Stuart Miller
Executive Chairman at Lennar
Thank you, and good morning everyone. This morning I'm here in Miami, and I'm joined by our Co-President and CEO, Jon Jaffe, and it happens to be his birthday today as well as, happy birthday Jon. And besides here are, our Chief Financial Officer, David Collins, our Controller; Bruce Gross, CEO of Lennar Financial Services; and of course, Alexa who you have just heard from. And we have joining us also Rick Beckwitt who's on the road, I believe in Dallas today and Rick will be joining and contributing as well.
So listen, today's call is pretty straightforward. So we're going to try to keep our remarks relatively brief. So we have plenty of time for your questions. As usual, I'll give a macro and strategic Lennar overview, Rick is going to talk about market strength and land and community count, Jon will update on the popular supply chain, production, construction costs, and as usual, Diane will give a detailed financial highlight, additional guidance and then we'll answer as many questions as we can. And as usual, please limit to one question and one follow-up.
So let me begin and start on our singular loan note. As you saw in our press release, we missed the low end of our third quarter delivery guidance by 600 homes, delivering 15,199 homes. And while at Lennar, we are certainly not immune to supply chain disruption, we are simply not used to missing either. While our entire team feels the pain of this miss, it is not for lack of effort or focus that we miss, but instead it's a reflection of the current market conditions. The supply chain for both land and construction is significantly stressed and that will continue into the fourth quarter and beyond. Accordingly, we expect our community count at the end of the year will be up only approximately 7% versus the 10% we previously guided and our deliveries will be approximately 18,000 versus the 19,000 to 21,000 we previously guided. And while we're not giving specific guidance for 2022, we fully expect double-digit growth in sales, starts, closings, and community count next year.
After my introductory remarks, Rick will further address the land and supply chain and our performance and expectations and Jon will give color on labor and materials and the effects on production.
So except for the miss on deliveries, our third quarter results were very strong and quite extraordinary, even with the supply chain constraint we still grew our deliveries 10% year-over-year, while our revenues from home sales grew 19% to over $6.5 billion. And by remaining focused on orderly targeted growth with our sales pace tightly matched with our pace of production, we drove 420 basis point gross margin improvement from 23.1% last year to 27.3% this year. Alongside gross margin, we recorded a significant improvement in operating efficiency as our SG&A decreased 100 basis points to 7% this year versus 8% last year, and that's without the embedded leverage of the mist closings.
Accordingly, our net margin increased 520 basis points year-over-year from 15.1% last year to accompany all-time high 20.3% in our third quarter. This drove a 54% after tax and before extraordinary items bottom line improvement in net earnings from approximately $667 million last year to over $1 billion this year. So with our focus on bottom line over top line improvement, 19% revenue growth drove 54% bottom line growth.
Our net new orders grew 5% year-over-year, even as we have -- even as we have matched our sales pace with production pace in this constrained environment and in spite of the difficult comparison to last year's strong recovery of fourth quarter numbers. Additionally, our Financial Services group continued to perform exceptionally adding $112 million of earnings, while supporting the orderly closings of our homes and making the closing process as Joyful as possible in the current environment.
With the strong performance of our core operating divisions, our balance sheet and returns continue to improve as well even after the purchase of 2.5 million shares of stock and the reduction of $350 million of debt in the quarter, we reported a cash balance of over $2.6 billion and a 21.2% debt-to-total capital ratio, while our return on equity grew 800 basis points to 21.9%. All in all our core operating numbers are very strong and we expect this strength to continue into the fourth quarter and beyond. Of course, in addition to our core, we have generated additional upside this quarter by some of our LENx investments, which entered the public markets.
While market conditions resulted in lower valuations for these companies by our quarter end and those include Doma, Title, Hippo home insurance, Blend mortgage processing, and smart rent automated entry systems. We still recorded just under $500 million of profit from those investments. So even though we are guiding down our deliveries for the next quarter. We are decidedly guiding the prospects for Lennar's continued success up as we continue to build on the core strategies that define our business. And Diane, will give more detailed guidance for the fourth quarter, but our expectations reflect overall strength in the market and optimism -- optimism for our future.
From a macro perspective, the housing market remain strong and these continued to be the best of times. Demand has been consistently strong while the supply of new and existing homes remains limited. Since new home construction cannot ramp quickly enough to fill the void of the production deficit that persisted over the last decade short supply is likely to remain for some time to come. Even though home prices have moved much higher -- have moved much higher, the overall affordability remains strong. Interest rates are still lower than they were a year ago and personal savings for deposits are strong. Wages for the average family seem to be rising faster than monthly payments and while inflation numbers might seem to tell a different story, this is the story that we're hearing from our customers as they come to visit our field offices.
The primary driver of demand continues to be an upward spiral of housing consumer needs. Millennials are forming families, apartment dwellers are purchasing first time homes. Yesterday's first time homes are selling at higher prices and anticipated and appreciated equity is enabling first time move ups. Yesterday's move-up home is selling at strong pricing, with increased equity enabling customers to consider -- consider and purchase an even larger home. All of this while supply is limited for everyone. Additionally, the iBuyer and single-family for rent participants are providing additional liquidity to the marketplace. The iBuyers are providing liquidity while becoming an essential convenience provider as the coordination of the closing of a new home is being complicated by supply chain disruptions. The convenience factor is becoming a real value proposition in and of itself.
The single-family for rent participants are also providing more liquidity while making a single-family home lifestyle accessible to more families. Although higher home prices have exacerbated the well-documented affordability crisis across the country, the solution is building more housing and making a growing portion of that housing stock available to more families to rent, if they can't yet meet the requirements for homeownership. Professional ownership of homes enables renters to access a single-family lifestyle while they build the credentials to own. Better housing for families produces better outcomes for families and the industry is rewiring to provide those solutions. I've noted before changes will also act as circuit breakers for the cyclicality of the housing market in the future, but for now the housing market is very strong and we the builders just have to get the homes built.
Before I conclude, let me briefly talk about our spin company that I have too briefly described in the past. As you can see from our balance sheet and cash flow, the case for SpinCo is becoming more and more compelling. We have adequate and even excess capacity to spin our well-established ancillary businesses. And those businesses and business lines do not meaningfully contribute to our core earnings in their current ownership configuration right now. In effect, these assets as currently positioned are actually dilutive to our growing returns on equity and returns on capital. With an effective spin the remaining Lennar Corporation can drive higher returns on our assets and equity base and we are pushing to make that happen. But as you would expect, we are determined to get it right and construct SpinCo as a standalone company that is investable, that is accountable, scalable, and successful in its own right. The already successful business of SpinCo can and will be structured for success and accountability and form the beginning of a growth story that matches the success of Lennar.
Accordingly, we have continued to work on the structure, components, and organization of the new company. Time has continued to be our friend and that will Lennar core business, the Lennar cash flow and balance sheet, have continued to improve and provide even greater opportunity and flexibility. Accordingly I am once again to your disappointment, I'm sure, going to kick the can on delivering more detail on SpinCo. While nothing has changed in our expected to execution and scope, the detail of standing up a new public company is time consuming and complex and we do not want to detail an incomplete picture or miss an opportunity to just get it right. To that end, this quarter we engaged a new participant Matt Zames, as a Senior Advisor to the company, focusing on the configuration and execution of our SpinCo strategy. Matt is a seasoned veteran in the financial services world, as the past President of Cerberus Capital and as the past Chief Operating Officer of JPMorgan Chase. Matt's expertise in operations, execution and detailed financial modeling will help quickly advance the timeline for SpinCo and help bring it to market. Matt is not a new comer to Lennar as we have worked with him through our very successful various advisory engagements with Cerberus. And I personally serve with and former on the Board of Doma were Matt serves as an extraordinary Chair of the Board.
In addition to and supporting Matt, we have sequestered a team of senior internal leaders under the focused leadership of Jeff McCall to work with Matt on the substance and structure of the new company. This team meets regularly to map the structure, model expected growth and review progress. We are standing up a new company backbone and the team includes all the leaders from the projected SpinCo verticals.
As noted last quarter, our SpinCo will be configured as an independent and active asset management business that raises third-party capital to support our ongoing business verticals. As noted, two of these verticals already have raised third-party capital and they are active asset managers. LMC, our multifamily platform, has approximately $9 billion of gross capital under management and is raising its third fund right now. LSFR, our growing single-family for rent platform, currently manages approximately $1.25 billion of equity already raised. Both of these programs are neatly configured as independent self-sustaining operation. Additionally, we have a dynamic and growing independent land and land management business that has been refining -- that has been refined and we have a growing technology investment business that as you can see from our numbers is performing exceptionally well under the name, LENx. As I noted last quarter, this separation from the homebuilder will enable these blue chip businesses to thrive and excel independently.
So let me wrap up and conclude by saying that in spite of the miss of deliveries and the supply chain disruption that is affecting us and the industry, we have simply never been better positioned financially, organizationally, and technologically to thrive and grow in this evolving housing market. Demand and the market in general remains very strong, even as we return to traditional seasonality and the over -- in our overall annual sales pace. While difficulties in the supply chain present challenges for Lennar and the industry, the housing market remains strong and supply of new and existing homes is very limited. And of course given the supply chain challenges, the industry will not be able to quickly remedy the supply shortage with increased production. Accordingly, we expect the market to remain in its current balance, or should I say imbalance for an extended period of time.
We remain focused on orderly targeted growth with our sales pace -- sales pace tightly matched with our pace of production. We focus on gross margin by selling and step with production while controlling costs and reducing our SG&A therefore driving our net margin. We have built a just-in-time delivery system for land at the front end and we have built just-in-time delivery system for our finished homes at the back-end with our SFR single family for rent program. We are focused on cash flow, on debt reduction, and stock buyback, land owned versus controlled, return on capital, and return on equity, and of course driving incremental upside from investments and upside on our innovative technologies.
We have an amazing group of talented associates driving our business forward and caring about the world around them at the same time. We are performing excellently on all metrics, driven by strategies that have worked to our benefit and the market condition remains extremely strong for the foreseeable future. As we begin to look to 2022, we see continued strength in the market and double-digit growth for Lennar. The story remains that supply is short and demand is strong. Some are concerned that demand is slowing as prices move higher and interest rates move. It feels to us that sales are slowing because many sales were made early and the industry is building through those sales slower than expected. We believe that home production has been constrained for a decade, and we are making up the deficit now, which should keep the housing market thriving for some time to come.
With that let me turn over to Rick.