We had an outstanding record-setting quarter, highlighted by a 71% increase in new contracts, a 29% increase in homes delivered and a 94% increase in net income.
For the quarter, we sold 2,949 homes.
Year-to-date through September, we have sold 7,299 homes, 43% better than last year and more than we sold all of 2019.
Our absorption pace improved significantly to 4.6 sales per community per month compared to 2.6 a year ago.
Our Smart Series sales comprised nearly 36% of total companywide sales during the quarter compared to 28% a year ago.
We are now selling our Smart Series homes in all 15 of our divisions.
We delivered 2,137 homes in the quarter.
Year-to-date through September, we have now delivered 5,467 homes, which is 25% more than last year.
Our backlog sales value at September 30 equaled $1.8 billion, an all-time record, and units in backlog increased 54% to a record 4,503 homes.
Gross margins during the third quarter improved by 240 basis points to 22.9%, and our SG&A expense ratio improved by 60 basis points to 11.6%, and our pre-tax income percentage significantly improved to 11.2%.
All of this resulted in a greater than 90% improvement in both pre-tax and net income for the quarter.
As you know, we divide our 15 markets into two regions.
The Northern region consists of six of our 15 markets: Columbus, Cincinnati, Indianapolis, Chicago, Minneapolis and Detroit.
New contracts in the Southern region increased 63% for the quarter while new contracts in the Northern region increased 85%.
Our deliveries increased by 27% over last year in the Southern region to 1,269 deliveries or 59% of company total.
The Northern region posted 868 deliveries, an increase of 33% over last year and 41% of total.
Our controlled lot position in the Southern region increased by 49% compared to a year ago and increased by 17% in the Northern region.
35% of our owned and controlled lots are in the Northern region with a balance roughly 65% in the Southern region.
In total, we own and control approximately 40,000 lots or about a 4.5- to five year supply.
Importantly, roughly 60% of our lots are controlled under option contracts, which, with more than half of our lots controlled by option, gives us tremendous flexibility to react to changes in demand or individual market conditions.
We had 121 communities in the Southern region at the end of the quarter, which is down from 132 a year ago and also down from 126 at the end of this year's second quarter.
We had 86 communities in the Northern region at the end of the third quarter, down slightly from a year ago and down from 94 at the end of this year's second quarter.
As far as financial results, new contracts for the third quarter increased 71% to 2,949, an all-time quarterly record compared to 1,721 for last year's third quarter.
Our new contracts were up 75% in July, up 94% in August and up 44% in September.
Our sales pace was 4.6 in the third quarter compared to last year's 2.6.
Our cancellation rate for the third quarter was 10%.
As to our buyer profile, about 53% of our third quarter sales were to first-time buyers compared to 50% in the second quarter.
In addition, 40% of our third quarter sales were inventory homes compared to 45% in the second quarter.
Our community count was 207 at the end of the third quarter compared to 221 at the end of '19 third quarter.
The breakdown by region is 86 in the Northern region and 121 in the Southern region.
During the quarter, we opened 12 new communities while closing 25, and we opened 51 new communities during the nine months ended 9/30 this year.
We delivered a third quarter record 2,137 homes, delivering 58% of our backlog, which was the same percentage as a year ago.
And revenue increased 30% in the third quarter, reaching a third quarter record of $848 million.
Our average closing price for the third quarter was $380,000, a 1% decrease when compared to last year's third quarter average closing price of $382,000.
Our backlog sales price is $404,000, up from $390,000 a year ago, and the backlog average sales price of our Smart Series is $315,000.
Our third quarter 2020 operating gross margin was 22.9%, up 240 basis points year-over-year and up 100 basis points from the second quarter.
And our third quarter SG&A expenses were 11.6% of revenue, increasing -- improving 60 basis points compared to 12.2% a year ago, reflecting greater operating leverage.
Interest expense decreased $3.4 million for the quarter compared to last year.
Interest incurred for the quarter was $10 million compared to $12.9 million a year ago.
During the third quarter, we generated $111 million of EBITDA compared to $67 million in last year's third quarter.
We have $22 million in capitalized interest on our balance sheet, which is about 1% of our total assets.
Our effective tax rate was 23% in the quarter compared to last year's 24% in the third quarter.
Our third quarter rate benefited from energy tax credits that were retroactive to 2019, and we estimate our annual effective rate this year to be around 23%.
And our earnings per diluted share for the quarter increased to $2.51 per share from $1.32 last year.
Revenue was up 115% to $28.9 million due to a higher volume of loans closed and sold along with significantly higher pricing margins.
For the quarter, the pre-tax income was $19.2 million, which was a 241% increase compared to 2019's third quarter.
76% of the loans closed in the quarter were conventional and 24% FHA or VA compared to 78% and 22%, respectively, for 2019's third quarter.
Our average mortgage amount increased to $314,000 in 2020 third quarter compared to $312,000 last year.
Loans originated increased to a third quarter and all-time record of 1,636 loans, 32% more than last year, and the volume of loans sold increased by 39%.
Our borrower profile remains solid with an average down payment of over 15%.
And for the quarter, the average credit score on mortgages originated by M/I Financial was 747, up slightly from 745 last year.
Our mortgage operation captured over 85% of our business in the third quarter, which was in line with last year.
At September 30, we had $136 million outstanding under these facilities.
We extended our repo line this month through October of 2021 and increased the commitment amount from $65 million to $90 million.
As far as the balance sheet, our total homebuilding inventory at 9/30 was $1.8 billion, an increase of $16 million over last year.
Our unsold land investment at 9/30/20 is $762 million compared to $821 million a year ago.
At September 30, we had $362 million of raw land and land under development and $400 million of finished unsold lots.
We own 4,942 unsold finished lots with an average cost of $81,000 per lot, and this average lot cost is 20% of our $404,000 backlog average sale price.
Lots owned and controlled as of 9/30/20, totaled 39,600 lots, 15,100 of which were owned and 24,500 under contract.
We own 6,900 lots in our Northern region and 8,200 lots in our Southern region.
A year ago, we owned more than 14,800 lots and controlled an additional 14,200 lots for a total of more than 29,000 lots.
And during this year's third quarter, we spent $107 million on land purchases and $89 million on land development for a total of $196 million.
Year-to-date, we have spent $267 million on land purchases and $222 million on land development for a total year-to-date land spend of $489 million, and about 48% of our purchase amount was raw land.
At the end of the quarter, we had 266 completed inventory homes, about one per community, and 1,113 total inventory homes.
And of the total inventory, 550 are in the Northern region and 563 are in the Southern region.
At September 30, '19, we had 531 completed inventory homes and 1,513 total inventory homes.

Summary:
Our backlog sales value at September 30 equaled $1.8 billion, an all-time record, and units in backlog increased 54% to a record 4,503 homes.
As far as financial results, new contracts for the third quarter increased 71% to 2,949, an all-time quarterly record compared to 1,721 for last year's third quarter.
We delivered a third quarter record 2,137 homes, delivering 58% of our backlog, which was the same percentage as a year ago.
And our earnings per diluted share for the quarter increased to $2.51 per share from $1.32 last year.
As far as the balance sheet, our total homebuilding inventory at 9/30 was $1.8 billion, an increase of $16 million over last year.