The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and accompanying notes included under Item 1 of this Report and our audited consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for our fiscal year ended November 30, 2007.

Some of the statements in this Management's Discussion and Analysis of Financial Condition and Results of Operations, and elsewhere in this Quarterly Report on Form 10-Q, are "forward-looking statements," as that term is defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements may include statements regarding our business, financial condition, results of operations, cash flows, strategies and prospects. You can identify forward-looking statements by the fact that these statements do not relate strictly to historical or current matters. Rather, forward-looking statements relate to anticipated or expected events, activities, trends or results. Because forward-looking statements relate to matters that have not yet occurred, these statements are inherently subject to risks and uncertainties. Many factors could cause our actual activities or results to differ materially from the activities and results anticipated in forward-looking statements. These factors include those described under the caption "Risk Factors" included in Item 1A of our Annual Report on Form 10-K for our fiscal year ended November 30, 2007. We do not undertake any obligation to update forward-looking statements, except as required by Federal securities laws.

Outlook

The weakness in the housing market accelerated during our third quarter as a result of increased foreclosures, weakened consumer confidence and tightened mortgage lending standards. With the U.S. housing inventory growing in excess of absorption and declining consumer confidence, the prospect of further deterioration in the homebuilding industry will likely become reality absent further Federal government action. If there is further deterioration in market conditions, this may lead to a further increase in the supply of new and existing homes that are for sale as a result of decreased absorption levels and increased foreclosures.

Our backlog dollar value at August 31, 2008 decreased 53% year over year to $1.0 billion. Despite our continued use of sales incentives, our new orders have decreased 42% and 48%, respectively, during the three and nine months ended August 31, 2008, compared to the same periods last year. Our cancellation rate increased to 27% during the third quarter from 22% during the second quarter of 2008, but was lower than the 32% experienced during the third quarter of 2007.

Despite the current housing market, we have made significant progress to improve our basic operations during the first three quarters of 2008. We have reduced our unsold completed inventory by 50% year over year. We continue to focus on the execution of an efficient homebuilding model through the repositioning of our product to meet today's consumer demand and by reducing our construction and overhead costs. Our S,G&A expenses are down 49% year over year. We continue to reduce the number of our joint ventures and have also reduced our maximum joint venture recourse debt by approximately $1.1 billion from its peak level in 2006, a decrease of over 64%.

We believe that the fourth quarter of 2008 will likely remain challenging. However, our well-positioned balance sheet and properly scaled operations should help us navigate the current downturn as a leaner and more efficient homebuilder.

Overview

We historically have experienced, and expect to continue to experience, variability in quarterly results. Our results of operations for the three and nine months ended August 31, 2008 are not necessarily indicative of the results to be expected for the full year.

Our net loss was $89.0 million, or $0.56 per diluted share, in the third quarter of 2008, compared to a net loss of $513.9 million, or $3.25 per diluted share, in the third quarter of 2007. Our net loss was $298.1 million, or $1.88 per diluted share, during the nine months ended August 31, 2008, compared to a net loss of $689.4 million, or $4.37 per diluted share, during the nine months ended August 31, 2007. The current year net loss was attributable to weakness in the housing market that accelerated during the third quarter of 2008 and has impacted all of our operations. Our gross margin increased due to our lower inventory basis and continued focus on repositioning our product and reducing construction costs, despite Statement of Financial Accounting Standards No. 144, Accounting for the Impairment of Long-lived Assets, ("SFAS 144") valuation adjustments and a decrease in the average sales price of homes delivered during the three and nine months ended August 31, 2008, compared to the same periods last year.

Financial information relating to our operations was as follows:

                                               Three Months Ended              Nine Months Ended
                                                   August 31,                     August 31,
(In thousands)                                2008            2007           2008            2007
Homebuilding revenues:
Sales of homes                             $   995,731      2,169,443      2,967,651       7,479,322
Sales of land                                   20,425         59,745         88,825         154,846

Total homebuilding revenues                  1,016,156      2,229,188      3,056,476       7,634,168

Homebuilding costs and expenses:
Cost of homes sold                             848,609      2,168,446      2,595,468       6,924,224
Cost of land sold                               49,273        404,444        149,526         634,808
Selling, general and administrative            156,298        304,254        488,288       1,069,575

Total homebuilding costs and expenses        1,054,180      2,877,144      3,233,282       8,628,607

Gain on recapitalization of
unconsolidated entity                               -              -              -          175,879
Equity in loss from unconsolidated
entities                                       (10,958 )     (127,409 )      (52,857 )      (168,137 )
Management fees and other expense, net         (52,228 )      (10,511 )     (121,895 )        (9,501 )
Minority interest income (expense), net          9,016         (1,822 )        9,000          (3,190 )

Homebuilding operating loss                $   (92,194 )     (787,698 )     (342,558 )      (999,388 )

Financial services revenues                $    90,384        112,665        240,893         375,708
Financial services costs and expenses         (103,245 )     (117,910 )     (266,460 )      (350,874 )

Financial services operating earnings
(loss)                                     $   (12,861 )       (5,245 )      (25,567 )        24,834

Total operating loss                       $  (105,055 )     (792,943 )     (368,125 )      (974,554 )
Corporate general and administrative
expenses                                       (34,047 )      (44,700 )      (98,453 )      (137,436 )

Loss before benefit for income taxes       $  (139,102 )     (837,643 )     (466,578 )    (1,111,990 )

Three Months Ended August 31, 2008 versus Three Months Ended August 31, 2007

Revenues from home sales decreased 54% in the third quarter of 2008 to $995.7 million from $2.2 billion in 2007. Revenues were lower primarily due to a 49% decrease in the number of home deliveries and a 9% decrease in the average sales price of homes delivered in 2008. New home deliveries, excluding unconsolidated entities, decreased to 3,694 homes in the third quarter of 2008 from 7,266 homes last year. In the third quarter of 2008, new home deliveries were lower in each of our homebuilding segments and

Gross margins on home sales excluding SFAS 144 valuation adjustments were $179.4 million, or 18.0%, in the third quarter of 2008, compared to $304.1 million, or 14.0%, in the third quarter of 2007. Gross margin percentage on home sales, excluding SFAS 144 valuation adjustments, improved compared to last year, primarily due to our lower inventory basis and continued focus on repositioning our product and reducing construction costs. The largest gross margin percentage improvement was experienced in our Homebuilding East segment. Gross margins on home sales were $147.1 million, or 14.8%, in the third quarter of 2008, which included $32.3 million of SFAS 144 valuation adjustments, compared to gross margins on home sales of $1.0 million, or 0.0%, in the third quarter of 2007, which included $303.1 million of SFAS 144 valuation adjustments. Gross margins on home sales excluding SFAS 144 valuation adjustments is a non-GAAP financial measure disclosed by certain of our competitors and has been presented because we find it useful in evaluating our performance and believe that it helps readers of our financial statements compare our operations with those of our competitors.

Homebuilding interest expense (primarily included in cost of homes sold and cost of land sold) was $27.6 million in the third quarter of 2008, compared to $40.3 million in 2007. The decrease in interest expense was due to lower interest costs resulting from lower average debt during the third quarter of 2008, as well as decreased deliveries during the third quarter of 2008, compared to the third quarter of 2007.

Selling, general and administrative expenses were reduced by $148.0 million, or 49%, in the third quarter of 2008, compared to the same period last year, primarily due to reductions in associate headcount, variable selling expense and fixed costs. As a percentage of revenues from home sales, selling, general and administrative expenses increased to 15.7% in the third quarter of 2008, from 14.0% in 2007, which was due to lower revenues.

Losses on land sales totaled $28.8 million in the third quarter of 2008, which included $21.4 million of SFAS 144 valuation adjustments and $10.9 million of write-offs of deposits and pre-acquisition costs related to approximately 900 homesites under option that we do not intend to purchase. In the third quarter of 2007, losses on land sales totaled $344.7 million, which included $114.6 million of SFAS 144 valuation adjustments and $242.5 million of write-offs of deposits and pre-acquisition costs related to approximately 15,000 homesites that were under option.

Equity in loss from unconsolidated entities was $11.0 million in the third quarter of 2008, which included $2.9 million of SFAS 144 valuation adjustments related to assets of unconsolidated entities in which we have investments, compared to equity in loss from unconsolidated entities of $127.4 million in the third quarter of 2007, which included $138.7 million of SFAS 144 valuation adjustments related to assets of unconsolidated entities in which we have investments.

Management fees and other expense, net, totaled $52.2 million in the third quarter of 2008, which included $40.0 million of APB 18 valuation adjustments to our investments in unconsolidated entities and $5.6 million of write-offs of notes receivable, compared to management fees and other expense, net, of $10.5 million in the third quarter of 2007, which included $32.1 million of APB 18 valuation adjustments to our investments in unconsolidated entities and $16.5 million of goodwill write-offs, partially offset by the recognition of $24.7 million of profit deferred at the time of the recapitalization of the LandSource joint venture.

Minority interest income (expense), net was $9.0 million in the third quarter of 2008, which included $7.9 million of minority interest income as a result of a $15.9 million SFAS 144 valuation adjustment to inventory of a 50%-owned consolidated joint venture, compared to minority interest income (expense), net of ($1.8) million in the third quarter of 2007.

Operating loss for the Financial Services segment was $12.9 million in the third quarter of 2008, compared to an operating loss of $5.2 million in the same period last year. The operating loss was due to a $27.2 million write-off of goodwill related to the segment's mortgage operations. This loss was partially offset by increased profitability in the mortgage operations primarily due to higher profits per loan resulting from an increase in FHA loans. There were $9.3 million in write-offs of land seller notes receivable in third quarter of 2007, compared to no write-offs of land seller notes receivable in the third quarter of 2008.

Corporate general and administrative expenses were reduced by $10.7 million, or 24%, in the third quarter of 2008, compared to the same period last year. As a percentage of total revenues, corporate general and administrative expenses increased to 3.1% in the third quarter of 2008, from 1.9% in 2007, due to lower revenues.

Our overall effective rates for income tax benefits were 36.04% and 38.66%, respectively, for the three months ended August 31, 2008 and 2007. The decrease in the effective tax benefit, compared with the same period during 2007, resulted from an increase in items providing no tax benefits relative to our financial results. These items are primarily related to non-deductible incentive stock options. This decrease was also a result of our change in accounting for tax-related interest expense under Financial Accounting Standards Board ("FASB") Interpretation No. 48, Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109, ("FIN 48") which reduced our income tax benefit in the third quarter of 2008 from 37.00% to 36.04%. Our effective tax rate may continue to fluctuate due to our change in accounting for tax-related interest expense under FIN 48 and items providing no tax benefits in relationship to actual financial results.

Nine Months Ended August 31, 2008 versus Nine Months Ended August 31, 2007

Revenues from home sales decreased 60% in the nine months ended August 31, 2008 to $3.0 billion from $7.5 billion in 2007. Revenues were lower primarily due to a 56% decrease in the number of home deliveries and an 8% decrease in the average sales price of homes delivered in 2008. New home deliveries, excluding unconsolidated entities, decreased to 10,860 homes in the nine months ended August 31, 2008 from 24,772 homes last year. In the nine months ended August 31, 2008, new home deliveries were lower in each of our homebuilding segments and Homebuilding Other, compared to 2007. The average sales price of homes delivered decreased to $274,000 in the nine months ended August 31, 2008 from $299,000 in 2007, due to reduced pricing. Sales incentives offered to homebuyers were $47,500 per home delivered in the nine months ended August 31, 2008, compared to $45,000 per home delivered in the same period last year.

Gross margins on home sales excluding SFAS 144 valuation adjustments were $504.3 million, or 17.0%, in the nine months ended August 31, 2008, compared to $1.1 billion, or 14.4%, in 2007. Gross margin percentage on home sales, excluding SFAS 144 valuation adjustments, improved compared to last year primarily due to the our lower inventory basis and continued focus on repositioning our product and reducing construction costs. The largest gross margin percentage improvement was experienced in our Homebuilding East segment. Gross margins on home sales were $372.2 million, or 12.5%, in the nine months ended August 31, 2008, which included $132.1 million of SFAS 144 valuation adjustments, compared to gross margins on home sales of $555.1 million, or 7.4%, in the nine months ended August 31,

Homebuilding interest expense (primarily included in cost of homes sold and cost of land sold) was $98.0 million in the nine months ended August 31, 2008, compared to $155.7 million in the same period last year. The decrease in interest expense was due to lower interest costs resulting from lower average debt during the nine months ended August 31, 2008, as well as decreased deliveries during the nine months ended August 31, 2008, compared to the same period last year. Our homebuilding debt to total capital ratio as of August 31, 2008 was 40.5%, compared to 33.5% as of August 31, 2007. Our net homebuilding debt to total capital ratio as of August 31, 2008 was 30.2%, compared to 32.4% as of August 31, 2007. Net homebuilding debt to total capital ratio consists of net homebuilding debt (homebuilding debt less homebuilding cash) divided by total capital (net homebuilding debt plus stockholders' equity).

Selling, general and administrative expenses were reduced by $581.3 million, or 54%, in the nine months ended August 31, 2008, compared to the same period last year, primarily due to reductions in associate headcount, variable selling expense and fixed costs. As a percentage of revenues from home sales, selling, general and administrative expenses increased to 16.5% in the nine months ended August 31, 2008, from 14.3% in 2007, which was due to lower revenues.

Losses on land sales totaled $60.7 million in the nine months ended August 31, 2008, which included $39.0 million of SFAS 144 valuation adjustments and $34.3 million of write-offs of deposits and pre-acquisition costs related to approximately 5,500 homesites under option that we do not intend to purchase. In the nine months ended August 31, 2007, losses on land sales totaled $480.0 million, which included $197.2 million of SFAS 144 valuation adjustments and $312.4 million of write-offs of deposits and pre-acquisition costs related to approximately 24,400 homesites that were under option.

Equity in loss from unconsolidated entities was $52.9 million in the nine months ended August 31, 2008, which included $29.9 million of SFAS 144 valuation adjustments related to assets of unconsolidated entities in which we have investments, compared to equity in loss from unconsolidated entities of $168.1 million in the nine months ended August 31, 2007, which included $172.7 million of SFAS 144 valuation adjustments related to assets of unconsolidated entities in which the we have investments.

Management fees and other expense, net totaled $121.9 million in the nine months ended August 31, 2008, which included $116.5 million of APB 18 valuation adjustments to our investments in unconsolidated entities and $5.6 million of write-offs of notes receivable, compared to management fees and other expense, net of $9.5 million in the nine months ended August 31, 2007, which included $46.4 million of APB 18 valuation adjustments to our investments in unconsolidated entities and $16.5 million of goodwill write-offs, partially offset by the recognition of $24.7 million of profit deferred at the time of the recapitalization of the LandSource joint venture.

Minority interest income (expense), net was $9.0 million in the nine months ended August 31, 2008, which included $7.9 million of minority interest income as a result of a $15.9 million SFAS 144 valuation adjustment to inventory of a 50%-owned consolidated joint venture, compared to minority interest income (expense), net of ($3.2) million in the nine months ended August 31, 2007.

Sales of land, equity in loss from unconsolidated entities, management fees and other expense, net and minority interest income (expense), net may vary significantly from period to period depending on the timing of land sales and other transactions entered into by us and unconsolidated entities in which we have investments.

Operating loss for the Financial Services segment was $25.6 million in the nine months ended August 31, 2008, compared to operating earnings of $24.8 million in the same period last year. The decline in profitability was primarily due to a goodwill write-off of $27.2 million related to the segment's mortgage operations and lower transactions in the segment's title and mortgage operations, compared to last year as a result of the overall weakness in the housing market. There were $27.9 million in write-offs of land seller

Corporate general and administrative expenses were reduced by $39.0 million, or 28%, for the nine months ended August 31, 2008, compared to 2007. As a percentage of total revenues, corporate general and administrative expenses increased to 3.0% in the nine months ended August 31, 2008, from 1.7% in the same period last year, due to lower revenues.

Our overall effective rates for income tax benefits were 36.11% and 38.00%, respectively, for the nine months ended August 31, 2008 and 2007. The decrease in the effective tax benefit, compared with the same period during 2007, resulted from an increase in items providing no tax benefits relative to our financial results. These items are primarily related to non-deductible incentive stock options. This decrease was also a result of our change in accounting for tax-related interest expense under FIN 48 which reduced our income tax benefit for the nine months ended August 31, 2008 from 37.00% to 36.11%. Our effective tax rate may continue to fluctuate due to our change in accounting for tax-related interest expense under FIN 48 and items providing no tax benefits in relationship to actual financial results.

We have grouped our homebuilding activities into three reportable segments, which we refer to as Homebuilding East, Homebuilding Central and Homebuilding West, based primarily upon similar economic characteristics, geography and product type. Information about homebuilding activities in states that do not have economic characteristics that are similar to those in other states in the same geographic area is grouped under "Homebuilding Other." References in this Management's Discussion and Analysis of Financial Condition and Results of Operations to homebuilding segments are to those reportable segments.

At August 31, 2008, our reportable homebuilding segments and Homebuilding Other consisted of homebuilding divisions located in the following states:

East: Florida, Maryland, New Jersey and Virginia

Central: Arizona, Colorado and Texas

West: California and Nevada

Other: Illinois, Minnesota, New York, North Carolina and South Carolina

The following tables set forth selected financial and operational information related to our homebuilding operations for the periods indicated:

Selected Financial and Operational Data



                                      Three Months Ended        Nine Months Ended
                                          August 31,               August 31,
      (In thousands)                   2008         2007        2008        2007
      Revenues:

      East:
      Sales of homes                $   306,415     554,191     878,856   2,130,210
      Sales of land                      11,956      12,284      19,317      26,387

      Total East                        318,371     566,475     898,173   2,156,597

      Central:
      Sales of homes                    263,504     565,017     774,930   1,898,349
      Sales of land                       3,276       8,661      23,329      32,717

      Total Central                     266,780     573,678     798,259   1,931,066

      West:
      Sales of homes                    320,943     825,864   1,000,056   2,726,608
      Sales of land                       2,804      25,612      28,621      70,840

      Total West                        323,747     851,476   1,028,677   2,797,448

      Other:
      Sales of homes                    104,869     224,371     313,809     724,155
      Sales of land                       2,389      13,188      17,558      24,902

      Total Other                       107,258     237,559     331,367     749,057

      Total homebuilding revenues   $ 1,016,156   2,229,188   3,056,476   7,634,168

--------------------------------------------------------------------------------
                                                  Three Months Ended         Nine Months Ended
                                                      August 31,                August 31,
(In thousands)                                    2008          2007         2008         2007
Operating earnings (loss):

East:
Sales of homes                                  $  22,787     (112,668 )       (824 )   (267,007 )
Sales of land                                     (18,742 )    (69,102 )    (29,619 )   (127,001 )
Equity in loss from unconsolidated entities        (3,262 )     (7,224 )    (30,275 )     (7,675 )
Management fees and other expense, net             (4,683 )    (12,642 )    (15,092 )    (12,635 )
Minority interest income (expense), net             8,999       (1,320 )      9,597       (3,160 )

Total East                                          5,099     (202,956 )    (66,213 )   (417,478 )

Central:
Sales of homes                                     (3,680 )    (23,598 )    (23,979 )      4,337
Sales of land                                      (1,370 )    (56,811 )    (10,918 )    (68,978 )
Equity in earnings (loss) from unconsolidated
entities                                               60       (9,889 )        298       (7,028 )
Management fees and other income (expense),
net                                                (1,179 )     (7,287 )        891       (7,081 )
Minority interest expense, net                         -           (86 )       (465 )        (63 )

Total Central                                      (6,169 )    (97,671 )    (34,173 )    (78,813 )

West:
Sales of homes                                    (30,250 )   (140,927 )    (80,616 )   (215,280 )
Sales of land                                      (5,794 )   (176,871 )    (15,997 )   (221,012 )
Gain on recapitalization of unconsolidated
entity                                                 -            -            -       175,879
Equity in loss from unconsolidated entities        (7,474 )   (109,727 )    (21,997 )   (154,101 )
Management fees and other income (expense),
net                                               (24,256 )     24,872      (87,770 )     23,057
Minority interest income (expense), net                17         (836 )         18       (1,079 )

Total West                                        (67,757 )   (403,489 )   (206,362 )   (392,536 )

Other:
Sales of homes                                      1,967      (26,064 )    (10,686 )    (36,527 )
Sales of land                                      (2,942 )    (41,915 )     (4,167 )    (62,971 )
. . .