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, 2008.

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, 2008. We do not undertake any obligation to update forward-looking statements, except as required by Federal securities laws.

Outlook

The housing market experienced further deterioration during our first quarter of fiscal 2009, driven primarily by mortgage foreclosures, which added inventories to an already oversupplied market, escalating levels of unemployment and a low level of consumer confidence. These conditions continued to drive pricing downward through the use of incentives and price reductions. Given dramatically declining home prices and historically low interest rates, the affordability of homeownership has significantly improved across the country; however, we do not know when the market will stabilize. Whether or not the affordability of housing continues to improve, there could be further deterioration in market conditions, which may lead to additional valuation adjustments in the future.

Our strategy has been to streamline our core homebuilding operations for a return to profitability and to position us for future opportunities. We have continued to make strategic operational changes in order to address the current homebuilding environment by focusing on S,G&A control, efficient low-cost floor plans and market tuned product. S,G&A control has resulted in the centralization of functions and reduction of homebuilding divisions in order to significantly lower overhead costs, while our focus on efficient low-cost floor plans and market tuned product has enabled us to reduce our construction cost per square foot and the number of floor plans we bring to market.

In addition, we continue to focus on managing our inventory levels through curtailing land purchases, reducing home starts and adjusting prices to sell and deliver completed homes. We also continue to diligently work on restructuring, repositioning and reducing our joint ventures, as well as reducing our net recourse indebtedness exposure with regard to joint ventures.

During fiscal 2009, we will continue to focus on homebuilding profitability and on cash generation. While we have not yet recognized the full impact of our strategic initiatives, we believe that our focus on such initiatives will return us to profitability once the market stabilizes.

Overview

We historically have experienced, and expect to continue to experience, variability in quarterly results. Our results of operations for the three months ended February 28, 2009 are not necessarily indicative of the results to be expected for the full year.

Our net loss was $155.9 million, or $0.98 per basic and diluted share, in the first quarter of 2009, compared to a net loss of $88.2 million, or $0.56 per basic and diluted share, in the first quarter of 2008. The net loss was attributable to challenging market conditions that have persisted during the first quarter of 2009 and have impacted all of our operations. Our gross margins decreased due to Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long-lived Assets, ("SFAS 144") valuation adjustments and higher sales incentives offered to homebuyers as a percentage of revenues from home sales during the three months ended February 28, 2009, compared to the same period last year.

Financial information relating to our operations was as follows:

                                                          Three Months Ended
                                                     February 28,      February 29,
 (In thousands)                                          2009              2008
 Homebuilding revenues:
 Sales of homes                                     $      522,758          953,066
 Sales of land                                               6,276           40,710

 Total homebuilding revenues                               529,034          993,776

 Homebuilding costs and expenses:
 Cost of homes sold                                        488,576          816,371
 Cost of land sold                                          16,806           67,160
 Selling, general and administrative                       101,177          175,018

 Total homebuilding costs and expenses                     606,559        1,058,549

 Equity in loss from unconsolidated entities                (2,917 )        (22,980 )
 Other income (expense), net                               (47,834 )        (21,793 )
 Minority interest income (expense), net                     1,734             (234 )

 Homebuilding operating loss                        $     (126,542 )       (109,780 )

 Financial services revenues                        $       64,029           69,137
 Financial services costs and expenses                      63,537           78,829

 Financial services operating earnings (loss)       $          492           (9,692 )

 Total operating loss                               $     (126,050 )       (119,472 )
 Corporate general and administrative expenses             (28,031 )        (34,822 )

 Loss before (provision) benefit for income taxes   $     (154,081 )       (154,294 )

Revenues from home sales decreased 45% in the first quarter of 2009 to $522.8 million from $953.1 million in 2008. Revenues were lower primarily due to a 38% decrease in the number of home deliveries and a 12% decrease in the average sales price of homes delivered in 2009. New home deliveries, excluding unconsolidated entities, decreased to 2,136 homes in the first quarter of 2009 from 3,437 homes last year. In the first quarter of 2009, new home deliveries were lower in each of our homebuilding segments and Homebuilding Other, compared to 2008. The average sales price of homes delivered decreased to $244,000 in the first quarter of 2009 from $278,000 in the same period last year, primarily due to reduced pricing. Sales incentives offered to homebuyers were $50,500 per home delivered in the first quarter of 2009, compared to $48,000 per home delivered in the first quarter of 2008.

Homebuilding interest expense (included in cost of homes sold, cost of land sold and other income (expense), net) was $17.0 million in the first quarter of 2009, compared to $32.4 million in the same period last year. The decrease in interest expense was due to decreased deliveries during the first quarter of 2009, compared to the first quarter of 2008.

Our homebuilding debt to total capital ratio as of February 28, 2009 was 51.1%, compared to 49.2% and 38.2%, respectively, as of November 30, 2008 and February 29, 2008. Our net homebuilding debt to total capital ratio as of February 28, 2009 was 37.4%, compared to 35.7% and 24.5%, respectively, as of November 30, 2008 and February 29, 2008. Net homebuilding debt to total capital ratio consists of net homebuilding debt (homebuilding debt less homebuilding cash and cash equivalents) divided by total capital (net homebuilding debt plus stockholders' equity).

Selling, general and administrative expenses were reduced by $73.8 million, or 42%, in the first quarter of 2009, compared to the same period last year, primarily due to reduction in associate headcount, variable selling expenses and fixed costs. As a percentage of revenues from home sales, selling, general and administrative expenses increased to 19.4% in the first quarter of 2009, from 18.4% in the first quarter of 2008, due to lower revenues.

Losses on land sales totaled $10.5 million in the first quarter of 2009, which included $0.2 million of SFAS 144 valuation adjustments and $10.2 million of write-offs of deposits and pre-acquisition costs related to approximately 1,100 homesites under option that we do not intend to purchase. In the first quarter of 2008, losses on land sales totaled $26.5 million, which included $15.5 million of SFAS 144 valuation adjustments and $16.9 million of write-offs of deposits and pre-acquisition costs related to approximately 2,600 homesites that were under option.

Equity in loss from unconsolidated entities was $2.9 million in the first quarter of 2009, compared to equity in loss from unconsolidated entities of $23.0 million in the first quarter of 2008, which included $18.9 million of SFAS 144 valuation adjustments related to assets of unconsolidated entities in which we have investments.

Other income (expense), net, totaled ($47.8) million in the first quarter of 2009, which included $37.2 million of APB 18 valuation adjustments to our investments in unconsolidated entities, compared to other income (expense), net, of ($21.8) million in the first quarter of 2008, which included $29.6 million of APB 18 valuation adjustments to our investments in unconsolidated entities.

Minority interest income (expense), net was $1.7 million and ($0.2) million, respectively, in the first quarter of 2009 and 2008.

Sales of land, equity in loss from unconsolidated entities, other income (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.

Corporate general and administrative expenses were reduced by $6.8 million, or 20%, in the first quarter of 2009, compared to the first quarter of 2008. As a percentage of total revenues, corporate general and administrative expenses increased to 4.7% in the first quarter of 2009, from 3.3% in the first quarter of 2008, due to lower revenues.

SFAS 109 requires a reduction of the carrying amounts of deferred tax assets by a valuation allowance, if based on available evidence, it is more likely than not that such assets will not be realized. As a result of our net loss during the three months ended February 28, 2009, we generated deferred tax assets of $57.7 million and recorded a non-cash valuation allowance in accordance with SFAS 109 against the entire amount of deferred tax assets generated.

Our overall effective income tax rates were (1.2%) and 42.83%, respectively, for the three months ended February 28, 2009 and February 29, 2008. The decrease in the effective tax rate, compared with the same period during 2008, resulted primarily from the establishment of a deferred tax asset valuation allowance.

Homebuilding Segments

We have grouped our homebuilding activities into four reportable segments, which we refer to as Homebuilding East, Homebuilding Central, Homebuilding West and Homebuilding Houston, 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 February 28, 2009, our reportable homebuilding segments and Homebuilding Other consisted of homebuilding divisions located in:

East: Florida, Maryland, New Jersey and Virginia

Central: Arizona, Colorado and Texas (1)

West: California and Nevada

Houston: Houston, Texas

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

(1) Texas in the Central reportable segment excludes Houston, Texas, which is its own reportable segment.

Selected Financial and Operational Data



                                                Three Months Ended
                                            February 28,    February 29,
             (In thousands)                     2009            2008
             Revenues:
             East:
             Sales of homes                $      178,372        307,580
             Sales of land                          2,326          4,439

             Total East                           180,698        312,019

             Central:
             Sales of homes                        61,902        132,810
             Sales of land                            807         10,578

             Total Central                         62,709        143,388

             West:
             Sales of homes                       140,490        312,859
             Sales of land                            736         16,941

             Total West                           141,226        329,800

             Houston:
             Sales of homes                        78,621        109,657
             Sales of land                          2,407          1,824

             Total Houston                         81,028        111,481

             Other:
             Sales of homes                        63,373         90,160
             Sales of land                             -           6,928

             Total Other                           63,373         97,088

             Total homebuilding revenues   $      529,034        993,776

--------------------------------------------------------------------------------
                                                                 Three Months Ended
                                                           February 28,       February 29,
(In thousands)                                                 2009               2008
Operating earnings (loss):
East:
Sales of homes                                            $      (15,837 )          (4,233 )
Sales of land                                                     (5,482 )          (7,708 )
Equity in loss from unconsolidated entities                       (1,698 )         (15,314 )
Other income (expense), net                                       (9,275 )           3,730
Minority interest income, net                                        217               255

Total East                                                       (32,075 )         (23,270 )

Central:
Sales of homes                                                   (16,991 )          (9,581 )
Sales of land                                                        118           (10,045 )
Equity in earnings (loss) from unconsolidated entities              (642 )           1,122
Other income (expense), net                                       (9,131 )           1,473
Minority interest income (expense), net                               44              (327 )

Total Central                                                    (26,602 )         (17,358 )

West:
Sales of homes                                                   (31,954 )         (20,734 )
Sales of land                                                     (1,116 )          (7,179 )
Equity in earnings (loss) from unconsolidated entities               244            (7,834 )
Other income (expense), net                                      (26,504 )         (28,487 )
Minority interest income (expense), net                              385                (6 )

Total West                                                       (58,945 )         (64,240 )

Houston:
Sales of homes                                                     2,383             5,955
Sales of land                                                       (917 )             152
Equity in loss from unconsolidated entities                         (815 )            (335 )
Other income (expense), net                                         (436 )              38

Total Houston                                                        215             5,810

Other:
Sales of homes                                                    (4,596 )          (9,730 )
Sales of land                                                     (3,133 )          (1,670 )
Equity in loss from unconsolidated entities                           (6 )            (619 )
Other income (expense), net                                       (2,488 )           1,453
Minority interest income (expense), net                            1,088              (156 )

Total Other                                                       (9,135 )         (10,722 )

Total homebuilding operating loss                         $     (126,542 )        (109,780 )

Summary of Homebuilding Data

Deliveries:



                                                                        Three Months Ended
                                            Homes                  Dollar Value (In thousands)            Average Sales Price
                                 February 28,   February 29,    February 28,        February 29,      February 28,    February 29,
                                     2009           2008            2009                2008              2009            2008
East                                      794          1,165   $       178,372             313,757   $      225,000        269,000
Central                                   315            604            61,902             132,809          197,000        220,000
West                                      409            924           148,116             366,523          362,000        397,000
Houston                                   405            575            78,620             109,657          194,000        191,000
Other                                     219            328            63,373             107,799          289,000        329,000

Total                                   2,142          3,596   $       530,383           1,030,545   $      248,000        287,000

Of the total homes delivered listed above, 6 homes with a dollar value of $7.6 million and an average sales price of $1,271,000 represent deliveries from unconsolidated entities for the three months ended February 28, 2009, compared to 159 deliveries with a dollar value of $77.5 million and an average sales price of $487,000 for the three months ended February 29, 2008.

Sales Incentives (1):



                                                                       Three Months Ended
                                       Sales Incentives             Average Sales Incentives        Sales Incentives as a % of
                                        (In thousands)                 Per Home Delivered                     Revenue
                                  February 28,    February 29,    February 28,      February 29,   February 28,     February 29,
                                      2009            2008            2009              2008           2009             2008
East                             $       42,257         62,302   $        53,200          54,500           19.2 %           16.8 %
Central                                  13,733         21,006            43,600          34,800           18.3 %           13.6 %
West                                     29,059         57,707            72,100          71,800           17.1 %           15.6 %
Houston                                  12,620          9,796            31,200          17,000           13.8 %            8.2 %
Other                                    10,242         14,119            46,800          45,400           13.9 %           13.6 %

Total                            $      107,911        164,930   $        50,500          48,000           17.1 %           14.7 %

(1) Sales incentives relate to home deliveries during the period, excluding deliveries by unconsolidated entities.

New Orders (2):



                                                                        Three Months Ended
                                            Homes                  Dollar Value (In thousands)            Average Sales Price
                                 February 28,   February 29,    February 28,        February 29,      February 28,    February 29,
                                     2009           2008            2009                2008              2009            2008
East                                      716            942   $       155,281             231,002   $      217,000        245,000
Central                                   366            569            72,846             122,009          199,000        214,000
West                                      491            747           161,676             293,082          329,000        392,000
Houston                                   395            492            74,069              99,277          188,000        202,000
Other                                     222            295            59,464              83,387          268,000        283,000

Total                                   2,190          3,045   $       523,336             828,757   $      239,000        272,000

(2) New orders represent the number of new sales contracts executed with homebuyers, net of cancellations, during the three months ended February 28, 2009 and February 29, 2008.

Of the total new orders listed above, 8 homes with a dollar value of $4.9 million and an average sales price of $612,000 represent new orders from unconsolidated entities for the three months ended February 28, 2009, compared to 62 new orders with a dollar value of $39.3 million and an average sales price of $634,000 for the three months ended February 29, 2008.

Backlog:



                                            Homes                  Dollar Value (In thousands)           Average Sales Price
                                 February 28,   February 29,    February 28,        February 29,     February 28,   February 29,
                                     2009           2008            2009                2008             2009           2008
East                                      711          1,568   $       180,785             492,862        254,000        314,000
Central                                   174            250            35,395              56,401        203,000        226,000
West                                      329            711           122,260             307,071        372,000        432,000
Houston                                   259            506            53,168             117,960        205,000        233,000
Other                                     174            363            58,513             178,045        336,000        490,000

Total                                   1,647          3,398   $       450,121           1,152,339        273,000        339,000

Of the total homes in backlog listed above, 9 homes with a backlog dollar value of $9.3 million and an average sales price of $1,038,000 represent the backlog from unconsolidated entities at February 28, 2009, compared with backlog from unconsolidated entities of 204 homes with a dollar value of $113.9 million and an average sales price of $558,000 at February 29, 2008.

Backlog represents the number of homes under sales contracts. Homes are sold using sales contracts, which are generally accompanied by sales deposits. In some instances, purchasers are permitted to cancel sales contracts if they fail to qualify for financing or under certain other circumstances. We experienced cancellation rates in our homebuilding segments and Homebuilding Other as follows:

                                     Three Months Ended
                                February 28,     February 29,
                                    2009             2008
                      East                24 %             30 %
                      Central             18 %             20 %
                      West                16 %             27 %
                      Houston             23 %             27 %
                      Other               20 %             23 %

                      Total               21 %             26 %

Homebuilding East: Homebuilding revenues decreased for the three months ended February 28, 2009, compared to the three months ended February 29, 2008, primarily due to a decrease in the number of home deliveries and average sales price of homes delivered in all of the states in this segment. Gross margins on home sales were $10.8 million, or 6.1%, in 2009, including SFAS 144 valuation . . .