M.D.C. Holdings posted another quarter of strong operating results, highlighted by year-over-year home sales revenue growth of 33%, homebuilding operating margin expansion of 370 basis points and net income growth of 96%.
Net new order growth for the quarter increased 73% as compared to last year on a sales pace of 6.1 homes per community per month.
According to the National Association of Realtors, total housing inventory at the end of September totaled 1.4 million units, which was down 19% from a year ago and represents less than a three-month supply of homes.
Anthony Berris has been promoted to President of our Financial Service operations.
David has been associated with the Company since 1977, most recently as our President and Chief Operating Officer.
David will be participating with me in our earning calls going forward.
We experienced strong topline growth for the quarter as home sale revenues increased by 33% year-over-year to $1 billion.
Homebuilding operating margin improved by 370 basis points from the prior year quarter, resulting in a 109% increase in pre-tax income from our homebuilding operations to $101.7 million.
In addition, our financial services pre-tax income increased $10.3 million, or 73%.
As a result, net income increased 96% to $98.9 million, or $1.49 per diluted share for the third quarter of 2020.
Our tax rate increased from 19.5% to 21.5% for the 2020 third quarter.
For the fourth quarter, we currently estimate a 25% tax rate, excluding any discrete items.
Homes delivered increased 25% year-over-year to 2,147, driven by an increase in the number of homes we had in backlog to start the quarter, and to a lesser extent, an increase in our backlog conversion rate.
The average selling price of homes delivered during the quarter increased 6% to about $466,000.
The increase was the result of price increases implemented across the majority of our communities over the past 12 months, as well as a shift in the mix of homes closed from Nevada to Southern California.
We are anticipating home deliveries for the fourth quarter of 2020 to reach between 2,400 and 2,600 units.
We expect the average selling price for 2020 fourth quarter unit deliveries to again exceed $460,000.
Gross margin from home sales improved by 170 basis points year-over-year to 20.5%.
Gross margin from home sales for the 2020 fourth quarter is expected to approach 21%, excluding impairments and warranty adjustments.
We continued to demonstrate solid operating leverage during the third quarter as our SG&A expense as a percentage of home sale revenues decreased 200 basis points year-over-year to 10.4%.
Our total dollar SG&A expense for the 2020 third quarter increased $10.9 million year-over-year, mostly due to variable commissions and marketing expenses that increased in line with our 33% increase in home sale revenues during the period.
Our overall headcount has increased by 5% year-over-year as we work to support the Company's strong growth trajectory.
For the fourth quarter of 2020, we may see our general and administrative expense increase to between $50 million and $55 million due to the 5% year-over-year increase in headcount I just mentioned, additional bonus accruals in line with strong operating results, and a potential charitable contribution to our Foundation.
As I previously mentioned, as a result of the continued expansion of our gross margin and our improved operating leverage, our homebuilding operating margin, defined as gross margin from home sales minus our SG&A rate, grew by 370 basis points year-over-year to 10.1%.
On the strength of this improvement, our last 12 months pre-tax return on equity increased 560 basis points year-over-year to 21.8%, which is our highest level in 15 years.
The dollar value of our net orders increased 89% year-over-year to $1.65 billion, and unit net orders increased by 73%, driven by a 70% increase in our monthly absorption rate to 6.1.
The average selling price of our net orders increased by 10% year-over-year, driven by price increases implemented over the past 12 months, as well as a shift in mix to California, which has our highest average price.
I'd like to note that we ended the quarter with 194 active subdivisions, which is slightly higher than a year ago.
As a result, we anticipate roughly 185 active subdivisions at year-end.
Based on the activity we've seen to date, we expect our October 2020 net orders to exceed our October 2019 orders by at least 50%.
As a result of our strong sales, we ended the quarter with an estimated sales value for our homes in backlog of $3.1 billion, which was up 47% year-over-year.
The average selling price of homes in backlog increased 4% due to price increases implemented over the past 12 months, decreased incentives, and a shift in mix to California.
The number of lots we acquired this quarter increased 63% year-over-year, reflecting our confidence in market conditions and our focus on continuing to grow our business.
While the number of lots we approved earlier this year were down due to the uncertainty created by COVID-19, we approved over 3,800 lots for purchase during the third quarter of 2020.
In the end, in spite of immense volatility, the number of lots approved over the last 12 months has increased by 34% compared to the prior year period.
As a result, our total lot supply to end the quarter was 8% higher than at the same point in 2019, supporting our growth potential for future periods.
With our strong balance sheet and current land pipeline, we are well positioned to grow community count significantly in 2021 and have a preliminary target of at least 10,000 home deliveries for the coming fiscal year.
Following our strong third quarter, our Board of Directors has declared a 21% increase in the quarterly cash dividend from $0.33 to $0.40 per share.
This represents a 33% increase from the prior year and demonstrates our commitment to rewarding our shareholders for their continued support.

Summary:
Anthony Berris has been promoted to President of our Financial Service operations.
David will be participating with me in our earning calls going forward.
We experienced strong topline growth for the quarter as home sale revenues increased by 33% year-over-year to $1 billion.
As a result, net income increased 96% to $98.9 million, or $1.49 per diluted share for the third quarter of 2020.
The average selling price of homes delivered during the quarter increased 6% to about $466,000.
We are anticipating home deliveries for the fourth quarter of 2020 to reach between 2,400 and 2,600 units.
We expect the average selling price for 2020 fourth quarter unit deliveries to again exceed $460,000.
The dollar value of our net orders increased 89% year-over-year to $1.65 billion, and unit net orders increased by 73%, driven by a 70% increase in our monthly absorption rate to 6.1.
As a result of our strong sales, we ended the quarter with an estimated sales value for our homes in backlog of $3.1 billion, which was up 47% year-over-year.
Following our strong third quarter, our Board of Directors has declared a 21% increase in the quarterly cash dividend from $0.33 to $0.40 per share.