Before we get started, let me highlight that in addition to reviewing our reported first quarter results, we will also discuss our adjusted results which exclude both a $61 million pre-tax charge associated with a debt tender completed in the quarter, and a $10 million tax insurance benefit recorded in the period.
For purposes of comparison, we will also discuss prior year Q1 earnings adjusted for a $20 million pre-tax goodwill impairment charge.
From double-digit growth in sign ups, revenues and earnings, to enhance liquidity and a $1 billion expansion of our share repurchase authorization we posted a tremendous start to 2021.
I think the first two sentences from a recent Wall Street Journal article aptly summarize the current state of housing supply in the U.S. The U.S. housing market is 3.8 million single family home short of what is needed to meet the country's demand according to a new analysis by mortgage-finance company Freddie Mac.
The estimate represents a 52% rise in the nation's home shortage compared with 2018, the first-time Freddie Mac quantified the shortfall.
In total, our net new orders were up 31% over last year, while our absorption pace was up 37%.
On a unit basis, this was the highest first quarter sign-ups we've reported in over a decade and at $4.6 billion our highest reported quarterly sales value ever.
Our pricing strategies and disciplined business practices helped us to generate a gross margin of 25.5% and an adjusted operating margin of 14.6% in the quarter.
To that end, since 2016, we have invested $14.6 billion in land acquisition and development, and have done so while building a more efficient land pipeline.
To clearly demonstrate the progress we have made, at the end of 2016, we owned 99,000 lots, while controlling an additional 44,000 lots via option.
Today, we actually own 5,000 fewer lots than five years ago and have more than doubled the lots we hold via option to 100,000.
Over the past five years, we've returned approximately $3 billion to shareholders through dividends and share repurchases, including $154 million of stock repurchased in the first quarter.
By paying $726 million of debt in the quarter, including the successful tender for $300 million of our nearest dated outstanding debt, we were able to lower our debt-to-capital ratio on a gross basis to 23.3%.
To be paying down debt and returning significant funds to shareholders, while targeting a 30% increase in our land acquisition and development in 2021, says a lot about our expectations for the earnings power, and the financial strength of this business.
With ongoing strong demand that exceeds available supply, a backlog value of $8.8 billion, and our tremendous financial strength and flexibility, I am excited about what we can accomplish this year.
Home sale revenues in the first quarter increased 17% over last year to $2.6 billion.
The higher revenues for the period reflect the 12% increase in closings to 6,044 homes, coupled with a 4% increase in average sales price to $430,000.
While home closings for the period were up more than 12% over last year, deliveries came in slightly below our guidance with the shortfall resulting primarily from the severe weather in Texas.
4% or $17,000 increase in average sales price realized in the quarter benefited from price increases across all buyer groups, and was led by a 6% increase in ASP for our active adult closings.
The buyer mix of closings in the first quarter was comparable with the prior year, and included 33% from first-time buyers, 43% for move-up buyers, and 24% from active adult buyers.
As Ryan mentioned, our net new orders in the first quarter were up 31% over last year to 9,852 homes.
In the first quarter orders among our first time buyers increased 39% to 3,303 homes, while move-up orders gained 18% to 4,040 homes, and active adult orders increased a robust 49% to 2,509 homes.
49% year-over-year increase in active adult closings reflects the impact of the slowdown in sales in the last two weeks of March last year, but I would highlight that the 2,500 active adult orders this year represent a first quarter high getting back almost 15 years.
The 31% increase in orders could have been higher, but our divisions continue to actively manage sales in the quarter to match production rates and to help maximize project specific returns.
Along with raising prices in 100% of our community to help cover cost inflation and moderate sales all of our divisions used dropped lot releases to more directly manage sales in some or all of their communities.
For the first quarter, we operated from an average of 837 communities, which is down 4% from last year's average of 873 communities.
Consistent with the overall strength of the market, our cancellation rate in the quarter declined by more than 500 basis points from last year to just 8%.
And we ended the quarter with a backlog of 18,966 homes, which is an increase of 50% over last year.
On a dollar basis, our backlog increased 58% to $8.8 billion.
On a year-over-year basis, we increased the number of homes, we started in the quarter by 25% to 8,364 homes, which helped to raise our total homes under construction by 22% to 14,728 homes.
Of these homes, 1,798 or 12% were spec units, which on a percentage basis is down slightly from the fourth quarter of last year.
Given market conditions, we have continued to work with our trade partners to further increase production and expect to increase overall start to at least 10,000 homes in the second quarter of this year.
This would be an increase of at least 20% over the first quarter of this year.
Based on the stage of construction for the 14,728 homes currently under construction, we expect deliveries in the second quarter to be in the range of 7,400 to 7,700 homes.
At the midpoint, this would be an increase of 27% in deliveries over the second quarter of last year.
Based on the ongoing strength of buyer demand and with almost 19,000 houses in backlog, we are raising our guidance for full year closings to 32,000 homes.
This is an increase of 7% from our prior guide of 30,000 homes and represents a 30% increase in deliveries for the year versus the prior year.
The strong pricing environment has helped to lift the average sales price in our backlog by 5% over last year to $465,000.
Given the backlog ASP and the anticipated mix of deliveries, we expect our average closing price in the second quarter to be in the range of $440,000 to $445,000.
For the full year, we now expect our average closing price to be between $450,000 and $450,000.
Our home sale -- our homebuilding gross margin for the first quarter was 25.5%, which is an increase of 180 basis points over the prior year and a sequential gain of 50 basis points from the fourth quarter of 2020.
In addition to the 4% increase in year-over-year ASP, our gross margins also benefited from lower sales discounts of 2.5% in the quarter, which represents a decrease of 110 basis points for the same period last year.
And a decrease of 50 basis points for the fourth quarter of last year.
While we now expect our house costs excluding land to be up 6% to 8% for the year, strong demand environment is allowing us to pass through these costs in the form of both higher base sales prices and lower discounts.
As a result, we expect to realize sequential gains of approximately 50 basis points in each of the three remaining quarters this year, which would have us in the range of 27% for the fourth quarter of 2021.
In the first quarter, our reported SG&A expense was $272 million or 10.5% of home sale revenues, excluding the $10 million pre-tax insurance benefit recorded in the period, our adjusted SG&A expense was $282 million or 10.9% of home sale revenues.
This compares with prior year SG&A expense for the quarter of $264 million or 11.9% of home sale revenues.
We are adding people to handle our higher construction volumes, but we still expect to realize sequential overhead leverage with the second quarter SG&A expense in the range of 9.9% to 10.3%.
And for the full year, we now expect adjusted SG&A as a percent of homebuilding revenue to be approximately 9.8%.
As Jim noted, we did record a $61 million pre-tax charge in the period related to the cash tender offer for $300 million of our senior notes that we completed in the first quarter.
Turning to Pulte Financial Services, they continue to report outstanding financial results with pre-tax income more than tripling to $66 million, which compares to $20 million in the first quarter of last year.
The large increase in pre-tax income reflects favorable competitive dynamics in the market as well as higher loan production volumes resulting from the growth in our closings and a 150 basis point increase in capture rate to 88%.
Tax expense for the first quarter was $90 million, which represents an effective tax rate of 22.8%.
We continue to expect our tax rate to be approximately 23.5% for the balance of the year, including the benefit of energy tax credits we expect to realize this year.
In total for the quarter, we reported net income of $304 million or $1.13 per share.
Our adjusted net income for the period was $343 million or $1.28 per share.
In the first quarter of 2020, the company reported net income of $204 million or $0.74 per share and adjusted net income of $219 million or $0.80 per share.
Turning to the balance sheet, we ended the quarter with $1.6 billion of cash.
On a gross basis, our debt-to-capital ratio at the end of the quarter was 23.3%, down from 29.5% at the end of the year, as we use available cash to pay down $726 million of senior notes in the first quarter.
Our net debt-to-capital ratio was 5.5% at the end of the quarter.
Along with paying down debt during the quarter, we repurchased 3.3 million common shares at a cost of $154 million or an average price of $46.11 per share.
As Ryan mentioned, given the strength of our business and expectations for continued strong cash flows and with our existing repurchase authorization down to approximately $200 million at the end of the quarter, Board of Directors approved an increase of $1 billion to our repurchase authorization.
In the first quarter, we invested $795 million in land acquisition and development, including the lots we've put under control through these investments, we ended the first quarter with approximately 194,000 lots under control, of which 94,000 were owned and 100,000 were controlled through options.
With 51% of our lots now controlled via option, we have surpassed our initial target of 50% owned and 50% optioned and expect that the percentage of option lot can move even higher.
Finally, I would like to give a big shout out to the entire PulteGroup family for being ranked on the Fortune 100 list of Best Companies to Work For.
The Fortune 100 list is built on an analysis conducted by the Great Place to Work organization, which is based on employee surveys from thousands of companies.
In our case they surveyed 100% of our employees.
To make the Fortune 100 list is an accomplishment, but to make it for the first time when we are operating in a global pandemic is clear and resounding statement about our people, and the culture that they have -- the culture they have built inside of our organization.

Summary:
As Ryan mentioned, our net new orders in the first quarter were up 31% over last year to 9,852 homes.
And we ended the quarter with a backlog of 18,966 homes, which is an increase of 50% over last year.
In total for the quarter, we reported net income of $304 million or $1.13 per share.
Our adjusted net income for the period was $343 million or $1.28 per share.