We had a remarkable year in 2021, producing revenue growth in excess of 35% and an increase in our earnings per share of more than 90%.
We achieved our objectives of expanding our scale and profitability, driving our return on equity up by over 800 basis points to 20%.
Our backlog value of $5 billion, which grew 67% year over year provides a strong base to support our roughly $7.4 billion in expected revenues in 2022.
This represents substantial top-line expansion, which combined with our expectation of a dramatic increase in our gross margin to nearly 26% will drive our return on equity meaningfully higher.
With respect to the fourth quarter, we generated total revenues of $1.7 billion and diluted earnings per share of $1.91, representing a year-over-year increase of more than 70% on the bottom line.
We achieved an operating income margin approaching 12%, resulting in a 28% expansion in our operating profit per unit to over $56,000.
And in 2021, we put over $2.5 billion to work in land acquisition and development.
We expanded our lot position to nearly 87,000 lots under control, which is almost 30% higher from year-end 2020.
In addition to reinvesting in our business, we returned over $240 million in cash to stockholders through the share repurchases that we completed in our third quarter, along with our quarterly dividend, and we reduced our debt during the year by over $60 million.
This dynamic continued in our fourth quarter contributing to a rise in our net order value of 12% year over year despite net orders decreasing 10%, a level similar to the decline in our community count.
This increase in net order value contributed to a backlog value that is more than 65% higher.
All of these factors combined are driving our expectation of a gross margin of nearly 26% for this year.
We successfully opened 130 new communities in 2021, our largest number in many years, including 33 in the fourth quarter.
As a result, we now expect to end 2022 with about 265 communities, up over 20% year over year and ahead of our initial projection that we shared in September.
In addition of supporting our roughly 30% increase in revenue planned for 2022, our community count expansion will also contribute to our growth in 2023.
Our monthly absorption per community of 5.5 net orders during the fourth quarter, reflected a typical seasonal pattern sequentially.
For the year, our absorption pace averaged 6.3 net orders per community per month, the best annual rate we have seen in more than a decade.
Our average selling price on deliveries rose about 9% year over year in 2021, well below the reported increase for overall pricing levels nationally, highlighting the affordability of our locations and products.
Although we offer floor plans below 1,600 square feet in about 80% of our communities, buyers continue to choose larger footage homes.
Over the past year, our deliveries have averaged between 2,000 and 2,100 feet, consistent with our historical trend.
On a combined basis, buyers spent about $48,000 per home in these two categories in the fourth quarter, a solid enhancement to our revenues.
Their average FICO score in the quarter was 732, an all-time high.
In addition, about two-thirds of our buyers qualified for a conventional mortgage, and our buyers overall are averaging a down payment of over $67,000.
We started over 3,800 homes during the quarter as we worked to position our production for growth in 2022 deliveries.
At year-end, we had over 9,100 homes in production with 90% of these homes already sold.
Generally, our cancellation rate once we start the home is extremely low, and at 5% in the fourth quarter, it remains so.
Our backlog is comprised of over 10,500 homes with a value of $5 billion, representing the bulk of our revenues expected for 2022.
In fact, our backlog includes almost 1,900 homes from 150 sold-out communities that will deliver approximately $1 billion in 2022 revenues.
While we have not seen a slowdown in demand across our geographic footprint in the past couple of months, and we foresee a strong spring selling season ahead, a combination of factors has resulted in a negative year-over-year net order comparison for the first six weeks of this quarter at 17%.
As a result of these and many other factors, KB Home was named to the list of the 250 most effectively managed companies in the U.S., a ranking that was developed by the Drucker Institute in conjunction with The Wall Street Journal.
As we look to the year ahead, during which we will celebrate our 65th anniversary, we anticipate another year of remarkable growth, which we expect will ultimately drive a return on equity of more than 26%.
We finished 2021 with strong fourth-quarter results, including significant year-over-year growth in revenues and a 310-basis-point expansion in our operating margin that drove a 71% increase in our diluted earnings per share.
With a robust 2021 ending backlog value of nearly $5 billion and 29% year-over-year expansion in the number of lots owned or controlled, we are well-positioned for continued meaningful growth in revenues, community count, earnings per share, and returns in 2022.
In the fourth quarter, our housing revenues of $1.66 billion were up 39% from a year ago, reflecting a 28% increase in homes delivered and a 9% increase in their overall average selling price.
Housing revenues were up significantly in all four of our regions, ranging from a 28% increase in the Central region to 114% in the Southeast.
For the 2022 first quarter, we expect to generate housing revenues in the range of $1.43 billion to $1.53 billion.
For the 2022 full year, assuming no change in supply chain dynamics, we are forecasting housing revenues in the range of $7.2 billion to $7.6 billion, up over $1.7 billion or 30% at the midpoint as compared to 2021.
Having ended our 2021 fiscal year with our highest year-end backlog level since 2005, along with our expectations for a higher community count and continued strong housing market conditions, we believe we are well-positioned to achieve this top-line performance for 2022.
In the fourth quarter, our overall average selling price of homes delivered increased to approximately $451,000.
Reflecting our higher average selling price per net order in recent quarters, we are projecting an average selling price of approximately $472,000 for the 2022 first quarter.
For the 2022 full year, we believe our overall average selling price will be in the range of $480,000 to $490,000.
Homebuilding operating income for the fourth quarter totaled $214.4 million, up 85% as compared to $115.7 million for the year-earlier quarter.
The current quarter included inventory-related charges of approximately $700,000 versus $11.7 million a year ago.
Our operating margin was 12.8%, up 310 basis points from the 2020 fourth quarter.
Excluding inventory-related charges, our operating margin was 12.9% as compared to 10.7% a year ago, reflecting improvements in both our gross margin and SG&A expense ratio.
We anticipate our 2022 first quarter homebuilding operating income margin, excluding the impact of any inventory-related charges, will be approximately 12%, compared to 10.4% for the year-earlier quarter.
For the 2022 full year, we expect this metric to be in the range of 15.7% to 16.5%, which represents a significant year-over-year improvement of 450 basis points at the midpoint, reflecting continued positive momentum in both our gross margin and SG&A expense ratio.
Our 2021 fourth-quarter housing gross profit margin improved 230 basis points from the year-earlier quarter to 22.3%.
Excluding inventory-related charges, our gross margin for the quarter reflected a year-over-year increase of 140 basis points to 22.4%.
We are forecasting a housing gross profit margin for the first quarter in the range of 22% to 22.6%, representing the low point for the year.
For the full year, we expect this metric will be in the range of 25.4% to 26.2%, an increase of 400 basis points at the midpoint as compared to 2021.
Our selling, general, and administrative expense ratio of 9.8% for the fourth quarter improved 50 basis points from a year ago, mainly reflecting enhanced operating leverage due to higher revenues, partly offset by increased performance-based compensation expenses and costs to support our expanding scale.
We are forecasting our 2022 first quarter SG&A ratio to be approximately 10.4%, an improvement of 30 basis points versus the prior year as expected favorable leverage impact from an anticipated year-over-year increase in housing revenues are partially offset by increased investments in personnel and other resources to support a projected meaningful expansion in community count.
We expect that our 2022 full-year SG&A expense ratio will be in the range of 9.4% to 9.9%.
Our income tax expense of $49.7 million for the fourth quarter, which represented an effective tax rate of approximately 22%, was favorably impacted by $7 million of federal energy tax credits, reflecting another benefit of our industry-leading sustainability initiatives.
We currently expect our effective tax rate for the 2022 first quarter and full year to be approximately 25%, both excluding any favorable impacts from energy tax credits.
If the Section 45L tax credit is extended at its current level, our 2022 effective tax rate would be favorably impacted by approximately 200 basis points.
Overall, we reported net income of $174.2 million or $1.91 per diluted share for the fourth quarter, a notable improvement from $106.1 million or $1.12 per diluted share for the prior-year period.
We increased our housing revenues by 37% to nearly $5.7 billion, expanded our operating margin by 400 basis points to 11.6% with measurable improvements in both our gross margin and SG&A expense ratio, and reported $6.01 of diluted earnings per share, an increase of 92%.
We also completed $188 million of share repurchases, refinanced $390 million of our senior notes, resulting in annualized savings of $16 million of incurred interest, and improved our year-end leverage ratio by 380 basis points.
Our fourth quarter average of 214 was down 9% from 234 in the corresponding 2020 quarter and up 4% sequentially.
We ended the year with 217 communities down 8% from a year ago and up 3% sequentially.
We anticipate ending the year with a 20% to 25% increase in our community count, supporting additional top-line growth in 2023 and beyond.
During the fourth quarter, to drive future community openings, we invested $622 million in land and land development with $258 million or 41% of the total representing land acquisitions.
In 2021, we invested over $2.5 billion in land acquisition development, compared to $1.7 billion in the previous year.
At year-end, our total liquidity was approximately $1.1 billion including $791 million of available capacity under our unsecured revolving credit facility.
Our debt-to-capital ratio improved to 35.8% at year-end 2021, compared to 39.6% the previous year.
Our 2021 year-end stockholders' equity was $3.02 billion as compared to $2.67 billion a year ago, and our book value per share increased by 18% to $34.23.
Finally, one of the most notable 2021 achievements was our significant improvement in return on equity to 19.9% for the full year, a year-over-year expansion of over 800 basis points.
In summary, using the midpoints of our guidance ranges, we expect a 30% year-over-year increase in housing revenues and significant expansion of our operating margin to 16.1% driven by improvements in both gross margin and our SG&A expense ratio.
These in turn should drive our return on equity of over 26% up and excess of 600 basis points from 19.9% in 2021.

Summary:
We had a remarkable year in 2021, producing revenue growth in excess of 35% and an increase in our earnings per share of more than 90%.
With respect to the fourth quarter, we generated total revenues of $1.7 billion and diluted earnings per share of $1.91, representing a year-over-year increase of more than 70% on the bottom line.
We achieved an operating income margin approaching 12%, resulting in a 28% expansion in our operating profit per unit to over $56,000.
In the fourth quarter, our housing revenues of $1.66 billion were up 39% from a year ago, reflecting a 28% increase in homes delivered and a 9% increase in their overall average selling price.
For the 2022 full year, we believe our overall average selling price will be in the range of $480,000 to $490,000.
Overall, we reported net income of $174.2 million or $1.91 per diluted share for the fourth quarter, a notable improvement from $106.1 million or $1.12 per diluted share for the prior-year period.