We set the bar for new operational and financial records every quarter during the year, culminating in our all-time highest annual sales orders and home closings, and in turn our best average absorption pace of 5.2 per month since 2005.
We closed our 135,000th home.
And as the industry leader in energy efficiency, we were the first homebuilder to introduce MERV-13 nationwide, the most advanced air filtration system offered today for residential construction, which controls and improves air exchange within the home.
In keeping with our commitment to innovation and enhancing the customer experience, we rolled out 100% contactless selling to our customers.
In line with our dedication to fostering healthy communities in which we live and work, we donated over $0.5 million to our Meritage Care Foundation to nonprofits like Feeding America and Americares that are focused on helping those affected by COVID-19, fighting hunger and combating homelessness.
And to promote racial equity nationwide, we donated $200,000 to INROADS and the United Negro College Fund and began our multiyear partnership with these organizations.
We sold 3,174 homes this quarter, which was 52% higher than the same quarter of 2019.
Home closing revenue of $1.4 billion in the current quarter increased 28% year-over-year.
In the fourth quarter of 2020, we delivered our best quarterly home closing gross margins in 2006 by improving 420 bps to 24% from 19.8% in the prior year.
Capitalizing on the overall industry demand as well as the expansion of our community mix toward entry-level homes, which sell at a higher pace than our first move homes, our absorption of 5.3 per month for the quarter was up 87% year-over-year, even as we increased pricing in all of our geographies in line with strong local market demand.
five out of the nine states had absorptions increase over 100% year-over-year this quarter, despite a 19% decline in average active communities.
Entry-level comprised almost 70% of total orders for the quarter, up from 55% in the fourth quarter last year.
Entry-level represents 67% of our average active communities during the current quarter compared to 45% a year ago.
Our first move communities also experienced improved demand year-over-year, with absorption 91% higher than a year ago.
Our East region led in terms of order growth, with a 76% improvement over the fourth quarter of 2019.
Absorption in the East region increased 118% year-over-year for the quarter, offset by a 20% decline in average community count.
64% of our average active communities in each region sold entry-level product during the quarter.
Our Central region, comprising our Texas market, increased orders by 46% over the fourth quarter of 2019, despite a 20% reduction in average community count.
Entry-level communities represented 71% of the Central region's average active community during the fourth quarter of 2020.
Our fourth quarter 2020 orders in the West region were up 34% over the same quarter in the prior year, driven by a 65% increase in absorptions and partially offset by 18% fewer average communities.
Entry-level communities represented 67% of the West region's average active communities during the quarter.
Colorado had our highest first order absorption in the company this quarter, with an average of 6.4 homes per month in the fourth quarter of 2020 compared to 2.5 in the prior year.
This produced a 48% year-over-year growth in orders, reflecting the hard shift down to ASP price band over the last four to six quarters.
We closed 32% more homes in the fourth quarter of 2020 than prior year.
And our backlog was 4,672 units at the end of the fourth quarter, reflecting the high absorption pace we achieved this quarter.
Of the 3,744 home closings this quarter, 71% came from previously started spec inventory compared to 61% a year ago.
At December 31, 2020, less than 10% of total specs were completed versus 1/3, which is our typical run rate.
Our backlog conversion rates decreased to 71% in the fourth quarter this year compared to 80% last year, reflecting the early stages of construction in our sold homes.
We ended the fourth quarter of 2020 with a little over 2,500 spec homes in inventory or an average of 12.9 per community compared to approximately 3,000 or an average of 12.4 last year, reflecting the significant sales order growth during the fourth quarter.
While specs for community grew, our total staff count did not quite achieve our goal of 3,000 as these homes converted to backlog as quickly as we started them.
As Philippe noted, the 28% year-over-year closing revenue growth in the fourth quarter was the net impact of 32% increase in home closings and 4% decline in ASP.
We had our highest quarterly home closing gross revenue since 2006 this quarter, reaching 24%, a 420 bps improvement from the prior year.
SG&A as a percentage of home closings revenue was 9.3% for the current quarter, which was our lowest quarterly percentage since 2007.
The 80 bps improvement over prior year reflects greater leverage of fixed expenses from efficiencies and higher closing revenue and ongoing permanent cost benefits from technology enhancements, particularly leading to our sales and marketing efforts.
Included in our Q4 results are $20.3 million of impairment charges on land sales.
The fourth quarter's effective income tax rate was 21.9% in 2020 compared to 6.3% in the prior year.
Our fourth quarter diluted earnings per share was $3.97, increasing 50% year-over-year compared to 2.65% in the same quarter of 2019.
To highlight just a few items for the full year 2020 results: On a year-over-year basis, we generated a 70% increase in net earnings.
Orders were up 43%, and closings were up 28%.
We delivered $4.5 billion in full year home closing revenue, a 310 bps increase in home closing gross margin to 22%, and a 90 bps improvement in SG&A as a percentage of home closing revenue, ending the year at 10%.
We opportunistically repurchased 100,000 shares for a total of $8.8 million in advance of the routine first quarter employee share issuance in 2021.
On November 13, 2020, our Board of Directors authorized an additional $100 million for share repurchases under the existing stock repurchase program.
At December 31, 2020, our cash balance was $746 million, reflecting positive cash flow from operations of $530 million despite increased land acquisition and development spend.
Our net debt to cap reached an all-time low of 10.5%.
We spent $506 million on land and development this quarter, our highest spend in a single quarter in the company's history and over a 100% increase year-over-year.
For full year 2020, we invested nearly $1.3 billion in land and development.
We anticipate spending more than $1.5 billion annually in 2021 and beyond to sustain and replenish our 300 communities.
In the fourth quarter of 2020, we secured a quarterly record of approximately 11,200 new lots, which translates to 69 new communities.
We put nearly 29,500 gross new lots under control in 2020, a 62% increase as compared to about 18,000 lots in 2019.
Adjusting for land sales and termination, we secured approximately 27,200 net new lots in 2020, representing 192 new communities, of which approximately 81% are entry level.
At year-end with over 55,500 total lots under control, we had 4.7 years' supply of lots based on trailing 12-month closings, in line with our target of four to five years' supply of lots on hand.
We increased our land book by 34% from December 31, 2019.
About 59% of our total inventory at December 31, 2020, was owned and 41% was optioned, an improvement compared to the prior year of 63% owned and 37% optioned.
For full year 2020, our new lots under control have an average community size of about 140 lots.
For full year 2021, we are projecting total closings to be between 11,500 and 12,500 units, total home closing revenue of $4.2 billion to $4.6 billion, home closing gross margin of 22% to 23%, and effective tax rate of about 23%, and diluted earnings per share in the range of $10.50 to $11.50.
We ended 2020 with 195 active communities, down from 244 in the prior year.
During the year, we opened up 105 communites, up 40% from 75% in 2019.
Since we anticipate continued strong sales demand in 2021, community count will remain plus-minus 200 for Q1 and Q2 as new community openings will be offset by community closings.
And our projected volume of closings between 11,500 and 12,500 for the full year, we expect to end 2021 with approximately 235 to 245 communities.
The community count growth will continue into Q1 and Q2 of '22 when we anticipate achieving our goal of operating 300 communities by June 2022.
As for Q1 2021, we are projecting total closings to be between 2,600 and 2,900 units, home closing revenue of $950 million to $1.05 billion, home closing gross margin of approximately 22.5%, and diluted earnings per share in the range of $2.25 to $2.50.
In the fourth quarter, we spent a record $506 million on land and secured approximately 11,200 new lots.
We already control all the land necessary to achieve our 300 active community goal by mid-2022.
To summarize on slide 13, we are entering 2021 with a heavy backlog of almost 4,700 sold homes and more than 2,500 specs completed or under construction, giving us some additional visibility in 2021.

Summary:
We sold 3,174 homes this quarter, which was 52% higher than the same quarter of 2019.
Of the 3,744 home closings this quarter, 71% came from previously started spec inventory compared to 61% a year ago.
Our fourth quarter diluted earnings per share was $3.97, increasing 50% year-over-year compared to 2.65% in the same quarter of 2019.
For full year 2021, we are projecting total closings to be between 11,500 and 12,500 units, total home closing revenue of $4.2 billion to $4.6 billion, home closing gross margin of 22% to 23%, and effective tax rate of about 23%, and diluted earnings per share in the range of $10.50 to $11.50.
And our projected volume of closings between 11,500 and 12,500 for the full year, we expect to end 2021 with approximately 235 to 245 communities.