UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON,  DC  20549


                                    FORM 10-K


 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
                                      1934

                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998

                        COMMISSION FILE NUMBER 000-23677


                              NEWMARK  HOMES  CORP.
             (Exact Name of Registrant as Specified in Its Charter)


                  Nevada                               76-0460831
     (State or Other Jurisdiction of       (IRS Employer Tax Identification No.)
     Incorporation  or  Organization)


         1200 Soldiers Field Drive               Sugar  Land,  TX  77479
  (Address of Principal Executive Offices)             (Zip  Code)

                                  281-243-0100
              (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:


                               Title of Each Class
                               -------------------

                          Common Stock, par value $.01


Indicate  by  check  mark  whether  the  registrant:  (1)  has filed all reports
required  to  be  filed by Section 13 or 15(d) of the Securities Exchange Act of
1934  during  the  preceding  12  months  (or  for  such shorter period that the
registrant  was required to file such reports), and (2) has been subject to such
filing  requirements  for  the  past  90  days.  Yes
                                                 ---

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  registrant's  knowledge, in definitive proxy or information statements
incorporated  by  reference  in  Part III of this Form 10-K or any amendments to
this  Form  10-K.  [   ]

     As of March 1, 1999, Registrant had outstanding 11,500,000 shares of common
stock.  Of  the  total shares outstanding, 2,262,000 shares of common stock were
held  by  non-affiliates  of the Registrant, having an aggregate market value on
that  date  of  $15,834,000  (based  on  the  closing  sales  price  on NASDAQ).


Documents  incorporated  by  reference:

Related
Section                    Documents
--------------------------------------------------------------------------------
  III         Definitive Proxy Statement to be filed pursuant to Regularion  14A
              on  or  before  April  30,  1999.

<PAGE>
                                     PART I

ITEM  1.  BUSINESS

GENERAL

     Newmark  Homes  Corp.  (the  "Company"),  a  Nevada  corporation  formed in
December  1994,  is  a  holding  company  and  the  parent company of a group of
homebuilding  companies  which consists of Newmark Home Corporation ("Newmark"),
Westbrooke  Communities,  Inc.  and  affiliated  entities  (collectively,
"Westbrooke")  and  The  Adler  Companies,  Inc.  The  Company  also  owns a lot
development  company,  Pacific  United  Development  Corp. Through its operating
subsidiaries, the Company designs, builds and sells single-family detached homes
in seven major  markets  within  the  Southwest  and  Southeast  United  States,
including Houston, Austin, Dallas/Fort  Worth,  Ft.  Lauderdale/Palm Beach/Miami
("South  Florida"),  Nashville  and  most  recently,  Charlotte, and Greensboro/
Winston-Salem.  Each  of  these  markets  has  experienced  population  and  job
growth above the national average over  the  last  several  years.  The  Company
operated in 66 subdivisions in these metropolitan areas, and had 829 homes under
construction  at  December 31, 1998.  In  addition, as of December 31, 1998, the
Company owned or had  under  option  contract 2,848 lots  available  for  future
growth.  The  Company  has  also  been  actively  engaged  in  residential  land
acquisition  and  development,  which  enables  it  to  provide  lots  for  its
homebuilding  operations.

     In Texas, Tennessee and North Carolina,  Newmark offers high-quality homes,
designed principally for the "move-up" and relocation market segments, under the
Newmark(TM) tradename.  Typically, Newmark homes range in size from 1,700 square
feet to over 4,500  square feet and range in price from  $120,000  to  $350,000,
with an average  sales price of $245,000 for homes closed  during 1998.  Newmark
also offers custom homes under the Fedrick,  Harris Estate Homes name that range
in size from 3,500 square feet to over 7,000 square feet and range in price from
$250,000 to over  $800,000,  with an average  sales price of $405,000  for homes
closed  during 1998.  Revenues  generated  from sales of Fedrick,  Harris Estate
Homes were  17.0% and 14.0% of total  homebuilding  revenues  for 1997 and 1998,
respectively.

     In the South Florida market,  Westbrooke and The Adler Companies, Inc. also
offers high-quality homes designed primarily to appeal to "move-up"  homebuyers,
with homes  ranging in size from  approximately  1,300 square feet to over 3,700
square feet and  ranging in price from  $114,000  to  $274,000,  with an average
sales price of $178,000 for homes closed in 1998.

     The  Company's  homebuilding  operation is positioned to compete with other
high-volume  builders  by  offering  a  broader  selection  of  homes  with more
amenities  and  greater  design  flexibility  than  typically  offered by volume
builders.  Homebuyers are given the ability to select various design features in
accordance  with their personal preferences. Through a volume building approach,
the  Company's  custom  homes  generally  offer more value than those offered by
local,  lower-volume  custom  builders, primarily due to the Company's effective
purchasing, construction and marketing programs. While most design modifications
are  significant  to  the  homebuyer,  they  typically  involve relatively minor
adjustments  that  allow  the  Company to maintain construction efficiencies and
result  in  greater profitability due to increased sales prices and margins. The
Company  believes  that  its  ability  to  meet the design tastes of prospective
homebuyers  at  competitive  prices  distinguishes the Company  from many of its
competitors.

     Newmark  was  founded in Houston, Texas in 1983 and was acquired by Pacific
Realty  Group, Inc. on October 1, 1993.  When the Company was formed in December
1994,  Pacific  Realty Group transferred its interest in Newmark to the Company.
Westbrooke was founded in Miami, Florida in 1976 and was acquired by the Company
on  January  1,  1998.  The  operations  of The Adler Companies, Inc., which was
formed  in  Miami, Florida in 1990 and acquired by the Company on March 1, 1995,
were  merged with the Westbrooke operation in 1998.  Newmark and Westbrooke have
achieved  consistent  profitability throughout their respective histories due to
both  innovative  and  disciplined  approaches  to  home  construction,  land
acquisition and development as well as lot purchases.  The Company believes that
the  tenure and experience of its officers and key employees and its disciplined
approach  to business have been key factors to the Company's success.  There has
been  virtually no turnover among officers and key employees since the inception
of  both  Newmark  and  Westbrooke.

                                        2
<PAGE>
     The  Company's  corporate  offices are located in  Houston.  The  Company's
divisions  in  Houston,  Austin,  Dallas/Ft.  Worth,  Nashville,  Charlotte  and
Greensboro/Winston-Salem  are managed from the Houston  location.  The Company's
South  Florida   operations  are  primarily  the  responsibility  of  Westbrooke
management with support from, and oversight of, the Company's  corporate  office
as needed.

STRATEGY

     The  Company's  objective is to provide its customers with homes that offer
both  quality  and  value,  while  seeking  to  maximize  its return on invested
capital.  Management  believes  that a balanced and disciplined approach to home
construction,  land  purchases  and  marketing  is  essential  to  the Company's
anticipated  growth.  To  achieve  this  objective,  the Company has developed a
strategy  which  focuses  on  the  following  elements:

     GROWTH  MARKETS.  The  Company's  primary  markets  have  each  experienced
population  and job  growth  in  excess of the  national  average  over the past
several  years.  The  Company  believes that  significant  growth  opportunities
remain in most these markets. The Company also continues to evaluate new markets
that have significant "move-up" and relocation segments  that would  satisfy the
Company's profitability, investment return and other criteria. While the Company
anticipates entering new markets primarily through start-up operations,  it will
also consider the acquisition of homebuilding  companies that have complementary
management  styles as  exemplified  by the Company's  acquisition of Westbrooke.
Entry into new markets is preceded  by  extensive  due  diligence  and  research
conducted by management,  in conjunction with Pacific  Research Group,  Inc., an
affiliate   corporation   wholly-owned  by  Pacific  Realty  Group,   Inc.,  and
unaffiliated third-party resources.

     SOPHISTICATED  MARKETING.  The  Company  employs  sophisticated  and
comprehensive  marketing  programs  to attract potential homebuyers. Elements of
this  marketing program include extensive telemarketing, an Internet web site, a
virtual  reality  CD-ROM  home  tour,  and  an interactive software program. The
Company  retains  a  national  marketing  consultant  to  develop  its  overall
advertising  strategy.  The  Company  executes  its  overall  marketing strategy
through  advertising  campaigns  tailored  to  local  markets.  Local  marketing
campaigns  include  coordination  of  realtor  promotions,  subdivision  grand
openings,  showcase  presentations  for custom homes, the Company's newsletters,
realtors'  newsletters,  product  bulletins,  billboards,  local  newspaper
advertisements  and  other  direct  sales  activities.  The  Company's web site,
featuring  a  virtual  reality  home  tour,  allows  a  prospective homebuyer to
download  the  home  tour  software to a personal computer and "tour" completely
furnished  homes,  view  the Company's different floor plans, locate the various
subdivisions  available  in  each  market, and learn about neighborhood schools,
subdivision  amenities  and  shopping  as  well  as  the  Company's construction
techniques.  The  South  Florida operation also utilizes an interactive software
program  known  as "Design Wizard" which enables a homebuyer to customize a home
which  meets  their  needs  and lifestyles.  While sitting at a computer monitor
located  in  a sales center, the buyer responds to a series of general lifestyle
and  financial  questions.  Based  on  the  buyer's  responses,  the interactive
software  program  then shows the buyer variations of a basic floor plan as well
as  the  cost  of  the  proposed  changes.  Design Wizard enhances the Company's
ability  to  offer customized homes at prices similar to standard floor plans of
competing  builders.

     MARKET  FOCUS.  In  markets with a significant number of relocation buyers,
such  as  Texas, Tennessee and North Carolina, the Company aggressively competes
with  resales  of  existing  homes,  primarily  by making available to potential
buyers  completed  or  nearly  completed homes. In these relocation markets, the
Company  believes that maintaining an inventory of completed or nearly completed
homes  provides  distinct  competitive advantages by (i) allowing home buyers to
physically inspect their future home, in many instances easing their decision to
buy,  (ii)  providing homes which can be moved into in or close to the same time
frame  as  purchases  of previously owned homes and (iii) allowing homebuyers to
avoid the significant time and monetary costs typically associated with updating
previously  owned  homes. Since 1993, 78% of the Company's homes were sold prior
to  completion  of the home.  In the South Florida market, the Company primarily
focuses  on "move-up" homebuyers, and to a lesser extent, first-time homebuyers.
In  this  market,  substantially  all  homes  are  sold  prior  to  commencing
construction.

     MANAGEMENT  TRAINING.  The  Company  aggressively  recruits  and  hires new
management  trainees,  typically  with  some  construction experience, following
graduation  from  college  and  trains  these new hires for increasing levels of
responsibility  within  the  Company. Through continuous "on the job" experience
and  classroom  training,  these  associates  become  knowledgeable, experienced
candidates for middle management positions. The Company believes that one of its
strengths  is  its  depth  of  middle  management.  This  depth  facilitates the
Company's  growth  strategy  as  more  experienced  management  relocates to new
markets  to conduct start-up operations while top performing middle managers are
promoted  to  increasing  levels  of  responsibility for continuing expansion of
existing  markets.  The  Company  also  actively  seeks  and  employs  qualified
candidates  for  sales  and  marketing positions and provides extensive training
designed  to  improve marketing skills and educate sales associates with respect
to  the uniqueness of the Company's homes which allows them to emphasize product
differentiation  in  the  sales  process.

                                        3
<PAGE>
     DECENTRALIZED  OPERATIONS WITH EXPERIENCED MANAGEMENT. The Company believes
that  the  in-depth  knowledge  of  its  experienced management in local markets
enables the Company to better serve its customers. The Company is organized into
operating  divisions,  each relating to a local market area. Local management of
each  operating  division  is  responsible  for  preliminary  site selection and
negotiation  of  option  contracts  in  accordance  with  Company  policies.
Additionally,  each  operating division plans its homebuilding schedule, selects
the  building  plans  and architectural scheme for its subdivisions, obtains all
building  approvals,  and  develops  a  marketing  plan  for its homes. With the
exception of the South Florida operation, the Company's corporate office retains
responsibility  for  purchasing,  accounting/consolidation,  and  certain  other
management  and  administrative matters including approval of all lot contracts,
final  product  selection,  securing  all financing and marketing plan approval.
With  respect to the South Florida operation, management of Westbrooke makes the
majority  of  the decisions related to the responsibilities described above with
the  support  from,  and oversight of, the Company's corporate office as needed.

     CENTRALIZED  PURCHASING.  The  Company  utilizes  centralized purchasing to
leverage  its  purchasing  power into volume discounts, a practice which reduces
costs, ensures timely deliveries and reduces the risk of supply shortages due to
allocations  of  materials.  The  Company  has  negotiated  favorable  price
arrangements  with  high quality national and regional suppliers such as General
Electric, Rheem Manufacturing, Dupont Corian, Owens Corning, Dow Chemical, Royal
Baths,  Kwikset  and  Sherwin-Williams  for  appliances,  heating  and  air
conditioning,  counter tops, bathroom fixtures, roofing and insulation products,
floor  coverings, and other housing components. Major materials, such as lumber,
sheetrock,  concrete  and  brick,  are also centrally purchased to obtain volume
discounts.  There  are  no minimum purchase requirements for these arrangements.

     COST  MANAGEMENT.  The  Company  controls  construction  costs  through the
efficient  design  of  its  homes  and  by  obtaining  favorable  pricing, where
possible, from subcontractors based on the high volume of work performed for the
Company.  The  Company  also controls its warranty costs through quality control
that  ensures  that the home has been totally finished prior to the buyer moving
in,  thus  enhancing customer satisfaction. The Company controls its advertising
expenses  through  sophisticated  budgeting of expenses with extensive review of
all  expenditures.  Some  of  the Company's major suppliers and contractors also
contribute  advertising  dollars  for special promotions of houses and products.
These campaigns feature the key suppliers' products and enhance the image of the
Company's  homes  through  brand  recognition. In addition, the Company seeks to
control  its  corporate overhead costs through efficiencies achieved through its
highly  automated  and  integrated  systems.

     STRATEGY  TO  LIMIT REAL ESTATE EXPOSURE. The Company seeks to maximize its
return  on  invested capital and limit its exposure to changes in land valuation
by  obtaining  options to purchase lots whenever feasible. The Company will also
directly  acquire, where appropriate, quality residential properties that are in
high  demand  for use in its homebuilding operations and for sale to third-party
builders.  The Company's executive management establishes targeted levels of lot
options  and  land  for  development based on its strategic plan for the overall
growth  of  the Company. The Company targets properties for acquisition that are
both  suitable  for  its  homebuilding  product  and  in  locations  which  are
anticipated  to  maintain  the homebuyers' property values. The Company believes
this strategy improves inventory turnover and enables the Company to develop and
dispose  of  the developed lots typically within two to three years. The Company
does  not  acquire land that is not suitable for lot development and residential
construction and does not speculate on land values by acquiring and holding land
for  resale  or  for  future  development.

     The  Company  seeks to limit its exposure to real estate inventory risks by
closely  monitoring  (i)  its  unsold  inventory  of  new homes and the stage of
completion  of homes under construction on an ongoing basis, (ii)  the volume of
starts  of  new homes and (iii) local job market and demographic trends, housing
preferences  and  related  economic developments, such as new job opportunities,
local  growth  initiatives  and  trends  in  work  force  median  income levels.

                                        4
<PAGE>
MARKETS

     The  Company  conducts homebuilding activities in seven markets within four
states,  including  Houston,  Austin,  Dallas/Fort  Worth,  Ft.  Lauderdale/Palm
Beach/Miami,  Nashville,  Charlotte  and  Greensboro/Winston-Salem.  The Company
intends  to  begin building homes in the San Antonio market in the third quarter
of  1999.  The  Company's  operations  in  each of its markets differ based on a
number  of  market  specific  factors.

     The  following  table presents selected lot inventory and homebuilding data
for  the  Company's  current  markets:

<TABLE>
<CAPTION>
                                                    LOT INVENTORY           HOMEBUILDING REVENUES/
                                                                                 HOMES CLOSED
                                          ------------------------------  ----------------------------
                                                      DECEMBER 31,           YEAR ENDED DECEMBER 31,
                                          ------------------------------  ----------------------------
MARKET                        COMMENCED       1996       1997       1998      1996      1997      1998
------------------- --------  ----------  ---------  ---------  --------  --------  --------  --------
                                                                          (Dollars in thousands/units)
<S>                           <C>         <C>        <C>        <C>       <C>       <C>       <C>
Houston                            1983        339        632        632  $ 79,920  $ 85,690  $126,138
                                                                               363       361       482
Austin                             1984        208        363        697    63,891    66,405    82,970
                                                                               334       317       386
Dallas/Fort Worth                  1995        146        396        292    20,180    30,119    38,078
                                                                               103       138       159
Ft. Lauderdale/Palm
 Beach/Miami                       1976        169        368        760    16,819    30,863   144,780
                                                                               102       156       814
Nashville                          1997         --        261        276        --        --    12,116
                                                                                --        --        33

Charlotte                          1998         --         --         16        --        --        --

Greensboro/ Winston-Salem          1998         --         --         34        --        --        --

San Antonio                        1998         --         --        141        --        --        --
                                          ---------  ---------  --------  --------  --------  --------
 Total Lots/Revenue                        862 (1)  2,020 (1)  2,848 (1)  $180,810  $213,077  $404,082
                                         ==========  =========  =========  ========  ========  ========
 Total Units Closed                                                            902       972     1,874
                                                                           ========  ========  ========
<FN>
__________
(1)     Includes  656,  1,267  and  1,880  lots  under  option  contracts  as  of  December 31, 1996,
        1997 and 1998, respectively.
</TABLE>

     From  the results of the research and analysis performed by the Company and
Pacific  Research  Group,  the  Company  plans to focus its development activity
based  on  the  following  factors,  among others: regional economic conditions,
projected  job  growth,  land  availability, the local land development process,
consumer tastes, competition from other builders of new homes and secondary home
sales  activity.  The  statistical information presented below has been compiled
from  a  number  of  public  sources  by  Pacific  Research  Group.

     HOUSTON,  TEXAS.  According to American  Metro Study  Corporation,  Houston
posted record  numbers in the new home market with 22,779 starts in 1998,  21.7%
higher  than in 1997.  Although  Houston  experienced  a downturn  in the energy
industry  in  late 1998, it has enjoyed a 3.1% rate of annual employment growth,
or an  average  of 55,000 jobs per year since 1993.  Houston has diversified its
employment  base  between  energy-dependent and non-energy-dependent industries,
which  has  promoted  more  stable  job  growth  and a strong relocation market.
Houston's  population  has  grown by an average of 90,000 persons per year since
1990.  The  area's  affordable  home  market,  low cost of living (98% of the US
average)  and  strong  population  growth (1.8 million people from 1970 to 1995)
continue to  favorably  impact the demand for single-family homes.  Places Rated
Almanac,  published in early 1998,  ranked Houston third in near-term job growth
just  behind  Atlanta and Dallas.  The mean household income for Houston rose to
an  estimated $75,317 in 1998 from $57,192 in 1990, reflective of the strong job
market  in  the  metro  area.

                                        5
<PAGE>
     Historically,  the  Company has maintained a moderate level of market share
in Houston, but believes that additional expansion in this market is appropriate
based on current and anticipated market conditions. The Company has strong brand
name  recognition in Houston and has positioned itself to take advantage of this
anticipated market expansion. The Company builds homes in ten of the top fifteen
performing  communities  in  Houston.

     AUSTIN, TEXAS.  Like Houston, Austin's new home market had a record setting
year  as  well in 1998.  According to American Metro, Austin started 9,670 homes
and  closed  approximately  8,738  in 1998.  In 1998, homebuilders started 33.1%
more  homes  and  closed  22.2% more than in 1997.  Builders were reporting that
they  could  not  finish  homes  fast  enough  to  keep  up with demand due to a
nationwide  labor  shortage.  From  1992  to  1998, Austin created an average of
27,700  jobs  per  year,  an  annual  growth  rate  of  5.6%. The metro area has
experienced  stellar  population  growth in the past five years adding an annual
average  of 32,800 people in a city of 1 million total people.  According to the
RFA  Precis Metro Edition for November 1998, Austin's economy slowed slightly in
1997  and  1998,  with  an  average  of 24,900 new jobs created, still posting a
strong  4.5%  employment  growth.

     The  Company  plans  to maintain current levels of activity in this market.
The  Company  believes  that  this is an appropriate level of activity given the
size  of  the  Austin  market.

     DALLAS/FORT  WORTH, TEXAS. The combined Dallas/Fort Worth metropolitan area
exceeded  4.7  million  in  total population in 1998. With an employment base of
more  than  2.5 million jobs, the metro area has added approximately 97,000 jobs
annually from 1994 to 1998 (a 4.1% annual growth rate). Strong population growth
has  accompanied  these gains in employment.  RFA Precis Metro Edition, November
1998,  reports  estimates  of  2.5%  growth  in  1997  and  2.3% growth in 1998.
According to American Metro Study, 1998 was a banner year for the Dallas and Ft.
Worth  housing markets.  Dallas started 20,102 homes, a 16.3% increase over 1997
and 23.9% more than 1996. The "months supply" of finished vacant  inventory  set
an all  time low of 0.96 months or 4 weeks illustrating the tight housing market
in Dallas.  Ft. Worth experienced the highest levels for housing starts  (8,797)
and closings  (8,076)  in  more  than  a  decade.  The regional economy  remains
vibrant, with  affordability,  as  well  as  a viable high-tech core, attracting
corporate moves.

     The  Company  has  positioned  itself  to  increase its market share in the
Dallas/Fort  Worth  market,  as  this area continues its economic expansion. The
Company  entered  this  market with start-up operations in 1995 and is achieving
the image, brand awareness and improved lot position, which the Company believes
will  support  its  expansion  in  this  market.

     FT.  LAUDERDALE/PALM  BEACH/MIAMI,  FLORIDA.  The  Company's  operations in
Florida  are  concentrated  in  Broward,  Palm  Beach  and Dade Counties.  These
counties  include  the  cities  of  Ft.  Lauderdale,  Palm  Beach  and  Miami,
respectively.  Broward County experienced an average annual population growth of
30,100 residents from 1991 to 1998, representing a compounded annual growth rate
of  2.1%.  The  RFA  Precis  Metro Edition, November 1998, projects that Broward
County's  population  will  increase at a rate of 1.9% annually between 1996 and
2002.  Most  newcomers  to the market are expected to be working-age families, a
majority relocating from the South Dade/Miami area. The service sector dominates
the  overall  employment  in Broward. The service sector job growth rate of 4.7%
between  September  1997  and September 1998 is reflected in the 29,200 new jobs
created  during  that  period.

     The  West  Palm Beach economy is expanding very rapidly.  Employment growth
is  currently  the fastest of the three major south Florida markets at 4.7%.  By
the  year  2005,  the employment base in Palm Beach County is projected to total
over  550,000  jobs;  a  notable  increase over 1997's estimated total of nearly
430,000  jobs.  Another  significant  long-term  advantage  is West Palm Beach's
affluence.  The  metro  area boasts one of the highest per capita incomes in the
nation  at  $38,081, 35% higher than the national average of $24,436.  According
to  the  RFA Precis Metro Edition, November 1998, Palm Beach County's population
is projected to increase annually by 21,700 people to a total population of 1.08
million  by  2000.

                                        6
<PAGE>
     Fueled  by  growth  in the service and trade industries, Dade County gained
approximately  20,000 new jobs per year from 1997 to 1998, an annual growth rate
of approximately 4.5%. According to the RFA Precis Metro Edition, November 1998,
the Dade County population is projected to increase annually by 16,500 people to
a  total  population  of  2.1 million by 2000. RFA also forecasted an employment
growth  rate  through  the  year  2002  of  2.3%  for  this area, which compares
favorably  to  a  national  projected  average  annual  growth  rate  of  1.4%.

     The  Company  entered this market in 1995 with the acquisition of The Adler
Companies,  Inc.  Then,  in  January 1998, the Company acquired Westbrooke, thus
expanding the Company's operations in Broward County and providing an entry into
the  Palm  Beach  County market.  The Company believes that  it is positioned to
expand  into  new  developments  in  these  markets.

     NASHVILLE,  TENNESSEE.  From 1991 to 1998,  Nashville's  population grew by
nearly 13%,  almost  double the  national  growth  rate of 6.6%.  With more than
123,500  jobs  created  from  1992  to  1998,  the area's  employment  growth
rate of 24.0% was 65% better than the  national  rate of 15.7% for that  period.
Nashville's labor market remains very tight and unemployment is at a 30-year low
of 2.7%.  Long term,  Nashville  has  several  advantages  that are  expected to
support  positive  employment  growth.  As the state capital and locale for many
regional  company  headquarters,  Nashville is expected to remain the  principal
driver in Tennessee's  economy.  It remains a popular  tourist  destination  and
relocation center for corporate headquarters.  The Company entered the Nashville
market through a start-up operation,  which commenced  construction of new homes
in August  1997.  Initial  home sales  began in the first half of 1998,  and the
first  closings  occurred  in the second  quarter  of 1998.  The  Company  plans
continuing expansion in this market over the next three to four years.

     CHARLOTTE,  NORTH CAROLINA.  Charlotte's  economy is growing at a sustained
robust pace. According to the RFA Precis Metro Edition for November 1998, annual
employment  growth  amounted to 3.5% from 1992 to 1998  outpacing both the South
(3.0%) and U.S.  (2.4%)  growth  rates.  The  primary  drivers of growth in this
market are finance, services and retail trade industries. Charlotte has become a
leading financial center, with two financial powerhouses,  BankAmerica (formerly
Nations Bank) and First Union now headquartered there.  Charlotte experienced an
average  annual  population  growth  of  26,700  residents  from  1991 to  1998,
representing  a  compounded  annual  growth  rate of  2.0%.  Market  Opportunity
Research  Enterprises  reported a record  setting new home  market in 1998.  The
Charlotte area closed 10,096 homes in 1998,  13.4% more than 1997 and 22.1% more
than 1996.

     GREENSBORO/WINSTON-SALEM,  NORTH CAROLINA.  Known as "The Triad Area", this
area's  primary  growth  drivers  are  finance,  services  and  durable  goods
manufacturing  industries.  According  to  the  RFA  Precis  Metro  Edition  for
November 1998, annual employment growth amounted to 2.4% from 1992 to 1998, just
in line with the national average.  The structurally declining non-durable goods
(mainly  textile  and apparel) manufacturing industry is the principal detractor
from growth.  The unemployment rate remains extremely low at 2.7%, substantially
below the state average.  Greensboro/Winston-Salem experienced an average annual
population  growth  of  14,400  residents  from  1991  to  1998,  representing a
compounded  annual growth rate of 1.3%.  RFA ranked the Triad Area above average
for long-term growth due to a number of advantages.  Greensboro/Winston-Salem is
home to a growing financial services industry and its low cost of doing business
(95%  of the national average) should continue to attract industrial relocations
and  spur  local  expansions.  Another favorable aspect of the Triad Area is the
growing  concentration  of  high-tech  firms  that are expected to provide solid
employment  growth.

     The  Company entered the Charlotte and the Greensboro/Winston-Salem markets
through start-up operations in 1998.  Construction of new homes commenced in the
fourth  quarter  of 1998.  The first closings should occur in the second quarter
of  1999.  The  Company  plans  a steady expansion in both these markets for the
next  four  to  five  years.

                                        7
<PAGE>
     SAN  ANTONIO,  TEXAS.  According  to  American Metro Study Corporation, San
Antonio  has  also  experienced  record  setting  new  home starts in 1998.  San
Antonio  started  7,723  homes  and  closed  approximately  6,672 homes in 1998.
Homebuilders  started  13.6% more homes and closed 9.7% more homes than in 1997.
In  the  past  two  years,  the Alamo City created an average of 25,500 jobs per
year,  an annual growth rate of almost 4.0%, outpacing the south and the nation.
For  the  past  five  years, the metro area has experienced an annual average of
1.8% growth in population, adding an average of 23,000 people per year in a city
of 687,400 total people.  According to the RFA Precis Metro Edition for November
of  1998, San Antonio's economy has remained solid in 1998.  The city's low cost
of  doing  business  (88%  of  the national average), bilingual labor force, and
strategic  location as a gateway to Mexico are notable advantages for attracting
relocations.

     The  Company  began  start-up operations in the San Antonio market in 1998.
Construction  of  homes should commence in July 1999.  The first closings should
occur  in  the  first  quarter of 2000.  The Company plans a steady expansion in
this  market  for  the  next  three  to  four  years.

BACKLOG

     The  following  table  sets forth the Company's sales backlog by market for
the  periods  indicated  below:

<TABLE>
<CAPTION>
                                                     DECEMBER 31,
                                   -----------------------------------------------
                                       1996            1997            1998
                                   --------------  --------------  ---------------
                                           SALES           SALES           SALES
                                   HOMES   VALUE   HOMES   VALUE   HOMES   VALUE
                                   -----  -------  -----  -------  -----  --------
<S>                                <C>    <C>      <C>    <C>      <C>    <C>
                                                (DOLLARS IN THOUSANDS)
Houston                               70  $15,411     97  $23,025    175  $ 44,915
Austin                                72   13,773     85   17,806    184    40,712
Dallas/Ft. Worth                      28    5,486     42    9,167     57    14,952
Ft. Lauderdale/                       97   15,987     55   10,050    315    61,733
  Palm Beach/
  Miami
Nashville                             --       --     --       --     22     8,090
                                   -----  -------  -----  -------  -----  --------
Total                                267  $50,657    279  $60,048    753  $170,402
                                   =====  =======  =====  =======  =====  ========
</TABLE>

     Backlog represents home purchase contracts which have been executed and for
which  earnest money deposits have been received, but for which the sale has not
yet  closed.  Home  sales are not recorded as revenues until the closings occur.
Sales  value  represents  the  product  of the number of homes for which earnest
money  contracts  have  been received multiplied by the average home sales price
for  the  specific  city  for  the  period  indicated.

     Consistent with historical experience, 98% and 100% of the homes in backlog
at December 31, 1996, and 1997, were closed in the subsequent fiscal year. Based
upon  unit  volume,  contract cancellations were approximately 14.0% of the home
sales  contracts  signed  during  each  of 1996 and 1997, and 12.5% during 1998.
Although  cancellations  can  disrupt  anticipated  home  closings,  the Company
believes  that  cancellations  have  not  had  a  material  negative  impact  on
operations  or  liquidity  of  the  Company  during  the last several years. The
Company  attempts  to reduce cancellations by reviewing each homebuyer's ability
to  obtain  mortgage  financing  early  in  the  sales  process  and  by closely
monitoring  the  mortgage  approval  process.

                                        8
<PAGE>
IDENTIFICATION  OF  NEW  MARKETS

     To achieve the Company's expansion strategy, the Company, together with its
affiliate,  Pacific  Research  Group,  has  developed a market expansion process
designed  to  identify  and  track  growing  homebuilding  markets in the United
States.  The Company's program is designed as an ongoing process and consists of
three  stages  which  track  economic  and  demographic  activity in primary and
secondary  metropolitan  markets  (Stage  I),  narrowing  the  focus on specific
markets  and criteria (Stage II and Stage III) as they meet expansion objectives
and  timing.  As  part  of  its  screening  process,  the  Company  evaluates
geographically  diverse  markets  because  it  believes  that  potential adverse
economic  conditions  associated  with  certain markets are often offset by more
favorable  economic  conditions  in other operating areas. Consideration is also
given  to  those  markets  located  near  current operating markets, which could
function  as satellite operations. An in-depth description of each of the stages
is  set  forth  below:

     Stage  I includes the accumulation, maintenance and monitoring of quarterly
economic  and demographic data in potential expansion markets through the use of
published databases and U.S. Census Statistics. Local and statewide data in each
market  are  also  analyzed  for  comparison purposes. The following factors are
tracked  on  a  quarterly basis for each expansion market: population growth and
trends; breakdown of population by age; overall employment growth; employment by
industry;  median/average  household  income;  unemployment  rate; single-family
housing  starts/permits;  median/average  sales price of new and existing homes;
and  resale  inventory  and  months  of  supply.

     The  Stage  II  analysis  establishes and analyzes economic and demographic
benchmarks  for  the  selection  of  three main markets and five back-up markets
based  on desired market share and geographic diversity. Following the selection
of  the three main markets, an in-depth Stage II market analysis is performed to
determine  market  viability in these selected markets. If the evaluation of any
of  the three selected markets reveals factors unfavorable for expansion, then a
Stage  II  analysis is performed on one of the selected back-up markets. A Stage
II  analysis  consists  of  the  following:  identifying  and  engaging a market
research  firm  that  tracks  and  can  produce  single-family statistical data;
profiling  market  (identify  submarkets,  price  bands, and total single-family
starts,  closings, inventory levels and competition); assessing the availability
of  single-family  land  and  lots  (both  current  and  future);  assessing the
availability  and  quality  of  the  local  trade  base;  identifying job growth
corridors and access to submarkets; identifying corporate relocations/expansions
and  major  employers;  identifying  tax  structure  of cities; profiling school
districts;  profiling  business  and  political  climate  for  municipalities;
assessing the government/regulatory issues with respect to homebuilding and land
development;  assessing  market  specific  environmental  issues;  determining
availability of utilities in submarkets and future growth corridors; determining
presence  of  national  and  regional  builders;  and  assessing office, retail,
industrial  and  multi-family  market  activity.

     Upon  completion  of  the  Stage II analysis, one or more of the three main
markets  will be selected as an expansion market. Once a market is identified as
an  expansion market, a market penetration and positioning strategy is developed
by  the  Company  to  evaluate  the  Stage  III analysis data which includes the
following:  profile  of existing communities in each submarket based on activity
levels (starts, closings, inventory levels), price point and product; profile of
existing  communities  based  on  location  and lot product size; and profile of
builders  by  submarket.

LAND  POLICIES  AND  POSITION

     The  Company  provides  lot  positions  for  its homebuilding operations by
acquiring  lot  options and by purchasing land for the development of lots. When
appropriate,  developed  lots  are  sold  to  third-party  builders  to increase
inventory  turnover  and  to enhance earnings for the Company. Historically, the
Company  has  been  able to option substantially all of its lot positions in the
Houston  and  Austin markets  due to the  brand awareness of the Newmark(TM) and
Fedrick,  Harris  Estate  Homes  names  among  both consumers and developers, in
addition  to  the willingness of developers in those markets to option available
lots.  The  Company  also  acquires  lot  options  in  the Dallas/Fort Worth and
Nashville  markets.  With  the  continuing  strength  in the housing sector, the
Company  has  been required to acquire some of its developed lots under specific
performance  purchase  contracts.  The Company has developed residential lots in
the  South  Florida,  Dallas/Fort  Worth  and  Nashville  markets and intends to
continue to do so in the future. Additionally, residential land developments may
be  purchased  when  the  Company  enters  new  markets.  Prior  to  any  land
acquisitions,  the  Company  conducts extensive due diligence utilizing regional
expertise,  including  on-site  inspection  and  soil  testing.

                                        9
<PAGE>
DESIGN

     The  Company's  home  designs  and  floor  plans  are  prepared  by outside
architects  in  each  of the Company's markets to appeal to the local tastes and
preferences of the community. Using its design department and Design Wizard, the
Company has the capability to change its standard floor plans to accommodate the
individual  homebuyer.  While  most  design modifications are significant to the
homebuyer,  they  typically  involve relatively minor adjustments that allow the
Company  to  maintain  construction  efficiencies  and  result  in  greater
profitability  due  to  increased  margins.

CONSTRUCTION

     Substantially  all  of  the  Company's  construction  work  is performed by
subcontractors.  The  Company's  construction  superintendents  monitor  the
construction  of  each  home,  coordinate  the  activities of subcontractors and
suppliers,  subject  the work of subcontractors to quality and cost controls and
monitor  compliance with zoning and building codes. Subcontractors typically are
retained  pursuant  to  a  contract that obligates the subcontractor to complete
construction in a workmanlike manner and that provides standard indemnifications
and  warranties.  Typically,  the  Company works with the same subcontractors in
each  city.  The  Company's  subcontractors  are  not  subject to any collective
bargaining  agreements.  While  the Company competes with other homebuilders for
qualified  subcontractors,  it  has established long-standing relationships with
many  of  its  subcontractors.  To  date,  by providing both timely payments and
steady work assignments, the Company has not experienced any inability to obtain
qualified  subcontractors.

     The  Company's  purchasing  and  cost  accounting practices are designed to
facilitate  construction  flexibility. This process permits homebuyers to modify
their  designs,  while  allowing  the  Company  to  monitor  and  maintain  its
profitability.  Construction  time  for  the Company's homes depends on weather,
availability  of  labor,  materials,  supplies  and  other  factors. The Company
typically  completes  the  construction  of  a  home within four to five months.

     The  Company  does  not  maintain  significant  inventories of construction
materials,  except  for  work in process materials for homes under construction.
Typically,  the  construction  materials  used  in  the Company's operations are
readily  available  from  numerous  sources.  The  Company  has  favorable price
arrangements  or  contracts with suppliers of certain of its building materials,
but  it  is not under any specific purchasing requirements. In recent years, the
Company  has  not  experienced  any  significant  delays  in construction due to
shortages  of  materials  or  labor.

MARKETING  AND  SALES

     The  Company markets and sells its homes through commissioned employees and
cooperates  with  independent  real  estate  brokers.  The  Company  targets the
"move-up"  and  relocation  market  segments and employs sophisticated marketing
techniques  to  attract  potential  homebuyers  through  its  Internet web site,
extensive  telemarketing,  interactive  software  programs  and  other marketing
programs.  Home  sales  are  typically  conducted  from sales offices located in
furnished  model  homes  used  in  each  subdivision.  At December 31, 1998, the
Company  owned  74 model homes. The Company's sales personnel assist prospective
buyers  by  providing  them  with floor plans, price information, tours of model
homes and the selection of options and other custom features. Such personnel are
trained by both the Company and external independent experts in sales expertise.
These  sales and marketing personnel are kept informed as to the availability of
financing,  construction  schedules  and  marketing  and  advertising plans. The
Company  has  also  formed  sales  teams  comprised  of a sales person and other
employees  from  throughout the Company to provide sales support and motivation.

     In  addition  to  using  model  homes,  the speculative homes built in most
subdivisions  enhance the Company's marketing and sales activities. Construction
of  these  speculative  homes  is  also necessary to satisfy the requirements of
relocated  personnel,  "move-up"  buyers,  and  independent  brokers,  who often
represent homebuyers requiring a completed home within sixty days. The number of
speculative  homes  the Company builds in any given subdivision is influenced by
local  market  factors,  such  as  new employment opportunities, significant job
relocations, growing housing demand and the length of time the Company has built
in  the  market.

                                       10
<PAGE>
     The Company advertises in newspapers and in real estate and mortgage broker
company publications, brochures, newsletters and billboards. Because real estate
brokers  are  important  to  sales,  the  Company  sponsors  realtor breakfasts,
contests  and  other  events to increase awareness of the Company's subdivisions
and products. Certain of the Company's suppliers participate with the Company in
its  advertising  and  promotional  materials,  either  through  co-branding and
cost-sharing  or  through  rebates.

     Sales  of  the  Company's  homes  generally are made pursuant to a standard
sales  contract  which requires a down payment of $2,000 to $5,000, or 5% to 10%
of  the  sales  price,  on  custom  homes.  The  contract  includes  a financing
contingency which permits the customer to cancel in the event mortgage financing
at  prevailing  interest  rates  is  unobtainable  within  a  specified  period,
typically  four  to  six weeks, and may include other contingencies, such as the
sale  of  an existing home. The Company includes a home sale in its backlog upon
execution  of  the  sales  contract and receipt of the initial down payment. The
Company  does not recognize revenue until the home is closed and title passes to
the  homebuyer.  The  Company  estimates  that  the  average  period between the
execution  of  a  sales contract for a home and closing is approximately four to
five  months  for  presold  homes.

TITLE  SERVICES

     In  1997, the Company acquired a 49% interest in Pacific Title, L.C., which
serves  as  a  title  insurance  agent and provides title insurance policies and
closing  services to purchasers of homes built and sold by the Company in Texas.
The  Company  assumes  no  title  insurance  risk  associated  with  these title
policies,  which  are  issued  by  Stewart  Title  Co.,  one of the oldest title
companies  in  Texas.  Stewart  Title  Co.  owns the balance of the interests of
Pacific  Title.

CUSTOMER  FINANCING

     In  1997, the Company acquired a 49.99% limited partnership interest in NHC
Mortgage  Group,  L.P.,  a  mortgage  origination company owned jointly with CTX
Mortgage  Ventures  Corporation, one of the nation's largest mortgage companies.
NHC  Mortgage  underwrites,  originates  and  sells  mortgages for the homes the
Company  builds and for other homebuilders. The Company's capital is not at risk
in  connection  with  these  mortgages.

CUSTOMER  SERVICE  AND  QUALITY  CONTROL

     The  Company's operating divisions are responsible for pre-closing, quality
control inspections and responding to customer's post-closing needs. The Company
believes  that  the  prompt,  courteous response to homebuyers' needs during and
after  construction  reduces  post-closing  repair costs, enhances the Company's
reputation  for  quality and service, and ultimately leads to significant repeat
and  referral  business.  The  Company  conducts  pre-closing  inspections  with
homebuyers  immediately prior to closing. In conjunction with the inspections, a
list  of  items  for  home  completion  is  created.

     All  warranty  requests  are  processed  through  the  customer  service
departments  located  in  each  of  the  markets.  In most instances, a customer
service  manager  inspects  the  warranty request within 48 hours of receipt. If
appropriate,  the  repair work is scheduled to be approved by the homeowner upon
satisfactory  completion.  An  integral  part  of the Company's customer service
program  revolves  around  post-closing  interviews. In most markets, a customer
service  representative  is  sent  into  each  home within 45 days of closing to
evaluate the homeowner's satisfaction with both their home and their home-buying
experience.  The  post-closing interview involves an analysis of the homebuyer's
experiences  with  the  sales counselor, the title company, the mortgage company
and  the construction department as well as their satisfaction with the product.
Typically,  after  a  year, another interview is conducted with the homeowner to
determine  their  continued  satisfaction.  The  subsequent  interview  provides
management  a  direct  link  to  the  customer's perception of the entire buying
experience  as  well  as  valuable  feedback  on  the  quality  of  the product.

                                       11
<PAGE>
WARRANTY  PROGRAM

     The  Company  provides  up  to a two-year limited warranty (one-year in the
case  of its South Florida operations) of workmanship and materials with each of
its  homes. The Company subcontracts its homebuilding work to subcontractors who
provide  the  Company  with an indemnity and a certificate of insurance prior to
receiving payments for their work and, therefore, claims relating to workmanship
and  materials  are  generally  the  primary  responsibility  of  the  Company's
subcontractors.  In  all  markets  except South Florida, the Company provides an
additional  eight  year  limited  homeowners' warranty covering major structural
defects  through  a  single  national  agreement  with  the Residential Warranty
Corporation. An appropriate warranty reserve is established to cover anticipated
warranty  expenses  not  borne  by  the  Company's subcontractors. The Company's
historical  experience  is such that warranty expenses generally fall within the
amount  established  for  such  reserve. The Company does not currently have any
material  litigation  or  claims  regarding  warranties  or  latent defects with
respect  to construction of homes. Current claims and litigation are expected to
be  substantially  covered  by  the  Company's  reserve or insurance. Generally,
warranty  claims  are  handled  by the construction superintendent who built the
particular home to ensure that prompt and appropriate corrective action is taken
by  the  appropriate  subcontractor.

COMPETITION

     The  development  and  sale of residential properties is highly competitive
and  fragmented.  The  Company  competes for residential sales on the basis of a
number  of  interrelated  factors,  including  location,  reputation, amenities,
design, quality and price, with numerous large and small homebuilders, including
some  homebuilders  with  nationwide  operations and greater financial resources
and/or  lower  costs than the Company. The Company also competes for residential
sales  with  individual resales of existing homes, available rental housing and,
to  a  lesser  extent,  resales  of  condominiums.  The Company believes that it
compares  favorably  to  other builders in the markets in which it operates, due
primarily  to: (i) its experience within its geographic markets, which allows it
to  vary  its  product offerings to reflect changing market conditions; (ii) its
responsiveness  to  market  conditions,  enabling  it  to  capitalize  on  the
opportunities  for  advantageous  land  acquisitions in desirable locations; and
(iii)  its  reputation  for  service  and  quality.

GOVERNMENT  REGULATION  AND  ENVIRONMENTAL  MATTERS

     Homes  and  residential  communities  built by the Company must comply with
state  and  local regulations relating to, among other things, zoning, treatment
of  waste,  construction  materials  which  must  be used, density requirements,
certain aspects of building design and minimum elevation of properties and other
local  ordinances.  These  include  laws requiring use of construction materials
which  reduce  the  need for energy-consuming heating and cooling systems. These
laws  and  regulations  are  subject  to  frequent  change  and  often  increase
construction costs. In some cases, there are laws which require that commitments
to  provide  roads  and  other  offsite  infrastructure be in place prior to the
commencement  of  new  construction.  The  provisions  of these laws are usually
administered  by  individual  counties  and  municipalities  and  may  result in
additional  fees  and  assessments or building moratoriums. In addition, certain
new  development  projects,  particularly  in  Southern  Florida, are subject to
assessments  for  schools,  parks,  streets  and  highways  and  other  public
improvements,  the  costs  of  which  can  be  substantial.

The  residential  homebuilding  industry  also is subject to a variety of local,
state  and  federal  statutes,  ordinances, rules and regulations concerning the
protection  of health and the environment. Environmental laws and conditions may
result  in  delays,  may  cause  the Company to incur substantial compliance and
other  costs,  and  can  prohibit  or severely restrict homebuilding activity in
certain  environmentally  sensitive  regions or areas. Additionally, the climate
and  geology  of  some  parts  of  Florida  and  Texas  present risks of natural
disasters  that  could adversely affect the homebuilding industry in those areas
in  general,  and  the  Company's  business  in  particular.

     The  Company's  title  insurance  affiliate  must  comply  with  applicable
insurance  laws  and  regulations.  The Company's mortgage origination affiliate
must  comply  with  applicable  real  estate  lending  laws  and  regulations.

EMPLOYEES

     At  December  31,  1998, the Company employed 438 persons, of whom 111 were
sales  and  marketing personnel, 156 were executive, administrative and clerical
personnel,  and  171  were  involved  with  construction.  None of the Company's
employees  is  covered by collective bargaining agreements. The Company believes
its  relations  with  its  employees  are  good.

                                       12
<PAGE>
ITEM  2.    PROPERTIES

     The  Company owns a 16,000 square foot facility in Sugar Land, Texas, which
serves  as  the  Company's  headquarters  and  primary  residential homebuilding
office.  The  Company leases an aggregate of approximately 19,700 square feet in
Dallas,  Austin,  Nashville,  Charlotte/Greensboro,  and  Miami for its division
operations.  The  Company  believes its existing facilities are adequate for the
Company's  current  and  planned  levels  of  operations.

ITEM  3.  LEGAL  PROCEEDINGS

     The  Company is involved in various claims and legal actions arising in the
ordinary  course  of  business.  In the opinion of the Company's management, the
ultimate disposition of these matters is not expected to have a material adverse
effect  on  the  financial  condition  or  results of operations of the Company.

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

     No  matters  were  submitted  during  the fourth quarter of the fiscal year
covered  by  this report to a vote of security holders, through the solicitation
of  proxies  or  otherwise.



                                     PART II


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


     The  Company's Common Stock commenced trading on the NASDAQ National Market
System on March 12, 1998 under the trading symbol "NHCH".  The range of high and
low  closing  sales  prices  per  share  by  quarter  for calendar year 1998, as
reported  by  the  NASDAQ  national  market,  appear  in  the  following  table.

<TABLE>
<CAPTION>
                  1998
-----------------------------------------
     QUARTER               HIGH     LOW
-----------------         ------   ------
<S>                    <C>       <C>
First (commencing        $ 11.38  $ 10.50
 March 12, 1998)
Second                     11.63     9.06
Third                      10.63     6.00
Fourth                      9.00     6.13
-----------------         ------   ------

                  1999 
-----------------------------------------
First (through March        8.50     6.25
19, 1999)
</TABLE>

     As  of  March  19,  1999, there were 7 shareholders of record.  The Company
believes  there  are  approximately 1,000 beneficial owners of its common stock.

     The  Company  did not declare  any cash  dividends  on its common  stock in
fiscal year 1998 and the Board of Directors  intends to retain all the Company's
earnings for use in the expansion of the Company's  business for the foreseeable
future.  The Company's credit agreements  generally contain covenants that limit
the amount of dividends or  distributions it can pay on its common stock and the
amount of stock the Company can repurchase.

                                       13
<PAGE>
ITEM  6.  SELECTED  FINANCIAL  DATA

     The  statement  of  operations  data and balance sheet data presented below
have  been  derived from the historical financial statements of the Company. The
Company's  consolidated  financial  statements  for the years ended December 31,
1994, 1995, 1996 and 1997, have been audited by KPMG LLP, independent  certified
public accountants. The Company's consolidated financial statements for the year
ended  December  31,  1998,  have  been audited by BDO Siedman, LLP, independent
certified public accountants. The selected financial data set forth below should
be  read  in  conjunction  with  and are qualified by reference to the Company's
consolidated  financial  statements and notes thereto included elsewhere in this
Form  10-K  and "Management's Discussion and Analysis of Financial Condition and
Results  of  Operations."

<TABLE>
<CAPTION>
                                                             YEAR ENDED DECEMBER 31,
                                              -----------------------------------------------------
                                                1994      1995(1)     1996       1997     1998 (2)
                                              ---------  ---------  ---------  ---------  ---------
                                                              (Dollars in thousands)
STATEMENT OF OPERATIONS DATA:
<S>                                           <C>        <C>        <C>        <C>        <C>
   Revenues                                   $108,630   $125,427   $190,855   $215,360   $406,353 
   Cost of Sales                                86,260    102,591    156,264    175,300    339,094 
                                              ---------  ---------  ---------  ---------  ---------
   Gross Profit                                 22,370     22,836     34,591     40,060     67,259 
 Equity in earnings from unconsolidated
    Subsidiaries                                   ---      1,978        792        465        812 
 Selling, general and administrative
   Expenses                                    (12,928)   (16,572)   (22,976)   (26,512)   (43,614)
 Depreciation and amortization                    (831)    (1,271)    (1,524)    (1,669)    (3,287)
                                              ---------  ---------  ---------  ---------  ---------
 Operating income                                8,611      6,971     10,883     12,344     21,170 
 Interest expense                                 (613)    (1,332)    (1,238)    (1,987)    (1,939)
 Other income, net                                 191        607        851        570      1,201 
                                              ---------  ---------  ---------  ---------  ---------
 Income before income taxes                      8,189      6,246     10,496     10,927     20,432 
 Income taxes                                    3,205      2,477      4,164      4,272      7,637 
                                              ---------  ---------  ---------  ---------  ---------
 Net income                                   $  4,984   $  3,769   $  6,332   $  6,655   $ 12,795 
                                              =========  =========  =========  =========  =========
 Net income per common share                  $   0.54   $   0.41   $   0.69   $   0.72   $   1.16 
                                              =========  =========  =========  =========  =========
 Weighted averages shares outstanding            9,200      9,200      9,200      9,200     11,035 
Operating Data:
 Units:
 New sales contracts, net of  cancellations        500        720        998        984      2,036 
 Closings                                          534        641        902        972      1,874 
 Backlog at end of period                           92        171        267        279        753 
 Average sales price per closing              $    201   $    188   $    200   $    219   $    216 
 Sales value of backlog at end of period      $ 18,579   $ 32,280   $ 50,657   $ 60,048   $170,402 
 Gross profit as a percentage of  revenues        20.6%      18.2%      18.1%      18.6%      16.5%
 Selling, general and administrative
   expenses as a percentage of revenues           11.9%      13.2%      12.0%      12.3%      10.7%
</TABLE>

                                       14
<PAGE>
<TABLE>
<CAPTION>
                                             DECEMBER 31,
                           -------------------------------------------------
                            1994     1995(1)     1996      1997    1998 (2)
                           -------  ---------  --------  --------  ---------
                                           (IN THOUSANDS)
BALANCE SHEET DATA:
<S>                        <C>      <C>        <C>       <C>       <C>
 Inventories               $36,670  $ 59,689   $ 83,659  $102,547  $185,247 
 Total assets               69,890   104,545    121,177   139,213   245,338 
 Total construction debt    33,086    47,428     60,768    66,100   106,839 
 Stockholders' equity       35,894    45,813     43,929    55,691    90,112 
<FN>
_____________
(1)     Reflects  the  operating  data  of  Adler  subsequent  to  the Company's
        acquisition  of the homebuilding assets of The Adler Family Partnership 
        on March 1, 1995.

(2)     Reflects  the  operating  data of Westbrooke subsequent to the Company's
        acquisition  of  the  homebuilding  assets  of  Westbrooke  Communities,
        Inc. on January  1,  1998.
</TABLE>


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

SPECIAL  STATEMENT  CONCERNING  FORWARD-LOOKING  STATEMENTS

     As  a  cautionary  note,  except  for  the historical information contained
herein,  certain  matters  discussed  in  Item  7,  "Management's Discussion and
Analysis  of  Financial  Condition  and  Results  of  Operations"  and  Item  7A
"Quantitative  and  Qualitative  Disclosures  About  Market  Risk",  are
"forward-looking"  statements  within  the  meaning  of  the  Private Securities
Litigation  Reform  Act  of 1995.  Such matters involve risks and uncertainties,
including:  the  Company's exposure to certain market risks, changes in economic
conditions,  tax  and interest rates, increases in raw material and labor costs,
weather  conditions,  and  general  competitive  factors,  that may cause actual
results  to  differ materially; its ability to correct all material applications
addressing  the  Year  2000  problem;  as  well  as the ability of the Company's
vendors  to  correct all material applications addressing the Year 2000 problem,
and  the Company's assessment of the Year 2000 problem's impact on its financial
results  and  operations.

GENERAL

     Since  inception,  the  Company  has  sought  to  achieve profitability and
revenue  growth  by  providing  quality  homes in markets which have experienced
population  and  job  growth  in excess  of the national average during the past
several  years.  Newmark  has  served as the foundation to support the Company's
growth strategy, including expansion within existing markets, entry into two new
markets  through  start-up  operations  and  the  acquisition  of  a  regional
homebuilder.

     The Company has experienced significant growth and has positioned itself to
continue  to  expand  its residential land and lot acquisitions significantly in
markets that it has recently entered,  such  as  Charlotte,  Greensboro/Winston-
Salem,  Nashville and Dallas/Fort Worth, as  well as  in  Houston.  The  Company
believes that,  based  on  its  recently  acquired  lot  options  in a number of
master-planned  communities  in  and  around  Houston,  there  are  significant
opportunities for achieving greater market  share  in  this  market. The Company
entered the Ft. Lauderdale/Miami  market through its acquisition  of  The  Adler
Companies on March 1, 1995, and then significantly  expanded  its  market share 
in the South Florida market, including Palm  Beach,  by  acquiring Westbrooke on
January  1, 1998.  The Company  also achieved  synergies  in  its  South Florida
operation by merging the operations of The  Adler  Companies  with  Westbrooke's
operations  in  1998.

                                       15
<PAGE>
     The Company  recognizes  revenue at the time of closing  when title to, and
possession of, the property  transfers to the buyer. The Company  capitalizes in
inventory  all  homebuilding  costs during the  construction  period,  including
interest and maintenance,  and charges those  capitalized costs to cost of sales
as the related  inventories are sold.  Interest incurred on inventory  following
completion of construction is expensed.  Accordingly, as the Company's inventory
level rises and falls, interest expense can vary significantly.  Included in the
Company's  depreciation and amortization expenses is amortization of goodwill in
excess  of $1.0  million  in each of 1996  and  1997  related  to the  Company's
acquisitions of Newmark and Adler and  approximately  $1.4 million in 1998 which
also included goodwill related to the Westbrooke acquisition.

     Equity  in earnings from unconsolidated subsidiaries includes earnings from
Pacific  Title,  L.C.  ("Pacific  Title"), a title service business in which the
Company  owns  a  49% interest, and NHC Mortgage Group, L.P. ("NHC Mortgage"), a
mortgage  origination company, in which the Company owns a 49.99% interest, each
of  which  was  formed  in  1997. The Company expects these ancillary sources of
revenues  to  grow at a rate consistent with the growth of its core homebuilding
business.  Additionally,  equity  in  earnings  from unconsolidated subsidiaries
includes  earnings  from  a  Florida  homebuilding partnership, owned 50% by the
Company, which wound-up its home-building operations in October 1997. Currently,
all of the Company's South Florida operations are conducted through wholly-owned
subsidiaries and are included in the Company's revenues rather than in equity in
earnings  of  unconsolidated  subsidiaries.

RESULTS  OF  OPERATIONS

     The  following table sets forth the homebuilding revenue and number of home
closings  by  market  for  the  periods  indicated  (dollars  in  thousands):

<TABLE>
<CAPTION>
                                     YEAR ENDED DECEMBER 31,
                                   ----------------------------
                                     1996      1997      1998
                                   --------  --------  --------
<S>                                <C>       <C>       <C>
Houston:
  Revenues                         $ 79,920  $ 85,690  $126,138
  Units                                 363       361       482
Austin:
  Revenues                         $ 63,891  $ 66,405  $ 82,970
  Units                                 334       317       386
Dallas/Fort Worth:
  Revenues                         $ 20,180  $ 30,119  $ 38,078
  Units                                 103       138       159
Ft. Lauderdale/Palm Beach/Miami:
  Revenues                         $ 16,819  $ 30,863  $144,780
  Units                                 102       156       814
Nashville:
  Revenues                              -0-       -0-  $ 12,116
    Units                               -0-       -0-        33
                                   --------  --------  --------
  Total homebuilding revenues (1)  $180,810  $213,077  $404,082
                                   ========  ========  ========
  Total home closings                   902       972     1,874
                                   ========  ========  ========
Average sales price per home       $    200  $    219  $    216
<FN>
________________
(1)     Does not include revenues from land sales of $10.1 million, $2.3 
        million and  $2.3  million  in  1996,  1997  and  1998,  respectively.
</TABLE>

                                       16
<PAGE>
     The  following  table  sets  forth,  as  a  percentage  of revenue, certain
information  in the Company's statement of operations for the periods indicated:

<TABLE>
<CAPTION>
                                                YEAR ENDED DECEMBER 31,
                                                -----------------------
                                                 1996   1997   1998
                                                 -----  -----  -----
<S>                                              <C>    <C>    <C>
  Cost of sales                                  81.9%  81.4%  83.4%
  Gross profit                                   18.1   18.6   16.6 
  Selling, general and administrative expenses   12.0   12.3   10.7 
  Income before income taxes                      5.5    5.1    5.0 
  Income taxes (1)                               39.7   39.1   37.4 
  Net income                                      3.3    3.1    3.1 
<FN>
____________________
(1)     As  a  percent  of  income  before  income  taxes.
</TABLE>

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

     Revenues  increased by 89% to $406.4 million in 1998 from $215.4 million in
1997.  The number of homes  closed  increased by 93% to 1,874 homes in 1998 from
972 in 1997. The increase in revenues is largely attributable to the acquisition
of Westbrooke.  In 1998,  Westbrooke accounted for 29% of the revenue and 36% of
the homes closed. Without Westbrooke, revenues increased by 35% and homes closed
increased  by  24%.  The  increase,  excluding  Westbrooke's  contribution,  was
attributable to the addition of the Nashville market as well as increases in the
existing markets.  Revenues  increased 47% in Houston,  25% in Austin and 26% in
Dallas.  The average  sales price of homes  decreased  from  $219,000 in 1997 to
$216,000 in 1998 due to the fact that  Westbrooke's  average sales price is less
than Newmark's.  The average sales price,  excluding  Westbrooke,  has increased
from $219,000 in 1997 to $239,000 in 1998. Also,  revenues  generated from sales
of custom homes under Fedrick, Harris Estate Homes increased from $36 million in
1997 to $56 million in 1998,  due primarily to increased  unit sales in Houston,
Austin and  Nashville.  Revenues  from land sales were $2.3 million in both 1998
and 1997.

     Cost of sales  increased  by 93.4%,  to $339.1  million  in the year  ended
December 31, 1998, from $175.3 million in 1997. The increase was attributable to
the increase in the number of homes closed as described  above.  As a percentage
of revenues,  cost of sales  increased to 83.4% in 1998 from 81.4% in 1997.  The
increase in cost of sales as a  percentage  of revenues is due  primarily to the
acquisition  of  Westbrooke.  Generally,  the margins on the homes sold in South
Florida  earn lower  margins due to the impact of higher  land cost  relative to
sales price.  Excluding Westbrooke,  as a percentage of revenues,  cost of sales
increased slightly to 81.7% in 1998 from 81.4% in 1997.

     Equity  earnings  from  unconsolidated  subsidiaries  increased $347,000 to
$812,000  for  1998 compared to $465,000 for 1997.  This increase was attributed
totally  to  the  increased  earnings  of  Pacific  Title  and  NHC  Mortgage.

     Selling,  general  and  administrative (SG&A) expense increased by 64.5% to
$43.6 million in 1998, from $26.5 million in 1997.  As a percentage of revenues,
SG&A expense decreased slightly to 10.7% in 1998, from 12.3% in 1997.  Excluding
Westbrooke,  SG&A expense increased by 39% to $36.8 million.  This increase  was
caused  by  the expansion into Nashville, Tennessee as well as the growth in the
Company's  Texas  markets as reflected in the 34.9% increase in revenues in 1998
and the 112% increase in the backlog at the end of December 1998 versus December
1997.

     Interest  expense amounted to $1.9 million in 1998 compared to $2.0 million
in  the  previous  year.  The  Company follows a policy of capitalizing interest
only  on  inventory  under  construction  or development.  During the year ended
December  31, 1998 and 1997, the Company expensed a portion of incurred interest
and  other  financing  costs  on  those completed homes held in inventory.  This
expense  decreased  due to the decrease in the average number of completed homes
held  in  inventory  for  the  year  ending  December 31, 1998 compared to 1997.
Capitalized  interest and other financing costs are included in cost of sales at
the  time  of  home  closings.

                                       17
<PAGE>
     The  Company's  provision  for  income  taxes  decreased as a percentage of
earnings before taxes to 37.4% for the year ended December 31, 1998, compared to
39.1%  for  1997.  Under  a  tax allocation agreement with Pacific USA (the "Tax
Allocation  Agreement"),  the  Company  is  required  to  calculate  its federal
corporate  income  tax  liability  as  if it filed a separate federal income tax
return for each period and to pay Pacific USA the sum of which would result from
such calculation if the Company were subject to federal corporate income tax and
filed  a separate tax return.  The Company recognized federal income tax expense
under  the Tax Allocation Agreement amounting to $7.6 million for the year ended
December  31,  1998  compared  to  $4.3  million  for  1997.

     Net  income increased by 91.0% to $12.8 million for the year ended December
31,  1998  from  $6.7  million for the corresponding period in 1997.  Westbrooke
comprised  30.8%  of  the  net  income  for  the  year ending December 31, 1998.
Excluding Westbrooke, net income increased by 33.1% to $8.9 million in 1998 from
$6.7  million.

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

     Revenues  increased  by 12.8% to $215.4 million in 1997 from $190.9 million
in  1996.  This  increase  in  revenues  is largely attributable to two factors.
First,  the number of homes closed by the Company increased by 7.8% to 972 units
in  1997  from  902 units in 1996.  Second, the average sales price increased by
9.5%  from  $200,000  to  $219,000  per home sold.  This increase in the average
sales  price  was  primarily due to a change in the mix of homes sold.  Revenues
generated from sales of Fedrick, Harris Estate Homes increased from 15% of total
revenues  in  1996  to  16%  of total revenues in 1997.  Since the average sales
price  for  Fedrick,  Harris  Estate  Homes is approximately 70% higher than the
average sales price for homes sold under the Newmark brand name, the increase in
the  percentage  of  revenues  from  Fedrick, Harris Estate Homes as compared to
Newmark  homes resulted in the increase in the average sales price of homes sold
in the 1997 period.  Home closings increased in the Company's Dallas/Forth Worth
and Ft. Lauderdale/Miami markets, and decreased in Houston and Austin.  Although
Houston's  home  closings  decreased  in  1997 compared to 1996 due to inclement
weather  in the first quarter of 1997, Houston's homebuilding revenues increased
due to a higher percentage of higher priced custom homes being closed in 1997 as
compared  to 1996.  Revenues from land sales were $2.3 million in 1997 and $10.1
million  in  1996.

     As  a  percentage of revenues, cost of sales decreased slightly to 81.4% in
1997 compared to 81.9% in 1996. As a percentage of revenues from land sales, the
cost  of  land  sales  was  65.2%  in  1997  compared  to  91.1%  in  1996.

     Equity  in  earnings from unconsolidated subsidiaries decreased $327,000 to
$465,000 for 1997 compared to $792,000 for 1996. Earnings from Pacific Title and
NHC  Mortgage amounted to approximately $235,000 and $105,000, respectively, for
1997.

     Selling,  general  and  administrative expenses increased by 15.2% to $26.5
million  in  1997 from $23.0 million in 1996. Of such increase, $375,000 was due
to  costs incurred in entering the Nashville market in 1997.  The balance of the
increase  in  these  expenses  was  due  largely  to  the increases in sales and
construction  activity  required  to  sustain the higher level of revenues. As a
percentage  of  revenues,  selling, general and administrative expenses remained
relatively  stable  at  12.3%  for  1997  compared  to  12.0%  for  1996.

     Interest  expense,  which primarily reflects the carrying cost of completed
homes,  increased  60.5% to $2.0 million in 1997 from $1.2 million in 1996. This
increase was primarily due to the impact of adverse weather on home sales in the
Houston  market  and  an  increased  inventory  level in Florida associated with
increased  levels  of  activity  in  that  market.

     The  Company's  provision  for  income  taxes  decreased as a percentage of
earnings  before  taxes  to  39.1% in 1997, compared to 39.7% in 1996. Under the
Tax  Allocation Agreement with Pacific USA, the Company is required to calculate
its  federal  corporate  income  tax liability as if it filed a separate federal
income  tax  return  for  each period and to pay Pacific USA the sum which would
result  from  such  calculation if the Company were subject to federal corporate
income  tax  and  filed  a  separate  tax return. The Company recognized federal
income  tax expense under the Tax Allocation Agreement amounting to $4.0 million
in  1997  compared  to  $3.8  million  in  1996.

                                       18
<PAGE>
SEASONALITY  AND  QUARTERLY  RESULTS

     The homebuilding industry is seasonal, as generally there are more sales in
the  spring  and summer months, resulting in more home closings in the fall. The
Company  operates  in  the  Southwestern  and Southeastern markets of the United
States,  where weather conditions are more suitable to a year round construction
process than other areas. The Company also believes its geographic dispersion to
be  somewhat  counter-cyclical, with adverse economic conditions associated with
certain  of its markets often being offset by more favorable economic conditions
in  other  areas. The seasonality of school terms has an impact on the Company's
operations,  but it is somewhat mitigated by the fact that many of the Company's
buyers at the higher end of the Company's price range, including Fedrick, Harris
custom  homes,  no longer have children in school. As a result of these factors,
among  others,  the  Company  generally experiences more sales in the spring and
summer  months,  and  more  closings  in  the  summer and fall months. Likewise,
Westbrooke  has  experienced  seasonality  in its revenues, generally completing
more  sales  in  the  spring  and  summer months and more closings in the fourth
quarter.

     The  following  table  presents  selected  quarterly  operating data of the
Company  for  each  of  the eight quarters through the period ended December 31,
1998.  In  the  opinion  of management, all necessary adjustments (consisting of
normal recurring adjustments) have been included to present fairly the unaudited
selected  quarterly  operating  data. This data is not necessarily indicative of
the  results  of  the  operations  of  the  Company  for  any  future  period.

<TABLE>
<CAPTION>
                                                                  QUARTER ENDED
                         --------------------------------------------------------------------------------------------------
                          MARCH 31,    JUNE 30,    SEPT. 30,    DEC. 31,    MARCH 31,    JUNE 30,    SEPT. 30,    DEC. 31,
                            1997         1997        1997         1997        1998         1998        1998         1998
                         -----------  ----------  -----------  ----------  -----------  ----------  -----------  ----------
                                                               (DOLLARS IN THOUSANDS)
<S>                      <C>          <C>         <C>          <C>         <C>          <C>         <C>          <C>
STATEMENT OF
OPERATIONS DATA:
Revenues                 $   46,241   $  54,556   $   61,507   $  53,056   $   69,195   $ 103,057   $  112,907   $ 121,194 
Gross profit                  8,686      10,033       11,251      10,090       11,455      16,676       19,007      20,121 
Selling, general and
  administrative              5,663       6,348        7,110       7,391        8,137      11,007       12,055      12,414 
Operating income              2,676       3,206        4,005       2,457        2,701       5,116        6,051       7,302 
MARGIN ANALYSIS:
Gross margin                   18.8%       18.4%        18.3%       19.0%        16.6%       16.2%        16.8%       16.6%
Selling, general and
  administrative               12.3%       11.6%        11.6%       13.9%        11.8%       10.7%        10.7%       10.2%
Operating income                5.8%        5.9%         6.5%        4.6%         3.9%        5.0%         5.4%        6.0%
OPERATING DATA:
Homes closed (units)            215         249          267         241          331         483          508         552 
Average sales price of
 homes closed            $      213   $     215   $      230   $     217   $      209   $     213   $      222   $     220 
</TABLE>

     The  Company  historically  has  experienced,  and in the future expects to
continue  to  experience,  variability in revenues on a quarterly basis. Factors
expected  to contribute to the variability include, among others: (i) the timing
of  home  closings;  (ii)  the Company's ability to continue to acquire land and
options on acceptable terms; (iii) the timing of receipt of regulatory approvals
for  the construction of homes; (iv) the condition of the real estate market and
general  economic  conditions;  (v)  the  cyclical  nature  of  the homebuilding
industry;  (vi)  prevailing  interest  rates  and  the  availability of mortgage
financing;  (vii)  pricing  policies  of  the  Company's competitors; (viii) the
timing  of  the  opening  of new residential projects; (ix) weather; and (x) the
cost and availability of materials and labor. The Company's historical financial
performance  is not necessarily a meaningful indicator of future results and the
Company  expects  its  financial  results  to  vary from project to project from
quarter  to  quarter.

                                       19
<PAGE>
LIQUIDITY  AND  CAPITAL  RESOURCES

     The  Company's  financing  needs  depend  primarily  upon its sales volume,
inventory  levels, inventory turnover and land acquisitions. For the years ended
December  31,  1996,  1997 and 1998, the Company used cash in operations of $7.8
million,  $10.5  million and $19.3 million, respectively. The significant use of
cash  in  operations  of  the  Company  has primarily been due to the increasing
inventory  levels  maintained  by the Company as the Company continues to expand
its  business.  Historically,  the Company has financed its operations primarily
through  its earnings, borrowings from financial institutions, and, prior to the
Company's  initial  public offering on March 12, 1998, capital contributions and
borrowings  from  Pacific  USA,  primarily  for  residential  land  development
acquisitions.

     The  Company  has financed in the past, and intends to continue to finance,
its  operations  with cash from operations and borrowings under construction and
lot  development  credit  facilities. Generally these credit agreements are with
regional and national lenders. Each of the credit agreements relates to specific
markets  and  provides  for  financing  residential land and lot acquisition and
construction.  The  agreements  have  restrictive  covenants  which, among other
things,  limit  speculative  home  building,  debt to tangible net worth ratios,
dividends  and  set a minimum requirement for tangible net worth. The agreements
have various maturity dates and bear interest at rates based on Libor and prime.
At  December  31,  1998, the Company had $18.1 million of available credit under
its  existing  credit facilities. The Company plans to renew these facilities as
they  mature.

     With the exception of the South Florida operation, the Company utilizes lot
options  as  a  method  of  controlling its investments in land. At December 31,
1998,  the  Company  had  1,880  lots  under  option.  At December 31, 1998, the
Company had no material capital commitments with respect to specific performance
lot  purchase  contracts.  In  the  Ft.  Lauderdale/Palm Beach/Miami market, the
Company  is  limited  in  its  ability  to  acquire  finished  lots under option
contracts,  a  factor  which  requires  the  Company to make significant capital
expenditures  in  order  to  maintain  adequate  lot  inventory  in this market.

     At the date hereof the Company had approximately $9,872 million outstanding
under  promissory  notes  incurred  in  connection  with  the  acquisition  of
Westbrooke.  The  promissory notes are to be repaid in equal annual installments
from  1999  through  2003.

     The Company believes it will have adequate financial  resources,  including
availability  under its  credit  facilities,  to meet its  working  capital  and
residential  land  acquisition  and  development   plans  under  current  market
conditions.  However,  there can be no assurance that the amounts available from
such sources will be sufficient. The Company's combined consolidated outstanding
debt was  approximately  $119  million at December 31,  1998.  Accordingly,  the
Company  expects to incur  interest  charges on a  consolidated  basis at higher
levels  than  it  has in the  past.  In  addition,  if  the  Company  identifies
significant  new  acquisition  opportunities  outside of the Company's  existing
markets,  or if the Company's  operations do not generate  sufficient  cash from
operations at levels currently anticipated,  the Company may be required to seek
additional  capital  in the form of equity or debt  financing  from a variety of
potential sources,  including additional bank financings or the issuance of debt
or equity securities.  There can be no assurance that the amounts available from
such sources will be sufficient.  The amount and types of indebtedness which the
Company may incur are limited by the terms of its existing financing agreements.
In addition, the incurrence of additional debt by the Company would increase its
debt service and interest obligations, which could have an adverse effect on the
Company's  results of operations or financial  condition.  If the Company is not
successful  in obtaining  sufficient  capital to fund its planned  expansion and
other  expenditures,  new  projects  may  be  constrained.  Any  such  delay  or
abandonment  could result in a reduction in sales and may  adversely  affect the
Company's future business and results of operations.

INFLATION

     The  Company,  as  well  as  the  homebuilding  industry in general, may be
adversely affected during periods of high inflation, primarily because of higher
land  and  construction  costs.  In addition, higher mortgage interest rates may
significantly  affect  the  affordability  of  permanent  mortgage  financing to
prospective  purchasers.  The  Company attempts to pass through to its customers
any  of its costs through increased sales prices. However, there is no assurance
that  inflation  will not have a material adverse impact on the Company's future
results  of  operations.

                                       20
<PAGE>
YEAR  2000  READINESS  DISCLOSURE

     The Company has assessed and is continuing to assess its operating systems,
computer  software  applications,  computer  equipment  and other equipment with
embedded  electronic  circuits  ("Programs")  that it currently uses to identify
whether they are year 2000 compliant and, if not, what steps are needed to bring
them  into  compliance.  The  Company expects that the majority of all Programs,
including  computer  information  systems  utilized  in  its  homebuilding  and
residential  lot  development operations, will be year 2000 compliant by the end
of  the  second  quarter  of calendar 1999.  For those Programs that will not be
compliant  by then, the Company is reviewing the potential impact on the Company
and  the alternatives that are available to it if the Programs cannot be brought
into  compliance  by  December 31, 1999.  The Company believes that the required
changes  to its Programs will be made on a timely basis without causing material
operational  issues  or having a material impact on its results of operations or
its  financial  position.

     The  Company believes that, should a reasonably likely worst case Year 2000
situation  occur,  the Company, because of the basic nature of its systems, many
of  which  can  be  executed  manually, would not likely suffer material loss or
disruption  in  remedying  the situation.  The costs incurred and expected to be
incurred in the future regarding Year 2000 compliance have been and are expected
to  be  immaterial  to  the  results  of operation and financial position of the
company.  Costs  related  to  Year  2000  compliance  are  expensed as incurred.

     The  Company  has  been  reviewing  whether its significant subcontractors,
suppliers,  financial institutions and other service providers ("Providers") are
Year  2000  compliant.  The  Company  is  not aware of any Providers that do not
expect  to  be compliant; however, the Company has no means of ensuring that its
Providers  will  be Year 2000 ready.  The inability of Providers to be Year 2000
ready  in  a  timely  fashion  could have an adverse impact on the Company.  The
Company  plans to respond to any such contingency involving any of its Providers
by  seeking  to  utilize  alternative sources for such goods and services, where
practicable.  In  addition,  widespread  disruptions  in  the  national  or
international  economy,  including, for example, disruptions affecting financial
markets,  commercial  and  investment  banks,  governmental agencies and utility
services, such as heat, lights, power and telephones, could also have an adverse
impact  on  the Company.  The likelihood and effects of such disruptions are not
determinable  at  this  time.

IMPACT  OF  NEW  ACCOUNTING  STANDARDS

     Derivative  and Hedging Activities - In June 1998, the FASB issued SFAS No.
133,  "Accounting  for  Derivative  Instruments  and  Hedging Activities" ("SFAS
133").  SFAS  133  requires  companies  to recognize all derivative contracts as
either  assets  or  liabilities in the balance sheet and to measure them at fair
value.  If  certain  conditions  are  met,  a  derivative  may  be  specifically
designated  as a hedge, the objective of which is to match the timing of gain or
loss  recognition  on  the  hedging  derivative  with the recognition of (i) the
changes in the fair value of the hedged asset or liability that are attributable
to  the  hedge  risk  or  (ii)  the  earnings  effect  of  the hedged forecasted
transaction.  For  a derivative not designated as a hedging instrument, the gain
or  loss is recognized in income in the period of change.  SFAS 133 is effective
for  all  fiscal  quarters  of  fiscal  years  beginning  after  June  15, 1999.
Historically,  the  Company  has not entered into derivative contracts either to
hedge existing risks or for speculative purposes.  Accordingly, the Company does
not  expect  adoption  of  the  new  standard  on  January 1, 2000 to affect its
financial  statements.

     Start-up  Activities  -  In  June  1998, the Accounting Standards Executive
Committee  of  the  AICPA  issued  SOP  98-5, Reporting on the Costs of Start-up
Activities.  SOP  98-5  requires  all  start-up  and  organizational costs to be
expensed  as  incurred.  It also requires all remaining historically capitalized
amounts  of  these  costs  existing  at  the date of adoption to be expensed and
reported  as  the  cumulative  effect of a change in accounting principles.  SOP
98-5  is  effective for all fiscal years beginning after December 31, 1998.  The
Company  believes that the adoption of SOP 98-5 on January 1, 2000 will not have
a  significant  effect  on  its  financial  statements.

                                       21
<PAGE>
     FASB Amendments and Clarifications - In February 1999, the FASB issued SFAS
No.  135,  Rescission of Financial Accounting Standards Board No. 75 ("SFAS 75")
and  Technical  Corrections.  SFAS  135 rescinds SFAS 75 and amends SFAS No. 35.
SFAS  135  also  amends  other existing authoritative literature to make various
technical  statements  issued  for  fiscal years ending after February 15, 1999.
The  Company  believes that the adoption of SFAS 135 will not have a significant
effect  on  its  financial  statements.


ITEM  7(A).  QUANTITATIVE  AND  QUALITATIVE  DISCLOSURES  ABOUT  MARKET  RISK

     The  Company  is  not  materially  affected  by  any  market risk sensitive
instruments.


ITEM  8.  FINANCIAL  STATEMENTS  AND  SUPPLEMENTARY  DATA

     Financial  Statements  are  set  forth  in  Item  14(a)(1) and (2), and are
incorporated  herein  by  reference.


ITEM  9.  CHANGES  IN  AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING AND
FINANCIAL  DISCLOSURE

     The information called for by this Item is incorporated by reference to the
Company's  Current  Report  on  Form  8-K, dated February 9, 1999 which has been
included  as  Exhibit  20.1  to  this  Form  10-K.


                                    PART III


ITEM  10.  DIRECTORS  AND  EXECUTIVE  OFFICERS  OF  THE  REGISTRANT

     Information  about  the Company's directors is incorporated by reference to
the  Company's  definitive  proxy  statement,  which  will  be  filed  with  the
Securities and Exchange Commission not later than April 30, 1999 (120 days after
the  end of the Company's fiscal year).  The following people were the executive
officers  of  the  Company  on  March  1,  1999.

EXECUTIVE  OFFICERS.  The  Company's  executive  officers  are  as  follows:

<TABLE>
<CAPTION>
NAME                                AGE                     POSITION
----------------------------------  ---  -----------------------------------------------
<S>                                 <C>  <C>
Lonnie M. Fedrick                    54  President, Chief Executive Officer and Director
James M. Carr                        48  Executive Vice President and Director
J. Eric Rome                         39  Executive Vice President -- Homebuilding
B. Coleman Bradley                   38  Executive Vice President -- Land
                                         Acquisition and Development
Terry C. White                       49  Senior Vice President, Chief Financial
                                         Officer, Treasurer and Secretary
</TABLE>

     Lonnie  M.  Fedrick  has served as President and Chief Executive Officer of
the  Company since 1997. Mr. Fedrick has also been President and Chief Executive
Officer  of  Newmark since 1994 and was Executive Vice President of Newmark from
1984  to 1994. Mr. Fedrick co-founded Newmark in 1983 and has more than 31 years
experience  in  the  homebuilding  industry.  Mr.  Fedrick began his career with
Norwood  Homes  in  1967,  most  recently  serving  as  the  Vice  President  of
Construction.  From  1974  to 1983, he served as Vice President of Operations of
Monarch  Homes.  He is a member of the board of directors of the Greater Houston
Builders  Association.

     James M. Carr became Executive Vice President and a Director of the Company
upon  the  closing  of  the  acquisition of Westbrooke by the Company in January
1998.  Mr.  Carr  founded  Westbrooke in 1976, and has served as Chairman, Chief
Executive Officer and President of Westbrooke since its inception. Mr. Carr is a
graduate  of  the  University  of  Miami. He is also the Chairman of the Baptist
Hospital  Foundation  and  a  director  of  Baptist  Health  Systems.

     J.  Eric  Rome has served as Executive Vice President - Homebuilding of the
Company  since  1997.  Mr. Rome has served as President of the Texas Division of
Newmark  since  1996.  He  was Executive Vice President of the Newmark's Central
Texas  Division  from  1995  to  1996,  a  Vice President from 1984 to 1994, and
Construction  Manager of Newmark's Houston division from 1983 to 1984. From 1981
to  1983,  Mr.  Rome  was  employed  by  Monarch  Homes  as  a  construction
superintendent.  He has also served as an officer in various capacities with the
Texas  Capitol  Area  Builders  Association.

     B.  Coleman Bradley has served as Executive Vice President-Land Acquisition
and  Development  of  the  Company  since  1997.  Additionally, he has served as
President  and  Chief  Executive  Officer  of PUDC since its formation  in 1993.
From  1990  to 1993, he directed the land development activities of Pacific USA.
From 1986 to 1990, Mr. Bradley served as Executive Vice President of Real Estate
Decision  Systems,  and  from 1982 to 1986, Mr. Bradley served as President of a
Dallas/Fort  worth  custom  homebuilding  company.

     Terry  C.  White has served as Chief Financial Officer and Treasurer of the
Company  since  1997.  Mr.  White is also Senior Vice President, Chief Financial
Officer  and  Treasurer of Newmark, which he joined in 1984 as Controller. Prior
thereto, Mr. White was employed by Wood Bros. Homes as a division controller and
prior to that he served in various accounting and finance positions with Safeway
Stores,  Inc.  He has played a key role in establishing the Company's accounting
controls  and  management  information  systems. Mr. White is a certified public
accountant  and  a  graduate  of  the  University  of  North  Texas.

     Bill  C.  Bradley,  a  director  of the Company, and B. Coleman Bradley are
father  and  son.  There are no other familial relationships among the executive
officers  and  directors  of  the  Company.

ITEM  11.  EXECUTIVE  COMPENSATION

     The information called for by this item is incorporated by reference to the
Company's  definitive  proxy  statement, which will be filed with the Securities
and Exchange Commission not later than April 30, 1999 (120 days after the end of
the  Company's  fiscal  year).


Item  12.  SECURITY  OWNERSHIP  OF  CERTAIN  BENEFICIAL  OWNERS  AND  MANAGEMENT

     The information called for by this item is incorporated by reference to the
Company's  definitive  proxy  statement, which will be filed with the Securities
and Exchange Commission not later than April 30, 1999 (120 days after the end of
the  Company's  fiscal  year).


ITEM  13.  CERTAIN  RELATIONSHIPS  AND  RELATED  TRANSACTIONS

     The information called for by this item is incorporated by reference to the
Company's  definitive  proxy  statement, which will be filed with the Securities
and Exchange Commission not later than April 30, 1999 (120 days after the end of
the  Company's  fiscal  year).


                                     PART IV


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


(a)  Financial   Statements  and  Financial   Statement  Schedules

     1.   Financial Statements

          Reports of independent certified public accountants
          Consolidated Balance Sheets as of December 31, 1997 and 1998

                                       22
<PAGE>
          Consolidated Statements of Operations for the Years Ended December 31,
          1996, 1997 and 1998
          Consolidated  Statements of  Stockholders'  Equity for the Years Ended
          December 31, 1996, 1997 and 1998
          Consolidated Statements of Cash Flows for the Years Ended December 31,
          1996, 1997 and 1998
          Notes to Consolidated Financial Statements

     2.   Financial Statement Schedules

          Schedule I - Condensed  Financial  Information  of  Registrant  Parent
                       Company Only  Balance  Sheets  as  of  December 31,  1997
                       and 1998
                       Condensed  Financial  Information  of  Registrant  Parent
                       Company  Only  Statements  of  Operations  Years  Ended
                       December 31, 1996, 1997, and 1998
                       Condensed  Financial  Information  of  Registrant  Parent
                       Company Only Statements of Cash Flows For the Years Ended
                       December 31, 1996,  1997, and 1998
          Schedule II- Valuation  and  Qualifying  Accounts for the Years  Ended
                       December 31, 1996, 1997, and 1998.
          Schedule III-Properties and Accumulated  Depreciation  as  of
                       December 31, 1998

     3.   Exhibits required to be filed by Item 601 of Regulation S-K.

<TABLE>
<CAPTION>
EXHIBIT
 NUMBER                                        EXHIBIT
--------  ------------------------------------------------------------------------------------------------
<C>       <S>

     2.1  Stock Purchase Agreement dated January 15, 1998 among James Carr, Westbrooke
          Communities, Inc., Westbrooke at West Lake, Inc., Westbrooke at Winston Trails, Inc.,
          Westbrooke at Pembroke Pines, Inc., Westbrooke at Oak Ridge Inc.,  Harold L. Eisenacher,
          Leonard R. Chernys, Diana Ibarria, The Westbrooke Partnership, Pacific USA Holdings Corp.,
          Newmark Homes Corp., and Westbrooke Acquisition Corp is hereby incorporated by
          reference to Exhibit 10.27 of the Registrant's Registration Statement on Form S-1,
          Amendment Number 3, filed with the Securities and Exchange Commission on March 5, 1998,
          File No. 333-42213.
  2.1(b)  Form of Addendum to Stock Purchase Agreement, effective January 15, 1998 is hereby
          incorporated by reference to Exhibit 10.27(b) of the Registrant's Registration Statement on
          Form S-1, Amendment Number 3, filed with the Securities and Exchange Commission on
          March 5, 1998, File No. 333-42213.
     3.1  Amended and Restated Articles of Incorporation is hereby incorporated by reference to
          Exhibit 3.1 of the Registrant's Registration Statement on Form S-1, Amendment Number 3,
          filed with the Securities and Exchange Commission on March 5, 1998, File No. 333-42213.
     3.2  Bylaws are hereby incorporated by reference to Exhibit 3.2 of the Registrant's registration
          Statement on Form S-1, Amendment Number 3, filed with the Securities and Exchange
          Commission on March 5, 1998, File No. 333-42213.
     4.1  Specimen of Registrant's Stock Certificate is hereby incorporated by reference to Exhibit 4.1
          of the Registrant's Registration Statement on Form S-1, Amendment Number 3, filed with the
          Securities and Exchange Commission on March 5, 1998, File No. 333-42213.
    10.1  Form of Tax Allocation Agreement ("Tax Agreement") between Pacific USA and various
          affiliates and subsidiaries, of Pacific USA, including the Registrant. Dated April 28. 1992 is
          hereby incorporated by reference to Exhibit 10.6(a) of the Registrant's Registration Statement
          on Form S-1, Amendment Number 3, filed with the Securities and Exchange Commission on
          March 5, 1998, File No. 333-42213.
    10.2  Form of Amendment to Tax Agreement is hereby incorporated by reference to Exhibit 10.6(b)
          of the Registrant's Registration Statement on Form S-1, Amendment Number 3, filed with the
          Securities and Exchange Commission on March 5, 1998, File No. 333-42213.

                                       23
<PAGE>
EXHIBIT
 NUMBER                                        EXHIBIT
--------  ------------------------------------------------------------------------------------------------
    10.3  1998 Tandem Stock Option/Stock Appreciation Rights Plan, with form of incentive plan
          agreement is hereby incorporated by reference to Exhibit 10.14 of the Registrant's
          Registration Statement on Form S-1, Amendment Number 3, filed with the Securities and
          Exchange Commission on March 5, 1998, File No. 333-42213.
    10.4  Employment Agreement between Newmark Homes Corp. and Terry White dated January 1,
          1998 is hereby incorporated by reference to Exhibit 10.17 of the Registrant's Registration
          Statement on Form S-1, Amendment Number 3, filed with the Securities and Exchange
          Commission on March 5, 1998, File No. 333-42213.
    10.5  Employment Agreement Between Newmark Homes Corp. and Eric Rome dated January 1,
          1998 is hereby incorporated by reference to Exhibit 10.18 of the Registrant's Registration
          Statement on Form S-1, Amendment Number 3, filed with the Securities and Exchange
          Commission on March 5, 1998, File No. 333-42213.
    10.6  Employment Agreement between Pacific United Development Corp. and Coleman Bradley
          effective January 1, 1998.
    10.7  Employment Agreement Between Newmark Homes Corp. and James Carr dated January 1,
          1998 is hereby incorporated by reference to Exhibit 10.26 of the Registrant's Registration
          Statement on Form S-1, Amendment Number 3, filed with the Securities and Exchange
          Commission on March 5, 1998, File No. 333-42213.
    10.8  Employment Agreement between Newmark Homes Corp. and Lonnie M. Fedrick dated
          January 1, 1998 is hereby incorporated by reference to Exhibit 10.28 of the Registrant's
          Registration Statement on Form S-1, Amendment Number 3, filed with the Securities and
          Exchange Commission on March 5, 1998, File No. 333-42213.
    11.1  Statement relating to computation of per share earnings.
    12.1  Statement relating to computation of ratios.
    16.1  Letter relating to change in certifying accountant is incorporated by reference to Exhibit 16.1
          of Registrant's Current Report on Form 8-K dated February 9, 1999.
    20.1  Registrant's Current Report on Form 8-K dated February 9, 1999
    21.1  List of subsidiaries.
    24.1  Power of Attorney is contained on the Signature Page hereof.
    27.1  Financial Data Schedule
<FN>

(b)     Reports  on  Form  8-K

        The  Registrant  did  not  file  any Current Report on Form 8-K during the quarter ended
        December 31, 1998.
</TABLE>

                                       24
<PAGE>
                                   SIGNATURES

     Pursuant  to  the  requirements  of  Section  13 or 15(d) of the Securities
Exchange  Act  of 1934, this registrant has duly caused this report to be signed
on  its  behalf  by  the  undersigned,  thereunto  duly  authorized.

                                       NEWMARK  HOMES  CORP.


March  31,  1999                  By:  /S/ Lonnie  M.  Fedrick
                                       -----------------------------------------
Date                                   Name:  Lonnie  M.  Fedrick
                                       Title: Chief  Executive  Officer
                                              (Principal Executive Officer)


March  31,  1999                  By:  /S/ Terry  C.  White
                                       -----------------------------------------
Date                                   Name:  Terry  C.  White
                                       Title: Senior Vice President, Chief
                                              Financial Officer, Treasurer
                                              and Secretary (Principal Financial
                                              and Accounting Officer)



                                POWER OF ATTORNEY

     KNOW  ALL  PERSONS  BY  THESE  PRESENTS,  that  each person whose signature
appears  below  constitutes  and appoints Michael K. McCraw and Larry D. Horner,
and  each  of  them, his true and lawful attorneys-in-fact and agents, each with
full  power  of  substitution and resubstitution, to sign any and all amendments
(including  post-effective amendments) to this Annual Report on Form 10-K and to
file  the  same,  with  exhibits  thereto  and  other  documents  in  connection
therewith,  with  the  Securities  and  Exchange  Commission, granting unto said
attorneys-in-fact  and  agents, and each of them, full power and authority to do
and  perform  each and every act and thing requisite and necessary to be done in
connection therewith, as fully to all intents and purposes as he or she might or
could  do  in  person,  hereby  ratifying  and  confirming  all  that  said
attorneys-in-fact,  or their substitute or substitutes, or any of them, shall do
or  cause  to  be  done  by  virtue  hereof.


     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  and  on  the  dates  indicated.



March 31, 1999                          /S/ William  A.  Hassler
                                        -----------------------------------
Date                                    Name:   William  A.  Hassler
                                        Title:  Director



March 31, 1999                          /S/ Jon  P.  Newton
                                        -----------------------------------
Date                                    Name:  Jon  P.  Newton
                                        Title: Director



March 31, 1999                          /S/ Larry  D.  Horner
                                        -----------------------------------
Date                                    Name:  Larry  D.  Horner
                                        Title: Director

                                       25
<PAGE>
March 31, 1999                          /S/ Bill  C.  Bradley
                                        -----------------------------------
Date                                    Name:  Bill  C.  Bradley
                                        Title: Director



March 31, 1999                          /S/ Michael  K.  McCraw
                                        -----------------------------------
Date                                    Name:  Michael  K.  McCraw
                                        Title: Director



March 31, 1999                          /S/ James  M.  Carr
                                        -----------------------------------
Date                                    Name:  James  M.  Carr
                                        Title: Director



March 31, 1999                          /S/ Lonnie  M.  Fedrick
                                        -----------------------------------
Date                                    Name:  Lonnie  M.  Fedrick
                                        Title: Director

                                       26
<PAGE>








                                    NEWMARK HOMES CORP. AND SUBSIDIARIES

                                    ============================================

                                               CONSOLIDATED FINANCIAL STATEMENTS
                                    YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998








<PAGE>

     REPORTS  OF  INDEPENDENT  CERTIFIED  PUBLIC  ACCOUNTANTS               2-3


     CONSOLIDATED  FINANCIAL  STATEMENTS

       Balance  sheets                                                      4-5

       Statements  of  operations                                             6

       Statements  of  stockholders'  equity                                  7

       Statements  of  cash  flows                                          8-9


     NOTES  TO  CONSOLIDATED  FINANCIAL  STATEMENTS                       10-28

<PAGE>

REPORT  OF  INDEPENDENT  CERTIFIED  PUBLIC  ACCOUNTANTS


The  Board  of  Directors
Newmark  Homes  Corp.:

We  have  audited  the  accompanying consolidated balance sheet of Newmark Homes
Corp.  and  subsidiaries  (the  "Company"), a subsidiary of Pacific USA Holdings
Corp.,  as  of  December  31,  1998,  and the related consolidated statements of
operations, stockholders' equity, and cash flows for the year ended December 31,
1998.  We  have  also  audited  the  schedules listed in the accompanying index.
These  consolidated financial statements and schedules are the responsibility of
the  Company's management.  Our responsibility is to express an opinion on these
consolidated  financial statements and schedules based on our audit.  We did not
audit  the  financial statements of Westbrooke Acquisition Corp., a consolidated
subsidiary,  for  the year ended December 31, 1998, which statements reflect the
total  assets  and total revenues constituting 27% and 29%, respectively, of the
related  consolidated  totals  for  that year.  Those statements were audited by
other  auditors  whose report has been furnished to us, and our opinion, insofar
as  it relates to the amounts included for Westbrooke Acquisition Corp., for the
year  ended  December  31,  1998  is  based  solely  on  the report of the other
auditors.

We conducted our audit 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  and schedules 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 significant estimates
made  by  management,  as  well  as  evaluating  the overall presentation of the
financial statements and schedules.  We believe that our audit and the report of
the  other  auditors  provide  a  reasonable  basis  for  our  opinion.

In  our  opinion,  based  on our audit and the report of the other auditors, the
consolidated  financial  statements,  referred  to above, present fairly, in all
material  respects, the financial position of the Company and subsidiaries as of
December  31, 1998, and the results of their operations and their cash flows for
the  year  ended  December  31,  1998  in  conformity  with  generally  accepted
accounting  principles.

Also,  in  our  opinion, the schedules present fairly, in all material respects,
the  information  set  forth  therein.


/s/  BDO  Seidman,  LLP

Los  Angeles,  California
February  12,  1999

<PAGE>

INDEPENDENT  AUDITORS' REPORT


The  Board  of  Directors  and  Stockholders
Newmark  Homes  Corp.:

We  have  audited  the  accompanying consolidated balance sheet of Newmark Homes
Corp.  and  subsidiaries  as  of December 31, 1997, and the related consolidated
statements  of  operations, stockholders' equity, and cash flows for each of the
years  in  the  two-year period ended December 31, 1997.  In connection with our
audits  of  the  consolidated  financial  statements,  we  also have audited the
financial  statement  schedules  as  of  December  31, 1997, and for each of the
years  in  the  two-year  period  ended  December  31,  1997,  as  listed in the
accompanying  index  at  Item  14.  These  consolidated financial statements and
financial  statement  schedules  are  the  responsibility  of  the  Company's
management.  Our  responsibility  is to express an opinion on these consolidated
financial  statements  and  financial  statement  schedules 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  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, the consolidated financial statements referred to above present
fairly,  in all material respects, the financial position of Newmark Homes Corp.
and  subsidiaries  as  of December 31, 1997, and the results of their operations
and their cash flows for each of the years in the two-year period ended December
31,  1997, in conformity with generally accepted accounting principles.  Also in
our  opinion,  the  related  financial  statement  schedules, when considered in
relation  to  the  basic  consolidated  financial  statements  taken as a whole,
present  fairly,  in  all  material respects, the information set forth therein.


                                  /s/ KPMG LLP

Dallas,  Texas
January  23,  1998

<PAGE>
<TABLE>
<CAPTION>
                                                              NEWMARK HOMES CORP. AND SUBSIDIARIES

                                                                       CONSOLIDATED BALANCE SHEETS
                                                              (IN THOUSANDS, EXCEPT SHARE AMOUNTS)
==================================================================================================



December 31,                                                                      1997      1998
------------------------------------------------------------------------------  --------  --------
<S>                                                                             <C>       <C>
ASSETS

  CASH                                                                          $    746  $  5,794
  RECEIVABLES:
      Title companies                                                                842     2,293
      Affiliates                                                                     656         -
      Other                                                                          231     4,674
                                                                                --------  --------
        Total Receivables                                                          1,729     6,967
                                                                                --------  --------

  INVENTORIES (Notes 4 and 6):
      Single family residences                                                    75,411   137,317
      Lots                                                                        27,136    47,930
                                                                                --------  --------
        Total Inventories                                                        102,547   185,247
                                                                                --------  --------

  INVESTMENT IN UNCONSOLIDATED SUBSIDIARIES (Note 5)                                 327       490

  PROPERTY, PREMISES AND EQUIPMENT, net of accumulated depreciation of $952 and
  $2,278 in 1997 and 1998, respectively                                            2,790     5,381

  DEFERRED TAX ASSET net (Note 9)                                                    857       723

  OTHER ASSETS (Note 4)                                                            2,670     3,092

  GOODWILL, net of accumulated amortization of  $3,773 and $5,173 in 1997 and
  1998, respectively (Note 3)                                                     27,547    37,644
------------------------------------------------------------------------------  --------  --------

Total assets                                                                    $139,213  $245,338
==============================================================================  ========  ========
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
December 31,                                                                  1997      1998
--------------------------------------------------------------------------  --------  --------
<S>                                                                         <C>       <C>
LIABILITIES AND STOCKHOLDERS' EQUITY

  CONSTRUCTION LOANS PAYABLE (Note 6)                                       $ 66,100  $106,839

  ACQUISITION NOTES PAYABLE (Note 3)                                               -    12,341

  PAYABLES TO AFFILIATES (Notes 7 and 9)                                       1,775     2,442

  ACCOUNTS PAYABLE AND ACCRUED LIABILITIES (Notes 3)                          10,963    22,935

  OTHER LIABILITIES (Note 10)                                                  4,684    10,669
                                                                            --------  --------

Total liabilities                                                             83,522   155,226
                                                                            --------  --------

COMMITMENTS AND CONTINGENCIES (Notes 3, 6 and 10)

STOCKHOLDERS' EQUITY (Note 6):
  Common stock - $.01 par value; 30,000,000 shares authorized, 9,200,000 at
     December 31, 1997 and 11,500,000 at December 31, 1998, issued and
  outstanding                                                                     92       115
     Additional paid-in capital                                               52,165    73,768
     Retained earnings                                                         3,434    16,229
                                                                            --------  --------

  Total stockholders' equity                                                  55,691    90,112
                                                                            --------  --------

Total liabilities and stockholders' equity                                  $139,213  $245,338
==========================================================================  ========  ========
</TABLE>
                    See accompanying notes to consolidated financial statements.

<PAGE>
<TABLE>
<CAPTION>
                                                              NEWMARK HOMES CORP. AND SUBSIDIARIES

                                                             CONSOLIDATED STATEMENTS OF OPERATIONS
                                                              (IN THOUSANDS, EXCEPT SHARE AMOUNTS)
==================================================================================================

Year ended December 31,                                           1996         1997          1998
-------------------------------------------------------------  -----------  -----------  ------------
<S>                                                            <C>          <C>          <C>

REVENUES                                                       $  190,855   $  215,360   $   406,353 

COST OF SALES (Note 4)                                            156,264      175,300       339,094 
                                                               -----------  -----------  ------------

GROSS PROFIT                                                       34,591       40,060        67,259 

EQUITY IN EARNINGS FROM UNCONSOLIDATED SUBSIDIARIES
 (Note 5)                                                             792          465           812 

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES                      (22,976)     (26,512)      (43,614)

DEPRECIATION AND AMORTIZATION                                      (1,524)      (1,669)       (3,287)
                                                               -----------  -----------  ------------

OPERATING INCOME                                                   10,883       12,344        21,170 

OTHER INCOME (EXPENSE):
  Interest expense (Notes 4 and 7)                                 (1,238)      (1,987)       (1,939)
  Other income, net (Note 8)                                          851          570         1,201 
                                                               -----------  -----------  ------------

INCOME BEFORE INCOME TAXES                                         10,496       10,927        20,432 

INCOME TAXES (Note 9)                                               4,164        4,272         7,637 
                                                               -----------  -----------  ------------

NET INCOME                                                     $    6,332        6,655   $    12,795 
=============================================================  ===========  ===========  ============

EARNINGS PER COMMON SHARE:
  Basic                                                        $     0.69         0.72   $      1.16 
  Diluted                                                            0.69         0.72          1.16 
=============================================================  ===========  ===========  ============

WEIGHTED AVERAGE NUMBER OF SHARES OF COMMON
  STOCK EQUIVALENTS OUTSTANDING:
  Basic                                                         9,200,000    9,200,000    11,035,342 
  Diluted                                                       9,200,000    9,200,000    11,035,342 
=============================================================  ===========  ===========  ============
                   See accompanying notes to consolidated financial statements.
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
                                                              NEWMARK HOMES CORP. AND SUBSIDIARIES

                                                    CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                                                                                    (IN THOUSANDS)
==================================================================================================

                                                            Additional
                                                  Common     Paid-in      Retained
                                                   Stock     Capital      Earnings    Total
                                                  -------  ------------  ----------  --------
<S>                                               <C>      <C>           <C>         <C>
BALANCE, December 31, 1995                        $    92  $    43,439   $   2,282   $45,813 

  Capital contribution                                  -        1,247           -     1,247 
  Dividends paid                                        -       (2,271)     (7,192)   (9,463)
  Net income                                            -            -       6,332     6,332 
------------------------------------------------  -------  ------------  ----------  --------

BALANCE, December 31, 1996                             92       42,415       1,422    43,929 

  Capital contribution (Note 7)                         -        9,917           -     9,917 
  Dividends paid                                        -         (167)     (4,643)   (4,810)
  Net income                                            -            -       6,655     6,655 
------------------------------------------------  -------  ------------  ----------  --------

BALANCE, December 31, 1997                             92       52,165       3,434    55,691 

  Initial public offering of common stock, net of
    issuance costs of $2,554,000                       20       18,426           -    18,446 
  Issuance of common stock due to the exercise of
    underwriters over-allotment option, net of
    issuance costs of $271,000
                                                        3        2,876           -     2,879 
  Capital contribution                                  -          301           -       301 
  Net income                                            -            -      12,795    12,795 
------------------------------------------------  -------  ------------  ----------  --------

BALANCE, December 31, 1998                        $   115  $    73,768   $  16,229   $90,112 
================================================  =======  ============  ==========  ========
</TABLE>
                    See accompanying notes to consolidated financial statements.

<PAGE>
<TABLE>
<CAPTION>
                                                              NEWMARK HOMES CORP. AND SUBSIDIARIES

                                                              CONSOLIDATED STATEMENTS OF CASH FLOW
                                                              (IN THOUSANDS, EXCEPT SHARE AMOUNTS)
==================================================================================================

INCREASE  (DECREASE)  IN  CASH

Year ended December 31,                                            1996        1997        1998
--------------------------------------------------------------  ----------  ----------  ----------
<S>                                                             <C>         <C>         <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net income                                                    $   6,332   $   6,655   $  12,795 
  Adjustments to reconcile net income to net cash used in
   operating activities:
    Depreciation and amortization                                   1,524       1,669       3,287 
    Net (gain) loss on sale of property, premises and equipment       (82)         44          27 
    Equity in earnings from unconsolidated subsidiaries              (792)       (465)       (812)
    Deferred tax (benefit) expense                                   (518)        109         134 
    Compensation costs paid by parent                                   -         313           - 
    Changes in operating assets and liabilities net of effects
     from purchase of Westbrooke Communities, Inc.:
      Inventory and land held for development, net                (18,664)    (19,026)    (41,998)
      Receivables - title companies                                  (269)        522      (1,451)
      Receivables - affiliates and other                             (438)          5      (2,247)
      Other assets                                                    (49)     (1,252)      1,417 
      Payable to affiliates                                         1,091        (287)        667 
      Accounts payable and accrued liabilities                      2,473         801       2,930 
      Other liabilities                                             1,612         428       5,985 
--------------------------------------------------------------  ----------  ----------  ----------

Net cash used in operating activities                              (7,780)    (10,484)    (19,266)
--------------------------------------------------------------  ----------  ----------  ----------

CASH FLOWS FROM INVESTING ACTIVITIES
  Proceeds from maturity of certificate of deposit                  1,000       1,000           - 
  Purchase of certificate deposit                                  (1,000)          -           - 
  Repayment of note receivable                                      3,034           -           - 
  Purchases of property, premises and equipment                    (1,285)     (1,812)     (2,134)
  Proceeds from sales of property, premises and equipment             216          33          44 
  Increase in goodwill for acquisition costs                            -           -      (1,338)
  Purchase of Westbrooke, net of cash acquired                          -           -       3,618 
  Other                                                               (34)        (32)          - 
  Investment in unconsolidated subsidiaries                             -        (105)       (255)
  Distributions from unconsolidated subsidiaries                    1,117       1,691         903 
--------------------------------------------------------------  ----------  ----------  ----------

Net cash provided by investing activities                           3,048         775         838 
--------------------------------------------------------------  ----------  ----------  ----------

CASH FLOWS FROM FINANCING ACTIVITIES
  Net proceeds from initial public offering of common stock             -           -      18,446 
  Net proceeds from underwriters over-allotment option                  -           -       2,879 
  Capital contributions received                                    1,247         181         301 
  Dividends paid                                                   (9,463)     (4,810)          - 


  Proceeds from advances on construction loans payable            133,349     140,101     279,694 
  Principal payments on construction loans payable               (116,746)   (130,463)   (261,263)

<PAGE>
  Principal payments on acquisition notes payable                       -           -     (16,581)
  Proceeds from advances on notes payable to affiliate              4,455       8,373           - 
  Principal payments on notes payable to affiliate                 (7,718)     (3,569)          - 
--------------------------------------------------------------  ----------  ----------  ----------

Net cash provided by financing activities                           5,124       9,813      23,476 
--------------------------------------------------------------  ----------  ----------  ----------

INCREASE IN CASH                                                      392         104       5,048 

CASH, beginning of year                                               250         642         746 
--------------------------------------------------------------  ----------  ----------  ----------

CASH, end of year                                               $     642   $     746   $   5,794 
==============================================================  ==========  ==========  ==========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
  Cash paid for:
    Interest                                                    $   4,928   $   5,939   $   9,501 
    Income taxes                                                $   3,164   $   4,182   $   7,456 
==============================================================  ==========  ==========  ==========
</TABLE>

See accompanying  Notes 3 and 7 for supplemental disclosure of noncash investing
and financing activities.

See  accompanying  notes  to  consolidated  financial  statements.

<PAGE>
                                            NEWMARK HOMES CORP. AND SUBSIDIARIES


                                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                            (IN THOUSANDS, EXCEPT SHARE AMOUNTS)
================================================================================


1.   ORGANIZATION

     Newmark Homes Corp.  (NHC) and  subsidiaries  (the Company) is an 80% owned
     subsidiary  of Pacific  Realty Group (PRG) and  ultimately a subsidiary  of
     Pacific USA Holdings Corp. (PUSA). NHC was formed in December 1994 to serve
     as a real estate holding company.


     NHC's primary subsidiaries are as follows:

<TABLE>
<CAPTION>
SUBSIDIARY                              NATURE OF BUSINESS
---------------------------  -----------------------------------------
<S>                          <C>

Newmark Home Corporation     Single-family residential homebuilding in
  (Newmark)                  Texas, Tennessee and North Carolina-
                             formed in 1983.

Westbrooke Communities,      Single-family residential homebuilding in
  Inc. (Westbrooke)          Florida-formed in 1976.

The Adler Companies, Inc.    Single-family residential homebuilding in
  (Adler)                    Florida-formed in 1990.

Pacific United Development   Residential lot developer in Texas and
  Corporation (PUDC)         Tennessee-formed in 1993.
</TABLE>


2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     The accounting and reporting  policies of the Company  conform to generally
     accepted   accounting   principles   and  general   practices   within  the
     homebuilding  industry.  The following  summarizes the more  significant of
     these policies.


     BASIS OF PRESENTATION

     The  consolidated  financial  statements  include  the  accounts of NHC and
     itssubsidiaries.  All significant  intercompany  balances and  transactions
     have been eliminated in the consolidated financial statements.

     USE OF ESTIMATES

     The  preparation  of financial  statements  in  accordance  with  generally
     accepted  accounting  principles  requires management to make estimates and
     assumptions  that affect the amounts  reported in the financial  statements
     and accompanying notes. Actual results could differ from those estimates.

<PAGE>

     ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS

     Effective  January 1, 1996, the Company adopted the provisions of Statement
     of  Financial  Accounting  Standards  (SFAS) No.  121,  Accounting  for the
     Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of
     (Statement 121).  Statement 121 addresses the accounting for the impairment
     of long-lived assets,  certain  identifiable  intangibles and goodwill when
     events or changes in circumstances  indicate that the carrying amount of an
     asset may not be recoverable.  Impairment is evaluated by estimating future
     undiscounted  cash flows  expected  to result from the use of the asset and
     its eventual  disposition.  If the sum of the expected future cash flows is
     less  than  the  carrying  amount  of the  assets,  an  impairment  loss is
     recognized. Fair value, for purposes of calculating impairment, is measured
     based  on  undiscounted  future  cash  flows.  The  Company's  adoption  of
     Statement 121 had no effect on the Company's  financial position or results
     of operations.

     GEOGRAPHIC CONCENTRATION OF BUSINESS

     The Company conducts business  primarily in Texas,  Florida,  Tennessee and
     North Carolina. Accordingly, the market value of the Company's inventory is
     susceptible  to  changes  in  market  conditions  that may  occur in Texas,
     Florida, Tennessee and North Carolina.

     RECEIVABLES FROM TITLE COMPANIES

     Receivables  from title  companies  consist of sales proceeds due for homes
     sold  and  closed,  less  amounts  withheld  by  the  title  companies  for
     disbursement to third parties.

<PAGE>

     INVENTORY

     Single  family  residences  and lots are  recorded  at the lower of cost or
     estimated net  realizable  value.  Net  realizable  value is defined as the
     estimated  proceeds  upon  disposition,  less  applicable  future  costs to
     complete and sell.  Construction costs are accumulated during the period of
     construction.  The Company utilizes the specific  identification  method of
     charging  construction  costs to cost of sales as units  are  sold.  Common
     construction overhead costs are allocated to each individual unit (home) in
     the  various  subdivisions  based  upon  the  total  number  of units to be
     constructed in each subdivision community.

     Interest cost and overhead  related to construction  activities,  primarily
     salaries and benefits of supervisors and support staff,  are capitalized as
     construction  costs during the  construction  period and charged to cost of
     sales as the related inventories are sold. General and administrative costs
     and selling costs are expensed at the time they are incurred.

     PROPERTY, PREMISES AND EQUIPMENT

     Property, premises and equipment,  consisting primarily of office premises,
     transportation  equipment,  office  furniture and fixtures,  and model home
     furniture,  are  carried at cost net of  accumulated  depreciation.  Office
     premises  and   transportation   equipment   are   depreciated   using  the
     straight-line  method  over  thirty  years  and five  years,  respectively.
     Furniture  and  fixtures  and model home  furniture  are  depreciated  over
     estimated useful lives of three to seven years using the declining  balance
     method switching to the straight-line method in the year that depreciation,
     computed on the  straight-line  method,  equals or exceeds that  determined
     under the declining-balance method.

<PAGE>

     PURCHASE OPTIONS

     The Company enters into lot option contracts and contracts to purchase land
     for lot  development.  When the Company  does not  exercise an option,  its
     liability is limited to the  forfeiture  of the related  deposit  (note 4).
     Consequently,  the  Company's  policy is to record the lots or land and the
     related  liabilities  at the time such are  purchased  and legal  title has
     passed.

     GOODWILL

     The excess of the purchase price paid by the Company over the fair value of
     net assets  acquired is recorded as goodwill  and is being  amortized  on a
     straight-line basis over 30 years.

     The Company evaluates  goodwill for impairment  periodically by determining
     whether the  amortization  of the balance  over its  remaining  life can be
     recovered through future cash flows of the Company.

     REVENUE RECOGNITION

     Revenue is recognized at the time of the closing of the sale, when title to
     and possession of the property transfers to the buyer.

     ADVERTISING COSTS

     As incurred,  the Company expenses advertising costs,  consisting primarily
     of newspaper and trade publications, signage and the cost of maintaining an
     internet web site.  Advertising  expense  included in selling,  general and
     administrative  expenses for the years ended  December  31, 1996,  1997 and
     1998 was  approximately  $3.1  million,  $3.5  million  and  $6.7  million,
     respectively.

<PAGE>

     INCOME TAXES

     The Company is included in the  consolidated  federal  income tax return of
     PUSA.  Under a tax sharing  agreement with PUSA, the Company is required to
     calculate  its federal  income tax on a separate  company  basis and pay to
     PUSA the amount of the liability. When applicable,  the Company is entitled
     to receive  payments  from PUSA.  Such  payment is only  applicable  to the
     extent the benefits  calculated  can be utilized to offset  prior  separate
     company income through  carryback or, if carried forward,  at the time such
     benefits are utilized to offset separate company income.

     Income  taxes are  accounted  for using  the  asset and  liability  method.
     Deferred  tax  assets and  liabilities  are  recognized  for the future tax
     consequences  attributable to differences  between the financial  statement
     carrying  amounts of existing assets and  liabilities and their  respective
     tax basis.  Deferred tax assets and  liabilities are measured using enacted
     tax rates  expected to apply to taxable  income in the years in which those
     temporary  differences are expected to be recovered or settled.  The effect
     on  deferred  tax  assets  and  liabilities  of a  change  in tax  rates is
     recognized in income in the period that includes the enactment date.

     EARNINGS PER SHARE

     In March 1997, the Financial  Accounting  Standards board issued Statements
     of Financial  Accounting  Standards No. 128, "Earnings Per Share" (SFAS No.
     128). This Statement establishes new standards for computing and presenting
     earnings per share (EPS). SFAS No. 128 replaces the presentation of primary
     EPS  previously  prescribed by Accounting  Principles  Board Opinion No. 15
     (APB No. 15) with a presentation of basic EPS which is computed by dividing
     income available to common stockholders by the  weighted-average  number of
     common shares outstanding for the period.

<PAGE>

     EARNINGS PER SHARE (CONTINUED)

     SFAS No. 128 also  requires  dual  presentation  of basic and diluted  EPS.
     Diluted EPS is computed  similarly to fully diluted EPS pursuant to APB No.
     15. Diluted  earnings per share are computed based on the weighted  average
     number of shares of common stock and dilutive securities outstanding during
     the period.  Dilutive  securities  are options that are freely  exercisable
     into common stock at less than market exercise prices.  Dilutive securities
     are not included in the weighted  average  number of shares when  inclusion
     would increase the earnings per share or decrease the loss per share.

     The following tables reconcile the computation of basic and diluted EPS for
     the years ended December 31, 1996, 1997 and 1998.

<TABLE>
<CAPTION>
                                         Year Ended December 31,
                                   -----------------------------------
                                      1996        1997        1998
                                   ----------  ----------  -----------
<S>                                <C>         <C>         <C>

Income available to common
  shareholders (Numerator)         $6,332,000  $6,655,000  $12,795,000

Weighted average of shares
  outstanding (Denominator)         9,200,000   9,200,000   11,035,342

Basic EPS                          $     0.69  $     0.72  $      1.16

Effect of dilutive securities
  1998 Tandem Stock Option Plan             -           -            -

Diluted EPS                        $     0.69  $     0.72  $      1.16
---------------------------------  ----------  ----------  -----------
</TABLE>

<PAGE>

     FAIR VALUE OF FINANCIAL INSTRUMENTS

     Statement of Financial  Accounting  Standards No. 107,  "Disclosures  about
     Fair Value of Financial  Instruments,"  requires  companies to disclose the
     estimated fair value of their financial  instrument assets and liabilities.
     Fair  value  estimates  are made at a  specific  point in time,  based upon
     relevant market information about the financial instrument. These estimates
     do not reflect any premium or discount  that could result from offering for
     sale at one time the Company's entire holdings of a particular  instrument.
     The  carrying  values of cash,  other  receivables,  accounts  payable  and
     accrued  liabilities  approximate their fair values due to their short-term
     nature.  The  carrying  value  of  construction  loans  and  notes  payable
     approximates  its  fair  value  as  substantially  all  of the  debt  has a
     fluctuating  interest rate based upon a current market index.  The carrying
     amount of the acquisition notes payable approximate their fair value.

     RECENT ACCOUNTING PRONOUNCEMENTS

     Statement of Financial Accounting Standard No. 133 (SFAS 133),  "Accounting
     for Derivative Instruments and Hedging Activities," issued by the Financial
     Accounting  Standards  Board is effective for all fiscal quarters of fiscal
     years beginning after June 15, 1999. This statement establishes  accounting
     and  reporting  standards for  derivative  instruments,  including  certain
     derivative  instruments  embedded  in  other  contracts,  and  for  hedging
     activities.  The Company does not expect adoption to have any effect on its
     financial position, results of operations and cash flows.

<PAGE>

3.   ACQUISITIONS

     WESTBROOKE ACQUISITION

     Effective January 1, 1998, the Company, through its wholly-owned subsidiary
     Westbrooke  Acquisition  Corp.,  acquired all of the  outstanding  stock of
     Westbrooke Communities, Inc. and its affiliated entities ("Westbrooke"),  a
     single-family home builder in South Florida. The initial purchase price for
     Westbrooke  was $18.9 million in the form of three  promissory  notes.  The
     note of $6.6  million  bearing an interest  rate of 9%, was paid in full in
     December 1998. The remaining  notes totaling $12.3 million bear interest at
     6.45% payable  annually.  The notes are payable in annual  installments  of
     $2,468,200  beginning  in  January  1999 and are  guaranteed  by  PUSA.  In
     addition to the  promissory  notes,  the  purchase  agreement  requires the
     Company to pay additional  consideration  of up to $7.5 million  contingent
     upon  Westbrooke  achieving  specified  income  targets  over the next five
     years. In order for the  consideration to be paid,  Westbrooke must achieve
     net income before income tax (as defined in the stock  purchase  agreement)
     on a cumulative basis of $3,400,000, $7,040,000,  $10,920,000,  $15,040,000
     and $19,400,000 for the fiscal years ending December 31, 1998,  1999, 2000,
     2001 and 2002, respectively. The deferred consideration will be recorded as
     an  adjustment  to the purchase  price once the income  targets are met and
     will be paid out from 2000 through  2002.  For the year ended  December 31,
     1998, the income target was met, and  accordingly  the Company  recorded an
     additional purchase price of $900,000.

     The Company also agreed to continue to pay  incentive  compensation  to the
     minority  interest  owners of  Westbrooke  equal to 6% of net income before
     income taxes, as defined in the purchase  agreement.  Such payments will be
     recorded as compensation expense in the period in which they are earned.

<PAGE>

     This  acquisition  has been  accounted  for using the purchase  method and,
     accordingly,  the operating results of Westbrooke have been included in the
     Company's  consolidated  operating  results since the effective date of the
     acquisition.


     As of January 1, 1998, the fair values of assets  acquired and  liabilities
     assumed,  exclusive  of cash  acquired of  $3,618,000,  were as follows (in
     thousands):

<TABLE>
<CAPTION>
                             Amount
                            ---------
<S>                         <C>

Inventory                   $ 40,759 
Receivables                    1,540 
Property and equipment         1,980 
Other assets                   2,216 
Goodwill                      10,159 
Construction loans payable   (22,308)
Acquisition notes payable    (28,922)
Other liabilities             (9,042)
--------------------------  ---------

                            $ (3,618)
                            ---------
</TABLE>

     Additional acquisition costs of $1,272,000 were incurred by the Company and
     recorded to goodwill.

<PAGE>

     The following unaudited pro forma financial  information for the year ended
     December  31,  1997  is  presented  as if the  Westbrooke  acquisition  had
     occurred  on  January  1,  1997  (dollars  in  thousands  except  per share
     information).  This  unaudited  pro forma  financial  information  does not
     necessarily  reflect the results of  operations  as if they had occurred or
     the results that may occur in the future.

<TABLE>
<CAPTION>
Year ended December 31,                         1997
-------------------------------------------  -----------
<S>                                          <C>

Revenues                                     $   318,781
Cost of sales                                    265,573
-------------------------------------------  -----------

Gross profit                                      53,208
Net income                                   $     8,932
-------------------------------------------  -----------

Earnings per common share:
  Basic                                      $       .97
-------------------------------------------  -----------

Weighted average number of shares of common
  stock equivalents outstanding:
  Basic                                       11,200,000
-------------------------------------------  -----------
</TABLE>

4.   INVENTORY 

     The inventory of single family  residences as of December 31, 1997 and 1998
     consists of the following:

<TABLE>
<CAPTION>
                  Number of Homes   Carrying value
                    ------------  -----------------
                    December 31,     December 31,
                    ------------  -----------------
                    1997   1998    1997      1998
                    ----  ------  -------  --------
                          (IN THOUSANDS)
<S>                 <C>   <C>     <C>      <C>

Completed             90     118  $18,564  $ 23,224
Under construction   444     829   48,352    98,692
Models                40      74    8,495    15,401
------------------  ----  ------  -------  --------

                     574   1,021  $75,411  $137,317
                    ----  ------  -------  --------
</TABLE>

<PAGE>

     A  summary  of  interest   capitalized  in  inventory  is  as  follows  (in
     thousands):

<TABLE>
<CAPTION>
Year ended December 31,                                   1996    1997    1998
-------------------------------------------------------  ------  ------  -------
<S>                                                      <C>     <C>     <C>

Interest capitalized, beginning of period                $1,061  $1,494  $ 2,572
Capitalized interest acquired in purchase of Westbrooke       -       -    2,597
Interest incurred                                         4,596   6,518   11,163
Less interest included in:
  Cost of sales                                           2,925   3,453    8,877
  Interest expense                                        1,238   1,987    1,939
-------------------------------------------------------  ------  ------  -------

Interest capitalized, end of period                      $1,494  $2,572  $ 5,516
-------------------------------------------------------  ------  ------  -------
</TABLE>

     In the ordinary  course of business,  the Company  enters into contracts to
     purchase lots and land for lot development.  At December 31, 1997 and 1998,
     the  Company  had  nonrefundable   deposits   aggregating   $1,118,000  and
     $1,289,000  included  in  other  assets  in the  accompanying  consolidated
     balance  sheets,  for  lots  and  land  with a  related  purchase  price of
     approximately $26.9 million and $64.4 million,  respectively. The Company's
     liability for non-performance under such contracts is limited to forfeiture
     of the related deposits.

5.   INVESTMENT IN UNCONSOLIDATED SUBSIDIARIES

     Included in investment in unconsolidated  subsidiaries at December 31, 1997
     and 1998 is the  Company's  50%  general  partnership  interest in the Twin
     Acres  Partnership  (Twin  Acres).  Twin Acres owns certain land in Broward
     County,  Florida,  for the purpose of developing,  constructing and selling
     single family residences. The Company obtained its investment in Twin Acres
     in 1995 in the  acquisition of Adler.  The Company does not have control of
     Twin Acres and therefore has accounted for its  partnership  interest using
     the equity method.


     During 1997,  Twin Acres closed on the sale of the  remaining  homes in its
     inventory  and is winding down its  operations.  Therefore,  the  Company's
     future  equity in  earnings  from Twin  Acres will not be  material  to the
     Company's operations.

<PAGE>

     Summarized  financial   information  for  Twin  Acres  is  as  follows  (in
     thousands):

<TABLE>
<CAPTION>
December 31,                         1997   1998
-----------------------------------  -----  -----
<S>                                  <C>    <C>

Assets:
  Cash and receivables               $ 357  $  64
  Other assets                          90      -
-----------------------------------  -----  -----

                                     $ 447  $  64
===================================  =====  =====

Liabilities:
  Accounts payable                   $ 249  $  60

Partners' capital                      198      4
-----------------------------------  -----  -----

                                     $ 447  $  64
===================================  =====  =====
</TABLE>

<TABLE>
<CAPTION>
Year ended December 31    1996      1997     1998
----------------------  --------  --------  ------
<S>                     <C>       <C>       <C>

Revenues                $19,869   $10,618   $   - 
Cost of sales            15,488     8,515       - 
----------------------  --------  --------  ------

                          4,381     2,103       - 
Subdivision overhead      2,819     1,932       - 
Other net                   (29)      (82)    (57)
----------------------  --------  --------  ------

Net income              $ 1,591   $   253   $  57 
======================  ========  ========  ======
</TABLE>

     Also  included  in the  investments  in  unconsolidated  subsidiaries,  the
     Company,  during 1997,  acquired a 49% interest in Pacific Title L.L.C.,  a
     title agency,  for $24,000 and a 50% interest in NHC  Mortgage,  a mortgage
     finance  company,  for $81,000.  The Company does not have control of these
     entities and therefore  has  accounted  for its interests  using the equity
     method.  The  operations  are  immaterial  to  the  consolidated  financial
     statements.

<PAGE>

6.   CONSTRUCTION LOANS PAYABLE

     Construction  loans  payable  consist of the following at December 31, 1998
     (in thousands):

<TABLE>
<CAPTION>
                                                              1997      1998
                                                             -------  --------
<S>                                                          <C>      <C>

Construction and lot loans with financial institutions,
  collateralized by lots and single family residences
  completed or under construction, bearing interest at
  the prime rate to prime plus 1.5% (7.75% to 9.25%
  at December 31, 1998), maturing upon completion
  and sale of the homes as defined in the loan
  agreement                                                  $62,565  $ 94,526

Development and land acquisition loans with financial
  institutions, collateralized by deeds of trust on
  property, with maturing dates ranging from February
  1999 through April 2002, bearing interest at 7.0% to
  prime plus 1.0%, (8.75% at December 31, 1998)                  603    11,564

Promissory note with a bank, collateralized by
  property, bearing interest at 7.45%, payable monthly,
  maturing in March, 2008                                        800       749

4,500,000 revolving construction loan with a financial
  institution collateralized by single-family residences,
  with final maturity in August 1998                              71         -

Promissory note with a bank, maturing in June 1988             2,052         -

Other                                                              9         -
-----------------------------------------------------------  -------  --------

                                                             $66,100  $106,839
===========================================================  =======  ========
</TABLE>

     Maturities  on  construction  loans  payable at  December  31,  1998 are as
     follows (in thousands):

<TABLE>
<CAPTION>
                 Amount
                --------
<S>             <C>

    1999        $103,794
    2000           2,420
    2001              69
    2002              74
    2003              80
    Thereafter       402
--------------  --------

                $106,839
==============  ========
</TABLE>

<PAGE>

     Construction  and lot loans  are  generally  repaid as sales of  individual
     homes are closed and therefore are considered current at December 31, 1998.
     At  December  31,  1998,  the  Company  had  unused  lines  of  credit  for
     construction  loans  totaling  approximately  $153  million of which  $18.1
     million was available to draw down.


     Certain of the Company's  lenders  require,  among other  things,  that the
     Company maintain minimum tangible net worth levels and debt to tangible net
     worth ratios. At December 31, 1998, the Company was in compliance with such
     requirements.  Certain debt agreements of NHC's  subsidiaries  restrict the
     subsidiaries'  ability  to pay  dividends  or  advance  funds to NHC to the
     extent that the  payment  would put the  subsidiary  in  violation  of debt
     covenants.  Under the most  restrictive  of these  covenants,  there was no
     restriction on the amount of retained  earnings  available to pay dividends
     at December 31, 1998.

7.   PAYABLE TO AFFILIATES

     Payable to  affiliates  consists of amounts owed by the Company to PUSA. At
     December 31, 1997,  PUSA forgave the balance of  outstanding  notes payable
     due from the Company of $9.1 million,  and has recorded this transaction as
     a capital  contribution.  Total  interest  paid to PUSA,  relating to these
     notes payable,  during the years ended December 31, 1996, 1997 and 1998 was
     approximately $439,000, $557,000 and $0, respectively.


8.   RELATED PARTY TRANSACTIONS

     The Company  purchases  insurance  policies  from an  affiliated  insurance
     broker.  The affiliated entity earned  commissions of $89,000,  $93,000 and
     $152,000  in 1996,  1997  and  1998,  respectively,  with  respect  to such
     policies.  The Company also  purchases  demographic  and economic  research
     information through an affiliate for $10,000 per year.


     The Company provides various managerial services to Twin Acres for which it
     receives a fee.  For the years  ended  December  31,  1996,  1997 and 1998,
     management  fees included in other income were $851,000,  $246,000,  and $0
     respectively.

<PAGE>

9.   INCOME TAXES

     Components of income tax expense (benefit) consist of (in thousands):

<TABLE>
<CAPTION>
Year ended December 31,   1996     1997     1998
-----------------------  -------  -------  ------
<S>                      <C>      <C>      <C>

Current:
  Federal                $4,231   $4,038   $7,183
  State                     451      125      320
-----------------------  -------  -------  ------

                          4,682    4,163    7,503
                         -------  -------  ------

Deferred:
  Federal                  (459)      (1)     134
  State                     (59)     110        -
-----------------------  -------  -------  ------

                           (518)     109      134
                         -------  -------  ------

                         $4,164   $4,272   $7,637
=======================  =======  =======  ======
</TABLE>

     The difference  between total reported income taxes and expected income tax
     expense  computed  using the federal  statutory  income tax rate of 35% for
     1996, 1997 and 1998 is reconciled as follows (in thousands):

<TABLE>
<CAPTION>
Year ended December 31,               1996    1997    1998
-----------------------------------  ------  ------  ------
<S>                                  <C>     <C>     <C>

Computed "expected" tax expense      $3,674  $3,825  $7,151
Goodwill amortization                   211     211     216
State taxes, net of federal benefit     255     153     208
Other                                    24      83      62
-----------------------------------  ------  ------  ------

                                     $4,164  $4,272  $7,637
===================================  ======  ======  ======
</TABLE>

<PAGE>

     Significant temporary differences that give rise to the deferred tax assets
     and liabilities are as follows (in thousands):

<TABLE>
<CAPTION>
December 31,                                           1997     1998
----------------------------------------------------  -------  -------
<S>                                                   <C>      <C>

Deferred tax assets:
  Warranty/advertising reserve                        $  367   $  441 
  Property, premises and equipment, principally due to
    differences in depreciation                           44        1 
  Capitalized interest                                   163      172 
  Accrued bonuses                                        397      551 
  Partnership investment                                 132      (15)
  Other                                                  113      111 
----------------------------------------------------  -------  -------

Total gross deferred tax assets                        1,216    1,261 
----------------------------------------------------  -------  -------

Deferred tax liabilities:
  Amortizable intangibles                               (343)    (522)
  Other                                                  (16)     (16)
----------------------------------------------------  -------  -------

Total gross deferred tax liabilities                    (359)    (538)
----------------------------------------------------  -------  -------

Net deferred tax asset                                $  857   $  723 
====================================================  =======  =======
</TABLE>

     Management of the Company believes that it is more likely than not that the
     gross  deferred tax assets will be realized or settled due to the Company's
     ability  to  generate   taxable  income   exclusive  of  reversing   timing
     differences.   Accordingly,  no  valuation  allowance  was  established  at
     December 31, 1997 and 1998.

     Included in payable to  affiliates  at  December  31, 1997 and 1998 is $1.8
     million  and $2.4  million  payable to PUSA under  terms of the tax sharing
     agreement.  Payments  of $3.0  million,  $3.9  million,  and $7.4  million,
     respectively,  were made to PUSA for federal income taxes during 1996, 1997
     and 1998, under the aforementioned agreement.

<PAGE>

10.  COMMITMENTS AND CONTINGENCIES

     The Company  leases  office  premises and  equipment  under  noncancellable
     operating  leases.  Future  minimum  payments  under  these  noncancellable
     operating leases for the fiscal years ending on December 31 are as follows:

<TABLE>
<CAPTION>
December 31,   Amount
------------  --------
<S>           <C>

1999          $311,000
2000           309,000
2001           216,000
2002             8,000
2003             1,000
------------  --------

              $845,000
============  ========
</TABLE>

     Rental  expense  for the  year  ended  December  31,  1996,  1997  and 1998
     aggregated, $340,000, $332,000 and $327,000, respectively.

     The Company is involved in various claims and legal actions  arising in the
     ordinary  course of business.  In the opinion of  management,  the ultimate
     disposition of these matters will not have a material adverse effect on the
     Company's consolidated financial position.

     The  Company  provides  homebuyers  with a one  year  limited  warranty  of
     workmanship and materials from the date of sale. The Company  generally has
     recourse against its  subcontractors for claims relating to workmanship and
     materials.  The  Company  also  provides  a ten-year  homeowner's  warranty
     through a single  national  contract  through a third party.  This warranty
     generally covers major  structural  defects.  Estimated  warranty costs are
     recorded  at the time of sale.  Total  warranty  expense for the year ended
     December 31, 1996,  1997 and 1998 was $881,973,  $1,567,442 and $2,138,017,
     respectively.  As of December 31, 1997 and 1998, the liability for warranty
     costs was $881,000 and $1,149,000  respectively,  and was included in other
     liabilities.

<PAGE>

     The Company has an  unsecured  letter of credit  facility  which is used to
     issue letters of credit which guarantee Westbrooke's performance of certain
     development and construction  obligations.  At December 31, 1998 letters of
     credit  aggregating  $900,000  were  outstanding  under this  facility.  No
     additional amounts are available under this facility.


     The  Company is a  guarantor  on a letter of credit  issued by a  financial
     institution  as  security  for a note.  The amount of this note  payable at
     December 31, 1997 and 1998 was $2.0 million and $1.3 million, respectively.

11.  EMPLOYEE BENEFIT PLAN

     The Company has a 401 (k) Profit  Sharing Plan (the Plan).  Under the terms
     of the Plan, the Company matches 50% of employee's voluntary  contributions
     up to a  maximum  of 6%  of  each  participant's  earnings.  The  Company's
     matching  contributions  to the Plan for the year ended  December 31, 1996,
     1997 and 1998 were $252,668, $256,880 and $446,000, respectively.


12.  STOCK OPTIONS

     During  the year ended  December  31,  1998,  Tandem  Stock  Option / Stock
     Appreciation  Rights to  acquire  682,000  shares at an  exercise  price of
     $10.50 were granted to certain  officers and employees of the Company under
     the Company's stock option plan.  During this same period,  no options were
     exercised.

     The  Company  accounts  for its stock  option plan in  accordance  with the
     provisions  of  Accounting   Principles   Board  ("APB")  Opinion  No.  25,
     "Accounting for Stock Issued to Employees," and related interpretations. As
     such,  compensation  expense would be recorded on the date of grant only if
     the current  market  price of the  underlying  stock  exceeded the exercise
     price.

<PAGE>

     FASB Statement 123, "Accounting for Stock-Based Compensation," requires the
     Company to provide pro forma information  regarding net income and earnings
     per share as if compensation  cost for the Company's stock option plans had
     been determined in accordance  with the fair value based method  prescribed
     in FASB Statement  123. The Company  estimates the fair value of each stock
     option, using the Black Scholes method, at the weighted-average  assumption
     used for grants in fiscal 1998  dividend  yield of zero  percent;  expected
     volatility of 21.5%; risk free interest rate of 6%; and expected life of 10
     years.

     The weighted  average fair value of options  granted  during the year ended
     December 31, 1998 was $5.23.

     Under the  accounting  provisions of FASB  Statement 123, the Company's net
     income and net income per share for the year ended  December 31, 1998 would
     have been reduced to the pro forma amounts indicated below:


<TABLE>
<CAPTION>
Year ended December 31,          1998
----------------------------  -----------
<S>                           <C>

Net income
  As reported                 $12,795,000
  Pro forma                   $ 9,228,000

Basic net income per share
  As reported                 $      1.16
  Pro forma                   $       .84

Diluted net income per share
  As reported                 $      1.16
  Pro forma                   $       .84
============================  ===========
</TABLE>

<PAGE>

13.  QUARTERLY RESULTS (UNAUDITED)

     Quarterly  results  for the  years  ended  December  31,  1997  and 1998 in
     thousands, except per share amounts.


<TABLE>
<CAPTION>
          1997               FIRST    SECOND    THIRD     FOURTH
--------------------------  -------  --------  --------  --------
<S>                         <C>      <C>       <C>       <C>

Revenues                    $46,241  $ 54,556  $ 61,507  $ 53,056
Operating income            $ 2,676  $  3,206  $  4,005  $  2,457
Net income                  $ 1,476  $  1,809  $  2,064  $  1,306
Basic earnings per share    $  0.16  $   0.20  $   0.22  $   0.14
Diluted earnings per share  $  0.16  $   0.20  $   0.22  $   0.14

          1998
--------------------------                                       
Revenues                    $69,195  $103,057  $112,907  $121,194
Operating income            $ 2,701  $  5,116  $  6,051  $  7,302
Net income                  $ 1,276  $  3,178  $  3,841  $  4,500
Basic earnings per share    $  0.13  $   0.28  $   0.33  $   0.39
Diluted earnings per share  $  0.13  $   0.28  $   0.33  $   0.39
</TABLE>

     Quarterly  and  year-to-date  computations  of per share  amounts  are made
     independently.  Therefore the sum of per share amounts for the quarters may
     not agree with the per share amounts for the year.

<PAGE>
<TABLE>
<CAPTION>
                                   SCHEDULE I
                      NEWMARK HOMES CORP.  AND SUBSIDIARIES
                  CONDENSED FINANCIAL INFORMATION OF REGISTRANT
                       PARENT COMPANY ONLY BALANCE SHEETS
                           DECEMBER 31, 1997 AND 1998
                                 (IN THOUSANDS)

                                     ASSETS

                                                          1997     1998
                                                         -------  -------
<S>                                                      <C>      <C>

Cash and short-term investments                          $    11  $   359
Investments in and equity in net assets of subsidiaries   55,690   90,471
Other assets                                               1,793       12
                                                         -------  -------

          Total assets                                   $57,494  $90,842
                                                         =======  =======

                     LIABILITIES AND STOCKHOLDERS' EQUITY

Other liabilities                                        $ 1,803  $   730
                                                         -------  -------

          Total liabilities                                1,803      730
                                                         -------  -------

STOCKHOLDERS' EQUITY
Common stock                                                  92      115
Additional paid in capital                                52,165   73,768
Retained earnings                                          3,434   16,229
                                                         -------  -------

          Total Stockholders' Equity                      55,691   90,112
                                                         -------  -------

          Total Liabilities and Stockholders' Equity     $57,494  $90,842
                                                         =======  =======
</TABLE>


<TABLE>
<CAPTION>
                                   SCHEDULE I
                      NEWMARK HOMES CORP.  AND SUBSIDIARIES
                  CONDENSED FINANCIAL INFORMATION OF REGISTRANT
                  PARENT COMPANY ONLY STATEMENTS OF OPERATIONS
              FOR THE YEARS ENDED DECEMBER 31, 1996, 1997, AND 1998
                                 (IN THOUSANDS)


                                     1996      1997      1998
                                    -------  ---------  -------
<S>                                 <C>      <C>        <C>

Equity in earnings of subsidiaries  $ 6,332  $   6,655  $13,091
Other expenses                          -0-  $     -0-  $   296
                                    -------  ---------  -------
Net income                          $ 6,332  $   6,655  $12,795
                                    =======  =========  =======
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
                                          SCHEDULE I
                             NEWMARK HOMES CORP.  AND SUBSIDIARIES
                         CONDENSED FINANCIAL INFORMATION OF REGISTRANT
                         PARENT COMPANY ONLY STATEMENTS OF CASH FLOWS
                     FOR THE YEARS ENDED DECEMBER 31, 1996, 1997, AND 1998
                                        (IN THOUSANDS)


                                                               1996        1997        1998
                                                             ---------  -----------  ---------
<S>                                                          <C>        <C>          <C>

Cash flows from operating activities:
Net income                                                   $  6,332   $    6,655   $ 12,795 
Adjustments to reconcile net income to cash from operating
  activities:
Change in other assets                                           (470)        (446)     1,781 
Change in other liabilities                                       470          456     (1,073)
  Equity in undistributed earnings of subsidiaries             (6,332)      (6,655)   (13,091)
                                                             ---------  -----------  ---------

Net cash provided by operating activities                          --           10        412 
                                                             ---------  -----------  ---------

Cash flows from investing activities:
  Dividends from subsidiaries                                   9,463        4,810        --- 
  Capital contributions to subsidiaries                        (1,247)        (181)   (21,690)
                                                             ---------  -----------  ---------
Net cash provided by (used in) investing activities             8,216        4,629    (21,690)

Cash flows from financing activities:
  Net proceeds from initial public offering of common stock        --           --     18,446 
  Net proceeds from underwriters over-allotment option             --           --      2,879 
  Capital contributions from parent                             1,247          181        301 
  Dividends paid to parent                                     (9,463)      (4,810)      (---)
                                                             ---------  -----------  ---------
Net cash provided by (used in) financing activities            (8,216)      (4,629)    21,626 


Net change in cash and short-term investments                      --           10        348 
Cash at the beginning of the year                                   1            1         11 
                                                             ---------  -----------  ---------

Cash at the end of the year                                  $      1   $       11   $    359 
                                                             =========  ===========  =========
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
                                      SCHEDULE II
                         NEWMARK HOMES CORP.  AND SUBSIDIARIES
                 VALUATION AND QUALIFYING ACCOUNTS (WARRANTY RESERVES)
                     YEARS ENDED DECEMBER 31, 1996, 1997, AND 1998
                                    (IN THOUSANDS)


                                          ADDITIONS
                                   -----------------------
                                               CHARGED TO
                      BALANCE AT   CHARGED TO     OTHER                     BALANCE AT
                     BEGINNING OF  COSTS AND   ACCOUNTS --  DEDUCTIONS --     END OF
DESCRIPTION             PERIOD      EXPENSES    DESCRIBE       DESCRIBE       PERIOD
-------------------  ------------  ----------  -----------  --------------  ----------
<S>                  <C>           <C>         <C>          <C>             <C>
  December 31, 1996           560       1,130          ---         (1,121)         569
  December 31, 1997           569       1,643          ---         (1,331)         881
  December 31, 1998           881       2,138          ---         (1,870)       1,149

</TABLE>

<TABLE>
<CAPTION>
                                  SCHEDULE III
                      NEWMARK HOMES CORP.  AND SUBSIDIARIES
                     PROPERTIES AND ACCUMULATED DEPRECIATION
                          YEAR ENDED DECEMBER 31, 1998
                                 (IN THOUSANDS)


                                                           COSTS CAPITALIZED
                                                             SUBSEQUENT TO
                                        INITIAL COSTS          ACQUISITION
                                     -------------------  ----------------------
                                             BUILDINGS
                                                AND                     CARRYING
DESCRIPTION            ENCUMBRANCES  LAND   IMPROVEMENTS  IMPROVEMENTS   COSTS
---------------------  ------------  -----  ------------  ------------  --------
<S>                    <C>           <C>    <C>           <C>           <C>
PROPERTIES:
Landmark Retail Tract
  Dallas, TX                    -0-  $ 325           -0-           -0-       -0-
=====================  ============  =====  ============  ============  ========
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
                                   TOTAL COSTS
                         -------------------------------------
                                                                                     DATE OF
                                BUILDINGS AND   TOTAL             ACCUMULATED        ACQUIS. 
DESCRIPTION              LAND    IMPROVEMENTS                   DEPRECIATION         CONSTR.
<S>                      <C>    <C>             <C>             <C>                <C>
-----------------------  -----  --------------  --------------  -----------------  -----------
PROPERTIES:
  Landmark Retail Tract
  Dallas, TX             $ 325  $          195  $          520  $             -0-     1984 
=======================  =====  ==============  ==============  =================  ===========
<FN>

NOTES:

    The  following  table  reconciles  the  historical  cost  of the  Company's
properties from January 1, 1996 to December 31, 1998:
</TABLE>


<TABLE>
<CAPTION>
                                  FOR THE YEAR ENDED
                                     DECEMBER 31,

                                                             1996    1997   1998
<S>                                                        <C>       <C>    <C>

Balance, beginning of period                               $ 5,631   $ 325  $ 463
Additions during period (acquisition, improvements, etc.)    1,378     138     57
Deductions during period (cost of real estate sold, etc.)   (6,684)    -0-    -0-
                                                           --------  -----  -----     
Balance, close of period                                   $   325   $ 463  $ 520
=========================================================  ========  =====  =====
</TABLE>

<PAGE>