Robert T. O'Shaughnessy
Executive Vice President and Chief Financial Officer at PulteGroup
Thanks, Ryan, and good morning. As part of my review of our fourth quarter performance, I'll discuss our reported results and where appropriate, review our results adjusted for specific items in the current or prior year quarter. Along with reviewing the Company's fourth quarter results, I will also be providing guidance on key performance metrics for both the first quarter and full year 2022.
Looking at the income statement. Wholesale revenues in the fourth quarter increased 38% over last year to $4.2 billion. Higher revenues for the period were driven by a 26% increase in closings to 8,611 homes, along with a 10% increase in average sales price to $490,000. The higher ASP in the quarter -- double-digit pricing gains from all buyer groups, while closings came in slightly above guidance, thanks to a tremendous effort on the part of our homebuilding and financial services teams. Consistent with comments made throughout 2021, favorable supply and demand dynamics for housing supported the strong price appreciation we experienced across all markets and from all buyer groups.
The mix of closings in the quarter were a direct alignment with our long-term goals and included 34% from first-time buyers, 42% for move-up buyers and 24% from active adult buyers. Closings in the fourth quarter last year included 31% first time, 46% move up and 23% active adult. Net new orders in the quarter totaled 6,769 homes, which is a decrease of 4% from last year. The decrease in orders reflects a decrease in community count as well as the ongoing actions to manage sales to better align the pace of our sales and production that Ryan mentioned. Our average community count in the quarter was 785, which is down 7% from the prior year. Buyer demand was strong and order volumes were fairly consistent across all three months of the quarter as we didn't experience the typical seasonal drop-off in order volumes as we moved through the quarter.
I would note that we continue to experience this strength in demand through January. By buyer group, orders by first-time buyers increased 12% to 2,207 homes, while orders by move-up and active adult buyers both declined 10% to 2,812 homes and 1,750 homes, respectively. The primary drivers of the lower order rates among the move up and active adult buyers was having fewer communities and our decision to restrict sales.
We ended the fourth quarter with a large backlog of sold homes, which provides a strong base of production heading into the New Year. On a unit basis, our backlog at year end was 18,003 homes, which is an increase of 19% over last year. Backlog value at year end was $9.9 billion, which is an increase of 45% over 2020.
Even with the well-documented challenges within the supply chain, I can say that thanks to a lot of hard work by our teams, trades and suppliers, we're getting homes into production. As a result, we ended the year with 18,423 homes under construction, which is up almost 50% over last year. I'm also pleased to report that we've been able to increase our spec production as 23% of homes under construction are spec. This is up from 17% in the third quarter and it's getting us closer to our target of having between 25% and 30% spec. While it's great to see homes getting into production, it's important to note that the overwhelming majority of these units are in the early stages of construction.
More specifically, 31% of our production pipeline is at the initial start stage with another 44% of the homes only at the framing stage. At the other end of the production pipeline, we have only 411 finished homes. This figure includes both sold and spec units. Given the number of homes under production and equally important, their stage of construction, we currently expect to deliver between 5,600 and 6,000 homes in the first quarter of 2022.
In addition to the challenging production environment Ryan discussed, our Q1 delivery guide reflects the impact of limited finished spec inventory and the longer construction cycle times we're experiencing. For the full year 2022, we expect to deliver 31,000 homes. This estimate assumes no meaningful change in the state of the supply chain and in turn, our current cycle times.
If the favorable demand conditions allow us to sell in an even higher year-over-year growth rate, we'll have to see if the supply of materials and labor will be equally supportive. Based on what occurred in 2021, we want to be confident we can deliver a high-quality and complete home at closing. If the supply of labor and materials does not allow for increased production, we'll continue to emphasize price over pace, restrict sales as needed as we focus on driving the best returns within each community.
As we move through 2022, we are well positioned to meet buyer demand, given our expectations for sequential increases in our community count throughout the year. For the coming four quarters, we project our average community count to be 790 in Q1, 815 in Q2, 840 in Q3 and 870 in Q4. Given the land investments we've made, we expect this trend to continue and see further community count growth in 2023.
As mentioned, strong demand and pricing conditions in 2021 resulted in higher prices across all buyer groups, which has resulted in our average sales price in backlog increasing by 22% compared to last year. Given the price of homes in backlog and the mix of homes we anticipate closing, we expect our average sales price to be between $500,000 and $510,000 in the first quarter.
Our average sales price should move higher as we move through the year, and we currently expect our full year average sales price to be approximately $515,000. As always, the ultimate mix of deliveries can influence the average sales price we realized in any given quarter. Driven by the strong price appreciation achieved throughout our markets, our homebuilding gross margin in the fourth quarter increased to 180 basis points over last year and 30 basis points sequentially to 26.8%.
With 18,000 homes in backlog, we have good visibility on near-term gross margins, but we also know that input costs are moving higher and that we expect to continue to incur what are now commonly called scramble costs, as we work to ensure product and labor availability. Based on what we can see today, we expect gross margin to be in the range of 28.5% to 29% in the first quarter and for the full year. This guide takes into consideration our current construction costs, as well as the recent run-up in lumber prices. Based on these factors, we anticipate being towards the bottom end of the range in the first quarter, but towards the higher end of the range by the end of the year. Speaking of inflation, we are closely monitoring increases that are impacting the cost of labor and materials. As a result, we currently expect house cost inflation exclusive of land costs of 6% to 8% for 2022. More than ever, there are a lot of moving pieces, so we'll update our gross margin guidance if needed as we move through the year.
For the fourth quarter, our reported SG&A expense of $344 million or 8.2% of home sale revenues includes a net pre-tax benefit of $23 million from adjustments to insurance- related reserves recorded in the fourth quarter. Exclusive of this benefit, our adjusted SG&A expense was $367 million or 8.7% of home sale revenues. In the comparable prior year period, our reported SG&A expense was $280 million or 9.1% of wholesale revenues, excluding a $16 million net pre-tax benefit from adjustments to insurance related reserves recorded in last year's fourth quarter, our adjusted SG&A expense was $296 million or 9.7% of home sale revenues.
Looking at 2022 overheads, we currently expect SG&A expense in the first quarter to be in the range of 10.7% to 10.9%, which would be flat to down slightly from last year. For the full year, we expect SG&A expense to decrease as a percentage of revenues to be in the range of 9.3% to 9.5% of home sale revenues as we realize incremental overhead leverage on the business.
In the fourth quarter, our financial services operations reported pre-tax income of $55 million. Prior year reported pre-tax income of $43 million included a $22 million pre-tax charge for adjustments to our mortgage origination reserves. During the fourth quarter, financial services pre-tax income was driven by increased loan production consistent with the growth in our homebuilding operations, offset by lower profitability per loan resulting from a more competitive market condition. Mortgage capture rate for the quarter was 85%, which is down slightly from last year's 86%.
Our reported tax expense for the fourth quarter was $193 million, which represents an effective tax rate of 22.5%. Taxes in the fourth quarter included a tax benefit of $9 million, resulting from deferred tax valuation allowance adjustments recorded in the period. For 2022, we expect our tax rate to increase to 25%, driven by changes in certain underlying state tax rates and the fact that legislation to extend the energy tax credits beyond 2021 has not been passed. For the fourth quarter, we reported net income of $663 million or $2.61 per share and adjusted net income of $637 million or $2.51 per share. Prior year fourth quarter reported net income was $438 million or $1.62 per share with adjusted net income of $415 million or $1.53 per share.
PulteGroup's earnings per share continue to benefit from our share repurchase program. In the fourth quarter, we repurchased 5.6 million common shares at a total cost of $283 million or an average price of $50.11 per share. For all of 2021, we repurchased 17.7 million shares, driving a 6% reduction in our shares outstanding at an average cost of $50.80 per share. For the year, we returned $897 million to shareholders through share repurchases, plus an additional $148 million of dividends. This brings the five-year total of share repurchases and dividends to approximately $3.2 billion. Having reduced our common shares outstanding by more than one-third over the past eight years, returning funds to shareholders has been a significant part of our capital allocation strategy. We fully expect such systematic repurchases to continue in the future, so we're extremely pleased with the Board -- announced today, approving a $1 billion increase to our repurchase authorization. At the end of 2021, we had $458 million remaining on the existing programs.
Given our improving financial results and cash flows even after returning over $1 billion to shareholders, investing over $4 billion in our business, paying down $726 million of bonds during the year. We ended the year with $1.8 billion of cash. Our debt-to-total capital ratio at year end was 21.3%, which is a decrease of 820 basis points from last year. Adjusting for the cash on our balance sheet, our net debt to capital ratio was 2.5%. As part of our overall capital allocation strategy, we have routinely talked about maintaining our gross debt-to-capital ratio in the range of 30% to 40%. As noted in today's press release, we are updating these numbers to better reflect how our business operates today.
Over the past several years, we have driven material and sustained gains in our operating performance and capital efficiency. These, in turn, have dramatically increased the cash flows we expect to generate. Taken in combination, we now believe we can grow our business and fund its operations while maintaining our gross debt-to-capital ratio in the range of 20% to 30%. This represents confirmation that the changes we've driven in the business continue to support long-term growth.
To further demonstrate this point, in the fourth quarter, we invested $1.4 billion of land acquisition and development. This brings our total land spend for 2021 to $4.2 billion. On paper, this is an increase of almost 50% over 2020 land spend. But I would remind you that we suspended land investment for almost six months when the pandemic first hit in 2020, so some of the 2021 spend was simply deferred for the prior year.
We currently expect to increase our land investment in 2022 to between $4.5 billion and $5 billion. Given the vast majority of land we acquire is undeveloped, more than half of our spend in 2022 will be from the development of existing land assets. Supported by the higher land spend, we ended 2021 with 228,000 lots under control, of which 109,000 were owned and 119,000 were controlled through options.
On a year-over-year basis, we ended 2021 with an incremental 30,000 lots under auction and remain focused on advancing our land life strategy going forward. I would note that included within our land position are approximately 1,400 lots that were approved under our strategic relationship with Invitation Homes and that we remain on track with our five-year plan of building 7,500 homes under this program with first closings expected in 2023.
Now let me turn the call back to Ryan.
