Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, or non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer x Accelerated Filer ¨ Non-Accelerated Filer ¨

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

As of ~~April~~June 30, 2007, ~~45,722,000~~45,841,000 shares of M.D.C. Holdings, Inc. common stock were outstanding.


	March 31, 2007			December 31, 2006			June 30, 2007			December 31, 2006
ASSETS
Cash and cash equivalents	$	630,681		$	507,947		$	668,379		$	507,947
Restricted cash		2,546			2,641			2,176			2,641
Home sales and other receivables		69,255			143,936			87,823			143,936
Mortgage loans held in inventory, net		150,356			212,903			125,717			212,903
Inventories
Housing completed or under construction		1,171,137			1,178,671			1,273,042			1,178,671
Land and land under development		1,341,804			1,575,158			1,061,884			1,575,158
Property and equipment, net		41,503			44,606			38,983			44,606
Deferred income taxes		174,590			124,880			229,291			124,880
Prepaid expenses and other assets, net		107,593			119,133			98,406			119,133

Total Assets	$	3,689,465		$	3,909,875		$	3,585,701		$	3,909,875

LIABILITIES
Accounts payable	$	132,905		$	171,005		$	161,208		$	171,005
Accrued liabilities		367,362			418,953			361,154			418,953
Income taxes payable		11,602			28,485			-			28,485
Related party liabilities		701			2,401			701			2,401
Homebuilding line of credit		-			-			-			-
Mortgage line of credit		100,703			130,467			99,411			130,467
Senior notes, net		996,782			996,682			996,883			996,682

Total Liabilities		1,610,055			1,747,993			1,619,357			1,747,993

COMMITMENTS AND CONTINGENCIES		-			-			-			-

STOCKHOLDERS’ EQUITY
Preferred stock, $0.01 par value; 25,000,000 shares authorized; none issued or outstanding		-			-			-			-
Common stock, $0.01 par value; 250,000,000 shares authorized; 45,708,000 and 45,694,000 issued and outstanding, respectively, at March 31, 2007 and 45,179,000 and 45,165,000 issued and outstanding, respectively, at December 31, 2006		457			452
Common stock, $0.01 par value; 250,000,000 shares authorized; 45,866,000 and 45,841,000 issued and outstanding, respectively, at June 30, 2007 and 45,179,000 and 45,165,000 issued and outstanding, respectively, at December 31, 2006								458			452
Additional paid-in capital		783,873			760,831			788,316			760,831
Retained earnings		1,296,742			1,402,261			1,179,232			1,402,261
Accumulated other comprehensive loss		(1,003	)		(1,003	)		(1,003	)		(1,003	)
Less treasury stock, at cost; 14,000 shares at March 31, 2007 and December 31, 2006		(659	)		(659	)
Less treasury stock, at cost; 25,000 and 14,000 shares at June 30, 2007 and December 31, 2006, respectively								(659	)		(659	)

Total Stockholders’ Equity		2,079,410			2,161,882			1,966,344			2,161,882

Total Liabilities and Stockholders’ Equity	$	3,689,465		$	3,909,875		$	3,585,701		$	3,909,875

The accompanying Notes are an integral part of the Unaudited Consolidated Financial Statements.


	Three Months Ended March 31,						Three Months Ended June 30,						Six Months Ended June 30,
	2007			2006			2007			2006			2007			2006
REVENUE

Home sales revenue	$	711,800		$	1,117,155		$	687,813		$	1,188,561		$	1,399,613		$	2,305,716
Land sales revenue		6,034			1,837			3,417			13,639			9,451			15,476
Other revenue		27,290			26,433			25,478			29,781			52,768			56,214

Total Revenue		745,124			1,145,425			716,708			1,231,981			1,461,832			2,377,406

COSTS AND EXPENSES

Home cost of sales		599,199			814,850			590,564			911,707			1,189,763			1,726,557
Land cost of sales		5,107			1,774			2,181			13,140			7,288			14,914
Asset impairments		141,422			600			161,050			260			302,472			860
Marketing expenses		29,079			29,035			29,371			31,568			58,450			60,603
Commission expenses		23,250			32,843			24,380			37,394			47,630			70,237
General and administrative expenses		90,657			111,265			80,090			115,551			170,747			226,816
Related party expenses		91			2,577			100			127			191			2,704

Total Costs and Expenses		888,805			992,944			887,736			1,109,747			1,776,541			2,102,691

(Loss) income before income taxes		(143,681	)		152,481			(171,028	)		122,234			(314,709	)		274,715
Benefit from (provision for) income taxes		49,283			(57,060	)		64,956			(45,743	)		114,239			(102,803	)

NET (LOSS) INCOME	$	(94,398	)	$	95,421		$	(106,072	)	$	76,491		$	(200,470	)	$	171,912

(LOSS) EARNINGS PER SHARE

Basic	$	(2.07	)	$	2.13		$	(2.32	)	$	1.70		$	(4.40	)	$	3.83

Diluted	$	(2.07	)	$	2.08		$	(2.32	)	$	1.66		$	(4.40	)	$	3.74

WEIGHTED-AVERAGE SHARES

Basic		45,501			44,820			45,722			44,939			45,612			44,880

Diluted		45,501			45,970			45,722			45,972			45,612			45,967

DIVIDENDS DECLARED PER SHARE	$	0.25		$	0.25		$	0.25		$	0.25		$	0.50		$	0.50

The accompanying Notes are an integral part of the Unaudited Consolidated Financial Statements.


	Three Months Ended March 31,						Six Months Ended June 30,
	2007			2006			2007			2006
OPERATING ACTIVITIES
Net (loss) income	$	(94,398	)	$	95,421		$	(200,470	)	$	171,912
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities
Amortization of deferred marketing costs		7,687			9,085			14,927			19,086
Depreciation and amortization of long-lived assets		4,133			4,543			7,290			9,423
Asset impairments		141,422			600			302,472			860
Write-offs of land option deposits and pre-acquisition costs		4,041			3,623
Non-cash land option deposit and pre-acquisition write-off costs								10,210			15,752
Deferred income taxes		(49,710	)		(4,640	)		(104,411	)		(16,812	)
Stock-based compensation expense		2,637			3,947			5,408			7,142
Non-cash related party expenses		-			2,301			-			2,301
Excess tax benefits from stock-based compensation		(5,850	)		(1,192	)		(6,326	)		(1,486	)
Amortization of debt discount		100			94
Other non-cash expenses								1,246			189
Net change in assets and liabilities
Restricted cash		95			(907	)		465			(113	)
Home sales and other receivables		74,681			61,067			60,466			(12,534	)
Mortgage loans held in inventory, net		62,547			46,939			87,186			74,003
Housing completed or under construction		(18,764	)		(59,838	)		(158,873	)		(191,903	)
Land and land under development		118,230			(159,553	)		275,304			(82,989	)
Prepaid expenses and other assets, net		(508	)		(23,523	)		(5,067	)		(30,575	)
Accounts payable		(38,100	)		(11,364	)		(9,797	)		22,919
Accrued liabilities		(48,180	)		(56,994	)		(54,388	)		(29,792	)
Income taxes payable		(10,740	)		(18,052	)		(26,320	)		(69,654	)

Net cash provided by (used in) operating activities		149,323			(108,443	)		199,322			(112,271	)


INVESTING ACTIVITIES
Net purchase of property and equipment		(710	)		(1,638	)		(2,055	)		(4,331	)


FINANCING ACTIVITIES
Lines of credit
Advances		160,448			354,800			468,478			437,531
Principal payments		(190,212	)		(285,792	)		(499,534	)		(425,900	)
Excess tax benefits from stock-based compensation		5,850			1,192			6,326			1,486
Dividend payments		(11,414	)		(11,217	)		(22,852	)		(22,456	)
Proceeds from exercise of stock options		9,449			2,306			10,747			2,894

Net cash (used in) provided by financing activities		(25,879	)		61,289
Net cash used in financing activities								(36,835	)		(6,445	)

Net increase (decrease) in cash and cash equivalents		122,734			(48,792	)
Net increase in (decrease in) cash and cash equivalents								160,432			(123,047	)
Cash and cash equivalents
Beginning of period		507,947			214,531			507,947			214,531

End of period	$	630,681		$	165,739		$	668,379		$	91,484

The accompanying Notes are an integral part of the Unaudited Consolidated Financial Statements.

The Unaudited Consolidated Financial Statements of M.D.C. Holdings, Inc. (“MDC” or the “Company,” which refers to M.D.C. Holdings, Inc. and its subsidiaries) have been prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. These statements reflect all normal and recurring adjustments which, in the opinion of management, are necessary to present fairly the financial position, results of operations and cash flows of MDC at ~~March 31,~~June 30, 2007 and for all periods presented. These statements should be read in conjunction with MDC’s Consolidated Financial Statements and Notes thereto included in MDC’s Annual Report on Form 10-K for the year ended December 31, 2006, filed with the SEC on February 28, 2007. Certain prior period balances have been reclassified to conform to the current year’s presentation.

The Company in the past has experienced seasonality and quarter-to-quarter variability in homebuilding activity levels. In general, the number of homes closed and associated home sales revenue historically have increased during the third and fourth quarters, compared with the first and second quarters. The Company believes that this seasonality reflects the historical tendency of homebuyers to purchase new homes in the spring with closings scheduled in the fall or winter, as well as the scheduling of construction to accommodate seasonal weather conditions in certain geographical areas (or markets). Also, the Company in the past has experienced seasonality in the financial services operations because mortgage loan originations are directly attributed to the closing of homes from the homebuilding operations. Due to reduced home closing levels during 2006 and continuing in 2007, this seasonality pattern in the homebuilding and financial services operations did not continue for the third and fourth quarters of 2006 and for the first two quarters of 2007, and there can be no assurance that it will continue in the future. The Unaudited Consolidated Statements of ~~Income~~Operations for the three and six months ended June 30, 2007 and the Unaudited Consolidated Statements of Cash Flows for the ~~three~~six months ended ~~March 31,~~June 30, 2007 are not necessarily indicative of the results to be expected for the full year. Refer to the economic conditions described under the caption “Risk Factors” in Part II, Item 1A of this Quarterly Report on Form 10-Q and “Risk Factors Relating to our Business” in Item 1A of the Company’s December 31, 2006 Annual Report on Form 10-K. ~~There are no assurances as to the results of operations for the second, third and fourth quarters of 2007.~~

The following table summarizes, by quarter, home sales revenue during 2007, 2006 and 2005 (in thousands).


	Three Months Ended								Three Months Ended
	March 31,		June 30,		September 30,		December 31,		March 31,		June 30,		September 30,		December 31,
2007	$	711,800		N/A		N/A		N/A	$	711,800	$	687,813		N/A		N/A
2006	$	1,117,155	$	1,188,561	$	1,050,700	$	1,294,140		1,117,155		1,188,561	$	1,050,700	$	1,294,140
2005	$	914,751	$	1,026,943	$	1,145,481	$	1,705,525		914,751		1,026,943		1,145,481		1,705,525

On a quarterly basis, the Company evaluates its inventory for impairment in accordance with Financial Accounting Standards Board (“FASB”) Statement of Financial Accounting Standards (“SFAS”) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS 144”). ~~As a result of its evaluation, the Company recorded impairments of its housing completed and under~~

As a result of its evaluation, the Company recorded impairments of its housing completed and under construction inventories of $38.2 million and $64.5 million during the three and six months ended June 30, 2007, respectively, and impairments of its land and land under development inventories of ~~$26.3~~$122.9 million and ~~$115.1~~$238.0 million ~~respectively, at March 31, 2007.~~during the three and six months ended June 30, 2007, respectively. These impairments, which relate to assets contracted for primarily during 2004 and 2005, were ~~the result of: (1) significant~~due to decreases in home sales prices and/or increases in ~~the level of~~ incentives offered ~~to generate~~in an effort to: (1) stimulate new home orders ~~and~~when the spring selling season failed to materialize; (2) maintain homes in Backlog (defined as homes under contract but not yet delivered) until they close; ~~(2) decreases in Company home sales prices when the typical spring selling season failed to materialize;~~ and (3) ~~decreases in Company home sales prices and/or increases in the level of incentives offered to~~ remain competitive with home sales prices offered by our competitors. In accordance with SFAS 144, the Company generally determined the fair value of each impaired asset based upon the present value of the estimated future cash flows on a subdivision-by-subdivision basis at a discount rate commensurate with the risk of the subdivision under evaluation, generally ranging from 10% to 18%. ~~The Company recorded $0.6 million in asset impairments for the three months ended March 31, 2006 relating to land held for sale.~~

The impairments recorded ~~at March 31,~~during the three and six months ended June 30, 2007 and 2006, by reportable segment (as defined in Note 9), are as follows (in thousands):


	Three Months Ended March 31,				Three Months Ended June 30,				Six Months Ended June 30,
	2007		2006		2007		2006		2007		2006
West	$	121,904	$	-	$	132,730	$	-	$	254,634	$	-
Mountain		654		-		9,123		-		9,777		-
East		2,567		-		5,865		-		8,432		-
Other Homebuilding		16,297		600		13,332		260		29,629		860

Total impairment	$	141,422	$	600
Total asset impairment					$	161,050	$	260	$	302,472	$	860

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities, Including an amendment of FASB Statement No. 115” (“SFAS 159”). SFAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value and establishes presentation and disclosure requirements designed to facilitate comparisons between entities that choose different measurement attributes for similar types of assets and liabilities. SFAS 159 is effective for financial statements issued for fiscal years beginning after November 15, 2007. The Company does not expect SFAS 159 to have a material impact on its financial position, results of operations or cash flows upon adoption.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS 157”), which defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. Earlier application is encouraged provided that the reporting entity has not yet issued financial statements for that fiscal year, including financial statements for an interim period within that fiscal year. The Company currently is evaluating the impact, if any, that SFAS 157 may have on its financial position, results of operations or cash flows.

In July 2006, the FASB issued FASB Interpretation (“FIN”) No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”). FIN 48 is an interpretation of SFAS No. 109, “Accounting for Income Taxes” (“SFAS 109”). FIN 48 provides interpretive guidance for the financial statement recognition and measurement of a tax position taken, or expected to be taken, in a tax return. FIN 48 requires the affirmative evaluation that it is more-likely-than-not, based on the technical merits of a tax position, that an enterprise is entitled to economic benefits resulting from positions taken in income tax returns. If a tax position does not meet the “more-likely-than-not” recognition threshold, the benefit of that position is not recognized in the financial statements. FIN 48 also requires companies to disclose additional quantitative and qualitative information in their financial statements about uncertain tax positions. FIN 48 iswas effective for fiscal ~~years~~year beginning ~~after December 15, 2006,~~January 1, 2007, and the $0.3 million cumulative effect of applying FIN 48 ~~shall be~~was reported as an adjustment to the opening balance of retained earnings for ~~that~~this fiscal year. ~~The adoption of FIN 48 did not have a material impact on the Company’s financial position, results of operations or cash flows.~~

In March 2006, the FASB issued SFAS No. 156, “Accounting for Servicing of Financial Assets” (“SFAS 156”), an amendment of SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities.” SFAS 156 requires that servicing assets and servicing liabilities be recognized at fair value, if practicable, when a company enters into a servicing agreement and allows two ~~alternatives,~~alternative subsequent measurement methods, the amortization and fair value ~~measurement methods, as subsequent~~ measurement methods. This accounting standard is effective for all new transactions occurring as of the beginning of fiscal years beginning after September 15, 2006. The adoption of SFAS 156 did not have a material impact on the Company’s financial position, results of operations or cash flows.

In February 2006, the FASB issued SFAS No. 155, “Accounting for Certain Hybrid Financial Instruments, an amendment of FASB Statements No. 133 and 140” (“SFAS 155”). SFAS 155 eliminates the exemption from applying SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” to interests in securitized financial assets so that similar instruments are accounted for similarly regardless of the form of the instrument. SFAS 155 also allows a ~~preparer~~company to elect fair value measurement at acquisition, at issuance, or when a previously recognized financial instrument is subject to a remeasurement event, on an instrument-by-instrument basis, in cases in which a derivative would otherwise be bifurcated. At the adoption of SFAS 155, any difference between the total carrying amount of the individual components of any existing hybrid financial instrument and the fair value of the combined hybrid financial instrument should be recognized as a cumulative-effect adjustment to the Company’s beginning retained earnings. SFAS 155 is effective for ~~the Company for~~ all financial instruments acquired or issued after January 1, 2007. The adoption of SFAS 155 did not have a material impact on the Company’s financial position, results of operations or cash flows.

The following table sets forth information relating to accrued liabilities (in thousands).


	March 31, 2007		December 31, 2006		June 30, 2007		December 31, 2006
Accrued liabilities
Warranty reserves	$	101,835	$	102,033	$	104,089	$	102,033
Insurance reserves		51,908		50,854		53,952		50,854
Land development and home construction accruals		51,905		64,224		44,500		64,224
Accrued compensation and related expenses		39,692		74,751		47,119		74,751
Customer and escrow deposits		30,577		28,705		31,797		28,705
Accrued interest payable		20,396		13,321		12,922		13,321
Accrued pension liability		13,483		13,183		13,783		13,183
Deferred revenue		10,818		23,089		6,362		23,089
Other accrued liabilities		46,748		48,793		46,630		48,793

Total accrued liabilities	$	367,362	$	418,953	$	361,154	$	418,953

The Company calculates ~~earnings~~(loss) or ~~loss~~earnings per share (“EPS”) in accordance with SFAS No. 128, “Earnings per Share” (“SFAS 128”). Pursuant to SFAS 128, basic EPS excludes the dilutive effect of common stock equivalents and is computed by dividing net income or loss by the weighted-average number of common shares outstanding during the period. Diluted EPS includes the dilutive effect of common stock equivalents and is computed using the weighted-average number of common stock and common stock equivalents outstanding during the period. Common stock equivalents ~~consist of~~include stock options and unvested restricted stock awards. Diluted EPS for the three and six months ended ~~March 31,~~June 30, 2007 excluded common stock equivalents because the effect of their inclusions would be anti-dilutive, or would decrease the reported loss per share. Using the treasury stock method pursuant to SFAS 128, the weighted-average common stock equivalents excluded were ~~879,000~~1.5 million and 1.6 million shares during the three and six months ended ~~March 31, 2007.~~June 30, 2007, respectively.

The basic and diluted EPS calculations are shown below (in thousands, except per share amounts).


	Three Months Ended March 31,					Three Months Ended June 30,					Six Months Ended June 30,
	2007			2006		2007			2006		2007			2006
Basic (Loss) Earnings Per Share
Net (loss) income	$	(94,398)		$	95,421	$	(106,072	)	$	76,491	$	(200,470	)	$	171,912

Basic weighted-average shares outstanding		45,501			44,820		45,722			44,939		45,612			44,880

Per share amounts	$	(2.07	)	$	2.13	$	(2.32	)	$	1.70	$	(4.40	)	$	3.83

Diluted (Loss) Earnings Per share
Net (loss) income	$	(94,398	)	$	95,421	$	(106,072	)	$	76,491	$	(200,470	)	$	171,912

Basic weighted-average shares outstanding		45,501			44,820		45,722			44,939		45,612			44,880
Stock options, net		-			1,150		-			1,033		-			1,087

Diluted weighted-average shares outstanding		45,501			45,970		45,722			45,972		45,612			45,967

Per share amounts	$	(2.07	)	$	2.08	$	(2.32	)	$	1.66	$	(4.40	)	$	3.74

The Company capitalizes interest incurred on its senior notes and Homebuilding Line (as defined below) during the period of active development and through the completion of construction of its homebuilding inventories. Interest incurred on the senior notes or Homebuilding Line, if any, that is not capitalized ~~is reported as~~and interest ~~expense. Interest incurred~~expense on the Mortgage Line (as defined below) is ~~charged to~~included in interest income, ~~net.~~ net, which is a component of other revenue in the Unaudited Consolidated Statements of Operations.


	Three Months Ended March 31,						Three Months Ended June 30,						Six Months Ended June 30,
	2007			2006			2007			2006			2007			2006
Total Interest Incurred
Corporate and Homebuilding	$	14,441		$	14,837		$	14,435		$	15,006		$	28,876		$	29,843
Financial Services and Other		651			1,964			359			2,317			1,010			4,281

Total interest incurred	$	15,092		$	16,801		$	14,794		$	17,323		$	29,886		$	34,124


Total Interest Capitalized
Interest capitalized in homebuilding inventory, beginning of period	$	50,655		$	41,999		$	51,811		$	47,222		$	50,655		$	41,999
Interest capitalized during the period		14,441			14,837			14,435			15,006			28,876			29,843
Previously capitalized interest included in home cost of sales during the period		(13,285	)		(9,614	)		(12,258	)		(13,659	)		(25,543	)		(23,273	)

Interest capitalized in homebuilding inventory, end of period	$	51,811		$	47,222		$	53,988		$	48,569		$	53,988		$	48,569


	Three Months Ended March 31,				Three Months Ended June 30,				Six Months Ended June 30,
	2007		2006		2007		2006		2007		2006
Interest income, net	$	8,995	$	3,777
Interest income					$	9,520	$	3,357	$	18,515	$	7,134
Interest expense, net of interest capitalized		651		1,964		359		2,317		1,010		4,281

Total interest income, net	$	8,344	$	1,813	$	9,161	$	1,040	$	17,505	$	2,853

Warranty reserves presented in the table below relate to general and structural reserves, as well as reserves for known, unusual warranty-related expenditures not covered by the Company’s general and structural warranty reserve. Generally, warranty reserves are reviewed monthly, using historical data and other relevant information, to determine the reasonableness and adequacy of both the reserve and the per-unit reserve amount originally included in home cost of sales, as well as the timing of the reversal of any excess reserve. Warranty payments for an individual house may exceed the related reserve. Payments in excess of the reserve are evaluated in the aggregate to determine if an adjustment to the warranty reserve should be recorded, which could result in a corresponding adjustment to home cost of sales. Warranty reserve activity for the three and six months ended ~~March 31,~~June 30, 2007 and 2006 is shown below (in thousands).


	Three Months Ended March 31,						Three Months Ended June 30,						Six Months Ended June 30,
	2007			2006			2007			2006			2007			2006
Warranty reserve balance at beginning of period	$	102,033		$	82,238		$	101,835		$	85,613		$	102,033		$	82,238
Warranty expense provision		6,422			11,496			6,169			11,797			12,591			23,293
Warranty cash payments		(6,445	)		(8,121	)		(7,408	)		(7,790	)		(13,853	)		(15,911	)
Warranty reserve adjustments		(175	)		-			3,493			2,390			3,318			2,390

Warranty reserve balance at end of period	$	101,835		$	85,613		$	104,089		$	92,010		$	104,089		$	92,010

The Company records expenses and liabilities for losses and loss adjustment expenses for claims associated with: (1) insurance policies and re-insurance agreements issued by StarAmerican Insurance Ltd. (“StarAmerican”) and Allegiant Insurance Company, Inc., A Risk Retention Group (“Allegiant”); (2) self-insurance, including workers compensation; and (3) deductible amounts under the Company’s insurance policies. The establishment of the provisions for outstanding losses and loss adjustment expenses is based on actuarial studies that include known facts and interpretation of circumstances,

including the Company’s experience with similar cases and historical trends involving claim payment patterns, pending levels of unpaid claims, product mix or concentration, claim severity, frequency patterns such as those caused by natural disasters, fires, or accidents, depending on the business conducted, and changing regulatory and legal environments.

The following table summarizes the insurance reserve activity for the three and six months ended ~~March 31,~~June 30, 2007 and 2006 (in thousands).


	Three Months Ended March 31,						Three Months Ended June 30,						Six Months Ended June 30,
	2007			2006			2007			2006			2007			2006
Insurance reserve balances at beginning of period	$	50,854		$	35,570		$	51,908		$	38,222		$	50,854		$	35,570
Insurance expense provisions		2,861			3,953			2,849			3,792			5,710			7,745
Insurance cash payments		(1,793	)		(1,301	)		(529	)		(362	)		(2,322	)		(1,663	)
Insurance reserve adjustments		(14	)		-			(276	)		1,888			(290	)		1,888

Insurance reserve balances at end of period	$	51,908		$	38,222		$	53,952		$	43,540		$	53,952		$	43,540

SFAS No. 131, “Disclosures About Segments of an Enterprise and Related Information” (“SFAS 131”), defines operating segments as a component of an enterprise for which discrete financial information is available and is reviewed regularly by the chief operating decision-maker, or decision-making group, to evaluate performance and make operating decisions. The Company has identified its chief operating decision-makers (“CODMs”) as three key executives—the Chief Executive Officer, Chief Operating Officer and Chief Financial Officer.

The Company has identified each homebuilding subdivision as an operating segment in accordance with SFAS 131. Each homebuilding subdivision engages in business activities from which it earns revenue primarily from the sale of single-family detached homes, generally to first-time and first-time move-up homebuyers. Subdivisions in the reportable segments noted below have been aggregated because they ~~have similar:~~are similar in the following regards: (1) economic characteristics; (2) housing products; (3) class of homebuyer; (4) regulatory environments; and (5) methods used to construct and sell homes. The Company’s homebuilding reportable segments are as follows:

The Company’s Financial Services and Other reportable segment consists of the operations of the following operating segments: (1) HomeAmerican Mortgage Corporation (“HomeAmerican”); (2) American Home Insurance Agency, Inc. (“American Home Insurance”); (3) American Home Title

and Escrow Company (“American Home Title”); (4) Allegiant; and (5) StarAmerican. These operating segments have been aggregated into one reportable segment because they do not individually exceed 10 percent of: (1) consolidated revenue; (2) the greater of (A) the combined reported profit of all operating segments that did not report a loss or (B) the positive value of the combined reported loss of all operating segments that reported losses; ~~and~~or (3) consolidated assets. The Company’s Corporate reportable segment incurs general and administrative expenses that are not identifiable specifically to another operating segment.

Inter-company supervisory fees (“Supervisory Fees”), which are included in (loss) income before income taxes, are charged by the Company’s Corporate segment to the homebuilding segments and the Financial Services and Other segment. Supervisory Fees represent costs incurred by the Company’s Corporate segment associated with certain resources that support the Company’s other reportable segments. ~~Inter-company~~Transfers, if any, between operating segments are recorded at cost. Additionally, inter-company adjustments noted in the (loss) income before income taxes table below relate to mortgage loan origination fees paid by the Company’s homebuilding subsidiaries to HomeAmerican on behalf of homebuyers. ~~Transfers, if any, between operating segments are recorded at cost.~~

The following table summarizes revenue and (loss) income before income taxes for each of the Company’s six reportable segments (in thousands).


	Three Months Ended March 31,						Three Months Ended June 30,						Six Months Ended June 30,
	2007			2006			2007			2006			2007			2006
Revenue
Homebuilding
West	$	454,654		$	687,246		$	433,049		$	720,530		$	887,703		$	1,407,776
Mountain		145,191			163,190			134,670			187,724			279,861			350,914
East		61,355			147,181			71,800			160,534			133,155			307,715
Other Homebuilding		64,860			125,887			58,971			142,859			123,831			268,746

Total Homebuilding		726,060			1,123,504			698,490			1,211,647			1,424,550			2,335,151

Financial Services and Other		19,570			23,642			13,614			26,673			33,184			50,315
Corporate		5,433			432			9,029			183			14,462			615
Inter-company adjustments		(5,939	)		(2,153	)		(4,425	)		(6,522	)		(10,364	)		(8,675	)

Consolidated	$	745,124		$	1,145,425		$	716,708		$	1,231,981		$	1,461,832		$	2,377,406

(Loss) Income Before Income Taxes
Homebuilding
West	$	(125,391	)	$	122,063		$	(139,239	)	$	98,817		$	(264,630	)	$	220,880
Mountain		10,971			8,635			(6,828	)		7,228			4,143			15,863
East		(4,386	)		35,318			(6,784	)		26,462			(11,170	)		61,780
Other Homebuilding		(20,131	)		4,882			(18,487	)		15			(38,618	)		4,897

Total Homebuilding		(138,937	)		170,898			(171,338	)		132,522			(310,275	)		303,420

Financial Services and Other		7,517			11,184			4,241			10,988			11,758			22,172
Corporate		(12,261	)		(29,601	)		(3,931	)		(21,276	)		(16,192	)		(50,877	)

Consolidated	$	(143,681	)	$	152,481		$	(171,028	)	$	122,234		$	(314,709	)	$	274,715

The following table summarizes total assets for each of the Company’s six reportable segments (in thousands).


	March 31, 2007		December 31, 2006		June 30, 2007			December 31, 2006
Homebuilding
West	$	1,604,053	$	1,869,442	$	1,438,028		$	1,869,442
Mountain		525,298		535,554		545,487			535,554
East		320,779		333,902		313,380			333,902
Other Homebuilding		232,328		266,326		208,654			266,326

Total Homebuilding		2,682,458		3,005,224		2,505,549			3,005,224

Financial Services and Other		177,810		246,734		196,655			284,791
Corporate		829,197		657,917		924,354			657,917
Inter-company adjustments						(40,857	)		(38,057	)

Consolidated	$	3,689,465	$	3,909,875	$	3,585,701		$	3,909,875

The following table summarizes depreciation and amortization of long-lived assets and amortization of deferred marketing costs for each of the Company’s six reportable segments (in thousands).


	Three Months Ended March 31,				Three Months Ended June 30,				Six Months Ended June 30,
	2007		2006		2007		2006		2007		2006
Homebuilding
West	$	6,887	$	7,746	$	6,604	$	8,014	$	13,491	$	15,760
Mountain		1,035		1,308		1,040		1,419		2,075		2,727
East		1,123		593		56		1,125		1,179		1,718
Other Homebuilding		1,193		2,417		1,109		2,824		2,302		5,241

Total Homebuilding		10,238		12,064		8,809		13,382		19,047		25,446

Financial Services and Other		47		96		73		79		120		175
Corporate		1,535		1,468		1,515		1,420		3,050		2,888

Consolidated	$	11,820	$	13,628	$	10,397	$	14,881	$	22,217	$	28,509

Total other comprehensive (loss) income includes net (loss) income plus unrealized gains or losses on securities available for sale and minimum pension liability adjustments which have been reflected as a component of stockholders’ equity and have not affected consolidated net (loss) income. The Company’s other comprehensive loss was ~~$94.4~~$106.1 million and $200.5 million for the three and six months ended ~~March 31,~~June 30, 2007, respectively, and other comprehensive income was ~~$95.4~~$76.5 million and $171.9 million for the three and six months ended ~~March 31, 2006.~~June 30, 2006, respectively.

The Company often is required to obtain bonds and letters of credit in support of its obligations primarily with respect to subdivision improvement, homeowner association dues and start-up expenses,

warranty work, contractor license fees and earnest money deposits. At ~~March 31,~~June 30, 2007, the Company had issued and outstanding performance bonds and letters of credit totaling ~~$376.8~~$354.3 million and ~~$71.5~~$62.7 million, respectively, including ~~$24.4~~$21.6 million in letters of credit issued by HomeAmerican, a wholly owned subsidiary of MDC. In the event any such bonds or letters of credit issued by third parties are called, MDC would be obligated to reimburse the issuer of the bond or letter of credit.

Homebuilding. The Company’s homebuilding line of credit (“Homebuilding Line”) is an unsecured revolving line of credit with a group of lenders for support of its homebuilding segments. The Company’s Homebuilding Line has an aggregate commitment amount of $1.25 billion and a maturity date of March 21, 2011. The facility’s provision for letters of credit is available in the aggregate amount of $500 million. The facility permits an increase in the maximum commitment amount to $1.75 billion upon the Company’s request, subject to receipt of additional commitments from existing or additional participant lenders. Interest rates on outstanding borrowings are determined by reference to ~~LIBOR,~~a chosen London Interbank Offered Rate (“LIBOR”), with a spread from LIBOR which is determined based on changes in the Company’s credit ratings and leverage ratio, or to an alternate base rate. At ~~March 31,~~June 30, 2007, the Company did not have any borrowings under the Homebuilding Line and had ~~$43.7~~$37.8 million in letters of credit issued as of such date, which reduced the amount available to be borrowed under the Homebuilding Line.

Mortgage Lending. The Company’s mortgage line of credit (“Mortgage Line”) has a borrowing limit of $225 million with terms that allow for increases of up to $175 million in the borrowing limit to a maximum of $400 million, subject to concurrence by the participating banks. Available borrowings under the Mortgage Line are collateralized by mortgage loans and mortgage-backed securities and are limited to the value of eligible collateral, as defined. At ~~March 31,~~June 30, 2007, ~~$100.7~~$99.4 million was borrowed and an additional ~~$31.8~~$8.2 million was collateralized and available to be borrowed. The Mortgage Line is cancelable upon 120 days notice.

General. The agreements for the Company’s bank lines of credit and the indentures for the Company’s senior notes require compliance with certain representations, warranties and covenants. The Company believes that it is in compliance with these requirements, and the Company is not aware of any covenant violations. The agreements containing these representations, warranties and covenants for the bank lines of credit and the indentures for the Company’s senior notes are on file with the SEC and are listed in the Exhibit Table in Part IV of the Company’s Annual Report on Form 10-K for the year ended December 31, 2006.

The Company’s debt obligations at ~~March 31,~~June 30, 2007 and December 31, 2006 are as follows (in thousands):


	March 31, 2007		December 31, 2006		June 30, 2007		December 31, 2006
7% Senior Notes due 2012	$	149,001	$	148,963	$	149,039	$	148,963
5¹/2% Senior Notes due 2013		349,382		349,361		349,404		349,361
5³/8% Medium Term Senior Notes due 2014		248,697		248,663		248,731		248,663
5³/8% Medium Term Senior Notes due 2015		249,702		249,695		249,709		249,695

Total Senior Notes		996,782		996,682		996,883		996,682
Homebuilding Line		-		-		-		-

Total Corporate and Homebuilding Debt		996,782		996,682		996,883		996,682
Mortgage Line		100,703		130,467		99,411		130,467

Total Debt	$	1,097,485	$	1,127,149	$	1,096,294	$	1,127,149

Effective March 1, 2006, the Company entered into a consulting agreement (the “Agreement”) with a firm owned by Mr. Gilbert Goldstein (a member of the Company’s Board of Directors). Pursuant to the terms of the Agreement, the Company has agreed that, among other things, in the event that Mr. Goldstein retires from the practice of law, becomes disabled, dies or the Agreement with the Company is not renewed or extended during the term of the Agreement, the Company will pay Mr. Goldstein’s firm or his estate, in lieu of any other payments, other benefits or services to be provided by the Company, ~~pursuant to the Agreement,~~ $15,000 per month for five years or the duration of Mr. Goldstein’s life, whichever is longer. At ~~March 31,~~June 30, 2007, the Company had a related party ~~accrual~~liability of $0.7 million associated with the foregoing obligation.

~~Notes~~In December 2006, the Company committed to ~~Unaudited Consolidated Financial Statements (Continued)~~contributing $1.7 million to the MDC/Richmond American Homes Foundation, a Delaware non-profit corporation that was incorporated on September 30, 1999 (the “Foundation”). In January 2007, the Company contributed to the Foundation 29,798 shares of MDC common stock in fulfillment of its December 2006 commitment.

The Company’s overall effective income tax rates were ~~34.3%~~38.0% and 36.3% for the three and six months ended June 30, 2007, respectively, and 37.4% for both the three and six months ended ~~March 31, 2007 and 2006, respectively. The decrease~~June 30, 2006. These changes in the effective tax ~~rate~~rates during the 2007 ~~first quarter,~~periods, compared with the same ~~period~~periods during 2006, resulted from the impact of ~~a reduction~~reductions in the benefits from I.R.C. Sec. 199, “Income Attributable to Domestic Production Activities,” and ~~an increase~~increases in estimated permanent differences related to accruals for non-deductible excess compensation under I.R.C. Sec. 162(m), “Certain Excessive Employee Remuneration.”

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of the assets and liabilities for financial reporting purposes and the amounts used for income

tax purposes. The tax effects of significant temporary differences that give rise to the net deferred tax asset are as follows (in thousands).


	March 31, 2007		December 31, 2006		June 30, 2007		December 31, 2006
Deferred tax assets
Warranty, litigation and other reserves	$	53,733	$	52,752	$	55,518	$	52,752
Asset impairment charges		92,624		41,876		146,788		41,876
Accrued liabilities		8,682		8,298		8,772		8,298
Deferred revenue		4,038		8,797		2,126		8,797
Inventory, additional costs capitalized for tax purposes		12,661		12,356		11,906		12,356
Stock-based compensation		6,319		5,620		7,339		5,620
Property, equipment and other assets, net		2,454		730		2,803		730

Total gross deferred tax assets		180,511		130,429		235,252		130,429

Deferred tax liabilities
Deferred revenue		1,907		1,532		1,947		1,532
Inventory, additional costs capitalized for financial statement purposes		594		596		593		596
Other, net		3,420		3,421		3,421		3,421

Total gross deferred tax liabilities		5,921		5,549		5,961		5,549

Net deferred tax asset	$	174,590	$	124,880	$	229,291	$	124,880

On January 1, 2007, the Company adopted the provisions of FIN ~~48, which is an interpretation of SFAS 109.~~48. As a result of the implementation of FIN 48, the Company decreased its liability for unrecognized tax benefits by approximately $0.3 million, which was accounted for as an increase to the January 1, 2007 retained earnings balance. A reconciliation of the beginning and ending balance for liabilities associated with unrecognized tax benefits is as follows (in thousands):

The total liabilities associated with unrecognized tax benefits that, if recognized, would affect the effective tax rate were $12.9 million and ~~$13.9~~$13.8 million at January 1, 2007 and ~~March 31,~~June 30, 2007, respectively.

The Company recognizes interest and penalties associated with unrecognized tax benefits in income tax expense in the Unaudited Consolidated Statements of ~~Income,~~Operations, and the corresponding liability in income taxes payable on the Unaudited Consolidated Balance Sheets. The expense for interest and penalties reflected in the Unaudited Consolidated Statements of ~~Income~~Operations for the three and six months ended ~~March 31,~~June 30, 2007 was approximately ~~$0.3~~$0.8 million and $1.1 million, respectively (interest net of related tax benefits). The corresponding liabilities on the Consolidated Balance Sheets were $2.6 million and ~~$2.9~~$3.7 million at January 1, 2007 and ~~March 31,~~June 30, 2007, respectively.

The Company has taken positions in certain taxing jurisdictions for which it is reasonably possible that the total amounts of unrecognized tax benefits may significantly decrease within the next twelve months. The possible decrease could result from the finalization of certain state income tax audits. An estimate of the range of the reasonably possible change cannot be made.

The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction and various state jurisdictions. The Company is subject to U.S. federal income tax examination for calendar tax years ending 2003 through 2006. The Company is subject to various state income tax examinations for the 1996 through 2006 calendar tax years.

The Company currently is under state income tax examination in the states of California, Virginia and Arizona.

In August 2007, the Company filed a registration statement on Form S-8 with the SEC, registering approximately 6.3 million shares of MDC common stock in connection with the M.D.C. Holdings, Inc. 2001 Equity Incentive Plan and the M.D.C. Holdings, Inc. Stock Option Plan for Non-Employee Directors, both of which were approved previously by the Company’s shareowners.

In July 2007, the Company closed transactions with third parties that qualify for tax purposes as a like-kind exchange transaction in accordance with I.R.C. Section 1031. Pursuant to the transactions, the Company sold an aircraft for approximately $21.8 million (resulting in a pre-tax gain of approximately $8.0 million) and upgraded with the purchase of a new aircraft for approximately $29.0 million.

The Company’s senior notes and Homebuilding Line are fully and unconditionally guaranteed on an unsecured basis, jointly and severally, by the following subsidiaries (collectively, the “Guarantor Subsidiaries”), which are 100%-owned subsidiaries of the Company.

Subsidiaries that do not guarantee the Company’s senior notes and Homebuilding Line (collectively, the “Non-Guarantor Subsidiaries”) include:

The Company has determined that separate, full financial statements of the Guarantor Subsidiaries would not be material to investors and, accordingly, supplemental financial information for the Guarantor Subsidiaries is presented.

The supplemental condensed combining statement of ~~income~~operations for the three and six months ended ~~March 31,~~June 30, 2006 previously disclosed inter-company cost of capital charges by the Company’s Corporate segment to its homebuilding segments. The supplemental condensed combining statement of ~~income~~operations for the three and six months ended ~~March 31,~~June 30, 2006 has been adjusted to eliminate this inter-company cost of capital charge in order to conform the presentation to the Company’s segment reporting included in Note 9 of the Unaudited Consolidated Financial Statements.


	MDC			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminating Entries			Consolidated MDC		MDC			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminating Entries			Consolidated MDC
ASSETS
Cash and cash equivalents	$	608,458		$	5,247		$	16,976		$	-		$	630,681	$	647,173		$	3,372		$	17,834		$	-		$	668,379
Restricted cash		-			2,546			-			-			2,546		-			2,176			-			-			2,176
Home sales and other receivables		570			60,663			46,779			(38,757	)		69,255		5,230			74,416			49,034			(40,857	)		87,823
Mortgage loans held in inventory, net		-			-			150,356			-			150,356		-			-			125,717			-			125,717
Inventories
Housing completed or under construction		-			1,169,135			2,002			-			1,171,137		-			1,272,917			125			-			1,273,042
Land and land under development		-			1,341,804			-			-			1,341,804		-			1,061,884			-			-			1,061,884
Investment in and advances to parent and subsidiaries		289,217			42,345			(11,108	)		(320,454	)		-		239,514			79,533			1,125			(320,172	)		-
Other assets, net		216,747			101,084			5,855			-			323,686		271,729			90,864			4,087			-			366,680

Total Assets	$	1,114,992		$	2,722,824		$	210,860		$	(359,211)		$	3,689,465	$	1,163,646		$	2,585,162		$	197,922		$	(361,029	)	$	3,585,701


LIABILITIES
Accounts payable and related party liabilities	$	39,805		$	131,755		$	803		$	(38,757	)	$	133,606	$	42,794		$	158,987		$	985		$	(40,857	)	$	161,909
Accrued liabilities		81,592			232,856			52,914			-			367,362		78,784			228,392			53,978			-			361,154
Advances and notes payable to parent and subsidiaries		(2,165,695	)		2,134,093			31,602			-			-		(2,074,486	)		2,077,116			(2,630	)		-			-
Income taxes payable		83,098			(73,737	)		2,241			-			11,602		153,327			(155,583	)		2,256			-			-
Homebuilding Line		-			-			-			-			-		-			-			-			-			-
Mortgage Line		-			-			100,703			-			100,703		-			-			99,411			-			99,411
Senior notes, net		996,782			-			-			-			996,782		996,883			-			-			-			996,883

Total Liabilities		(964,418	)		2,424,967			188,263			(38,757	)		1,610,055		(802,698	)		2,308,912			154,000			(40,857	)		1,619,357


STOCKHOLDERS’ EQUITY		2,079,410			297,857			22,597			(320,454	)		2,079,410		1,966,344			276,250			43,922			(320,172	)		1,966,344

Total Liabilities and Stockholders’ Equity	$	1,114,992		$	2,722,824		$	210,860		$	(359,211	)	$	3,689,465	$	1,163,646		$	2,585,162		$	197,922		$	(361,029	)	$	3,585,701


	MDC			Guarantor Subsidiaries		Non- Guarantor Subsidiaries			Eliminating Entries		Consolidated MDC		MDC			Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminating Entries			Consolidated MDC
ASSETS
Cash and cash equivalents	$	484,682		$	6,400	$	16,865		$	-	$	507,947	$	484,682		$	6,400	$	16,865		$	-		$	507,947
Restricted cash		-			2,641		-			-		2,641		-			2,641		-			-			2,641
Home sales and other receivables		-			129,559		53,379			(39,002)		143,936		-			129,559		53,379			(39,002	)		143,936
Mortgage loans held in inventory, net		-			-		212,903			-		212,903		-			-		212,903			-			212,903
Inventories
Housing completed or under construction		-			1,178,671		-			-		1,178,671		-			1,178,671		-			-			1,178,671
Land and land under development		-			1,575,158		-			-		1,575,158		-			1,575,158		-			-			1,575,158
Investment in and advances to parent and subsidiaries		480,650			1,068		(37,782	)		(443,936)		-		480,650			1,068		(37,782	)		(443,936	)		-
Other assets, net		169,961			113,383		5,275			-		288,619		169,961			113,383		5,275			-			288,619

Total Assets	$	1,135,293		$	3,006,880	$	250,640		$	(482,938)	$	3,909,875	$	1,135,293		$	3,006,880	$	250,640		$	(482,938	)	$	3,909,875


LIABILITIES
Accounts payable and related party liabilities	$	41,458		$	168,401	$	1,604		$	(38,057)	$	173,406	$	41,458		$	168,401	$	1,604		$	(38,057	)	$	173,406
Accrued liabilities		93,755			271,482		54,661			(945)		418,953		93,755			271,482		54,661			(945	)		418,953
Advances and notes payable to parent and subsidiaries		(2,114,146	)		2,103,373		10,773			-		-		(2,114,146	)		2,103,373		10,773			-			-
Income taxes payable		(44,338	)		66,668		6,155			-		28,485		(44,338	)		66,668		6,155			-			28,485
Homebuilding Line		-			-		-			-		-		-			-		-			-			-
Mortgage Line		-			-		130,467			-		130,467		-			-		130,467			-			130,467
Senior notes, net		996,682			-		-			-		996,682		996,682			-		-			-			996,682

Total Liabilities		(1,026,589	)		2,609,924		203,660			(39,002)		1,747,993		(1,026,589	)		2,609,924		203,660			(39,002	)		1,747,993


STOCKHOLDERS’ EQUITY		2,161,882			396,956		46,980			(443,936)		2,161,882		2,161,882			396,956		46,980			(443,936	)		2,161,882

Total Liabilities and Stockholders’ Equity	$	1,135,293		$	3,006,880	$	250,640		$	(482,938)	$	3,909,875	$	1,135,293		$	3,006,880	$	250,640		$	(482,938	)	$	3,909,875


	MDC			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminating Entries		Consolidated MDC			MDC			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminating Entries			Consolidated MDC
REVENUE
Home sales revenue	$	-		$	710,309		$	1,491		$	-	$	711,800		$	-		$	690,471		$	1,767		$	(4,425	)	$	687,813
Land sales and other revenue		5,427			8,064			19,833			-		33,324			7,923			6,225			14,747			-			28,895
Equity in earnings of subsidiaries		(61,001	)		-			-			61,001		-			(85,866	)		-			-			85,866			-

Total Revenue		(55,574	)		718,373			21,324			61,001		745,124			(77,943	)		696,696			16,514			81,441			716,708


COSTS AND EXPENSES
Home cost of sales		-			597,889			1,310			-		599,199			-			593,055			1,934			(4,425	)		590,564
Asset impairments		-			141,422			-			-		141,422			-			161,050			-			-			161,050
Marketing and commission expenses		-			52,150			179			-		52,329			-			53,577			174			-			53,751
General and administrative expenses		17,602			60,695			12,360			-		90,657			12,862			57,656			9,572			-			80,090
Inter-company interest		(1,111	)		-			1,111					-
Other expenses		91			4,882			225			-		5,198			100			2,181			-			-			2,281

Total Costs and Expenses		16,582			857,038			15,185			-		888,805			12,962			867,519			11,680			(4,425	)		887,736

(Loss) income before income taxes		(72,156	)		(138,665	)		6,139			61,001		(143,681	)		(90,905	)		(170,823	)		4,834			85,866			(171,028	)
Benefit from (provision for) income taxes		(22,242	)		73,737			(2,212	)		-		49,283
(Provision for) benefit from income taxes																(15,167	)		81,846			(1,723	)		-			64,956

NET (LOSS) INCOME	$	(94,398	)	$	(64,928	)	$	3,927		$	61,001	$	(94,398	)	$	(106,072	)	$	(88,977	)	$	3,111		$	85,866		$	(106,072	)


	MDC			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminating Entries			Consolidated MDC			MDC		Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminating Entries			Consolidated MDC
REVENUE
Home sales revenue	$	-		$	1,117,155		$	-		$	-		$	1,117,155		$	-	$	1,195,083		$	-		$	(6,522	)	$	1,188,561
Land sales and other revenue		422			4,054			23,794			-			28,270			171		16,434			26,815			-			43,420
Equity in earnings of subsidiaries		132,317			-			-			(132,317	)		-			98,064		-			-			(98,064	)		-

Total Revenue		132,739			1,121,209			23,794			(132,317	)		1,145,425			98,235		1,211,517			26,815			(104,586	)		1,231,981


COSTS AND EXPENSES
Home cost of sales		-			814,833			17			-			814,850			-		918,202			27			(6,522	)		911,707
Asset impairments		-			600			-			-			600			-		260			-			-			260
Marketing and commission expenses		(199	)		62,077			-			-			61,878			306		68,656			-			-			68,962
General and administrative expenses		27,456			71,679			12,130			-			111,265			21,332		78,826			15,393			-			115,551
Other expenses		2,577			1,774			-			-			4,351			127		13,140			-			-			13,267

Total Costs and Expenses		29,834			950,963			12,147			-			992,944			21,765		1,079,084			15,420			(6,522	)		1,109,747

Income before income taxes		102,905			170,246			11,647			(132,317	)		152,481			76,470		132,433			11,395			(98,064	)		122,234
Provision for income taxes		(7,484	)		(45,216	)		(4,360	)		-			(57,060	)
Benefit from (provision for) income taxes																	21		(41,431	)		(4,333	)		-			(45,743	)

NET INCOME	$	95,421		$	125,030		$	7,287		$	(132,317	)	$	95,421		$	76,491	$	91,002		$	7,062		$	(98,064	)	$	76,491


	MDC			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminating Entries		Consolidated MDC			MDC			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminating Entries		Consolidated MDC
Net cash provided by (used in) operating activities	$	120,530		$	(1,101	)	$	29,894		$	-	$	149,323		$	170,254		$	(2,976	)	$	32,044		$	-	$	199,322

Net cash used in investing activities		(639	)		(52	)		(19	)		-		(710	)		(1,984	)		(52	)		(19	)		-		(2,055	)

Financing activities
Net increase (decrease) in borrowings from parent and subsidiaries																-			-			-			-		-
Lines of credits
Advances		160,448			-			-			-		160,448			160,448			-			308,030			-		468,478
Principal payments		(160,448	)		-			(29,764	)		-		(190,212	)		(160,448	)		-			(339,086	)		-		(499,534	)
Excess tax benefit from stock- based compensation		5,850			-			-			-		5,850			6,326			-			-			-		6,326
Dividend payments		(11,414	)		-			-			-		(11,414	)		(22,852	)		-			-			-		(22,852	)
Proceeds from exercise of stock options		9,449			-			-			-		9,449			10,747			-			-			-		10,747

Net cash provided by (used in) financing activities		3,885			-			(29,764	)		-		(25,879	)
Net cash used in financing activities																(5,779	)		-			(31,056	)		-		(36,835	)

Net increase (decrease) in cash and cash equivalents		123,776			(1,153	)		111			-		122,734			162,491			(3,028	)		969			-		160,432
Cash and cash equivalents
Beginning of period		484,682			6,400			16,865			-		507,947			484,682			6,400			16,865			-		507,947

End of period	$	608,458		$	5,247		$	16,976		$	-	$	630,681		$	647,173		$	3,372		$	17,834		$	-	$	668,379


	MDC			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminating Entries			Consolidated MDC			MDC			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminating Entries			Consolidated MDC
Net cash provided by (used in) operating activities	$	202,693		$	(353,014	)	$	42,251		$	(373	)	$	(108,443	)	$	65,767		$	(175,127	)	$	(2,165	)	$	(746	)	$	(112,271	)

Net cash used in investing activities		(684	)		(929	)		(25	)		-			(1,638	)		(1,464	)		(2,840	)		(27	)		-			(4,331	)

Financing activities
Net increase (reduction) in borrowings from parent and subsidiaries		(347,298	)		355,912			(8,614	)		-			-
Net (decrease) increase in borrowings from parent and subsidiaries																	(170,848	)		178,628			(7,780	)		-			-
Lines of credits
Advances		354,800			-			-			-			354,800			425,900			-			11,631			-			437,531
Principal payments		(254,800	)		-			(30,992	)		-			(285,792	)		(425,900	)		-			-			-			(425,900	)
Excess tax benefit from stock- based compensation		1,192			-			-			-			1,192
Excess tax benefit from stock-based compensation																	1,486												1,486
Dividend payments		(11,590	)		-			-			373			(11,217	)		(23,202	)		-			-			746			(22,456	)
Proceeds from exercise of stock options		2,306			-			-			-			2,306			2,894			-			-			-			2,894

Net cash provided by (used in) financing activities		(255,390	)		355,912			(39,606	)		373			61,289
Net cash (used in) provided by financing activities																	(189,670	)		178,628			3,851			746			(6,445	)

Net increase (decrease) in cash and cash equivalents		(53,381	)		1,969			2,620			-			(48,792	)
Net (decrease) increase in cash and cash equivalents																	(125,367	)		661			1,659			-			(123,047	)
Cash and cash equivalents
Beginning of period		196,032			5,527			12,972			-			214,531			196,032			5,527			12,972			-			214,531

End of period	$	142,651		$	7,496		$	15,592		$	-		$	165,739		$	70,665		$	6,188		$	14,631		$	-		$	91,484

The following discussion should be read in conjunction with, and is qualified in its entirety by, the Unaudited Consolidated Financial Statements and Notes thereto included elsewhere in this Quarterly Report on Form 10-Q. This item contains forward-looking statements that involve risks and uncertainties. Actual results may differ materially from those indicated in such forward-looking statements. Factors that may cause such a difference include, but are not limited to, those discussed in “Item 1A: Risk Factors Relating to our Business” of our Annual Report on Form 10-K for the year ended December 31, 2006 and this Quarterly Report on Form 10-Q.

M.D.C. Holdings, Inc. is a Delaware Corporation. We refer to M.D.C. Holdings, Inc. as the “Company,” “MDC,” “we” or “our” in this Quarterly Report on Form 10-Q, and these designations include our subsidiaries unless we state otherwise. Our homebuilding segments consist of subsidiary companies that build and sell homes under the name “Richmond American Homes.” ~~Richmond American Homes maintains operations in certain markets within the United States, including Arizona,~~The Company’s homebuilding reportable segments are as follows: (1) West (Arizona, California ~~Colorado,~~and Nevada markets); (2) Mountain (Colorado and Utah markets); (3) East (Maryland and Virginia, which includes Virginia and West Virginia, markets); and (4) Other Homebuilding (Florida, Illinois, Delaware Valley, ~~(which~~which includes Pennsylvania, Delaware and New ~~Jersey), Florida, Illinois, Maryland, Nevada,~~Jersey, and Texas ~~(although~~markets, although we ~~are in~~recently completed our exit of the ~~final stages of exiting this~~Texas market)~~, Utah and Virginia (which includes Virginia and West Virginia)~~.

Our Financial Services and Other segment consists of HomeAmerican Mortgage Corporation (“HomeAmerican”), which originates mortgage loans primarily for our homebuyers, American Home Insurance Agency, Inc. (“American Home Insurance”), which offers third party insurance products to our homebuyers, and American Home Title and Escrow Company (“American Home Title”), which provides title agency services to our homebuyers in Colorado, Delaware, Florida, Illinois, Nevada, Maryland, Virginia and West Virginia. This segment also includes Allegiant Insurance Company, Inc., A Risk Retention Group (“Allegiant”), which provides general liability coverage for products and completed operations to the Company and, in most of the Company’s markets, to subcontractors of MDC’s homebuilding subsidiaries. In 2003, we formed StarAmerican Insurance Ltd. (“StarAmerican”), now a Hawaii corporation. StarAmerican, a wholly owned subsidiary of MDC, has agreed to re-insure all claims pursuant to two policies issued to the Company by a third party. Pursuant to agreements beginning in June 2004, StarAmerican has agreed to re-insure all Allegiant claims in excess of $50,000 per occurrence, up to $3.0 million per occurrence, subject to various aggregate limits, which do not exceed $18.0 million per year.

We closed ~~2,001~~2,031 and ~~3,198~~4,032 homes during the three and six months ended ~~March 31,~~June 30, 2007, respectively, compared with 3,376 and ~~2006, respectively.~~6,574 homes during the same periods during 2006. We received ~~2,558~~1,970 and 4,528 net home orders during the 2007 second quarter and first ~~quarter,~~six months, respectively, compared with ~~3,800~~2,738 and 6,538 net home orders during the same ~~period~~periods in 2006. We had ~~4,195~~4,134 homes in Backlog (as defined below) valued at approximately $1.5 billion at ~~March 31,~~June 30, 2007, compared with ~~7,134~~6,496 homes in Backlog valued at ~~$2.7~~approximately $2.4 billion at ~~March 31,~~June 30, 2006.

~~During the first three months of 2007, the homebuilding industry~~We continued to experience ~~uncertainty and reduced~~weakness in the demand for new homes in each of our homebuilding segments, and particularly in our California, Nevada and ~~Nevada markets, and~~Arizona markets. This weakness contributed to the decline in ~~most sub-markets within our Mountain, East and Other Homebuilding segments, which negatively impacted~~ our financial and operating results during the 2007 second quarter and first ~~quarter, compared with~~six months,

compared with the ~~2006 first quarter.~~same periods in 2006. The conditions ~~experienced~~we have been experiencing during ~~the~~ 2007 ~~first quarter included,~~include, among other ~~things: reduced consumer confidence; on-going~~things, increased homebuyer concerns about declines in the ~~housing~~ market value of homes, and ~~the lack~~lower availability of ~~stabilization in home sales prices; and concerns over~~credit for homebuyers resulting from more strict mortgage loan underwriting criteria associated with higher-risk mortgage loan ~~products, such as Alt-A (as defined below)~~products. These and ~~sub-prime (as defined below). These~~other factors contributed to, among other things: (1) ~~lower demand for new homes; (2)~~ significant increases in competition for new home orders; ~~(3)~~(2) continued high levels of incentives and, in ~~some~~many cases, ~~increases~~increased incentives required to stimulate new home orders and maintain previous home orders in Backlog until they close; ~~(4)~~(3) increases in the supply of new and existing homes available to be purchased; and ~~(5)~~(4) prospective homebuyers having a more difficult time selling their existing homes in this ~~more~~increasingly competitive environment. Additionally, during the ~~2007~~ first ~~quarter,~~six months of 2007, many lenders in the mortgage industry faced liquidity issues surrounding ~~higher-risk~~ originated ~~mortgage loans, including Alt-A, sub-prime and high loan-to-value~~higher-risk mortgage loans. ~~As a result, we tightened our mortgage loan underwriting criteria during the 2007 first quarter related to high loan-to-value mortgage loan originations.~~ We believe that these ~~changes~~factors, as well as the media’s recent reporting of problems in the mortgage lending environment, have impacted negatively ~~impacted~~ our homebuyers’ confidence in both the homebuilding and mortgage lending ~~industries, which contributed to lower demand for homes and fewer new home orders during~~industries.

For MDC, the ~~2007 first quarter, as well as the delay of some home closings as homebuyers were required to re-qualify for new or different mortgage loan products. This~~ weaker homebuilding market resulted in fewer closed homes, decreased new home orders, reduced year-over-year Backlog and lower Home Gross Margins (as defined below) ~~and significant asset impairments. As a result of these factors, and after recording~~in 2007, as well as asset impairments of ~~$141.4~~$161.1 million and $302.5 million for the second quarter and first six months of 2007, respectively. As a consequence, we recognized a net ~~loss~~losses of ~~$94.4~~$106.1 million and $200.5 million during the three and six months ended ~~March 31,~~June 30, 2007, respectively, compared with net income of ~~$95.4~~$76.5 million and $171.9 million for the same ~~period~~periods in 2006.

~~In response to these conditions,~~Recognizing the challenges presented by the current homebuilding and mortgage lending environments, our management continued to focus on: (1) initiatives to generate new home orders and maintain home orders in Backlog until they close; (2) sales and marketing programs to generate homebuyer traffic in our home sales offices; (3) ~~rolling out nationally~~controlling our ~~new customer experience initiative, which is focused on making improvements in our customer’s complete home buying~~general and ~~homeownership experience;~~administrative expenses, primarily through personnel reductions and consolidation of several homebuilding divisions; (4) adjusting our portfolio of lots controlled to accommodate the current pace of new home orders in our markets; (5) strategies to lower risks associated with the origination and ~~(5) controlling~~subsequent sales of mortgage loan products; and (6) implementing our ~~general~~new national customer experience initiative, which is intended to improve our customer’s home buying and ~~administrative expenses, primarily through personnel reductions and consolidation of several homebuilding divisions. Accordingly, we continued to modify our~~home ownership experience. Our sales and marketing strategies ~~to address market conditions in many of our sub-markets and subdivisions. In many cases, this required~~included offering additional ~~increases in the level of~~ incentives ~~we have offered~~ as a means of generating homebuyer interest and ~~minimizing~~discouraging home order cancellations. ~~These incentives~~This contributed to the significant reduction in our Home Gross Margins during the second quarter and first ~~quarter~~six months of 2007, compared with the same ~~period~~periods during 2006. AAdditionally, during the first six months of 2007, we continued ~~slowdown~~to right-size our business in ~~new home orders could have a greater negative impact on~~response to the reduced levels of homebuilding activity in most of our ~~Home Gross Margins~~markets. Accordingly, our employee headcount declined to approximately 2,700 at June 30, 2007, from approximately 3,900 and ~~results~~3,200 at June 30, 2006 and December 31, 2006, respectively, and we decreased the number of ~~operations in future periods.~~our separate homebuilding operating divisions to 19 at June 30, 2007, compared with 23 operating divisions at December 31, 2006. See“Forward-Looking Statements” below.

In response to the issues surrounding the mortgage lending industry, as discussed above, we have tightened our mortgage loan underwriting criteria during 2007. This resulted in fewer originations of: (1) high loan-to-value mortgage loans; (2) sub-prime (as defined below) and Alt-A (as defined below) mortgage loan products; and (3) loans with related second mortgages. Additionally, during the 2007 second quarter, we implemented a new strategy of selling our mortgage loans on a flow basis rather than a bulk basis, which was intended to mitigate some of the risks associated with holding these mortgage loans. However, this strategy also contributed to lower gains on sales of mortgage loans.

Consistent with our homebuilding inventory valuation policy, we evaluated facts and circumstances existing at quarter-end to determine whether the carrying values of our homebuilding inventories were recoverable on a subdivision-by-subdivision basis. Based upon the evaluation performed, we determined that the carrying ~~values~~value of certain inventory assets ~~were not recoverable~~at June 30, 2007 in each of our homebuilding segments, particularly in our California, Nevada and ~~Nevada markets.~~Arizona markets, were not recoverable. Accordingly, we recorded ~~$141.4~~$161.1 million in asset impairments ~~during the three months ended March 31,~~at June 30, 2007 associated with ~~3,284~~4,427 owned lots in 5283 subdivisions. These impairments, which relate to assets contracted for primarily during 2004 and 2005, ~~were the result of:~~resulted from decreases in home sales prices and/or increases in incentives offered in an effort to: (1) ~~decreased demand for~~stimulate new home orders ~~during~~when the ~~2007 first quarter;~~spring selling season failed to materialize; (2) ~~significant increases in the level of incentives offered to generate new home orders and~~ maintain homes in Backlog until they close; ~~(3) our reduction in home sales prices when the~~

~~typical spring selling season failed to materialize;~~ and ~~(4) decreases in our home sales prices and/or increases in the level of incentives offered to~~(3) remain competitive with home sales prices offered by our competitors. As market conditions for the homebuilding industry can fluctuate significantly period-to-period, we will continue to assess facts and circumstances existing at each future period-end to determine whether the carrying values of our homebuilding inventories are recoverable. We cannot provide any assurance as to the potential for future asset impairments. See ““Forward-Looking ~~Statements”~~Statements” below.

We have continued to pursue our objective of limiting our lot supply to avoid over-exposure to any single sub-market and to create flexibility to react to changes in market conditions. Accordingly, we limited our new land acquisitions and elected not to exercise certain options to purchase lots under existing contracts. As a result, we incurred ~~$4.0~~approximately $6.4 million and $10.5 million in write-offs of lot option deposits and pre-acquisition costs ~~associated with lot option contracts that we chose not to exercise,~~during the three and six months ended June 30, 2007, respectively, which contributed to the ~~12%~~29% and ~~10%~~21% reductions of total lots under option and total lots owned, respectively, from December 31, 2006. In addition, partly as a result of our efforts to control land acquisitions through modifications to lot takedown prices and extensions of time for specified lot takedowns, we were able to decrease our land and land under development by ~~$233.4~~$513.3 million from December 31, 2006, which includes the impact of ~~$115.1~~$238.0 million of impairments recognized during the ~~2007~~ first ~~quarter.~~six months of 2007.

During the 2007 second quarter and first ~~quarter,~~six months, we maintained our focus on our balance sheet, preparing to react to opportunities that may arise in the future. We were able to generate ~~$149.3~~$199.3 million in cash from operations during the first six months of 2007, resulting in cash and cash equivalents at ~~March 31,~~June 30, 2007 of ~~$630.7~~$668.4 million, with no borrowings outstanding on our Homebuilding Line (as defined below). Consequently, our cash and available borrowing capacity increased to ~~more than~~approximately $1.9 billion at ~~March 31,~~June 30, 2007, compared with $1.7 billion and $1.3 billion at December 31, 2006 and ~~March 31,~~June 30, 2006, respectively. We will continue to evaluate our alternatives for using this capital, which may include lot acquisitions, various investment vehicles, potential repurchases of MDC common stock and dividend payments. See“Forward-Looking Statements” below.

The preparation of financial statements in conformity with accounting policies generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting periods. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.

Management evaluates such estimates and judgments on an on-going basis and makes adjustments as deemed necessary. Actual results could differ from these estimates using different estimates and assumptions, or if conditions are significantly different in the future. See“Forward-Looking Statements” below.

The accounting policies and estimates, which we believe are critical and require the use of complex judgment in their application, are those related to (1) homebuilding inventory valuation; (2) revenue recognition; (3) segment reporting; (4) stock-based compensation; (5) home cost of sales; (6) warranty ~~costs;~~reserves; (7) land ~~options;~~option contracts; and (8) insurance reserves. Our critical accounting estimates and policies have not changed from those reported in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2006.

The following discussion compares results for the three and six months ended ~~March 31,~~June 30, 2007 with the three and six months ended ~~March 31,~~June 30, 2006.

(Loss) Income Before Income Taxes.The table below summarizes our (loss) income before income taxes by segment (dollars in thousands).


	Three Months Ended March 31,						Change				Three Months Ended June 30,						Change
	2007			2006			Amount			%	2007			2006			Amount			%
Homebuilding
West	$	(125,391	)	$	122,063		$	(247,454	)	-203%	$	(139,239	)	$	98,817		$	(238,056	)	-241%
Mountain		10,971			8,635			2,336		27%		(6,828	)		7,228			(14,056	)	-194%
East		(4,386	)		35,318			(39,704	)	-112%		(6,784	)		26,462			(33,246	)	-126%
Other Homebuilding		(20,131	)		4,882			(25,013	)	-512%		(18,487	)		15			(18,502	)	N/A

Total Homebuilding		(138,937	)		170,898			(309,835	)	-181%		(171,338	)		132,522			(303,860	)	-229%

Financial Services and Other		7,517			11,184			(3,667	)	-33%		4,241			10,988			(6,747	)	-61%
Corporate		(12,261	)		(29,601	)		17,340		-59%		(3,931	)		(21,276	)		17,345		-82%

Consolidated	$	(143,681	)	$	152,481		$	(296,162	)	-194%	$	(171,028	)	$	122,234		$	(293,262	)	-240%


											Six Months Ended June 30,						Change
											2007			2006			Amount			%
Homebuilding
West											$	(264,630	)	$	220,880		$	(485,510	)	-220%
Mountain												4,143			15,863			(11,720	)	-74%
East												(11,170	)		61,780			(72,950	)	-118%
Other Homebuilding												(38,618	)		4,897			(43,515	)	-889%

Total Homebuilding												(310,275	)		303,420			(613,695	)	-202%
Financial Services and Other												11,758			22,172			(10,414	)	-47%
Corporate												(16,192	)		(50,877	)		34,685		-68%

Consolidated											$	(314,709	)	$	274,715		$	(589,424	)	-215%

We recognized a loss before income taxes in our homebuilding segments during the three and six months ended June 30, 2007, ~~first quarter,~~ primarily resulting from: (1) asset impairments of $161.1 million and

$302.5 million, respectively; (2) significant decreases in Home Gross Margins in most of our homebuilding segments; ~~(2) asset impairments of $141.4 million;~~ and (3) closing fewer homes in ~~each~~most of our homebuilding ~~segment.~~segments during the 2007 second quarter and first six months. Partially offsetting these items were decreases ~~of $10.7 million and $9.6 million~~ in general and administrative, commission and marketing expenses during three and ~~commission expenses, respectively.~~six months ended June 30, 2007.

In our West segment, the loss before income taxes during the three and six months ended June 30, 2007 ~~first quarter~~ primarily was due to: (1) asset impairments of ~~$121.9 million;~~$132.7 million and $254.6 million, respectively; (2) significant decreases in Home Gross Margins; and (3) closing ~~624 fewer homes. These items partially were offset by decreases of $7.4 million in general~~670 and administrative expenses and commission expense. Income before income taxes for our Mountain segment increased during the three months ended March 31, 2007, primarily due to a decrease in general and administrative and commission expenses and increases in Home Gross Margins. These improvements partially were offset by the impact of closing 180 fewer homes.

In both of our East and Other Homebuilding segments, we recognized losses before income taxes during the 2007 first quarter, primarily due to: (1) asset impairments of $2.6 million and $16.3 million, respectively; (2) significant decreases in Home Gross Margins in both segments; and (3) closing 134 and 2591,294 fewer homes, respectively. These items partially were offset by a combined ~~$11.4 million~~ decrease in general and administrative, marketing and commission expenses. In our Mountain segment, the loss before income taxes during the 2007 second quarter primarily resulted from asset impairments of $9.1 million and closing 244 fewer homes. Income before income taxes for the six months ended June 30, 2007 decreased primarily resulting from closing 424 fewer homes and $9.8 million in asset impairments, partially offset by a combined decrease in general and administrative, commission and marketing expenses.

In our East segment, we recognized losses before income taxes during the 2007 second quarter and first six months, primarily due to: (1) asset impairments of $5.9 million and $8.4 million, respectively; (2) significant decreases in Home Gross Margins; and (3) closing 146 and 280 fewer homes, respectively. These items partially were offset by a combined decrease in general and administrative, marketing and commission expenses for the three and six months ended June 30, 2007. We recognized losses before income taxes during the 2007 second quarter and first six months in our Other Homebuilding segment, primarily resulting from: (1) asset impairments of $13.3 million and $29.6 million, respectively; (2) closing 285 and 544 fewer homes, respectively; and (3) decreases in Home Gross Margins in nearly each market within this segment. These items partially were offset by a combined decrease in general and administrative, marketing and commission expenses for the three and six months ended June 30, 2007.

Income before income taxes in our Financial Services and Other segment ~~was $3.7 million lower~~decreased during the 2007 second quarter and first ~~quarter~~six months due to lower gains on sales of mortgage loans primarily resulting from originating fewer mortgage loans during ~~the three months ended March 31, 2007.~~these periods. This decline partially was offset by ~~the impact of selling a higher volume of more valuable fixed-rate mortgage loans~~decreases in general and administrative expenses during ~~the~~both 2007 ~~first quarter.~~periods. Our Corporate segment net expenses ~~were reduced to $12.3~~decreased $17.3 million and $34.7 million for the three and six months ended ~~March 31,~~June 30, 2007, ~~from $29.6 million for the same period in 2006,~~respectively, primarily resulting from a decrease in general and administrative expenses and an increase in interest income, net.

Total Revenue. The table below summarizes total revenue by segment (dollars in thousands).


	Three Months Ended March 31,						Change			Three Months Ended June 30,						Change
	2007			2006			Amount		%	2007			2006			Amount			%
Homebuilding
West	$	454,654		$	687,246		$	(232,592)	-34%	$	433,049		$	720,530		$	(287,481	)	-40%
Mountain		145,191			163,190			(17,999)	-11%		134,670			187,724			(53,054	)	-28%
East		61,355			147,181			(85,826)	-58%		71,800			160,534			(88,734	)	-55%
Other Homebuilding		64,860			125,887			(61,027)	-48%		58,971			142,859			(83,888	)	-59%

Total Homebuilding		726,060			1,123,504			(397,444)	-35%		698,490			1,211,647			(513,157	)	-42%

Financial Services and Other		19,570			23,642			(4,072)	-17%		13,614			26,673			(13,059	)	-49%
Corporate		5,433			432			5,001	1158%		9,029			183			8,846		N/A
Inter-company adjustments		(5,939	)		(2,153	)		(3,786)	176%		(4,425	)		(6,522	)		2,097		-32%

Consolidated	$	745,124		$	1,145,425		$	(400,301)	-35%	$	716,708		$	1,231,981		$	(515,273	)	-42%


										Six Months Ended June 30,						Change
										2007			2006			Amount			%
Homebuilding
West										$	887,703		$	1,407,776		$	(520,073	)	-37%
Mountain											279,861			350,914			(71,053	)	-20%
East											133,155			307,715			(174,560	)	-57%
Other Homebuilding											123,831			268,746			(144,915	)	-54%

Total Homebuilding											1,424,550			2,335,151			(910,601	)	-39%
Financial Services and Other											33,184			50,315			(17,131	)	-34%
Corporate											14,462			615			13,847		N/A
Inter-company adjustments											(10,364	)		(8,675	)		(1,689	)	19%

Consolidated										$	1,461,832		$	2,377,406		$	(915,574	)	-39%

The decline in total revenue during the three and six months ended ~~March 31,~~June 30, 2007 primarily resulted from ~~lower~~a significant decline in home ~~sales revenue~~closings in each of our homebuilding segments, most notably in our West segment. Total revenue for our Financial Services and Other segment decreased due to lower gains on sales of mortgage ~~loans.~~loans, which were driven by: (1) originating significantly fewer mortgage loans because of declines in our home closing levels; (2) lower capture rates during the 2007 periods; and (3) a shift to a less profitable, but risk mitigating strategy of selling mortgage loan products faster after origination. Total revenue in our Corporate segment improved during the ~~three~~2007 second quarter and first six months ~~ended March 31, 2007,~~ due to an increase in interest income generated from significantly higher cash balances throughout the ~~2007~~ first ~~quarter.~~two quarters of 2007.

Inter-company adjustments relate to mortgage loan origination fees paid at the time of a home closing by our homebuilding subsidiaries to HomeAmerican on behalf of our homebuyers. During the 2007 first quarter, our homebuilding subsidiaries paid more mortgage loan origination fees on behalf of our homebuyers as a means of increasing incentives, resulting in the higher inter-company adjustments.

Home Sales Revenue. The table below summarizes home sales revenue by segment (dollars in thousands).


	Three Months Ended March 31,						Change				Three Months Ended June 30,						Change
	2007			2006			Amount			%	2007			2006			Amount			%
West	$	453,269		$	686,138		$	(232,869	)	-34%	$	430,921		$	719,178		$	(288,257	)	-40%
Mountain		138,821			162,931			(24,110	)	-15%		132,071			186,948			(54,877	)	-29%
East		61,324			146,600			(85,276	)	-58%		70,584			159,251			(88,667	)	-56%
Other Homebuilding		64,325			123,639			(59,314	)	-48%		58,662			129,706			(71,044	)	-55%

Total Homebuilding		717,739			1,119,308			(401,569	)	-36%		692,238			1,195,083			(502,845	)	-42%

Inter-company adjustments		(5,939	)		(2,153	)		(3,786	)	176%		(4,425	)		(6,522	)		2,097		-32%

Consolidated	$	711,800		$	1,117,155		$	(405,355	)	-36%	$	687,813		$	1,188,561		$	(500,748	)	-42%


											Six Months Ended June 30,						Change
											2007			2006			Amount			%
West											$	884,190		$	1,405,316		$	(521,126	)	-37%
Mountain												270,892			349,879			(78,987	)	-23%
East												131,908			305,851			(173,943	)	-57%
Other Homebuilding												122,987			253,345			(130,358	)	-51%

Total Homebuilding												1,409,977			2,314,391			(904,414	)	-39%
Inter-company adjustments												(10,364	)		(8,675	)		(1,689	)	19%

Consolidated											$	1,399,613		$	2,305,716		$	(906,103	)	-39%

In our West segment, the ~~decrease~~decreases in home sales revenue for the three and six months ended June 30, 2007 primarily resulted from closing ~~624~~670 and 1,294 fewer homes, respectively, as well as decreases in the average selling prices for homes closed in each market within this segment for both ~~Arizona and Nevada.~~2007 periods. Home sales revenue in our Mountain segment decreased during the 2007 second quarter and first six months due to closing ~~235~~244 and 424 fewer homes, ~~in our Colorado market,~~respectively, partially offset by ~~closing 55 more homes in our Utah market and~~ higher average selling prices for homes closed during both 2007 periods in ~~both markets~~each market within this segment.

The decline in home sales revenue for the three and six months ended June 30, 2007 in our East segment primarily was due to significant decreases in the average selling prices of closed homes during both 2007 periods in each market within this segment and closing ~~134~~146 and 280 fewer ~~homes.~~homes, respectively. Home sales revenue ~~decreased~~ in our Other Homebuilding segment decreased in the second quarter of 2007 and first six months primarily due to closing ~~274~~285 and 544 fewer homes, respectively, and decreases in the average selling prices for homes closed in our Florida ~~Illinois~~ and Texas ~~markets, partially offset by closing more homes with higher average selling prices in our Delaware Valley market.~~markets.

Land Sales.Land sales revenue ~~increased $4.2~~was $3.4 million and $9.5 million during the three and six months ended ~~March 31,~~June 30, 2007, respectively, primarily due to the sale of land in ~~our~~ Utah ~~market~~ that no longer met our strategic objectives in that market. Land sales revenue was $13.6 million and $15.5 million during the three and six months ended June 30, 2006, respectively, primarily due to the sale of land in Texas as we were in the process of exiting that market.

Other Revenue. The table below sets forth the components of other revenue (dollars in thousands).


	Three Months Ended March 31,				Change				Three Months Ended June 30,				Change
	2007		2006		Amount			%	2007		2006		Amount			%
Gains on sales of mortgage loans, net	$	9,271	$	13,027	$	(3,756	)	-29%	$	6,410	$	15,439	$	(9,029	)	-58%
Broker origination fees		1,762		2,080		(318	)	-15%		1,673		2,343		(670	)	-29%
Insurance revenue		5,017		6,240		(1,223	)	-20%		4,669		4,839		(170	)	-4%
Interest income, net		8,344		1,813		6,531		360%		9,161		1,040		8,121		781%
Title and other revenue		2,896		3,273		(377	)	-12%		3,565		6,120		(2,555	)	-42%

Total other revenue	$	27,290	$	26,433	$	857		3%	$	25,478	$	29,781	$	(4,303	)	-14%


									Six Months Ended June 30,				Change
									2007		2006		Amount			%
Gains on sales of mortgage loans, net									$	15,681	$	28,466	$	(12,785	)	-45%
Broker origination fees										3,435		4,423		(988	)	-22%
Insurance revenue										9,686		11,079		(1,393	)	-13%
Interest income, net										17,505		2,853		14,652		514%
Title and other revenue										6,461		9,393		(2,932	)	-31%

Total other revenue									$	52,768	$	56,214	$	(3,446	)	-6%

The decrease in other revenue for the three and six months ended June 30, 2007 primarily resulted from lower gains on sales of mortgage loans, due in part to originating fewer mortgage loans during the 2007 first quarter and first six months. Offsetting a substantial portion of the decline in other revenue during the second quarter and first six months of 2007 was an increase in interest ~~income~~income. This increase is attributable to our cash balances being significantly higher during the 2007 ~~period,~~periods, resulting from our on-going efforts to limit our inventory acquisitions during the current homebuilding down cycle. Our cash and cash equivalents primarily consisted of funds in highly liquid, cash equivalents with an original maturity of 90 days or less, such as commercial paper, money market funds and time deposits. ~~This improvement was offset by lower gains on sales of mortgage loans, primarily resulting from originating fewer mortgage loans during the three months ended March 31, 2007.~~

Home Cost of Sales. Home cost of sales (which primarily includes land and construction costs, capitalized interest, closing costs, and reserves for warranty expenses and excludes commissions, amortization of deferred marketing costs and asset impairments) was ~~$599.2~~$590.6 million and ~~$814.9 million~~$1.2 billion for the three and six months ended ~~March 31,~~June 30, 2007, respectively, compared with $911.7 million and $1.7 billion during the same periods in 2006, respectively. ~~This decrease~~These decreases primarily resulted from closing ~~1,197~~1,345 and 2,542 fewer homes during the 2007 second quarter and first ~~quarter.~~six months, respectively. Partially offsetting ~~this decrease~~these decreases was the impact of closing more homes with higher land costs per closed home (more of the lots on which we closed homes during the 2007 second quarter and first ~~quarter~~six months were purchased in the higher-priced 2005 and 2006 periods), and closing larger homes that included more options and upgrades as incentives for our homebuyers.

Asset Impairments. During the 2007 first quarter, we recorded impairments of our housing completed and under construction and land and land under development in the amounts of $26.3 million and $115.1 million, respectively. The following table sets forth by homebuilding segment, the 2007 second quarter asset impairment, post-impairment asset ~~balance,~~balances, and number of impaired lots and subdivisions (dollars in thousands).


							Three Months Ended June 30, 2007
	Asset Impairment		Post-Impairment Asset Balance		Number of Lots	Number of Subdivisions	Asset Impairments		Post-Impairment Asset Balances		Number of Lots	Number of Subdivisions
West	$	121,904	$	339,457	2,635	37	$	132,730	$	340,904	3,398	55
Mountain		654		4,425	50	2		9,123		25,910	409	11
East		2,567		5,032	78	5		5,865		12,781	85	4
Other Homebuilding		16,297		32,203	521	8		13,332		68,777	535	13

Total asset impairment	$	141,422	$	381,117	3,284	52
Total							$	161,050	$	448,372	4,427	83

During the three and six months ended June 30, 2007, we recorded impairments of our housing completed and under construction in the amounts of $38.2 million and $64.5 million, respectively, and impairments of our land and land under development in the amounts of $122.9 million and $238.0 million, respectively. The ~~asset~~2007 second quarter impairments, ~~recorded in each homebuilding segment relate~~related to assets contracted for primarily during 2004 and 2005, ~~and were the result of: (1) decreased demand for new homes during the 2007 first quarter; (2) significant~~resulted from decreases in home sales prices and/or increases in ~~the level of~~ incentives offered ~~to generate~~in an effort to: (1) stimulate new home orders ~~and~~when the spring selling season failed to materialize; (2) maintain homes in Backlog until they close; ~~(3) our reductions in home sales prices when the typical seasonal spring selling season failed to materialize;~~ and ~~(4) decreases in our home sales prices and/or increases in the level of incentive offered to~~(3) remain competitive with home sales prices offered by our competitors.

Marketing Expenses. Marketing expenses (which include advertising, amortization of deferred marketing costs, model home expenses and other selling costs) were ~~$29.1~~$29.4 million and ~~$29.0~~$31.6 million for the three months ended ~~March 31,~~June 30, 2007 and 2006, respectively, and $58.5 million and $60.6 million for six months ended June 30, 2007 and 2006, respectively. ~~While total marketing expenses were flat~~The decreases during the 2007 ~~first quarter, compared with the 2006 first quarter, we recognized an increase~~periods primarily related to lower amortization of ~~$1.8 million~~deferred marketing costs resulting from closing fewer homes and reduced salaries from a reduction in headcount. These decreases were offset partially by increases in advertising and sales office expenses incurred in an effort to generate homebuyer traffic. This increase was offset by a decrease of $1.4 million related to lower amortization of deferred marketing costs resulting from closing fewer homes during the 2007 first quarter and reduced salaries from our lower employee headcount.

Commission Expenses. Commission expenses (which include direct incremental commissions paid for closed homes) were ~~$23.3~~$24.4 million and ~~$32.8~~$37.4 million for the three months ended ~~March 31,~~June 30, 2007 and 2006, respectively, and $47.6 million and $70.2 million for the six months ended June 30, 2007 and 2006, respectively. The decreases during the 2007 ~~decrease~~periods primarily ~~was~~were attributable to closing ~~1,197~~1,345 and 2,542 fewer homes during the three and six months ended June 30, 2007, ~~period,~~respectively, partially offset by increases in commission rates paid to outside brokers in response to more competitive markets.

General and Administrative Expenses. The following table summarizes our general and administrative expenses (dollars in thousands).


	Three Months Ended March 31,				Change			Three Months Ended June 30,				Change
	2007		2006		Amount		%	2007		2006		Amount			%
Homebuilding segments	$	60,999	$	71,681	$	(10,682)	-15%	$	57,859	$	78,822	$	(20,963	)	-27%
Financial Services and Other		12,058		12,128		(70)	-1%		9,367		15,397		(6,030	)	-39%
Corporate		17,600		27,456		(9,856)	-36%		12,864		21,332		(8,468	)	-40%

Total general and administrative expenses	$	90,657	$	111,265	$	(20,608)	-19%	$	80,090	$	115,551	$	(35,461	)	-31%


								Six Months Ended June 30,				Change
								2007		2006		Amount			%
Homebuilding segments								$	118,858	$	150,503	$	(31,645	)	-21%
Financial Services and Other									21,425		27,525		(6,100	)	-22%
Corporate									30,464		48,788		(18,324	)	-38%

Total general and administrative expenses								$	170,747	$	226,816	$	(56,069	)	-25%

~~The $20.6 million decline in general~~General and administrative expenses for each of our segments decreased during the three and six months ended June 30, 2007, primarily ~~was~~ due to lower compensation and other employee ~~benefit-related~~benefit related costs. These ~~cost reductions primarily~~reduced expenses resulted from

~~our efforts~~ various initiatives intended to right-size our ~~Company,~~operations, including the consolidation of several of our homebuilding divisions and reductions in employee headcount. We continue to remain focused on properly structuring our operations in response to reduced levels of homebuilding activity in most of our markets. As a result of these efforts, our employee headcount has decreased from approximately 3,900 at June 30, 2006 to approximately 2,700 at June 30, 2007. In addition, general and administrative expenses in our homebuilding segments were lower due to declines in write-offs of pre-acquisition costs and deposits on lot option contracts that we elected not to exercise. In our Financial Services and Other segment, the declines in general and administrative expenses associated with lower compensation related costs partially were offset by increased expenses associated with mortgage loans that were repurchased or subject to repurchase during both 2007 periods.

Income Taxes. Our overall effective income tax rates were ~~34.3%~~38.0% and ~~37.4%~~36.3% for the three and six months ended ~~March 31,~~June 30, 2007, respectively, and ~~2006, respectively.~~37.4% and for both the three and six months ended June 30, 2006. The ~~decrease~~changes in the effective tax ~~rate~~rates during the 2007 ~~first quarter,~~periods, compared with the same ~~period~~periods during 2006, resulted from the impact of ~~a reduction~~reductions in the benefits from I.R.C. Sec. 199, “Income Attributable to Domestic Production Activities,” and ~~an increase~~increases in estimated permanent differences related to accruals for non-deductible excess compensation under I.R.C. Sec. 162(m), “Certain Excessive Employee Remuneration.”

The table below sets forth information relating to Home Gross Margins and orders for homes.


	Three Months Ended March 31,				Change				Three Months Ended June 30,				Change				Six Months Ended June 30,				Change
	2007		2006		Amount			%	2007		2006		Amount			%	2007		2006		Amount			%
Home Gross Margins		15.8%		27.1%		-11.3%				14.1%		23.3%		-9.2%				15.0%		25.1%		-10.1%

Orders For Homes, net (units)
Arizona		754		919		(165	)	-18%		611		679		(68	)	-10%		1,365		1,598		(233	)	-15%
California		415		544		(129	)	-24%		282		392		(110	)	-28%		697		936		(239	)	-26%
Nevada		380		779		(399	)	-51%		365		519		(154	)	-30%		745		1,298		(553	)	-43%

West		1,549		2,242		(693	)	-31%		1,258		1,590		(332	)	-21%		2,807		3,832		(1,025	)	-27%

Colorado		300		451		(151	)	-33%		224		291		(67	)	-23%		524		742		(218	)	-29%
Utah		210		339		(129	)	-38%		139		326		(187	)	-57%		349		665		(316	)	-48%

Mountain		510		790		(280	)	-35%		363		617		(254	)	-41%		873		1,407		(534	)	-38%

Maryland		99		152		(53	)	-35%		92		98		(6	)	-6%		191		250		(59	)	-24%
Virginia		112		194		(82	)	-42%		82		113		(31	)	-27%		194		307		(113	)	-37%

East		211		346		(135	)	-39%		174		211		(37	)	-18%		385		557		(172	)	-31%

Delaware Valley		62		39		23		59%		19		35		(16	)	-46%		81		74		7		9%
Florida		179		272		(93	)	-34%		117		177		(60	)	-34%		296		449		(153	)	-34%
Illinois		41		44		(3	)	-7%		31		18		13		72%		72		62		10		16%
Texas		6		67		(61	)	-91%		8		90		(82	)	-91%		14		157		(143	)	-91%

Other Homebuilding		288		422		(134	)	-32%		175		320		(145	)	-45%		463		742		(279	)	-38%

Total		2,558		3,800		(1,242	)	-33%		1,970		2,738		(768	)	-28%		4,528		6,538		(2,010	)	-31%


Approximate Cancellation Rate		35%		31%		4%				44%		43%		1%				39%		37%		2%
Estimated Value of Orders for Homes, net	$	902,000	$	1,360,000	$	(458,000)		-34%	$	653,000	$	914,000	$	(261,000	)	-29%	$	1,555,000	$	2,274,000	$	(719,000	)	-32%
Estimated Average Selling Price of Orders for Homes, net	$	352.6	$	357.9	$	(5.3	)	-1%	$	331.5	$	333.8	$	(2.3	)	-1%	$	343.4	$	347.8	$	(4.4	)	-1%

Orders for Homes. Each of our homebuilding segments experienced declines in net home orders during the 2007 second quarter and first ~~quarter,~~six months, resulting from what we believe to be ~~customers hesitating in making purchase decisions because of uncertainties as to the stability of home prices and because of negative news coverage of issues which emerged~~homebuyer concerns about declines in the ~~mortgage industry.~~market value of homes and lower availability of credit for homebuyers. Additionally, competition for new home orders during the three and six months ended June 30, 2007 ~~first quarter~~ continued at a high level, caused in part by expanding new and existing home inventories.

Home Gross Margins. We define “Home Gross Margins” to mean home sales revenue less home cost of sales (which primarily includes land and construction costs, capitalized interest, closing costs, and reserves for warranty expenses and excludes commissions, amortization of deferred marketing costs and asset impairments) as a percent of home sales revenue. Home Gross Margins ~~were 15.8% and 27.1%~~ during the ~~three months ended March 31,~~ 2007 ~~and 2006, respectively. Home Gross Margins~~periods decreased significantly in each of our West, East and Other Homebuilding segments due to offering lower selling prices and/or higher sales incentives to generate new home orders and subsequent home closings, increases in speculative homes that were sold and closed, and higher land and home construction costs incurred to build larger homes that we were unable to fully offset through increases in the average selling prices of our closed homes. The decreases in Home Gross Margins for these three segments partially were offset by ~~higher~~increases in Home Gross Margins in our Mountain ~~segment, primarily resulting~~segment. These increases resulted from closing homes in select subdivisions in our Colorado market with higher Home Gross Margins due, in part, to strong demand for our homes in those ~~locations. Additionally, Home Gross Margins during the 2007 first quarter were impacted positively by~~locations, as well as closing a higher percentage of homes in Utah, ~~during the 2007 first quarter,~~ which produced ~~one~~some of the highest Home Gross Margins in the Company during ~~this period.~~these periods.

Home Gross Margins for the three months ended June 30, 2007 ~~first quarter~~ were impacted positively by recognizing ~~$23.1~~$10.6 million in ~~Operating Profits~~“Operating Profits” (home sales revenue less home cost of sales and all direct incremental costs associated with the home closing) that had been deferred under Statement of Financial Accounting Standards (“SFAS”) No. 66, “Accounting for Sales of Real Estate” (“SFAS 66”), as of ~~December~~March 31, 2006, partially offset by a current deferral of ~~$10.6~~$5.6 million in Operating Profits at ~~March 31,~~June 30, 2007 pursuant to SFAS 66. Home Gross Margins for the first six months of 2007 were impacted positively by recognizing $23.1 million in Operating Profits that had been deferred under SFAS 66 as of December 31, 2006, partially offset by our June 30, 2006 deferral of $5.6 million. Additionally, during the three and six months ended ~~March 31,~~June 30, 2007, we closed homes on lots for which we ~~had~~previously recorded ~~$9.2~~$18.8 million and $28.0 million, respectively, of asset ~~impairments during 2006.~~impairments.

Future Home Gross Margins may be impacted by, among other things: (1) increased competition and continued high levels of cancellations, which would affect our ability to ~~raise~~maintain home prices and ~~maintain~~ lower levels of incentives; (2) continued decline in demand for new homes in our markets; (3) increases in the costs of subcontracted labor, finished lots, building materials, and other resources, to the extent that market conditions prevent the recovery of increased costs through higher selling prices; (4) adverse weather; (5) shortages of subcontractor labor, finished lots and other resources, which can result in delays in the delivery of homes under construction and increases in related home cost of sales; (6) the impact of being unable to sell high loan-to-value mortgage loans on a timely basis, as this may affect the timing of recognizing the Operating Profit on closed homes pursuant to SFAS 66; and (7) other general risk factors. See“Forward-Looking Statements” below.

Approximate Cancellation Rate.We define our home order “Approximate Cancellation Rate” as the approximate number of total cancelled home order contracts during a specified period of time as a percent of total home orders received during such time period. ~~Our Approximate Cancellation Rates were 35% and 31% for the three months ended March 31, 2007 and 2006, respectively.~~

Homes Closed. The following table sets forth homes closed for each market within our homebuilding segments (in units).


	Three Months Ended March 31,		Change			Three Months Ended June 30,		Change			Six Months Ended June 30,		Change
	2007	2006	Amount		%	2007	2006	Amount		%	2007	2006	Amount		%
Arizona	652	778	(126	)	-16%	645	843	(198	)	-23%	1,297	1,621	(324	)	-20%
California	328	464	(136	)	-29%	266	405	(139	)	-34%	594	869	(275	)	-32%
Nevada	313	675	(362	)	-54%	405	738	(333	)	-45%	718	1,413	(695	)	-49%

West	1,293	1,917	(624	)	-33%	1,316	1,986	(670	)	-34%	2,609	3,903	(1,294	)	-33%


Colorado	164	399	(235	)	-59%	200	421	(221	)	-52%	364	820	(456	)	-56%
Utah	228	173	55		32%	178	201	(23	)	-11%	406	374	32		9%

Mountain	392	572	(180	)	-31%	378	622	(244	)	-39%	770	1,194	(424	)	-36%


Maryland	49	74	(25	)	-34%	61	112	(51	)	-46%	110	186	(76	)	-41%
Virginia	68	177	(109	)	-62%	76	171	(95	)	-56%	144	348	(204	)	-59%

East	117	251	(134	)	-53%	137	283	(146	)	-52%	254	534	(280	)	-52%


Delaware Valley	46	31	15		48%	35	41	(6	)	-15%	81	72	9		13%
Florida	128	252	(124	)	-49%	138	255	(117	)	-46%	266	507	(241	)	-48%
Illinois	14	36	(22	)	-61%	13	37	(24	)	-65%	27	73	(46	)	-63%
Texas	11	139	(128	)	-92%	14	152	(138	)	-91%	25	291	(266	)	-91%

Other Homebuilding	199	458	(259	)	-57%	200	485	(285	)	-59%	399	943	(544	)	-58%

Total	2,001	3,198	(1,197	)	-37%	2,031	3,376	(1,345	)	-40%	4,032	6,574	(2,542	)	-39%

Our home closings were down during the three and six months ended June 30, 2007 in ~~each market~~most markets of our homebuilding segments ~~except Utah and Delaware Valley, during the 2007 first quarter. These declines~~ primarily ~~were~~ due to significantly lower Backlogs at the beginning of ~~the~~both 2007 ~~period,~~periods, compared with the beginning of ~~the~~both 2006 ~~period,~~periods. These declines in Backlog primarily ~~resulting~~resulted from decreases in ~~demand for~~ new ~~homes~~home orders during the second half of 2006 ~~compared with the same period during 2005. Also contributing to the comparative decline in homes closed between the 2007~~ and ~~2006~~ first quarter ~~were delays~~ of ~~home closings caused by homebuyers having to re-qualify for mortgage loans in response to the emerging issues in the mortgage lending industry. These items that negatively impacted our~~ 2007, ~~home closings partially were offset by closing more homes in Utah during the three months ended March 31, 2007. This resulted from more homes in Backlog at the beginning of the 2007 period,~~ compared with ~~the beginning of the 2006 period, primarily due to higher demand for new homes in~~ the second half of 2005 and first quarter of 2006, ~~compared with 2005.~~partially as a result of homebuyer concerns about declines in the market value of homes and the lack of stabilization in home sales prices.

Backlog. The following table below sets forth information relating to Backlog for each market within our homebuilding segments (dollars in thousands).


									June 30, 2007		December 31, 2006		June 30, 2006		December 31, 2005
Backlog (units)	March 31, 2007		December 31, 2006		March 31, 2006		December 31, 2005
Arizona		1,606		1,504		2,240		2,099		1,572		1,504		2,076		2,099
California		514		427		845		765		530		427		832		765
Nevada		382		315		1,127		1,023		342		315		908		1,023

West		2,502		2,246		4,212		3,887		2,444		2,246		3,816		3,887


Colorado		389		253		629		577		413		253		499		577
Utah		447		465		504		338		408		465		629		338

Mountain		836		718		1,133		915		821		718		1,128		915


Maryland		237		187		329		251		268		187		315		251
Virginia		180		136		398		381		186		136		340		381

East		417		323		727		632		454		323		655		632


Delaware Valley		135		119		189		181		119		119		183		181
Florida		248		197		619		599		227		197		541		599
Illinois		50		23		88		80		68		23		69		80
Texas		7		12		166		238		1		12		104		238

Other Homebuilding		440		351		1,062		1,098		415		351		897		1,098

Total		4,195		3,638		7,134		6,532		4,134		3,638		6,496		6,532

Backlog Estimated Sales Value	$	1,500,000	$	1,300,000	$	2,700,000	$	2,440,000	$	1,480,000	$	1,300,000	$	2,440,000	$	2,440,000

Estimated Average Selling Price of Homes in Backlog	$	357.6	$	357.3	$	378.5	$	373.5	$	358.0	$	357.3	$	375.6	$	373.5

We define “Backlog” as homes under contract but not yet delivered. At ~~March 31,~~June 30, 2007 and 2006, we had ~~4,195~~4,134 and ~~7,134~~6,496 homes in Backlog, respectively. Because our change in Backlog during the ~~2007~~ first ~~quarter~~six months of 2007 is equal to the total net home orders received during the ~~three~~six months ended ~~March 31,~~June 30, 2007 less homes closed during the same period, refer to the previous discussion on “Homes Closed” and “Orders for Homes” for an explanation of the change in the number of homes in Backlog. The estimated Backlog sales value decreased from ~~$2.7~~$2.4 billion at ~~March 31,~~June 30, 2006 to $1.5 billion at ~~March 31,~~June 30, 2007, primarily due to the ~~41%~~36% decrease in the number of homes in Backlog and a 6%5% decrease in the estimated average selling price of homes in Backlog.

Active Subdivisions. The following table displays the number of our active subdivisions for each market within our homebuilding segments.


	March 31, 2007	December 31, 2006	March 31, 2006	June 30, 2007	December 31, 2006	June 30, 2006
Arizona	70	67	58	69	67	61
California	47	45	42	44	45	45
Nevada	45	41	41	43	41	35

West	162	153	141	156	153	141


Colorado	49	47	50	50	47	45
Utah	26	22	21	25	22	20

Mountain	75	69	71	75	69	65


Maryland	18	19	15	16	19	18
Virginia	22	19	25	23	19	23

East	40	38	40	39	38	41


Delaware Valley	4	8	8	5	8	7
Florida	28	30	26	27	30	28
Illinois	6	6	7	6	6	7
Texas	-	2	18	-	2	4

Other Homebuilding	38	46	59	38	46	46

Total	315	306	311	308	306	293

Average for quarter ended	311	299	299	311	299	300

Average Selling Prices Per Home Closed. The following table displays our average selling prices per home closed, by market (dollars in thousands).


	Three Months Ended March 31,				Change				Three Months Ended June 30,				Change				Six Months Ended June 30,				Change
	2007		2006		Amount			%	2007		2006		Amount			%	2007		2006		Amount			%
Arizona	$	262.5	$	285.2	$	(22.7	)	-8%	$	253.1	$	313.6	$	(60.5	)	-19%	$	257.8	$	300.0	$	(42.2	)	-14%
California		540.0		533.3		6.7		1%		534.6		574.5		(39.9	)	-7%		537.6		552.5		(14.9	)	-3%
Colorado		352.5		296.5		56.0		19%		326.5		308.3		18.2		6%		338.2		302.6		35.6		12%
Delaware Valley		489.6		412.0		77.6		19%		439.9		387.5		52.4		14%		468.1		398.0		70.1		18%
Florida		280.9		297.7		(16.8	)	-6%		260.1		293.5		(33.4	)	-11%		270.1		295.6		(25.5	)	-9%
Illinois		311.3		363.3		(52.0	)	-14%		412.0		374.5		37.5		10%		359.8		369.0		(9.2	)	-2%
Maryland		530.8		570.3		(39.5	)	-7%		513.4		573.9		(60.5	)	-11%		521.2		572.5		(51.3	)	-9%
Nevada		305.3		323.1		(17.8	)	-6%		304.2		320.9		(16.7	)	-5%		304.7		321.9		(17.2	)	-5%
Texas		135.5		169.0		(33.5	)	-20%		126.3		166.8		(40.5	)	-24%		130.4		167.9		(37.5	)	-22%
Utah		350.0		260.7		89.3		34%		369.2		291.5		77.7		27%		358.4		277.3		81.1		29%
Virginia		492.0		596.2		(104.2	)	-17%		497.8		573.3		(75.5	)	-13%		495.1		584.9		(89.8	)	-15%
Company average	$	355.7	$	349.3	$	6.4		2%	$	338.7	$	352.1	$	(13.4	)	-4%	$	347.1	$	350.7	$	(3.6	)	-1%

The average selling prices of homes closed for the Company ~~increased slightly for~~decreased during the three and six months ended ~~March 31,~~June 30, 2007. These declines were most notable in our Arizona, California, Maryland,

Nevada and Virginia markets and resulted in part from increased levels of incentives and reductions in sales prices required to close homes in response to lower demand for new homes in these markets. Additionally, we experienced an increase in the number of cancellations, which resulted in homes being resold as speculative homes, generally at lower prices or with higher incentives, and closed during the 2007 ~~compared with the same period~~second quarter, which negatively impacted our average selling prices of closed homes during ~~2006.~~this period. We experienced ~~significant~~ increases in average selling prices in our Delaware Valley, Colorado and Utah markets during the second quarter of 2007 and first six months, primarily related to changes in the style and size of our single-family detached homes that were closed

during ~~the 2007 first quarter.~~these periods. Also contributing to the higher average selling prices of homes closed in Utah was our ability to raise home sales prices due to the higher demand for new homes in the second half of 2006, compared with the same period during 2005. These improvements partially were offset by decreases in the average selling prices of homes closed in most of our other markets, particularly Virginia, Illinois, Maryland and Arizona, resulting from increased levels of incentives required to close homes in response to lower demand for new homes in these markets.

Land Inventory.The table below shows the carrying value of land and land under development, for each market within our homebuilding segments (in thousands).


	March 31, 2007		December 31, 2006		March 31, 2006		June 30, 2007		December 31, 2006		June 30, 2006
Arizona	$	269,936	$	284,407	$	290,847	$	203,928	$	284,407	$	289,959
California		282,051		391,170		546,317		181,867		391,170		498,073
Nevada		248,576		305,089		387,315		201,161		305,089		365,206

West		800,563		980,666		1,224,479		586,956		980,666		1,153,238


Colorado		180,786		191,456		158,152		172,355		191,456		167,554
Utah		76,495		90,607		90,426		79,831		90,607		85,560

Mountain		257,281		282,063		248,578		252,186		282,063		253,114


Maryland		72,463		76,981		82,159		55,476		76,981		80,138
Virginia		104,267		108,646		114,222		85,822		108,646		127,173

East		176,730		185,627		196,381		141,298		185,627		207,311


Delaware Valley		28,126		29,345		39,303		22,403		29,345		38,441
Florida		57,412		74,149		87,152		41,358		74,149		82,385
Illinois		21,692		23,105		29,124		17,683		23,105		23,757
Texas		-		203		11,884		-		203		1,831

Other Homebuilding		107,230		126,802		167,463		81,444		126,802		146,414

Total	$	1,341,804	$	1,575,158	$	1,836,901	$	1,061,884	$	1,575,158	$	1,760,077

The tables below ~~shows~~show the total number of lots owned (excluding ~~lots in work-in-process)~~homes completed or under construction) and lots controlled under option agreements for each market within our homebuilding segments (in units).


	March 31, 2007	December 31, 2006	March 31, 2006	June 30, 2007	December 31, 2006	June 30, 2006
Lots Owned
Arizona	5,701	6,368	7,686	4,771	6,368	7,477
California	2,508	2,802	3,622	2,182	2,802	3,391
Nevada	2,416	2,747	4,139	2,038	2,747	3,619

West	10,625	11,917	15,447	8,991	11,917	14,487


Colorado	3,274	3,479	3,508	3,052	3,479	3,390
Utah	987	1,185	1,295	933	1,185	1,159

Mountain	4,261	4,664	4,803	3,985	4,664	4,549


Maryland	492	528	624	389	528	558
Virginia	600	643	784	542	643	822

East	1,092	1,171	1,408	931	1,171	1,380


Delaware Valley	261	265	402	212	265	372
Florida	1,033	1,093	1,458	907	1,093	1,307
Illinois	268	287	380	233	287	312
Texas	-	13	365	-	13	77

Other Homebuilding	1,562	1,658	2,605	1,352	1,658	2,068

Total	17,540	19,410	24,263	15,259	19,410	22,484


Lots Controlled Under Option
Arizona	575	744	3,592	548	744	2,506
California	157	387	1,921	157	387	1,510
Nevada	117	250	665	4	250	568

West	849	1,381	6,178	709	1,381	4,584


Colorado	931	801	2,064	312	801	1,785
Utah	91	91	454	93	91	553

Mountain	1,022	892	2,518	405	892	2,338


Maryland	992	960	1,148	925	960	1,156
Virginia	2,148	2,381	3,231	1,894	2,381	2,642

East	3,140	3,341	4,379	2,819	3,341	3,798


Delaware Valley	644	683	1,277	741	683	966
Florida	1,436	1,800	2,686	1,073	1,800	2,367
Illinois	-	-	186	-	-	139
Texas	-	-	80	-	-	-

Other Homebuilding	2,080	2,483	4,229	1,814	2,483	3,472

Total	7,091	8,097	17,304	5,747	8,097	14,192

Total Lots Owned and Controlled (excluding lots in work-in-process)	24,631	27,507	41,567
Total Lots Owned and Controlled (excluding homes completed or under construction)				21,006	27,507	36,676

During the 2007 second quarter and first ~~quarter,~~six months, in view of the current pace of new home orders in our markets, we remained focused on managing the total number of lots we ~~own~~owned and ~~control~~controlled under option. Accordingly, the total number of lots owned (excluding ~~lots in work-in-process)~~homes completed or under construction) at ~~March 31,~~June 30, 2007 declined ~~28%~~32% and ~~10%~~21% from ~~March 31,~~June 30, 2006 and December 31, 2006, respectively, including decreases in each of our homebuilding segments. Additionally, our total lots controlled under option at ~~March 31,~~June 30, 2007 decreased by ~~59%~~60% and ~~12%~~29% from ~~March 31,~~June 30, 2006 and December 31, 2006, respectively. The decrease from December 31, 2006 includes declines within each of our homebuilding segments ~~except our Mountain segment,~~ and primarily related to ~~the purchase of lots under option and~~ the termination of lot option contracts with terms that no longer met our underwriting ~~criteria.~~criteria, as well as limited purchases of lots under option. As a result, we incurred approximately ~~$4.0~~$6.4 million and $10.5 million in write-offs of lot option deposits and pre-acquisition costs during the three and six months ended ~~March 31, 2007.~~ June 30, 2007, respectively, compared with $12.1 million and $15.8 million during the same periods in 2006, respectively.

In addition to the non-refundable option deposits noted in the table below (in thousands), we had ~~$5.2~~$4.0 million and $5.6 million in capitalized pre-acquisition costs at ~~March 31,~~June 30, 2007 and December 31, 2006, respectively.


	March 31, 2007		December 31, 2006		March 31, 2006		June 30, 2007		December 31, 2006		June 30, 2006
Non-refundable Option Deposits
Cash	$	15,649	$	20,228	$	44,108	$	11,009	$	20,228	$	37,993
Letters of Credit		14,422		14,224		19,240		11,850		14,224		17,640

Total Non-refundable Option Deposits	$	30,071	$	34,452	$	63,348	$	22,859	$	34,452	$	55,633

The table below shows the number of homes completed or under construction (in units).


	March 31, 2007	December 31, 2006	March 31, 2006	June 30, 2007	December 31, 2006	June 30, 2006
Unsold Home Under Construction - Final	422	476	261	423	476	279
Unsold Home Under Construction - Frame	480	573	531	690	573	781
Unsold Home Under Construction - Foundation	310	400	346	382	400	395

Total Unsold Homes Under Construction	1,212	1,449	1,138	1,495	1,449	1,455
Sold Homes Under Construction	2,677	2,430	4,934	3,095	2,430	4,699
Model Homes	792	757	709	764	757	720

Homes Completed or Under Construction	4,681	4,636	6,781	5,354	4,636	6,874

HomeAmerican Operating Activities. The following table sets forth information relating to mortgage loans originated by our HomeAmerican operations, mortgage loans brokered and our Capture Rate (dollars in thousands).


	Three Months Ended March 31,				Change			Three Months Ended June 30,				Change
	2007		2006		Amount		%	2007		2006		Amount			%
Principal amount of mortgage loans originated	$	351,033	$	526,231	$	(175,198)	-33%	$	293,544	$	604,419	$	(310,875	)	-51%

Principal amount of mortgage loans brokered	$	118,342	$	157,243	$	(38,901)	-25%	$	127,891	$	172,438	$	(44,547	)	-26%

Capture Rate		58%		56%		2%			52%		59%		-7%
Including brokered loans		77%		72%		5%			72%		75%		-3%
Mortgage products (% of loans originated by HomeAmerican)
Fixed rate		69%		49%		20%			83%		49%		34%
Adjustable rate - interest only		27%		44%		-17%			14%		43%		-29%
Adjustable rate - other		4%		7%		-3%			3%		8%		-5%

Prime loans⁽¹⁾		59%		59%		0%			86%		61%		25%
Alt-A loans⁽²⁾		35%		34%		1%			5%		33%		-28%
Government loans⁽³⁾		5%		5%		0%			9%		4%		5%
Sub-prime loans⁽⁴⁾		1%		2%		-1%			0%		2%		-2%

								Six Months Ended June 30,				Change
								2007		2006		Amount			%
Principal amount of mortgage loans originated								$	644,577	$	1,130,650	$	(486,073	)	-43%
Principal amount of mortgage loans brokered								$	246,233	$	329,681	$	(83,448	)	-25%
Capture Rate									55%		57%		-2%
Including brokered loans									74%		73%		1%
Mortgage products (% of loans originated by HomeAmerican)
Fixed rate									76%		49%		27%
Adjustable rate - interest only									20%		44%		-24%
Adjustable rate - other									4%		7%		-3%
Prime loans									73%		64%		9%
Alt-A loans									20%		30%		-10%
Government loans									7%		4%		3%
Sub-prime loans									0%		2%		-2%

The principal amount of mortgage loans originated and brokered decreased in the ~~2007~~second quarter and first ~~quarter~~six months of 2007 primarily due to a ~~37%~~40% and 39% decline in the number of homes closed during the three and six months ended ~~March 31,~~June 30, 2007, ~~as we had~~respectively, and a ~~comparable~~decline in the Capture ~~Rate,~~ Rates,

with and without brokered loans, for both 2007 periods. Fixed rate mortgage loans as a percentage of the total mortgage loans HomeAmerican originated during the 2007 second quarter and first ~~quarter~~six months increased significantly, primarily due to a decrease in the difference in the interest rates for adjustable rate mortgage loans and fixed rate mortgage loans, making fixed rate loans more attractive for our homebuyers. The “Capture Rate” is defined as the number of mortgage loans originated by HomeAmerican for our homebuyers as a percent of total MDC home closings.

Forward Sales Commitments. HomeAmerican is exposed to market risks related to fluctuations in interest rates on its mortgage loan inventory. Derivative instruments utilized in the normal course of business by HomeAmerican include forward sales of mortgage-backed securities, commitments to sell whole mortgage loans and commitments to originate mortgage loans. HomeAmerican utilizes forward mortgage securities contracts to manage the price risk on fluctuations in interest rates on our mortgage loans owned and the interest rate lock commitments. Such contracts are the only significant financial derivative instruments utilized by us and are generally settled within 45 days of origination. Certain mortgage loans originated by HomeAmerican are sold pursuant to an early purchase program and generally are settled within five days of origination. Due to this hedging philosophy, the market risk

associated with HomeAmerican’s mortgages is limited. Reported gains on sales of mortgage loans may vary significantly from period to period depending on ~~the~~ volatility in the interest rate market. See“Forward-Looking Statements” below.

Interest Activity. We capitalize interest on our homebuilding inventories during the period of active development and through the completion of construction. All interest incurred by our Corporate and homebuilding segments during the three and six months ended ~~March 31,~~June 30, 2007 and 2006 was capitalized. Interest incurred by the Financial Services and Other segment is charged to interest expense, which is deducted from interest income. ~~Total~~For a reconciliation of our interest incurred, bycapitalized and expensed, see Note 6 to our ~~Corporate and homebuilding segments was $14.4 million and $14.8 million for the three months ended March 31, 2007 and 2006, respectively.~~Unaudited Consolidated Financial Statements.

We use our liquidity and capital resources to (1) support our operations, including our homebuilding inventories; (2) provide working capital; and (3) provide mortgage loans for our homebuyers. Liquidity and capital resources are generated internally from operations and from external sources. Additionally, we have an effective shelf registration statement, which allows us to issue equity, debt or hybrid securities up to $1.0 billion, with $500 million earmarked for our medium-term senior notes program.

Our capital structure is a combination of (1) permanent financing, represented by stockholders’ equity; (2) long-term financing, represented by our publicly traded 7% senior notes due 2012, 5¹/2% senior notes due 2013, 5³/8% medium-term senior notes due 2014 and 2015 and our homebuilding line of credit (the “Homebuilding Line”); and (3) current financing, primarily our mortgage lending line of credit (the “Mortgage Line”). Based upon our current capital resources and additional capacity available under existing credit agreements, we believe that our current financial condition is both balanced to fit our current operating structure and adequate to satisfy our current and near-term capital requirements. We continue to monitor and evaluate the adequacy of our Homebuilding Line and Mortgage Line. However, we believe that we can meet our long-term capital needs (including meeting future debt payments and refinancing or paying off other long-term debt as it becomes due) from operations and external financing sources, assuming that no significant adverse

changes in our business or capital and credit markets occur as a result of the various risk factors described in Item 1A “Risk Factors Relating to our ~~Business”~~Business,” which are included in our Annual Report on Form 10-K for the year ended December 31, 2006 and this Quarterly Report on Form 10-Q. See“Forward-Looking Statements” below.

Homebuilding. Our Homebuilding Line is an unsecured revolving line of credit with a group of lenders for support of our homebuilding segments. Our Homebuilding Line has an aggregate commitment amount of $1.25 billion and a maturity date of March 21, 2011. The facility’s provision for letters of credit is available in the aggregate amount of $500 million. The facility permits an increase in the maximum commitment amount to $1.75 billion upon our request, subject to receipt of additional commitments from existing or additional participant lenders. Interest rates on outstanding borrowings are determined by reference to ~~LIBOR,~~a chosen London Interbank Offered Rate (“LIBOR”), with a spread from LIBOR which is determined

based on changes in our credit ratings and leverage ratio, or to an alternate base rate. At ~~March 31,~~June 30, 2007, we did not have any borrowings on our Homebuilding Line and had ~~$43.7~~$37.8 million in letters of credit issued, which reduced the amount available to be borrowed under the Homebuilding Line.

Mortgage Lending. Our Mortgage Line has a borrowing limit of $225 million with terms that allow for increases of up to $175 million in the borrowing limit to a maximum of $400 million, subject to concurrence by the participating banks. Available borrowings under the Mortgage Line are collateralized by mortgage loans and mortgage-backed securities and are limited to the value of eligible collateral, as defined. At ~~March 31,~~June 30, 2007, ~~$100.7~~$99.4 million was borrowed and an additional ~~$31.8~~$8.2 million was collateralized and available to be borrowed. The Mortgage Line is cancelable upon 120 days notice.

General. The agreements for our bank lines of credit and the indentures for our senior notes require compliance with certain representations, warranties and covenants. We believe that we are in compliance with these requirements, and we are not aware of any covenant violations. The agreements containing these representations, warranties and covenants for the bank lines of credit and the indentures for our senior notes are on file with the Securities and Exchange Commission and are listed in the Exhibit Table in Part IV of our Annual Report on Form 10-K for the year ended December 31, 2006.

The financial covenants contained in the Homebuilding Line agreement include a leverage test and a consolidated tangible net worth test. Under the leverage test, generally, our consolidated indebtedness is not permitted to exceed 55% (subject to adjustment in certain circumstances) of the sum of consolidated indebtedness and our “adjusted consolidated tangible net worth,” as defined. Under the consolidated tangible net worth test, our “consolidated tangible net worth,” as defined, must not be less than (1) $1.360 billion; plus (2) 50% of “consolidated net income,” as defined, of the “borrower,” as defined, and the “guarantors,” as defined, earned after September 30, 2005; plus (3) 50% of the net proceeds or other consideration received for the issuance of capital stock after September 30, 2005; minus (4) the lesser of (A) the aggregate amount paid by “borrower” after September 30, 2005 to repurchase its common stock and (B) $300 million. Failure to satisfy the foregoing financial covenant tests ~~could~~would not result in a default, but would result in a scheduled term-out of the facility. In addition, “consolidated tangible net worth,” as defined, must not be less than the sum of (1) $850 million; (2) 50% of the “quarterly consolidated net income” of “borrower” and the “guarantors” earned after September 30, 2005; and (3) 50% of the net proceeds or other consideration

received for the issuance of capital stock after September 30, 2005. Failure to satisfy this covenant could result in a termination of the facility. We believe that we are in full compliance with these covenants, and we are not aware of any covenant violations.

Our senior notes are not secured and, while the senior notes indentures contain some restrictions on secured debt and other transactions, they do not contain financial covenants. Our senior notes are fully and unconditionally guaranteed on an unsecured basis, jointly and severally, by most of our homebuilding segment subsidiaries.

At ~~March 31,~~June 30, 2007, we were authorized to repurchase up to 4,000,000 shares of our common stock. We did not repurchase any shares of our common stock during the three months ended ~~March 31,~~June 30, 2007 or 2006.

During the ~~2007~~ first ~~quarter,~~six months of 2007, we generated ~~$149.3~~$199.3 million in cash from operating activities, primarily resulting from a reduction of ~~$137.2~~$147.7 million in mortgage loans held in inventory and home sales and other receivables from December 31, 2006. The decline in mortgage loans held in inventory primarily was due to originating a higher volume of mortgage loans during the 2006 fourth quarter, compared with the 2007 ~~first~~second quarter. Additionally, we generated cash of ~~$99.5~~$116.4 million from ~~lower~~lowering our homebuilding inventories, as we continued to execute ~~our~~a strategy of limiting our new land purchases. Offsetting these cash proceeds was the use of ~~$38.1 million, $48.2 million and $10.7~~$64.2 million to reduce accounts payable and accrued liabilities and $26.3 million to reduce our income tax ~~payable, respectively.~~payable. The cash used to decrease our accounts payable and accrued liabilities primarily related to the payment of ~~executive and non-executive~~employee bonuses and homebuilding construction payables. We decreased our income tax payable as we incurred payments in 2007 associated with our 2006 income tax obligations.

During the first ~~quarter~~six months of 2006, we used ~~$108.4~~$112.3 million in cash ~~in our~~from operating activities. We used ~~$219.4~~$274.9 million of cash to increase our homebuilding inventories in connection with the expansion of our operations during the early part of 2006. In addition, we used ~~$68.4~~$69.7 million in cash to reduce ~~accounts~~our income tax payable ~~and accrued liabilities, primarily due to the payment of executive bonuses and homebuilding construction payables and~~as we incurred payments in 2006 associated with our 2005 income tax obligations. These uses of cash partially were offset by generating cash of ~~$113.8~~$208.4 million from our net income before non-cash items and a ~~$46.9~~$74.0 million decrease in mortgage loans held in inventory from December 31, 2005 resulting from our selling a higher volume of loans to third-party purchasers. ~~Additionally, a decrease in our home sales receivables balance provided $61.1 million in cash.~~

We used ~~$0.7~~$2.1 million and ~~$1.6~~$4.3 million of cash in investing activities during the ~~three~~six months ended ~~March 31,~~June 30, 2007 and 2006, respectively, ~~primarily due to the purchase~~for purchases of property and equipment.

During the ~~three~~six months ended ~~March 31,~~June 30, 2007, we used ~~$25.9~~$36.8 million in cash from financing activities. This cash usage primarily resulted from ~~$29.8~~$31.1 million in net payments on our lines of credit and ~~$11.4~~$22.9 million in dividend payments, partially offset by cash proceeds of ~~$9.4~~$10.7 million from the exercise of stock options. Additionally, we received proceeds of ~~$5.9~~$6.3 million with respect to the excess tax benefit from stock-based compensation during the ~~2007~~ first ~~quarter.~~six months of 2007.

During the first ~~quarter~~six months of 2006, we ~~received~~used a total of ~~$61.3~~$6.4 million in cash from financing activities. ~~These~~This cash ~~proceeds~~usage primarily ~~were~~resulted from dividend payments of $22.5 million, partially offset by the ~~result of~~ net borrowings under our Homebuilding Line and Mortgage Line of ~~$69.0~~$11.6 million. ~~Additionally, we received $3.5 million in proceeds and tax benefits from the exercise of stock options. These financing cash proceeds were offset in part by dividend payments of $11.2 million.~~

In the ordinary course of business, we enter into lot option purchase contracts in order to procure lots for the construction of homes. Lot option contracts enable us to control lot positions with a minimal capital investment, which substantially reduces the risks associated with land ownership and development. At ~~March 31,~~June 30, 2007, we had non-refundable option deposits of ~~$15.6~~$11.0 million in the form of cash and ~~$14.4~~$11.9 million in the form of letters of credit to secure option contracts to purchase lots. In ~~limited circumstances,~~certain cases, in the event that we exercise our right to purchase the lots or land under option, in addition to our purchase price, our obligation also includes certain costs we are required to

reimburse the seller. At ~~March 31,~~June 30, 2007, the total purchase price for lots under option and total capitalized pre-acquisition costs were ~~$677.2~~$578 million and ~~$5.2~~$4.0 million, respectively.

At ~~March 31,~~June 30, 2007, we had issued performance bonds (“Bonds”) and letters of credit totaling approximately ~~$376.8~~$354.3 million and ~~$71.5~~$62.7 million, respectively, including ~~$24.4~~$21.6 million in letters of credit issued by HomeAmerican, with the remaining issued by third parties, to secure our performance under various contracts. We expect that the obligations secured by these Bonds and letters of credit generally will be performed in the ordinary course of our business and in accordance with the applicable contractual terms. To the extent that the obligations are performed, the related Bonds and letters of credit should be released and we should not have any continuing obligations.

Our contractual obligations have not changed materially from those reported in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2006.

Real estate and residential housing prices are affected by a number of factors, including but not limited to inflation, interest rate changes and the supply of new and existing homes to be purchased. Inflation can cause increases in the price of land, raw materials and subcontracted labor. ~~Unless~~During 2007, these increased costs ~~are~~were not fully recovered through higher sales prices, which negatively impacted our 2007 Home Gross ~~Margins would decrease.~~Margins. If interest rates increase, construction and financing costs, as well as the cost of borrowings, could also increase, which can result in lower Home Gross Margins. Increases in home mortgage interest rates make it more difficult for our customers to qualify for home mortgage loans, potentially decreasing home sales revenue. Increases in interest rates also may affect adversely the volume of mortgage loan originations. Increases in the supply of unsold new and existing homes have had an adverse effect on our ability to generate new home orders and maintain home orders in Backlog, and have impacted negatively our Home Gross Margins, homes sales revenue and results of operations.

The volatility of interest rates could have an adverse effect on our future operations and liquidity. Reported gains on sales of mortgage loans may vary significantly from period to period depending on the volatility in the interest rate market. Derivative instruments utilized in the normal course of business by HomeAmerican include forward sales securities commitments, private investor sales commitments and commitments to originate mortgage loans. We utilize these commitments to manage the price risk on fluctuations in interest rates on our mortgage loans held in inventory and commitments to originate mortgage loans. Such contracts are the only significant financial derivative instruments we utilize.

Among other things, an increase in interest rates may affect adversely the demand for housing and the availability of mortgage financing and may reduce the credit facilities offered to us by banks, investment bankers and mortgage bankers.

We continue to have the objective of limiting our lot supply to avoid over-exposure to any single sub-market and to create flexibility to react to changes in market conditions, but a continued slowdown in the pace of net home orders could work contrary to this strategy.

Certain statements in this Quarterly Report on Form 10-Q, as well as statements made by us in periodic press releases, oral statements made by our officials in the course of presentations about the Company and conference calls in connection with quarterly earnings releases, constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include statements regarding our business, financial condition, results of operation, cash flows, strategies and prospects. These forward-looking statements may be identified by terminology such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue,” or the negative of such terms and other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements contained in this Report are reasonable, we cannot guarantee future results. These statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company to be materially different from those expressed or implied by the forward-looking statements. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. However, any further disclosures made on related subjects in subsequent reports on Forms 10-K, 10-Q and 8-K should be consulted. Additionally, information about issues that could lead to material changes in performance and risk factors that have the potential to affect us is contained under the caption “Risk Factors Relating to our Business” in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2006 and Item 1A of Part II of this Quarterly Report on Form 10-Q.

There have been no material changes from the 2006 Annual Report on Form 10-K related to the Company’s exposure to market risk from interest rates.

(a)Conclusion regarding the effectiveness of disclosure controls and procedures - An evaluation of the effectiveness of the design and operation of our disclosure controls and procedures was performed under the supervision, and with the participation, of our management, including the Chief Executive Officer and the Chief Financial Officer. Based on that evaluation, the Company’s management, including the Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures were effective at ~~March 31,~~June 30, 2007.

(b) Changes in internal control over financial reporting - There were no changes in our internal control over financial reporting that occurred during the quarter ended ~~March 31,~~June 30, 2007 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

The Company and certain of its subsidiaries and affiliates have been named as defendants in various claims, complaints and other legal actions arising in the ordinary course of business, including moisture intrusion and related mold claims. In the opinion of management, the outcome of these matters will not have a material adverse effect upon the financial condition, results of operations or cash flows of the Company. See“Forward-Looking Statements” ~~below.~~above.

The U.S. Environmental Protection Agency (“EPA”) filed an administrative action against Richmond American Homes of Colorado, Inc. (“RAH Colorado”), alleging that RAH Colorado violated the terms of RAH Colorado’s general permit for discharges of stormwater from construction activities at two of RAH Colorado’s development sites. In its complaint, the EPA sought civil penalties against RAH Colorado in the amount of $0.1 million. On November 11, 2003, the EPA filed a motion to withdraw the administrative action so that it could refile the matter in United States District Court as part of a consolidated action against RAH Colorado for alleged stormwater violations at not only the original two sites, but also two additional sites. The EPA’s motion to withdraw was granted by the Administrative Law Judge on February 9, 2004. The EPA has not yet refiled the matter. The EPA has inspected 21 sites under development in Colorado and by RAH Colorado affiliates in Virginia, Maryland, Arizona and California, and claims to have found additional stormwater permit violations. RAH Colorado has substantial defenses to the allegations made by the EPA and also is exploring methods of resolving this matter with the EPA.

The EPA has issued two Notices of Violation against Richmond American Homes of Arizona, Inc. (“RAH Arizona”) alleging violations of the Clean Air Act. The EPA asserts that RAH Arizona has not controlled dust generated at construction sites in Maricopa County in that it has not operated a water application system or other approved control measures, installed suitable track-out control devices and/or cleaned-up materials tracked-out from project sites. RAH Arizona has substantial defenses to the EPA’s allegations and is exploring methods of resolving these matters with the EPA.

Because of the nature of the homebuilding business, and in the ordinary course of its operations, the Company from time to time may be subject to product liability claims.

There have been no significant changes in the risk factors previously identified as being attendant to our business in our Annual Report on Form 10-K for the year ended December 31, 2006, except with respect to the following:

Adverse changes in general economic conditions could reduce the demand for homes and, as a result, could negatively impact our results of operations.

The homebuilding industry continued to experience uncertainty and reduced demand for new homes, which negatively impacted our financial and operating results during the ~~2007~~ first ~~quarter,~~six months of 2007, compared with the ~~2006~~ first ~~quarter.~~six months of 2006. The conditions experienced during the 2007 first ~~quarter~~and

second quarters included, among other things: reduced consumer confidence; on-going homebuyer concerns about the housing market and the lack of home selling price stabilization; and concerns over higher-risk mortgage loan products, such as Alt-A and sub-prime. Further declines during this down cycle in the homebuilding industry could continue to cause demand for our homes to weaken significantly, which ~~could~~would have a significant negative impact on our Home Gross Margins, home sales revenue and results of operations.

Competition in the homebuilding industry could negatively impact our results of operations.

During the 2007 first ~~quarter,~~and second quarters, we experienced an increase in competition whereby, in many cases, other homebuilders in the markets in which we operate were offering homes at sales prices less than ours. Accordingly, we reduced our home sales prices and/or increased incentives in response to lower home sales prices offered by our competitors, and as a result of the ~~typical~~ spring selling season failing to materialize. These competitive pressures are likely to continue for some time and could affect our ability to maintain existing home prices and require that we provide additional incentives, which would negatively impact our future financial and operating results.

If the market value of our homes or carrying value of our land drops significantly, we could be required to further write down the carrying value of our inventory to its estimated fair value, which would negatively impact our results of operations.

The market value of our homebuilding inventories further decreased during the 2007 ~~first~~second quarter, compared with the market value as of ~~December~~March 31, ~~2006.~~2007. This decline was the result of lower demand for new home orders during the 2007 ~~first~~second quarter, significant increases in the level of incentives offered to generate new home orders and maintain homes in Backlog until they close, decreases in home sales prices and/or increases in the level of incentives offered to remain competitive with home sales prices offered by our competitors and decreases in our home sales prices when the ~~typical~~ spring selling season failed to materialize. As a result, we recorded asset impairments of ~~$141.4~~$161.1 million during the 2007 ~~first~~second quarter. If these conditions continue or deteriorate further, additional asset impairments may be required, which could have a significant negative impact on our results of operations.

Further uncertainty in the mortgage lending industry regarding the origination of higher-risk mortgage loans could negatively impact our results of operations.

The Company is subject to risks associated with higher-risk mortgage loans, including Alt-A, sub-prime, second mortgage loans and high loan-to-value mortgage loans. These risks may include the willingness of third-parties to purchase these mortgage loan products from HomeAmerican, or HomeAmerican’s ability to sell these mortgage loans at market prices that are deemed acceptable. During the ~~2007~~ first ~~quarter,~~half of 2007, many lenders in the mortgage industry faced liquidity issues surrounding these loan products, primarily resulting from changes in the underwriting criteria of third-party purchasers of mortgage loans. As a result, we tightened our mortgage loan underwriting criteria during the ~~2007~~ first ~~quarter~~half of 2007 as they related to high loan-to-value and high combined loan-to-value mortgage loan originations. Additionally, we believe the reporting of these conditions in the media negatively impacted the confidence of potential homebuyers in the homebuilding and mortgage lending industries. These factors contributed to lower demand for new homes during the 2007 first ~~quarter~~and second quarters and the delay of some home closings, as homebuyers were required to re-qualify for new or different mortgage loan products.

The Company also is subject to risks associated with previously sold mortgage loans originated by HomeAmerican, depending upon, among other things, compliance with mortgage loan underwriting criteria and the associated homebuyers’ performance, which could require

HomeAmerican to re-purchase certain of those mortgage loans. These risks may affect HomeAmerican’s ability to realize the full value of its investment in these re-purchased mortgage loans either through sales, collections or foreclosure proceedings, which would negatively impact our results of operations and cash from operations. During the 2007 second quarter, HomeAmerican experienced an increase in the number of previously sold mortgage loans that were required to be re-purchased, which negatively impacted our results of operations for the three and six months ended June 30, 2007.

For a more complete discussion of risk other factors that affect our business, see “Risk Factors Relating to our Business” in our Form 10-K for the year ended December 31, 2006, which also include the following:

The Company did not repurchase any shares during the ~~first~~second quarter of 2007. Additionally, there were no sales of unregistered equity securities during the ~~first~~second quarter of 2007.

~~None~~The annual meeting of the Company’s shareowners was held on June 25, 2007 (the “Annual Meeting”). A total of 42,517,467 shares out of 45,721,798 shares outstanding were represented in person or by proxy at the Annual Meeting. The following members of the Board of Directors were elected as Class I Directors for three-year terms expiring in 2010:

Gilbert Goldstein and William B. Kemper continue as Class II directors with terms expiring in 2008. Steven J. Borick, David D. Mandarich and David E. Blackford continue as Class III directors with terms expiring in 2009.

On ~~April 26,~~July 23, 2007, MDC’s Board of Directors declared a quarterly cash dividend of twenty five cents ($0.25) per share. The dividend will be paid on ~~May 23,~~August 22, 2007 to shareowners of record on ~~May 9,~~August 8, 2007.

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


			Page No.
Part I.	Financial Information:

	Item 1.	Unaudited Consolidated Financial Statements:

		Consolidated Balance Sheets at ~~March 31,~~June 30, 2007 and December 31, 2006	1

		Consolidated Statements of ~~Income~~Operations for the three and six months ended ~~March 31,~~June 30, 2007 and 2006	2

		Consolidated Statements of Cash Flows for the ~~three~~six months ended ~~March 31,~~June 30, 2007 and 2006	3

		Notes to Unaudited Consolidated Financial Statements	4

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2426

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4449

	Item 4.	Controls and Procedures	4449

Part II.	Other Information:

	Item 1.	Legal Proceedings	4550

	Item 1A.	Risk Factors	4550

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4853

	Item 3.	Defaults Upon Senior Securities	4853

	Item 4.	Submission of Matters to a Vote of Security Holders	4853

	Item 5.	Other Information	4853

	Item 6.	Exhibits	4853

	Signature		4954


Balances at January 1, 2007	$	18,739
Additions for tax positions related to the current year		1,478

Balances at March 31, 2007	$	20,217


Balances at January 1, 2007	$	18,739
Additions for tax positions related to the current year		1,263

Balances at June 30, 2007	$	20,002


	Votes For	Votes Withheld
Michael A. Berman	42,026,589	490,878
Herbert T. Buchwald	38,647,798	3,869,669
Larry A. Mizel	35,583,459	6,934,008


		10.1		~~Stock Limit Amendment to M.D.C. Holdings, Inc. 401(k) Savings Plan, March 26, 2007.~~ Aircraft Sale Agreement

		12 10.2		~~Ratio of Earnings to Fixed Charges Schedule.~~ Aircraft Purchase Agreement

		~~31.1~~ 10.3		Section 1031 Exchange Agreement

		10.4		Lease Agreement (Larry A. Mizel)

		10.5		Lease Agreement (David D. Mandarich)

		12		Ratio of Earnings to Fixed Charges Schedule.

		31.1		Certification of Chief Executive Officer required by 17 CFR 240.13a-14(a), pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

		31.2		Certification of Chief Financial Officer required by 17 CFR 240.13a-14(a), pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

		32.1		Certification of Chief Executive Officer required by 17 CFR 240.13a-14(b), pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

		32.2		Certification of Chief Financial Officer required by 17 CFR 240.13a-14(b), pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.


Date: ~~May 10,~~August 3, 2007	M.D.C. HOLDINGS, INC.
	(Registrant)

	By:	/s/ Paris G. Reece III
		Paris G. Reece III,
		Executive Vice President,
		Chief Financial Officer and
		Principal Accounting Officer