With our full year coming into better view, we are poised for continued returns-focused growth expanding our scale to about $6 billion in revenues and generating a return on equity of roughly 20%.
As for the details of the quarter, we produced total revenues of $1.44 billion and diluted earnings per share of $1.50.
We achieved an operating income margin of 11.3% driven by several factors.
Our profitability per unit grew meaningfully on a sequential basis to nearly $47,000.
With the progression of our work in process and our success in accelerating starts, we are confident in our ability to achieve full-year deliveries of between 14,000 and 14,500 homes.
We recently completed a $390 million debt offering, the net proceeds from which together with a portion of our existing cash will be used to retire our '21 maturity in full.
In the second quarter, we invested $575 million in land acquisition and development, expanding our lot position sequentially by 7,800 lots to roughly 77,500 lots owned or controlled with 45% of the total optioned.
In addition, we are pursuing moderately sized deals in our preferred submarkets averaging between 100 and 150 lots and staying on strategy and positioning these new communities to be attainable near the median household income for that sub-market.
Along with our success in Seattle and recent reentry into Charlotte, we are announcing today that we have started up a division in Boise, Idaho, a top 25 housing market.
We now have over 900 lots under control and anticipate our first land parcel closing in the third quarter.
We successfully opened 33 new communities in the second quarter.
And although it operates at a higher ASP, it is still below the median resale price of homes in its submarkets which are as much as $100,000 higher and selling within a few weeks of being listed.
Although we offer floor plans below 1,600 square feet in over 75% of our communities, buyers are still selecting homes averaging 2,100 feet, which is consistent with their choices over the past couple of years.
The first is an acute shortage of supply stemming not only from limited resale inventory, but also from the under production of new homes over the past 15 years.
These demographic groups value personalization and we believe we are well positioned to capture increases in home sales given our expertise in serving the first-time buyer which represents 64% of our deliveries this past quarter with our built-to-order approach.
Net orders were 4,300, our best second quarter since 2007 with strength throughout the quarter resulting in year-over-year growth of 145%.
We are matching starts to sales and in the first half of this year we have quickly scaled up our production to start over 8,500 homes.
To put this in context, the homes we started in the past two quarters represent about 75% of the total homes we started for the full year 2020.
Almost 95% of the homes in production are already sold and we remain committed to our built-to-order business model.
Nearly 80% of our orders in the second quarter were for personalized homes, which also creates an additional revenue stream from our design studios and with lot premiums.
Our studio revenue per unit rose sequentially in the second quarter and is continuing to average about 9% of our higher base prices.
Between studio revenue and lot premiums, we are averaging about $40,000 per home today and believe there is opportunity to continue to grow this going forward.
We ended the quarter with a robust backlog value of $4.3 billion, up 126% year-over-year representing over 10,000 homes.
KBHS Home Loans, our mortgage joint venture, continued to be a solid partner for our customers handling the financing for 75% of the homes we delivered in the second quarter.
These buyers have a strong and consistent credit profile with an average down payment of about 13% or over $50,000 and an average FICO score that inched up to 727.
We've been on this journey for over 15 years.
We have built over 150,000 ENERGY STAR certified homes to-date, more than any other builder, and have the lowest published average Home Energy Rating System, or HERS, index score among production homebuilders.
And we're striving to be even better with an aggressive goal to further improve our average HERS score from 50 down to 45 by 2025, a level which translates into an additional estimated reduction in a KB Home's carbon emission of about 8% per year.
With our operations performing well, we leveraged 58% growth in housing revenues to generate a 216% increase in operating income for the quarter.
In addition, our net orders reached their highest second-quarter level in 14 years.
Our housing revenues of $1.44 billion for the quarter increased from $910 million in the prior-year period, reflecting a 40% increase in homes delivered and a 13% increase in overall average selling price.
Considering our current backlog and construction cycle times, we anticipate our 2021 third quarter housing revenues will be in a range of $1.5 billion to $1.58 billion.
For the full year, we are projecting housing revenues in the range of $5.9 billion to $6.1 billion.
We believe we are very well positioned to achieve this top line performance due to our strong second quarter net orders and ending backlog of over 10,000 homes, representing nearly $4.3 billion in ending backlog value.
In the second quarter, our overall average selling price of homes delivered increased to nearly $410,000, reflecting strong housing market conditions, which enabled us to raise prices in the vast majority of our communities, as well as product and geographic mix shifts of homes delivered.
For the 2021 third quarter we are projecting an overall average selling price of $420,000.
We believe our ASP for the full year will be in a range of $415,000 to $425,000.
Homebuilding operating income significantly improved to $162.9 million as compared to $51.6 million in the year-earlier quarter, reflecting an increase of 560 basis points in operating income margin to 11.3% due to meaningful improvements in both our housing gross profit margin and SG&A expense ratio.
Excluding inventory related charges of $0.5 million in the current quarter and $4.4 million of inventory-related charges and $6.7 million of severance charges in the year-earlier quarter, this metric improved to 11.4% from 6.9%.
We expect our homebuilding operating income margin, excluding the impact of any inventory-related charges, to further improve to a range of 11.7% to 12.1% for the 2021 third quarter.
For the full year, we expect our operating margin, excluding any inventory-related charges, to be in the range of 11.5% to 12%.
Our housing gross profit margin for the second quarter expanded to 21.4%, up 320 basis points from the prior-year period.
Excluding inventory related charges, our gross margin for the quarter increased to 21.5% from 18.7% for the prior-year period.
Our adjusted housing gross profit margin, which excludes inventory-related charges as well as the amortization of previously capitalized interest, was 24.2% for the 2021 second quarter compared to 21.9% for the same 2020 period.
Assuming no inventory-related charges, we expect a sequential increase in our 2021 third quarter housing gross profit margin to approximately 21.7% and further improvement in the fourth quarter.
Considering this expected favorable trend, we believe our full year housing gross profit margin, excluding inventory-related charges, will be within the range of 21.5% to 22% representing a 215 basis point year-over-year increase at the midpoint.
Our selling, general and administrative expense ratio of 10.1% for the quarter improved from 12.6% for the 2020 second quarter.
The 250 basis point improvement reflected the continued benefit of overhead cost reductions implemented last year in the early stages of the pandemic, increased operating leverage from higher revenues and the severance charges in the year-earlier quarter.
Considering anticipated increases in future revenues and our continuing actions to contain costs, we believe that our 2021 third quarter SG&A expense ratio will be approximately 9.8% and our full year ratio will be in a range of 9.8% to 10.2%.
Our income tax expense for the quarter of $30.3 million, which represented an effective tax rate of 17%, reflected the favorable impact of $14.8 million of federal energy tax credits recorded in the quarter relating to qualifying energy-efficient homes.
We expect our effective tax rate for the full year to be approximately 20%, including the expected favorable impact of additional federal energy tax credits in the third and fourth quarters.
Overall, we produced net income for the second quarter of $143.4 million or $1.50 per diluted share compared to $52 million or $0.55 per diluted share for the prior-year period.
Turning now to community count, our second quarter average of 205 communities decreased 17% from the year-earlier quarter.
We ended the quarter with 200 communities as compared to 244 communities at the end of the 2020 second quarter.
On a sequential basis, our average community count decreased 8% from the first quarter and ending community count was down 4%.
The decreases were due to our strong absorption pace of seven monthly net orders per community during the quarter, which show 42 close-outs as well as community openings that were delayed to the third quarter.
Over the past 12 months our robust absorption pace has driven the close-out of over 150 selling communities.
Although they will not generate additional net orders, we will continue to produce revenues and profit in future quarters associated with nearly 80% of these sold-out communities as we work through the construction and delivery of the sold homes.
We anticipate our 2021 third quarter ending community count will increase sequentially by approximately 5%, followed by another modest sequential improvement in the fourth quarter.
Favorable operating cash flow in the quarter generated primarily from homes delivered net of higher levels of land investment resulted in quarter and total liquidity of approximately $1.4 billion including $608 million of cash and $788 million available under our unsecured revolving credit facility.
Earlier this month, we completed the $390 million issuance of 4% 10-year senior notes and used a portion of the proceeds to redeem approximately $270 million of tendered 7% notes that mature on December 15, 2021.
We expect to realize a charge of approximately $5 million for this early extinguishment of debt in the third quarter.
It is our intention to redeem the remaining $180 million of the 7% notes at par value on September 15.
Once completed, this redemption, partially offset by the new issuance, will result in a net $16 million reduction in debt and an annualized interest savings of nearly $16 million, contributing to our continuing trend of lowering the interest amortization included in future housing gross profit margins.
In addition, we believe the $350 million of our maturity in 2022 of 7.5% senior notes represents another opportunity to reduce incurred interest and enhanced future gross margins.
In summary, given the size and composition of our quarter-end backlog of over 10,000 homes, along with our expanded production capacity, we expect further improvement in our financial results and return metrics in 2021 as compared to our expectations at the time of our last earnings call.
Using the midpoints of our new guidance ranges, we now expect a 45% year-over-year increase in housing revenues and further expansion in our operating margin to 11.75%.
This profitability level should drive a return on average equity of approximately 20% for the full year.

Summary:
As for the details of the quarter, we produced total revenues of $1.44 billion and diluted earnings per share of $1.50.
Net orders were 4,300, our best second quarter since 2007 with strength throughout the quarter resulting in year-over-year growth of 145%.
Our housing revenues of $1.44 billion for the quarter increased from $910 million in the prior-year period, reflecting a 40% increase in homes delivered and a 13% increase in overall average selling price.
Overall, we produced net income for the second quarter of $143.4 million or $1.50 per diluted share compared to $52 million or $0.55 per diluted share for the prior-year period.