FORM 10 - Q
                                                

                          SECURITIES AND EXCHANGE COMMISSION
                                Washington, D.C. 20549

     (Mark One)

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

                     For the Quarterly Period Ended June 30, 1998

                                          OR

     [  ]         TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
                        OF THE SECURITIES EXCHANGE ACT OF 1934


                 For the transition period from _______ to _________

                            Commission File Number 0-20829

                             DIAMOND HOME SERVICES, INC.
                (Exact name of registrant as specified in its charter)

                    DELAWARE                          36-3886872
        (State or other jurisdiction of    (I.R.S. Employer Identification No.)
         incorporation or organization)

                     222 Church Street, Woodstock, Illinois 60098
             (Address of principal executive offices, including zip code)

                                    (815) 334-1414
                 (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 (X ) No (  )

     The number of shares of the registrant's common stock outstanding as of
     July 31, 1998, the latest practicable date, was 8,507,375 shares.


                            PART I. FINANCIAL INFORMATION


     ITEM 1. FINANCIAL STATEMENTS

     <TABLE>
                     DIAMOND HOME SERVICES, INC. AND SUBSIDIARIES

                     CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                                     (Unaudited)
     <CAPTION>

                                         Three Months Ended   Six Months Ended
                                              June 30,            June 30,
                                            1998     1997      1998      1997
                                          (In thousands, except per share data)
     <S>                                  <C>       <C>       <C>      <C>
     Net sales                            $65,615   $43,787   $94,491  $73,962
     Cost of sales                         41,951    24,065    58,140   40,877
     Gross profit                          23,664    19,722    36,351   33,085
     Operating expenses:
        Selling, general, and 
          administrative expense           21,602    18,688    33,891   31,874
        Operating interest expense             68        --       123       --
        Amortization expense                  274       153       434      296
     Operating income                       1,720       881     1,903      915
     Interest expense                         752        --       752       --
     Interest income and other                130       186       256      406
     Income before income taxes             1,098     1,067     1,407    1,321
     Income tax provision                     475       416       599      515
     Net income                              $623      $651      $808     $806

     Net income per share:
         Basic                              $0.07     $0.07     $0.09    $0.09
         Diluted                            $0.07     $0.07     $0.09    $0.09
     Weighted average number of
       common shares outstanding:
         Basic                              8,507     9,037     8,507    9,058
         Diluted                            8,507     9,037     8,507    9,119


     See accompanying notes.
     </TABLE>

     <TABLE>
                     DIAMOND HOME SERVICES, INC. AND SUBSIDIARIES

                        CONDENSED CONSOLIDATED BALANCE SHEETS
     <CAPTION>
                                                   June 30, 1998   December 31,
                                                                       1997
                                                    (Unaudited)
                                                         (In thousands)
     <S>                                               <C>            <C>
     ASSETS
     Current assets
          Cash and cash equivalents                    $4,061         $9,966
          Accounts receivable, net                     22,726          6,630
          Inventories, net                             17,761             --
          Refundable income taxes                       1,087            986
          Prepaids  and other current assets            2,228          1,959
          Deferred income taxes                           611            872
     Total current assets                              48,474         20,413

     Finance company accounts receivable, net          10,643          8,758

     Net property, plant and equipment                 17,645          5,546
     Intangible assets, net                            37,553         16,514
     Deferred income taxes                              2,648          1,892
     Other                                              9,308          3,466
     Total assets                                    $126,271        $56,589

     LIABILITIES AND COMMON STOCKHOLDERS' EQUITY

     Current Liabilities
          Current portion of long-term debt            $5,946    $        --
          Due to bank                                   3,770          2,050
          Accounts payable and accrued liabilities     23,569         10,070
          Deferred revenue                              1,068             --
          Due to stockholders                             554            554
     Total current liabilities                         34,907         12,674
     Long-term liabilities:
          Long-term debt                               43,389             --
          Warranty and retention                        9,727          9,161
          Deferred income taxes                         1,094             --
          Due to stockholders                             256            544
          Other                                         1,823             --
     Total long-term liabilities                       56,289          9,705
     Common stockholders' equity                       35,075         34,210
     Total liabilities and common
        stockholders' equity                         $126,271        $56,589

     See accompanying notes.
     </TABLE>

     <TABLE>
                              
                                                  DIAMOND HOME SERVICES, INC. AND SUBSIDIARIES

                                                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                                   (Unaudited)
         <CAPTION>
                                                                                                            Six Months Ended
                                                                                                                 June 30
                                                                                                             (In thousands)
                                                                                                           1998          1997
          <S>                                                                                              <C>           <C>
          Net income                                                                                       $808          $806
             Adjustments to reconcile net income to net cash
               provided by (used in) operating activities:
                Depreciation and amortization                                                               852           463
                Deferred income taxes                                                                     (495)            35
                Other                                                                                       134            --
                Changes in operating assets and liabilities:
                     Accounts receivable and other assets                                               (2,626)         (996)
                     Inventories                                                                          (455)            --
                     Accounts payable and accrued expenses                                                 (99)       (2,066)
                     Deferred revenues                                                                     (17)            --
                     Warranty and retention                                                                 566           912
             Net cash used in operating activities                                                      (1,332)         (846)
          Investing activities:
             Acquisition of Reeves Southeastern Corporation, net of cash acquired                      (30,938)            --
             Consumer finance loans originated, net of collections                                      (1,885)       (2,225)
             Advances to "captive" insurance company and other                                          (2,230)         (512)
             Capital expenditures, net                                                                  (1,509)       (1,660)
             Net cash used in investing activities                                                     (36,562)       (4,397)
          Financing activities: 
             Advances under revolving credit agreement                                                      500            --
             Proceeds on issuance of term debt                                                           30,000            --
             Borrowings on finance company bank line of credit, net                                       1,720            --
             Payments on notes receivable from officers for treasury stock and other                         57         (525)
             Payments due to stockholders                                                                 (288)         (260)
             Net cash provided by (used in) financing activities                                         31,989         (785)
             Net decrease in cash and cash equivalents                                                  (5,905)       (6,028)
             Cash and cash equivalents at beginning of period                                             9,966        18,928
             Cash and cash equivalents at end of period                                                  $4,061       $12,954
             Supplemental cash flow disclosure:
                 Interest paid                                                                             $127            --
                 Income taxes paid                                                                       $1,006           $90
           Investing and financing activities exclude the following non-cash transactions:
             Acquisition of Reeves Southeastern Corporation through notes payable                       $11,413            --

         See accompanying notes.
         </TABLE>

                     DIAMOND HOME SERVICES, INC. AND SUBSIDIARIES
                 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                     (Unaudited)

     1.     Basis of Presentation

            The   accompanying   unaudited   condensed  consolidated   financial
     statements  have  been  prepared  in  accordance  with  generally  accepted
     accounting principles  for interim financial information  and Article 10 of
     Regulation S-X.   Accordingly, they do  not include all  of the information
     and  footnotes required  by  generally accepted  accounting principles  for
     complete   financial  statements.    In  the  opinion  of  management,  all
     adjustments (consisting of normal  recurring accruals) considered necessary
     for a  fair presentation have  been included.   Operating  results for  the
     three-month and six-month periods  ended June 30, 1998 are  not necessarily
     indicative  of  the  results  that may  be  expected  for  the year  ending
     December 31, 1998.   For  further information,  refer  to the  consolidated
     financial statements included in  the Company's 1997 Annual Report  on Form
     10-K and Form 8-K/A filed May 13, 1998.

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

            The following summarized condensed financial information for
     Marquise Financial, the Company's finance subsidiary, is before elimination
     of inter-company transactions in consolidation:

     <TABLE>
                                                     June 30,      December 31,
                                                       1998             1997
                                                    (Unaudited)
     <S>                                            <C>            <C>
     Assets:
     Cash                                               $74,000       $23,000
     Financing receivables, net                      10,643,000     8,758,000
     Other assets                                       994,000     1,046,000
     Total assets                                   $11,711,000    $9,827,000
     Liabilities and stockholder's equity:
     Due to Bank                                     $3,770,000    $2,050,000
     Due to Diamond Exteriors, Inc.                   7,550,000     7,388,000
     Other                                              131,000       147,000
     Total liabilities                               11,451,000     9,585,000
     Total stockholder's equity                         260,000       242,000
     Total liabilities and stockholder's equity     $11,711,000    $9,827,000
     </TABLE>

     Results of operations for the three months and six months ended June 30,
     1998 and 1997, respectively:

     <TABLE>
     <CAPTION>
                                         Three Months Ended    Six Months Ended
                                              June 30,             June 30,
                                          1998       1997      1998       1997
                                                      (Unaudited)
     <S>                                 <C>       <C>        <C>       <C>
     Financing income                    $412,000  $335,000   $787,000  $574,000
     General and administrative expenses (1)
                                          509,000   643,000    966,000   992,000
     Loss before tax benefit               97,000   308,000    179,000   418,000
     Income tax benefit                    39,000   120,000     72,000   163,000
     Net loss                             $58,000  $188,000   $107,000  $255,000

     (1) Includes interest expense paid to Diamond Home Services, Inc. (the
     "Company") and provision for credit losses.
     </TABLE>


     Cash flow for the six months ended June 30, 1998 and 1997, respectively:

     <TABLE>
     <CAPTION>
                                                      Six Months Ended June 30
                                                         1998           1997
                                                             (Unaudited)
     <S>                                            <C>           <C>
     Cash at beginning of period                       $23,000       $50,000 
     Net cash used in operating activities             (16,000)     (255,000)
     Net cash used in investing activities          (1,885,000)   (1,944,000)
     Net cash provided by financing activities       1,952,000     2,149,000 
     Cash at end of period                             $74,000            $0 

            At June 30,  1998, Marquise Financial had approximately $1.0 million
     in approved but not funded loan commitments.

     3.     Acquisition

            On April 20,  1998, the Company consummated the  purchase of all the
     outstanding  and  voting  shares  in  the capital  of  Reeves  Southeastern
     Corporation  ("Reeves")  for  an  aggregate  consideration  of  $42,900,000
     consisting  of:   1)   $30,000,000  cash at  closing;  2)   $3,700,000 non-
     interest bearing  notes  payable  in installments  through  June  2000;  3)
     $8,000,000  in 7%  notes payable  (to be  paid into  an escrow  account for
     future possible environmental expenses, as defined) in installments through
     June 2005; and  4) $1,500,000 in transaction costs (the "Acquisition").  In
     connection  with the  Acquisition,  the Company  replaced  its $15  million
     unsecured  bank line  of credit  with a  $45 million  secured bank  line of
     credit.

            Based  on the terms of the transaction, the acquisition is accounted
     for as a purchase,  in accordance with Accounting Principles  Board Opinion
     No.   16    ("APB  No.  16").    Accordingly,  the  accompanying  condensed
     consolidated  statements of  income include  Reeves' results  of operations
     since  the date of acquisition.  The  Company revalued the basis of Reeves'
     acquired  assets and  assumed  liabilities to  fair  value at  the  date of
     purchase.  The purchase price of Reeves is calculated as the cash plus fair
     value of notes  paid plus the Company's transaction costs.   The difference
     between the purchase price and the fair  value of identifiable tangible and
     intangible  assets acquired  and the  liabilities  assumed and  incurred is
     recorded as goodwill and will  be amortized over a period of 40 years.  The
     Company has not completed its  valuation of the Reeves acquisition  and the
     purchase  price allocation is  subject to change  as additional information
     concerning  asset and  liability valuation is  completed.   The preliminary
     allocation of purchase price is as follows:

               Purchase price                       $41,413,000
               Transaction costs                      1,500,000
               Total purchase price                 $42,913,000

     Purchase price has been preliminarily allocated as follows:

               Fair value of assets acquired         $48,832,000
               Goodwill                               21,366,000
               Liabilities assumed                  (27,285,000)
               Total                                 $42,913,000

            The following  unaudited pro forma information  reflects the results
     of  the Company's  operation as  if  the acquisition  had  occurred at  the
     beginning  of the  period presented  adjusted  for 1)   the  effect of  the
     recurring charges related to the acquisition, primarily the amortization of
     goodwill, interest expense on borrowings to finance the acquisition, and an
     increase in depreciation expense due  to the write-up to fair  market value
     of fixed  assets;  and  2)    the elimination  of  compensation  for  prior
     management and directors, certain benefit plans, and non-recurring charges.

     
</TABLE>
<TABLE>
     <CAPTION>
                       Three months ended June 30,   Six months ended June 30,
                             1998         1997          1998         1997
     <S>               <C>            <C>           <C>          <C>
     Revenues          $74,040,000    $79,855,000   $125,020,000   $134,975,000
     Net income            885,000      1,480,000        735,000      1,455,000
     Net income per
       share -- diluted       $.10           $.16           $.09           $.16
     </TABLE>

            The pro  forma results have  been prepared for  comparative purposes
     only and  do not purport  to be  indicative of the  results which  actually
     would have  been attained  if the Acquisition  had been consummated  on the
     dates indicated above, nor does it  purport to indicate or suggest what the
     results of the operations of the Company will be for any future period.

     4.     Inventories

            The components of inventories at June 30 are as follows:

                                                  1998

               Raw materials                    $667,000
               Work in progress                  617,000
               Finished goods                 16,477,000
               Total                         $17,761,000

     5.     Debt

            In  connection  with  the  Reeves acquisition,  in  April  1998, the
     Company  replaced  its $15,000,000  unsecured bank  line  of credit  with a
     $45,000,000 secured syndicated bank  credit facility.  The credit  facility
     is for  a term  of five years  expiring April  2003.   The credit  facility
     provides,  among other  things: 1)  $30,000,000 in term  notes (to  be used
     solely for  the Reeves acquisition)  with quarterly  principal payments  of
     $1,047,000 commencing in December 1998; and 2) a $15,000,000 revolving line
     of credit (to be used for Reeves'  working capital requirements and general
     corporate  purposes).  The term notes  and revolving line of credit provide
     for monthly interest payments at varying premiums over LIBOR or bank  prime
     rates, at  borrower's option, based on EBITDA coverage ratios.  Through the
     first quarter 1999,  the interest  rates are fixed  as follows:   1)   Term
     Notes:  LIBOR  plus 2.50%  or prime plus  .50%; and 2)   Revolving line  of
     credit:   LIBOR plus  2.50% or prime  plus .50%.   The terms  of the credit
     facility  contain, among  other  provisions,  restrictive requirements  for
     maintaining  cash  flow  and  debt  coverage  ratios,  minimum  net  worth,
     restrictions on incurring additional debt, dividends and stock repurchases.
     Deferred loan  fees and  costs are  amortized over the  term of  the credit
     facility (5 years).
 
             At June 30, 1998, debt consisted of:

               Term notes                     $30,000,000
               Revolver                         7,678,000
               7% Notes payable                 8,000,000
               0% Notes payable                 3,700,000
               Discount                         (287,000)
               Capital leases                     244,000
                                               49,335,000
               Less:  current portion         (5,946,000)
                                              $43,389,000


     ITEM 2.  MANAGEMENT'S DISCUSSION  AND ANALYSIS OF  FINANCIAL CONDITION
              AND RESULTS OF OPERATIONS

     RECENT DEVELOPMENTS

            On  April  20, 1998,  the Company  acquired  all of  the outstanding
     capital stock of Reeves.  The acquisition of  Reeves was accounted for as a
     purchase  in  accordance  with APB  No.  16;  accordingly,  the results  of
     operations for Reeves are  included in the Company's results  of operations
     from the date of acquisition, April 20, 1998.

            Prior to  the  acquisition,  the Company  operated  in  one  primary
     business  segment:   installation of  home improvement  products, including
     roofing systems,  gutters,  fencing and  doors;  and, through  its  finance
     subsidiary, Marquise  Financial, also  offered financing to  its customers.
     Following  the  acquisition  of Reeves,  the  Company  has  operated in  an
     additional business segment:  manufacturing and distribution of fencing and
     perimeter security products.

     RESULTS OF OPERATIONS

     Second Quarter 1998 Compared to Second Quarter 1997

     Net Sales

            Net  sales increased $21.8 million, or 49.9%, from $43.8 million for
     the second  quarter 1997  to $65.6  million  for the  second quarter  1998.
     Reeves contributed $24.5 million to net sales for the second quarter 1998.

            Installed Home Improvements

            Installed home improvement product  sales decreased $2.7 million, or
     6.1%,  from $43.8 million for the second  quarter 1997 to $41.1 million for
     the second  quarter 1998.   Net  sales attributable  to roofing and  gutter
     products and services decreased $272 thousand, or 1.0%, to $26.0 million in
     the  second quarter 1998.   Net sales attributable  to fencing products and
     services decreased $1.3  million, or 13.8%,  to $8.5 million in  the second
     quarter of  1998.  Net sales attributable to garage doors, entry doors, and
     other  products  and services  decreased $1.3  million,  or 18.1%,  to $5.7
     million  in the  second  quarter 1998.    Credit participation  fee  income
     increased  $137 thousand  to  $557 thousand  in  the second  quarter  1998.
     Finance  interest  income  increased  $77  thousand  to  $412  thousand  on
     receivables  financed   by  the  Company's   finance  subsidiary,  Marquise
     Financial.  Backlog, defined as jobs sold but not installed, increased $4.0
     million from $12.0 million at the end of March 1998 to $16.0 million at the
     end of the second quarter 1998.   Backlog increased $7.1 million from $13.1
     million at the end  of March 1997 to $20.2 million at the end of the second
     quarter 1997.   The decrease in  installed sales and the  reduced amount of
     backlog was attributable  to a significant decrease in lead count or number
     of  in-home presentations and lower  unit sales prices  partially offset by
     improved   operating  efficiencies   measured  in   close  ratio,   reduced
     cancellations and increased credit approvals.

            Manufacturing and Wholesale Distribution

            Manufacturing and wholesale distribution  sales are comprised of the
     following major product lines:

               Chain link and accessories             $17,077,000
               Wood                                     4,488,000
               Ornamental/specialty                     1,929,000
               Gate operators and access control          903,000
               Security systems                         1,647,000
                                                       26,044,000
               Less:  inter-segment sales               1,560,000
                                                      $24,484,000

     Gross Profit

            Gross  profit increased $4.0 million, or 20%, from $19.7 million, or
     45.0% of net sales, for the second  quarter 1997 to $23.7 million, or 36.1%
     of net sales, for the second quarter 1998.  Reeves contributed $6.0 million
     to gross profit in the second quarter 1998.

            Installed Home Improvements

            Installed  home  improvement  product gross  profit  decreased  $2.1
     million,  or  10.5%,  from  $19.7  million,  or  45.0%  of  installed  home
     improvement product sales, for the second quarter 1997 to $17.6 million, or
     42.9% of installed home  improvement product sales, for the  second quarter
     1998.  The decrease in gross profit amount was attributable  to lower sales
     volume due to the decrease  in lead count.   The decrease in gross  profit,
     expressed  as a  percentage of  installed  home improvement  product sales,
     resulted  from  a decrease  in  average unit  sales  price as  a  result of
     expanded  and lower  price  points, partially  offset  by a  $214  thousand
     increase in credit participation fee income and in finance interest income.
     The license fee incurred to  Sears decreased $536 thousand, or  11.5%, from
     $4.6 million, or 10.8% of net installed home improvement product sales, for
     the  second quarter 1997  to $4.1 million,  or 10.2% of  net installed home
     improvement  product sales, for  the second quarter 1998.   The decrease in
     the license fee  amount and index incurred to Sears  for the second quarter
     1998 was  due to  an overall  decrease  in net  installed home  improvement
     product sales and  to a shift  in the balance  of sales, primarily  roofing
     repairs  and pricing  test  programs, to  lower  license fee  products  and
     services.   Sears  and  the  Company  entered  into  a  three-year  license
     agreement  effective  January 1,  1996.   Among  other things,  the license
     agreement provides for  a fixed license fee, at the  March 1995 license fee
     rate, to be charged during the term of the license agreement.  Gross profit
     before the Sears license fee, credit participation fee and finance interest
     income  decreased $2.8 million,  or 11.9%, from $23.6  million, or 54.9% of
     net installed home improvement  product sales, for the second  quarter 1997
     to $20.8 million, or 51.8% of net installed home improvement product sales,
     for the second quarter 1998.  The decrease in gross profit amount and gross
     profit index was attributable to  lower sales volume and unit prices.   The
     unit costs  of materials, installation labor and  warranty expense remained
     relatively constant during the quarterly period.

            Manufacturing and Wholesale Distribution

            Manufacturing  and  wholesale  distribution gross  profit  was  $6.0
     million or 22.9% of  gross (before inter-segment elimination) manufacturing
     and  wholesale  distribution revenue.   Gross  profit,  as a  percentage of
     segment sales, approximates last year's index.

     Selling, General and Administrative Expenses

            Selling, general and administrative expenses increased $2.9 million,
     or 15.6%, from $18.7 million in the second quarter 1997 to $21.6 million in
     the second quarter 1998 and,  as a percentage of net sales,  decreased from
     42.7% to 32.9%.   Reeves contributed $4.2 million  in selling, general  and
     administrative expense in the second quarter 1998.

            Installed Home Improvements

            Selling,  general  and  administrative  expenses  for  this  segment
     decreased $1.3 million,  or 6.7%, from $18.7 million in  the second quarter
     1997 to $17.4  million in the second  quarter 1998 and, as a  percentage of
     installed  home improvement sales, decreased  from 42.7% to  42.4%.  Direct
     advertising expense decreased  $694 thousand, or  20.0%, from $3.5  million
     for the second quarter 1997 to $2.8 million for the second quarter 1998; as
     a percentage of net installed  sales, direct advertising expense  decreased
     from 8.1%  for the second quarter 1997 to 6.9% for the second quarter 1998,
     reflecting decreased  radio and newspaper advertising  placements and below
     plan  lead generating  effectiveness of  ad placements  offset by  improved
     close ratios during  the quarter.   Selling  commission expense,  including
     attendant payroll-related benefits, decreased $652 thousand, or 13.9%, from
     $4.7  million in  the second  quarter 1997  to $4.0  million in  the second
     quarter  1998; as a percentage  of net installed  sales, selling commission
     expense decreased  from 10.8% to 10.0%  in the second quarter  1998.  Sales
     representatives are  compensated on  a variable commission  basis depending
     upon  the type  and  gross  profit  of  product  sold.    Performance-based
     compensation paid  to officers  and field,  sales  and production  managers
     decreased  $183 thousand to $183 thousand in the second quarter, reflecting
     the  decrease in net installed home improvement sales and operating profit.
     The  balance of  selling,  general and  administrative expenses,  primarily
     sales  lead-generation  activities,  administrative,  field  operations and
     Marquise  Financial  payrolls  and  related  costs  and  general  expenses,
     increased  $217 thousand,  or 2.1%,  from $10.2  million, or  23.2% of  net
     sales, in the second quarter 1997 to $10.4 million, or 25.2% of net segment
     sales, in the second quarter 1998.  Included in general and  administrative
     expenses  were special charges related  to the Reeves  acquisition and lead
     center  activities aggregating  $450  thousand  and information  technology
     project expenses  approximating  $450  thousand.    Information  technology
     expenses are expected to continue into the third and fourth quarters before
     expected benefits may be realized.

            Manufacturing and Wholesale Distribution

            Selling,  general,  and  administrative expenses  for  this  segment
     includes  selling expenses  of  $3.4 million  representing the  operations,
     primarily payroll and related costs, and facilities and equipment costs, of
     31 distribution centers  and $832  thousand of  general and  administrative
     expenses.

     Operating Interest Expense

            Operating interest expense increased from  $0 in the second  quarter
     1997 to $68 thousand in the second quarter 1998.  The increase in operating
     interest  expense   resulted  from   the  Company's  finance   subsidiary's
     borrowings during the quarter.

     Amortization of Intangibles

            Amortization  of  intangibles  increased  $121  thousand  from  $153
     thousand in the second quarter 1997  to $274 thousand in the second quarter
     1998.  The amortization  expense relates primarily to goodwill  incurred in
     connection with the September 1994 stock repurchase from management and the
     Reeves acquisition in April 1998.

     Interest Expense

            Interest expense increased  from $0  in the second  quarter 1997  to
     $752  thousand  in  the second  quarter  1998.   This  increase  relates to
     interest expense  incurred related to  working capital requirements  and
     the debt associated with the acquisition of Reeves.

     Interest Income and Other

            Interest income decreased  $56 thousand  from $186  thousand in  the
     second quarter 1997  to $130 thousand in the second quarter 1998, primarily
     due to decreased interest income from lower invested cash balances.

     Income Tax Provision

            The Company's income tax provision increased from $416 thousand,  or
     an effective rate  of 39.0%, for the second quarter  1997 to $475 thousand,
     or an effective rate of 43.3%, for the second quarter 1998.  The difference
     in the  effective income tax rate  and the federal statutory  rate (34%) is
     due primarily to amortization  of intangibles which are not  deductible for
     income tax purposes and the effect of state income taxes.

     First Six Months 1998 Compared to First Six Months 1997    
   
     Net Sales

            Net  sales increased $20.5 million, or 27.8%, from $74.0 million for
     the first six months  1997 to $94.5 million for the  first six months 1998.
     Reeves contributed $24.5 million to net sales in the first six months 1998.

            Installed Home Improvements

            Installed home improvement product  sales decreased $4.0 million, or
     5.3%, from $74.0 million for the first six months 1997 to $70.0 million for
     the first  six months 1998.   Net sales attributable to  roofing and gutter
     products and services  decreased $1.9 million or 4.0%  to $44.6 million for
     the first six months 1998.  Net sales attributable to  fencing products and
     services decreased $1.0 million or 7.7%  to $12.3 million for the first six
     months 1998.   Net  sales attributable  to garage  doors, entry  doors, and
     other  products and  services  decreased $1.4  million  or 11.1%  to  $11.4
     million for the  first six months  1998.  Credit  participation fee  income
     increased  $143 thousand  to $913  thousand in the  first six  months 1998.
     Interest income  on receivables financed by the  Company's consumer finance
     subsidiary, Marquise  Financial, increased  $213 thousand to  $787 thousand
     for  the first  six months  1998.  Backlog,  defined as  jobs sold  but not
     installed,  increased $5.1  million  from  $10.9  million  at  the  end  of
     December,  1997 to $16.0 million at  the end of the  first six months 1998.
     Backlog increased  $5.4 million from $14.8  million at the  end of December
     1996 to $20.2 million at the end of the second quarter  1997.  The decrease
     in installed sales and the reduced  amount of backlog was attributable to a
     significant  decrease,  primarily  in  the  second  quarter 1998,  in  lead
     production or number of  in-home presentations and lower unit  sales prices
     partially  offset  by improved  operating  efficiencies  measured in  close
     ratio, reduced cancellations and increased credit approvals.

            Manufacturing and Wholesale Distribution

            Manufacturing and wholesale distribution  sales are comprised of the
     following major product lines:

               Chain link and accessories             $17,077,000
               Wood                                     4,488,000
               Ornamental/specialty                     1,929,000
               Gate operators and access control          903,000
               Security systems                         1,647,000
                                                       26,044,000
               Less:  inter-segment sales               1,560,000
                                                      $24,484,000

     Gross Profit

            Gross profit increased $3.3 million, or 9.9%, from $33.1 million, or
     44.7% of  net sales, for  the first  six months 1997  to $36.4 million,  or
     38.5% of net sales, for the first six months 1998.  Reeves contributed $6.0
     million to gross profit in the first six months 1998.

            Installed Home Improvements
    
            Installed  home  improvement  product gross  profit  decreased  $2.8
     million,   or  8.3%,  from  $33.1  million,  or  44.7%  of  installed  home
     improvement product sales, for  the first six months 1997 to $30.3 million,
     or 43.3%  of installed home  improvement product  sales, for the  first six
     months 1998.  The decrease in gross profit amount was attributable to lower
     sales volume  due primarily to the decrease, in the second quarter, in lead
     count.    The  decrease in  gross  profit,  expressed  as a  percentage  of
     installed  home improvement  product  sales, resulted  from  a decrease  in
     average unit  sales price as a  result of expanded and  lower price points,
     partially  offset by a $356  thousand increase in  credit participation fee
     income and in  finance interest income.  The license  fee incurred to Sears
     decreased  $824 thousand,  or 10.5%,  from  $7.9 million,  or 10.8%  of net
     installed home  improvement product sales, for the first six months 1997 to
     $7.0 million, or 10.3% of net installed home improvement product sales, for
     the  first six months  1998.  The  decrease in the license  fee incurred to
     Sears for the first six months 1998  was due to an overall decrease in  net
     installed home improvement  product sales and to a shift  in the balance of
     sales,  primarily  roofing  repairs  and pricing  test  programs,  to lower
     license fee  products and services.   Sears and the Company  entered into a
     three-year  license  agreement  effective January  1,  1996.    Among other
     things, the license  agreement provides  for a  fixed license  fee, at  the
     March 1995  license fee rate, to be charged  during the term of the license
     agreement.  Gross profit before the Sears license fee, credit participation
     fee and finance interest income decreased $3.9 million, or 9.9%, from $39.6
     million, or 54.5% of  net installed home improvement product sales, for the
     first six  months 1997  to $35.7  million, or 52.2%  of net  installed home
     improvement product  sales, for the first six months 1998.  The decrease in
     gross profit amount and gross profit index was attributable to  lower sales
     volume  and unit prices.   The unit costs  of materials, installation labor
     and  warranty expense  remained relatively  constant during  the six  month
     period.

            Manufacturing and Wholesale Distribution

            Manufacturing  and  wholesale  distribution  gross  profit was  $6.0
     million or 22.9% of  gross (before inter-segment elimination) manufacturing
     and wholesale distribution revenue. 

     Selling, General and Administrative Expenses

            Selling, general and administrative expenses increased $2.0 million,
     or 6.3%, from $31.9  million in the first six months 1997  to $33.9 million
     in the first six  months 1998 and, as a percentage  of net sales, decreased
     from  43.1% to 35.9%.  Reeves  contributed $4.2 million in selling, general
     and administrative expense in the first six months 1998.

            Installed Home Improvements

            Selling,  general  and  administrative  expenses  for  this  segment
     decreased $2.1 million, or 6.6%, from $31.9 million in the first six months
     1997 to $29.8  million in the first six months 1998 and, as a percentage of
     installed  home improvement sales, decreased  from 43.1% to  42.5%.  Direct
     advertising expense decreased $1.2 million, or 22.9%, from $5.3 million for
     the first six months 1997 to $4.1 million for the first six months 1998; as
     a  percentage of  net segment sales,  direct advertising  expense decreased
     from 7.2% for  the first six months 1997  to 5.9% for the first  six months
     1998, reflecting  decreased radio and newspaper  advertising placements and
     below  plan  lead  generating  effectiveness  of ad  placements  offset  by
     improved  close ratios  during the  first six  months.   Selling commission
     expense,  including  attendant  payroll-related  benefits,  decreased  $882
     thousand, or 11.4%, from $7.7 million in the  first six months 1997 to $6.8
     million in  the first  six months  1998; as a  percentage of  net installed
     sales,  selling commission  expense decreased  from 10.6%  to 10.0%  in the
     first six months 1998.  Sales representatives are compensated on a variable
     commission basis depending upon the type and gross profit  of product sold.
     Performance-based  compensation  paid  to  officers and  field,  sales  and
     production managers decreased $248  thousand to $246 thousand in  the first
     six months, reflecting the decrease in net installed home improvement sales
     and operating profit.   The balance of selling, general  and administrative
     expenses, primarily sales lead-generation activities, administrative, field
     operations and  Marquise Financial payrolls  and related costs  and general
     expenses, increased $239 thousand, or 1.3%, from $18.4 million, or 24.9% of
     net segment sales,  in the first six months 1997 to $18.6 million, or 26.6%
     of net segment sales,  in the first six  months 1998.  Included  in general
     and  administrative expenses  were special  charges related  to the  Reeves
     acquisition  and  lead  center  activities aggregating  $450  thousand  and
     information  technology  project   expenses  approximating  $450  thousand.
     Information technology expenses are expected to continue into the third and
     fourth quarters before expected benefits may be realized.

            Manufacturing and Wholesale Distribution

            Selling,  general,  and  administrative expenses  for  this  segment
     includes  selling expenses  of  $3.4 million  representing the  operations,
     primarily payroll and related costs, and facilities and equipment costs, of
     31 distribution  centers and $832  thousand of  general and  administrative
     expenses.

     Operating Interest Expense

            Operating interest expense increased from $0 in the first six months
     1997  to $123  thousand in  the first  six months  1998.   The increase  in
     operating interest expense resulted from the Company's finance subsidiary's
     borrowings during the first six months.

     Amortization of Intangibles

            Amortization  of  intangibles  increased  $138  thousand  from  $296
     thousand  in the first six  months 1997 to  $434 thousand in  the first six
     months  1998.   The  amortization  expense  relates primarily  to  goodwill
     incurred  in  connection  with the  September  1994  stock  repurchase from
     management and the Reeves acquisition in April 1998.

     Interest Expense

            Interest expense increased from $0 in  the first six months 1997  to
     $752  thousand in the   first six  months 1998.   This increase  relates to
     interest  expense incurred related  to working capital  requirements and
     the debt associated with the acquisition of Reeves.

     Interest Income and Other

            Interest income  decreased $150 thousand  from $406 thousand  in the
     first  six  months 1997  to $256  thousand in  the  first six  months 1998,
     primarily  due  to decreased  interest  income  from  lower  invested  cash
     balances.

     Income Tax Provision

            The Company's income tax provision  increased from $515 thousand, or
     an effective rate of 39.0%, for the first six months 1997 to $599 thousand,
     or  an effective  rate  of  42.6%, for  the  first six  months  1998.   The
     difference in the effective income tax  rate and the federal statutory rate
     (34%)  is  due  primarily to  amortization  of  intangibles  which are  not
     deductible for income tax purposes and the effect of state income taxes.

     LIQUIDITY AND CAPITAL RESOURCES

            The Company's primary capital needs have been  to fund the growth of
     the Company, to fund  the September 1994 stock repurchase  from management,
     to fund  the  operations  of  the Company's  finance  subsidiary,  Marquise
     Financial, and, more  recently, to fund new information  technology systems
     and the acquisition of  Reeves.  The Company's primary sources of liquidity
     have  been  cash flow  from operations,  borrowings  under its  bank credit
     facility, and,  in  June 1996,  the  net  proceeds of  its  initial  public
     offering.   The Company's  home  improvement installation  business is  not
     capital  intensive.   Capital expenditures  for first  six months  1998 and
     years 1997 and 1996 were approximately $1.5 million, $4.3 million, and $461
     thousand,  respectively.   Capital  expenditures for  1998 are  expected to
     approximate  $3.3  million,  primarily  related to  ongoing  new  equipment
     purchases and software development for the Company's information technology
     systems and major plant  repairs.  Future requirements for  new information
     technology and other capital expenditures are expected to be funded by cash
     flow from  operations and operating leases.  On April 30, 1997, the Company
     announced a stock repurchase program to  repurchase up to 500,000 shares of
     its common stock  and on August 12, 1997, the  Company increased the number
     of shares it  is authorized to  repurchase by 500,000 to  1,000,000 shares.
     During the second  and third  quarters 1997 the  Company purchased  572,300
     shares of its common stock for $4.7 million.  

            On  April  20, 1998,  the  Company acquired  all of  the  issued and
     outstanding  stock  of  Reeves  for approximately  $43  million,  including
     transaction expenses. 

            The  Company believes  that it  has sufficient operating  cash flow,
     working capital base, and available bank lines of credit to meet all of its
     obligations  for  the foreseeable  future,  including  ongoing funding  for
     Marquise Financial, for the stock repurchase program announced in 1997, for
     investments   in  information   technology,   and  for   the   acquisition,
     development,  and expansion of complementary  new products and services and
     markets.
    
            In November  1995, the Company commenced the  operations of Marquise
     Financial.   Marquise's primary objective  is to support,  along with other
     designated  third-party finance  companies, the  Company's requirement  for
     providing  financing to its core  installation business customers.   In the
     fourth  quarter  1996,  as  a  follow-on  objective  to expanding  Marquise
     Financial's consumer financing markets  and products, Marquise introduced a
     new  finance product -- fixed  rate loans secured  by developed residential
     real estate  -- to  a segment  of its  creditworthy  customers that  cannot
     obtain  unsecured consumer loans.  During the second quarter 1997, Marquise
     Financial  expanded  its  scope of  operations,  in  part  to leverage  its
     consumer  finance   infrastructure  to  i)  purchase   from  third  parties
     portfolios of  secured receivables,  and ii) originate  secured receivables
     from  customers   of,  and/or   purchase  individual  secured   receivables
     originated  by, entities other than the Company  and its affiliates.  These
     entities do  not necessarily  engage in  business in  any of  the Company's
     product lines.  As a  general proposition, these entities are all  expected
     to operate  businesses related to  installed home improvement  products and
     services,  although from time to time Marquise Financial may also originate
     or purchase  receivables secured  by  commercial real  estate or  otherwise
     acquire  or originate loans that do not constitute obligations arising from
     installed  home   improvements.    The  outstanding   principal  amount  of
     individual receivables purchased by  Marquise Financial from entities other
     than  the  Company  may significantly  exceed  the  average  amount of  all
     receivables  owned  by Marquise  Financial.    The  Company is  continually
     mindful  of the  risks  associated with  consumer  financing and  plans  to
     increase  its consumer  finance  receivable portfolio  at  a measured  pace
     commensurate with its available resources and acceptable  levels for losses
     on finance receivables.  Marquise Financial has been capitalized and funded
     with  the Company's  excess operating  cash flow  and borrowings  under the
     Company's former $15 million  bank line of credit, which  were subsequently
     paid  down with  a portion  of the  proceeds from  the Company's  June 1996
     initial public offering.   In December 1997, Marquise Financial  obtained a
     $10 million secured line of credit and, at June 30, 1998, had borrowed $3.8
     million.   At  June 30,  1998, Marquise  Financial has  approximately $10.6
     million  in  net finance  receivables.    During 1998,  Marquise  Financial
     originated or purchased approximately $3.8  million of fixed rate,  secured
     loans.   At  June  30, 1998,  Marquise had  approximately  $1.0 million  in
     outstanding  commitments of  the fixed  rate, secured  loans.   The Company
     anticipates that its existing cash balances, the bank lines of  credit, the
     sale of Marquise  Financial's consumer loan  finance receivables as  market
     conditions may warrant from time to time and excess cash flow from its core
     installation  operations  will  be  sufficient  to  satisfy  the  Company's
     financing cash requirements in the foreseeable future.

            In December 1996, with an  initial investment of approximately  $450
     thousand, the  Company completed  agreements with insurance  companies with
     the effect of establishing a captive  insurance company.  At June 30, 1998,
     the investment in the captive  insurance company approximated $1.1 million.
     The primary objective of this captive insurance business  is to provide the
     means for  offering workers'  compensation and general  liability insurance
     coverage, primarily  for Company installations, to  qualified installers as
     the Company seeks to maintain and expand its core complement of independent
     installers.   Premiums  are immediately  collected through  deductions from
     payments to installers; and the excess cash  balances, after administrative
     expenses,  are   invested,  pursuant  to  agreement,   with  the  insurance
     companies.  Losses are comprised  of actual claims paid, reserves  for open
     claims and allowances for  incurred but not reported  claims.  The  Company
     maintains individual and aggregate stop-loss reinsurance coverage at levels
     deemed to be adequate by management  of the Company.  Premiums collected in
     the first six  months 1998 and  year 1997 were approximately  $275 thousand
     and $571 thousand, respectively.

            From its inception in June 1993, the Company has generated cash flow
     from operations of approximately $22.0 million.  Cash flows from operations
     have been used  to fund  and leverage the  Company's investing  activities,
     including  Reeves   acquisition,   Marquise  Financial   consumer   lending
     activities,  and   capital  expenditures;  and  its  financing  activities,
     including the repurchase of  40.2% of common stock  in September 1994  from
     management, and repurchase of 6.3%  of common stock in  1997.  At June  30,
     1998,  the Company  had  approximately  $26.8  million  in  cash  and  cash
     equivalents and trade receivables and net working capital of $13.6 million.
     At June 30,  1998, the Company  had $13.5 million  in unused bank lines  of
     credit and $53.9  million total debt including $41.5 million under its bank
     lines of credit.

            The Company has  not completed its  assessment of compliance  issues
     for the  Year 2000 date  change.  The  Company has also not  determined the
     cost  of  these compliance  issues or  the time  it  will take  to complete
     compliance.   As  a preliminary  assessment, the  Company believes  its new
     investments in information technology systems, including software, are Year
     2000 compliant and as such should not pose significant operational problems
     for  its  computer systems.    The Company  expects  to  complete its  full
     assessment  of  the  Year  2000  issue,  including  its  manufacturing  and
     distribution  systems and  operations, not  later than  December 31,  1998,
     which  is prior  to any  anticipated impact  on its  operating systems  and
     manufacturing and distribution systems and processes.   As part of the Year
     2000 assessment, the  Company has initiated formal communications  with all
     of its  significant suppliers,  third-party finance  sources, and Sears  to
     determine  the  extent  to  which   the  Company's  interface  systems  are
     vulnerable  to those  parties' failure  to remedy  their Year  2000 issues.
     There  is no  guarantee that the  systems of  other companies  on which the
     Company relies  will corrected in  a timely manner  or that the  failure to
     correct will  not have a material adverse  effect on the Company's systems.
     Year  2000  modifications and  assessments are  based on  management's best
     estimates,  which were  derived  utilizing numerous  assumptions of  future
     events,  including availability  of  certain resources  and other  factors.
     However, there can  be no guarantee the  estimates and assessments will  be
     achieved or come to pass, and  actual results could differ  materially from
     those anticipated. 

          Certain statements contained herein, including without limitation,
     statements addressing the beliefs, plans, objectives estimates or
     expectations of the Company or future results or events constitute
     "forward-looking statements" within the meaning of the Private Securities
     Litigation Reform Act of 1995.  Such forward-looking statements involve
     known or unknown risks, including, but not limited to, general economic and
     business conditions, matters related to the licensing agreement between
     Diamond Exteriors, Inc. and Sears, Roebuck and Co., the impact of the
     Company's response to Year 2000 issues, warranty exposure, the Company's
     reliance on sales associates and on the availability of qualified
     independent installers, and conditions in the installed home improvement
     industry, including, without limitation, the fencing and perimeter security
     products business.  There can be no assurance that the actual future
     results, performance, or achievements expressed or implied by such forward-
     looking statements will occur.  Users of forward-looking statements are
     encouraged to review Item 7 of the Company's 1997 annual report on Form 10-
     K, its filings on Form 10-Q, management's discussion and analysis in the
     Company's 1997 annual report to stockholders, the Company's filings on Form
     8-K, and other federal securities law filings for a description of other
     important factors that may affect the Company's business, results of
     operations and financial condition.


                             PART II.  OTHER INFORMATION 

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

            On   May  14,  1998,  the   Company  held  its   Annual  Meeting  of
     Shareholders.    The only  matter  voted  on by  the  shareholders  was the
     election of  directors to the Board of Directors.   By a majority of shares
     represented at  the Annual Meeting,  the shareholders elected  directors to
     serve one-year terms as follows:  Messrs. C. Stephen Clegg, James  F. Bere,
     Jr., James M. Gillespie, Jacob Pollock, William R. Griffin and George A. 
     Stinson.

            Shares were voted as follows:

                                   Number of Shares of Common Stock
     Election of Directors                For           Withheld

     James F. Bere, Jr.               7,690,190          204,825
     Stephen Clegg                    7,688,890          206,125
     James M. Gillespie               7,690,640          204,375
     Jacob Pollock                    7,689,180          205,835
     William R. Griffin               7,690,640          204,375
     George A. Stinson                7,602,190          292,825


     ITEM 5.  OTHER INFORMATION

            The Company  has amended  its By-Laws  in respect  to the  period of
     notification  to include  new business  to be  taken up  at any  meeting of
     stockholders.  Accordingly, stockholders wishing to bring a proposal before
     the  1999  Annual Meeting  of  Stockholders  (but  not include  it  in  the
     Company's Proxy  Statement) must cause written notice of the proposal to be
     received  by  the   Secretary  of   the  Company  at   the  Executive   and
     Administrative offices  of the Company not  less than 90 days  and not more
     than 120 days before the date of the Annual Meeting of Stockholders.

     ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

        (a)  Exhibits
 
                (27)   Financial Data Schedule.

        (b)(i) A report on Form 8-K was filed on April 30, 1998 announcing the
       	       the closing of the acquisition of Reeves Southeastern Corporation
               and the Credit Agreement between the Company and Harris Trust and
               Savings Bank and providing copies of the Stock Purchase Agreement
       	       for the Acquisition of Reeves Southeastern Corporation and the 
 	             Credit Agreement with Harris Trust and Savings Bank.

          (ii) A  report on Form  8-K/A was filed  on May  13, 1998 providing
               financial  statements,  pro   forma  financial  information   and
               exhibits pertaining  to the acquisition by  the Company's wholly-
               owned  subsidiary Diamond Acquisition  Corp. on April  20, 1998 
               of all the issued  and  outstanding  voting  stock  of  Reeves
               Southeastern Corporation.

                                      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.

                                        DIAMOND HOME SERVICES, INC.


                                              /s/ Richard G. Reece
                                        ---------------------------------
                                        By:   Richard G. Reece
     Date:  August 14, 1998                   Vice President and
                                              Chief Financial Officer
                                              (For the Registrant and as 
                                              Principal Financial Officer)