MDC delivered strong results in the fourth quarter of 2020, highlighted by fully diluted earnings per share of $2.19, representing a 54% increase over the fourth quarter of 2019.
Home sales revenues increased 10% year-over-year, and home sales gross margin expanded 350 basis points to 22%.
We continue to experience robust demand across our homebuilding operations as the dollar value of our net new orders increased 92% for the quarter on a sales pace of 4.7 homes per community per month.
The strong order activity resulted in backlog value of $3.26 billion, our largest year-end backlog ever.
In December, we successfully increased the size of our unsecured revolving credit facility from $1 billion to $1.2 billion.
Shortly thereafter, we issued $350 million of senior notes due in 2031 with a coupon of 2.5%, the lowest rate ever achieved by a non-investment grade company for 10-year issuance.
In summary, the fourth quarter of 2020 capped a remarkable year for our company, culminating in a 54% increase in our annual net income as compared to 2019.
We ended 2020 with another strong quarter as pre-tax income from our homebuilding operations increased $48.9 million or 52% from the prior year quarter to $142.3 million.
To a lesser extent, our homebuilding profits also benefited from improved home sale revenues, which increased by 10% to $1.18 billion.
Our financial services pre-tax income increased $10.2 million or 54% to $29 million.
As a result, overall net income increased 59% to $147.5 million or $2.19 per diluted share for the fourth quarter of 2020.
Our tax rate decreased from 17.5% to 13.9% for the 2020 fourth quarter.
For 2021, I would roughly estimate an effective tax rate of 24%, excluding any discrete items, and not accounting for any potential changes in tax rates or policy.
Homes delivered increased 7% year-over-year to 2,564, driven by an increase in the number of homes, we had in backlog to start the quarter.
The average selling price of homes delivered during the quarter increased 2% to about $461,000 and 61% of the units we closed were a part of our more affordable collections.
We are anticipating home deliveries for the first quarter of 2021 to reach between 2,200 and 2,400 units.
We expect the average selling price for 2021 first quarter deliveries to be between $470,000 and $480,000.
Gross margin for home sales improved by 350 basis points year-over-year to 22%, which is our best gross margin in over a decade.
We experienced improved gross margin from home sales across each of our segments on both build-to-order and spec home deliveries, driven by price increases implemented across nearly all of our communities over the past 12 months.
As a result, the gross margin for home sales for the 2021 first quarter is expected to be approximately 21.5% assuming no impairments and no warranty adjustments.
This would still be 150 [Phonetic] basis points higher than the prior year.
Additionally, we currently expect that gross margin for the remainder of the year will improve from our 21.5% estimate for Q1.
Our total dollar SG&A expense for the 2020 fourth quarter increased $12.8 million from the 2019 fourth quarter.
General and administrative expenses increased $7.1 million due to an increase in stock-based compensation expense related to performance-based awards, consulting fees related to energy tax credits recognized during the quarter, and a $2.2 million charitable contribution approved by our Board of Directors during the quarter.
The increase in marketing and commission expenses was due to variable selling and marketing expenses that increased in line with the 10% increase in home sale revenues during the period.
Looking forward to the first quarter of 2021, we currently estimate our general and administrative expense to be approximately $55 million, which is a slight increase from what we just recognized in the fourth quarter.
In the fourth quarter alone, we saw a 5% increase in our headcount.
The dollar value of our net orders increased 92% year-over-year to $1.32 billion and unit net orders increased by 72%, driven by a 67% increase in our monthly absorption rate to 4.7.
The average selling price of our net orders increased by 12% year-over-year, driven by price increases implemented over the past 12 months.
As a result of the strong sales we just discussed, we ended the quarter with an estimated sales value for our homes in backlog of $3.26 billion, which was up 87% year-over-year and, as Larry mentioned, was our highest year-end backlog dollar value ever.
The average selling price of homes in backlog increased 7% due to price increases implemented over the past 12 months, decreased incentives and a shift in mix to California.
Only 38% of homes in backlog at December 31, 2020 had reached the frame stage of construction compared to 52% of homes in backlog at December 31, 2019.
We ended 2020 with 194 active subdivisions, up 5% from 185 at the end of 2019.
For 2021, we are currently targeting an active subdivision increase of at least 10% year-over-year.
We acquired 4,976 lots during the quarter, a 51% increase from the prior year, reflecting our confidence in market conditions and our focus on continued growth for our company.
We spent $359 million on land acquisition and $124 million on land development during the period, making our total land spend $483 million.
As a result of our recent land acquisitions, our total lot supply to end the year was 8% higher than at the end of 2020, nearly reaching the 30,000 lot mark.
To that end, our current target for home deliveries in 2021 is between 10,000 and 11,000 units.
As previously mentioned, we are targeting a 10% increase in active subdivisions during the year, and we are expanding our geographic footprint with the addition of the Boise market.
In anticipation of this growth, we increased our liquidity to roughly $1.7 billion at the end of the year and further enhanced that liquidity with our $350 million senior note issuance in January.
Last week, we were pleased to announce that our Board of Directors declared a $0.40 per share cash dividend and a special 8% stock dividend.

Summary:
MDC delivered strong results in the fourth quarter of 2020, highlighted by fully diluted earnings per share of $2.19, representing a 54% increase over the fourth quarter of 2019.
To a lesser extent, our homebuilding profits also benefited from improved home sale revenues, which increased by 10% to $1.18 billion.
As a result, overall net income increased 59% to $147.5 million or $2.19 per diluted share for the fourth quarter of 2020.
The average selling price of homes delivered during the quarter increased 2% to about $461,000 and 61% of the units we closed were a part of our more affordable collections.
We are anticipating home deliveries for the first quarter of 2021 to reach between 2,200 and 2,400 units.
The dollar value of our net orders increased 92% year-over-year to $1.32 billion and unit net orders increased by 72%, driven by a 67% increase in our monthly absorption rate to 4.7.
As a result of the strong sales we just discussed, we ended the quarter with an estimated sales value for our homes in backlog of $3.26 billion, which was up 87% year-over-year and, as Larry mentioned, was our highest year-end backlog dollar value ever.
To that end, our current target for home deliveries in 2021 is between 10,000 and 11,000 units.