**UNITED
      STATES SECURITIES AND EXCHANGE COMMISSION**


Washington,
      D.C. 20549





**FORM
      10-Q**


(Mark
      One)


QUARTERLY
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                EXCHANGE ACT OF 1934.




**For
      the quarterly period ended March 31, 2006**





OR





TRANSITION
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXHANGE
                ACT OF
                1934.


FOR
                THE TRANSITION PERIOD__________ TO
                __________.





Commission
      File No. 1-6830





**ORLEANS
      HOMEBUILDERS, INC.**


(Exact
      name of registrant as specified in its charter)




Delaware
            59-0874323(State
                or other jurisdiction of
            (I.R.S.
                Employer I.D. No.)incorporation
                or organization)





One
      Greenwood Square, Suite 101


3333
      Street Road


Bensalem,
      PA 19020


(Address
      of principal executive offices)


Telephone:      (215)
      245-7500


(Registrant’s
      telephone number, including area code)





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   No




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





Large
  accelerated filer            Accelerated
  filer Non-accelerated
  filer





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





Number
      of
      shares of common stock, par value $0.10 per share, outstanding as
      of


May
      8,
      2006:  18,401,207


(excluding
      296,924 shares held in Treasury).


---



**ORLEANS
  HOMEBUILDERS, INC. AND SUBSIDIARIES**




**PAGE****PART
          1 - FINANCIAL INFORMATION**Item
          1.
      Financial
          Statements (unaudited)Consolidated
          Balance Sheets at March 31, 2006and
          June 30, 2005
      1Consolidated
          Statements of Operations for theThree
          and Nine Months Ended March 31, 2006 and 2005
      2Consolidated
          Statements of Shareholders’ Equity for theNine
          Months Ended March 31, 2006
      3Consolidated
          Statements of Cash Flows for the NineMonths
          Ended March 31, 2006 and 2005
      4Notes
          to Consolidated Financial Statements
      5Item
          2.
      Management’s
          Discussion and Analysis of FinancialCondition
          and Results of Operations
      14Item
          3.
      Quantitative
          and Qualitative Disclosures About MarketRisk
      33Item
          4.
      Controls
          and Procedures
      33**PART
          II - OTHER INFORMATION**Item
          2.
      Unregistered
          Sales of Equity Securities and Use of Proceeds
      34Item
          6.
      Exhibits
      34


---



Back to Contents

**Orleans
                Homebuilders, Inc. and Subsidiaries****Consolidated
                Balance Sheets****(in
                thousands)**




March
          31,
          2006
          (Unaudited)
      
      June
          30,
          2005AssetsCash
          and cash equivalents
      
      $
      42,246
      
      $
      62,576Restricted
          cash - due from title company
      
      
      9,972
      
      
      28,785Restricted
          cash - customer deposits
      
      
      19,752
      
      
      20,100Real
          estate held for development and sale:Residential
          properties completed or under construction
      
      
      340,005
      
      
      190,855Land
          held for development or sale and improvements
      
      
      504,605
      
      
      398,290Inventory
          not owned - Variable Interest Entities
      
      
      138,657
      
      
      88,252Property
          and equipment, at cost, less accumulated depreciation
      
      
      3,392
      
      
      3,420Deferred
          taxes
      
      
      3,106
      
      
      2,802Intangible
          assets
      
      
      4,111
      
      
      6Goodwill
      
      
      20,514
      
      
      20,514Receivables,
          deferred charges and other assets
      
      
      21,489
      
      
      18,532Land
          deposits and costs of future development
      
      
      27,579
      
      
      27,408Total
          Assets
      
      $
      1,135,428
      
      $
      861,540Liabilities
          and Shareholders’ EquityLiabilities:Accounts
          payable
      
      $
      32,121
      
      $
      47,689Accrued
          expenses
      
      
      71,637
      
      
      65,253Customer
          deposits
      
      
      30,722
      
      
      27,738Obligations
          related to inventory not owned - Variable Interest Entities
      
      
      126,117
      
      
      79,585Mortgage
          and other note obligations
      
      
      498,605
      
      
      399,030Subordinated
          notes
      
      
      105,000
      
      
      Other
          notes payable
      
      
      5,890
      
      
      9,400Total
          Liabilities
      
      
      870,092
      
      
      628,695Commitments
          and contingencies (See Note J)Redeemable
          common stock
      
      
      240
      
      
      889Shareholders’
          Equity:Common
          stock, $.10 par, 23,000,000 shares authorized,18,698,131
          shares issued at March 31, 2006and
          June 30, 2005
      
      
      1,870
      
      
      1,870Capital
          in excess of par value - common stock
      
      
      71,764
      
      
      70,450Retained
          earnings
      
      
      195,300
      
      
      160,407Treasury
          stock, at cost (296,924 and 176,911 shares held atMarch
          31, 2006 and June 30, 2005, respectively)
      
      
      (3,838
      )
      
      (771
      )Total
          Shareholders’ Equity
      
      
      265,096
      
      
      231,956Total
          Liabilities and Shareholders’ Equity
      
      $
      1,135,428
      
      $
      861,540




See
                accompanying notes which are an integral part of the consolidated
                financial statements.




1

---



Back to Contents



**Orleans
                  Homebuilders, Inc. and Subsidiaries****Consolidated
                  Statements of Operations****(Unaudited)****(in
                  thousands, except per share
                  amounts)**
  Three
            Months Ended
            March 31,
        
        Nine
            Months Ended
            March 31,2006
        
        2005
        
        2006
        
        2005Earned
            revenuesResidential
            properties
        
        $
        207,843
        
        $
        198,120
        
        $
        586,718
        
        $
        514,710Land
            sales
        
        
        —
        
        
        250
        
        
        1,353
        
        
        342Other
            income
        
        
        2,072
        
        
        1,612
        
        
        6,136
        
        
        5,100209,915
        
        
        199,982
        
        
        594,207
        
        
        520,152Costs
            and expensesResidential
            properties
        
        
        161,411
        
        
        160,523
        
        
        453,998
        
        
        412,068Land
            sales
        
        
        
        
        
        250
        
        
        1,150
        
        
        338Other
        
        
        1,407
        
        
        972
        
        
        4,631
        
        
        3,293Selling,
            general and administrative
        
        
        25,864
        
        
        20,894
        
        
        74,439
        
        
        60,149Interest:Incurred
        
        
        10,779
        
        
        6,913
        
        
        26,497
        
        
        12,951Less
            capitalized
        
        
        (10,779
        )
        
        (6,878
        )
        
        (26,497
        )
        
        (12,887
        )188,682
        
        
        182,674
        
        
        534,218
        
        
        475,912Income
            from operations before income taxes
        
        
        21,233
        
        
        17,308
        
        
        59,989
        
        
        44,240Income
            tax expense
        
        
        8,424
        
        
        6,735
        
        
        23,986
        
        
        17,235Net
            income
        
        $
        12,809
        
        $
        10,573
        
        $
        36,003
        
        $
        27,005Basic
            earnings per share
        
        $
        0.69
        
        $
        0.58
        
        $
        1.94
        
        $
        1.52Diluted
            earnings per share
        
        $
        0.68
        
        $
        0.56
        
        $
        1.91
        
        $
        1.44Dividends
            declared per share
        
        $
        0.02
        
        $
        
        
        $
        0.06
        
        $
        Basic
            weighted average shares outstanding
        
        
        18,445
        
        
        18,339
        
        
        18,514
        
        
        17,798Diluted
            weighted shares outstanding
        
        
        18,781
        
        
        18,893
        
        
        18,854
        
        
        18,812
  See
                  accompanying notes which are an integral part of the consolidated
                  financial statements.




2

---



Back to Contents



**Orleans
                  Homebuilders, Inc. and Subsidiaries****Consolidated
                  Statements of Shareholders’ Equity****(dollars
                  in thousands)**
  Common
            Stock
        
        
        
        
        
        Treasury
            StockSharesIssued
            and
            Outstanding
        
        Amount
        
        Capital
            in
            Excess ofPar Value -Common
            Stock
        
        Retained
            Earnings
        
        Share
            Held
        
        Amount
        
        TotalBalance
            at June 30, 2005
        
        
        18,698,131
        
        $
        1,870
        
        $
        70,450
        
        $
        160,407
        
        
        176,911
        
        $
        (771
        )
        $
        231,956Redeemable
            common stock sold / expired
        
        
        
        
        
        
        
        
        649
        
        
        
        
        
        
        
        
        
        
        
        649Shares
            awarded under Stock Award Plan
        
        
        
        
        
        
        
        
        427
        
        
        
        
        
        (14,126
        )
        
        62
        
        
        489Fair
            market value of stock options issued
        
        
        
        
        
        
        
        
        104
        
        
        
        
        
        
        
        
        
        
        
        104Stock
            options, net
        
        
        
        
        
        
        
        
        (115
        )
        
        
        
        
        (40,000
        )
        
        174
        
        
        59Tax
            benefit of stock option exercises
        
        
        
        
        
        
        
        
        249
        
        
        
        
        
        
        
        
        
        
        
        249Treasury
            stock purchase
        
        
        
        
        
        
        
        
        
        
        
        
        
        
        174,139
        
        
        (3,303
        )
        
        (3,303
        )Dividends
            declared
        
        
        
        
        
        
        
        
        
        
        
        (1,110
        )
        
        
        
        
        
        
        
        (1,110
        )Net
            income
        
        
        
        
        
        
        
        
        
        
        
        36,003
        
        
        
        
        
        
        
        
        36,003Balance
            at March 31, 2006
        
        
        18,698,131
        
        $
        1,870
        
        $
        71,764
        
        $
        195,300
        
        
        296,924
        
        $
        (3,838
        )
        $
        265,096




See
                  accompanying notes which are an integral part of the consolidated
                  financial statements.




3

---



Back to Contents

**Orleans
                  Homebuilders, Inc. and Subsidiaries****Consolidated
                  Statements of Cash Flows****(Unaudited)****(in
                  thousands)**
 
 Nine
              Months Ended
              March 31,2006
          
          2005Cash
              flows from operating activities:Net
              income
          
          $
          36,003
          
          $
          27,005Adjustments
              to reconcile net income to net cashprovided
              by (used in) operating activities:Depreciation
              and amortization
          
          
          928
          
          
          1,051Amortization
              of note discount
          
          
          50
          
          
          Deferred
              taxes
          
          
          (304
          )
          
          (89
          )Stock
              based compensation expense
          
          
          392
          
          
          226Changes
              in operating assets and liabilities:Restricted
              cash - due from title company
          
          
          18,813
          
          
          Restricted
              cash - customer deposits
          
          
          348
          
          
          (3,051
          )Real
              estate held for development and sale
          
          
          (255,465
          )
          
          (195,053
          )Receivables,
              deferred charges and other assets
          
          
          (2,957
          )
          
          (6,852
          )Land
              deposits and costs of future developments
          
          
          (4,044
          )
          
          (10,473
          )Accounts
              payable and other liabilities
          
          
          (13,746
          )
          
          (13,008
          )Customer
              deposits
          
          
          2,984
          
          
          4,423Net
              cash used in operating activities
          
          
          (216,998
          )
          
          (195,821
          )Cash
              flows from investing activities:Purchases
              of property and equipment
          
          
          (894
          )
          
          (452
          )Acquisitions,
              net of cash acquired
          
          
          
          
          
          (56,635
          )Net
              cash used in investing activities
          
          
          (894
          )
          
          (57,087
          )Cash
              flows from financing activities:Borrowings
              from loans secured by real estate assets
          
          
          190,959
          
          
          628,811Repayment
              of loans secured by real estate assets
          
          
          (91,384
          )
          
          (384,649
          )Borrowings
              from unsecured line of credit
          
          
          
          
          
          135,948Repayments
              of unsecured line of credit
          
          
          
          
          
          (135,948
          )Borrowings
              from subordinated notes
          
          
          105,000
          
          
          Borrowings
              from other note obligations
          
          
          
          
          
          5,179Repayment
              of other note obligations
          
          
          (3,560
          )
          
          (2,168
          )Sale/(purchase)
              of treasury stock
          
          
          (3,303
          )
          
          268Proceeds
              from Stock Award Plan
          
          
          284
          
          
          Tax
              benefit form exercise of stock options
          
          
          249
          
          
          Proceeds
              from stock options exercised
          
          
          59
          
          
          137Common
              stock dividend paid
          
          
          (742
          )
          
          Net
              cash provided by financing activities
          
          
          197,562
          
          
          247,578Net
              decrease in cash and cash equivalents
          
          
          (20,330
          )
          
          (5,330
          )Cash
              and cash equivalents at beginning of year
          
          
          62,576
          
          
          32,962Cash
              and cash equivalents at end of period
          
          $
          42,246
          
          $
          27,632Supplemental
              disclosure of cash flow activities:Interest
              paid, net of amounts capitalized
          
          $
          
          
          $
          64Income
              taxes paid
          
          $
          25,919
          
          $
          14,512




See
                  accompanying notes which are an integral part of the consolidated
                  financial statements.




4

---



Back to Contents

**ORLEANS
      HOMEBUILDERS, INC. AND SUBSIDIARIES**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**




(A)
            Summary
                of Significant Accounting Policies:





The
      accompanying unaudited consolidated financial statements are presented in
      accordance with the requirements for Form 10-Q and do not include all the
      disclosures required by generally accepted accounting principles for complete
      financial statements. Reference is made to Form 10-K as of and for the year
      ended June 30, 2005 for Orleans Homebuilders, Inc. and subsidiaries (the
“Company”) for additional disclosures, including a summary of the Company’s
      accounting policies.





In
      the
      opinion of management, the consolidated financial statements contain all
      adjustments, consisting only of normal recurring accruals, necessary to present
      fairly the consolidated financial position of the Company for the periods
      presented. The interim operating results of the Company may not be indicative
      of
      operating results for the full year.





Accounting
      for variable interest entities:





In
      January 2003, the Financial Accounting Standards Board (“FASB”) issued FASB
      Interpretation No. 46 “Consolidation of Variable Interest Entities, an
      interpretation of ARB No. 51” (“FIN 46”). The FASB issued a revised FIN 46 in
      December 2003 which modifies and clarifies various aspects of the original
      interpretations. A Variable Interest Entity (“VIE”) is created when (i) the
      equity investment at risk is not sufficient to permit the entity to finance
      its
      activities without additional subordinated financial support from other parties
      or (ii) equity holders either (a) lack direct or indirect ability to make
      decisions about the entity, (b) are not obligated to absorb expected losses
      of
      the entity or (c) do not have the right to receive expected residual returns
      of
      the entity if they occur. If an entity is deemed to be a VIE, pursuant to FIN
      46, an enterprise that absorbs a majority of the expected losses of the VIE
      is
      considered the primary beneficiary and must consolidate the VIE.





Based
  on the provisions of FIN 46, the Company has concluded that whenever it enters
  into an option agreement to acquire land or lots from an entity and pays a significant
  deposit that is not unconditionally refundable, a VIE is created under condition
  (ii) (b) of the previous paragraph. The Company has been deemed to have provided
  subordinated financial support, which refers to variable interests that will
  absorb some or all of an entity’s expected theoretical losses if they
  occur. For each VIE created, the Company will compute expected losses and residual
  returns based on the probability of future cash flows as outlined in FIN 46.
  If the Company is deemed to be the primary beneficiary of the VIE it will consolidate
  the VIE on its balance sheet. The fair value of the VIEs inventory will be reported
  as “Inventory not owned  Variable Interest Entities.”





At
      March
      31, 2006, the Company consolidated twenty-two VIEs as a result of its options
      to
      purchase land or lots from the selling entities. The Company paid cash or issued
      letters of credit deposits to these twenty-two VIEs totaling $12,890,000 and
      incurred additional pre-acquisition costs totaling $2,500,000. The Company's
      deposits
  and any costs incurred prior to acquisition of the land or lots represent the
  Company’s maximum exposure to loss. The fair value of the VIEs inventory
  is reported as “Inventory not owned  Variable Interest Entities.”
  The Company recorded $138,657,000 in Inventory Not Owned - Variable Interest
  Entities as of March 31, 2006. The fair value of the property to be acquired
  less cash deposits and pre-acquisition costs, which totaled $126,117,000 at
  March 31, 2006, was reported on the balance sheet as “Obligations related
  to inventory not owned  Variable Interest Entities.” Creditors,
  if any, of these VIEs have no recourse against the Company.




5

---



Back to Contents

The
      Company will continue to secure land and lots using options. Including the
      deposits and other costs capitalized in connection with the VIEs discussed
      in
      the prior paragraph, the Company had total costs incurred to acquire land and
      lots at March 31, 2006 of approximately $40,135,000, including $24,300,000
      of
      cash deposits. The total purchase price under these cancelable contracts or
      options is approximately $605,613,000. The maximum exposure to loss is limited
      to the deposits, although some deposits are refundable, and costs incurred
      prior
      to the acquisition of the land or lots.





Accounting
      for share based payments:





In
      December 2004, the FASB revised FAS No. 123 through the issuance of FAS No.
      123-R “Share Based Payment”, revised (“FAS 123-R”).  FAS 123-R was
      effective for the Company commencing July 1, 2005.  FAS 123-R, among other
      things, eliminates the alternative to use the intrinsic value method of
      accounting for stock based compensation and requires entities to recognize
      the
      cost of employee services received in exchange for awards of equity instruments
      based on the grant-date fair value of those awards (with limited exceptions).
       The fair value based method in FAS 123-R is similar to the
      fair-value-based method in FAS No. 123 in most respects, subject to certain
      key
      differences.  As the Company previously adopted the fair value recognition
      provisions of FAS No. 123 prospectively for all stock awards granted, commencing
      on July 1, 2002, the impact of the modified prospective adoption of FAS 123-R
      did not have a significant impact on the financial position or results of
      operations of the Company. The Company amortizes compensation expense on a
      straight line basis over the vesting period of each option grant. The Company
      utilizes the Black-Scholes option pricing model to calculate the compensation
      expense associated with stock options. For the nine months ended March 31,
      2006,
      the Company recorded pretax compensation expense associated with stock awards
      of
      $392,000. Total compensation cost related to nonvested awards not yet recognized
      of $3,804,000 will be recognized according to vesting schedules through March
      2015. For the nine months ended March 31, 2006, the Company recognized a
      $249,000 tax benefit resulting from the disqualified disposition of shares
      issued to employees in connection with the exercise of incentive stock options.





Accounting
      for income taxes:





In
      December 2004, the FASB issued FASB Staff Position No. FAS 109-1, "Application
      of FASB Statement No. 109, Accounting for Income Taxes, for the Tax Deduction
      on
      Qualified Production Activities Provided by the American Jobs Creation Act
      of
      2004" (FSP FAS 109-1). FSP FAS 109-1 clarifies that the deduction will be
      treated as a "special deduction" as described in Statement of Financial
      Accounting Standards No. 109, "Accounting for Income Taxes." As such, the
      special deduction has no effect on deferred tax assets and liabilities existing
      at the date of enactment.
      The impact of the deduction will be reported in the period in which the
      deduction is claimed.   The Company files a consolidated return on a
      calendar year.  Accordingly, the Company began reflecting the special
      deduction with respect to its operations effective January 1, 2005.  The
      expected impact was and will be to lower the effective tax provision in the
      periods in which the deduction may be claimed and that this benefit will
      increase as the deduction is phased in under the statute.




6

---



Back to Contents

| | (B) | Acquisitions:
| | --- | -------------




***Peachtree
      Acquisition:***




On
      December 23, 2004, pursuant to an Asset Purchase Agreement of the same date,
      the
      Company acquired, through a wholly-owned subsidiary, the real estate assets
      described below (the “Assets”) from Peachtree Residential Properties, LLC, a
      North Carolina limited liability company and Peachtree Townhome Communities,
      LLC, a North Carolina limited liability company which, at the time the Company
      acquired the assets, were wholly-owned subsidiaries of Peachtree Residential
      Properties, Inc., a Georgia corporation (collectively, “Peachtree Residential
      Properties”).




The
      Assets include: (a) improved and unimproved real property, (b) rights to acquire
      real estate under options or agreements, (c) equipment, (d) rights under certain
      contracts for the sale of homes to be sold and leases for real property, (e)
      rights to certain tradenames and other intangibles, including contract backlog,
      (f) homes and other improvements under construction as of the closing, (g)
      certain plans, drawings, specifications, permits and rights under warranties
      and
      (h) governmental approvals and books and records associated with, or relating
      to
      the foregoing.




The
      Company paid $29,300,000 in cash, to acquire the Assets. The Company also
      assumed certain liabilities of Peachtree Residential Properties, less $200,000
      to be retained by the Company and applied towards the administration of certain
      home warranty claims.




***Realen
      Acquisition:***





On
      July
      28, 2004, pursuant to a Purchase Agreement of the same date, the Company
      completed its acquisition of all of the issued and outstanding partnership
      interests in Realen Homes L. P., a Pennsylvania limited partnership (“Realen
      Homes”), from Realen General Partner, LLC, a Pennsylvania limited liability
      company, and DB Homes Venture L.P., a Pennsylvania limited partnership. The
      Company acquired the limited partner’s interest in Realen Homes and a subsidiary
      of the Company, RHGP LLC, acquired the general partner's interest and serves
      as
      the general partner of Realen Homes.





In
      accordance with the Purchase Agreement, the consideration paid by the Company
      consisted of: (i) $53,348,000 in cash delivered at closing, (ii) a promissory
      note of the Company in the aggregate principal amount of $5 million, payable
      over a period of up to two years, with an interest rate of 3% per year and
      (iii)
      a warranty holdback of $1.5 million retained by the Company to be applied toward
      the administration of any warranty claims made against Realen Homes in excess
      of
      certain predetermined amounts. The purchase price was determined based on Realen
      Homes’ book value at June 30, 2004, its management personnel, its profitability,
      its backlog and its land position.




7

---



Back to Contents

The
      Company evaluated the $5,000,000 3% note in accordance with APB 21 and
      determined that it was a below market rate note. In accordance with APB 21,
      the
      Company estimated, based on current market conditions that the Company would
      likely have been able to obtain similar fixed-rate financing from a third party
      at approximately 150 basis points higher than the note actually obtained. The
      Company imputed interest on the note at 4.5% and reduced the carrying value
      of
      the note from $5,000,000 to $4,863,000. The discount of $137,000 will be
      recorded as interest expense over the life of the note.





The
      acquisition included, subject to specified exceptions, all assets and
      liabilities of Realen Homes, including land owned or under contract, homes
      under
      construction but not sold or sold but not delivered, sales offers and
      reservations, and model homes and furnishings. The acquired assets were used
      by
      Realen Homes in the homebuilding business in Pennsylvania and Illinois. The
      Company intends to continue to use the acquired assets in the homebuilding
      business.





The
      Company accounted for the acquisition as a purchase in accordance with SFAS
      No.
      141, “Business Combinations.” The purchase price was allocated to goodwill for
      $13,327,000 which is defined as the fair value of assets and liabilities
      acquired in excess of the purchase price and to intangible assets for $500,000.
      The intangible assets represent the intangible value of the backlog acquired
      from Realen Homes. The intangible value of the backlog was amortized into cost
      of sales as the acquired backlog was delivered. The Company amortized the
      remaining $6,000 of the intangible value of the backlog acquired from Realen
      Homes during the three months ended September 30, 2005.





***Masterpiece
      Acquisition:***





On
      July
      28, 2003, the Company acquired all of the issued and outstanding shares of
      Masterpiece Homes and entered into an employment agreement with the president
      of
      Masterpiece Homes. Masterpiece Homes is an established homebuilder located
      in
      Orange City, Florida. The terms of the stock purchase agreement and employment
      agreement are as follows: (i) $3,900,000 in cash, at closing; and (ii)
      $2,130,000 payable January 1, 2005 (the “Contingent Stock Payment”), unless
      prior to that date the president is terminated for cause or terminates his
      employment without good reason, as defined in the employment agreement; (iii)
      sale of 30,000 shares of the Company’s common stock at $8 per share with a put
      option at the same price, (iv) stock options to purchase 45,000 shares of the
      Company’s common stock at $10.64 per share vesting equally on December 31, 2004,
      2005 and 2006; and (v) contingent payments representing 25% of the pre-tax
      profits of Masterpiece Homes for the calendar years ended December 31, 2004,
      2005 and 2006. The Company also incurred approximately $405,000 in acquisition
      costs to complete this transaction. The aforementioned costs are considered
      part
      of the purchase price of Masterpiece Homes, except for the following items
      that
      are considered part of, and contingent upon, the employment agreement: (a)
      $710,000 of the $2,130,000 paid January 10, 2005; (b) stock options to purchase
      45,000 shares of the Company’s common stock at $10.64 per share; and (c)
      contingent payments representing 25% of the pre-tax profits of Masterpiece
      Homes
      for the calendar years ended December 31, 2004, 2005 and 2006.





The
      Company accounted for these transactions in accordance with SFAS No. 141,
“Business Combinations”, whereby approximately $5,700,000 was considered to
      be part
      of
      the purchase price of the business and the remainder part of employee
      compensation. That portion related to employee compensation will be charged
      to
      expense over the period to which it relates. With respect to the amounts
      allocated to the purchase, such amounts were allocated to the fair value of
      assets and liabilities acquired with the excess of approximately $3,007,000
      allocated to goodwill.




8

---



Back to Contents

From
      July
      28, 2003 through March 31, 2006, the Company recorded $308,000 in pretax
      compensation expense associated with the stock options granted pursuant to
      the
      employment agreement with the president of Masterpiece Homes, recognized
      $3,763,000 in contingent payments representing 25% of the pre-tax profits of
      Masterpiece Homes, and paid the Contingent Stock Payment of $2,130,000 on
      January 1, 2005 as required under the terms of the acquisition agreement.





(C)
            Mortgage
                and other note obligations and subordinated
                notes:





The
      $603,605,000 outstanding balance at March 31, 2006 consists of $495,950,000
      outstanding under the Revolving Credit Facility, which is discussed below,
      $105,000,000 outstanding pursuant to the sale and issuance of trust preferred
      securities discussed below, and $2,655,000 under mortgage obligations secured
      by
      land held for development and sale and improvements. The average month end
      balance during the nine months ended March 31, 2006 was $500,947,000.





At
      March
      31, 2006, the Company had approximately $495,950,000 outstanding under the
      Revolving Credit Facility. In addition, approximately $42,468,000 of letters
      of
      credit and other assurances of the availability of funds have been provided
      under the Revolving Credit Facility.





On
      December 22, 2004, Greenwood Financial, Inc., a wholly-owned subsidiary of
      the
      Company and other wholly-owned subsidiaries of the Company, as borrowers, and
      Orleans Homebuilders, Inc. as guarantor, entered into a Revolving Credit and
      Loan Agreement for a $500,000,000 Senior Secured Revolving Credit and Letter
      of
      Credit Facility (the “Revolving Credit Facility”) with various banks as lenders.
      The Revolving Credit Facility was amended on January 24, 2006 via the Amended
      and Restated Revolving Credit and Loan Agreement (the “Amended and Restated
      Credit Agreement”). The Amended and Restated Credit Agreement provided for the
      following amendments to the terms of its December 22, 2004 revolving credit
      facility:





·
            The
                revolving sublimit was increased from $500,000,000 to
                $650,000,000.




·
            The
                accordion feature of the Revolving Credit Facility was increased
                from
                $650,000,000 to $750,000,000.




·
            The
                interest rate was lowered from the LIBOR Market Index Rate plus a
                non-default variable spread ranging from 175 basis points to 237.5
                basis
                points to the LIBOR Market Index Rate plus a non-default variable
                spread
                ranging from 165 basis points to 225 basis points.




·
            The
                maturity date of the Revolving Credit Facility was extended from
                December
                20, 2007 to December 20, 2008.






9

---



Back to Contents

·
            The
                loan to value or loan to cost advance rate ranges were increased
                from 50%
                to 90% of the lower of the appraised value or cost of the real estate
                to
                50% to 95% of the lower of the appraised value or cost of the real
                estate.




Under
      and
      subject to the terms of the Amended and Restated Credit Agreement, the borrowers
      may borrow and re-borrow for the purpose of financing the acquisition and
      development of real estate, the construction of homes and improvements, for
      investment in joint ventures, for working capital and for such other appropriate
      purposes as may be approved by the lenders. The Company is required to maintain
      certain financial ratios and customary covenants as set forth in the Amended
      and
      Restated Credit Agreement. The Amended and Restated Credit Agreement is
      primarily collateralized by real estate held for development and sale. In
      addition, in connection with the Amended and Restated Credit Agreement, Orleans
      Homebuilders entered into an amended and restated Guaranty Agreement.




On
      November 23, 2005, the Company issued $75,000,000 of trust preferred securities
      which mature on January 30, 2036 and are callable, in whole or in part, at
      par
      plus accrued interest on or after January 30, 2011. For the first ten years,
      the
      securities have a fixed interest rate of 8.61% per annum. Thereafter, the
      securities have a floating interest rate equal to three-month LIBOR plus 360
      basis points per annum, resetting quarterly. In the event the Company fails
      to
      meet certain financial covenants, the applicable rate of interest will be
      increased by 300 basis points until such time as the Company is in compliance
      with the financial covenants, then the interest rate will return to its original
      amount. The transaction is treated as debt for financial statement purposes.
      The
      Company used proceeds from the sale of these securities to repay outstanding
      obligations under the Revolving Credit Facility discussed above.





On
      September 20, 2005, the Company issued $30,000,000 of trust preferred securities
      which mature on September 30, 2035 and are callable, in whole or in part, at
      par
      plus accrued interest on or after September 30, 2010. For the first ten years,
      the securities have a fixed interest rate of 8.52% per annum. Thereafter, the
      securities have a floating interest rate equal to three-month LIBOR plus 380
      basis points per annum, resetting quarterly. The transaction is treated as
      debt
      for financial statement purposes. The Company used proceeds from the sale of
      these securities for land purchases and general corporate purposes. The
      obligations relating to the trust preferred securities are subordinated to
      the
      Revolving Credit Facility.





On
      December 21, 2004 and in accordance with the terms of the Company’s Convertible
      Subordinated 7% Note issued to Jeffrey P. Orleans, Chairman and Chief Executive
      Officer of the Company, the third and final installment due of $1,000,000 was
      converted, at $1.50 per share, into 666,668 shares of the Company’s common
      stock.





(D)
            Redeemable
                Common Stock:





In
      connection with the Company’s acquisition of Parker and Lancaster Corporation on
      October 13, 2000, the Company issued 300,000 shares of common stock of the
      Company to the former shareholders of Parker and Lancaster Corporation. The
      former shareholders of Parker and Lancaster Corporation have the right to cause
      the Company to repurchase the common stock approximately five years after the
      closing of the acquisition at a price of $3.33 per share. The redemption feature
      of these shares expired during the quarter ended December 31,
      2005.




10

---



Back to Contents

In
      connection with the Company’s acquisition of Masterpiece Homes on July 28, 2003,
      the Company sold 30,000 shares of common stock of the Company to the president
      of Masterpiece Homes at $8 per share. The president of Masterpiece Homes has
      the
      right to cause the Company to repurchase the common stock at $8 per share by
      giving notice to the Company no later than the earlier of December 31, 2006
      or
      30 days after termination of his employment, as specified in his employment
      agreement.





(E)
            Employee
                Retirement and Deferred Compensation
                Plans





***Employee
      Retirement Plan***




On
      December 1, 2005, the Company adopted a non-qualified target defined benefit
      retirement plan, effective as of September 1, 2005, which covers a group of
      management employees of the Company. This Supplemental Executive Retirement
      Plan
      (the “SERP”) is intended to provide to each participant an annual supplemental
      retirement benefit based upon their years of service with the Company and
      highest average compensation for five consecutive years. The annual supplemental
      benefit for each participant will be adjusted based on the actual performance
      of
      the SERP compared to the target. The benefit is payable for life with a minimum
      of 10 years guaranteed. In order to qualify for normal retirement benefits,
      a
      Participant must attain age 65 with at least five years of participation in
      the
      SERP. Early retirement will be permitted beginning at age 55, after 5 years
      of
      participation in the Plan. Early retirement benefits will be adjusted
      actuarially to reflect the early retirement date.





If
      a
      participant terminates employment with the Company prior to attaining his or
      her
      normal retirement date, other than by reason of early retirement, death or
      disability, the participant will forfeit all benefits under the
      SERP.





The
      Company can amend or terminate the SERP at any time. However, no termination
      will affect the participants' accrued benefits as determined in accordance
      with
      the SERP or delay any payments to a participant beyond the time that such amount
      would otherwise be payable without regard to the amendment.





The
      Company used a 4% annual compensation increase and a 5% discount rate in
        its calculation of the present value of its projected benefit obligation.
        The
      discount rate used represented the Moody’s AA bond rate for long-term
      bonds as  of September 2005. The Company recognized the following costs
      related to the
      SERP for the period ended March 31, 2006:




Three
            Months Ended
      
      Nine
          Months EndedMarch
            31, 2006
      
      March
          31, 2006Net
          periodic pension cost:Service
          cost
      
      $
      134,000
      
      $
      314,000Interest
          cost
      
      
      77,000
      
      
      180,000Amortization
          of prior service cost
      
      
      83,000
      
      
      194,000Total
          net periodic pension cost
      
      $
      294,000
      
      $
      688,000








***Deferred
      Compensation Plan***





On
      December 1, 2005, the Company adopted an Executive Compensation Deferral Plan
      (the “Deferral Plan”) effective as of June 1, 2005. Under the Plan, participants will
      have
      the ability to defer a portion of their compensation which will be credited
      to
      an account maintained by the Company for the participant. Amounts contributed
      by
      participants are always vested. Participant deferral accounts will be maintained
      by the Company for recordkeeping purposes only. Participants will have no
      interest in any assets which may be set aside by the Company to meet its
      obligations under the Deferral Plan.




11

---



Back to Contents




(F)
            Earnings
                Per Share:





The
      weighted average number of shares used to compute basic earnings per common
      share and diluted earnings per common share and a reconciliation of the
      numerator and denominator used in the computation for the three and nine months
      ended March 31, 2006 and 2005 are shown in the following table:





Three
            Months Ended
        
        Nine
            Months EndedMarch
            31,2006
        
        
        2005
        
        
        2006
        
        
        2005(Unaudited)
          (in
            thousands)Weighted
            average common shares issued
        
        
        18,698
        
        
        18,698
        
        
        18,698
        
        
        18,250Unconditional
            shares issuable
        
        
        —
        
        
        —
        
        
        —
        
        
        32Less:
            Average treasury shares
          Outstanding
        
        
        (253
        )
        
        (359
        )
        
        (184
        )
        
        (484
        )Basic
            EPS shares
        
        
        18,445
        
        
        18,339
        
        
        18,514
        
        
        17,798Effect
            of assumed shares issued undertreasury
            stock method for stock options
        
        
        336
        
        
        554
        
        
        340
        
        
        566Effect
            of partial conversion of $3 millionConvertible
            Subordinated 7% Note
        
        
        —
        
        
        —
        
        
        —
        
        
        448Diluted
            EPS shares
        
        
        18,781
        
        
        18,893
        
        
        18,854
        
        
        18,812Net
            income available for common
          Shareholders
        
        $
        12,809
        
        $
        10,573
        
        $
        36,003
        
        $
        27,005Effect
            of partial conversion of $3 millionConvertible
            Subordinated 7% Note
        
        
        —
        
        
        —
        
        
        —
        
        
        22Adjusted
            net income for diluted EPS
        
        $
        12,809
        
        $
        10,573
        
        $
        36,003
        
        $
        27,027




(G)
            Residential
                Properties Completed or under
                Construction:





Residential
      properties completed or under construction consist of the
      following:





March
          31,
        2006
      
      June
          30,
        2005(in
          thousands)Under
          contract for sale (backlog)
      
      $
      224,558
      
      $
      128,137Unsold
      
      
      115,447
      
      
      62,718Total
          residential properties completed or under construction
      
      $
      340,005
      
      $
      190,855




12

---



Back to Contents

(H)
            Restricted
                Stock Award:





On
      March
      4, 2005, the Compensation Committee of the Company resolved to grant Michael
      T.
      Vesey, the Company's President, Chief Operating Officer and a member of the
      Company's Board of Directors, 125,000 restricted shares of the Company's common
      stock pursuant to the terms of the Company's Stock Award Plan. The award was
      subject to Mr. Vesey's execution of a Restricted Stock Award Agreement which
      he
      has executed. The Compensation Committee also approved the payment of bonus
      compensation to Mr. Vesey sufficient to allow Mr. Vesey to pay the income tax
      liability triggered on each vesting date.





The
  shares of restricted stock granted to Mr. Vesey will vest at a rate of 10,000
  per year on the first through fifth anniversaries of the date of grant and 15,000
  per year on the sixth through tenth anniversaries of the date of the grant,
  with all shares being fully vested by or on the tenth anniversary of the date
  of grant, assuming Mr. Vesey's continued employment with the Company. In addition,
  in the event of a change of control as defined in the Stock Award Plan, any
  shares of restricted stock not vested at that time will vest, assuming Mr. Vesey
  is then employed by the Company. Any
  shares that are not vested are subject to forfeiture in the event Mr. Vesey's
  employment with the Company terminates for any reason.





On
      a
      monthly basis, the Company records compensation expense for the portion of
      the
      award earned along with additional compensation expense sufficient to cover
      the
      taxes Mr. Vesey will have to pay on the award.





(I)
            Litigation





From
      time
      to time the Company is named as a defendant in legal actions arising from its
      normal business activities. Although the amount of liability that could arise
      with respect to currently pending actions cannot be accurately predicted, in
      the
      opinion of the Company any such liability will not have a material adverse
      effect on the financial position, operating results or cash flows of the
      Company.





(J)
            Commitments
                and Contingencies:





As
      of
      March 31, 2006, the Company owned or controlled approximately 18,989 building
      lots. As part of the aforementioned building lots, the Company had contracted
      to
      purchase, or had under option, undeveloped land and improved lots for an
      aggregate purchase price of approximately $605,613,000 which are expected to
      yield approximately 10,054 building lots. Generally,
      the Company structures its land acquisitions so that it has the right to cancel
      its agreements to purchase undeveloped land and improved lots by forfeiture
      of
      its deposit under the agreement. Furthermore, purchase of the properties is
      usually contingent upon obtaining all governmental approvals and satisfaction
      of
      certain requirements by the Company and the sellers.




13

---



Back to Contents

**ORLEANS
      HOMEBUILDERS, INC. AND SUBSIDIARIES**





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





Orleans
      Homebuilders, Inc. and its subsidiaries (collectively, the “Company”, “OHB” or
“Orleans”) market, develop and build high-quality, single-family homes,
      townhomes and condominiums to serve various homebuyer segments, including
      first-time, first move-up, second move-up, luxury and active adult. The Company
      believes this broad range of home designs allows it to capitalize on favorable
      economic and demographic trends within its markets. The Company is currently
      engaged in residential real estate development in the following fourteen
      markets: southeastern Pennsylvania; central New Jersey; southern New Jersey;
      Orange County New York; Charlotte, Raleigh and Greensboro, North Carolina;
      Richmond and Tidewater, Virginia; Orlando, Palm Coast, and Palm Bay Florida;
      Chicago, Illinois; and Phoenix, Arizona. The Company’s Charlotte, North Carolina
      market also includes operations in adjacent counties in South Carolina. The
      Company has operated in its Pennsylvania and New Jersey markets for over 85
      years and began operations in its North Carolina and Virginia markets in fiscal
      2001 through the acquisition of Parker & Lancaster Corporation, a
      privately-held residential homebuilder. The Company entered the Orlando and
      Palm
      Coast, Florida markets on July 28, 2003 through its acquisition of Masterpiece
      Homes, Inc. (“Masterpiece Homes”), a privately-held residential homebuilder. On
      July 28, 2004, the Company entered the Chicago, Illinois market through the
      acquisition of Realen Homes, L.P. (“Realen Homes”), an established
      privately-held homebuilder with operations in southeastern Pennsylvania and
      Chicago, Illinois. On December 23, 2004, pursuant to an Asset Purchase Agreement
      of the same date, the Company acquired, through a wholly-owned subsidiary,
      certain real estate assets from Peachtree Residential Properties, LLC, a North
      Carolina limited liability company and Peachtree Townhome Communities, LLC,
      a
      North Carolina limited liability company which, at the time the Company acquired
      the assets, were wholly-owned subsidiaries of Peachtree Residential Properties,
      Inc., a Georgia corporation (collectively, “Peachtree Residential Properties”).
      In December 2005, the Company entered the Phoenix, Arizona market as a start-up
      operation via the purchase of an undeveloped parcel of land. The Company
      anticipates generating its first revenues in the Phoenix market in the last
      quarter of fiscal 2007. The Results of Operations include the activity of Realen
      Homes from July 28, 2004 through March 31, 2006 as well as the revenue and
      expenses associated with certain real estate assets acquired from Peachtree
      Residential Properties from December 22, 2004 through March 31, 2006. Unless
      otherwise indicated, the term the “Company” includes the accounts of Realen
      Homes.




References
      to a given fiscal year in this Quarterly Report on Form 10-Q are to the fiscal
      year ended June 30th of that year. For example, the phrases “fiscal 2006” or
“2006 fiscal year” refer to the fiscal year ended June 30, 2006. When used in
      this report, “northern region” refers to the Company’s markets in Pennsylvania,
      New Jersey and New York, which includes the southeastern Pennsylvania operations
      of Realen Homes that were acquired on July 28, 2004; “southern region” refers to
      the Company’s markets in North Carolina and Virginia; “Florida region” refers to
      the Company’s market in Florida, and “midwestern region” refers to the Company’s
      market in Illinois.




At
      March
      31, 2006, backlog was $588,048,000 representing 1,298 homes compared to a
      backlog of $665,441,000 representing 1,713 homes at March 31, 2005. At March
      31,
      2006, the Company was selling in 86 active selling communities and owned or
      controlled approximately 18,989 building lots compared to 85 active selling
      communities and approximately 16,119 owned or controlled building lots at March
      31, 2005. The Company considers a community active if it has five or more lots
      available for sale in that community.




14

---



Back to Contents




After
      considerable increases in new orders and new home pricing in the prior
        fiscal years, the Company has experienced a softening of demand beginning
        in the second
      quarter of fiscal 2006 and continuing through the third quarter of
        fiscal 2006, primarily in its northern and Florida regions. The Company
        believes this
      softening in certain regions is consistent with the trend in the housing
         industry, as record level sales for three consecutive years adjust toward
        more
      sustainable levels.





Several
      factors contributing to the overall decline in new orders for the housing
      industry include rising interest rates, decreasing home price affordability
      and
      an increasing supply of homes as investors exit various markets. In addition
      to
      these overall housing industry trends, the Company has encountered delays in
      the
      opening of new communities due to increasingly restrictive regulations and
      moratoriums by governments, particularly in the Company’s northern region, and
      an increase in new order cancellation rates, particularly in the Company’s
      Florida region, as investors exit the market. The Company believes these overall
      factors will continue to place downward pressure on new orders and new order
      pricing in the near-term, thereby negatively impacting future revenue growth
      and
      gross margins. Despite these pressures, the Company believes the long-term
      outlook for the housing industry remains positive, as the population increases
      and new households are formed, mortgage interest rates remain relatively low
      compared to historical levels and employment opportunities continue to
      grow.





Results
      of Operations





The
      following table sets forth certain details as to residential sales activity.
      The
      information provided is for the three and nine months ended March 31, 2006
      and
      2005 in the case of residential revenue earned and new orders, and as of March
      31, 2006 and 2005 in the case of backlog.





A
      sales
      contract or potential sale is classified as a new order and, therefore, becomes
      a part of backlog, at the time a homebuyer executes a contract to purchase
      a
      home from the Company.





Nine
          Months Ended March 31,2006
      
      2005(Dollars
          in thousands)**Northern
          Region****(1)******
      
      
      
      
      
      Average
      
      
      
      
      
      AveragePennsylvania
          and New Jersey:
      
      Amount
      
      Homes
      
      Price
      
      Amount
      
      Homes
      
      PriceResidential
          revenue earned
      
      $
      239,303
      
      
      510
      
      $
      469
      
      $
      214,202
      
      
      481
      
      $
      445New
          orders
      
      
      191,509
      
      
      349
      
      
      549
      
      
      256,977
      
      
      526
      
      
      489Backlog
      
      
      202,727
      
      
      374
      
      
      542
      
      
      325,594
      
      
      705
      
      
      462**Southern
          Region****(2)**North
          Carolina, South Carolinaand
          Virginia:Residential
          revenue earned
      
      $
      210,328
      
      
      527
      
      $
      399
      
      $
      161,708
      
      
      452
      
      $
      358New
          orders
      
      
      288,994
      
      
      639
      
      
      452
      
      
      198,484
      
      
      517
      
      
      384Backlog
      
      
      236,957
      
      
      485
      
      
      489
      
      
      192,919
      
      
      477
      
      
      404




15

---



Back to Contents

**Florida
                Region**Residential
                revenue earned
            
            $
            60,086
            
            
            248
            
            $
            242
            
            $
            53,052
            
            
            310
            
            $
            171New
                orders
            
            
            62,952
            
            
            193
            
            
            326
            
            
            70,799
            
            
            320
            
            
            221Backlog
            
            
            89,068
            
            
            304
            
            
            293
            
            
            70,595
            
            
            329
            
            
            215**Midwestern
                Region****(3)**Residential
                revenue earned
            
            $
            77,001
            
            
            183
            
            $
            421
            
            $
            85,748
            
            
            233
            
            $
            368New
                orders
            
            
            78,074
            
            
            179
            
            
            436
            
            
            64,403
            
            
            169
            
            
            381Backlog
            
            
            59,296
            
            
            135
            
            
            439
            
            
            76,333
            
            
            202
            
            
            378**Combined
                Regions**Residential
                revenue earned
            
            $
            586,718
            
            
            1,468
            
            $
            400
            
            $
            514,710
            
            
            1,476
            
            $
            349New
                orders
            
            
            621,529
            
            
            1,360
            
            
            457
            
            
            590,663
            
            
            1,532
            
            
            386Backlog
            
            
            588,048
            
            
            1,298
            
            
            453
            
            
            665,441
            
            
            1,713
            
            
            388




(1)
      Information on residential revenue earned and new orders for the nine months
      ending March 31, 2006 includes the acquired operations of Realen Homes’
      Southeastern Pennsylvania region from the date of acquisition, July 28, 2004,
      through March 31, 2006.




(2)
      Information on residential revenue earned and new orders for the nine months
      ending March 31, 2006 includes amounts acquired from Peachtree Residential
      Properties for the period beginning December 23, 2004, the date the Company
      acquired the assets, through March 31, 2006.




(3)
      Information on residential revenue earned and new orders is for the period
      beginning July 28, 2004, the date the Company entered this market through its
      acquisition of Realen Homes, through March 31, 2006.




Three
          Months Ended March 31,2006
      
      2005(Dollars
          in thousands)**Northern
          Region****(1)******
      
      
      
      
      
      Average
      
      
      
      
      
      AveragePennsylvania
          and New Jersey:
      
      Amount
      
      Homes
      
      Price
      
      Amount
      
      Homes
      
      PriceResidential
          revenue earned
      
      $
      90,105
      
      
      184
      
      $
      490
      
      $
      78,501
      
      
      172
      
      $
      456New
          orders
      
      
      52,267
      
      
      92
      
      
      568
      
      
      116,431
      
      
      252
      
      
      462Backlog
      
      
      202,727
      
      
      374
      
      
      542
      
      
      325,594
      
      
      705
      
      
      462**Southern
          Region****(2)**North
          Carolina, South Carolinaand
          Virginia:Residential
          revenue earned
      
      $
      71,445
      
      
      172
      
      $
      415
      
      $
      62,995
      
      
      173
      
      $
      364New
          orders
      
      
      100,027
      
      
      209
      
      
      479
      
      
      94,880
      
      
      240
      
      
      395Backlog
      
      
      236,957
      
      
      485
      
      
      489
      
      
      192,919
      
      
      477
      
      
      404




16

---



Back to Contents

**Florida
                Region**Residential
                revenue earned
            
            $
            24,359
            
            
            97
            
            $
            251
            
            $
            19,221
            
            
            104
            
            $
            185New
                orders
            
            
            13,889
            
            
            41
            
            
            339
            
            
            33,072
            
            
            141
            
            
            235Backlog
            
            
            89,068
            
            
            304
            
            
            293
            
            
            70,595
            
            
            329
            
            
            215**Midwestern
                Region****(3)**Residential
                revenue earned
            
            $
            21,934
            
            
            51
            
            $
            430
            
            $
            37,403
            
            
            100
            
            $
            374New
                orders
            
            
            30,581
            
            
            68
            
            
            450
            
            
            18,163
            
            
            49
            
            
            371Backlog
            
            
            59,296
            
            
            135
            
            
            439
            
            
            76,333
            
            
            202
            
            
            378**Combined
                Regions**Residential
                revenue earned
            
            $
            207,843
            
            
            504
            
            $
            412
            
            $
            198,120
            
            
            549
            
            $
            361New
                orders
            
            
            196,764
            
            
            410
            
            
            480
            
            
            262,546
            
            
            682
            
            
            385Backlog
            
            
            588,048
            
            
            1,298
            
            
            453
            
            
            665,441
            
            
            1,713
            
            
            388




(1)
          Information on residential revenue earned and new orders for the three
          months
          ending March 31, 2006 includes the acquired operations of Realen Homes’        Southeastern Pennsylvania region from the date of acquisition, July 28,
        2004,
        through March 31, 2006.
  (2)
          Information on residential revenue earned and new orders for the three
          months
          ending March 31, 2006 includes amounts acquired from Peachtree Residential
          Properties for the period beginning December 23, 2004, the date the Company
          acquired the assets, through March 31, 2006.
  (3)
          Information on residential revenue earned and new orders is for the period
          beginning July 28, 2004, the date the Company entered this market through
          its
          acquisition of Realen Homes, through March 31, 2006.
  Three
          and Nine Months Ended March 31, 2006


Orders
      and Backlog and Cancellations





New
      orders for the nine months ended March 31, 2006 increased $30,866,000, or 5.2%,
      to $621,529,000 on 1,360 homes, compared to $590,663,000 on 1,532 homes for
      the
      nine months ended March 31, 2005. The average price per home of new orders
      increased by approximately 18.4% to $457,000 for the nine months ended March
      31,
      2006 compared to $386,000 for the nine months ended March 31, 2005.





New
      orders for the three months ended March 31, 2006 decreased $65,782,000, or
      25.1%, to $196,764,000 on 410 homes, compared to $262,546,000 on 682 homes
      for
      the three months ended March 31, 2005. The average price per home of new orders
      increased by approximately 24.7% to $480,000 for the three months ended March
      31, 2006 compared to $385,000 for the three months ended March 31, 2005.





The
      backlog at March 31, 2006 decreased $77,393,000, or 11.6%, to $588,048,000
      on
      1,298 homes compared to the backlog at March 31, 2005 of $665,441,000 on 1,713
      homes. The decrease in the backlog was attributable to decreases in new orders
      in the northern and Florida regions which were partially offset by increases
      in
      new orders in the southern and midwestern regions.
      The average price per home included in the Company’s backlog increased 16.8% to
      $453,000 at March 31, 2006 compared to $388,000 at March 31, 2005.




17

---



Back to Contents



The
      Company experienced a cancellation rate of approximately 19% and 20% for the
      nine and three months ended March 31, 2006, respectively, compared to a
      cancellation rate of approximately 15% in fiscal 2005. The Company believes
      the
      increase in the cancellation rates is primarily attributable to investors
      exiting the Palm Coast market in the Company’s Florida region.





***Northern
      Region:***





New
      orders for the nine months ended March 31, 2006 decreased $65,468,000 to
      $191,509,000, or 25.5%, on 349 homes, compared to $256,977,000 on 526 homes
      for
      the nine months ended March 31, 2005. The decrease in new orders is attributable
      to softening demand coupled with delays in the start of new communities to
      replace communities that were sold-out at the conclusion of fiscal 2005. The
      delays are due to significant government regulations imposed on developers
      and
      homebuilders in the northern region. The average price per home of new orders
      increased by 12.3% to $549,000 for the nine months ended March 31, 2006 compared
      to $489,000 for the nine months ended March 31, 2005. The increase in the
      average price per home of new orders was impacted by a shift in the mix of
      new
      orders for the nine months ended March 31, 2006 compared to the nine months
      ended March 31, 2005. Specifically, single family homes, which typically have
      higher price points than multi-family homes, comprised a larger percentage
      of
      new orders than multi-family homes for the nine months ended March 31, 2006
      when
      compared to the nine months ended March 31, 2005.





New
      orders for the three months ended March 31, 2006 decreased $64,164,000 to
      $52,267,000, or 55.1%, on 92 homes, compared to $116,431,000 on 252 homes for
      the three months ended March 31, 2005. The decrease in new orders is
      attributable to softening demand in the region coupled with delays in the start
      of new communities to replace communities that were sold-out at the conclusion
      of fiscal 2005. The delays are due to significant government regulations imposed
      on developers and homebuilders in the northern region. The average price per
      home of new orders increased by 22.9% to $568,000 for the three months ended
      March 31, 2006 compared to $462,000 for the three months ended March 31, 2005.
      The increase in the average price per home of new orders was impacted by a
      shift
      in the mix of new orders for the three months ended March 31, 2006 compared
      to
      the three months ended March 31, 2005. Specifically, single family homes, which
      typically have higher price points than multi-family homes, comprised a larger
      percentage of new orders than multi-family homes for the three months ended
      March 31, 2006 when compared to the three months ended March 31, 2005.





The
      Company had 26 active selling communities in the northern region as of March
      31,
      2006 and 2005.




***Southern
      Region:***





New
      orders for the nine months ended March 31, 2006 increased $90,510,000 to
      $288,994,000, or 45.6%, on 639, homes compared to $198,484,000 on 517 homes
      for
      the nine months ended March 31, 2005. The increase in new orders was
      attributable to the opening of new communities during the nine months ended
      March 31, 2006. The new communities replaced existing communities that were
      sold-out during fiscal 2005. The average price per home of new orders increased
      by 17.7% to $452,000 for the nine months ended March 31, 2006 compared to
      $384,000 for the nine months ended March 31, 2005. This increase in the average
      price per home of new orders is attributable to two factors. First, the Company
      increased prices in a majority of those
      communities in the region open during the nine months ended March 31, 2006
      when
      compared with the same communities and homes offered for sale in the comparable
      prior year period. Second, the Company opened new communities in the region
      during the nine months ended March 31, 2006 that have higher price points than
      the communities they are replacing that were open during the nine months ended
      March 31, 2005.




18

---



Back to Contents







New
      orders for the three months ended March 31, 2006 increased $5,147,000 to
      $100,027,000, or 5.4%, on 209 homes, compared to $94,880,000 on 240 homes for
      the three months ended March 31, 2005. The decrease in the number of new orders
      is primarily attributable to softening demand in the Company’s Richmond,
      Virginia market. The increase in the new order dollars was attributable to
      positive pricing trends in existing communities and the opening of new
      communities that have higher price points than the communities they are
      replacing. These trends have resulted in an increase in the average price per
      home of new orders of 21.3% to $479,000 for the three months ended March 31,
      2006 compared to $395,000 for the three months ended March 31, 2005.





The
      Company had 46 active selling communities in the southern region as of March
      31,
      2006 and 2005.





***Florida
      Region:***





New
      orders for the nine months ended March 31, 2006 decreased $7,847,000 to
      $62,952,000, or 11.1%, on 193 homes, compared to $70,799,000 on 320 homes for
      the nine months ended March 31, 2005. The decrease in new orders was primarily
      attributable to two factors. First, the region experienced approval and land
      development related delays which have postponed the opening of several new
      communities. Second, the region experienced a higher percentage of cancellations
      during the nine months ended March 31, 2006 compared to the nine months ended
      March 31, 2005 as investors exit various markets in the region. The average
      price per home of new orders increased by 47.5% to $326,000 for the nine months
      ended March 31, 2006 compared to $221,000 for the nine months ended March 31,
      2005. The increase in the average price per home of new order was attributable
      to a shift towards move-up homes as opposed to entry level homes.





New
      orders for the three months ended March 31, 2006 decreased $19,183,000 to
      $13,889,000, or 58.0%, on 41 homes, compared to $33,072,000 on 141 homes for
      the
      three months ended March 31, 2005. The decrease in new orders was attributable
      to two factors. First, the region experienced approval and land development
      related delays which have postponed the opening of several new communities.
      Second, the region experienced a higher percentage of cancellations during
      the
      three months ended March 31, 2006 compared to the three months ended March
      31,
      2005 as investors exit various markets in the region. The average price per
      home
      of new orders increased by 44.3% to $339,000 for the three months ended March
      31, 2006 compared to $235,000 for the three months ended March 31, 2005. The
      increase in the average price per home of new order was attributable to a shift
      towards move-up homes as opposed to entry level homes.





The
      Company had five active selling communities in the Florida region as of March
      31, 2006, compared to seven active selling communities as of March 31, 2005.
      The
      Company expects an increase in the number of active selling communities for
      the
      Florida region in the next fiscal year. The Company owns or controls 2,332
      lots
      at March 31, 2006 compared to 1,764 lots at March 31, 2005.




19

---



Back to Contents

***Midwestern
      Region:***





The
      Company entered the midwestern region through the acquisition of Realen Homes
      on
      July 28, 2004. New orders for nine months ended March 31, 2006 increased
      $13,671,000 to $78,074,000, or 21.2%, on 179 homes compared to $64,403,000
      on
      169 homes for the nine months ended March 31, 2005. The increase in new orders
      was primarily attributable to an increase in the average price per home of
      new
      orders during the nine months ended March 31, 2006 when compared to the nine
      months ended March 31, 2005. The average price per home of new orders increased
      by 14.4% to $436,000 for the nine months ended March 31, 2006 compared to
      $381,000 for the nine months ended March 31, 2005. The increase in average
      price
      per home of new orders was attributable to price increases in a majority of
      those communities open during the nine months ended March 31, 2006 when compared
      with the same communities and products offered for sale in the comparable prior
      year period.





New
      orders for three months ended March 31, 2006 increased $12,418,000 to
      $30,581,000, or 68.4%, on 68 homes compared to $18,163,000 on 49 homes for
      the
      three months ended March 31, 2005. The increase in new orders was attributable
      to increases in the number of active selling communities and the average price
      per home of new orders during the three months ended March 31, 2006 when
      compared to the three months ended March 31, 2005. The average price per home
      of
      new orders increased by 21.3% to $450,000 for the three months ended March
      31,
      2006 compared to $371,000 for the three months ended March 31, 2005. The
      increase in average price per home of new orders was attributable to price
      increases in a majority of those communities open during the three months ended
      March 31, 2006 when compared with the same communities and products offered
      for
      sale in the comparable prior year period.





The
      Company had nine active selling communities in the midwestern region as of
      March
      31, 2006, compared to six active selling communities as of March 31, 2005.





Total
      Earned Revenues





Total
      earned revenues for the nine months ended March 31, 2006 increased $74,055,000,
      to $594,207,000, or 14.2%, compared to $520,152,000 for the nine months ended
      March 31, 2005. Residential revenue earned from the sale of residential homes
      included 1,468 homes totaling $586,718,000 during the nine months ended March
      31, 2006, as compared to 1,476 homes totaling $514,710,000 during the nine
      months ended March 31, 2005. The average selling price per home delivered in
      the
      nine months ended March 31, 2006 increased by approximately 14.6% to $400,000
      for the nine months ended March 31, 2006 compared to $349,000 for the nine
      months ended March 31, 2005.





Total
      earned revenues for the three months ended March 31, 2006 increased $9,933,000,
      to $209,915,000, or 5.0%, compared to $199,982,000 for the three months ended
      March 31, 2005. Residential revenue earned from the sale of residential homes
      included 504 homes totaling $207,843,000 during the three months ended March
      31,
      2006, as compared to 549 homes totaling $198,120,000 during the three months
      ended March 31, 2005. The average selling price per home delivered in the three
      months ended March 31, 2006 increased by approximately 14.1% to $412,000 for
      the
      three months ended March 31, 2006 compared to $361,000 for the three months
      ended March 31, 2005.





***Northern
      Region:***





Residential
      revenue earned for the nine months ended March 31, 2006 increased $25,101,000
      to
      $239,303,000, or 11.7%, on 510 homes delivered as compared to $214,202,000
      on
      481 homes delivered
      during the nine months ended March 31, 2005. The increase in residential revenue
      earned and new home deliveries is a result of increased homebuilding production
      in the region coupled with a shift in the mix of homes delivered. Specifically,
      multi-family homes comprised a larger percentage of the total homes delivered
      in
      the region during the nine months ended March 31, 2006 than single family
      product when compared to the nine months ended March 31, 2005. The average
      selling price per home delivered in the nine months ended March 31, 2006
      increased 5.4% to $469,000 for the nine months ended March 31, 2006 compared
      to
      $445,000 for the nine months ended March 31, 2005.




20

---



Back to Contents



Residential
      revenue earned for the three months ended March 31, 2006 increased $11,604,000
      to $90,105,000, or 14.8%, on 184 homes delivered as compared to $78,501,000
      on
      172 homes delivered during the three months ended March 31, 2005. The increase
      in residential revenue earned and new home deliveries is a result of increased
      homebuilding production in the region coupled with an increase in the average
      sales price per home delivered. The average selling price per home delivered
      in
      the three months ended March 31, 2006 increased 7.5% to $490,000 for the three
      months ended March 31, 2006 compared to $456,000 for the three months ended
      March 31, 2005.





***Southern
      Region:***





Residential
      revenue earned for the nine months ended March 31, 2006 increased $48,620,000
      to
      $210,328,000, or 30.1%, on 527 homes delivered as compared to $161,708,000
      on
      452 homes delivered during the nine months ended March 31, 2005. The increase
      in
      residential revenue earned and homes delivered was attributable to continued
      new
      order growth as the Company continues to expand in the region. The average
      price
      per home delivered increased 11.5% to $399,000 for the nine months ended March
      31, 2006 compared to $358,000 for the nine months ended March 31, 2005. The
      increase in the average price per home delivered was attributable to increases
      in the average price per home of new orders in fiscal 2006 and a change in
      the
      product mix of homes delivered during the nine months ended March 31, 2006
      compared to the nine months ended March 31, 2005. Specifically, the Company
      delivered a larger percentage of luxury and move-up homes during the nine months
      ended March 31, 2006 than during the nine months ended March 31, 2005.





Residential
      revenue earned for the three months ended March 31, 2006 increased $8,450,000
      to
      $71,445,000, or 13.4%, on 172 homes delivered as compared to $62,995,000 on
      173
      homes delivered during the three months ended March 31, 2005. The increase
      in
      residential revenue earned was attributable to an increase in the average price
      per home delivered as the Company delivered a larger percentage of luxury and
      move-up homes during the three months ended March 31, 2006 than during the
      three
      months ended March 31, 2005. The average price per home delivered increased
      14.0% to $415,000 for the three months ended March 31, 2006 compared to $364,000
      for the three months ended March 31, 2005.





***Florida
      Region:***




Residential
      revenue earned for the nine months ended March 31, 2006 increased $7,034,000
      to
      $60,086,000, or 13.3%, on 248 homes, compared to $53,052,000 on 310 homes for
      the nine months ended March 31, 2005. The increase in residential revenue earned
      is primarily attributable to a 41.5% increase in the average selling price
      per
      home delivered to $242,000 for the nine months ended March 31, 2006 compared
      to
      $171,000 for the nine months ended March 31, 2005. The increase in the average
      selling price per home delivered is attributable to the demand for new housing
      as well a shift in the region toward move-up homes which command greater pricing
      power than entry level homes. The decrease in the number of homes delivered
      is primarily
      attributable to a decrease in the number of new orders resulting from
      speculative homebuyer cancellations and government-related delays in recording
      the record plats and obtaining building permits in some of the Company’s new
      communities in the region.




21

---



Back to Contents



Residential
      revenue earned for the three months ended March 31, 2006 increased $5,138,000
      to
      $24,359,000, or 26.7%, on 97 homes, compared to $19,221,000 on 104 homes for
      the
      three months ended March 31, 2005. The increase in residential revenue earned
      is
      primarily attributable to a 35.7% increase in the average selling price per
      home
      delivered to $251,000 for the three months ended March 31, 2006 compared to
      $185,000 for the three months ended March 31, 2005. The increase in the average
      selling price per home delivered is primarily attributable to the demand for
      new
      housing as well a shift in the region toward move-up homes which command greater
      pricing power than entry level homes.




***Midwestern
      Region:***





The
      Company entered the midwestern region on July 28, 2004 through the acquisition
      of Realen Homes. Residential revenue earned for the nine months ended March
      31,
      2006, decreased $8,747,000 to $77,001,000, or 10.2%, on 183 homes, compared
      to
      $85,748,000 on 233 homes for the nine months ended March 31, 2005. The decrease
      in residential revenue earned is primarily due to the significant backlog
      acquired and delivered in the prior fiscal year when compared to the available
      backlog deliverable in the current fiscal year. The average selling price per
      home delivered in the nine months ended March 31, 2006 increased 14.4% to
      $421,000 for the nine months ended March 31, 2006 compared to $368,000 for
      the
      nine months ended March 31, 2005.





Residential
      revenue earned for the three months ended March 31, 2006, decreased $15,469,000
      to $21,934,000, or 41.4%, on 51 homes, compared to $37,403,000 on 100 homes
      for
      the three months ended March 31, 2005. The decrease in residential revenue
      earned is primarily due to the significant backlog acquired and delivered in
      the
      prior fiscal year when compared to the available backlog deliverable in the
      current fiscal year. The average price per home delivered increased 15.0% to
      $430,000 for the three months ended March 31, 2006 compared to $374,000 for
      the
      three months ended March 31, 2005.





Other
      Income





Other
      income consists primarily of property management fees and mortgage processing
      income. Other income for the nine months ended March 31, 2006 increased
      $1,036,000 to $6,136,000, or 20.3%, compared to $5,100,000 for the nine months
      ended March 31, 2005. The increase is primarily attributable to increases in
      mortgage processing revenue and interest income earned during the nine months
      ended March 31, 2006 compared to the nine months ended March 31, 2005. The
      increase in the mortgage processing revenue is attributable to the Company’s
      increased residential property revenue coupled with an improved mortgage capture
      rate for the nine months ended March 31, 2006 compared to the nine months ended
      March 31, 2005.





Other
      income for the three months ended March 31, 2006 increased $460,000 to
      $2,072,000, or 28.5%, compared to $1,612,000 for the three months ended March
      31, 2005. The increase is primarily attributable to increases in mortgage
      processing revenue as a result of the increase in residential property revenue
      of the Company and interest income earned during the three months ended March
      31, 2006 compared to the three months ended March 31, 2005. The increase in
      the
      mortgage processing revenue is attributable to the Company’s increased
      residential property revenue coupled with an improved mortgage capture rate
      for
      the three months ended March 31, 2006 compared to the three months ended March
      31, 2005.




22

---



Back to Contents

Costs
      and Expenses





Costs
      and
      expenses for the nine months ended March 31, 2006 increased $58,306,000 to
      $534,218,000, or 12.3%, compared with the nine months ended March 31, 2005.
      The
      cost of residential properties for the nine months ended March 31, 2006
      increased $41,930,000 to $453,998,000, or 10.2%, when compared with the nine
      months ended March 31, 2005. The increase in cost of residential properties
      was
      primarily attributable to the overall increase in residential revenue as noted
      above. The consolidated gross profit margin for the nine months ended March
      31,
      2006 increased 2.7% to 22.6% compared to 19.9% for the nine months ended March
      31, 2005.





The
      increase in gross profit margin is primarily attributable to the change in
      product mix toward more homes for move-up and luxury buyers and the introduction
      of new models at the communities the Company acquired from Realen Homes. In
      addition, the gross profit margin is favorably affected by the consolidated
      reduced inventory step-up amortization related to acquisition accounting for
      inventory delivered during the nine months ended March 31, 2006 as compared to
      the nine months ended March 31, 2005.





Interest
      included in the costs and expenses of residential properties and land sold
      for
      the nine months ended March 31, 2006 and March 31, 2005 was $8,648,000 and
      $6,423,000, respectively. The interest incurred during the construction periods
      is capitalized to inventory and then expensed to the cost of residential
      properties in the period in which the home settles.





Costs
      and
      expenses for the three months ended March 31, 2006 increased $6,008,000 to
      $188,682,000, or 3.3%, compared with the three months ended March 31, 2005.
      The
      cost of residential properties for the three months ended March 31, 2006
      increased $888,000 to $161,411,000, or 0.6%, when compared with the three months
      ended March 31, 2005. The consolidated gross profit margin for the three months
      ended March 31, 2006 increased 3.3% to 22.3% compared to 19.0% for the three
      months ended March 31, 2005.





The
      increase in gross profit margin is primarily attributable to the change in
      product mix toward more homes for move-up and luxury buyers and the introduction
      of new models at the communities the Company acquired from Realen Homes. In
      addition, the gross profit margin is favorably affected by the consolidated
      reduced inventory step-up amortization related to acquisition accounting for
      inventory delivered during the three months ended March 31, 2006 as compared
      to
      the three months ended March 31, 2005.





Interest
      included in the costs and expenses of residential properties and land sold
      for
      the three months ended March 31, 2006 and March 31, 2005 was $3,218,000 and
      $1,696,000, respectively. The interest incurred during the construction periods
      is capitalized to inventory and then expensed to the cost of residential
      properties in the period in which the home settles.





The
      Company sells a variety of home types in various communities and regions, each
      yielding a different gross profit margin. As a result, depending on the mix
      of
      both communities and of home types delivered, the consolidated gross profit
      margin may fluctuate up or down on a periodic basis and periodic profit margins
      may not be representative of the consolidated gross profit margin for the year.





Selling,
      General & Administrative Expenses





For
      the
      nine months ended March 31, 2006, selling, general and administrative expenses
      increased $14,290,000 to $74,439,000, or 23.8%, when compared with the nine
      months ended March
      31,
      2005. The increase was attributable to increases in both variable and fixed
      selling, general and administrative expenses. Variable expenses increased due
      to
      an increase in outside broker commissions and incentive compensation during
      the
      nine months ended March 31, 2006 as compared to the nine months ended March
      31,
      2005. Fixed selling, general and administrative expenses for the nine months
      ended March 31, 2006 are higher than for the nine months ended March 31, 2005
      primarily due to expenses recognized in connection with the Company’s adoption
      of a supplemental executive retirement plan, forfeited deposits and land
      pre-acquisition costs related to abandoned land development projects and
      advertising expenditures.




23

---



Back to Contents



The
      selling, general and administrative expenses as a percentage of residential
      revenue earned for the nine months ended March 31, 2006 increased 1.0% to 12.7%
      as compared to the 11.7% for the nine months ended March 31, 2005. The increased
      percentage is primarily due to the increased variable selling and fixed selling,
      general and administrative expenses discussed above.





For
      the
      three months ended March 31, 2006, selling, general and administrative expenses
      increased $4,970,000 to $25,864,000, or 23.8%, when compared with the three
      months ended March 31, 2005. The increase was attributable to increases in
      both
      variable selling and fixed selling, general and administrative expenses.
      Variable expenses increased due to an increase in outside broker commissions
      and
      incentive compensation during the three months ended March 31, 2006 as compared
      to the three months ended March 31, 2005. Fixed selling, general and
      administrative expenses for the three months ended March 31, 2006 are higher
      than for the three months ended March 31, 2005 primarily due to expenses
      recognized in connection with the Company’s adoption of a supplemental executive
      retirement plan, forfeited deposits and land pre-acquisition costs related
      to
      abandoned land development projects and advertising expenditures.





The
      selling, general and administrative expenses as a percentage of residential
      revenue earned for the three months ended March 31, 2006 increased 1.9% to
      12.4%
      as compared to the 10.5% for the three months ended March 31, 2005. The
      increased percentage is primarily due to the increased variable selling and
      fixed selling, general and administrative expenses discussed above.





Income
      Tax Expense





Income
      tax expense for the nine months ended March 31, 2006 increased $6,751,000 to
      $23,986,000, or 39.2% from $17,235,000 for the nine months ended March 31,
      2005.
      Income tax expense as a percentage of income from operations before income
      taxes
      was 40.0% and 39.0% for the nine months ended March 31, 2006 and 2005,
      respectively. The increase in income tax expense for the nine months ended
      March
      31, 2006 is attributable to an increase in pre-tax income during the nine months
      ended March 31, 2006 compared to the nine months ended March 31, 2005 coupled
      with a higher effective tax rate. The increase in the effective tax rate is
      due
      to a decrease in favorable permanent differences from previous acquisitions,
      partially offset by the inclusion of tax credits for the tax deduction of
      qualified production activities provided by the American Jobs Creation Act
      of
      2004.





Income
      tax expense for the three months ended March 31, 2006 increased $1,689,000
      to
      $8,424,000, or 25.1% from $6,735,000 for the three months ended March 31, 2005.
      Income tax expense as a percentage of income from operations before income
      taxes
      was 39.7% and 38.9% for the three months ended March 31, 2006 and 2005,
      respectively. The increase in income tax expense for the three months ended
      March 31, 2006 is attributable to an increase in pre-tax income during the
      three
      months ended March 31, 2006 compared to the three months ended March 31, 2005
      coupled with a higher effective tax rate. The increase in the effective tax
      rate
      is due to a decrease in favorable permanent differences from previous
      acquisitions, partially offset by
      the
      inclusion of tax credits for the tax deduction of qualified production
      activities provided by the American Jobs Creation Act of 2004.




24

---



Back to Contents



Net
      Income





Net
      income for the nine months ended March 31, 2006 increased $8,998,000, or 33.3%,
      to $36,003,000, compared with $27,005,000 for the nine months ended March 31,
      2005. The increase in net income was attributable to increased residential
      revenue earned during the nine months ended March 31, 2006 coupled with improved
      gross profit margins.





Net
      income for the three months ended March 31, 2006 increased $2,236,000, or 21.1%,
      to $12,809,000, compared with $10,573,000 for the three months ended March
      31,
      2005. The increase in net income was attributable to increased residential
      revenue earned during the three months ended March 31, 2006 coupled with
      improved gross profit margins.





Liquidity
      and Capital Resources





On
      an
      ongoing basis, the Company requires capital to purchase and develop land, to
      construct units, to fund related carrying costs and overhead and to fund various
      advertising and marketing programs to facilitate sales. These expenditures
      include site preparation, roads, water and sewer lines, impact fees and
      earthwork, as well as the construction costs of the homes and amenities. The
      Company's sources of capital include funds derived from operations, sales of
      assets and various borrowings, most of which are secured. The Company believes
      that funds generated from operations and financial commitments from available
      lenders will provide sufficient capital for the Company to meet its existing
      operating needs.





***Trust
      Preferred Securities***





On
      November 23, 2005, the Company issued $75,000,000 of trust preferred securities
      which mature on January 30, 2036 and are callable, in whole or in part, at
      par
      plus accrued interest on or after January 30, 2011. For the first ten years,
      the
      securities have a fixed interest rate of 8.61% per annum. Thereafter, the
      securities have a floating interest rate equal to three-month LIBOR plus 360
      basis points per annum, resetting quarterly. In the event the Company fails
      to
      meet certain financial covenants, the applicable rate of interest will be
      increased by 300 basis points until such time as the Company is in compliance
      with the financial covenants, then the interest rate will return to its original
      amount. The transaction is treated as debt for financial statement purposes.
      The
      Company used proceeds from the sale of these securities to repay outstanding
      obligations under the Revolving Credit Facility discussed below.





On
      September 20, 2005, the Company issued $30,000,000 of trust preferred securities
      which mature on September 30, 2035 and are callable, in whole or in part, at
      par
      plus accrued interest on or after September 30, 2010. For the first ten years,
      the securities have a fixed interest rate of 8.52% per annum. Thereafter, the
      securities have a floating interest rate equal to three-month LIBOR plus 380
      basis points per annum, resetting quarterly. The transaction is treated as
      debt
      for financial statement purposes. The Company used proceeds from the sale of
      these securities to fund land purchases and residential construction. The
      obligations relating to the trust preferred securities are subordinated to
      the
      Revolving Credit Facility.





***Revolving
      Credit Facility***





At
      March 31, 2006, the Company had $111,581,000 of borrowing capacity under
      its secured revolving credit facility discussed below, of which $66,376,000
      was
      available to be drawn based upon
      the
      Company’s borrowing base. A majority of the Company’s debt is variable rate,
      primarily based on 30-day LIBOR, and therefore, the Company is exposed to market
      risk in connection with interest rate changes. At March 31, 2006, the 30-day
      LIBOR rate of interest was 4.83%




25

---



Back to Contents



On
      December 22, 2004, Greenwood Financial, Inc., a wholly-owned subsidiary of
      the
      Company and other wholly-owned subsidiaries of the Company, as borrowers, and
      Orleans Homebuilders, Inc. as guarantor, entered into a Revolving Credit and
      Loan Agreement for a $500,000,000 Senior Secured Revolving Credit and Letter
      of
      Credit Facility (the “Revolving Credit Facility”) with various banks as lenders.
      The Revolving Credit Facility was amended on January 24, 2006 via the Amended
      and Restated Revolving Credit and Loan Agreement (the “Amended and Restated
      Credit Agreement”). The Amended and Restated Credit Agreement provided for the
      following amendments to the terms of its December 22, 2004 revolving credit
      facility:





·
            The
                revolving sublimit was increased from $500,000,000 to
                $650,000,000.




·
            The
                accordion feature of the Revolving Credit Facility was increased
                from
                $650,000,000 to $750,000,000.




·
            The
                interest rate was lowered from the LIBOR Market Index Rate plus a
                non-default variable spread ranging from 175 basis points to 237.5
                basis
                points to the LIBOR Market Index Rate plus a non-default variable
                spread
                ranging from 165 basis points to 225 basis points.




·
            The
                maturity date of the Revolving Credit Facility was extended from
                December
                20, 2007 to December 20, 2008.




·
            The
                loan to value or loan to cost advance rate ranges were increased
                from 50%
                to 90% of the lower of the appraised value or cost of the real estate
                to
                50% to 95% of the lower of the appraised value or cost of the real
                estate.




Under
      and
      subject to the terms of the Amended and Restated Credit Agreement, the borrowers
      may borrow and re-borrow for the purpose of financing the acquisition and
      development of real estate, the construction of homes and improvements, for
      investment in joint ventures, for working capital and for such other appropriate
      purposes as may be approved by the lenders. The Company is required to maintain
      certain financial ratios and customary covenants as set forth in the Amended
      and
      Restated Credit Agreement. The Amended and Restated Credit Agreement is
      primarily collateralized by real estate held for development and sale. In
      addition, in connection with the Amended and Restated Credit Agreement, Orleans
      Homebuilders entered into an amended and restated Guaranty Agreement.




***Employee
      Retirement Plan***





On
      December 1, 2005, the Company adopted a non-qualified target defined benefit
      retirement plan, effective as of September 1, 2005, which covers a group of
      management employees of the Company. This Supplemental Executive Retirement
      Plan
      (the “SERP”) is intended to provide to each participant an annual supplemental
      retirement benefit based upon their years of service with the Company and
      highest average compensation for five consecutive years. The annual supplemental
      benefit for each participant will be adjusted based on the actual performance
      of
      the SERP compared to the target. The benefit is payable for life with a minimum
      of 10 years guaranteed. In order to qualify for normal retirement benefits,
      a
      Participant must attain age 65 with at least five years of participation in
      the
      SERP. Early retirement will be permitted beginning at
      age
      55, after 5 years of participation in the Plan. Early retirement benefits will
      be adjusted actuarially to reflect the early retirement date.




26

---



Back to Contents



If
      a
      participant terminates employment with the Company prior to attaining his or
      her
      normal retirement date, other than by reason of early retirement, death or
      disability, the participant will forfeit all benefits under the
      SERP.





The
      Company can amend or terminate the SERP at any time. However, no termination
      will affect the participants' accrued benefits as determined in accordance
      with
      the SERP or delay any payments to a participant beyond the time that such amount
      would otherwise be payable without regard to the amendment.





The
      Company used a 4% annual compensation increase and a 5% discount rate in its
      calculation of the present value of its projected benefit obligation. The
      discount rate used represented the Moody’s AA bond rate for long-term bonds as
      of September 2005. The Company recognized the following related to the SERP
      for
      the period ended March 31, 2006:





Three
          Months Ended
      
      Nine
          Months EndedMarch
          31, 2006
      
      March
          31, 2006Net
          periodic pension cost:Service
          cost
      
      $
      134,000
      
      $
      314,000Interest
          cost
      
      
      77,000
      
      
      180,000Amortization
          of prior service cost
      
      
      83,000
      
      
      194,000Total
          net periodic pension cost
      
      $
      294,000
      
      $
      688,000







***Deferred
      Compensation Plan***





On
      December 1, 2005, the Company adopted an Executive Compensation Deferral Plan
      (the “Deferral Plan”) effective as of June 1, 2005. Under the Plan, participants
      will have the ability to defer a portion of their compensation which will be
      credited to an account maintained by the Company for the participant. Amounts
      contributed by participants are always vested. Participant deferral accounts
      will be maintained by the Company for recordkeeping purposes only. Participants
      will have no interest in any assets which may be set aside by the Company to
      meet its obligations under the Deferral Plan.





***Share
      Repurchase Program***





In
      September 2005, the Board of Directors authorized the repurchase of up to one
      million shares of the Company’s common stock. The repurchases, which represent
      up to 5% of the Company’s 18.7 million shares of common stock currently
      outstanding, will be made from time to time through open market purchases or
      privately negotiated transactions at the Company’s discretion and in accordance
      with the rules of the Securities and Exchange Commission. The amount and timing
      of the repurchases will depend on market conditions and other factors.





During
      the nine months ended March 31, 2006, the Company repurchased 174,139 shares
      of
      its common stock for a total purchase price of $3,303,000.




***Cash
      Flow Statement***





Net
      cash
      used in operating activities for the nine months ended March 31, 2006 was
      $216,998,000, compared to net cash used in operating activities for the prior
      year nine monthperiod
      of
      $195,821,000. The increase was primarily attributable to an increase in cash
      used for real estate held for development and sale and a decrease in cash used
      for land deposits and costs of future development and receivables, deferred
      charges and other assets. The increase in net cash used in operating activities
      was partially offset by increases in net income and restricted cash during
      the
      nine months ended March 31, 2006 as compared to the nine months ended March
      31,
      2005. Net cash used in investing activities for the nine months ended March
      31,
      2006 was $894,000, compared to $57,087,000 for the prior fiscal period. This
      decrease was primarily related to the acquisition of Realen Homes on July 28,
      2004. Net cash provided by financing activities for the nine months ended March
      31, 2006 was $197,562,000, compared to $247,578,000 for the prior fiscal period.
      The decrease in net cash provided by financing activities in the current year
      is
      primarily attributable to increased borrowings in the prior year used to acquire
      Realen Homes during the nine months ended March 31, 2005.




27

---



Back to Contents



Lot
      Positions





As
      of
      March 31, 2006, the Company owned or controlled approximately 18,989 building
      lots. Included in the aforementioned lots, the Company had contracted to
      purchase, or has under option, undeveloped land and improved building lots
      for
      an aggregate purchase price of approximately $605,613,000 that are expected
      to
      yield approximately 10,054 building lots.





***Undeveloped
      Land Acquisitions***





In
      recent
      years, the process of acquiring desirable undeveloped land has become extremely
      competitive, particularly in the northern region, mostly due to the lack of
      available parcels suitable for development. In addition, expansion of regulation
      in the housing industry has increased the time it takes to acquire undeveloped
      land with all of the necessary governmental approvals required to begin
      construction. Generally, the Company structures its land acquisitions so that
      it
      has the right to cancel its agreements to purchase undeveloped land by
      forfeiture of its deposit under the agreement. For the nine months ended March
      31, 2006, the Company forfeited $240,000 of land deposits and expensed an
      additional $1,015,000 of pre-acquisition costs related to the cancellation
      of
      purchase agreements. Included in the balance sheet captions “Inventory not owned
      - Variable Interest Entities” and “Land deposits and costs of future
      development,” at March 31, 2006 the Company had $35,618,000 invested in 76
      parcels of undeveloped land, of which $20,121,000 is deposits, a portion of
      which is non-refundable. At March 31, 2006 overall undeveloped parcels of land
      under contract had an aggregate purchase price of approximately $508,289,000
      and
      were expected to yield approximately 9,076 building lots.





The
      Company attempts to further mitigate the risks involved in acquiring undeveloped
      land by structuring its undeveloped land acquisitions so that the deposits
      required under the agreements coincide with certain benchmarks in the
      governmental approval process, thereby limiting the amount at risk. This process
      allows the Company to periodically review the approval process and make a
      decision on the viability of developing the acquired parcel based upon expected
      profitability. In some circumstances the Company may be required to make
      deposits solely due to the passage of time. This structure still provides the
      Company an opportunity to periodically review the viability of developing the
      parcel of land. In addition, the Company primarily structures its agreements
      to
      purchase undeveloped land to be contingent upon obtaining all governmental
      approvals necessary for construction. Under most agreements, the Company secures
      the responsibility for obtaining the required governmental approvals as the
      Company believes that it has significant expertise in this area. The Company
      intends to complete the acquisition of undeveloped land after all governmental
      approvals are in place. In certain circumstances, however, when all extensions
      have been exhausted, the Company must make a decision on whether to proceed
      with
      the purchase even though all governmental approvals have not
      yet
      been received. In these circumstances, the Company performs reasonable due
      diligence to ascertain the likelihood that the necessary governmental approvals
      will be granted.




28

---



Back to Contents







***Improved
      Lot Acquisitions***





The
      process of acquiring improved building lots from developers is extremely
      competitive. The Company competes with many national homebuilders to acquire
      improved building lots, some of which have greater financial resources than
      the
      Company. The acquisition of improved lots is usually less risky than the
      acquisition of undeveloped land as the contingencies and risks involved in
      the
      land development process are borne by the developer. In addition, governmental
      approvals are generally in place when the improved building lots are
      acquired.





At
      March
      31, 2006, the Company had contracted to purchase or had under option
      approximately 978 improved building lots for an aggregate purchase price of
      approximately $97,324,000. At March 31, 2006, the Company had $4,517,000
      invested in these improved building lots, of which $4,179,000 is deposits.
      There
      were no deposits forfeited during the nine months ended March 31, 2006 with
      respect to improved building lots.





The
      Company expects to utilize primarily the Revolving Credit Facility as described
      above as well as other existing capital resources, to finance the acquisitions
      of undeveloped land and improved lots described above. The Company anticipates
      completing a majority of these acquisitions during the next several years.




Critical
      Accounting Policies





For
      a
      discussion of the Company’s critical accounting policies, see “Critical
      Accounting Policies” under Item 7 of the Company’s Annual Report on Form 10-K
      for fiscal year ended June 30, 2005 filed with the Securities and Exchange
      Commission.





Recent
      Accounting Pronouncements





In
      December 2004, the FASB revised FAS No. 123 through the issuance of FAS No.
      123-R “Share Based Payment”, revised (“FAS 123-R”).  FAS 123-R was
      effective for the Company commencing July 1, 2005.  FAS 123-R, among other
      things, eliminates the alternative to use the intrinsic value method of
      accounting for stock based compensation and requires entities to recognize
      the
      cost of employee services received in exchange for awards of equity instruments
      based on the grant-date fair value of those awards (with limited exceptions).
       The fair value based method in FAS 123-R is similar to the
      fair-value-based method in FAS No. 123 in most respects, subject to certain
      key
      differences.  As the Company previously adopted the fair value recognition
      provisions of FAS No. 123 prospectively for all stock awards granted, commencing
      on July 1, 2002, the impact of the modified prospective adoption of FAS 123-R
      did not have a significant impact on the financial position or results of
      operations of the Company. The Company amortizes compensation expense on a
      straight line basis over the vesting period of each option grant. The Company
      utilizes the Black-Scholes option pricing model to calculate the compensation
      expense associated with stock options. For the nine months ended March 31,
      2006,
      the Company recorded pretax compensation expense associated with stock awards
      of
      $392,000. Total compensation cost related to nonvested awards not yet recognized
      of $3,804,000 will be recognized according to vesting schedules through March
      2015. For the nine months ended March 31, 2006, the Company recognized a
      $249,000 tax benefit resulting from the disqualified disposition of shares
      issued to employees in connection with the exercise of incentive stock options.




29

---



Back to Contents

In
      December 2004, the FASB issued FASB Staff Position No. FAS 109-1, "Application
      of FASB Statement No. 109, Accounting for Income Taxes, for the Tax Deduction
      on
      Qualified Production Activities Provided by the American Jobs Creation Act
      of
      2004" (FSP FAS 109-1). FSP FAS 109-1 clarifies that the deduction will be
      treated as a "special deduction" as described in Statement of Financial
      Accounting Standards No. 109, "Accounting for Income Taxes." As such, the
      special deduction has no effect on deferred tax assets and liabilities existing
      at the date of enactment. The impact of the deduction will be reported in the
      period in which the deduction is claimed.   The Company files a
      consolidated return on a calendar year.  Accordingly, the Company began
      reflecting the special deduction with respect to its operations effective
      January 1, 2005.  Its expected impact was and will be to lower the
      effective tax provision in the periods in which the deduction may be claimed
      and
      that this benefit will increase as the deduction is phased in under the statute.





Cautionary
      Statement for Purposes of the “Safe Harbor” Provisions of the Private Securities
      Litigation Reform Act of 1995





In
      addition to historical information, this report contains statements relating
      to
      future events or our future results. These statements are forward-looking
      statements within the meaning of Section 27A of the Securities Act of 1933
      and
      Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange
      Act”), and are subject to the Safe Harbor provisions created by statute.
      Generally words such as “may”, “will”, “should”, “could”, “anticipate”,
“expect”, “intend”, “estimate”, “plan”, “continue”, and “believe” or the
      negative of or other variation on these and other similar expressions identify
      forward-looking statements. These forward-looking statements are made only
      as of
      the date of this report. The Company does not undertake to update or revise
      the
      forward-looking statements, whether as a result of new information, future
      events or otherwise.





Forward-looking
      statements are based on current expectations and involve risks and uncertainties
      and the Company’s future results could differ significantly from those expressed
      or implied by the Company’s forward-looking statements.





Many
      factors, including those listed below, could cause the Company’s actual
      consolidated results to differ materially from those expressed in any
      forward-looking statements made by, or on behalf of, the Company:





·
            Continued
                increases in interest rates or a decrease in the availability of
                mortgage
                financing could lead to fewer home sales, which could adversely affect
                the
                Company’s total earned revenues and earnings.





·
            The
                Company is subject to substantial risks with respect to the land
                and home
                inventories it maintains and fluctuations in market conditions may
                affect
                the Company’s ability to sell its land and home inventories at expected
                prices, if at all, which could reduce the Company’s total earned revenues
                and earnings.





·
            The
                Company’s business is subject to governmental regulations that may delay,
                increase the cost of, prohibit or severely restrict the Company’s
                development and homebuilding projects and reduce its total earned
                revenues
                and growth.





·
            States,
                cities and counties in which the Company operates have adopted, or
                may
                adopt, slow or no growth initiatives which would reduce the Company’s
                ability to build and sell homes in these areas and could adversely
                affect
                the Company’s total earned revenues and
                earnings.




30

---



Back to Contents

·
            Adverse
                changes in national, regional or local economic conditions, such
                as
                decreases in employment levels or job growth, increases in interest
                rates
                or decreases in consumer confidence, could have a negative impact
                on the
                Company’s operations and reduce revenues.





·
            The
                Company recently experienced an increase in the rate of customer
                cancellations and it is impossible to predict whether there will
                be
                further increases in the future. Additional increases in the rate
                of
                customer cancellations could lead to fewer home sales and a decrease
                in
                revenues.





·
            The
                Company may not be successful in its effort to identify, complete
                or
                integrate acquisitions, or to enter new markets through start-up
                operations, which could disrupt the activities of the Company’s current
                business, adversely affect the Company’s results of operations and future
                growth, or cause losses.





·
            The
                Company is dependent on the services of certain key employees and
                the loss
                of their services could harm the Company’s
                business.





·
            The
                Company may not be able to acquire suitable land at reasonable prices,
                which could result in cost increases the Company is unable to recover
                and
                reduce the Company’s total earned revenues and
                earnings.





·
            The
                competitive conditions in the homebuilding industry could increase
                the
                Company’s costs, reduce its total earned revenues and earnings and
                otherwise adversely affect its results of operations or limit its
                growth.





·
            The
                Company may need additional financing to fund its operations or to
                expand
                its business, and if the Company is unable to obtain sufficient financing
                or such financing is obtained on adverse terms, the Company may not
                be
                able to operate or expand its business as planned, which could adversely
                affect the Company’s results of operations and future
                growth.





·
            Shortages
                of labor or materials and increases in the price of materials can
                harm the
                Company’s business by delaying construction, increasing costs, or
                both.





·
            The
                Company depends on the continued availability and satisfactory performance
                of its subcontractors which, if unavailable, could have a material
                adverse
                effect on the Company’s business by limiting its ability to build and
                deliver homes.





·
            The
                Company is subject to construction defect, product liability and
                warranty
                claims arising in the ordinary course of business that could adversely
                affect its results of operations.





·
            The
                Company is subject to mold litigation and mold claims arising in
                the
                ordinary course of business for which the Company has no insurance
                that
                could adversely affect the Company’s results of
                operations.





·
            The
                Company’s business, total earned revenues and earnings may be adversely
                affected by adverse weather conditions or natural
                disasters.




31

---



Back to Contents

·
            The
                Company may be subject to environmental liabilities that could adversely
                affect its results of operations or the value of its
                properties.





·
            Increases
                in taxes or government fees could increase the Company’s costs and adverse
                changes in tax laws could reduce customer demand for the Company’s homes,
                either of which could reduce the Company’s total earned revenues or
                profitability.





·
            Jeffrey
                P. Orleans, Chairman and Chief Executive Officer and the Company’s
                majority shareholder, can cause the Company to take certain actions
                or
                preclude the Company from taking actions without the approval of
                the other
                shareholders and may have interests that could conflict with the
                interests
                of other shareholders.





·
            The
                Company has entered into several transactions with related parties,
                including entities controlled by Mr. Jeffrey P. Orleans, which may
                create conflicts of interest.





·
            Acts
                of war or terrorism may seriously harm the Company’s
                business.





·
            The
                Company’s substantial indebtedness could adversely affect it financial
                condition and prevent it form fulfilling its debt service
                obligations.





·
            To
                service the Company’s indebtedness, the Company requires a significant
                amount of cash. The Company’s ability to generate cash depends on many
                factors beyond its control.




32

---



Back to Contents

Item
              3.
            Quantitative
                and Qualitative Disclosures About Market
                Risk





Market
      risk represents the risk of loss that may impact the financial position, results
      of operations or cash flows of the Company, due to adverse changes in financial
      and commodity market prices and interest rates. The Company’s principal market
      risk exposure continues to be interest rate risk. A majority of the Company’s
      debt is variable based on LIBOR or the prime rate, and, therefore, affected
      by
      changes in market interest rates. Based on current operations, an increase
      or
      decrease in interest rates of 100 basis points will result in a corresponding
      increase or decrease in cost of sales and interest charges incurred by the
      Company of approximately $4,960,000 in a fiscal year, a portion of which will
      be
      capitalized and included in cost of sales as homes are delivered. The Company
      believes that reasonably possible near-term interest rate changes will not
      result in a material negative effect on future earnings, fair values or cash
      flows of the Company. Generally, the Company has been able to recover any
      increased costs of borrowing through increased selling prices; however, there
      is
      no assurance the Company will be able to continue to increase selling prices
      to
      cover the effects of any increase in near-term interest rates.





Changes
      in the prices of commodities that are a significant component of home
      construction costs, particularly lumber, may result in unexpected short term
      increases in construction costs. Since the sales price of the Company’s homes is
      fixed at the time the buyer enters into a contract to acquire a home and because
      the Company generally contracts to sell its homes before construction begins,
      any increase in costs in excess of those anticipated may result in gross margins
      lower than anticipated for the homes in the Company’s backlog. The Company
      attempts to mitigate the market risks of price fluctuation of commodities by
      entering into fixed-price contracts with its subcontractors and material
      suppliers for a specified period of time, generally commensurate with the
      building cycle.





There
      have been no material adverse changes to the Company’s (1) exposure to risk and
      (2) management of these risks, since June 30, 2005.





Item 
              4.
            Controls
                and Procedures





The
      Company's management, with the participation of the Company's Chief Executive
      Officer, President and Chief Operating Officer, and Chief Financial Officer,
      evaluated the effectiveness of the Company's disclosure controls and procedures
      as of the end of the period covered by this report. Based upon that evaluation,
      the Chief Executive Officer, President and Chief Operating Officer and Chief
      Financial Officer concluded that the Company's disclosure controls and
      procedures are functioning effectively to provide reasonable assurance that
      information required to be disclosed by the Company in reports filed under
      the
      Securities Exchange Act of 1934 is recorded, processed, summarized and reported
      within the time periods specified in the Security and Exchange Commission's
      rules and forms and also to ensure information required to be disclosed is
      accumulated and communicated to management. There has been no change in the
      Company's internal control over financial reporting during the Company's most
      recent fiscal quarter that has materially affected, or is reasonably likely
      to
      materially affect, the Company's internal control over financial
      reporting.




33

---



Back to Contents

**PART
      II. OTHER INFORMATION**





Item
              2.
            Unregistered
                Sales of Equity Securities and Use of Proceeds (dollars inthousands,
                except per share data)





In
      September 2005, the Board of Directors authorized the repurchase of up to one
      million shares of the Company’s common stock. The repurchases, which represent
      up to 5% of the Company’s 18.7 million shares of common stock currently
      outstanding, will be made from time to time through open market purchases or
      privately negotiated transactions at our discretion and in accordance with
      the
      rules of the Securities and Exchange Commission. The amount and timing of the
      repurchases will depend on market conditions and other factors. The Company
      repurchased the following shares of common stock during the third quarter of
      2006:




Total
          Number of
        Maximum
          Number
        of
          Shares That May
        Yet
          Be Purchased
        Under
          the PlanTotal
        Number
        of
          Shares
        Purchased
      
      Average
        Price
        Paid
        Per
          Share
      
      Shares
          Purchased
        as
          Part of
        Publicly
        Announced
          PlansPeriodJanuary
          1  31, 2006
      
      
      26,539
      
      $
      18.78
      
      
      26,539
      
      
      882,561February
          1  28, 2006
      
      
      4,000
      
      $
      19.25
      
      
      4,000
      
      
      878,561March
          1  31, 2006
      
      
      52,700
      
      $
      18.66
      
      
      52,700
      
      
      825,861




Item
              6.
            Exhibits.





3.1*
            Certificate
                of Incorporation





4.1
            In
                accordance with Regulation S-K, Item 601(b)(4)(iii)(A) certain instruments
                respecting long-term debt of the Company have been omitted; the Company
                agrees to furnish a copy of any such instrument to the SEC upon
                request.





10.1**
            Amendment
                to Orleans Homebuilders, Inc. Supplemental Executive Retirement Plan,
                dated March 13, 2006 (incorporated by reference to Exhibit 10.1 to
                the
                Company’s Current Report on Form 8-K filed March 15, 2006).





31.1*
            Certification
                of Jeffrey P. Orleans pursuant to Section 302 of the Sarbanes-Oxley
                Act of
                2002.




31.2*
            Certification
                of Michael T. Vesey pursuant to Section 302 of the Sarbanes-Oxley
                Act of
                2002.




31.3*
            Certification
                of Joseph A. Santangelo pursuant to Section 302 Sarbanes-Oxley Act
                of
                2002.




34

---



Back to Contents

32.1*
            Certification
                of Jeffrey P. Orleans pursuant to Section 906 Sarbanes-Oxley Act
                of 2002.




32.2*
            Certification
                of Michael T. Vesey pursuant to Section 906 Sarbanes-Oxley Act of
                2002.




32.3*
            Certification
                of Joseph A. Santangelo pursuant to Section 906 Sarbanes-Oxley Act
                of
                2002.




*
      Exhibits filed herewith electronically.




**
      Management contract or compensatory plan or arrangement.




35

---



Back to Contents

SIGNATURES








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




ORLEANS HOMEBUILDERS, INC.(Registrant)May
                8,
                2006
            
            Michael
              T. VeseyMichael
                T. Vesey
              President and Chief Operating
                Officer




May
                8,
                2006
            
            Joseph
              A. SantangeloJoseph
                A. Santangelo

        Treasurer, Secretary and Chief Financial Officer




36

---



Back to Contents

**EXHIBIT
      INDEX**




3.1*
            Certificate
                of Incorporation





4.1
            In
                accordance with Regulation S-K, Item 601(b)(4)(iii)(A) certain instruments
                respecting long-term debt of the Company have been omitted; the Company
                agrees to furnish a copy of any such instrument to the SEC upon
                request.





10.1**
            Amendment
                to Orleans Homebuilders, Inc. Supplemental Executive Retirement Plan,
                dated March 13, 2006 (incorporated by reference to Exhibit 10.1 to
                the
                Company’s Current Report on Form 8-K filed March 15, 2006).





31.1*
            Certification
                of Jeffrey P. Orleans pursuant to Section 302 of the Sarbanes-Oxley
                Act of
                2002.




31.2*
            Certification
                of Michael T. Vesey pursuant to Section 302 of the Sarbanes-Oxley
                Act of
                2002.




31.3*
            Certification
                of Joseph A. Santangelo pursuant to Section 302 Sarbanes-Oxley Act
                of
                2002.




32.1*
            Certification
                of Jeffrey P. Orleans pursuant to Section 906 Sarbanes-Oxley Act
                of 2002.




32.2*
            Certification
                of Michael T. Vesey pursuant to Section 906 Sarbanes-Oxley Act of
                2002.




32.3*
            Certification
                of Joseph A. Santangelo pursuant to Section 906 Sarbanes-Oxley Act
                of
                2002.




*
      Exhibits filed herewith electronically.




**
      Management contract or compensatory plan or arrangement.




1

---