - Zelman & Associates: But it's safe to say that they were previously impaired before this quarter's sale?

Yes, I would say that that's a safe bet. Allen Zelman - Zelman & Associates: And then second, on the gross margin, looking at your conversion, over 90%, it seems pretty obvious that you guys made a concerted effort to flush out some spec product in the quarter. I was hoping to get a little bit of color on kind of the differences in margin you're seeing on spec versus to be built homes. And, looking forward over the next several quarters, when do you think you're going to get kind of back to that point where you're going to be focusing more on the to be built model as opposed to flushing out the specs.

A couple of things. First of there, there were precious few to be built sold during the quarter. Specs continue to be the focus for buyers, people really not wanting to take a future, if you will, on housing in this kind of environment. Obviously, we would like to get back to a typical model for Pulte where plus or minus one-third of our business is spec sales and two-thirds are presold, but we're not in that kind of environment today.So the margin differential between those two categories is tough to say because, candidly, almost all the to be builts are canceling in this kind of environment and we end up selling spec. The other thing on margins is clearly it's being impacted by renegotiating at the closing table. When you see the unbelievable movement in the market like we saw through October, as an example, buyers are in a position to want to cancel and frankly, rather than resell the homes, we would just as soon renegotiate them, generate the cash. Clearly our focus, as you've seen from what we delivered was on cash, and margins, candidly, took a hit as a result of that. We closed a lot of houses in the quarter. So that's a little bit of a general overview. Maybe Steve might have some specifics there.

Yes, Allen, margin pressure's out there. Like Rich said, we may sell a dirt home and it may have a nicer margin when we put it in the backlog, but as markets continue to deteriorate and appraisals get tough and it comes down to the actual day of closing, it's a buyer's market out there. So as Richard indicated, we're doing a lot of negotiating at the closing table just to keep that sold backlog in backlog and get them through the closing process, and that deteriorated on us in the fourth quarter. So what we're continuing to do is the only thing you can do - start fewer homes. And we're putting the brakes on pretty hard across the board and really even watching our sold not starteds, trying to get those buyers pre-approved, trying to understand what the appraisals are going to come in on those properties even before we start our sold homes. And we know that, as I said, we've got too many sold final homes. We're going to move those first. The good news is we typically see better activity during this quarter. The secondary good news is that buyers aren't buying futures; they're buying spec homes after they sell their home, and we think we can make a fairly significant dent in our inventory position in the first quarter.

Your next question comes from Daniel Oppenheim - Credit Suisse.

I was wondering just about following up on that issue of specs. If you talked about your spec count at the end of the fourth quarter, what progress did you make on that in January and what's your goal overall for specs for this year?

Dan, we don't have a lot of specifics yet on January. We're not giving out that information. We just kind of reiterate what we've said. We've seen a pickup in activity. It's almost all in spec inventory overall. And we haven't given any guidance in terms of that. I think Steve pretty much indicated in his comments, we're not happy with our finished spec position, for one; we think it's too high. We do think we can make substantial progress on it this quarter. He just mentioned to Allen that we're going to be putting the brakes pretty hard on new production going forward unless it's very well approved buyers. So look for progress, but I can't predict what the market's going to throw at us this quarter. If we see this sequential momentum continue to build, I would suspect we'll make good progress against those spec numbers. If we see something unexpected, that could hurt us.

And in terms of that, Centex was talking about how they want two to five specs per community and if you think about the spending that you have on land development over the year and thinking about the limited backlog right now, would your goal, though, be to continue to have some specs available just so you can have positive cash flow for the year?

I wouldn't say just from a positive cash flow, but to be able to actually capture the buyer that's out there. And as Steve had mentioned, a lot of the buyers are looking for specs versus waiting for a house to be built. Certainly, we don't want to carry spec just to generate cash flow on the one hand, but on the other hand we'd rather make sure we're driving it from the sales perspective.

Your next question comes from Kenneth Zener - Macquarie Research Equities.

The dynamic you discussed at the closing table, is that being driven by the buyer as much as the lender and are you seeing differences there between the Del Webb versus traditional business?

It's really being driven just kind of across the board. The buyer is in a situation clearly where they're in the driver's seat, and to get them to close when there's been a significant change in the environment, especially like there was in the fourth quarter, it's taking a lot more work on behalf of our folks and we've got to sweeten the deal, so to speak. So that's some of it. Some of it's being driven - I wouldn't say by lenders; it's being driven by the underlying appraisal process. You've got markets like Las Vegas, for instance, where 60% to 70% of the resales are now either short sales or foreclosures and in the past we were always able to kind of throw those appraisals out as non-arms length transactions when the volume was low, but that's becoming the market reality in those places. And so appraisers are kind of caught between a rock and a hard place. They're appraising the market for what property values are and it's impacting us. We come to the table with an appraised value that might be lower than the agreed-upon sales price and we've got to find a way to get that transaction closed. I tell you, if we thought the market was going to get better in the next 30 days, then we'd probably stand our ground. But we haven't seen that and so we continue to be way more flexible at the closing table than what we've historically been.

And then you'd mentioned your owned lot count, the owned lot count had declined to 98. How many lots do you hold in land held for sale, because I think that's a different classification, as well as what's your units under construction?

I don't have the number of lots in the land held for sale.

I do have the number of units under construction and the total units under construction as of 12/31/08 was 5,050 and that compares to 9,030 at the end of the year last year.

Your next question comes from [Rob Hinson] - Deutsche Bank.

On the mortgage business, in the release you mentioned that you had a positive shift in the mix of mortgage loans toward more profitable agency backed products. I just wanted to see if you could provide some color around this. Is there a significant difference in the profitability between FHA and conforming or am I just - could you give some color around that?

Yes, the agency definitely is more profitable, so the shift was minor relative to the previous year. We've been talking about it now the last three quarters this year, where we've seen the shift almost 99% to the agency. So definitely the agency is more profitable from that standpoint. But even given that, it's kind of hollow from the standpoint when you look at the level of volume that's fallen off. But yes, the product from the agency side is more profitable.

And what percentage of your lots are developed and if you could give us a little color in terms of where they are geographically, the majority of them.

Do you mean fully developed?

Yes.

We've got about 29% of our 98,000 lots is fully developed, roughly about 29,000 lots. And we're not going to go into the geographical spread across the U.S. on those, but it's roughly just around 29,000 lots that are finished.

Your next question comes from Michael Rehaut - J.P. Morgan.

First question, just on the land spend, I believe you said that for '09 you expect to do, on a combined basis, $750 to $800 million.

That's correct.

Certainly you guys took the current backlog into consideration there, but I just wanted to get a sense to the extent that that backlog remains down on the order of magnitude it is or even gets hurt a little more, where the flexibility is in that, particularly on the 600 to 650 number. And just remind us what it was for '08.

Sure. The flexibility, basically, is in a couple of areas. One, it's the work in process, as Steve had mentioned, that coming into the year we have more inventory so technically if you look at even building houses, if you wind up with more coming in you might wind up with less being built, so there's a cash flow coming over from one year that we didn't be able to capture in 2008 and so we get that in 2009 driving the inventory levels down. And again, we're always adjusting this based on what's actually happening on a month-to-month basis. Flexibility on the land acquisition side, if you remember in 2008, we started out the year talking about investment of $1.1 to $1.2 billion overall and we ended with roughly just under $800 million. So again, in a dynamic environment, we still see opportunities to leverage ourselves on our land spend. But, again, looking at 2009 into 2010, we're constantly looking at the ability to adjust ourselves for the future as well. So we ended 2008 with roughly about $110 million in land that we took down [inaudible] lot options and about close to $660 million in land investment. So relatively speaking, when you look at it, it's almost comparable, $750 to $800 in 2009, but conditions are going to continue to drive that. In the land spend itself, we've talked about $200 to $250 million in soft costs, so the difference between our $600 to - that is, again, something we continue to look at for flexibility of our ability to slow down more development if the environment deteriorates worse than where we are today.

Let me just add one bit of color to that. I think that might help. If you look at where we expected to spend for land in 2008, Roger had given guidance of about $1.2 billion at the beginning of the year, and he just indicated, we ended up spending plus or minus $750 to $800 million, clearly a difference that helped our cash flow in 2008. So when you look at what we're projecting to spend in 2009 relative to whatever market conditions we see, other than the soft cost component he mentioned, we do have the flexibility to adjust that. And that's clearly what we have frankly gotten pretty good at over the last couple of years. The spend is being monitored incredibly closely. So it's not just a function of backlog and cash in. It's obviously that as well, and I think we've demonstrated we've been able to hit our guidance consistently on that, so we'll continue to manage it that way.

Before my second question, just clarification, the 400 that you broke out of the 600 to 650, I assume, obviously, a decent portion of that has to be Del Webb. Is it also safe to assume that there's some flexibility in slowing down spend in the Del Webb community, even though there are different dynamics there, relative to a traditional community?

Mike, I'd just tell you this. There's flexibility everywhere, right, except for the soft costs. When you continue to look at the environment that you're dealing in, there are builders out there today that are going out of business. So flexibility is the name of the game at this point. But you're looking to run a solid business as you do this so, yeah, we take all of this into consideration. Again, I don't have a breakout between whether it's traditional side or active adult side, but again, clearly there's flexibility there and something that we continue to look at on a monthtomonth basis.

Second question just on the spec comments, you know, that it kind of crept up a little bit more than you would have liked and you're going to be focusing on reducing that. I was wondering if you could give us some color from a regional perspective, if there were some markets where that buildup was a bit more concentrated and just kind of elaborating, perhaps, on some regional color. I think Steve in the past has kind of gone through your different regions and given some more granularity. If you might be able to just walk through some of the key regions of note.

Mike, it's predominantly exactly where you would expect to see it - Southwest, as we continue to get hit with a glut of foreclosures out there, Phoenix and Las Vegas markets, as well as Florida. Those are our predominantly two higher spec areas. Everything else, I mean, you know, there's nothing good out there, so we're working through it every place, but those are the predominantly two higher areas.

Your next question comes from David Goldberg - UBS.

Richard, the first question had to do with the comments about government stimulus and what that means from a demand perspective. I'm wondering if you thought about what it could potentially mean from a supply perspective, i.e., do you think that there's pent-up supplies of people that are waiting to sell their homes in the market? With that, if there is some sort of stimulus to try to pick up demand, to pick up demand accordingly, do you think we'll see a lot more supply hit the market and, if so, do you have any way to think about how to quantify that?

That's a good question. It's hard to predict. I think that if it were the case it would be from what you would call more traditional sellers that are otherwise holding off on putting their homes on the market. Frankly, I think what it would likely do is help to stabilize pricing because the only thing that's going to help stabilize pricing is more demand overall. And I do believe that there's a significant amount of demand that's on the sidelines because the market's so uncertain. But there's no real way to quantify the answer to your question, so I suspect it's possible we could see more people putting their homes on the market. It's not going to change the foreclosure picture much. Frankly, those homes are continuing to come onto the market. The only help we may get on foreclosures there as a result of demand stimulus is if prices stabilize. Maybe some of the homes that are being worked out of foreclosure won't re-foreclose. Unfortunately, the stats are not real good there. A lot of homes that get worked out re-foreclose if the underlying asset value falls. So there's a lot riding on this idea of getting more demand in the market. That's why we've been so aggressive in pursuit of help in the Fix Housing First coalition. But having said all of that, David, it's really hard to quantify the answer to your question. I'm sorry.

I guess as a quick follow up before my second question, I just want to get an idea - do you think the builders', your competitors', maybe even your strategy would change if you did see more demand stimulus, i.e., would you build more spec, would you try to build on some land? Do you think that's a potential issue on the supply side?

Well, I think, frankly, the first thing we'd do is see how the market responded to the stimulus. And I dare say that for quite some period of time we just need to work off what we have. Steve indicated we ended with more spec than we'd like; we'd obviously try to work that down. And then I think the watch word would be cautious in terms of incremental investment. We've got too much inventory; we've got more land in this kind of environment than we need. So we would be cautious. I think we could probably stand to improve returns for awhile before we put a lot of additional inventory out there. So I'm not concerned that builders would all of a sudden build a bunch of product. Frankly, unless you're a large, well-capitalized builder and that list is getting smaller, the banks have been incredibly restrictive on most of the industry, so I don't know that you'd see a return of capital to the industry real fast anyway. So I think the chances of a lot of either spec or land getting built right away would be pretty low.

Your next question comes from Alex Barron - Agency Trading Group.

I wanted to ask you a question. You gave your number of communities impaired for the quarter and all that, but I was wondering what percentage of all your communities you guys own have been impaired at least once here through the last few years?

I don't think we have that information

That's a calculation we haven't done, Alex.

And, you know, some of them roll off, so even though we might have impaired it, it's something that's not with us today, of course.

Right. Yes, that's what I was wondering on the current ones. Well, maybe instead of that question do you guys have like the benefit to gross margins this quarter of previous impairments?

Yes, I mentioned that in my opening comments. I think we had about 876 basis points that were in there, $133 million.

And my other question was Centex was mentioning the other day they expect banks to start, I guess, selling a lot of properties they've taken back probably in the back half of this year. I'm not sure if you guys kind of agree with that or not, but I guess my question is what do you guys think is going to be the impact if those prices are going to be below where maybe potentially, if some of those land positions are close to where you guys have land, is that going to impact your valuation, do you think?

Frankly, I do agree that there will be some bank properties that are going to begin hitting the market. It seems like that's kind of just starting in any kind of a significant way. In terms of how it affects our valuation, it's going to be very community specific. It's impossible to exactly predict. As an example, if we have a large Del Webb community that doesn't have a lot of competitive product near it, it may not have any impact. On the other hand, if it's an entry level community that's right next door to a 200-lot parcel that comes back on the market, it could impact strategy. And I think we indicated before in some cases, depending on the terms you're able to work out, it may push you into looking at some of that dirt and potentially putting it in line ahead of some of the stuff you may own in terms of acquiring it. So it's just going to have to play out, but I guess maybe the most relevant comment I could make is that until those properties hit the market and we see what kind of pricing there is and until demand picks up some, I'm not sure you'll see a lot of that actually get sold. I think some of that property may sit there for awhile until people have an appetite to buy, and I think that's going to be coincident with demand improving.

Your next question comes from Joel Locker - FBN Securities.

Just looking for a - if you had a total for homebuyer deposits at the end of the fourth quarter and what the total number was, the dollar amount?

I think I can find that. Give me a second.

Thanks.

Maybe not as readily as I thought. Maybe we can back on that.

Sure. And then just a follow up question. Your price per square foot to build in California right now, what would you say it is on a move up lot, move up or luxury type house versus, say, a year ago or versus the peak?

Well, Joel, I don't have the exact dollar amount as to what it is right now. It clearly would depend on the product and those type of things, whether we're building attached or detached, because even some of our move-up is still attached. But I would tell you that on an overall basis, we're seeing house cost reductions that are fairly significant on a year-over-year basis. We're probably down from the peak, I would guess, 25% to 40% depending on the product type on some of those house cost numbers.

Joel, hang on. We have the answer to your question there on the customer deposits.

At the end of 2008 it was $41 million, and at the end of the third quarter it was $133 million.

And that's homebuyer deposits against backlog?

Homebuyer deposits. They're reflected as a liability on our balance sheet.

Right. So that's roughly 6.5% of the backlog?

Approximately, yes, that sounds about right. We haven't done the math.

.:

On the gross margin side, I was wondering if I could get a little more color, obviously. You gave the pre-impairment and suggested that your sale in October certainly had an impact on it. Could you color how it's changed your outlook since or what gross margins might look like in backlog compared to what you saw in the quarter?

No, we don't give that, Jim. But as Steve had mentioned, a lot of it is not really reflective in the backlog because if you're doing a lot of spec sales, they're coming in through the quarter. So what you do have a lot of times is if you're doing that you've got dilution of maybe what you have in your backlog because of the specs and the sales or selling a spec twice. So it's not a good indicator the way it has been in the past.

Okay. And then my other question is on the land held for sale. Obviously you took an impairment of, what was it here, about $146 million on land held for sale. Could you give a little color on what you have held for sale in general, any of it under contract, is that reflected or is it just a general valuation allowance for that pool of assets?

Well, like I said, the $146 million was what we adjusted in the quarter. $120 million of the $146 million impairment was related to land that we actually sold. So there was roughly the difference between the $120 and the $146 million, which is $26 million, which would have been what was still remaining on the books as held for sale. Typically what we do is many times we've had land, the same land, the same parcel, under contract, sometimes twice, sometimes three times, sometimes more, and each time we have to reflect a value based on what offers may be for those parcels, so we're constantly adjusting those as we're trying to sell those parcels. And in general, again, every market's got some out there so, again, it was not like we moved a lot of product off of basic inventory into held for sale to actually close it in the fourth quarter. There was a lot for sale throughout the year and the fourth quarter just was higher, as it was last year as well, than the other quarters were.

Your last question comes from Susan Berliner - J.P. Morgan.

Just two quick questions. One was I was wondering if you could just talk about the potential for the NOL and how you're looking at it because I think some of the recent conversations by the builders have been alluding to the fact that it isn't necessarily that beneficial.

Yes. I think, as everybody knows, the discussion on the tax legislation could be to allow 2008 and 2009 to be carried back for five years, so it's going to be a combination of things. One is if you have any remaining amount in 2008, it can be carried back to those years. That's one, and we do have some to be carried back. Then the other, which is unknown - and this is where it's very difficult to answer this question very exact - because you need to generate additional tax losses in the current year, 2009, in order to be applicable to the previous five years. So you would have to, you know, for 2009 know what your runoff is and typically that would be what we would know more today or not today but we would know more through 2009 because we're selling homes that - properties have been impaired. But what's unknown would be new impairments, which you could actually generate a tax loss in 2009, as well as land sales. So on the face of it, the unknown is what's going to happen in 2009 to get carried back, but the number I think for 2008 is relatively small. And so overall, again, the tax legislation, it would be more beneficial if you include 2009, which we haven't experienced yet, versus what we've already experienced in 2008 because we're able to carry back 2008 to the 2006 tax year. So again, if that's not been exhausted, then there's some remaining there.

And just my other question was I guess January sales this year versus last year, what is the change?

We've not given that out; typically don't give out that information within the quarter. But we just gave some color on typically what we were seeing in the traffic and the overall sign-ups.

Thank you. Ladies and gentlemen, this concludes our Q&A session. I would like to turn the call over to Calvin Boyd for closing remarks.

Thank you, Eric. Thanks, everyone, for your participation on the call today. If you have any follow up questions, feel free to give me a call. Have a great day. Thank you.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect and have a good day.