CROSSMANN COMMUNITIES INC, 10-K, 1999-03-29

CROSSMANN COMMUNITIES INC
10-K, 1999-03-29
OPERATIVE BUILDERS

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________

FORM 10-K
____________________

[ x ] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934.
For the fiscal year ended December 31, 1994

[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.

0-22562
Commission file number

CROSSMANN COMMUNITIES, INC.
(Exact name of registrant as specified in its charter)
<TABLE>

<S> <C>

INDIANA 35-1880120
------------------------------------
State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation)
- -------------------------------
</TABLE>

9202 NORTH MERIDIAN STREET
INDIANAPOLIS, INDIANA 46260
(Address of principal executive offices)(Zip code)

(317) 843-9514
(Registrant's telephone number, including area code)

SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
None

SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:

COMMON SHARES, WITHOUT PAR VALUE
(Title of class)

Traded on the NASDAQ Stock Market under the symbol "CROS"

Indicate by check mark whether the registrant (1) has filed all documents
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 if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]

The aggregate market value of the voting stock held by non-affiliates of
the registrant on March 23, 1999 was approximately $245,305,155. As of March
23, 1999, there were 11,543,772 Common Shares of the registrant issued and
outstanding.

DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of the documents listed below have been incorporated by
reference into the indicated part of this Form 10-K.

DOCUMENT INCORPORATED PART OF FORM
10-K
Proxy Statement for 1999 Annual Meeting of Shareholders Part III

PART I

ITEM 1. BUSINESS

Certain statements contained in this section and elsewhere in this Form 10-K
are "forward-looking statements" within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended. Such forward-looking statements may be deemed to
include statements regarding the intent, belief or current expectations of the
Company and its management with respect to (i) the Company's strategic plans,
(ii) the Company's future profitability, (iii) the Company's policy regarding
capital expenditures, financing or other matters, (iv) the Company's sales and
marketing plans, (v) industry trends affecting the Company's financial
condition and (vi) the Company's growth strategy. Such statements involve
known and unknown risks, uncertainties and other factors that may cause actual
results to differ materially from those anticipated in the forward-looking
statements. Such risks, uncertainties and other factors include, but are not
limited to the factors described below. In light of the uncertainties
inherent in any forward-looking statement, the inclusion of a forward-looking
statement herein should not be regarded as a representation by the Company or
the Company's management that the Company's plans and objectives will be
achieved.

GENERAL

Crossmann Communities, Inc. ("Crossmann" or the "Company") has provided
homes to families in central Indiana since 1973; in 1993, the Company began
expanding operations to other markets in the Midwest and Southeast.
Crossmann's homes are targeted primarily to entry-level and first move-up
buyers. They range in price from approximately $70,000 to approximately
$150,000; the average size of one of Crossmann's new homes is 1,400 square
feet, and the average selling price in 1998 was approximately $113,600.

The Company completed its initial public offering of shares five years
ago, to finance its expanding business. Today the Company operates in
thirteen markets in six states:

<TABLE>

<S> <C>

In Indiana: Indianapolis, Lafayette, Ft. Wayne and Columbus;
In Ohio: Columbus, Cincinnati, and Dayton;
In Kentucky: Louisville and Lexington;
In Tennessee: Memphis and Nashville;
In North Carolina: Charlotte;
In South Carolina: Myrtle Beach.
</TABLE>

Crossmann achieved record sales in 1998, delivering 3,714 new homes,
compared to 2,774 in 1997. During 1998, Crossmann made two acquisitions:
Paragon Builders, Inc. ("Paragon") in Memphis, Tennessee and Pinehurst
Builders, Inc. ("Pinehurst") in Myrtle Beach, South Carolina. The Company
also entered two new markets via startup operations: Charlotte, North
Carolina and Nashville, Tennessee. The acquisitions added to Crossmann's
revenue in 1998; the start ups are expected to contribute to revenue and
income in 1999.

Crossmann is characterized by a record of strong and consistent sales and
net income growth over recent years, having achieved a 5-year average compound
growth in revenue of approximately 39%. The Company's success has been and
will continue to be dependent upon the following key operating strategies:

1. Focused Market Approach. The Company focuses on affordably-priced
entry-level and first move-up single family homes, in markets the Company
believes have significant and stable long-term demand. Management believes
that entry-level housing generally allows high volume homebuilders, such as
the Company, to build a standardized product. This permits efficiencies in
construction and materials purchasing that can result in high margins. The
Company will continue to focus on providing product lines that address the
needs of this market segment.

2. Emphasis on Customer Service. The Company is committed to providing a
high level of customer service as an integral component of its competitive
strategy. The Company serves its customers through the attention it devotes
to their financial concerns and by producing a high quality product.

3. Market Concentration. The Company currently conducts its business in
thirteen Midwestern and Southeastern markets. The Company believes that these
cities enjoy relatively low unemployment, diversified industry, and
satisfactory infrastructure. The Company believes that these characteristics,
among others, make these cities attractive to employers, which, in turn,
create demand for housing of the type offered by the Company. The Company
intends to explore opportunities to expand its homebuilding operations to
metropolitan areas that offer stable economic characteristics similar to those
of its existing markets. The Company believes that its most effective
expansion opportunities will be in similar markets where it can effectively
utilize the strengths of its operating strategy.

4 . Land Development. Management believes that the development of land
achieves several strategic objectives by (i) helping the Company to improve
its profit margins by reducing the cost of the land on which its homes are
built; (ii) ensuring the Company of an adequate supply of lots to meet market
demand; (iii) allowing the Company to control the developments in which it
builds its homes; and (iv) allowing the Company to construct homes efficiently
and more cost-effectively by permitting the construction of several similar
homes within the same neighborhood at the same time.

5. Stringent Cost Controls. The large number of homes built by the Company
allows it to purchase both products and services at favorable prices.
Additionally, the Company has relatively few home designs, enabling it to
significantly reduce delays and expenses associated with educating
subcontractors as to new design requirements. The Company controls its
construction costs through favorable pricing negotiated with subcontractors
due to the efficient design of its homes. The Company believes that its
success in dealing with subcontractors can be attributed to the large amount
of work each subcontractor performs for the Company and from the long-term
relationships the Company has with most of its subcontractors.

MARKETS
<TABLE>

The size and economic characteristics of the Company's markets are shown
in the tables below:

MARKET POPULATION (1) POPULATION GROWTH (2)
- ---------------------------------- -------------- ---------------------
Indianapolis 1,492,297 8.1%
Lafayette 171,200 6.0%
Ft. Wayne 475,299 4.2%
Southern Indiana (3) (3)
Columbus 1,447,646 7.6%
Cincinnati 1,920,931 5.7%
Dayton 950,661 -.01%
Louisville 991,765 4.5%
Lexington 441,073 8.7%
Memphis 1,070,151 7.0%
Nashville 1,111,717 13.4%
Charlotte 1,321,068 13.7%
Myrtle Beach 163,856 13.7%
<FN
(1) Estimated, as of July 1, 1996.
(2) Estimated growth since 1990.
(3) Not available.
</TABLE>

<TABLE>

UNEMPLOYMENT
-------------
MARKET MAJOR EMPLOYERS RATE (1)
- ------------ ------------------------------------------------------------------------------ -------------
Indianapolis Federal, state and local government; Allison Engine Company, the Allison 2.4%
- ------------ ------------------------------------------------------------------------------ -------------
Transmission Division of General Motors, Eli Lilly & Co., Thomson Consumer
------------------------------------------------------------------------------
Electronics, Dow AgroSciences, United Airlines.
------------------------------------------------------------------------------
Lafayette Purdue University, Subaru-Isuzu America, Inc., Wabash National Corporation, 2.1%
- ------------ ------------------------------------------------------------------------------ -------------
Alcoa, Great Lakes Chemical, A.E. Staley.
------------------------------------------------------------------------------
Ft. Wayne Lincoln National Corporation, General Motors Truck and Bus, General Electric, 2.7%
- ------------ ------------------------------------------------------------------------------ -------------
ITT Aerospace, Dana Corporation.
------------------------------------------------------------------------------
Southern Indiana University, Cummins Engine, Walmart Distribution. (2)
- ------------ ------------------------------------------------------------------------------ -------------
Indiana
- ------------
Columbus Federal ,state and local government; Ohio State University, The Limited, Inc., 2.3%
- ------------ ------------------------------------------------------------------------------ -------------
Nationwide Insurance, Lucent Technologies, Honda of America, Banc One
------------------------------------------------------------------------------
Corporation.
------------------------------------------------------------------------------
Cincinnati Procter & Gamble Co., the University of Cincinnati, the Kroger Company, G.E. 2.9%
- ------------ ------------------------------------------------------------------------------ -------------
Aircraft Engines, Delta Airlines.
------------------------------------------------------------------------------
Dayton Wright-Patterson Air Force Base, General Motors, Airborne Express, Elder- 3.2%
- ------------ ------------------------------------------------------------------------------ -------------
Beerman Stores, Navistar International Trans Corp.
------------------------------------------------------------------------------
Louisville UPS, General Electric, Ford Motor Co., Columbia Health Care, Inc., Humana. 2.5%
- ------------ ------------------------------------------------------------------------------ -------------
Lexington University of Kentucky, Toyota Motor Corporation, Lexmark International, Inc. 1.7%
- ------------ ------------------------------------------------------------------------------ -------------
Memphis Federal Express Corporation, Kellog Company, National Commerce 2.8%
- ------------ ------------------------------------------------------------------------------ -------------
Bancorporation.
------------------------------------------------------------------------------
Nashville Baptist Hospital, Vanderbilt Hospital, Saturn, Columbia HCA Hospital, Nissan, 2.1%
- ------------ ------------------------------------------------------------------------------ -------------
State of Tennessee, Nashville Electric Service.
------------------------------------------------------------------------------
Charlotte Carolinas HealthCare System, First Union Corporation, Charlotte-Mecklenburg 2.0%
- ------------ ------------------------------------------------------------------------------ -------------
Schools, Bank of America, Duke Energy Corporation, USAirways.
------------------------------------------------------------------------------
Myrtle Beach Horry County School District, AVX Corporation, International Paper Company, 4.8%
- ------------ ------------------------------------------------------------------------------ -------------
Georgetown County School District, Horry County Government.
------------------------------------------------------------------------------

<FN>

(1) Compared to the national average of 4.3%.
(2) Not available.
</TABLE>

All Crossmann's markets enjoy relatively low cost land and stable,
broad-based employment. When considering a city for expansion, Crossmann
seeks markets where the entry-level consumer is under-served, but where land,
labor, utilities and zoning are available so that homes can be produced in
volume.

PRODUCT LINES

The Company offers a variety of floor plans and exterior styles with
two, three, and four bedrooms, two or more bathrooms and, typically, a two-car
attached garage. Standard features of each product line include built-in
appliances and custom wood cabinets in the kitchen, wall-to-wall carpeting, a
high-efficiency furnace, maintenance-free vinyl siding, landscaped yard,
poured concrete walks, porches and driveways. Purchasers are given the
opportunity to select, at additional cost, such amenities as patios or decks,
wood windows, skylights, upgraded carpeting and flooring, a fireplace or a
basement. The homes are primarily single-family detached units, although in
some locations in some markets, the Company offers attached single-family
units.

The Company sells homes under the names "New American Homes," "Deluxe
Homes" and "Trimark Homes" in most of its markets, except where operations
were acquired from another builder. For example, in Lexington it sells as
"Cutter Homes;" in Memphis it sells as "Heartland Homes" or "Paragon;" and in
Myrtle Beach, as "Pinehurst." Each local operation offers homes to
entry-level and first move-up buyers. In Myrtle Beach, South Carolina, that
target market has been expanded to include second-home and retirement buyers
seeking homes at Crossmann's price point.

The Company intends to remain focused on delivering attractive
housing at prices entry-level consumers can afford. It will explore
modification of its existing product lines or creation of new product lines
when local marketing efforts indicate changes will improve profitability.

CONSTRUCTION

The Company acts as the general contractor for the construction of its
residential communities. The Company's construction supervisors monitor the
construction of each home; actual construction is performed by subcontractors.
The use of subcontractors enables the Company to minimize its investment in
direct employee labor, capital, equipment and building supply inventory. This
practice also increases the Company's flexibility in responding to changes in
the demand for housing. The Company has had long business relationships with
many of its subcontractors. These relationships, coupled with the volume of
homes built by the Company, enable the Company to negotiate favorable
agreements with its subcontractors. The Company has not experienced any
significant delays in construction due to shortages of materials or labor.

Except as necessary to maintain customer satisfaction with the
aesthetics of its product lines, the Company does not materially change its
home designs and floor plans from year to year. The Company believes that
consistency in the design of its homes helps reduce costs and minimize delays
by avoiding expenses associated with educating subcontractors on the
requirements of a new design. Where practical, the Company uses mass
production techniques, construction on contiguous lots, and prepackaged
standardized components to streamline the on-site construction phase.

The construction of detached single-family homes by the Company
generally begins with a home buyer sales contract to minimize the costs and
risks of completed but unsold inventory. When a contract has been signed, a
"house work order" is generated and sent out to the Company's field supervisor
and to each subcontractor who will work on the home. The house work order
describes the basic house purchased and the optional items selected by the
customer. Subcontractors prepare invoices on the basis of a pre-negotiated
price list specifying the current rate the Company will pay for the work to be
completed and the materials used. Price lists are updated periodically based
on changes in the costs of raw materials and other factors. Vouchers are
prepared by the subcontractor according to the price list andmust be
reviewed and approved by the field supervisor before they are paid by the
Company.

Despite seasonal changes in the weather, the Company maintains a
construction schedule throughout the entire year. The Company can build in
all but the harshest winter weather; however, production is slower when cold
temperatures and snow or ice interfere with work. Furthermore, additional
construction cost may be incurred due to such factors as temporary heating
costs, additives to concrete, extra utility charges and the placement of
temporary stone driveways and sidewalks.

LAND ACQUISITION AND DEVELOPMENT

The Company typically acquires unimproved land through contingent
purchase agreements. Closing of the land is contingent upon, among other
things, the Company's ability to obtain necessary zoning and other
governmental approvals for the proposed development, confirmation of the
availability of utilities and completion of an environmental review.

Once the land has been purchased, the Company undertakes development
activities that include site planning and engineering, as well as constructing
roads, sewer, water and drainage facilities and other amenities. The
activities are carefully managed, with phases geared to the Company's
projected sales. Generally, management of the Company attempts to maintain an
inventory of "finished" lots sufficient for approximately half the homes which
the Company anticipates it will construct during the next 18 months. In
addition, the Company maintains an inventory of raw land in anticipation of
its needs for a period of 18 to 36 months in the future. The following chart
summarizes the Company's available lot inventory as of December 31, 1998.
<TABLE>

FINISHED LOTS UNDER RAW LAND UNDER
-------- ----------- ----------- ------
LOTS DEVELOPMENT (EST. LOTS) TOTAL OPTION
-------- ----------- ----------- ------ ------

Indianapolis . . . . . . . . 1,134 461 3,556 5,151 2,595
- ------------------------------ -------- ----------- ----------- ------ ------
Lafayette. . . . . . . . . . 32 42 34 108 691
- ------------------------------ -------- ----------- ----------- ------ ------
Ft. Wayne. . . . . . . . . 203 0 0 203 442
- ------------------------------ -------- ----------- ----------- ------ ------
Columbus. . . . . . . . . 248 163 489 900 219
- ------------------------------ -------- ----------- ----------- ------ ------
Cincinnati. . . . . . . . . 73 177 436 686 62
- ------------------------------ -------- ----------- ----------- ------ ------
Southern Indiana . . . 307 170 275 752 319
- ------------------------------ -------- ----------- ----------- ------ ------
Dayton . . . . . . . . . . . . 111 182 338 631 16
- ------------------------------ -------- ----------- ----------- ------ ------
Louisville . . . . . . . . . 153 231 416 800 680
- ------------------------------ -------- ----------- ----------- ------ ------
Lexington . . . . . . . . . 16 141 399 556 136
- ------------------------------ -------- ----------- ----------- ------ ------
Memphis . . . . . . . . . . 69 164 321 554 197
- ------------------------------ -------- ----------- ----------- ------ ------
Nashville . . . . . . . . . . 2 0 0 2 230
- ------------------------------ -------- ----------- ----------- ------ ------
Charlotte . . . . . . . . . . 144 0 0 144 288
- ------------------------------ -------- ----------- ----------- ------ ------
Myrtle Beach . . . . . . . 113 987 230 1,330 681
- ------------------------------ -------- ----------- ----------- ------ ------
2,605 2,718 6,494 11,817 6,556
-------- ----------- ----------- ------ ------
</TABLE>

In addition to purchasing unimproved land outright, the Company from
time to time has used partnerships and joint ventures to acquire and develop
land. Joint ventures sell finished lots to builders, including, but not
limited to, the Company. The Company will continue to consider such
partnership and joint venture arrangements in the future when management
perceives a favorable opportunity. At December 31, 1998, the Company was a
participant in seven such joint ventures.
The development of land is extremely capital intensive, and as a
result, the Company's ability to develop land is limited. In 1997 and 1998,
the Company developed approximately 57% of the lots on which its homes were
built. The Company expects this percentage to stay approximately the same in
1999.

MARKETING AND SALES

The Company sells its homes through a sales force of commissioned
independent contractors ("New Home Counselors") who work from sales offices
located at the Company's headquarters and in model homes located in each
residential community. New Home Counselors of the Company advise prospective
buyers throughout the home buying process by providing information on the
Company's product lines of homes, pricing, options and upgrades, financing
options, warranties and construction.

New Home Counselors contract with the Company, and the Company
attempts to maintain long term relationships with them. New Home Counselors
attend weekly sales meetings at which they are kept apprised of changes in
available financing options and other information relevant to prospective
buyers and semi-annual seminars offered by the Company on a variety of
marketing topics.

The Company does most of its advertising in the classified
advertisement section of local newspapers. The Company also attracts buyers
as a result of referrals, directional signs and direct mailings. From time to
time the Company may participate in television and radio advertising
promotions.

The Company offers a Guaranteed Sale Program to certain buyers who
have existing homes that they intend to sell before purchasing a home
constructed by the Company. Under the Guaranteed Sale Program the Company
will assist the buyer in selling his existing home and, if that home is unsold
at closing, the Company will purchase the buyer's home at a predetermined
price. Management of the Company believes that the Guaranteed Sale Program
has been an effective marketing tool for the Company as many prospective
buyers are hesitant to purchase a new home until they are certain that they
will be able to sell their existing residence. Sales to new home buyers who
executed contracts under the Guaranteed Sale Program contributed approximately
$25 million to 1998 sales.

FINANCING

The Company assists its customers in financing their new homes in
several ways. First, the Company's New Home Counselors advise buyers, many of
whom are first-time home buyers, on available financing options. The Company
builds most of its homes under the guidelines and specifications of the
Federal Housing Administration ("FHA") and the Veterans Administration ("VA"),
thereby providing eligible buyers the benefit of FHA/VA mortgages. This is
significant because FHA and VA financing generally enables buyers to purchase
homes with lower down payments than the down payments required by conventional
mortgage lenders and allow applicants to direct a larger percentage of their
incomes toward housing expenses. The FHA/VA insured mortgages also provide
more liberal rules with respect to the amount of points and closing costs that
the seller may pay.

The Company believes that the availability of FHA/VA financing is
important to its overall success in that many entry-level and first move-up
buyers have limited financial resources. FHA and VA mortgages are backed by
government insured Fannie Mae and Ginnie Mae securities and should therefore
be a relatively secure source of financing for Crossmann's customers. In
1998, approximately 59% of the homes delivered by the Company were financed
with FHA/VA mortgages.

The Company has established a mortgage brokerage subsidiary, Crossmann
Mortgage Corp. Crossmann Mortgage Corp. was certified by FHA, a program of
the Federal Department of Housing and Urban Development in July 1994. Once
certified, the subsidiary began processing FHA, VA and conventional loans and
selling the servicing rights. In 1997, Crossmann Mortgage Corp. became a
qualified FHA underwriter. The revenue of the subsidiary is comprised of
origination fees and servicing release fees, and its expenses primarily
include administrative personnel salaries and other general office expenses.
Crossmann Mortgage Corp. does not warehouse or fund loans and, as a result,
does not incur credit risk or market risk associated with loans it
originates.

CUSTOMER SERVICE AND QUALITY CONTROL

Before the sale, the Company's New Home Counselors work with customers
to select from available options in order to customize their new home to their
particular taste. After the contract is signed, the buyer visits the Company's
administrative office to make color selections and complete the house work
order. Here the Company provides the new homeowner an orientation to the
construction process and a detailed checklist which describes the items
covered by the Company's warranty. When construction on a new home
commences, the Company encourages the buyer to visit the site during the
construction process. Before a buyer takes occupancy of a new house a
pre-inspection tour is conducted with the buyer to ensure that the buyer is
satisfied with the condition of the home and to attempt to correct any
problems before the buyer takes possession.

Approximately 30 days after closing, representatives of the Company
place a courtesy call to the new homeowner to enable him or her to ask any
questions that have arisen since they took possession. Customers are
encouraged to request an additional walk-through of the home approximately 90
days after closing. Finally, the Company also offers its customers a final
inspection on the first anniversary of the closing to check the home for items
to be submitted for warranty action and to discuss any items which the
customer believes warrant the Company's attention.

Each home sold by the Company is covered by a comprehensive warranty
from an independent HUD approved warranty company. The warranty extends
coverage for ten years for structural matters, four years for the roof of the
home and two years for other specified items. By maintaining this warranty
program, the Company is required to undergo one inspection, rather than three,
to qualify for FHA/VA financing, thereby reducing the cost and time delay
associated with such inspections.

COMPETITION AND MARKET FACTORS

The development and sale of residential properties is highly
competitive. The Company competes in the sale of homes with the resale market
for existing homes and with other homebuilders.

The resale market for existing homes has several attractions for home
buyers including the following: (i) buyers of existing homes can generally
take occupancy of their homes more quickly; (ii) sellers in the resale market
generally have lower basis in their homes and therefore may have price
expectations different from those of sellers of new homes; and (iii) resale
homes are generally located in established neighborhoods. The Company
attempts to meet this competition from the home resale market by offering
benefits which this market cannot provide, notably newer design features, the
flexibility to select interior and exterior finishes, new home warranties and
more desirable locations from which to choose a homesite.

The Company competes with other homebuilders on the basis of a number
of interrelated factors, including location, reputation, amenities, design,
quality and price. Management believes that entry-level housing generally
allows high volume homebuilders, such as the Company, to build a more
standardized product, thus permitting efficiencies in construction and
materials purchasing which can result in a better value to the consumer. Some
of the Company's competitors have greater financial, marketing and sales
resources in certain markets; nevertheless, the Company's volume permits
efficiencies in marketing and advertising as well.

The Company believes that a competitive challenge facing it in all of
its present markets is locating and acquiring undeveloped land suitable for
the types of communities which it can profitably develop. Although the
Company has been successful in the past in locating and developing such tracts
within its present markets, there can be no assurance that this success will
continue. If the Company expands the geographic scope of its business to new
markets, there can be no assurance that the Company will be successful in
acquiring suitable land for development in such markets.

The housing industry is affected by consumer confidence levels and
prevailing economic conditions in general and by job availability and interest
rate levels in particular. A variety of other factors affect the demand for
new homes, including changes in costs associated with home ownership such as
property taxes and energy costs, changes in consumer preferences, demographic
trends and availability of and changes in mortgage financing programs.

TRADEMARKS

"Trimark" is a federally registered service mark for real estate
development services that is owned by the Company. The Company has not yet
registered its "Deluxe" trademark. "Crossmann Communities" is a federally
registered service mark for construction planning, laying out residential
communities and residential construction services that is owned by the
Company.

EMPLOYEES

At December 31, 1998, the Company had 611 full-time employees and 19
part-time employees. The Company is not a party to any collective bargaining
agreements. The Company considers its relationship with its employees to be
good.

EXECUTIVE OFFICERS OF THE REGISTRANT
<TABLE>

The executive officers and directors of the Company and their ages as of
December 31, 1998 are as follows:

NAME AGE POSITION WITH COMPANY
- ------------------- --- -------------------------------------------------------
John B. Scheumann 49 Chairman of the Board of Directors
and Chief Executive Officer
Richard H. Crosser 60 President and Chief Operating Officer; Director
Jennifer A. Holihen 40 Chief Financial Officer; Treasurer; Secretary; Director
Steven M. Dunn 45 Executive Vice President of Operations
</TABLE>

Mr. Scheumann has been the Company's Chairman of the Board of Directors
and Chief Executive Officer since 1992 and has served as a senior executive
officer since joining the Company in 1977. Before joining the Company, Mr.
Scheumann was employed by National Homes Construction Corp. for three years in
a variety of capacities, last serving as Division Controller for Multi-Family
Construction.

Mr. Crosser has been the Company's President and Chief Operating Officer
since 1992 and serves on its Board of Directors. He has served as a senior
executive officer since joining the Company in 1974. Prior to 1974, Mr.
Crosser was employed by National Homes Construction Corp. for 15 years in a
variety of capacities, last serving as a regional manager of the company.

Ms. Holihen has been the Chief Financial Officer, Secretary, and
Treasurer since September 1993 and serves on its Board of Directors. Ms.
Holihen served as controller for the Company from 1983 until 1993. Ms.
Holihen is a Certified Public Accountant and received her MBA in accounting
and management information systems from Indiana University in 1987.

Mr. Dunn assumed the role of Executive Vice President of Operations in
August of 1998, after the death of John M. Moody, who served in that capacity
from January of 1998 through May 1998. Mr. Dunn had been the General Manager
of the Company's Columbus, Ohio Division and the President of Crossmann
Communities of Ohio, Inc. since October 1993. Mr. Dunn was the sole
shareholder and president of Deluxe Homes of Columbus, Inc. from 1987 until
the acquisition by the Company in 1993.

<TABLE>

OTHER KEY EMPLOYEES

NAME AGE POSITION WITH COMPANY SINCE
- ------------------- --- ---------------------------------------------------------- -----
Lloyd W. McKenzie 61 Vice President, Indianapolis Division 1997
Previously President and CEO of National Building Systems.
Charles F. Holle 58 Vice President, Lafayette Division 1983
Mark T. Roberts 33 Vice President, Ft. Wayne Division 1997
Previously a sales representative for Dura Builders.
Lynn R. Cooper 59 Vice President, Southern Indiana Division 1989
David P. Clark 42 General Manager, Columbus Division 1997
Previously a Regional President for Zaring Homes.
Ronald W. Rooze 59 Vice President, Cincinnati/Datyon Division 1994
Previously President and owner of Westron, Inc.
Barry S. White 37 Vice President, Louisville Division 1996
Previously a sales representative for Dura Builders.
Anthony E. Incorvia 52 Vice President, Lexington Division 1996
Previously President of Melody Homes.
Mark S. Livingston 39 Vice President, Memphis: Heartland 1997
Previously General Manager for Heartland Homes.
Richard A. Whitney 36 General Manager, Nashville Division 1998
Previously Regional President of Southfork Development.
Robert A. Volles 49 General Manager, Charlotte Division 1998
Previously Division President of David Weekley Homes.
Ralph Teal 38 Co-Manager, Myrtle Beach Division 1998
James T. Callihan 38 Co-Manager, Myrtle Beach Division 1998
Jeffery H. Skelley 46 Co-Manager, Myrtle Beach Division 1998
Guilford H. Edwards 42 Co-Manager, Myrtle Beach Division 1998
Previously owners of Pinehurst Builders, Inc.
</TABLE>

GOVERNMENT REGULATIONS AND ENVIRONMENTAL MATTERS

The housing industry and the Company are subject to various local, state
and federal statutes, ordinances, rules and regulations concerning zoning,
resource protection, building design, construction and similar matters. These
include local regulations that impose restrictive zoning and density
requirements in that may limit the number of residences that can eventually be
built within the boundaries of a particular location. Furthermore, in
developing its projects the Company must obtain the approval of numerous
governmental authorities regulating such matters as permitted land uses,
levels of density, and the installation of utility services such as
electricity, water and waste disposal.

The length of time necessary to obtain permits and approvals increases
the carrying cost of unimproved property acquired for the purpose of
development and construction. In addition, the continued effectiveness of
permits already granted is subject to changes in policies, rules and
regulations and changes in their interpretation and application. Such
regulation affects construction activities and may result in delays, cause the
Company to incur substantial costs, or prohibit or severely restrict
development in environmentally sensitive regions or areas. To date, the
governmental approval processes discussed above have not had a material
adverse effect on the Company's development activities. In addition, because
the Company purchases land contingent upon necessary zoning, restrictive
zoning issues also have not had a material adverse effect on the Company's
development activities. However, there is no assurance that these and other
restrictions will not adversely affect the Company in the future.
The Company generally will condition its obligation to purchase land on,
among other things, an environmental review of the land. However, there can
be no assurance that the Company will not incur material liabilities relating
to the removal of toxic wastes or other environmental matters affecting land
owned by the Company or land which the Company no longer owns. To date, the
Company has not incurred any liability relating to the removal of toxic wastes
or other environmental matters and to its knowledge has not acquired any land
with environmental problems.

A significant number of the Company's customers obtain mortgage financing
under programs sponsored by FHA and VA. Any reductions in the scope of
funding of FHA/VA mortgage programs could have a material adverse effect on
the Company and its operations.

ITEM 2. PROPERTIES

The Company leases approximately 25,000 square feet of office space for
its headquarters and Indianapolis building division at 9202 North Meridian
Street in Indianapolis, Indiana from Pinnacle Properties LLC, an entity owned
by the Company's Chairman of the Board and Chief Executive Officer, John B.
Scheumann, and its President and Chief Operating Officer, Richard H. Crosser.
The monthly rent on the leases are $21,844. The leases expire March 1999
through May 2001.

The Company also leases approximately 5,000 square feet of warehouse
space at 9202 North Meridian Street from Pinnacle Properties LLC. The monthly
rent is $2,708. Management believes that the terms of all the above
mentioned leases are no less favorable to the Company than terms available
from unrelated third party lessors.
<TABLE>

The Company's other divisions occupy rented space in their respective communities as follows:

<S> <C> <C> <C> <C> <C> <C>
LOCATED IN SQUARE FEET MONTHLY RENT EXPIRES EXTENSION
Southern Indiana . . Franklin, IN 3,900 $ 2,681 December 2001 yes
Lafayette . . . . . . . . Lafayette, IN 5,268 3,167 August 2000 yes
Ft. Wayne . . . . . . . Ft. Wayne, IN 2,500 2,000 March 1999 yes
Columbus . . . . . . . Westerville,OH 6,642 4,735 December 2000 yes
Cincinnati/Dayton Mason, OH 3,686 4,147 June 2002 yes
Louisville . . . . . . . . Louisville, KY 2,764 2,591 December 2000 yes
Lexington . . . . . . Lexington, KY 2,512 2,300 January 2000 yes
Memphis . . . . . . . Memphis, TN 1,600 1,467 September 1999 yes
Nashville . . . . . . . Nashville, TN 500 346 February 1999 yes
Charlotte . . . . . . . Charlotte, NC 2,224 2,188 June 2000 yes
</TABLE>

ITEM 3. LEGAL PROCEEDINGS

The Company from time to time is involved in routine litigation
incidental to its business. The Company does not believe that any liabilities
resulting from litigation to which it is a party will materially affect the
Company's financial position and results of operations.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS

None.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDERS'
MATTERS

The Company's common shares trade on The Nasdaq Stock Market under the
symbol: "CROS." Shares outstanding at December 31, 1998 were 11,543,772.
The closing price at December 31, 1998 was $27.625. During the year ended
December 31, 1998, the high closing sales price per share as reported by The
Nasdaq Stock Market was $37.25. The low closing sales price per share
$12.125.
<TABLE>

High and low share prices for the last two fiscal years were:

1997 1998
Quarter ended High Low High Low
- ------------- ------ ------ ------ ------
March 31 $13.83 $10.50 $31.25 $20.75
June 30 14.50 12.67 31.75 25.75
September 30 23.38 13.50 37.25 19.13
December 31 28.50 19.81 30.88 12.13
</TABLE>

The closing sale price of the Company's Common Shares as reported on The
Nasdaq Stock Market on March 23, 1999 was $21.25. As of March 23, 1999, there
were 60 holders of record of the Company's Common Shares. The Company's
transfer agent estimates that there were 11,543,772 shares outstanding, on
March 23, 1998, and that on that date there are approximately 2,100 beneficial
owners of the Company's Common Shares.

The transfer agent for the Company's common shares is American Stock
Transfer & Trust. Its address is 40 Wall Street, New York, NY 10005.

The Company has not paid dividends since its initial public offering in
October 1993. It anticipates that future earnings will be retained to
finance the continuing development of its business and does not anticipate
paying cash dividends on its Common Shares in the foreseeable future. The
payment of future dividends will be at the discretion of the Company's Board
of Directors and subject to consent of its primary lenders. Payment of future
dividends will depend upon, among other things, future earnings, the success
of the Company's expansion activities, capital requirements, the general
financial condition of the Company and general business conditions. The
Company is party to credit agreements with noteholders and commercial banks
that restrict its ability to pay cash dividends with respect to the Common
Shares. (See "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.")

ITEM 6. SELECTED FINANCIAL DATA

The following is selected consolidated financial data of the Company for
the five years ended December 31, 1998. The data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the consolidated financial statements of
Crossmann Communities, Inc. and notes thereto contained elsewhere in this Form
10-K.

<TABLE>

CONSOLIDATED FINANCIAL AND OPERATING DATA
(in thousands, except per share and operating data)
Year Ended December 31,

1994 1995 1996 1997 1998
STATEMENT OF OPERATIONS DATA:
Sales $112,140 $177,590 $229,485 $316,435 $421,926
Gross Profit 24,494 35,704 48,051 65,550 89,906
Income from operations 12,566 18,621 24,854 32,170 44,056
Income before income taxes 12,791 18,630 24,668 33,399 49,606
Income taxes 5,040 7,519 9,603 13,393 19,734
Net income 7,750 11,111 15,065 20,005 29,872
Net income per common share (1):
Basic .85 1.22 1.65 2.05 2.63

Diluted .85 1.21 1.63 2.02 2.57

Weighted average common shares
outstanding:
Basic 9,105 9,112 9,150 9,759 11,342
Diluted 9,105 9,183 9,261 9,927 11,608

OPERATING DATA:
Number of closings (2) 1,073 1,675 2,068 2,774 3,714
Average home sales price $104,250 $106,024 $110,970 $114,072 $113,604
Homes in backlog (2) 345 757 1,006 1,080 1,744

BALANCE SHEET DATA:
Cash and cash equivalents $ 5,233 $ 100 $ 5,526 $ 18,011
Inventories and properties
held for development or sale $ 54,667 69,683 113,202 153,524 214,198
Total assets 62,026 83,954 128,336 185,276 283,794
Notes payable 20,554 25,472 48,326 51,122 101,223
Total shareholders' equity 33,011 44,212 59,649 110,803 150,281
<FN>

(1) Per share amounts for 1994 through 1996 have been adjusted to reflect the
three-for-two stock split effective August 18, 1997.

(2) A home is included in "closings" when title is transferred to the buyer. Sales
and cost of sales for a house are recognized at the date of closing. A home is
included in "backlog" after a sales contract is executed and prior to the transfer
of title to the purchaser. Because the closings of pending sales contracts are
subject to contingencies, no assurances can be given that homes in backlog will
result in closings.
</TABLE>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.

OVERVIEW

The Company's business and the homebuilding industry in general are
subject to changes in economic conditions, including but not limited to
employment levels, interest rates, the availability of credit, and consumer
confidence. The Company's success in 1998 and in the past several years has
been influenced by favorable economic conditions in its principal markets.
Employment has been strong; interest rates have been low and relatively
stable; low inflation has kept the Company's costs predictable. Financing has
been and continues to be readily available to Crossmann's consumers in the
form of FHA and VA mortgages. Capital has been readily available for
expansion, enabling Crossmann to take advantage of this strong economic
climate. There can be no assurance that these trends will continue, that
employment for the entry-level consumer will stay strong, that government
sponsored mortgage programs will not be changed or withdrawn, or that interest
rates will not change substantially. Nevertheless, Crossmann's management is
generally optimistic and believes that modest deterioration in these economic
conditions might still afford the Company a strong housing market.

Because the Company targets an entry-level consumer, price increases in
response to strong demand can only be modest. Management strives to increase
profits by increasing unit volume. The focus of Crossmann's management is on
selling more units in existing markets, thus improving buying power and
margins, and on expanding operations to new markets. There can be no
assurance that the Company will continue to find attractive opportunities in
new cities, nor can there by any assurance that the Company will be able to
transfer its business strategy to new market areas successfully, or that new
markets will offer the opportunities and stability of the Company's existing
markets.

RESULTS OF OPERATIONS

During the five-year period ended December 31, 1998, the Company's sales
increased at an average compound annual rate of 39.3% per year, from $112.1
million in 1994 to $421.9 million in 1998. Net income increased at an average
compound annual rate of 41.7%, from $7.7 million in 1994 to $29.9 million in
1998. Shareholders' equity increased from $33.0 million as of December 31,
1994 to $150.3 million as of December 31, 1998.
<TABLE>

The following table recaps unit growth in the Company's markets. Management views
volume relative to the total size of each market a significant factor in producing good
margins.
UNIT CLOSINGS BY MARKET

1992 1993 1994 1995 1996 1997 1998
---- ---- ----- ----- ----- ----- -----
Indianapolis(1). . . . . . . . . . . . 491 686 732 1,043 1,124 1,314 1,384
Lafayette. . . . . . . . . . . . . . . 125 143 183 160 188 166 171
Columbus. . . . . . . . . . . . . . 23 133 197 247 315 315
Cincinnati. . . . . . . . . . . . . . 13 159 162 189 230
Ft. Wayne. . . . . . . . . . . . . . 12 116 94 84 186
Dayton. . . . . . . . . . . . . . . . . 83 230 259
Southern Indiana. . . . . . . . . 169 283 338
Louisville. . . . . . . . . . . . . . . 1 102 240
Lexington. . . . . . . . . . . . . . 64 109
Memphis. . . . . . . . . . . . . . . 27 189
Nashville . . . . . . . . . . . . . . . 2
Charlotte . . . . . . . . . . . . . . . 1
Myrtle Beach . . . . . . . . . . . . . 290
-----
Total. . . . . . . . . . . . . . . . . . 616 852 1,073 1,675 2,068 2,774 3,714
==== ==== ===== ===== ===== ===== =====
<FN>

(1) Closings in Indianapolis do not include units built by Crossmann's 50% joint
venture, Trinity Homes LLC ("Trinity"). Trinity closed 448 homes in 1997 and 446 homes
in 1998. Crossmann's share of Trinity earnings are included in "other income" in
Crossmann's financial statements.
</TABLE>

YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997

Sales increased by $105.5 million, or approximately 33.3%, in 1998 over
1997. Sales were higher primarily as a result of increased unit sales; 3,714
units were closed in 1998 compared to 2,774 in 1997. Sales were up in all
divisions except Columbus where they were flat; Ft. Wayne and Louisville
improved most dramatically. In Ft. Wayne, 186 units were closed in 1998
compared to 84 in 1997, an increase of 121.4%, in Louisville, 240 units were
closed in 1998, compared to 102 in 1997, an increase of 135.3%. Acquisitions
also contributed to the higher sales volume. The Company's new Memphis
division, enhanced by the acquisition of Paragon in May of 1998, contributed
189 closings compared to only 27 in 1997, and its new Myrtle Beach division,
formed with the acquisition of Pinehurst in May 1998, contributed 290.
Crossmann's average selling price was lower, approximately $113,600 in 1998,
compared to approximately $114,100 in 1997.

Gross profit increased by $24.3 million, or approximately 37.0%, for the
year, representing 21.3% of sales in 1998 as compared to 20.7% in 1997. The
increase resulted from market mix: Crossmann achieves higher margins in
cities where it has operated longer and has greater buying power in the local
building market. Margins improved in 1998 in Indianapolis, Lafayette and
Columbus, where it has operated for a number of years. Margins were also
stronger in Ft. Wayne, Southern Indiana, Cincinnati and Dayton in 1998 than in
1997. Improving margins in maturing markets tend to offset weaker margins
that new divisions may generate in early stages.

Selling, general and administrative expenses increased as a percentage
of sales from 10.6% in 1997 to 10.8% in 1998. Management believes that the
increase reflects higher general and administrative expenses incurred by the
newer homebuilding divisions. Management believes that higher volume in
these divisions in 1999 will help to offset this overhead in future periods.

Other income, net of expenses increased $4.3 million for the year, to
approximately $5.5 million in 1998 from $1.2 million in 1997. The increase
was due principally to earnings from Trinity, which generated approximately
$2.9 million in income to Crossmann in 1998 compared to approximately $825,400
in 1997. Also included in other income in 1998 was a gain of approximately
$1.3 million on the sale of an 80.2% equity interest in a previously
wholly-owned subsidiary to related parties.

Due to the increase in unit sales and to increased other income, income
before income taxes for 1998 increased approximately $16.2 million over 1997,
or 48.5%. This represents an increase from 10.6% of sales in 1997 to 11.8% of
sales in 1998. Net income increased $9.9 million or 49.3%. Net income as a
percentage of sales was 7.1% in 1998 compared to 6.3% in 1997. The Company's
effective tax rate was 39.8% in 1998, compared to 40.1% in 1997.

YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996

Sales increased by $87.0 million, or approximately 37.9% in 1997 over
1996. Sales were higher primarily as a result of increased unit sales; 2,774
units were sold in 1996 compared to 2,068 in 1996. Sales were up in all
divisions except Lafayette and Ft. Wayne where they were down slightly; Dayton
and Louisville closings were up most dramatically. In Dayton, 230 homes were
sold in 1997 compared to 83 units sold in 1996, and in Louisville, 102 homes
were sold in 1997, compared to 1 in 1996. Acquisitions also contributed to
higher volume. The Company's new Lexington division contributed 64 closings,
and its new Memphis division contributed 27. Management attributes increased
volume in its markets to the comparatively high value of the product compared
to others offered in the marketplace.

Gross profit increased by $17.5 million, or approximately 36.4%, for the
year, representing 20.7% of sales in 1997 as compared to 20.9% in 1996. The
decline resulted from market mix; Crossmann achieves higher margins in cities
where it has operated longer and has more buying power in the local building
market. Growth in new division tends to depress margins slightly in early
stages.

Selling, general and administrative expenses increased as a percentage
of sales from 10.1% in 1996 to 10.5% in 1997. Management believes that the
increase reflected higher general and administrative expenses incurred by the
newer homebuilding divisions. Management believes that higher volume in these
divisions in 1998 will help offset this overhead in future periods.

Due primarily to the increase in unit sales, income before income taxes
for 1997 increased approximately $8.7 million over 1996, or 35.4%. This
represents an increase from 10.7% of sales in 1996 to 10.6% of sales in 1997.
Net income increased $4.9 million or 32.8%. Net income as a percentage of
sales was 6.3% in 1997, compared to 6.6% in 1996. The Company's effective
tax rate was 40.1% in 1997 as compared to 38.9% in 1996.

BACKLOG
<TABLE>

The following table sets forth certain data relating to the operations of
the Company for the years ended December 31, 1996, 1997 and 1998.

December 31

1996 1997 1998
------------ ------------ ------------
Closings (for the period ended) 2,068 2,774 3,714
Homes in backlog 1,006 1,080 1,744
Aggregate sales value in backlog $108,084,640 $120,540,000 $197,100,000
Average sales price of backlog $ 107,440 $ 111,610 $ 113,020
</TABLE>

Management believes that a substantial portion of the homes in backlog
at December 31, 1998 will be closed prior to June 30, 1999, but because of
weather conditions, there can be no assurance as to the quarter in which such
closings will occur.

LIQUIDITY AND CAPITAL RESOURCES

At December 31, 1998, Crossmann had cash and cash equivalents balances of
$18.0 million, of which $17.4 million was held in escrow for periods of up to
30 days.

The Company's primary uses of capital are home construction costs and the
purchase and development of land. Real estate inventories were approximately
$214.2 million or 75.5% of total assets at December 31, 1998 compared to
approximately $153.5 million or 82.8% of total assets at December 31, 1997.
To assure the future availability of developed lots for next year's
operations, from time to time in the normal course of business the Company
contracts to purchase a portion of its developed lots from outside developers.
Total commitments for these purchases was approximately $83.4 million at
December 31, 1998. The purchases of these lots are subject to various
conditions imposed on both the sellers and the Company. Capital is also used
to add and improve equipment used in administering the business and for model
home furnishings.

In 1998, the Company used capital to acquire Paragon, in Memphis,
Tennessee and Pinehurst, in Myrtle Beach, South Carolina. These transactions
gave rise to approximately $11.0 million in goodwill in 1998. Capital was
also used to add and improve equipment used in administering the business and
for model home furnishings.

Crossmann enters into joint ventures with other builders and developers,
to share risk and to obtain external expertise. Crossmann's investment in and
advances to joint ventures increased to approximately $17.7 million in 1998
from approximately $12.4 million in 1997. The most significant joint venture
investment is Trinity, totaling approximately $11.3 million.

During 1998, expenditures were financed with cash from operations and
with borrowings on a $60 million unsecured line of credit with Bank One,
Indiana N.A. and its participant, NBD Bank N.A. The line of credit bears
interest at the bank's prime lending rate, but permits portions of the
outstanding balance to be committed for fixed periods of time at a rate equal
to LIBOR plus 1.3% through 1.6%. In the summer of 1998, Bank One and NBD
announced plans to merge. As a result of the combination, Bank One desires a
reduction in its overall credit exposure to the Company. The bank will add
additional participants in the line of credit upon renewal of the facility on
March 31, 1999.

The Company also has $16.7 million in senior notes, maturing in 2004 with
interest payable quarterly at 7.625%, and $50.0 million in new notes issued in
June of 1998, payable over 10 years at 7.75%, payable quarterly. Annual
principal reductions for this note issue of $8,333,334 begin June 11, 2003.

Both the note agreements and the bank line of credit require compliance
with certain financial and operating covenants and place certain limitations
on the Company's investments in land and unconsolidated joint ventures.
They also limit payments of cash dividends by the Company.

The notes and the modifications to the banks' credit agreement are
expected to provide adequate liquidity for planned internal growth and capital
expenditures. In the event that the Company seeks to accelerate growth
through the acquisition of large parcels of land or of other homebuilders,
additional capital may be necessary. The Company believes that such capital
could be obtained from banks or other financing alternatives, from the
issuance of additional shares, or from seller financing; however, there can be
no assurances that the Company would be able to secure the necessary capital.

The Company has financed some of its growth in 1998 with equity.
Pursuant to the Pinehurst transaction, Crossmann issued 311,938 shares valued
at $8,294,436 to the sellers.

INFLATION AND EFFECTS OF CHANGING PRICES

The Company historically has been able to raise sales prices by amounts
at least equal to its cost increases and accordingly has not experienced any
detrimental effect from inflation. Because the Company sells to a
price-conscious consumer, its ability to raise prices is limited. Management
seeks to optimize volume by keeping homes affordable and to optimize margins
thorough careful planning.

Housing demand, in general, is affected adversely by increases in
interest rates. If mortgage interest rates increase significantly, the
Company's sales of residential real estate could be adversely affected. In
addition, gross profit and net income can be affected as well because
Crossmann can assist buyers, subject to certain limitations by FHA and VA, by
paying a portion of a customer's points and closing costs needed to help in
securing a mortgage loan.

YEAR 2000 SYSTEM REQUIREMENTS

RISKS PRESENTED BY THE YEAR 2000 ISSUE.
Crossmann's management believes that the Company's core selling
and construction operations are largely unautomated and would continue
uninterrupted even in the event of Year 2000 problems. As for accounting and
administration, the Company's software is largely not date-dependent. Dates
are carried for informational purposes and are not generally used in
computations.

SYSTEMS TESTING.
The manufacturer of the computer on which Crossmann's central accounting
and management information systems resides has certified that its hardware and
operating system software are Year 2000 compliant. The Company's applications
software has been tested in the course of normal maintenance. The Company's
programmers have identified those few instances where dates are compared and
have initiated corrections to handle the date change properly. Equipment and
software peripheral to Crossmann's central system are being tested for Year
2000 compliance. Any replacements or upgrades required are expected to be
complete by mid-1999.

COSTS.
The cost and timing of upgrades to hardware and software corrections are
not deemed to be materially different than normally scheduled upgrades.

CONTINGENCY PLANS.
Management's contingency plans, which are intended to enable the Company
to continue to operate normally, include performing some procedures manually,
changing suppliers, if necessary, and repairing or obtaining replacement
systems.

FUTURE TRENDS

Management views land acquisition and zoning as the greatest challenges
to its business in years to come. The Company will continue to seek to
maximize the value of each parcel it purchases so that it can continue to
serve its core customer.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company does not invest in marketable securities, nor does it engage
in hedging activities or foreign currency conversions. A portion of its
revolving debt is carried at floating interest rates, but the exposure to
changes in prime rate related to that debt is not material.

<PAGE>

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Crossmann Communities, Inc.
and Subsidiaries

Index to Consolidated Financial Statements

<TABLE>

<S> <C>

Independent Auditors' Report 20
Consolidated Balance Sheets as of December 31, 1997 and 1998 21
Consolidated Statements of Income for the Years Ended December 31, 1996, 1997, and 1998 22
Consolidated Statements of Shareholders' Equity for the Years Ended December 31, 1996,1997, and
1998 23
Consolidated Statements of Cash Flows for the Years Ended December 31, 1996, 1997, and 1998 24
Notes to Consolidated Financial Statements 25-31
</TABLE>

INDEPENDENT AUDITORS' REPORT

Board of Directors and Shareholders
Crossmann Communities, Inc.

We have audited the accompanying consolidated balance sheets of Crossmann
Communities, Inc. and subsidiaries as of December 31, 1997 and 1998, and the
related consolidated statements of income, shareholder's equity and cash flows
for each of the three years in the period ended December 31, 1998. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and the significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, such consolidated financial statements present
fairly, in all material respects, the financial position of Crossmann
Communities, Inc. and subsidiaries as of December 31, 1997 and 1998, and the
results of their operations and their cash flows for each of the three years
in the period ended December 31,1998 in conformity with generally accepted
accounting principles.

DELOITTE & TOUCHE LLP

Indianapolis, Indiana
March 8, 1999

Crossmann Communities, Inc
and Subsidiaries

Consolidated Balance Sheets

as of December 31, 1997 and 1998
<TABLE>

1997 1998
------------ ------------
ASSETS
Cash and cash equivalents $ 5,526,138 $ 18,011,456
Retainages 886,766 1,115,617
Real estate inventories 153,523,571 214,197,844
Furniture and equipment, net 3,310,345 3,964,369
Investments in joint ventures 12,354,474 17,720,878
Goodwill, net 3,817,650 15,395,896
Other assets 5,856,819 13,387,755
------------ ------------
Total assets $185,275,763 $283,793,815
============ ============

LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable $ 15,924,136 $ 20,734,383
Accrued expenses and other liabilities 7,426,217 11,555,789
Notes payable 51,122,431 101,222,955
------------ ------------
Total liabilities 74,472,784 133,513,127

Commitments and contingencies

Shareholders' equity:
Preferred shares, without par value:
Authorized shares - 10,000,000
No shares issued and outstanding
Common shares, without par value:
Authorized shares - 30,000,000
Issued and outstanding shares - 11,107,853 and 11,543,772
at December 31, 1997 and 1998, respectively 55,548,737 65,154,710
Retained earnings 55,254,242 85,125,978
------------ ------------
Total shareholders' equity 110,802,979 150,280,688
------------ ------------
Total liabilities and shareholders' equity $185,275,763 $283,793,815
============ ============
<FN>

See accompanying notes.
</TABLE>

Crossmann Communities, Inc.
and Subsidiaries

Consolidated Statements of Income

for the Years Ended December 31, 1996, 1997 and 1998
<TABLE>

1996 1997 1998
------------- ------------- -------------

Sales of residential real estate $229,485,094 $316,435,463 $421,925,742
Cost of residential real estate sold 181,434,071 250,885,725 332,119,887
------------- ------------- -------------
Gross profit 48,051,023 65,549,738 89,805,855

Selling, general and administrative expenses 23,196,933 33,380,216 45,749,445
------------- ------------- -------------
Income from operations 24,854,090 32,169,522 44,056,410

Other income, net 853,896 2,102,473 6,869,524
Interest expense (1,035,251) (872,862) (1,319,920)
------------- ------------- -------------
(185,355) 1,229,611 5,549,604
------------- ------------- -------------
Income before income taxes 24,668,735 33,399,133 49,606,014
Income taxes 9,603,107 13,393,347 19,734,278
------------- ------------- -------------
Net income $ 15,065,628 $ 20,005,786 $ 29,871,736
============= ============= =============

Net income per common share:
Basic $ 1.65 $ 2.05 $ 2.63
============= ============= =============
Diluted $ 1.63 $ 2.02 $ 2.57
============= ============= =============

Weighted average number of common shares
outstanding:
Basic 9,149,993 9,758,678 11,341,645
============= ============= =============
Diluted 9,261,199 9,927,482 11,607,944
============= ============= =============

<FN>

See accompanying notes.
</TABLE>

Crossmann Communities, Inc.
and Subsidiaries

Consolidated Statements of
Shareholders' Equity

for the Years Ended December 31, 1996, 1997 and 1998

<TABLE>

Common Shares Retained
---------- -----------
Shares Amount Earnings Total
---------- ----------- ----------- ------------

Balances at January 1, 1996 9,122,250 $24,028,879 $20,182,828 $ 44,211,707
Net income 15,065,628 15,065,628
Issuance of common shares 66,402 372,024 372,024
---------- ----------- ------------
Balances at December 31, 1996 9,188,652 24,400,903 35,248,456 59,649,359
Net income 20,005,786 20,005,786
Issuance of common shares, net
of offering costs 1,919,201 31,147,834 31,147,834
---------- ----------- ------------
Balances at December 31, 1997 11,107,853 55,548,737 55,254,242 110,802,979
Net income 29,871,736 29,871,736
Issuance of common shares 435,919 9,605,973 9,605,973
---------- ----------- ------------
Balances at December 31, 1998 11,543,772 $65,154,710 $85,125,978 $150,280,688
========== =========== =========== ============
<FN>

See accompanying notes.
</TABLE>

Crossmann Communities, Inc.
and Subsidiaries
Consolidated Statements of Cash Flows

for the Years Ended December 31, 1996, 1997 and 1998 (See Notes 6, 7 and 8)
<TABLE>

1996 1997 1998

OPERATING ACTIVITIES:
Net income $ 15,065,628 $ 20,005,786 $ 29,871,736
Adjustments to reconcile net income to net

cash used by operating activities:
Depreciation 539,443 689,111 999,519
Amortization 161,394 363,576 494,990
Deferred income taxes (169,308) (70,430) (302,188)
Cash provided (used) by changes in:

Retainages (525,387) 269,434 (228,851)
Real estate inventories (37,567,373) (31,894,099) (38,736,025)
Other assets (1,001,198) (877,623) (3,106,812)
Accounts payable 2,974,123 553,229 3,278,609
Accrued expenses and other liabilities 530,734 1,739,068 4,129,563
------------- -------------- --------------
Net cash used by operating activities (19,991,944) (9,221,948) (3,599,459)

INVESTING ACTIVITIES:
Purchases of furniture and equipment (2,023,660) (1,026,085) (1,307,119)
Investments in joint ventures (2,206,582) (8,949,732) (8,471,224)
Business acquisitions, net of cash acquired (330,901) (421,925) (9,669,888)
------------- -------------- --------------
Net cash used by investing activities (4,561,143) (10,397,742) (19,448,231)

FINANCING ACTIVITIES:
Proceeds from bank borrowings 119,832,796 161,113,458 198,603,946
Principal payments on bank borrowings (97,534,584) (163,090,000) (211,489,000)
Payments on notes and long-term debt (3,250,099) (3,258,798) (2,893,467)
Proceeds from issue of senior notes -0- -0- 50,000,000
Net proceeds from sale of common shares 372,024 30,281,168 1,311,529
------------- -------------- --------------
Net cash provided by financing activities 19,420,137 25,045,828 35,533,008

Net increase (decrease) in cash and cash equivalents (5,132,950) 5,426,138 12,485,318
Cash and cash equivalents at beginning of year 5,232,950 100,000 5,526,138
------------- -------------- --------------
Cash and cash equivalents at end of year $ 100,000 $ 5,526,138 $ 18,011,456
============= ============== ==============

<FN>

See accompanying notes.
</TABLE>

Crossmann Communities, Inc.
and Subsidiaries

Notes to Consolidated Financial Statements

for the Years Ended December 31, 1996, 1997 and 1998

1. BASIS OF PRESENTATION

Crossmann Communities, Inc. ("Crossmann" or the "Company") is engaged
primarily in the development, construction, marketing and sale of new
single-family homes for first time and first move-up buyers. The Company
also acquires and develops land for construction of such homes and originates
mortgage loans for the buyers. The Company operates in Indianapolis, Ft.
Wayne, Lafayette, and Southern Indiana; Cincinnati, Columbus and Dayton, Ohio;
Louisville, and Lexington, Kentucky; Memphis and Nashville, Tennessee;
Charlotte, North Carolina; and Myrtle Beach, South Carolina.

2. SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation.
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated. The Company also owns 50% interests in
certain unconsolidated joint ventures, which are accounted for using the
equity method. In 1998, the Company acquired two homebuilders for
approximately $13,850,000 million in cash and notes and 311,938 shares of the
Company's common stock. The transactions were accounted for as purchases and
includes their operations subsequent to each acquisition date. Cost in excess
of the fair value of net assets acquired of approximately $10,900,000 was
recorded as goodwill. The pro forma effect of the acquisitions on results of
operations are not presented as they are not considered material.

Accounting Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period.
Actual results could differ from those estimates.

Cash and Cash Equivalents
All highly liquid investments with maturities of three months or less when
purchased are considered to be cash equivalents. Due to the short maturity
period of the cash equivalents, the carrying value of these instruments
approximates their fair value. Cash and cash equivalents at December 31, 1998
include approximately $17,400,000 of cash held in escrow for periods of up to
30 days.

Real Estate Inventories
Real estate inventories are stated at the lower of cost (specific
identification method) or net realizable value. In addition to direct land
acquisition, land development and housing construction costs, inventory costs
include interest, real estate taxes and related development and construction
overhead costs which are capitalized in inventory during the development and
construction periods. Net realizable value represents estimates, based on
management's present plans and intentions, of sale price less development and
disposition cost, assuming that disposition occurs in the normal course of
business.

Goodwill
Goodwill is amortized over twenty years using the straight-line method.
Accumulated amortization was approximately $685,000 and $1,211,800 at
December 31, 1997 and 1998, respectively.

Furniture and Equipment
Furniture and equipment are stated at cost. Depreciation is computed using
straight-line and accelerated methods over the estimated useful lives of the
respective assets ranging from 5 to 39 years. Accumulated depreciation is
approximately $2,334,000 and $3,333,300 at December 31, 1997 and 1998,
respectively. Repairs and maintenance costs are expensed as incurred.

Revenue Recognition
Revenue is recognized upon a formal closing and as title to the property
transfers to the buyer.

New Accounting Pronouncements
Statements of Financial Accounting Standard ("SFAS") No. 133, Accounting for
Derivative Instruments and Hedging Activities, was issued in June 1998 and is
effective for all fiscal years beginning after June 15, 1999. This statement
established accounting and reporting standards for derivative instruments and
for hedging activities. It requires that an entity recognize all derivatives
as either assets or liabilities in the statement of financial condition and
measure those instruments at fair value. If certain conditions are met, a
derivative may be specifically designated as a fair value hedge, a cash flow
hedge, or a hedge of a foreign currency exposure. The accounting for changes
in the fair value of a derivative (that is, gains and losses) depends on the
intended use of the derivative and the resulting designation. Management has
not yet determined the effect, if any, SFAS No. 133 will have on the Company's
consolidated financial statements.

3. FINANCIAL INSTRUMENTS

SFAS No. 107, Disclosure About Fair Value of Financial Instruments, defines
the fair value of a financial instruments as the amount at which the
instrument could be exchanged in a current transaction between willing
parties, other than in a forced or liquidation sale. The following summarizes
the estimated fair values of financial instruments and the major methods and
assumptions used in estimating such amounts:

The recorded amounts of short-term financial instruments (primarily cash and
cash equivalents, retainages, and accounts payable) approximate the fair
values due to the relatively short period to maturity.

Debt with variable interest rates is recorded at carrying amounts which
approximate the fair value based on discounted future cash flows. The
carrying amount of senior notes payable at December 31, 1998, approximates the
fair value based upon debt instruments with similar terms and conditions.

4. REAL ESTATE INVENTORIES
<TABLE>

Real estate inventories at December 31 consist of:
<S> <C> <C>

1997 1998
------------ ------------

Residential homes under construction $ 74,525,972 $ 97,679,676
Land held for future development 18,988,624 36,649,746
Land under development 35,212,285 45,784,467
Purchased developed lots 13,956,254 21,813,143
Homes held for resale 3,099,039 5,193,641
Model homes 7,741,397 7,077,171
------------ ------------
$153,523,571 $214,197,844
============ ============
</TABLE>

The Company occasionally purchases homes from customers to facilitate the sale
of new homes. Such homes held for resale are recorded at the lower of cost or
market.

5. INVESTMENTS IN UNCONSOLIDATED JOINT VENTURES

The Company has entered into joint ventures with various real estate
developers and owns 50% or less in each venture. The joint ventures are
accounted for using the equity method. Aggregated condensed financial
information for unconsolidated joint ventures is as follows:
<TABLE>

1996 1997 1998
---------- ----------- ------------

Revenue $ 518,372 $24,978,053 $101,829,142
Expenses 487,938 23,146,934 94,867,827
---------- ----------- ------------
Net income $ 30,434 $ 1,831,119 $ 6,961,315
========== =========== ============

Assets $7,962,009 $43,891,845 $ 63,358,541
Liabilities 3,627,019 31,043,708 48,716,614
---------- ----------- ------------
Equity $4,334,990 $12,848,137 $ 14,641,927
========== =========== ============
</TABLE>

For 1997 and 1998, assets of the joint ventures consisted primarily of
developed lots, land under development and land held for future development.
Revenue consisted primarily of single-family home and residential lot sales.
Land joint ventures provided $2,843,994 and $6,525,180 in lots to the Company
in 1997 and 1998 respectively. Investments in land joint ventures include
accounts receivable from the joint ventures $760,189 and $2,424,886 in 1997
and 1998, respectively.

In October 1997, the Company entered into a joint venture with another
homebuilding company in Indianapolis. This joint venture provided
approximately $825,400 and $2,866,700 in other income to the Company in 1997
and 1998 respectively. Investments in joint ventures at December 31, 1997 and
December 31,1998, includes $5,000,000 and $7,336,000 respectively, in notes
receivable from this joint venture. The notes receivable bear interest at the
prime rate of Bank One, Indiana, N.A. (7.75% at December 31, 1998), payable
quarterly, and they mature in 2003.

6. CREDIT ARRANGEMENTS
<TABLE>

Notes payable consists of the following at December 31:

1997 1998
----------- ------------
Line of credit with banks, maximum $60,000,000, with interest payable
on funds committed for fixed periods at LIBOR (5.687% at December
31, 1998) plus 1.3% through 1.6% and on floating funds at the banks'
prime rate (7.75% at December 31, 1998) maturing in March 1999. $30,897,000 $ 33,891,000

Various notes payable collateralized by land, with periodic principal
payments, maturing through November 2000, and bearing fixed and
variable interest at rates ranging from 8.25% to prime plus 1%. 780,987 665,289

Senior notes payable, due December 2004 with annual principal
payments of $2,777,777, and quarterly interest payments at 7.625%
per annum. 19,444,444 16,666,666

Senior notes payable, due June 11, 2008 with annual principal -0- 50,000,000
payments of $8,333,334 beginning June 2003, and quarterly interest
payments at 7.75% per annum
$51,122,431 $101,222,955
=========== ============
</TABLE>

The senior note and line of credit agreements require a minimum current ratio,
a minimum fixed charge coverage ratio, a maximum ratio of debt to tangible
capital base, a maximum ratio of land to equity, and a maximum ratio of debt
to a borrowing base derived from inventory levels. The senior note agreement
requires a pre-payment premium in the event of early extinguishment of the
debt. Additionally, both credit agreements limit investment in unconsolidated
joint ventures, payments of cash dividends, and require express written
consent of the lenders for certain transactions.

Interest capitalized during real estate development and construction
was approximately $2,155,400, $3,925,100, and $4,704,200 for 1996, 1997, and
1998, respectively.

Interest paid, including amounts capitalized, was approximately $3,194,700,
$4,798,000 and $6,053,000 in 1996, 1997, and 1998, respectively. The
weighted average interest rate on borrowings outstanding was 7.25% at December
31, 1998.
<TABLE>

Scheduled maturities of notes payable for each of the five years and
thereafter as of December 31, 1998 are as follows:

<S> <C>

1999 $ 37,234,067
2000 2,877,778
2001 2,777,778
2002 2,777,778
2003 11,111,112
Thereafter 44,444,442
------------

$101,222,955
============
</TABLE>

7. SHAREHOLDERS' EQUITY

The Company has authorized 10,000,000 preferred shares which remain unissued
at December 31, 1998. The Board of Directors of the Company has not yet
determined the preferences, qualifications, relative voting or other rights of
the authorized preferred shares.

The Company issued 62,726 and 311,938common shares to acquire homebuilders in
June 1997 and May 1998, respectively.

The Company has incentive share option plans for employees and directors
pursuant to which 937,500 common shares are reserved. The options were
issued at market prices on the grant date, became exercisable on the grant
date or in some cases three years from the grant date, and expire ten years
after the grant date. Details of stock options are as follows. The 1996 and
1997 amounts have been adjusted to reflect a three-for-two stock split
effective August 18, 1997. As of December 31, 1998, options outstanding had
exercise prices between $5.17 and $30.38 and a weighted average remaining
contractual life of 7.1 years.

<TABLE>

<S> <C> <C> <C> <C> <C>
1996 1996 1997 1997 1998
-------- -------------------------------- -------- -------------------------------- --------
Weighted Average Exercise Price Weighted Average Exercise Price

Shares Shares Shares
Beginning Balance 243,750 $ 5.76 270,450 $ 7.70 377,700
Options granted 90,750 11.83 139,500 13.59 206,250
Options exercised (36,312) 5.46 (24,750) 5.19 (80,720)
Options forfeited (27,738) 7.26 (7,500) 11.83 (1,600)
-------- -------------------------------- -------- -------------------------------- --------
Ending Balance 270,450 $ 7.70 377,700 $ 9.96 501,630
======== ================================ ======== ================================ ========
Exercisable 255,450 $ 7.80 377,700 $ 9.96 501,630
======== ================================ ======== ================================ ========

<S> <C>
1998
--------------------------------
Weighted Average Exercise Price

Beginning Balance $ 9.96
Options granted 25.22
Options exercised 9.149
Options forfeited 22.63
--------------------------------
Ending Balance $ 16.33
================================
Exercisable $ 16.33
================================
</TABLE>

The Company applies APB Opinion No. 25, Accounting for Stock Issued to
Employees, and related Interpretations in accounting for the option plans. No
compensation cost has been recognized for the plans because the stock option
price is equal to fair value at the grant date. Had compensation cost for the
plans been determined based on the fair value at the grant dates for awards
under the plan consistent with the method of SFAS No. 123, Accounting for
Stock-Based Compensation, the Company's net income and basic and diluted net
income per share for the years ended December 31, 1996, 1997 and 1998 would
have decreased to the pro forma amounts indicated below:
<TABLE>

1996 1997 1998
----------- ----------- -----------
Net income:
As reported $15,065,628 $20,005,786 $29,871,736
Pro forma 14,829,416 19,512,261 28,519,836
Basic net income per share:
As reported 1.65 2.05 2.63
Pro forma 1.62 2.00 2.51
Diluted net income per share:
As reported 1.63 2.02 2.57
Pro forma 1.60 1.97 2.46
</TABLE>

The fair value of the option grants are estimated on the date of grant using
an option pricing model with the following assumptions: no dividend yield,
risk-free interest rates of 4.51% to 7.13%, volatility of 38 to 42 and
expected lives ranging from five to ten years. The pro forma amounts are not
representative of the effects on reported net income for future years.

In 1997, the Company adopted SFAS No. 128 and accordingly, the accompanying
consolidated statements of income have been restated to reflect diluted as
well as basic net income per share amounts. The following is a reconciliation
of the weighted average common shares for the basic and diluted net income per
share computations:
<TABLE>

FOR THE YEAR ENDED DECEMBER 31,

1996 1997 1998
--------- --------- ----------
Weighted average common shares 9,149,993 9,758,678 11,341,645
Dilutive effect of stock options 111,206 168,804 266,299
--------- --------- ----------
Weighted average common shares
and incremental shares 9,261,199 9,927,482 11,607,944
========= ========= ==========
</TABLE>

8. INCOME TAXES
<TABLE>

The reconciliation of income taxes computed at the U.S. federal statutory tax rate
to income tax expense for the years ended December 31, 1996, 1997 and 1998 is:

1996 1997 1998
----------- ----------- -----------

Tax at U.S. statutory rate $8,634,057 $10,785,504 $17,362,105
State income taxes, net of federal tax benefit 1,233,437 2,607,843 2,372,173
Other, net (264,387) -0- -0-
----------- ----------- -----------
$9,603,107 $13,393,347 $19,734,278
=========== =========== ===========
</TABLE>

<TABLE>

The following is a summary of the components of the provision for income
taxes:

1996 1997 1998
----------- ------------ ------------
Current tax expense:
Federal $8,014,453 $10,842,305 $16,218,343
State 1,757,962 2,621,472 3,818,123
----------- ------------ ------------
9,772,415 13,463,777 20,036,466
Deferred tax benefit (169,308) (70,430) (302,188)
----------- ------------ ------------
$9,603,107 $13,393,347 $19,734,278
=========== ============ ============
</TABLE>

Income taxes paid were $7,570,000, $12,514,000 and $14,860,000 during 1996,
1997 and 1998, respectively.

The net deferred tax liability of approximately $444,000 at December 31, 1998
consists primarily of temporary basis differences for tax and financial
reporting resulting from acquisitions and warranty expense.

The deferred tax asset of approximately $396,000 at December 1997 results
principally from temporary differences in the recognition of warranty expense
for tax and financial reporting purposes.

9. RELATED PARTY TRANSACTIONS

Office and warehouse space at the Company's headquarters is leased from a
related party. During 1996, 1997 and 1998 approximately $251,200, $292,800
and $294,600, respectively, in rental payments were made to related parties.

On September 30, 1998, the Company sold an 80.2% equity interest in its
multifamily subsidiary to a related party for approximately $11,400,000 based
on an independent appraisal of the multifamily assets held by the subsidiary.
The gain on the sale of the equity interest was approximately $1.3 million.

10. LEASES

The Company leases office and warehouse space, vehicles and office equipment
pursuant to operating lease agreements expiring from March 1999 to September
2000. Rent expense was approximately $479,100, $510,200 and $603,600 for
1996, 1997 and 1998, respectively. Annual minimum payments to be made to a
related party incorporated in the amounts below range from $121,300 in 1999 to
$5,160 in 2001.
<TABLE>

Annual minimum operating lease payments due as of December 31, 1998 are as
follows:

<S> <C>

1999 $ 743,504
2000 360,955
2001 174,365
2002 48,882
2003 18,000
----------
$1,345,706
==========
</TABLE>

11. EMPLOYEE BENEFITS

The Company's defined contribution savings plan covers substantially all
employees of the Company. Participants are allowed to make nonforfeitable
contributions up to limits established by the Internal Revenue Code. The plan
also permits investments by employees in the Company's common shares. In 1996
and 1997 and 1998 the Company matched in cash 50% of the first 6% of
compensation contributed by each participant, totaling $114,800 and $142,500
and $215,900 respectively. On December 31, 1996, 1997 and 1998, the Company
declared a discretionary profit sharing contribution of approximately
$340,000, $509,000 and $773,700 respectively, payable in the Company's common
shares. These contributions were the maximum amount deductible by the Company
under the rules set forth in section 404(a)(3) of the Internal Revenue Code.

12. COMMITMENTS AND CONTINGENCIES

To assure the future availability of various developed lots, in the normal
course of business, the Company has contracted to purchase developed lots.
Total commitments for these purchases were approximately $83.4 million at
December 31, 1998. The purchase of these lots is subject to various
conditions imposed on both the sellers and the Company.

The Company from time to time is involved in routine litigation incidental to
its business. The Company does not believe that any liabilities resulting
from litigation to which it is a party will materially affect the Company's
financial position and results of operations.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY.

The information required by this Item is contained in the sections captioned
"Election of Directors" and "Section 16(A) Beneficial Ownership Reporting
Compliance" of the Company's Proxy Statement for the Annual Meeting of
Stockholders to be held on May 26, 1999 (the "Proxy Statement"), and is
incorporated herein by reference. Information with respect to Executive
Officers of the Company is set forth under the caption "Executive Officers of
the Registrant" in Part I, Item 1 of this report.

ITEM 11. EXECUTIVE COMPENSATION

The information required by this Item is contained in the section captioned
"Executive Compensation" of the Company's Proxy Statement and is incorporated
herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information required by this Item is contained in the section captioned
"Security Ownership of Certain Beneficial Owners and Management" of the
Company's Proxy Statement and is incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by this Item is contained in the section captioned
"Certain Transactions" of the Company's Proxy Statement and is incorporated
herein by reference.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(A) DOCUMENTS FILED WITH THIS REPORT. See Index to Consolidated Financial
Statements included in this report. See Item 14(d) for an index of the
supplementary financial statement schedule included in this report.

(B) REPORTS ON FORM 8-K. None.
<TABLE>

<S> <C>

Exhibit
Number Description of Exhibit
3.1 Amended and restated Articles of Incorporation of Crossmann Communities,
Inc.(Incorporated by reference to Exhibit 3.1 to Form S-1 Registration Statement
No. 33-68396.)
3.2 Bylaws of Crossmann Communities, Inc. (Incorporated by reference to Exhibit 3.2
to Form S-1 Registration Statement No. 33-68396.)
4.1 Specimen Share Certificate for Common Shares. (Incorporated by reference to
Exhibit 2.9 to Form S-1 Registration Statement No. 33-68396.)
10.1 1993 Outside Director Stock Option Plan. (Incorporated by reference to Exhibit
10.2 to Form S-1 Registration Statement No. 33-68396.)
10.2 1993 Employee Stock Option Plan. (Incorporated by reference to Exhibit 10.3 to
Form S-1 Registration Statement No. 33-68396.)
10.3 Partnership Agreement of Mark Anthony Partnership, dated April 17, 1991.
(Incorporated by reference to Exhibit 10.6 to Form S-1 Registration Statement
No. 33-68396.)
10.4 Non-standardized Joinder Agreement for McCready and Keene, Inc. 401(k) Basic
Regional Prototype Plan (with Revised Options) for Crossmann Communities,
Inc. (Incorporated by reference to Exhibit 10.26 to Form 10-Q dated May 10, 1995.)
10.5 McCready and Keene, Inc. 401(k) Basic Regional Prototype Plan Basic Plan
Document #03. (Incorporated by reference to Exhibit 10.27 to Form 10-Q dated
May 10, 1995.)
10.6 Trust Agreement for Crossmann Communities, Inc. 401(k) Profit Sharing Plan, by
and between Crossmann Communities, Inc. and Richard H. Crosser, John
Scheumann, and Jennifer Holihen, Trustees. (Incorporated by reference to Exhibit
10.28 to Form 10-Q dated May 10, 1995.)
10.7 Note Agreement dated as of December 19, 1995, $25,000,000 7.625% Senior
Notes due December 19, 2004, by Crossmann Communities, Inc., et al.
(Incorporated by reference to Exhibit 10.37 to Form 10-K dated March 20, 1996.)
10.8 7.625% Senior Note due December 19, 2004, issued to Combined Insurance
Company of America by Crossmann Communities, Inc. et al. (Incorporated by
reference to Exhibit 10.38 to Form 10-K dated March 20, 1996.)
10.9 7.625% Senior Note due December 19, 2004, issued to The Minnesota Mutual
Life Insurance Company by Crossmann Communities, Inc. et al. (Incorporated
by reference to Exhibit 10.39 to Form 10-K dated March 20, 1996.)
10.10 Amended and Restated Credit Agreement, dated December 22, 1995, by and
between Crossmann Communities, Inc. and Bank One, Indianapolis, N.A.
(Incorporated by reference to Exhibit 10.40 to Form 10-K dated March 20, 1996.)
10.11 Employee Stock Option Agreement, dated March 13, 1996 by and between
Crossmann Communities, Inc. and Jennifer A. Holihen. (Incorporated by
reference to Exhibit 10.47 to Form 10-K dated March 24, 1998.)
10.12 Employee Stock Option Agreement, dated February 18, 1997 by and between
(Crossmann Communities, Inc. and Jennifer A. Holihen. (Incorporated by
reference to Exhibit 10.48 to Form 10-K dated March 24, 1998.)
10.13 Asset Purchase Agreement, dated September 30, 1997 by and among Crossmann
Communities, Inc., Crossmann Communities of Tennessee, LLC, Heartland
Homes Holdings, LLC, Heartland Homes, Inc., and Heartland Homes Limited
Partnership. (Incorporated by reference to Exhibit 10.49 to Form 10-K dated
March 24, 1998.)
10.14 Amended and Restated Operating Agreement for Trinity Homes, LLC dated
October 17, 1997, by and among Crossmann Communities, Inc., Trinity Homes,
Inc., and Pyramid Mortgage Co., Inc. (Incorporated by reference to Exhibit 10.50
to Form 10-K dated March 24, 1998.)
10.15 Asset Purchase Agreement, dated May 5, 1998 by and among Crossmann
Communities, Inc., Crossmann Communities of Tennessee, LLC, Paragon
Properties, LLC, W.V. Richerson, Jr. and William R. Hyneman. (Incorporated
by reference to Exhibit 10.47 to Form 10-Q dated August 14, 1998.)
10.16 Employment contract dated May 5, 1998, by and among Crossmann Communities
of Tennessee, LLC and W.V. Richerson, Jr. (Incorporated by reference to Exhibit
10.48 to Form 10-Q dated August 14, 1998.)
10.17 Agreement and Plan of Merger, dated May 29, 1998 by and among Crossmann
Communities, Inc., Crossmann Communities of North Carolina, Inc., Pinehurst
Builders, Inc. Buck Creek Development, Inc. CTS Communications, Inc. Beach
Vacations, Inc. James T. Callihan, Ralph R. Teal, Jr., Jeffrey H. Skelley, and H.
Gilford Edwards. (Incorporated reference to Exhibit 10.49 to Form 10-Q dated
August 14, 1998.)
10.18 Purchase agreement dated May 29,1998, by and between Crossmann Communities
of North Carolina, Inc., True Blue Development, LLC, and James T. Callihan, Ralph
R. Teal, Jr., Jeffrey H. Skelley, Charles D. Floyd and Ralph Jones.(Incorporated by
reference to Exhibit 10.50 to Form 10-Q dated August 14, 1998.)
10.19 Agreement and Plan of Merger, dated May 29, 1998, by and among Crossmann
Communities, Inc., Crossmann Communities of North Carolina, Inc., River Oaks
Golf Development Corporation and James T. Callihan, Ralph R. Teal, Jr., Jeffrey
H. Skelley, Charles D. Floyd and Ralph C. Jones. (Incorporated by reference to
Exhibit 10.51 to Form 10-Q dated August 14, 1998.)
10.20 Employment contract dated May 29, 1998, by and among Crossmann
Communities of North Carolina, Inc., Crossmann Communities, Inc. and H.
Gilford Edwards. (Incorporated by reference to Exhibit 10.52 to Form 10-Q
dated August 14, 1998.)
10.21 Employment contract dated May 29, 1998, by and among Crossmann
Communities of North Carolina, Inc., Crossmann Communities, Inc. and James
T. Callihan. (Incorporated by reference to Exhibit 10.53 to Form 10-Q dated
August 14, 1998.)
10.22 Employment contract dated May 29, 1998, by and among Crossmann
Communities of North Carolina, Inc., Crossmann Communities, Inc. and Ralph
R. Teal, Jr. (Incorporated by reference to Exhibit 10.54 to Form 10-Q dated
August 14, 1998.)
10.23 Employment contract dated May 29, 1998, by and among Crossmann
Communities of North Carolina, Inc., Crossmann Communities, Inc. and Jeffrey
H. Skelley. (Incorporated by reference to Exhibit 10.55 to Form 10-Q dated
August 14, 1998.)
10.24 Employee Stock Option Agreement, dated March 5, 1998 by and between
Crossmann Communities, Inc. and Jennifer A. Holihen.
10.25 Director Stock Option Agreement, dated March 5, 1998 by and between
Crossmann Communities, Inc. and James C. Shook.
10.26 Director Stock Option Agreement, dated March 5, 1998 by and between
Crossmann Communities, Inc. and Larry S. Wechter.
19.1 Lease by and between Pinnacle Properties LLC ("Landlord") and Crossmann
Communities, Inc. ("Tenant"), 9202 North Meridian Street, Suite 300,
Indianapolis, Indiana 46260, executed April 18, 1994. (Incorporated by
references as Exhibit 19.1 to Form 10-Q filed with the Securities and Exchange
Commission August 12, 1994.)
21.1 Amended subsidiaries of the registrant.
23.1 Consent of Deloitte & Touche LLP.
27.1 Financial Data Schedule for the year ended December 31, 1998.
</TABLE>

SIGNATURES

Pursuant to the requirements of Section 12 or 15(d) 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.

CROSSMANN COMMUNITIES, INC.

By /s/ John B. Scheumann
John B. Scheumann
Chairman and Chief Executive Officer

Dated: March 24, 1999

<TABLE>

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and in the
capacities on the dates indicated.

SIGNATURE TITLE DATE
- ----------------------- ----------------------------------------------- --------------
/S/ JOHN B. SCHEUMANN CHAIRMAN OF THE BOARD OF DIRECTORS; MARCH 24, 1999
- -----------------------
JOHN B. SCHEUMANN CHIEF EXECUTIVE OFFICER
/S/ RICHARD H. CROSSER DIRECTOR; PRESIDENT AND CHIEF OPERATING OFFICER MARCH 24, 1999
- -----------------------
RICHARD H. CROSSER
/S/ JENNIFER A. HOLIHEN DIRECTOR; CHIEF FINANCIAL OFFICER; MARCH 24, 1999
- -----------------------
JENNIFER A. HOLIHEN TREASURER; SECRETARY
/S/ JAMES C. SHOOK DIRECTOR MARCH 24, 1999
- -----------------------
JAMES C. SHOOK
/S/ LARRY S. WECHTER DIRECTOR MARCH 24, 1999
- -----------------------
LARRY S. WECHTER
</TABLE>

EXHIBIT 10.24

CROSSMANN COMMUNITIES, INC.

EMPLOYEE STOCK OPTION AGREEMENT

THIS AGREEMENT made this eighteenth (5th) day of March, 1998, by and
between Crossmann Communities, Inc., an Indiana corporation (the "Company")
and JENNIFER A. HOLIHEN (the "Optionee"), pursuant to the terms, conditions
and limitations contained in the Employee Stock Option Plan, attached hereto
and made a part hereof and as it may be amended from time to time hereafter
(the "Plan");

WHEREAS, the Board has determined that it is in the best interest of the
Company and appropriate to the stated purposes of the Plan, that the Company
grant to the Optionee an option to purchase shares of Common Stock of the
Company pursuant to the terms and conditions of the Plan and this Agreement,

NOW, THEREFORE, the Company and the Optionee do hereby agree as follows:

1. Grant of Option. The Company hereby grants to the Optionee the
right and option to purchase, pursuant to the terms and conditions contained
herein and in the Plan, all or any part of an aggregate of 4,000 shares of
the Common Stock of the Company (the "Option").

2. Option Price. The Option price hereunder is $25.00 per share
(the "Option Price") which Option Price is equal to one hundred percent (100%)
of the fair market value of the Common Stock on the date of grant of the
Option (the "Grant Date") under this Agreement, as determined under the terms
of the Plan.

3. Exercise of Option. The Option shall be exercisable as of March
5, 1998, and shall continue to be exercisable subject to the provisions of
Section 4, 6 and 7, until the tenth anniversary of the Grant Date (the
"Expiration Date").

(a) Method of Exercise. The Option shall be exercised by
written notice, which shall:

(i) state the election to exercise the Option, the number
of shares in respect of which it is being exercised, the person(s) in whose
name(s) the stock certificate(s) for such shares is (are) to be registered,
including pertinent address(es) and Social Security Number(s);

(ii) contain such representations and agreements, if any,
as may be required by the Company's counsel relative to the holder's
investment intent regarding such shares;

(iii) be signed by the Optionee; and

(iv) be in writing and delivered in person or by certified
mail to the Chairman of the Board of the Company.

The Option may not be exercised if the issuance of the shares upon
such exercise could constitute a violation of any applicable Federal or state
securities or other law or valid regulation. As a condition to his exercise
of the Option, the Company may require the person exercising the Option to
make any representation or warranty to the Company as may be required by any
applicable law or regulation.

(b) Payment Upon Exercise of Option. Payment of the full
Option Price for shares upon which the Option is exercised shall accompany the
written notice of exercise described above. The Company shall cause to be
issued and delivered to the Optionee the certificate(s) representing such
shares as soon as practicable following the receipt of the notice and payment
described above.

(c) Limitation on Exercise of Option. Notwithstanding any
other provision of this Agreement to the contrary, the aggregate fair market
value (determined as of the Grant Date) of the Common Stock of the Company
with respect to which the Option is exercisable for the first time during any
calendar year, under all such incentive stock option plans (as defined in Code
Section 422A) of the Company and any parent or subsidiary corporations shall
not exceed One Hundred Thousand Dollars ($100,000.00).

(d) No Obligation to Exercise Option. This grant of options
shall impose no obligation upon the Optionee to exercise any such Options.

4. Nontransferability of Option. The Option shall not be
transferable or assignable by the Optionee. The Option shall be exercisable,
during the Optionee's lifetime, only by him or her. The Option shall not be
pledged or hypothecated in any way, and shall not be subject to execution,
attachment or similar process. Any attempted transfer, assignment, pledge,
hypothecation or other disposition of the Option contrary to the provisions
hereof, and the levy of any process upon the Option, shall be null, void and
without effect.

5. Termination of Employment. In the event Optionee shall cease
to be employed by the Company, all options granted to the Optionee under this
Agreement shall terminate immediately as to the unexercised portion thereof.
In the event of the death of an Optionee while in employ of the Company, the
Optionee's personal representative shall have the right subject to Section 3
of this Agreement and the Plan, to exercise any and all Options which could
have been exercised on the date of death, at any time within twelve months
from the date of death.

6. Non-Competitive, Non-Solicitation and Non-Disclosure. In
consideration for the grant of the Option by the Company, the Optionee
consents to the following restrictions on competition, solicitation, and
disclosure of certain information (the "Covenants"). The Company and the
Optionee agree that participation in the Plan bears a significant relationship
to the Optionee's employment situation, and that the Covenants are ancillary
to the stated purpose of the Plan, namely, providing key employees of the
Company or of any subsidiary corporation of the Company with an opportunity to
acquire or increase a proprietary interest in the Company, thereby (1)
creating a stronger incentive to expend maximum effort for the growth and
success of the Company and its subsidiaries and (2) encouraging such
individuals to remain in the employ or service of the Company or one or more
of its subsidiaries.

The Optionee acknowledges that the Covenants, including the duration,
scope, and territory thereof, are, under the circumstances, reasonable and
necessary to safeguard the interests of the Company. In the event that these
restrictions are found to be overly broad or unreasonable, the Optionee agrees
that such restrictions shall be enforceable on such modified terms as may be
deemed reasonable and enforceable by a court having competent jurisdiction.
a. Non-Competition During the term of the Optionee's employment
with the Company, and for a period of two (2) years following the termination
of the Optionee's employment (irrespective of the timing, manner, cause, or
other circumstances of such termination), the Optionee shall not, directly or
indirectly, as an individual or as a director, officer, employee, partner,
shareholder, consultant, manager, agent, or in any other capacity become
associated with any individual, corporation, partnership or business that is
engaged, directly or indirectly, in any business carried on or engaged in by
the Company. The restrictions of this subparagraph (a) shall apply to the
lesser of (1) each and all of the markets in which the Company is now
operating or shall hereafter operate or (2) the maximum area declared by a
court of competent jurisdiction to be reasonable and enforceable.

b. Non-Solicitation. During the term of his or her employment with
the Company and the two (2) year period immediately following the cessation of
his or her employment with the Company, the Optionee shall not, directly or
indirectly, as an individual or on behalf of another company or in any other
capacity:

i. call upon, solicit, contact or service any customer, client,
or potential client of the Company;

ii. call upon, solicit, contact or service any individual,
corporation, partnership or any company or business of which the Optionee
became aware through the Company; or

iii. solicit for employment, endeavor to entice away from the
Company, recruit, hire or otherwise interfere with the Company's relationship
with any person who is employed by or otherwise engaged to perform services
for the Company.

c. Non-Disclosure. The Optionee recognizes that by reason of his
or her employment with the Company, he or she may acquire Confidential
Information concerning the Company's operation, the use or disclosure of which
could cause the Company and its affiliates or subsidiaries immeasurable and
substantial loss and damages. Accordingly, the Optionee covenants and agrees
with the Company that, except as necessary to perform his or her employment
obligations to the Company, or with the prior written consent of the Company,
he or she or she will not at any time directly or indirectly (i) disclose any
Confidential Information that he or she may learn of by association with the
Company, or (ii) use any Confidential Information other than in the
performance of his or her employment for the Company. The term "Confidential
Information" includes information not in the public record and not previously
disclosed to the public or to the trade by the Company's management or Board
with respect to the products, facilities and methods, trade secrets and other
intellectual property, systems, procedures, manuals, reports, price lists,
customer lists, financial information, business plans, prospects or
opportunities of the Company or any of its subsidiaries or affiliates. The
Optionee's obligations set forth in this Section 6(c) and the Company's
remedies, whether legal or equitable, shall extend indefinitely.

7. Remedies for Breach of Covenants. The Optionee recognizes that
breach of any of the Covenants contained in Section 6 herein may cause
irreparable injury to the Company, inadequately compensable in monetary
damages. Accordingly, in addition to any other legal or equitable remedies
that may be available to the Company, the Optionee agrees that the Company
will be entitled to seek and obtain injunctive relief against the breach or
threatened breach of any of the Optionee's obligations under the Covenants.
The Company shall be entitled to recover from the Optionee its reasonable
attorneys' fees and costs of any action to enforce the Covenants.

8. Effect of Amendment, Suspension or Termination of Existing
Options. No amendment, suspension or termination of the Plan shall, without
the Optionee's consent, alter or impair any of the rights or obligations of
the Company or the Optionee with respect to the Option granted under the terms
of this Agreement.

9. Restrictions on Issuing Shares. The Company's shares shall not
be issued pursuant to the exercise of the Option unless the transferability of
the shares so issued and/or the actual issuance of the shares comply with all
relevant provisions of law, including but not limited to, the (i) limitations,
if any, imposed by the Sate of Indiana, (ii) restrictions, if any, imposed by
the Securities Act of 1933, as amended, the Securities Exchange Act of 1934,
as amended, and the rules and regulations promulgated by the United States
Securities and Exchange Commission thereunder, and (iii) requirements of any
stock exchange upon which the shares may then be listed. The Board of
Directors, shall, in its sole discretion, determine if such restrictions or
such issuance of shares so complies with all relevant provisions of law.

(a) Withholding of Taxes. Shares shall not be issued upon
exercise of the Option unless and until withholding tax, if any, or other
withholding liabilities, if any, imposed by any governmental entity have, in
the opinion of the Board of Directors, been satisfied or provision for their
satisfaction has been made.

(b) Other Restrictions. The Board of Directors may at the
time shares are actually issued pursuant to the exercise of the Option, place
such further restrictions on the transferability of any shares of Common Stock
to be issued to the Optionee upon the exercise of the Option as the Board, in
its sole discretion, determines to be reasonable, appropriate or necessary.

(c) No Rights Vested as a Shareholder. The Optionee and/or
his successor in interest shall not have any of the rights of a shareholder
of the Company by reason of the grant of the Option until such Option is
exercised and optioned shares are issued pursuant to such Option.

10. Adjustments. In the event of any Company recapitalization,
dissolution, liquidation or reorganization, the adjustments described under
the terms of the Plan shall be applied.

11. Acknowledgment. The Optionee acknowledges receipt of a copy of
the Plan, a copy of which is attached hereto, and represents that Optionee is
familiar with the terms and provisions thereof, and hereby accepts this Option
subject to all the terms and provisions thereof. Optionee hereby agrees to
accept as binding, conclusive and final all decisions or interpretations of
the Board upon any questions arising under the Plan.

IN WITNESS WHEREOF, the Company, by its authorized representative, and
the Optionee have entered into this Agreement on the date first written above.

CROSSMANN COMMUNITIES, INC.:

By: /s/ Richard H. Crosser
Richard H. Crosser

OPTIONEE:
By: /s/ Jennifer A. Holihen
Jennifer A. Holihen

Witness: /s/ Judith Swihart
Signed

EXHIBIT 10.25

CROSSMANN COMMUNITIES, INC.

OUTSIDE DIRECTOR STOCK OPTION AGREEMENT

THIS AGREEMENT made this 5th day of March, 1998, by and between Crossmann
Communities, Inc., an Indiana corporation (the "Company") and James C. Shook
(the "Optionee"), pursuant to the terms, conditions and limitations contained
in the Outside Director Stock Option Plan, as it may be amended from time to
time hereafter (the "Plan") the terms of which are incorporated into and made
a part of this Agreement;

NOW, THEREFORE, the Company and the Optionee do hereby agree as follows:

1. Grant of Option. The Company hereby grants to the Optionee the
right and option to purchase, pursuant to the terms and conditions contained
herein and in the Plan, all or any part of an aggregate of one thousand
(1,000) shares of the Common Stock of the Company (the "Option").

2. Option Price. The Option price hereunder is $25.00/per share
(the "Option Price") which Option Price is equal to one hundred percent (100%)
of the fair market value of the Common Stock on the Grant Date under this
Agreement, as determined under the terms of the Plan.

3. Exercise of Option. The Option shall be exercisable as of the
Grant Date and shall continue to be exercisable subject to the provisions of
Section 4, 6 and 7, until the tenth anniversary of the Grant Date (the
"Expiration Date").

(a) Method of Exercise. The Option shall be exercised by
written notice, which shall:
(i) state the election to exercise the Option, the
number of shares in respect of which it is being exercised, the person(s) in
whose name(s) the stock certificate(s) for such shares is (are) to be
registered, including pertinent address(es) and Social Security Number(s);
(ii) contain such representations and agreements, if
any, as may be required by the Company's counsel relative to the holder's
investment intent regarding such shares;

(iii) be signed by the Optionee; and

(iv) be in writing and delivered in person or by
certified mail to the Chairman of the Board of the Company.

(d) No Obligation to Exercise Option. This grant of options
shall impose no obligation upon the Optionee to exercise any such Options.

5. Termination of Directorship. In the event Optionee shall cease
to serve as an Outside Director of the Company, all options granted to the
Optionee under this Agreement shall terminate immediately as to the
unexercised portion thereof. In the event of the death of an Optionee while
serving as an Outside Director of the Company, the Optionee's personal
representative shall have the right subject to Section 3 of this Agreement and
the Plan, to exercise any and all Options which could have been exercised on
the date of death, at any time within twelve months from the date of death.

6. Effect of Amendment, Suspension or Termination of Existing
Options. No amendment, suspension or termination of the Plan shall, without
the Optionee's consent, alter or impair any of the rights or obligations of
the Company or the Optionee with respect to the Option granted under the terms
of this Agreement.

7. Restrictions on Issuing Shares. The Company's shares shall not
be issued pursuant to the exercise of the Option unless the transferability of
the shares so issued and/or the actual issuance of the shares comply with all
relevant provisions of law, including but not limited to, the (i) limitations,
if any, imposed by the Sate of Indiana, (ii) restrictions, if any, imposed by
the Securities Act of 1933, as amended, the Securities Exchange Act of 1934,
as amended, and the rules and regulations promulgated by the United States
Securities and Exchange Commission thereunder, and (iii) requirements of any
stock exchange upon which the shares may then be listed. The Inside
Directors, shall, in its sole discretion, determine if such restrictions or
such issuance of shares so complies with all relevant provisions of law.

(a) Withholding of Taxes. Shares shall not be issued upon exercise of
the Option unless and until withholding tax, if any, or other withholding
liabilities, if any, imposed by any governmental entity have, in the opinion
of the Inside Directors, been satisfied or provision for their satisfaction
has been made.

(b) Other Restrictions. The Inside Directors may at the time shares are
actually issued pursuant to the exercise of the Option, place such further
restrictions on the transferability of any shares of Common Stock to be issued
to the Optionee upon the exercise of the Option as the Board, in its sole
discretion, determines to be reasonable, appropriate or necessary.

(c) No Rights Vested as a Shareholder. The Optionee and/or his
successor in interest shall not have any of the rights of a shareholder of the
Company by reason of the grant of the Option until such Option is exercised
and optioned shares are issued pursuant to such Option.

8. Adjustments. In the event of any Company recapitalization,
dissolution, liquidation or reorganization, the adjustments described under
the terms of the Plan shall be applied.

9. Acknowledgment. The Optionee acknowledges receipt of a copy of
the Plan, a copy of which is attached hereto, and represents that Optionee is
familiar with the terms and provisions thereof, and hereby accepts this Option
subject to all the terms and provisions thereof. Optionee hereby agrees to
accept as binding, conclusive and final all decisions or interpretations of
the Board upon any questions arising under the Plan.

IN WITNESS WHEREOF, the Company, by its authorized representative, and
the Optionee have entered into this Agreement on the date first written above.

CROSSMANN COMMUNITIES, INC.:

By:/s/ Richard H. Crosser
Richard H. Crosser, President

OPTIONEE:
By: /s/ James C. Shook
James C. Shook

Witness: /s/ Judith Swihart

EXHIBIT 10.26

CROSSMANN COMMUNITIES, INC.

OUTSIDE DIRECTOR STOCK OPTION AGREEMENT

THIS AGREEMENT made this 5th day of March, 1998, by and between Crossmann
Communities, Inc., an Indiana corporation (the "Company") and Larry S. Wechter
(the "Optionee"), pursuant to the terms, conditions and limitations contained
in the Outside Director Stock Option Plan, as it may be amended from time to
time hereafter (the "Plan") the terms of which are incorporated into and made
a part of this Agreement;

NOW, THEREFORE, the Company and the Optionee do hereby agree as follows:

1. Grant of Option. The Company hereby grants to the Optionee the
right and option to purchase, pursuant to the terms and conditions contained
herein and in the Plan, all or any part of an aggregate of one thousand
(1,000) shares of the Common Stock of the Company (the "Option").

(iii) be signed by the Optionee; and

(iv) be in writing and delivered in person or by
certified mail to the Chairman of the Board of the Company.

(d) No Obligation to Exercise Option. This grant of options
shall impose no obligation upon the Optionee to exercise any such Options.

(a) Withholding of Taxes. Shares shall not be issued upon exercise of
the Option unless and until withholding tax, if any, or other withholding
liabilities, if any, imposed by any governmental entity have, in the opinion
of the Inside Directors, been satisfied or provision for their satisfaction
has been made.

(c) No Rights Vested as a Shareholder. The Optionee and/or his
successor in interest shall not have any of the rights of a shareholder of the
Company by reason of the grant of the Option until such Option is exercised
and optioned shares are issued pursuant to such Option.

8. Adjustments. In the event of any Company recapitalization,
dissolution, liquidation or reorganization, the adjustments described under
the terms of the Plan shall be applied.
9. Acknowledgment. The Optionee acknowledges receipt of a copy of
the Plan, a copy of which is attached hereto, and represents that Optionee is
familiar with the terms and provisions thereof, and hereby accepts this Option
subject to all the terms and provisions thereof. Optionee hereby agrees to
accept as binding, conclusive and final all decisions or interpretations of
the Board upon any questions arising under the Plan.

IN WITNESS WHEREOF, the Company, by its authorized representative, and
the Optionee have entered into this Agreement on the date first written above.

CROSSMANN COMMUNITIES, INC.:
By:/s/ Richard H. Crosser
Richard H. Crosser, President

OPTIONEE:
By: /s/ Larry S. Wechter
Larry S. Wechter

Witness: /s/ Judith Swihart

EXHIBIT 21.1

Amended Subsidiaries of the Registrant

1. Merit Realty, Inc.
2. Crossmann Communities of Ohio, Inc.
3. Deluxe Homes of Lafayette, Inc.
4. Deluxe Homes, Inc.
5. Trimark Homes, Inc.
6. Trimark Development, Inc.
7. Crossmann Management, Inc.
8. Deluxe Aviation, Inc.
9. Crossmann Investment, Inc.
10. Crossmann Mortgage Corp.
11. Cutter Homes, LTD.
12. Crossmann Communities of Tennessee, LLC
13. Crossmann Communities of North Carolina, Inc.
14. Beach Vacations, LLC
15. Pinehusrt Builders, LLC

Exhibit 23.1

INDEPENDENT AUDITORS' CONSENT

We consent to the incorporation by reference in Registration Statement Nos.
33-94568, 333-2626, 333-4980 on Forms S-8 and Registration Statement Nos.
333-35509 and 333-63059 on Forms S-3 each of Crossmann Communities, Inc. of
our report dated March 8, 1999, appearing in the Annual Report on Form 10-K of
Crossmann Communities, Inc. for the year ended December 31, 1998.

DELOITTE & TOUCHE LLP
Indianapolis, Indiana
March 25, 1999

<ARTICLE> 5
<LEGEND>
Crossmann Communities, Inc.
Exhibit 27.1
Article 5 Financial Data Schedule for 1998 10-K
</LEGEND>

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 18011456
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 214197844
<CURRENT-ASSETS> 0
<PP&E> 7297691
<DEPRECIATION> 3333322
<TOTAL-ASSETS> 283793815
<CURRENT-LIABILITIES> 0
<BONDS> 101222955
0
0
<COMMON> 65154710
<OTHER-SE> 85125978
<TOTAL-LIABILITY-AND-EQUITY> 283793815
<SALES> 421925742
<TOTAL-REVENUES> 421925742
<CGS> 332119887
<TOTAL-COSTS> 332119887
<OTHER-EXPENSES> 0
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<INTEREST-EXPENSE> 1319920
<INCOME-PRETAX> 49606014
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<NET-INCOME> 29871736
<EPS-PRIMARY> 2.63
<EPS-DILUTED> 2.57

</TABLE>