Robert T. O Shaughnessy
Executive Vice President and Chief Financial Officer at PulteGroup
Thanks, Ryan, and good morning. Our teams have done an outstanding job navigating through the challenging production environment, which can be seen in the exceptional operating and financial results we delivered in the quarter.
Starting with our income statement. Our home sale revenues for the third quarter increased 18% over last year to $3.3 billion. The increase in revenues was driven by a 9% increase in closings to 7,007 homes in combination with an 8% or $37,000 increase in average sales price to $474,000. The higher average sales price realized in the third quarter reflects meaningful price increases we've realized across all buyer groups, with first-time up 8%, move-up up 10% and active adult up 8%. The mix of homes we delivered in the third quarter included 32% from first-time buyers, 44% from move-up buyers and 24% from active adult buyers. In last year's third quarter, 30% of homes delivered were first-time, 45% were move-up and 25% were active adult.
Our net new orders for the third quarter were 6,796 homes, which represents a 17% decrease from last year that was driven primarily by a 14% decline in year-over-year community count. In addition to fewer open communities, orders for the period were impacted by ongoing actions to manage sales paces to better align with current production volumes. The actions to manage sales pace and outright restrict sales were more frequently targeted toward our first-time buyer communities as we strategically work to build up spec inventory within our Centex branded communities.
Looking at our third quarter orders in a little more detail. Our orders from first-time buyers decreased 20% compared with last year. This decrease was driven primarily by our actions to restrict sales as our first-time community count was only down 6% compared with last year. In contrast, our orders from move-up and active adult buyers decreased 22% and 4%, respectively, which was driven by comparable 22% and 5% decreases in community count, respectively.
In the third quarter, we operated from an average of 768 communities. Consistent with the guide in our recent market update, this is down 14% from last year's average of 892 communities. Our Q3 community count should be the low watermark for the year as we expect our fourth quarter community count to increase to approximately 775 active communities.
Further, our existing land pipeline should allow us to realize a meaningful ramp-up in community count as we move through 2022. As is our practice, we will provide more specifics on 2022 community count as part of our fourth quarter earnings call.
Our unit backlog at the end of the third quarter was up 33% over last year to 19,845 homes. The dollar value of our backlog increased an even greater 56% to $10.3 billion as we benefited from robust price increases realized over the course of this year. At the end of the third quarter, we had 18,802 homes under construction, of which 83% were sold and 17% re-spec. We have almost 900 more spec homes in production than we did in the second quarter as we have been working to increase spec availability, particularly in our Centex communities. In many instances, this has meant tightly controlling current period order rates, but we feel this is the appropriate action as we seek to better align our sales with the current pace of production.
Given that 90% of our specs are early in the construction cycle and we have only 109 finished specs, these units are about helping to position the company for 2022, rather than providing closings in 2021. We faced similar dynamics within our production of sold units as 2/3 of these homes are in the earlier stages of construction, and we can see gaps in the supply of key building products needed to complete these homes. Given these conditions, we believe it appropriate to update our fourth quarter guide for expected fourth quarter deliveries and currently expect to deliver approximately 8,500 homes in the fourth quarter, which would represent an increase of 24% over the fourth quarter of last year.
It's difficult to say there are positives to be gleaned from the challenging production environment, but one of the outcomes is that the limited supply of homes, coupled with ongoing strong demand, has supported higher prices across the market. Reflective of these conditions, our average price in backlog increased 18% or $78,000 over last year to $519,000. Although more than half of our quarter end backlog is expected to deliver in 2022, we will continue to see the benefit of rising prices in our fourth quarter as our average closing price is expected to be $485,000 to $490,000. At the midpoint, this would represent an increase of approximately 10% over last year.
Our reported homebuilding gross margin in the third quarter increased 200 basis points over last year to 26.5%. Given that our third quarter closings absorbed the elevated lumber prices from earlier this year, expanding our gross margin by 200 basis points attest to the strong pricing environment the industry experienced over the past year. It's worth noting that the strong market conditions also contributed to another step down in incentives in the period as discounts fell to 1.3%. This is down from 3% last year and down 60 basis points from the second quarter of this year.
As our margin increase demonstrates, strong buyer demand has allowed the company to pass through the higher labor and material costs we've experienced. That said and as Ryan discussed, we are knowingly incurring additional expenses to get houses built within today's challenged operating environment. In addition to the incremental build costs we are absorbing over the short term to get homes completed, our reported gross margins are being influenced by the mix of homes closed. As we also highlighted in our recent market update, certain of the homes that we expected to close in Q3 slipped into Q4 and others have been pushed out of the fourth quarter into 2022. These conditions are impacting our reported gross margins in the third and fourth quarters of 2021 but set us up to realize gross margin expansion as we head into 2022.
That said, with the changing mix of homes we currently expect to close in the fourth quarter, coupled with the added material, labor and logistics costs we're paying to get homes closed, we currently expect our fourth quarter gross margin to be 26.6% or 26.7%. This would represent an increase of 160 to 170 basis points over last year's fourth quarter and an increase of 10 to 20 basis points over the third quarter of this year. We see the opportunity to build on this momentum as the strong pricing conditions we've experienced, coupled with the lower lumber costs we expect in next year's closings, should result in further gross margin expansion in 2022.
Our SG&A expense for the third quarter was $321 million or 9.6% of home sale revenues. Prior year SG&A expense for the period was $271 million for a comparable 9.6% home sale revenues. Given there's still increase in closings, we expect [Technical Issues] in the upcoming quarter expected to fall to a range of 8.9% to 9.2% of home sale revenues.
Looking at our financial services operations. Our third quarter pretax income was $49 million versus $64 million last year. As has been the case for much of this year, higher origination volumes have been offset by lower profitability per loan given more competitive market conditions. The company's reported tax expense in the third quarter was $145 million, for an effective tax rate of 23.3%. In the comparable prior year period, our effective rate was 14% as we realized a tax benefit of $53 million associated with energy tax credits recognized in the period. For the third quarter, our reported net income was $476 million or $1.82 per share. This compares with prior year adjusted net income, excluding the impact of the energy tax credits, of $363 million or $1.34 per share.
Moving over to the balance sheet. Our business continues to generate strong cash flow, which allowed us to end the quarter with $1.6 billion of cash after significant investment in the business and continued shareholder distributions in the quarter. In the quarter, we repurchased 5.1 million shares or about 2% of our outstanding common shares for $261 million at an average price of $51.07 per share. The $261 million in stock repurchase is a sequential increase of $61 million from the second quarter of this year. As stated previously, we are fully prepared to allocate more capital to shareholders as conditions warrant.
We also invested $1.1 billion in land acquisition and development in the third quarter. This brings our total land-related spend in 2021 to $2.9 billion and keeps us on track to invest approximately $4 billion of land acquisition and development for the year, which would be an increase of almost 40% over last year. We ended the third quarter with a debt-to-capital ratio of 22.4%, which is down from 29.5% at the end of last year. Adjusting for our cash position, our net debt-to-capital ratio at the end of the quarter was 5.7%. We ended the third quarter with approximately 223,000 lots under control, of which 54% were controlled through options. Our divisions and particularly our land teams have done an outstanding job building a more efficient land bank while helping to reduce market risk. We're extremely proud of their efforts and the success that they've realized.
Now let me turn the call back to Ryan.