##### 



UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, D.C.
    20549
      Form 10-K
  ANNUAL
    REPORT PURSUANT TO SECTION 13 OR 15(d)
 OF THE SECURITIES EXCHANGE ACT
    OF 1934
  For the fiscal year ended December 31, 2006
  Commission file number 1-32375
      Comstock Homebuilding
    Companies, Inc.
 (Exact Name of Registrant as
    Specified in Its Charter)
  Delaware

20-1164345(State or Other Jurisdiction of
    Incorporation or Organization)

(I.R.S. Employer Identification
    No.)   11465
    Sunset Hills Road
 5th Floor
 Reston, Virginia 20190
 (703) 883-1700
 (Address, including zip code,
    and telephone number, including area code, of principal
    executive offices)
  Securities
    registered pursuant to Section 12(b) of the Act:
 None
  Securities
    registered pursuant to Section 12(g) of the Act:
  Class A
    common stock, par value $.01 per share
 (Title of Class)
  o þ
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. o
  Rule 12b-2 o þ o
  Rule 12b-2 o þ
      DOCUMENTS
    INCORPORATED BY REFERENCE
  Form 10-K.




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##### 



COMSTOCK
    HOMEBUILDING COMPANIES, INC.
  ANNUAL REPORT ON FORM
    10-K
 For the Fiscal Year Ended December 31, 2006
  TABLE OF
    CONTENTS
  PagePART IItem 1.

Business


2Item 1A.

Risk
    Factors


18Item 1B.

Unresolved Staff
    Comments


28Item 2.

Properties


29Item 3.

Legal
    Proceedings


29Item 4.

Submissions of
    Matters to a Vote of Security Holders


29PART IIItem 5.

Market for
    Registrants Common Equity, Related Stockholder Matters and
    Issuer Purchase of Equity Securities


30Item 6.

Selected Financial
    Data


31Item 7.

Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations


33Item 7A.

Quantitative and
    Qualitative Disclosures About Market Risk


47Item 8.

Financial
    Statements and Supplementary Data


47Item 9.

Changes In and
    Disagreements With Accountants and Financial
    Disclosure


47Item 9A.

Controls and
    Procedures


48Item 9B.

Other
    Information


48PART IIIItem 10.

Directors and
    Executive Officers of the Registrant


48Item 11.

Executive
    Compensation


49Item 12.

Security Ownership
    of Certain Beneficial Owners and Management


49Item 13.

Certain
    Relationships and Related Transactions


49Item 14.

Principal
    Accountant Fees and Services


49PART IVItem 15.

Exhibits and
    Financial Statement Schedules


49SignaturesIndex to
    Consolidated Financial Statements


F-1  1




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##### 



PART I Item 1.
    Business  Overview
      www.comstockhomebuilding.com.
  Our
    Markets
   2




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##### 



Our
    Business Strategy
    Attract and retain experienced personnel at all
    levels.
  Build in and expand with the strong growth markets of the
    Mid-Atlantic and Southeast region of the United States.
  Manage our land inventory to provide the most attractive
    margins or returns possible.
  Create opportunities in areas overlooked by our competitors.
 3




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##### 



Focus on a broad segment of the home buying market, the
    middle of the market.
  Position our inventory for the growing active adult market.
  Maximize our economies of scale.
    Protect liquidity and maximize capital
    availability.
  Invest in creating a highly qualified sales force capable of
    closing sales in difficult times.
  Maximize the realized value of our real estate
    owned.
 4




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##### 



Concentrate on finished lot option takedown opportunities.
  Identify and capitalize on undervalued and/or distressed real
    estate assets.
  Capitalize on our public status to attract capital and build
    a sustainable pipeline for future growth.
  Invest in technology to streamline operations, increase our
    ability to communicate with customers and facilitate growth.
  Our
    Operations
    Land
    Identification and Acquisition
         5




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##### 




    supply and absorption rates of similar new home projects;
    supply and absorption rates of existing homes in the area;
    projected equity requirements;
    projected return on invested capital;
    status of land development entitlements;
    projected net margins of homes to be sold by us;
    projected absorption rates;
    demographics, school districts, transportation facilities and
    other locational factors; and
    competitive market positioning.    Land
    Entitlement and Development
       6




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##### 



Sales,
    Marketing and Production
           7




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##### 



tm
  
    DownRighttm 
    a program designed to help identify ways to meet the down
    payment requirements of a new home purchase;
    Tailor
    Madetm 
    a program with unique financing products and agreements with
    major lenders that tailor a monthly payment in order to make
    home ownership affordable in any interest rate climate;
    Get It
    Soldtm 
    a program designed to help our customers sell their current home
    quickly and efficiently in order to facilitate their purchase of
    a new Comstock home;
    All@Hometm 
    a program enabling our customers to design technology solutions
    for their new Comstock home to meet their individual
    specifications;
    Built
    Righttm 
    a quality assurance program incorporating quality assurance
    inspections with high-quality materials; and
    Home
    Styletm 
    an optional upgrade program providing hundreds of options to
    choose from to customize a new Comstock home to suit the
    specific desires of our customers.  project-by-project
       8




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##### 



on-site time-to-market
  Our
    Communities
    State

CountyGeorgia

Forsyth, Gwynett, Fulton,
    Paulding, Jackson, CherokeeMaryland

FrederickNorth Carolina

Wake, Raleigh, Johnston, DurhamDistrict of Columbia

Washington, DCVirginia

Arlington, Fairfax Loudon, Prince
    William, Culpepper     As of December 31, 2006Lotsunder


AverageEstimated








Lots


Option


NewProduct


Units at


Units





Owned


Agreement


OrderProject

State


Type(2)


Completion


Settled


Backlog(3)


Unsold


Unsold


Revenue to DateStatus: Active(1)Allen Creek


GA



SF



26



18







8






$
210,272Arcanum


GA



SF



34



11



1



22






$
438,858Brentwood Estates


GA



SF



33



19



1



11



2


$
145,072Falling Water


GA



SF



23



7



4



12






$
571,155Gates of Luberon


GA



SF



32



1



1



30






$
609,000Glenn Ivey


GA



SF



65



10



5



50






$
306,864Highland Station


GA



SF



105



22



4



79






$
341,192Maristone


GA



SF



40



3







37






$
264,930Senators Ridge


GA



SF



60



16







44






$
244,618Wyngate


GA



SF



28











28







n/aTraditions


GA



SF



4











4







n/aSub-Total/Weighted Average (4):










450



107



16



325



2


$
305,983Emerald Farm


MD



SF



84



77







7






$
457,625Sub-Total/Weighted Average:










84



77







7






$
457,625Allyns Landing


NC



TH



116



39



18



59






$
307,321Brookfield Station


NC



SF



130















130



n/aCarpenter Pointe


NC



SF



5



5







2






$
142,280Haddon Hall


NC



Condo



90











90







n/aKelton at Preston


NC



TH



56



39



4



16






$
340,589North Farms


NC



SF



138



29



2



11



96


$
190,958Pine Hollow


NC



SF



10



3











7


$
168,908Providence-SF


NC



SF



148











34



114



n/aRiverbrooke


NC



SF



68



30



1



37






$
171,171Strathaven


NC



SF



6



6














$
382,402Wakefield Plantation


NC



TH



77



40



1



16



20


$
504,593Wheatleigh Preserve


NC



SF



28



12



3



13






$
330,419Sub-Total/Weighted Average (4):










872



203



29



278



367


$
312,697 9




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##### 



As of December 31, 2006Lotsunder


AverageEstimated








Lots


Option


NewProduct


Units at


Units





Owned


Agreement


OrderProject

State


Type(2)


Completion


Settled


Backlog(3)


Unsold


Unsold


Revenue to DateBarrington Park


VA



Condo



148











148






$
Beacon Park at Belmont Bay 8&9


VA



Condo



600











112



488


$
Blooms Mill Carriage


VA



TH



91



91














$
453,642Carter Lake


VA



Condo



258



258














$
155,040Commons at Bellemeade


VA



Condo



316



58



3



255






$
236,083Commons on Potomac Sq


VA



Condo



192



40



2



150






$
275,570Commons on Williams Sq


VA



Condo



180



104



2



74






$
358,662Penderbrook


VA



Condo



424



239



7



178






$
265,946River Club at Belmont Bay 5


VA



Condo



84



82







2






$
449,210The Eclipse on Center Park


VA



Condo



465



134



258



73






$
711,960Woodlands at Round Hill


VA



SF



46



24







22






$
757,118Sub-Total/Weighted Average:










2,804



1,030



272



1,014



488


$
418,427Total Active










4,210



1,417



317



1,624



857


$
398,045Status: DevelopmentEast Capitol


DC



Condo



130











130







n/aSub-Total:










130











130



Cedars Road


GA



SF



109















109



n/aHighland Avenue


GA



SF



30











30







n/aJames Road


GA



SF



50











50







n/aKelly Mill Road


GA



SF



28















28



n/aPost Road


GA



SF



59











59







n/aPost Road II


GA



TH



54















54



n/aSettingdown Circle


GA



SF



172











172







n/aShiloh Road


GA



SF



61











61







n/aTribble Lakes


GA



SF



200











200







n/aSub-Total:










763











572



191Massey Preserve


NC



SF



297











297







n/aHolland Road


NC



SF



81











81







n/aProvidence-TH


NC



TH



80















80



n/aBoyce Road


NC



SF



33















33



n/aLakeshore Hills


NC



SF



34















34



n/aStowe Road


NC



SF



110















110



n/aSub-Total:










635











378



257Aldie Singles


VA



SF



15















15



n/aBlake Crossing


VA



TH



130











130







n/aBrandy Station


VA



SF



350















350



n/aLoudoun Station Condominiums


VA



Condo



484















484



n/aStation View


VA



TH



47











47







n/aSub-Total:










1,026











177



849Total Development










2,554











1,257



1,297



n/aTotal Active &
    Development










6,764



1,417



317



2,881



2,154


$
398,045Status: Joint VentureNorth Shore Condominiums(5)


NC



Condo



196







7



189






$
286,361North Shore Townhomes(5)


NC



TH



163



33



7



123






$
239,107Countryside(6)


VA



Condo



102



67



2



33






$
274,816Total Joint Venture










461



100



16



345






$
263,199  10




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##### 



(1)
    Active communities are open for sales.
    Development communities are in the development
    process and have not yet opened for sales. Completed
    communities have settled all units during the year ended
    December 31, 2006.(2)
    SF means single family home, TH means
    townhouse and Condo means condominium.(3)
    Backlog means we have an executed order with a
    buyer, inclusive of lot sales, but the settlement has not yet
    taken place.(4)
    Weighted Average means the weighted average new
    order sale price(5)
    Not consolidated(6)
    Consolidated, under Fin 46  Greater
    Washington, DC Area
  Northern
    Virginia Market
  Aldie Singles
  Barrington Park .
  Beacon Park at Belmont Bay
  Blakes Crossing
  Blooms Mill
  Brandy Station
  Commons at Bellemeade
  Commons on Potomac Square
 11




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##### 



Commons on the Park
  Commons on William Square two-over-two
  Countryside
  The Eclipse on Center Park
  Loudoun Station Condominiums
  Penderbrook Square
  River Club at Belmont Bay 5
  Woodlands at Round Hill
  Maryland
  Emerald Farm
 12




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##### 



North
    Carolina Market
  Raleigh,
    North Carolina
  Allyns Landing
  Holland Road
  Kelton at Preston
  North Shore
  Wakefield Plantation
  Brookfield
  Haddon Hall
  Massey Preserve
  North Farm
  Pine Hollow 18-hole
  Providence single family
  Providence townhomes
 13




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##### 



Riverbrooke II
  Wheatleigh Preserve
  Charlotte,
    North Carolina Market
    Greater
    Atlanta Market
  Atlanta,
    Georgia
  Allen Creek
  Arcanum
  Brentwood Estates
  Falling Water
  Gates of Luberon
    Highland Ave
  Highland Station
  James Road
  Maristone
 14




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##### 



Post Road
  Post Road II
  Senators Ridge
  Settingdown Circle
  Shiloh Road
  Traditions at Braselton
  Tribble Lakes
  Wyngate
  South
    Carolina Market
  Myrtle
    Beach, South Carolina
    Warranty
    Competition
   15




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##### 




    Atlanta, Georgia.In the Atlanta, Georgia
    market we compete against approximately 10 to 15 publicly-traded
    national home builders, approximately 10 to 15 privately-owned
    regional home builders, and a large number of small, local home
    builders.
    Raleigh, North Carolina.In the Raleigh, North
    Carolina market we compete against approximately 10 to 15
    publicly-traded national home builders, approximately 10 to 15
    privately-owned regional home builders, and a large number of
    small, local home builders.
    Washington, D.C.In the greater Washington, D.C.
    metropolitan market we compete against approximately 15 to 20
    publicly-traded national home builders, approximately 10 to 15
    privately-owned regional home builders, and many local home
    builders, some of whom are very small and may build as few as
    five to 25 homes per year.      Regulation
      Technology
  www.comstockhomebuilding.com,
 16




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##### 



Intellectual
    Property and Other Proprietary Rights
    Employees
    Executive
    Officers
    Name

Age


PositionChristopher Clemente*


47



Chairman and Chief Executive OfficerGregory V. Benson*


52



Regional President, SoutheastBruce J. Labovitz*


38



Chief Financial OfficerJason Parikh*


35



Chief Accounting OfficerJubal R. Thompson


37



General Counsel and Secretary     *
    Section 16 officers.  Executive
    Officers and Key Employees
  Christopher Clemente
  Gregory V. Benson
  Bruce J. Labovitz
 17




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##### 



Jason Parikh On-Site
  Jubal R. Thompson
  Other
    Information
  1-800-SEC-0330. http://www.sec.gov.
  www.comstockhomebuilding.com, Form 10-K, Form 10-Q, Form 8-K
  CAUTIONARY
    NOTES REGARDING FORWARD-LOOKING STATEMENTS
     Item 1A.
    Risk Factors  Risks
    Relating to Our Business
  We
    engage in construction and real estate activities which are
    speculative and involve a high degree of risk.
    
    employment levels; 18




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##### 




    availability of financing;
    interest rates; and
    consumer confidence.    
    delays in construction schedules;
    cost overruns;
    changes in governmental regulations (such as slow- or no-growth
    initiatives);
    increases in real estate taxes and other local government fees;
    labor strikes;
    transportation costs for delivery of materials; and
    increases and/or shortages in raw materials and labor costs.  Failure
    to successfully negotiate extensions to our credit facilities
    could adversely affect our liquidity.
    Fluctuations
    in market conditions may affect our ability to sell our land and
    home inventories at expected prices, if at all, which could
    adversely affect our revenues, earnings and cash
    flows.
    Home
    prices and sales activities in the Washington, D.C., Raleigh,
    North Carolina and Atlanta, Georgia geographic markets have a
    large impact on our results of operations because we conduct
    substantially all of our business in these
    markets.
   19




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##### 



Because
    our business depends on the acquisition of new land, the
    potential limitations on the supply of land could reduce our
    revenues or negatively impact our results of operations and cash
    flows.
    Our
    business is subject to governmental regulations that may delay,
    increase the cost of, prohibit or severely restrict our
    development and home building projects and reduce our revenues
    and cash flows.
    Cities
    and counties in which we operate have adopted, or may adopt,
    slow or no-growth initiatives that would reduce our ability to
    build and sell homes in these areas and could adversely affect
    our revenues, earnings and cash flows.
       20




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##### 



Our
    ability to sell homes, and, accordingly, our results of
    operations, will be affected by the availability of financing to
    potential home buyers.
    
    increases in interest rates and/or related fees;
    increases in real estate transaction closing costs;
    decreases in the availability of mortgage financing;
    increasing housing costs;
    unemployment; and
    changes in federally sponsored financing programs.    The
    competitive conditions in the home building industry could
    increase our costs, reduce our revenues and earnings and
    otherwise adversely affect our results of operations and cash
    flows.
      
    make it difficult for us to acquire suitable land or home sites
    in desirable locations at acceptable prices and terms, which
    could adversely affect our ability to build homes;
    require us to increase selling commissions and other incentives,
    which could reduce our profit margins;
    result in delays in construction if we experience delays in
    procuring materials or hiring trades people or laborers;
    result in lower sales volume and revenues; and
    increase our costs and reduce our earnings.    Our
    business is concentrated in a few geographic areas which
    increases our exposure to localized risks.
   21




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##### 



Our
    growth strategy to expand into new geographic areas poses
    risks.
    
    adjusting our construction methods to different geographies and
    climates;
    obtaining the necessary construction materials and labor in
    sufficient amounts and on acceptable terms;
    obtaining necessary entitlements and permits under unfamiliar
    regulatory regimes;
    attracting potential customers in a market in which we do not
    have significant experience; and
    the cost of hiring new employees and increased infrastructure
    costs.    We may
    not be able to successfully identify, complete or integrate
    acquisitions.
    
    difficulties in assimilating acquired management and operations;
    risks associated with investing the necessary resources in order
    to achieve profitability;
    the incurrence of significant due diligence expenses relating to
    acquisitions that are not completed;
    unforeseen expenses and liabilities;
    risks associated with entering new markets or sub-markets in
    which we have limited or no prior experience;
    the diversion of our managements attention from our
    current business;
    the potential loss of key employees, including senior
    executives, of acquired organizations; and
    risks associated with transferred assets and liabilities.    We are
    dependent on the services of certain key employees and the loss
    of their services could harm our business.
   22




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##### 



Our
    growth requires additional capital, which may not be
    available.
    Our
    growth depends on the availability of construction, acquisition
    and development loans.
    A
    significant portion of our business plan involves construction
    of mixed-use developments and high-rise projects with which we
    have less experience.
    If we
    experience shortages of labor or supplies or other circumstances
    beyond our control, there could be delays or increased costs in
    developing our projects, which would adversely affect our
    operating results and cash flows.
    
    work stoppages, labor disputes and shortages of qualified trades
    people, such as carpenters, roofers, electricians and plumbers;
    lack of availability of adequate utility infrastructure and
    services;
    transportation cost increases; 23




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##### 




    our need to rely on local subcontractors who may not be
    adequately capitalized or insured; and
    shortages or fluctuations in prices of building materials.    We
    depend on the availability and skill of
    subcontractors.
    Product
    liability litigation and claims that arise in the ordinary
    course of business may be costly or negatively impact sales,
    which could adversely affect our results of operations and cash
    flows.
    Increased
    insurance risk could negatively affect our business, results of
    operations and cash flows.
   24




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##### 



We are
    subject to warranty claims arising in the ordinary course of
    business that could be costly.
    Our
    business, revenues, earnings and cash flows may be adversely
    affected by adverse weather conditions or natural
    disasters.
    We are
    subject to certain environmental laws and the cost of compliance
    could adversely affect our business, results of operations and
    cash flows.
      If we
    are not able to develop our communities successfully, our
    earnings and cash flows could be diminished.
   25




---



##### 



Our
    operating results may vary.
    
    the uncertain timing of real estate closings;
    our ability to continue to acquire additional land or options
    thereon on acceptable terms and the timing of all necessary
    regulatory approvals required for development;
    the condition of the real estate market and the general economy
    in the markets in which we operate;
    the cyclical nature of the home building industry;
    the changing regulatory environment concerning real estate
    development and home building;
    changes in prevailing interests rates and the availability of
    mortgage financing; and
    costs of material and labor and delays in construction schedules.  start-up
  Acts
    of war or terrorism may seriously harm our
    business.
    We do
    not own the Comstock brand or trademark, but use the brand and
    trademark pursuant to the terms of a perpetual license granted
    by Christopher Clemente, our Chief Executive Officer and
    Chairman of the Board.
   26




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##### 



Risks
    Related to our Common Stock and the Securities Markets
  Volatility
    of our stock price could adversely affect
    stockholders.
    
    quarterly variations in our operating results;
    general conditions in the home building industry;
    interest rate changes;
    changes in the markets expectations about our operating
    results;
    our operating results failing to meet the expectation of
    securities analysts or investors in a particular period;
    changes in financial estimates and recommendations by securities
    analysts concerning our Company or the home building industry in
    general;
    operating and stock price performance of other companies that
    investors deem comparable to us;
    news reports relating to trends in our markets;
    changes in laws and regulations affecting our business;
    material announcements by us or our competitors;
    material announcements by our construction lenders or the
    manufacturers and suppliers we use;
    sales of substantial amounts of Class A common stock by our
    directors, executive officers or significant stockholders or the
    perception that such sales could occur; and
    general economic and political conditions such as recessions and
    acts of war or terrorism.    Investors
    in our Class A common stock may experience dilution with
    the future exercise of stock options and warrants, the grant of
    restricted stock and issuance of stock in connection with our
    acquisitions of other homebuilders.
    Substantial
    sales of our Class A common stock, or the perception that
    such sales might occur, could depress the market price of our
    Class A common stock.
    The
    holders of our Class B common stock exert control over us
    and thus limit the ability of other stockholders to influence
    corporate matters.
   27




---



##### 



The
    limited voting rights of our Class A common stock could
    impact its attractiveness to investors and its liquidity and, as
    a result, its market value.
    It may
    be difficult for a third party to acquire us, which could
    inhibit stockholders from realizing a premium on their stock
    price.
      
    a staggered board of directors, so that it would take three
    successive annual meetings to replace all directors;
    a prohibition of stockholder action by written consent; and
    advance notice requirements for the submission by stockholders
    of nominations for election to the board of directors and for
    proposing matters that can be acted upon by stockholders at a
    meeting.  Our
    issuance of shares of preferred stock could delay or prevent a
    change of control of us.
   Item 1B.
    Unresolved Staff Comments   28




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##### 



Item 2.
    Properties   Item 3.
    Legal Proceedings       Item 4.
    Submission of Matters to a Vote of Security Holders.   29




---



##### 



PART II  Item 5.
    Market
    for the Registrants Common Equity, Related Stockholder
    Matters and Issuer Purchases of Equity Securities  Market
    for Common Stock
    High


LowFiscal Year Ended
    2004Fourth quarter

$
22.10


$
16.00Fiscal Year Ended
    2005First quarter

$
31.00


$
18.39Second quarter

$
27.03


$
18.80Third quarter

$
29.42


$
17.76Fourth quarter

$
19.97


$
13.34Fiscal Year Ended
    2006First quarter

$
14.69


$
8.77Second quarter

$
11.60


$
5.45Third quarter

$
7.20


$
3.65Fourth quarter

$
6.24


$
3.94     Dividends
    Issuer
    Purchases of Equity Securities
      Stock
    Performance Graph
   30




---



##### 



COMPARISON
    OF CUMULATIVE TOTAL RETURN
  
  Base



Indexed Returns Years EndingPeriodCompany/Index


12/14/04



12/31/04



12/31/05



12/31/06COMSTOCK HOMEBUILDING
    COS



100




137.31




88.19




35.94NASDAQ U.S. INDEX



100




100.73




102.87




113.02S&P 500 HOMEBUILDING
    INDEX



100




104.68




132.52




106.01   Item 6.
    Selected Financial Data
   31




---



##### 



FIVE YEAR
    COMPARISON OF SELECTED FINANCIAL DATA
  Dollars
    in thousands (except per share data)
  Year ended December 31,2006


2005


2004


2003


2002Revenues

$
245,881


$
224,305


$
96,045


$
55,521


$
34,752Expenses Cost of sales


216,657



156,490



63,993



41,756



26,820Impairments and write-offs (1)


57,426



1,216











Selling, general and administrative


37,500



24,190



11,940



5,712



3,725Operating (loss) income


(65,702
)


42,409



20,112



8,053



4,207Other (income) expense, net


(1,487
)


(1,450
)


908



(44
)


10(Loss) Income before minority
    interest and equity in earnings of real estate partnerships


(64,215
)


43,859



19,204



8,097



4,197Minority interest


15



30



5,260



2,297



664(Loss) Income before equity in
    (loss) earnings of real estate partnerships


(64,230
)


43,829



13,944



5,800



3,533Equity in (loss) earnings of real
    estate partnerships


(135
)


99



118



139



51Total pre-tax (loss) income


(64,365
)


43,928



14,062



5,939



3,584Income tax (benefit) provision


(24,520
)


16,366



(241
)






Net (loss) income

$
(39,845
)

$
27,562


$
14,303


$
5,939


$
3,584Basic (loss) earnings per share

$
(2.63
)

$
2.14


$
1.95


$
0.84


$
0.59Basic weighted average shares
    outstanding (2)


15,148



12,870



7,347



7,067



6,074Dilutive (loss) earnings per share

$
(2.63
)

$
2.12


$
1.95


$
0.84


$
0.59Dilutive weighted average shares
    outstanding (2)


15,148



13,022



7,351



7,067



6,074   December 31,2006


2005


2004


2003


2002Balance Sheet Data:Cash and cash equivalents

$
21,263


$
42,167


$
67,559


$
17,160


$
8,695Real estate held for development
    and sale (1)(3)


405,144



263,802



104,326



65,272



20,192Total assets


517,429



431,319



304,507



90,184



33,971Notes payable


265,403



143,657



76,628



61,062



17,203Subordinated debt


30,000















Total liabilities


393,173



285,843



239,586



71,746



21,574Minority interest


371



400



2,695



11,413



8,790     (1)
    During the year ended December 31, 2006 the Company
    recorded impairment charges and write-offs of option deposits
    and related feasibility costs. The inclusion of these charges
    makes year to year comparisons difficult and should be
    considered when evaluating results of operations in relation to
    earlier years.(2)
    Shares outstanding of our predecessor for prior years have been
    adjusted to account for shares issued to the owners of our
    predecessor in connection with the initial public offering of
    our common stock.(3)
    During 2006 the Company acquired Parker Chandler Homes, Inc. in
    Atlanta, GA and Capitol Homes, Inc. in Raleigh, NC. 32




---



##### 



Item 7.
    Managements Discussion and Analysis of Financial Condition
    and Results of Operations
    Overview
        36-month
 33




---



##### 



Twelve Months Ended December 31,2006Washington Metro


NorthArea


Carolina


Georgia


TotalNew orders


503



169



122



794New order revenues

$
119,877


$
42,257


$
32,605


$
194,739Average new order price

$
238


$
250


$
267


$
245Settlements


675



132



107



914Settlement revenue

$
180,182


$
32,255


$
27,657


$
240,094Average settlement price

$
267


$
244


$
258


$
263Backlog units


285



45



15



345Backlog

$
123,081


$
13,245


$
4,948


$
141,274Average backlog price

$
432


$
294


$
330


$
409   34




---



##### 



2005Washington Metro


NorthArea


Carolina


Georgia


TotalNew orders


598



33







631New order revenues

$
218,684


$
11,575






$
230,259Average new order price

$
366


$
351






$
365Settlements


570



33







603Settlement revenue

$
204,933


$
11,330






$
216,263Average settlement price

$
360


$
343






$
359Backlog units


438



37







475Backlog

$
190,378


$
3,443






$
193,821Average backlog price

$
435


$
93






$
408   2004Washington Metro


NorthArea


Carolina


Georgia


TotalNew orders


608











608New order revenues

$
224,292










$
224,292Average new order price

$
369










$
369Settlements


263











263Settlement revenue

$
87,008










$
87,008Average settlement price

$
331










$
331Backlog units


329











329Backlog

$
174,600










$
174,600Average backlog price

$
531










$
531   Recent
    accounting pronouncements
  Fair Value Measurements
  Accounting for Uncertainty in Income Taxes  an
    Interpretation of FASB Statement No. 109, Accounting for
    Income Taxes
  Critical
    Accounting Policies and Estimates
   35




---



##### 



Consolidation
    of Variable Interest Entities
    (FIN 46-R), FIN 46-R FIN 46-R FIN 46-R FIN 46-R,
   36




---



##### 



Revenue
    Recognition
    Impairment
    of Real Estate Held for Development and Sale
    
    significant negative industry or economic trends;
    a significant underperformance relative to historical or
    projected future operating results;
    a significant change in the manner in which an asset is used; and
    an accumulation of costs significantly in excess of the amount
    originally expected to construct an asset.  property-by-property
  Warranty
    Reserve
    Environmental
    Liability Exposure
   37




---



##### 



Results
    of Operations
  Year
    ended December 31, 2006 compared to year ended
    December 31, 2005
  Orders,
    backlog and cancellations
      move-up
  Revenues
   38




---



##### 



Other
    Revenues
    Cost of
    Sales and Cost of sales other
    Impairments
    and write-offs
   39




---



##### 



Selling,
    general and administrative expenses
        Operating
    income
    Other
    (income) expense, net
    Income
    before minority interest
   40




---



##### 



Minority
    interest
    Income
    taxes
    Year
    ended December 31, 2005 compared to year ended
    December 31, 2004
  Orders
    and Backlog
        Revenues
   41




---



##### 



Other
    Revenue
    Cost of
    sales and selling, general and administrative
    expenses.
           42




---



##### 



Operating
    income
    Other
    (income) expense, net
    Income
    before minority interest
    Minority
    interest
    Income
    taxes
    Liquidity
    and Capital Resources
     43




---



##### 



Credit
    Facilities
      10-year
         44




---



##### 



Year ending December 31,2007

$
205,9222008


16,9862009


39,9812010


2,5142011 and thereafter


30,000Total

$
295,403     Cash
    Flow
     45




---



##### 



Recent
    Acquisitions
      Subsequent
    Events
          Payments due by periodLess than





3-5


More thanTotal


1 Year


1-3 Years


Years


5 Years(In thousands)Notes payable(1)

$
295,403


$
205,922


$
59,481


$



$
30,000Operating leases

$
3,423


$
1,231


$
2,187


$
5


$
Capital leases

$
237


$
86


$
151


$



$
Total

$
299,063


$
207,239


$
61,819


$
5


$
30,000     (1)
    Notes payable includes estimated interest payments based on
    interest rates in effect at December 31, 2006.   46




---



##### 



Seasonality
    and Weather
    Inflation
    Item 7A.
    Quantitative and Qualitative Disclosures about Market
    Risk
    Item 8.
    Financial
    Statements and Supplementary Data  page F-1
  Item 9.
    Changes
    in and Disagreements with Accountants on Accounting and
    Financial Disclosure   47




---



##### 



Item 9A.
    Controls
    and Procedures  Evaluation
    of Disclosure Controls and Procedures
  Rules 13a-15(e)
  Limitations
    on the Effectiveness of Controls
      Managements
    Report on Internal Control Over Financial Reporting
        Item 9B.
    Other
    Information   PART III  Item 10.
    Directors
    and Executive Officers of the Registrant   48




---



##### 



Item 11.
    Executive
    Compensation    Item 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters    Item 13.
    Certain
    Relationships and Related Transactions    Item 14.
    Principal
    Accountant Fees and Services   PART IV  Item 15.
    Exhibit
    and Financial Statement Schedules  (a) Financial Statements
  page F-1
    (b) Exhibits
  ExhibitNumber

Exhibit3.1(2)

Amended and Restated Certificate
    of Incorporation3.2(2)

Amended and Restated Bylaws4.1(1)

Specimen Stock Certificate10.1(1)

Lease Agreement, dated as of
    January 31, 2004, with Comstock Partners, L.C.10.2(1)

Agreement of Sublease, dated as of
    October 1, 2004, with Comstock Asset Management, L.C.10.3(1)

Loan Agreement, dated
    December 17, 1997, as amended, with Bank of America, N.A.10.4(1)

Disbursement and Construction Loan
    Agreement and Disbursement and Development Loan Agreement, each
    dated October 10, 2002 and as amended, with Branch Banking
    and Trust Company of Virginia10.5(1)

Disbursement and Construction Loan
    Agreement and Acquisition, Disbursement and Development Loan
    Agreement, each dated July 25, 2003, with Branch Banking
    and Trust Company of Virginia10.6(2)

Loan Agreement, dated
    January 25, 2005, with Corus Bank, N.A.10.7(2)

Completion Guaranty, dated
    January 25, 2005 in favor of Corus Bank, N.A.10.8(2)

Carve-Out Guaranty, dated
    January 25, 2005, in favor of Corus Bank, N.A.10.9(1)

Form of Indemnification Agreement 49




---



##### 



ExhibitNumber

Exhibit10.10(1)

Form of Promissory Note to be
    issued to each of Christopher Clemente, Gregory Benson, James
    Keena and Lawrence Golub by each of Comstock Holding Company,
    Inc., Comstock Homes, Inc., Sunset Investment Corp., Inc. and
    Comstock Service Corp., Inc.10.11(1)

Form of Tax Indemnification
    Agreement to be entered into by each of Christopher Clemente,
    Gregory Benson, James Keena and Lawrence Golub with each of
    Comstock Holding Company, Inc., Comstock Homes, Inc., Sunset
    Investment Corp., Inc. and Comstock Service Corp., Inc.10.12(1)

2004 Long-Term Incentive
    Compensation Plan10.13(1)

Form of Stock Option Agreement
    under the 2004 Long-Term Incentive Compensation Plan10.14(2)

Form of Restricted Stock Grant
    Agreement under the 2004 Long-Term Incentive Compensation Plan10.15(1)

Employee Stock Purchase Plan10.16(1)

Purchase and Sale Agreement, dated
    as of April 25, 2003, as amended, with Crescent Potomac
    Yard Development, LLC10.17(2)

Purchase and Sale Agreement, dated
    as of November 9, 2004, as amended, with Fair Oaks
    Penderbrook Apartments L.L.C.10.18(2)

Real Estate Purchase Contract,
    dated as of February 4, 2005, with Westwick Apartments LLC10.19(2)

Services Agreement, dated
    March 4, 2005, with Comstock Asset Management, L.C.10.20(1)

Employment Agreement with
    Christopher Clemente10.21(1)

Employment Agreement with Gregory
    Benson10.22(1)

Employment Agreement with Bruce
    Labovitz10.23(1)

Confidentiality and
    Non-Competition Agreement with Christopher Clemente10.24(1)

Confidentiality and
    Non-Competition Agreement with Gregory Benson10.25(1)

Confidentiality and
    Non-Competition Agreement with Bruce Labovitz10.26(2)

Description of Arrangements with
    William Bensten10.27(2)

Description of Arrangements with
    David Howell10.28(1)

Trademark License Agreement10.29(2)

Purchase Agreement, dated as of
    November 12, 2004 with Comstock Asset Management, L.C.10.30(3)

Agreement of Purchase and Sale,
    dated June 23, 2005, by and between Comstock Carter Lake,
    L.C. and E.R. Carter, L.L.C.10.31(3)

Agreement of Purchase and Sale,
    dated September 28, 2005, by and between Comstock
    Bellemeade, L.C. and Bellemeade Farms Investors, LLC et. al.10.32(3)

Loan Agreement, dated
    September 28, 2005, by and between Comstock Bellemeade,
    L.C. and Bank of America, N.A.10.33(3)

Guaranty Agreement, dated
    September 28, 2005, by the Registrant in favor of Bank of
    America, N.A.10.34(4)

Life Insurance Reimbursement
    Agreement with William P. Bensten10.35(4)

Life Insurance Reimbursement
    Agreement with Bruce Labovitz10.36(4)

Description of Reimbursement and
    Indemnification Arrangement with Christopher Clemente and
    Gregory Benson10.37(3)

Agreement of Purchase and Sale,
    dated June 23, 2005, by and between Comstock Carter Lake,
    L.C. and E.R. Carter, L.L.C.10.38(5)

Stock Purchase Agreement with
    Parker-Chandler Homes, Inc. and the Selling Stockholders
    identified therein, dated as of January 19, 200610.39(5)

Loan Agreement, dated
    January 31, 2006, by and between Comstock Carter Lake, L.C.
    and Bank of America, N.A.10.40(5)

Guaranty Agreement, dated
    January 31, 2006, by the Registrant in favor of Bank of
    America, N.A. 50




---



##### 



ExhibitNumber

Exhibit10.41(6)

Form of purchase agreement, dated
    as of May 5, 2006, as amended as of May 9, 2006, by
    and between the Company and the purchasers identified therein10.42(6)

Form of warrant.10.43(7)

Note Purchase Agreement with
    Kodiak Warehouse LLC, dated as of May 4, 200610.44(7)

Junior Subordinated Indenture with
    Wells Fargo Bank, N.A., dated as of May 4, 200610.45(7)

Credit Agreement with Wachovia
    Bank, N.A., dated as of May 26, 200610.46(7)

Stock Purchase Agreement with
    Capitol Homes, Inc. and the Selling Shareholders identified
    therein, dated as of May 1, 200610.47*

Letter, dated October 18,
    2007, from Friedlander, Misler, Sloan, Kletzkin &
    Ochsman, PLLC to the Registrant and Comstock Bellemeade, L.C.10.48*

Purchase and Sale Agreement by and
    between Comstock Countryside L.C. and Merion-Loudon, LC, dated
    as of December 21, 200610.49*

Marketing and Sale Agreement by
    and between Comstock Countryside LC and Merion-Loudon, LC, dated
    as of December 21, 200610.50*

Consulting Agreement with The
    Merion Group, L.C., dated as of December 21, 200610.51*

Loan Modification Agreement, dated
    as of December 2006, by and among the Registrant, Highland
    Avenue Properties, LLC and Bank of America, N.A.10.52*

Amended and Restated Guaranty
    Agreement, dated December 2006, by the Registrant in favor of
    Bank of America, N.A.10.53*

Loan Modification Agreement, dated
    as of December 2006, by and among the Registrant, Comstock Homes
    of Atlanta, LLC, Comstock Homes of Myrtle Beach, LLC and Bank of
    America, N.A.10.54*

Amended and Restated Guaranty
    Agreement, dated December 2006, by the Registrant in favor of
    Bank of America, N.A.10.55*

First Loan Modification Agreement,
    dated as of December 2006, by and among the Registrant, Comstock
    Bellemeade, L.C., Bank of America, N.A. and Lenka E. Lundsten10.56*

Second Loan Modification
    Agreement, dated as of December 22, 2006, by and between
    the Registrant and Bank of America, N.A.14.1(2)

Code of Ethics21.1*

List of subsidiaries23.1*

Consent of PricewaterhouseCoopers
    LLP24.1*

Power of Attorney (see signature
    page to this Annual Report on
    Form 10-K.)31.1*

Certification of Chief Executive
    Officer pursuant to Section 302 of Sarbanes-Oxley Act of
    200231.2*

Certification of Chief Financial
    Officer pursuant to Section 302 of Sarbanes-Oxley Act of
    200232.1*

Certification of Chief Executive
    Officer and Chief Financial Officer pursuant to Section 906
    of Sarbanes-Oxley Act of 2002       (1)
    
    Incorporated by reference to an exhibit to the Registrants
    Registration Statement on
    Form S-1,
    as amended, initially filed with the Commission on
    August 13, 2004
    (No. 333-118193).(2)
    
    Incorporated by reference to an exhibit to the Registrants
    Annual Report on
    Form 10-K
    filed with the Commission on March 31, 2005.(3)
    
    Incorporated by reference to an exhibit to the Registrants
    Quarterly Report on
    Form 10-Q
    filed with the Commission on November 14, 2005.(4)
    
    Incorporated by reference to an exhibit to the Registrants
    Quarterly Report on
    Form 10-Q
    filed with the Commission on August 9, 2005. 51




---



##### 



(5)
    
    Incorporated by reference to an exhibit to the Registrants
    Annual Report on
    Form 10-K
    filed with the Commission on March 16, 2006.(6)
    
    Incorporated by reference to an exhibit to the Current Report on
    Form 8-K
    of the Registrant filed with the Commission on May 10, 2005.(7)
    
    Incorporated by reference to an exhibit to the Registrants
    Quarterly Report on
    Form 10-Q
    filed with the Commission on August 9, 2006. 52




---



##### 



INDEX TO
    FINANCIAL STATEMENTS  PageCOMSTOCK
    HOMEBUILDING COMPANIES, INC. AND SUBSIDIARIESReport of
    Independent Registered Public Accounting Firm


F-2Consolidated
    Balance Sheets at December 31, 2006 and 2005


F-4Consolidated
    Statements of Operations for the Years Ended December 31,
    2006, 2005 and 2004


F-5Consolidated
    Statements of Changes in Shareholders Equity for the Years
    Ended December 31, 2006, 2005 and 2004


F-6Consolidated
    Statements of Cash Flows for the Years Ended December 31,
    2006, 2005 and 2004


F-7Notes to
    Consolidated Financial Statements


F-8  F-1




---



##### 



Report of
    Independent Registered Public Accounting Firm  Report of
    Independent Registered Public Accounting Firm
      Consolidated
    financial statements
    Internal
    control over financial reporting
  Internal Control  Integrated Framework Internal Control 
    Integrated Framework
   F-2




---



##### 



F-3




---



##### 



COMSTOCK
    HOMEBUILDING COMPANIES, INC. AND SUBSIDIARIES
    CONSOLIDATED BALANCE SHEETS
    (Amounts in thousands, except per share data) December 31,


December 31,2006


2005ASSETSCash and cash equivalents

$
21,263


$
42,167Restricted cash


12,326



10,800Receivables


4,555



6,365Note receivables






1,250Due from related parties


4,053



2,899Real estate held for development
    and sale


405,144



263,802Inventory not owned 
    variable interest entities


43,234



89,890Property, plant and equipment, net


2,723



605Investment in real estate
    partnership


(171
)


(35
)Deferred income tax


10,188



2,545Other assets


14,114



11,031TOTAL ASSETS

$
517,429


$
431,319LIABILITIES AND
    SHAREHOLDERS EQUITYAccounts payable and accrued
    liabilities


55,680



59,131Due to related parties


1,140



40Obligations related to inventory
    not owned


40,950



83,015Notes payable


265,403



142,994Junior subordinated debt


30,000



Notes payable  related
    parties






663TOTAL LIABILITIES


393,173



285,843Commitments and contingencies
    (Note 15)Minority interest


371



400SHAREHOLDERS
    EQUITYClass A common stock,
    $0.01 par value, 77,266,500 shares authorized, 14,129,081
    and 11,532,442 issued and outstanding, respectively


141



115Class B common stock,
    $0.01 par value, 2,733,500 shares authorized, 2,733,500
    issued and outstanding


27



27Additional paid-in capital


147,528



126,461Treasury stock, at cost (391,400
    Class A common stock)


(2,439
)


(Accumulated deficit) retained
    earnings


(21,372
)


18,473TOTAL SHAREHOLDERS EQUITY


123,885



145,076TOTAL LIABILITIES AND
    SHAREHOLDERS EQUITY

$
517,429


$
431,319    F-4




---



##### 



COMSTOCK
    HOMEBUILDING COMPANIES, INC. AND SUBSIDIARIES
    CONSOLIDATED STATEMENTS OF OPERATIONS
    (Amounts in thousands, except per share data) Twelve Months Ended December 31,2006


2005


2004RevenuesSale of real estate 
    Homes

$
240,093


$
216,265


$
87,003Other revenue


5,788



8,040



9,042Total revenue


245,881



224,305



96,045ExpensesCost of sales of real estate


211,408



152,886



57,339Cost of sales of other


5,249



3,604



6,654Impairments and write-offs


57,426



1,216



Selling, general and administrative


37,500



24,190



11,940Operating (loss) income


(65,702
)


42,409



20,112Other (income) expense, net


(1,487
)


(1,450
)


908(Loss) income before minority
    interest and equity in (loss) earnings of real estate partnership


(64,215
)


43,859



19,204Minority interest


15



30



5,260(Loss) income before equity in
    (loss) earnings of real estate partnership


(64,230
)


43,829



13,944Equity in (loss) earnings of real
    estate partnership


(135
)


99



118Total pre tax (loss) income


(64,365
)


43,928



14,062Income taxes (benefit) provision


(24,520
)


16,366



(241
)Net (loss) income

$
(39,845
)

$
27,562


$
14,303Basic (loss) earnings per share

$
(2.63
)

$
2.14


$
1.95Basic weighted average shares
    outstanding


15,148



12,870



7,347Diluted (loss) earnings per share

$
(2.63
)

$
2.12


$
1.95Diluted weighted average shares
    outstanding


15,148



13,022



7,351    F-5




---



##### 



COMSTOCK
    HOMEBUILDING COMPANIES, INC. AND SUBSIDIARIES
    CONSOLIDATED STATEMENTS OF CHANGES IN
    SHAREHOLDERS EQUITY
    (Amounts in thousands, except per share data) Additional





RetainedThe Comstock Companies


Class A


Class B


paid-in


Treasury


earningsShares


Amount


Shares


Amount


Shares


Amount


capital


stock


(deficit)


TotalBalance at December 31,
    2003


3,558


$
3






$







$



$
1,493


$



$
5,529


$
7,025Distributions


































(5,668
)


(5,668
)Issuance of common stock in
    Homebuilding on June 7, 2004






































Recapitalization by virtue of merger


(3,558
)


(3
)


4,333



43



2,733



27



4











71Acquisition of Comstock Service on
    December 17, 2004


























4,756











4,756Issuance of common stock of
    Homebuilding on December 17, 2004 (less transaction costs)










3,960



40











56,012











56,052Issuance of common
    stock  overallotment










594



6











8,833











8,839Distribution following IPO


































(23,253
)


(23,253
)Issuance of restricted common stock










275



3











(3
)










Stock compensation and issuances


























101











101Net income


































14,303



14,303Balance at December 31,
    2004










9,162



92



2,733



27



71,196







(9,089
)


62,226Stock compensation and issuances










3



0











2,346











2,346Issuance of common stock under
    employee stock purchase plans










8



0











133











133Issuances of common stock in follow
    on offering on June 22, 2005 (less transaction costs)










2,360



23











52,786











52,809Net income


































27,562



27,562Balance at December 31,
    2005










11,533



115



2,733



27



126,461







18,473



145,076Stock compensation and issuances










457



5











2,386











2,391Issuance of common stock under
    employee stock purchase plans










18















142











142Treasury stock purchases






























(2,439
)






(2,439
)Share issuance  private
    placement of equity (less transaction costs)










2,121



21











18,539











18,560Net loss


































(39,845
)


(39,845
)Balance at December 31,
    2006





$




14,129


$
141



2,733


$
27


$
147,528


$
(2,439
)

$
(21,372
)

$
123,885    F-6




---



##### 



COMSTOCK
    HOMEBUILDING COMPANIES, INC. AND SUBSIDIARIES
    CONSOLIDATED STATEMENTS OF CASH FLOWS
    (Amounts in thousands, except per share data) Twelve Months Ended December 31,2006


2005


2004Cash flows from operating
    activities:Net (loss) income

$
(39,845
)

$
27,562


$
14,303Adjustment to reconcile net (loss)
    income to net cash (used in) provided by operating activitiesAmortization and depreciation


1,080



172



106Write-down of land, deposits and
    pre-acquisition costs


57,426







Loss on disposal of assets


24



9



1Minority interest


15



30



5,260Equity in (loss) earnings of real
    estate partnership


136



(99
)


(118
)Distributions from investment in
    real estate partnership






163



Amortization of stock compensation


2,390



2,346



101Deferred income tax


(21,816
)


(1,724
)


(531
)Changes in operating assets and
    liabilities:Restricted cash


(1,526
)


(3,300
)


(7,500
)Receivables


3,593



(7,376
)


2,107Due from related parties


(1,154
)


(1,452
)


1,693Real estate held for development
    and sale


(71,444
)


(159,476
)


(23,081
)Other assets


1,338



(11,141
)


(5,428
)Accounts payable and accrued
    liabilities


(14,247
)


23,599



24,025Income tax payable






(290
)


290Due to related parties


(2,333
)


(108
)


(82
)Net cash (used in) provided by
    operating activities


(86,363
)


(131,085
)


11,146Cash flows from investing
    activities:Purchase of property, plant and
    equipment


(2,392
)


(298
)


(372
)Distributions of capital from
    investment in real estate partnership






1,000



120Business acquisitions, net of cash
    acquired


(15,490
)






1,215Net cash (used in) provided by
    investing activities


(17,882
)


702



963Cash flows from financing
    activities:Proceeds from notes payable


216,551



212,408



81,747Proceeds from junior subordinated
    debt


30,000







Proceeds from related party notes
    payable


4,200



444



4,646Payments on notes payable


(182,199
)


(135,098
)


(78,716
)Payments on related party notes
    payable


(1,430
)


(10,725
)


(6,000
)Contribution from minority
    shareholders






87



Payment of distribution payable






(12,655
)


Distributions paid to minority
    shareholders


(44
)


(2,412
)


(14,181
)Distributions paid to shareholders










(14,168
)Proceeds from shares issued under
    employee stock purchase plan


141



133



Purchase of treasury stock


(2,438
)






Net proceeds from equity offerings


18,561



52,809



64,962Net cash provided by financing
    activities


83,342



104,991



38,290Net (decrease) increase in cash and
    cash equivalents


(20,904
)


(25,392
)


50,399Cash and cash equivalents,
    beginning of period


42,167



67,559



17,160Cash and cash equivalents, end of
    period

$
21,263


$
42,167


$
67,559Supplemental cash flow information:Interest paid (net of interest
    capitalized)

$



$



$
Income taxes paid

$
45


$
22,274



Supplemental disclosure for
    non-cash activity:Interest incurred but not paid in
    cash

$
13,689


$
8,036


$
2,760    F-7




---



##### 



COMSTOCK
    HOMEBUILDING COMPANIES, INC. AND SUBSIDIARIES
    NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
    (Amounts in thousands, except per share data) 1.
    ORGANIZATION            2.
    SUMMARY
    OF SIGNIFICANT ACCOUNTING POLICIES    Basis
    of presentation
  85-5, Issues Related to Accounting for Business
    Combinations. Business Combinations
 F-8




---



##### 



Principles
    of consolidation
  No. 46-R: Consolidation of Variable Interest Entities, an
    interpretation of ARB No. 51 (FIN 46-R).
  Reclassification
    Cash
    and cash equivalents and restricted cash
      Receivables
    Real
    estate held for development and sale
        F-9




---



##### 



property-by-property
  Capitalized
    interest and real estate taxes
      Years Ended December 31,2006


2005


2004Total interest incurred

$
27,758


$
12,272


$
4,686Beginning interest capitalized

$
11,590


$
4,524


$
1,428Plus: Interest incurred on notes
    payable and junior subordinated debt


27,718



11,752



2,847Plus: Interest incurred on related
    party notes payable


40



310



1,461Less: Interest expensed as a
    component of cost of sales


(12,094
)


(4,996
)


(1,212
)Ending interest capitalized

$
27,254


$
11,590


$
4,524   Property,
    plant and equipment
    Furniture and fixtures






7 yearsOffice equipment






5 yearsComputer equipment and capitalized
    software






3 yearsLeasehold improvements






Life of related lease     Investment
    in real estate partnerships
  FIN 46-R,
  Warranty
    reserve
   F-10




---



##### 



Years Ended December 31,2006


2005


2004Balance at beginning of period

$
1,206


$
916


$
541Additions(a)


1,524



888



823Releases
    and/or
    charges incurred


(1,061
)


(598
)


(448
)Balance at end of period

$
1,669


$
1,206


$
916     (a)
    
    As discussed in Note 4, 2006 includes additions of $360,
    assumed in connection with the acquisition of Parker Chandler
    Homes. Inc. and Capitol Homes Inc.  Revenue
    recognition
      Advertising
    costs
    Stock
    compensation
  Share-Based Payment Accounting for Stock Issued to Employees
  Income
    taxes
  Accounting for Income
    Taxes
 F-11




---



##### 



Earnings
    per share
    Year Ended December 31,Basic earnings per share

2006


2005


2004Net (loss) income

$
(39,845
)

$
27,562


$
14,303Basic weighted-average shares
    outstanding


15,148



12,870



7,347Per share amounts

$
(2.63
)

$
2.14


$
1.95Dilutive Earnings Per ShareNet (loss) income

$
(39,845
)

$
27,562


$
14,303Basic weighted-average shares
    outstanding


15,148



12,870



7,347Stock options and restricted stock
    grants






152



4Dilutive weighted-average shares
    outstanding


15,148



13,022



7,351Per share amounts

$
(2.63
)

$
2.12


$
1.95     Comprehensive
    income
    Segment
    reporting
  Disclosures about Segments of an Enterprise and Related
    Information As such,
 F-12




---



##### 



Year ended December 31,2006


2005


2004Revenues:Washington DC Metropolitan Area

$
181,058


$
212,973


$
96,045North and South Carolina(a)


32,297



11,332



Georgia(b)


32,526







Total

$
245,881


$
224,305


$
96,045Operating (loss) incomeWashington DC Metropolitan Area


(10,729
)


57,738



22,940North and South Carolina


(7,811
)


(1,022
)


Georgia


(29,121
)






Segment operating (loss) income


(47,661
)


56,716



22,940Corporate expenses unallocated


(18,041
)


(14,307
)


(2,828
)Total operating (loss) income


(65,702
)


42,409



20,112Other income (loss)


1,487



1,450



(908
)Equity in (losses) earnings of
    real estate partnership


(135
)


99



118Minority interest expense


(15
)


(30
)


(5,260
)(Loss) income before income taxes

$
(64,365
)

$
43,928


$
14,062     (a)
    
    As discussed in Note 1, the Company entered the North and
    South Carolina market on December 14, 2004 as a result of
    the merger with Comstock Service. Due to their immateriality,
    the results of the North and South Carolina region, for the
    period December 14, 2004 to December 31, 2004 have
    been included in the Washington DC Metropolitan Area. In
    May of 2006, the Company acquired Capital Homes Inc. and
    expanded its presence in the North and South Carolina region.(b)
    
    In January of 2006, the Company entered the Georgia region, by
    acquiring Parker Chandler Homes Inc.    Total Assets

2006


2005Washington DC Metropolitan Area

$
317,349


$
350,970North and South Carolina


61,617



19,930Georgia


94,133



Corporate


44,330



60,419Total Assets

$
517,429


$
431,319   Use of
    estimates
   F-13




---



##### 



Recent
    accounting pronouncements
  Fair Value Measurements
  Accounting for Uncertainty in Income Taxes  an
    Interpretation of FASB Statement No. 109, Accounting for
    Income Taxes
  3.
    CONSOLIDATION
    OF VARIABLE INTEREST ENTITIES    FIN 46-R. FIN 46-R. FIN 46-R.
   F-14




---



##### 



4.
    ACQUISITIONS        5.
    REAL
    ESTATE HELD FOR DEVELOPMENT AND SALE      Washington DC Metropolitan Area

$
19,900North and South Carolina

$
4,700Georgia

$
15,200  F-15




---



##### 



December 31,2006


2005Land and land development costs

$
232,693


$
119,530Cost of construction (including
    capitalized interest and real estate taxes)


172,451



144,272Total

$
405,144


$
263,802   6.
    PROPERTY,
    PLANT AND EQUIPMENT, NET    December 31,2006


2005Computer equipment and capitalized
    software

$
2,228


$
540Furniture and fixtures


371



296Office equipment


282



243Leasehold improvements


640



2,746



1,079Less: accumulated depreciation


(798
)


(474
)$
2,723


$
605     Position 98-1
  7.
    INVESTMENT
    IN REAL ESTATE PARTNERSHIP       F-16




---



##### 



2006


2005Investment in real estate
    partnership

$
(171
)

$
(35
)Development and construction loan
    receivable

$
3,477


$
2,835       December 31,2006


2005Real estate held for development
    and sale

$
13,081


$
11,263Other assets


22



75Total assets

$
13,103


$
11,338Mortgage notes payable

$
14,353


$
10,921Notes payable to related parties


350



1,547Other liabilities


64



143Total liabilities


14,767



12,611Partners deficit


(1,664
)


(1,273
)Total liabilities and
    partners deficit

$
13,103


$
11,338   Condensed
    Combined Statements of Operations
  Years Ended December 31,2006


2005


2004Revenues

$



$
3,920


$
22,157Operating (loss) income

$
(241
)


111



4,573Other expense


141



7



99Net (loss) income

$
(382
)

$
104


$
4,474Companys share of net (loss)
    income

$
(135
)

$
99


$
118  F-17




---



##### 



8.
    OTHER
    ASSETS    December 31,2006


2005Contract land deposits

$
2,528


$
2,825Restricted escrow deposits


2,231



1,915Prepaid income taxes(1)


4,460



4,708Miscellaneous prepaid and other


4,895



1,583$
14,114


$
11,031     (1)
    
    Prepaid income taxes includes approximately $2,705 in expected
    tax benefits as a result of a taxable loss incurred for the
    twelve months ended December 31, 2006. The company expects
    to carry back this benefit and apply it against 2005 taxable
    income.  9.
    ACCOUNTS
    PAYABLE AND ACCRUED LIABILITIES    December 31,2006


2005Trade payables

$
32,990


$
35,163Warranty


1,672



1,206Customer deposits


14,932



17,817Other


6,086



4,945$
55,680


$
59,131   10.  NOTES PAYABLE,
    JUNIOR SUBORDINATED DEBT AND COVENANTS
    December 31,Debt

Due

2006


2005Secured acquisition, development
    and construction notes(a)

Various

$
218,461


$
138,097Secured revolving credit line(b)

May 2009


39,981



2,046Junior subordinated note(c)

June 2036


30,000



Unsecured term loans(d)

Various


6,764



Subordinate secured notes(e)

Various


197



2,851Sub-total




295,403



142,994Other notes payable 
    related party








663Total



$
295,403


$
143,657   (a)  Secured
    acquisition, development and construction notes
   F-18




---



##### 



(b)  Secured
    revolving credit lines
    (c)  Junior
    subordinated note
    (d)  Unsecured
    term loans
    (e)  Subordinated
    secured notes
   F-19




---



##### 



Year ending December 31,2007

$
205,9222008


16,9862009


39,9812010


2,5142011 and thereafter


30,000Total

$
295,403     11.  COMMON
    STOCK
          00-19
   F-20




---



##### 



12.  RELATED
    PARTY TRANSACTIONS
      father-in-law,
    mother-in-law
         F-21




---



##### 



not-for-profit
    13.  EMPLOYEE
    BENEFIT PLANS
   F-22




---



##### 



14.  RESTRICTED
    STOCK, STOCK OPTIONS AND OTHER STOCK PLANS
          2006


2005Stock options


207,144



213,993Restricted stock grants


617,827



273,891Total outstanding equity awards


824,971



487,884     Shares available for issuance
    at December 31, 2005


1,050Additions to plan


338Restricted stock
    grants  Issued


(819
)Shares issued under employee stock
    purchase plan


(18
)Restricted stock grants and
    options  Forfeited


376Shares available for issuance
    at December 31, 2006


927     2006


2005Weighted average fair value of
    options granted


N/A


$
7.61Dividend yields


N/A



N/AExpected volatility


N/A



41-48
%Weighted average expected
    volatility


N/A



45
%Risk free interest rates


N/A



3.56- 3.63
%Weighted average expected lives
    (in years)


N/A



2.5  F-23




---



##### 



Weighted


WeightedAverage


AverageShares


Exercise Price


Intrinsic ValueOutstanding at December 31,
    2004


107,144


$
16.00Granted


106,849



23.90Exercised






Forfeited or expired






Outstanding at December 31,
    2005


213,993



19.94Granted






Exercised






Forfeited or expired


(6,849
)


23.00Outstanding at December 31,
    2006


207,144


$
19.81Exercisable at December 31,
    2006


25,000


$
23.00


$
     Weighted Average FairShares


Value at Date of GrantRestricted shares outstanding at
    December 14, 2004






Granted


275,317


$
16.00Restricted shares outstanding at
    December 31, 2005


275,317



16.00Granted


16,188



24.55Vested


(4,068
)


18.12Forfeited


(13,545
)


16.28Restricted shares outstanding at
    December 31, 2005


273,892



16.46Granted


597,940



9.71Vested


(129,800
)


(15.05
)Forfeited


(155,347
)


15.62Restricted shares outstanding at
    December 31, 2006


586,685


$
9.83         15.  COMMITMENTS
    AND CONTINGENCIES
  Litigation
   F-24




---



##### 



Letters
    of credit and performance bonds
    Operating
    leases
    Year Ended:

Amount2007

$
1,2312008


1,1202009


9032010


1642011


5Thereafter


Total

$
3,423    F-25




---



##### 



16.  FAIR
    VALUE OF FINANCIAL INSTRUMENTS
    December 31,2006


2005Carrying amount

$
60,097


$
31,609Fair value

$
61,924


$
36,233     17.  INCOME
    TAXES
        2006


2005Current:Federal

$
(2,281
)

$
15,160State


(424
)


2,885(2,705
)


18,045Deferred:Federal


(18,833
)


(1,417
)State


(3,552
)


(262
)(22,385
)


(1,679
)OtherTax shortfall related to the
    vesting of equity awards


570



Total income tax (benefit) expense

$
(24,520
)

$
16,366  F-26




---



##### 



2006


2005Deferred tax assets:Inventory

$
9,642


$
2,246Warranty


612



417Investment in affiliates


25



27Accrued expenses


1,213



64Stock based compensation


762



79012,254



3,544Less  valuation
    allowance


(470
)


(840
)Net deferred tax assets


11,784



2,704Deferred tax liabilities:Depreciation and amortization


(1,596
)


(159
)Net deferred tax liabilities


(1,596
)


(159
)Net deferred tax assets

$
10,188


$
2,545       2006


2005Statutory Rate


35.00
%


35.00
%State income taxes  net
    of federal benefit


4.03
%


3.95
%Permanent differences


0.02
%


(1.75
)%Change in effective tax rate


(0.04
)%


(0.03
)%Tax reserve


(0.61
)%


1.67
%Tax shortfall related to the
    vesting of certain equity awards


(0.88
)%


0.00
%Change in valuation allowance


0.58
%


(1.58
)%38.10
%


37.26
%  F-27




---



##### 



18.  QUARTERLY
    RESULTS (unaudited)
    Three months endedMarch 31,


June 30,


September 30,


December 31,2006


2006


2006


2006Revenues

$
36,595


$
50,697


$
35,280


$
123,309Operating income (loss)


1,778



(11,962
)


(9,709
)


(45,808
)Pretax income


1,991



(11,645
)


(9,404
)


(45,306
)Net income (loss)


1,240



(7,123
)


(5,754
)


(28,207
)Basic earnings per share


0.09



(0.47
)


(0.36
)


(1.79
)Diluted earnings per share


0.09



(0.47
)


(0.36
)


(1.79
)   Three months endedMarch 31,


June 30,


September 30,


December 31,2005


2005


2005


2005Revenues

$
28,729


$
39,911


$
78,437


$
77,228Operating income (loss)


6,075



4,636



17,919



13,779Pretax income


6,140



4,787



18,424



14,578Net income (loss)


3,809



3,066



11,483



9,204Basic earnings per share


0.33



0.26



0.82



0.66Diluted earnings per share


0.32



0.26



0.81



0.65   year-to-date
      19.  SUBSEQUENT
    EVENTS
         F-28




---



##### 



SIGNATURES    COMSTOCK HOMEBUILDING COMPANIES, INC.
    By:
    /s/  Christopher
    Clemente       Form 10-K
  Signature

Capacity

Date/s/  Christopher
    ClementeChristopher
    Clemente

Chairman of the Board of
    Directors
    and Chief Executive Officer (Principal
    Executive Officer)

March 16, 2007/s/  Gregory
    V. BensonGregory
    V. Benson

Regional President, Southeast

March 16, 2007/s/  Bruce
    J. LabovitzBruce
    J. Labovitz

Chief Financial Officer
    (Principal Financial Officer)

March 16, 2007/s/  Jason
    ParikhJason
    Parikh

Chief Accounting Officer
    (Principal Accounting Officer)

March 16, 2007/s/  A.
    Clayton
    PerfalA.
    Clayton Perfal

Director

March 16, 2007/s/  David
    M. GuernseyDavid
    M. Guernsey

Director

March 16, 2007/s/  James
    A.
    MacCutcheonJames
    A. MacCutcheon

Director

March 16, 2007/s/  Norman
    D. ChiriteNorman
    D. Chirite

Director

March 16, 2007/s/  Robert
    P. PincusRobert
    P. Pincus

Director

March 16, 2007/s/  Socrates
    VersesSocrates
    Verses

Director

March 16, 2007




---



##### 



ExhibitNumber

Exhibit3.1(2)

Amended and Restated Certificate
    of Incorporation3.2(2)

Amended and Restated Bylaws4.1(1)

Specimen Stock Certificate10.1(1)

Lease Agreement, dated as of
    January 31, 2004, with Comstock Partners, L.C.10.2(1)

Agreement of Sublease, dated as of
    October 1, 2004, with Comstock Asset Management, L.C.10.3(1)

Loan Agreement, dated
    December 17, 1997, as amended, with Bank of America, N.A.10.4(1)

Disbursement and Construction Loan
    Agreement and Disbursement and Development Loan Agreement, each
    dated October 10, 2002 and as amended, with Branch Banking
    and Trust Company of Virginia10.5(1)

Disbursement and Construction Loan
    Agreement and Acquisition, Disbursement and Development Loan
    Agreement, each dated July 25, 2003, with Branch Banking
    and Trust Company of Virginia10.6(2)

Loan Agreement, dated
    January 25, 2005, with Corus Bank, N.A.10.7(2)

Completion Guaranty, dated
    January 25, 2005 in favor of Corus Bank, N.A.10.8(2)

Carve-Out Guaranty, dated
    January 25, 2005, in favor of Corus Bank, N.A.10.9(1)

Form of Indemnification Agreement10.10(1)

Form of Promissory Note to be
    issued to each of Christopher Clemente, Gregory Benson, James
    Keena and Lawrence Golub by each of Comstock Holding Company,
    Inc., Comstock Homes, Inc., Sunset Investment Corp., Inc. and
    Comstock Service Corp., Inc.10.11(1)

Form of Tax Indemnification
    Agreement to be entered into by each of Christopher Clemente,
    Gregory Benson, James Keena and Lawrence Golub with each of
    Comstock Holding Company, Inc., Comstock Homes, Inc., Sunset
    Investment Corp., Inc. and Comstock Service Corp., Inc.10.12(1)

2004 Long-Term Incentive
    Compensation Plan10.13(1)

Form of Stock Option Agreement
    under the 2004 Long-Term Incentive Compensation Plan10.14(2)

Form of Restricted Stock Grant
    Agreement under the 2004 Long-Term Incentive Compensation Plan10.15(1)

Employee Stock Purchase Plan10.16(1)

Purchase and Sale Agreement, dated
    as of April 25, 2003, as amended, with Crescent Potomac
    Yard Development, LLC10.17(2)

Purchase and Sale Agreement, dated
    as of November 9, 2004, as amended, with Fair Oaks
    Penderbrook Apartments L.L.C.10.18(2)

Real Estate Purchase Contract,
    dated as of February 4, 2005, with Westwick Apartments LLC10.19(2)

Services Agreement, dated
    March 4, 2005, with Comstock Asset Management, L.C.10.20(1)

Employment Agreement with
    Christopher Clemente10.21(1)

Employment Agreement with Gregory
    Benson10.22(1)

Employment Agreement with Bruce
    Labovitz10.23(1)

Confidentiality and
    Non-Competition Agreement with Christopher Clemente10.24(1)

Confidentiality and
    Non-Competition Agreement with Gregory Benson10.25(1)

Confidentiality and
    Non-Competition Agreement with Bruce Labovitz10.26(2)

Description of Arrangements with
    William Bensten10.27(2)

Description of Arrangements with
    David Howell10.28(1)

Trademark License Agreement10.29(2)

Purchase Agreement, dated as of
    November 12, 2004 with Comstock Asset Management, L.C.10.30(3)

Agreement of Purchase and Sale,
    dated June 23, 2005, by and between Comstock Carter Lake,
    L.C. and E.R. Carter, L.L.C.10.31(3)

Agreement of Purchase and Sale,
    dated September 28, 2005, by and between Comstock
    Bellemeade, L.C. and Bellemeade Farms Investors, LLC et. al.10.32(3)

Loan Agreement, dated
    September 28, 2005, by and between Comstock Bellemeade,
    L.C. and Bank of America, N.A.




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##### 



ExhibitNumber

Exhibit10.33(3)

Guaranty Agreement, dated
    September 28, 2005, by the Registrant in favor of Bank of
    America, N.A.10.34(4)

Life Insurance Reimbursement
    Agreement with William P. Bensten10.35(4)

Life Insurance Reimbursement
    Agreement with Bruce Labovitz10.36(4)

Description of Reimbursement and
    Indemnification Arrangement with Christopher Clemente and
    Gregory Benson10.37(3)

Agreement of Purchase and Sale,
    dated June 23, 2005, by and between Comstock Carter Lake,
    L.C. and E.R. Carter, L.L.C.10.38(5)

Stock Purchase Agreement with
    Parker-Chandler Homes, Inc. and the Selling Stockholders
    identified therein, dated as of January 19, 200610.39(5)

Loan Agreement, dated
    January 31, 2006, by and between Comstock Carter Lake, L.C.
    and Bank of America, N.A.10.40(5)

Guaranty Agreement, dated
    January 31, 2006, by the Registrant in favor of Bank of
    America, N.A.10.41(6)

Form of purchase agreement, dated
    as of May 5, 2006, as amended as of May 9, 2006, by
    and between the Company and the purchasers identified therein10.42(6)

Form of warrant.10.43(7)

Note Purchase Agreement with
    Kodiak Warehouse LLC, dated as of May 4, 200610.44(7)

Junior Subordinated Indenture with
    Wells Fargo Bank, N.A., dated as of May 4, 200610.45(7)

Credit Agreement with Wachovia
    Bank, N.A., dated as of May 26, 200610.46(7)

Stock Purchase Agreement with
    Capitol Homes, Inc. and the Selling Shareholders identified
    therein, dated as of May 1, 200610.47*

Letter, dated October 18,
    2007, from Friedlander, Misler, Sloan, Kletzkin &
    Ochsman, PLLC to the Registrant and Comstock Bellemeade, L.C.10.48*

Purchase and Sale Agreement by and
    between Comstock Countryside L.C. and Merion-Loudon, LC, dated
    as of December 21, 200610.49*

Marketing and Sale Agreement by
    and between Comstock Countryside LC and Merion-Loudon, L.C.,
    dated as of December 21, 200610.50*

Consulting Agreement with The
    Merion Group, LC, dated as of December 21, 200610.51*

Loan Modification Agreement, dated
    as of December 2006, by and among the Registrant, Highland
    Avenue Properties, LLC and Bank of America, N.A.10.52*

Amended and Restated Guaranty
    Agreement, dated December 2006, by the Registrant in favor of
    Bank of America, N.A.10.53*

Loan Modification Agreement, dated
    as of December 2006, by and among the Registrant, Comstock Homes
    of Atlanta, LLC, Comstock Homes of Myrtle Beach, LLC and Bank of
    America, N.A.10.54*

Amended and Restated Guaranty
    Agreement, dated December 2006, by the Registrant in favor of
    Bank of America, N.A.10.55*

First Loan Modification Agreement,
    dated as of December 2006, by and among the Registrant, Comstock
    Bellemeade, L.C., Bank of America, N.A. and Lenka E. Lundsten10.56*

Second Loan Modification
    Agreement, dated as of December 22, 2006, by and between the
    Registrant and Bank of America, N.A.14.1(2)

Code of Ethics21.1*

List of subsidiaries23.1*

Consent of PricewaterhouseCoopers
    LLP24.1*

Power of Attorney (see signature
    page to this Annual Report on
    Form 10-K.)31.1*

Certification of Chief Executive
    Officer pursuant to Section 302 of Sarbanes-Oxley Act of
    200231.2*

Certification of Chief Financial
    Officer pursuant to Section 302 of Sarbanes-Oxley Act of
    200232.1*

Certification of Chief Executive
    Officer and Chief Financial Officer pursuant to Section 906
    of Sarbanes-Oxley Act of 2002




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##### 



(1)
    
    Incorporated by reference to an exhibit to the Registrants
    Registration Statement on
    Form S-1,
    as amended, initially filed with the Commission on
    August 13, 2004
    (No. 333-118193).(2)
    
    Incorporated by reference to an exhibit to the Registrants
    Annual Report on
    Form 10-K
    filed with the Commission on March 31, 2005.(3)
    
    Incorporated by reference to an exhibit to the Registrants
    Quarterly Report on
    Form 10-Q
    filed with the Commission on November 14, 2005.(4)
    
    Incorporated by reference to an exhibit to the Registrants
    Quarterly Report on
    Form 10-Q
    filed with the Commission on August 9, 2005.(5)
    
    Incorporated by reference to an exhibit to the Registrants
    Annual Report on
    Form 10-K
    filed with the Commission on March 16, 2006.(6)
    
    Incorporated by reference to an exhibit to the Current Report on
    Form 8-K
    of the Registrant filed with the Commission on May 10, 2005.(7)
    
    Incorporated by reference to an exhibit to the Registrants
    Quarterly Report on
    Form 10-Q
    filed with the Commission on August 9, 2006.