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 September 30, 1997

                                       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 October
31, 1997, the latest practicable date, was 8,507,375 shares.


                         PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS


                  DIAMOND HOME SERVICES, INC. AND SUBSIDIARIES

                  CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                                  (Unaudited)
<TABLE>
<CAPTION>


                                           Three Months Ended       Nine Months Ended

                                              September 30            September 30

                                            1997       1996         1997         1996

                                               (In thousands, except per share data)
<S>                                        <C>        <C>         <C>           <C>
Net sales........................          $48,301    $46,492     $122,263      $114,974
Cost of sales....................           27,056     25,962       67,933        64,096
Gross profit.....................           21,245     20,530       54,330        50,878
Operating expenses:
  Selling, general, and 
  administrative expense.........           19,050     16,245       50,924        42,151
  Operating interest expense.....                0          0            0           234
  Amortization expense...........              151        135          447           396
Operating income.................            2,044      4,150        2,959         8,097
Interest income (expense), net...              170        122          576            26
Income before income taxes.......            2,214      4,272        3,535         8,123
Income tax provision.............              864      1,681        1,379         3,264

Net income.......................           $1,350     $2,591       $2,156        $4,859

Net income per share.............             $.16       $.28         $.24          $.67

Weighted average number of common
shares and equivalent outstanding........    8,702      9,198        8,957         7,296

  See accompanying notes.

</TABLE>



                  DIAMOND HOME SERVICES, INC. AND SUBSIDIARIES

                     CONDENSED CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>


                              September 30, 1997  December 31, 1996
                                   (Unaudited)
                                            (In thousands)
           ASSETS
<S>                                   <C>            <C>
Current assets:
 Cash and cash equivalents........... $9,412          $18,982
 Accounts receivable................. 11,182            8,621
 Finance company accounts            
   receivable........................  7,331            5,312
 Refundable income                     
   taxes.............................  1,419            1,725
 Prepaids  and other current assets..  1,134            1,377
 Deferred income taxes...............    616              794
Total current assets................. 31,094           36,811
Net property and equipment...........  5,249            1,607
Intangible assets, net............... 16,661           16,961
Deferred income taxes................  1,463            1,313
Other................................  3,033            2,101
Total assets.........................$57,500          $58,793

           LIABILITIES AND COMMON STOCKHOLDERS' EQUITY

Current liabilities:
 Accounts payable and accrued                         
 liabilities.........................$13,500         $13,767
 Due to stockholders.................    554              554
Total current liabilities............ 14,054           14,321
Long-term liabilities:
 Warranty and retention..............  8,700            7,128
 Due to stockholders.................    686            1,108
Total long-term liabilities..........  9,386            8,236
Common stockholders' equity.......... 34,060           36,236
Total liabilities and common
stockholders'
  equity.............................$57,500          $58,793


See accompanying notes.

</TABLE>


                  DIAMOND HOME SERVICES, INC. AND SUBSIDIARIES

                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (Unaudited)
<TABLE>
<CAPTION>


                       
                                                                Nine Months Ended
                                                                   September 30
                                                                1997           1996
                                                                  (In thousands)
<S>                                                            <C>             <C>
Operating activities:
Net income.................................................    $2,156          $4,859
  Adjustments to reconcile net income to net cash provided
   by (used in) operating activities:
    Depreciation and amortization..........................       694             599
    Deferred income taxes..................................        28            (529)
      Changes in operating assets and liabilities:
     Accounts receivable and other assets..................    (2,362)         (5,927)
     Accounts payable and accrued expenses.................      (267)          1,653
     Warranty and retention................................     1,572           2,527
  Net cash provided by operating activities................     1,821           3,182
Investing activities:
  Consumer finance loans originated, net of collections....   (2,019)         (17,815)
  Advances to "captive" insurance company and other........     (731)               -
  Capital expenditures.....................................   (3,887)            (273)
  Net cash used in investing activities....................   (6,637)         (18,088)
Financing activities:
  Issuance of Common Stock, net of offering expenses.......        -           33,147
  Common Stock special dividend............................        -           (8,600)
  Preferred Stock redemption...............................        -           (1,400)
  Payments on notes receivable from officers for treasury   
     stock and other.......................................      356               -
  Purchases of treasury stock..............................   (4,688)              -
  Payments due to stockholders.............................     (422)          (4,440)
  Net cash provided by (used in) financing activities......   (4,754)          18,707
  Net increase (decrease) in cash and cash equivalents.....   (9,570)           3,801
  Cash and cash equivalents at beginning of period.........    18,982           4,715
  Cash and cash equivalents at end of period...............    $9,412          $8,516

  Supplemental cash flow disclosure:
    Interest paid..........................................        $0            $738
    Income taxes paid......................................    $1,362          $3,061



See accompanying notes.

</TABLE>


                  DIAMOND HOME SERVICES, INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)
                       (TABULAR AMOUNTS ARE IN THOUSANDS)

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 nine-month periods ended September 30, 1997  are
not necessarily indicative  of the  results that may  be expected  for the  year
ending December 31, 1997.  For further  information, refer  to the  consolidated
financial statements included in the Company's 1996 Annual Report on Form 10-K.

     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
intercompany transactions in consolidation:

<TABLE>
<CAPTION>
                                 September 30,      December 31,
                                     1997              1996
                                 (Unaudited)
<S>                                  <C>               <C>
ASSETS:
Cash................................    $0               $50
Financing receivables............... 7,331             5,312
Other assets........................   242               349

                                    $7,573            $5,711



LIABILITIES AND STOCKHOLDER'S
EQUITY:
Due to Diamond Exteriors, Inc.......$7,088            $5,623
Other...............................   203                50

Total liabilities................... 7,291             5,673
Total stockholder's equity..........   282                38

Total liabilities and               
 stockholder's equity...............$7,573            $5,711


</TABLE>


Results of operations for the three months and nine months ended September 30,
1997 and 1996, respectively:

<TABLE>
<CAPTION>


                                Three Months      Nine Months
                                Ended Sept 30     Ended Sept 30
                                 1997   1996      1997     1996



<S>                             <C>     <C>     <C>        <C>
     (Unaudited)
Financing income................$326    $726   $  900      $1,219
General and administrative       
expenses (1).................... 689     726    1,681       1,393                  
Loss before tax benefit......... 363       0      781         174
Income tax benefit.............. 142       0      305          70
Net loss........................$221      $0   $  476        $104

(1) Includes interest expense paid to Diamond and provision for credit losses.

</TABLE>

Cash flow for the nine months ended September 30, 1997 and 1996, respectively:

<TABLE>
<CAPTION>


                                      Nine Months Ended Sept 30
                                       1997               1996
                                             (Unaudited)
<S>                                     <C>             <C>
Cash at beginning of period..........     $50                $0
Net cash used in operating           
activities...........................    (476)             (104)
Net cash used in investing           
activities...........................  (1,039)          (17,867)
Net cash provided by financing       
activities...........................   1,465            18,151
Cash at end of period................      $0              $180

</TABLE>

     At September 30, 1997, Marquise Financial had approximately $1.8 million in
approved but not funded loan commitments.

3.    EARNINGS PER SHARE

     At September 30,  1997 and 1996,  the Company had  8,507,375 and  9,074,900
common shares outstanding, respectively.   During the  second and third  quarter
1997, the Company repurchased in the open market 72,300 and 500,000 common 
shares, respectively, which shares are being held as treasury stock.

     In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, Earnings per Share, which  establishes new standards for reporting  and
presenting earnings per share and which is required to be adopted in the  fourth
quarter 1997; earlier adoption is not permitted.  At that time, the Company will
be required to change  the method currently used  to compute earnings per  share
and to restate all  prior periods.  Under  the new requirements for  calculating
primary earnings  per  share, the  dilutive  effect  of stock  options  will  be
excluded.  The impact is not sufficient to change the reported primary  earnings
per share for the  third quarter and  nine months ended  September 30, 1997  and
1996.   Similarly, the  impact of  Statement  128 on  the calculation  of  fully
diluted earnings per share will be negligible.

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

RESULTS OF OPERATIONS

THIRD QUARTER 1997 COMPARED TO THIRD QUARTER 1996

Net Sales

     Net sales increased $1.8 million, or 3.9%, from $46.5 million for the third
quarter 1996 to $48.3 million for the third quarter 1997. Approximately 5.8%  of
the increase in net  sales was attributable to  roofing and gutter products  and
services, net sales of  which increased $105 thousand  to $30.0 million for  the
third quarter  1997.  Approximately 81.7%  of  the  increase in  net  sales  was
attributable to garage door and entry  door products and services, net sales  of
which increased  $1.5  million to  $7.8  million  for the  third  quarter  1997.
Approximately 42.6% of the increase in net sales was attributable to fencing and
other products and services, net sales of which increased $770 thousand to  $9.5
million for the third quarter of 1997. The foregoing increases in net sales were
partially offset by  a decrease in  credit participation  fee income,  primarily
from Sears  and its  afilliates on  installed sales  financed by  Sears and  its
affiliates and other  third-party finance companies,  of $164  thousand to  $521
thousand and a decrease in interest income of $400 thousand to $326 thousand  on
receivables financed by  the Company's finance  subsidiary, Marquise  Financial.
The third quarter increase in net sales was due primarily to: i) an increase  in
higher priced proprietary products and, ii)  an increase in the number of  leads
generated and  the average  number of  sales associates  during the  comparative
periods from 752 to 809, partially offset by  a decrease in credit participation
fee income and finance interest income.   Backlog, defined as jobs sold but  not
installed, was $17.0 million  and $18.0 million at  September 30, 1997 and  1996
respectively.

Gross Profit

     Gross profit increased $715 thousand, or 3.5%, from $20.5 million, or 44.1%
of net sales,  for the  third quarter 1996  to $21.2  million, or  44.0% of  net
sales, for the third quarter 1997. The decrease in gross profit, expressed as  a
percentage of  net sales,  resulted  from a  $564  thousand decrease  in  credit
participation fee income and in finance interest income, partially offset by  an
increase in proprietary product offerings and an increase in balance of sales to
higher margin  products  and  services.   The  license  fee  incurred  to  Sears
increased $222 thousand, or 4.5%, from  $4.9 million, or 10.8% of net  installed
sales, for the third  quarter 1996 to  $5.1 million, or  10.7% of net  installed
sales, for the third quarter 1997. The  increase in the license fee incurred  to
Sears for the third quarter 1997 was due to an overall increase in sales and  to
a shift in the balance of sales, primarily doors, to higher 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  increased  $1.5
million, or 6.2%, from $24.0 million, or  53.2% of net installed sales, for  the
third quarter 1996 to $25.5  million, or 53.7% of  net installed sales, for  the
third quarter 1997. The unit costs of materials, installation labor and warranty
expense remained relatively constant during the quarterly period.

Selling, General and Administrative Expenses

     Selling, general  and administrative  expenses increased  $2.8 million,  or
17.3%, from $16.2  million in the  third quarter 1996  to $19.0  million in  the
third quarter 1997 and, as  a percentage of net  sales, increased from 34.9%  to
39.4%. The increase  in selling,  general and  administrative expenses  resulted
primarily from  expenses  associated with  increased  net sales,  the  increased
number of  and the  cost of  recruiting and  training new  sales associates  and
expenses related to the hiring of additional personnel to support the  expansion
of the  infrastructure of  the Company's  core sales  and installation  business
including the  expansion  of  Marquise  Financial.  Direct  advertising  expense
increased $625 thousand , or 29.7%, from $2.1 million for the third quarter 1996
to $2.7 million for the third quarter 1997; as a percentage of net sales, direct
advertising expense increased from 4.5% for  the third quarter 1996 to 5.6%  for
the third quarter 1997, reflecting  increased direct advertising placements  and
below plan lead generating  effectiveness of ad  placements during the  quarter.
Selling  commission  expense,  including  attendant  payroll-related   benefits,
increased $432 thousand, or 9.4%, from $4.6 million in the third quarter 1996 to
$5.0 million in the third quarter 1997; as a percentage of net installed  sales,
selling commission expense increased  from 10.2% to 10.7%  in the third  quarter
1997. 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
$81 thousand, or  9.7%, from $838  thousand in the  third quarter  1996 to  $757
thousand in the third quarter 1997,  primarily due to the decrease in  operating
income. 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  $1.8
million, or  21.7%, from  $8.7 million,  or 18.7%  of net  sales, in  the  third
quarter 1996 to $10.5 million, or 21.8% of net sales, in the third quarter 1997.
The increase was primarily due to  increased expenses related to recruiting  and
training new sales  associates and support  personnel and  services required  to
manage   the   Company's   anticipated   sales   volume   increases,   expanding
infrastructure and  finance subsidiary,  Marquise Financial.   The  increase  in
selling, general  and administrative  expenses, as  a percentage  of sales,  was
caused,  in  large   part,  by  the   aforementioned  up-front  investments   in
infrastructure required  to  generate  the anticipated  sales  and  installation
activity for the balance of the year and beyond.

Amortization of Intangibles

     Amortization of  intangibles  increased from  $135  thousand in  the  third
quarter 1996  to $151  thousand  in the  third  quarter 1997.  The  amortization
expense relates primarily to goodwill incurred in connection with the  September
1994 stock repurchase from management.

Interest Income (Expense), Net

     Net interest income increased $48 thousand from $122 thousand in the  third
quarter 1996  to $170  thousand in  the  third quarter  1997, primarily  due  to
increased interest  income from  invested cash  balances  and the  reduction  of
interest expense related to the notes payable to certain of the Company's senior
managers in connection with the September 1994 stock repurchase from management.


Income Tax Provision

     The Company's  income tax  provision decreased  from  $1.7 million,  or  an
effective rate of  39.3%, for the  third quarter 1996  to $864  thousand, or  an
effective rate  of 39.0%,  for the  third quarter  1997. 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 NINE MONTHS 1997 COMPARED TO FIRST NINE MONTHS 1996

Net Sales

     Net sales increased  $7.3 million,  or 6.3%,  from $115.0  million for  the
first nine  months  1996 to  $122.3  million for  the  first nine  months  1997.
Approximately 32.9% of the increase in net sales was attributable to roofing and
gutter products and services, net sales of which increased $2.4 million to $76.5
million for the first nine months  1997. Approximately 54.9% of the increase  in
net sales was attributable to garage door and entry door products and  services,
net sales of which increased  $4.0 million to $19.7  million for the first  nine
months 1997.  Approximately 21.1% of the increase in net sales was  attributable
to fencing and other  products and services, net  sales of which increased  $1.5
million to $23.8  million for  the first  nine months  of 1997.   The  foregoing
increases  in  net  sales  were  partially  offset  by  a  decreases  in  credit
participation fee income, primarily from Sears  and its affiliates on  installed
sales financed  by  Sears  and its  affiliates  and  other  third-party  finance
companies,  of  $335  thousand  to  $1.3  million  and  in  interest  income  on
receivables financed  by the  Company's  consumer finance  subsidiary,  Marquise
Financial, of $319  thousand to $900  thousand for the  first nine months  1997.
The first nine months increase in net sales was due primarily to: i) an increase
in higher priced  proprietary products,  and ii) an  increase in  the number  of
leads  generated  and  the  average  number  of  sales  associates  during   the
comparative periods from  701 to 803  partially offset by  a decrease in  credit
participation fee income and finance interest income.

Gross Profit

     Gross profit increased $3.4 million, or 6.8%, from $50.9 million, or  44.3%
of net sales, for the first nine months 1996  to $54.3 million, or 44.4% of  net
sales, for the first nine months  1997. The increase in gross profit,  expressed
as a percentage of net sales,  resulted from an increase in proprietary  product
offerings and an increase in the balance of sales to higher margin products  and
services, partially offset by a $654  thousand decrease in credit  participation
fee income and  in finance interest  income. The license  fee incurred to  Sears
increased $1.0 million, or 7.9%, from  $12.0 million, or 10.6% of net  installed
sales, for  the  first nine  months  1996 to  $13.0  million, or  10.6%  of  net
installed sales, for the first nine months 1997. The increase in the license fee
incurred to Sears for the first nine  months 1997 resulted from the increase  in
net sales and from the shift in the balance of sales, primarily doors, to higher
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 increased $5.1  million, or  8.4%, from $60.0  million, or  53.5% of  net
installed sales, for the first  nine months 1996 to  $65.1 million, or 54.2%  of
net installed  sales,  for  the  first  nine months  1997.  The  unit  costs  of
materials, installation labor and warranty expense remained relatively  constant
during the nine month period.


Selling, General and Administrative Expenses

     Selling, general  and administrative  expenses increased  $8.8 million,  or
20.8%, from $42.1 million in the first nine months 1996 to $50.9 million in  the
first nine months 1997 and, as a  percentage of net sales, increased from  36.7%
to 41.6%. The increase in selling, general and administrative expenses  resulted
primarily from  expenses  associated with  increased  net sales,  the  increased
number of and the  cost of recruiting  and training   sales associates and  from
expenses related to the hiring of additional personnel to support the  expansion
of the  infrastructure of  the Company's  core sales  and installation  business
including the  expansion  of  Marquise  Financial.  Direct  advertising  expense
increased $2.2 million, or  38.5%, from $5.8 million  for the first nine  months
1996 to $8.0  million for the  first nine months  1997; as a  percentage of  net
sales, direct advertising expense increased from 5.1% for the first nine  months
1996 to  6.6%  for the  first  nine  months 1997,  reflecting  increased  direct
advertising placements  and  below  plan lead  generating  effectiveness  of  ad
placements during the first nine  months. Selling commission expense,  including
attendant payroll-related benefits, increased $1.2 million, or 10.8%, from $11.4
million in the first nine months 1996 to $12.6 million in the first nine  months
1997; as  a  percentage  of net  installed  sales,  selling  commission  expense
increased  from  10.1%  to   10.2%  in  the  first   nine  months  1997.   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  $850  thousand,
or 40.5%, from $2.1 million in the first nine months 1996 to $1.2 million in the
first nine months 1997, primarily due  to the decrease in operating income.  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  $6.2 million,  or
26.9%, from $22.8 million, or 19.9% of net sales, in the first nine months  1996
to $29.1 million,  or 23.7% of  net sales, in  the first nine  months 1997.  The
increase was  primarily due  to increased  expenses relating  to recruiting  and
training new sales  associates and support  personnel and  services required  to
manage   the   Company's   anticipated   sales   volume   increases,   expanding
infrastructure and  finance subsidiary,  Marquise Financial.   The  increase  in
selling, general  and administrative  expenses, as  a  percentage of  sales,  is
caused,  in  large   part,  by  the   aforementioned  up-front  investments   in
infrastructure required  to  generate  the anticipated  sales  and  installation
activity for the balance of the year and beyond.

Operating Interest Expense

     Operating interest expense decreased from $234  thousand in the first  nine
months 1996 to $  0 in the  first nine months  1997. Operating interest  expense
incurred in the first  nine months 1996 related  to bank borrowings required  to
finance a portion  of Marquise Financial  receivables.  The  Company utilized  a
portion of the proceeds  from the June 1996  initial public offering to  paydown
all bank borrowings.   The Company  has not incurred  bank borrowings since  its
June 1996 initial public offering.


Amortization of Intangibles

     Amortization of intangibles increased from $396 thousand in the first  nine
months 1996 to  $447 thousand in  the first nine  months 1997. The  amortization
expense relates primarily to goodwill incurred in connection with the  September
1994 stock repurchase from management.

Interest Income (Expense), Net

     Net interest income increased $550 thousand from $26 thousand in the  first
nine months 1996 to $576 thousand in  the first nine months 1997, primarily  due
to increased interest income  from invested cash balances  and the reduction  of
interest expense related to the notes payable to certain of the Company's senior
managers in connection with the September 1994 stock repurchase from management.

Income Tax Provision

     The Company's  income tax  provision decreased  from  $3.3 million,  or  an
effective rate of 40.2%, for the first nine  months 1996 to $1.4 million, or  an
effective rate of 39.0%, for the first  nine months 1997. 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 and,  in the first  nine months 1996,  the
effect on state income taxes pursuant  to the tax agreement between the  Company
and Globe which was terminated in June 1996.

LIQUIDITY AND CAPITAL RESOURCES

     The Company's primary  capital needs have  been to fund  the growth of  the
Company,  the  September  1994  stock  repurchase  from  management,  and,  more
recently, to fund the operations of  the Company's finance subsidiary,  Marquise
Financial.  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  core sales  and
installation business is not  capital intensive.   Capital expenditures for  the
first nine  months of  1997, and  years 1996  and 1995  were approximately  $3.9
million, $461 thousand  and $888 thousand,  respectively.  Capital  expenditures
for the next twelve months are  expected to approximate $2.0 million,  primarily
related to  ongoing  upgrading  and maintenance  of  the  Company's  information
technology systems.  Future requirements  for capital expenditures are  expected
to be funded  by cash  flow from operations.   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 1.0 million  shares.  During  the
second and  third quarters  1997 the  Company purchased  572,300 shares  of  its
common stock for  $4.7 million.   The Company  believes that  it has  sufficient
operating cash flow, working capital base, available bank line of credit as well
as additional financing currently being pursued  by the Company with respect  to
Marquise Financial to meet  all of its obligations  for the foreseeable  future,
including ongoing  funding  for Marquise  Financial,  for the  stock  repurchase
program announced  in April  1997,  and for  the  development and  expansion  of
complementary new products and services.

     In  November  1995,  the  Company  commenced  the  operations  of  Marquise
Financial, its finance subsidiary.  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   businesses
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 existing
from  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
secured borrowings under the  Company's $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.  At September  30, 1997, Marquise  Financial
has approximately $7.3  million in net  finance receivables.   During the  first
nine months of  1997, Marquise Financial  originated or purchased  approximately
$4.7 million of fixed rate, secured loans.  At September 30, 1997, Marquise  had
approximately $1.8 million in outstanding commitments of the fixed rate, secured
loans.  The Company anticipates that  its existing cash balances, the bank  line
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 September 30, 1997, the investment
in the  captive  insurance company  has  been increased  to  approximately  $635
thousand.   The primary  objective  of this  captive  insurance business  is  to
provide the  means  for offering  workers'  compensation and  general  liability
insurance coverage, solely 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 to  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 nine months  1997
were approximately $525 thousand.

     In  June  1996,  the  Company  issued  2,824,950  shares  of  Common  Stock
(including underwriters' over-allotment option) at $13 per share in its  initial
public offering.  Proceeds  from the offering,  net of underwriting  commissions
and related expenses totaling  $3.7 million, were $33.1  million.  A portion  of
the offering proceeds was used  to pay a $8.6  million special dividend to  pre-
offering stockholders, repay all borrowings aggregating $11.9 million under  the
bank line of credit (used to  finance Marquise Financial receivables) and  repay
$3.2 million of  notes to senior  managers related to  the September 1994  stock
repurchase.  From  its inception in  June 1993, the  Company has generated  cash
flow from operations  of approximately $21.4  million.  The  Company used  $12.5
million of cash in connection with the  repurchase of 40.2% of its Common  Stock
in September 1994, $6.1  million for capital expenditures  and $5.0 million  for
the initial funding of Marquise Financial's  consumer financing activities.   At
September 30, 1997, the Company had approximately $20.6 million in cash and cash
equivalents and trade receivables and net working capital of $17.0 million.   At
September 30, 1997, the Company had available $15 million in bank line of credit
and $1.2 million total debt to management stockholders.  At September 30,  1997,
the Company had no amounts outstanding under its bank line of credit.

     The Company's results  of operations  may fluctuate  from year  to year  or
quarter to quarter  due to  a variety  of factors.   The  Company expects  lower
levels of sales and  profitability during the  period from mid-November  through
mid-March, impacting the  first and fourth  quarter of each  year.  The  Company
believes that this  seasonality is caused  by winter weather  in certain of  the
Company's markets located  in the  northeastern and  north central  U.S. and  by
rainy weather, each of  which limits the Company's  ability to install  exterior
home improvement products.

     CERTAIN STATEMENTS CONTAINED HEREIN WHICH ARE NOT OF A HISTORICAL NATURE,
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 AND UNKNOWN RISKS, INCLUDING, BUT NOT LIMITED TO, GENERAL ECONOMIC
AND BUSINESS CONDITIONS, MATTERS RELATED TO THE SEARS LICENSE, 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.  THERE CAN BE NO ASSURANCE THAT ACTUAL RESULTS,
PERFORMANCE OR ACHIEVEMENTS OF THE COMPANY WILL NOT DIFFER MATERIALLY FROM ANY
FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH
FORWARD-LOOKING STATEMENTS.  THE COMPANY PROVIDES CAUTIONARY STATEMENTS,
DETAILED IN SECURITIES AND EXCHANGE COMMISSION FILINGS, INCLUDING WITHOUT
LIMITATION THE COMPANY'S 1996 ANNUAL REPORT ON FORM 10-K, WHICH IDENTIFY
SPECIFIC FACTORS THAT COULD CAUSE ACTUAL RESULTS OR EVENTS TO DIFFER MATERIALLY
FROM THOSE DESCRIBED IN THE FORWARD-LOOKING STATEMENTS.  THE COMPANY UNDERTAKES
NO OBLIGATION TO UPDATE PUBLICLY ANY FORWARD-LOOKING STATEMENT WHETHER AS A
RESULT OF NEW INFORMATION, FUTURE EVENTS OR OTHERWISE.



                     PART II.  OTHER INFORMATION


ITEM. 6.  EXHIBITS AND REPORTS ON FORM 8-K

     (a)  Exhibits

          (27)      Financial Data Schedule.

     (b)  No reports on Form 8-K were filed during the quarter.



                                   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
Date:  November 12, 1997                     By:_________________________
                                                 Richard G. Reece
                                                 Vice President and
                                                 Chief Financial Officer
                                                 (For the Registrant and as
                                                 Principal Financial Officer)