These strategic supply side partnerships and our operating model focus on spec homes and limited SKUs, allowed us to deliver 3,112 homes, which set the company record for the highest third quarter of home closings.
We also set two additional quarterly company records: we generated the highest quarterly home closing gross margin of 29.7% in company history as a result of pricing power, more than offsetting the elevated lumber and other commodity costs; and our quarterly diluted earnings per share of $5.25 was the highest in our company's history.
As of September 30, 2021, we had 236 ending communities and remain confident in our ability to achieve our goal of 300 communities by mid-2022.
Overall, it was another successful quarter, where our teams and supplier relationships helped Meritage deliver 3,112 homes.
Although order ASP grew 12% year-over-year, we experienced a deceleration in ASP growth sequentially this quarter, and the new product we'll be bringing on in 2022 and 2023 will allow us to continue repositioning our future communities down the ASP band.
Even still, our average absorption pace remained elevated at 5.0 per month.
Our third quarter closings totaled 3,112 homes.
They were up 4% over the prior year.
Entry-level comprised 78% of closings, up from 63% in the prior year.
For us, Q3 of last year was the quarterly peak of the surging housing demand since the start of COVID-19, resulting in our all-time highest third quarter absorption pace of 5.8 sales per month.
As a result, the total orders of 3,441 for the quarter of 2021 reflected a decrease of 11% year-over-year, driven by a 15% decline in average absorption pace that was partially offset by a 5% increase in average communities.
Entry-level comprised over 80% of quarterly orders, up from nearly 70% in the third quarter of last year.
Entry-level also represented 77% of our average active communities compared to 60% a year ago.
Our central region, which is comprised of Texas, led in terms of average absorption pace with 5.4 sales per month this quarter, which was 14% lower than prior year.
This decline was partially offset by a 5% greater average active communities, which together contributed to a 10% decline in order volume.
Third quarter order ASP increased 20% year-over-year given solid market conditions in Texas.
Our east region with the highest entry-level product mix with -- representing 80% of the average community was the only region to generate year-over-year growth in order volume of 3% despite metering as a result of an 8% increase in average active communities in the third quarter, which offset a 4% decrease in average absorption pace.
South Carolina opened several new communities later in the third quarter, which resulted in a 3.7 average absorption pace in the third quarter.
This was our lowest absorption pace in the company's quarter, despite South Carolina's orders increasing 11% over prior year.
The west region's third quarter 2021 order volume had our largest decline at 24% year-over-year, mainly due to 25% lower average absorption pace to 4.9 per month.
Specifically, Arizona reduced its absorption pace from 6.5 per month in Q3 of 2020 to 4.8 per month this quarter as a result of supply chain challenges.
Colorado remained the lowest percentage of entry-level mix at 48% of its average active communities this quarter.
During the third quarter, California had the highest average absorption pace of all our states at 5.6 per month.
Given 100% of the average active communities are entry-level there, we continue to focus on affordability, particularly as it's our most expensive geography.
The third quarter order ASP increased 15% year-over-year in the west region.
Arizona and Colorado had the largest increase in order ASP in all our states at 26%.
Of our home closings this quarter, 74% came from previously started spec inventory, which increased from 71% a year ago.
We ended the quarter with nearly 2,100 spec homes in inventory or an average of 11.7 homes per community as we push to get homes in the ground.
This was an important improvement from approximately 2,300 specs or an average of 11.2 in the third quarter of 2020.
At September 30, 2021, less than 5% of the total specs were completed versus our typical run rate of 1/3.
Having available spec is crucial to our business model, but even as we started over 3,400 homes this quarter, maintaining our goal of a four to six-month supply of entry-level spec has been challenging.
We ended the quarter with a backlog of over 1,500 units as our conversion rate declined from 68% last year to 57% this year due to supply delays.
We have been benefiting from our 100% spec building strategy for entry-level homes.
The 10% year-over-year home closing revenue growth to $1.3 billion in the third quarter of 2021 was the result of the 4% increase in home closings and 7% higher closing ASP despite the mix shift to more entry-level products.
The 820 bp improvement in third quarter 2021 home closing gross margin to 29.7% from 21.5% a year ago was driven by the price increases over the past several quarters as well as the leveraging of our fixed costs on greater home closing revenue.
Once we're fully selling and closing from all 300 communities in 2022, we will be able to leverage the higher fixed overhead costs across the corresponding higher revenue.
Our SG&A leverage of 9.3% remained better than our 10% expectation and continued to benefit from both greater closing volumes and higher ASPs.
The 80 bps year-over-year improvement and SG&A leverage from 10.1% in the third quarter of 2020 also included lower brokerage commissions in 2021 and cost savings from technology innovations that particularly benefited our sales and marketing efforts.
The third quarter 2021's effective income tax rate was 23.3% compared to 19.5% in the prior year.
Higher closing volume, pricing power, expanded gross margin and the improved overhead leverage that we achieved this quarter all led to the 85% year-over-year increase in third quarter diluted earnings per share of $5.25.
To highlight a few year-to-date results through September 30, 2021, on a year-over-year basis, we generated an 85% increase in net earnings, orders decreased 1%, closing were up 15%, we had a 640 bp expansion of our home closing gross margin to 27.4%, and SG&A as a percentage of home closing revenue improved 90 bps to 9.4%.
At September 30, 2021, our cash balance was $562 million compared to $746 million at December 30, 2020.
It was down just $184 million despite an $815 million increase in real estate assets over the same time.
Our net debt-to-cap ratio of 17.5% at September 30, 2021, remained low.
We repurchased over 95,000 shares during the quarter for $9.5 million.
Since the end of the quarter, we repurchased an additional nearly 244,000 shares for another $24 million.
Today, over $153 million remains in our share repurchase authorization program.
We expect cash generation to accrete once our 300 communities are operating and delivering homes in the back half of 2022.
Our land book increased 46% from September 30, 2020.
With nearly 70,000 lots under control at the end of this quarter, we had 5.4 years supply of lots based on trailing 12-month closings, which was higher than our target range of four to five-year supply of lots under control.
However, looking forward to the closing volume that we would generate once our 300 communities are actively selling in the middle of next year, the ratio drops back to our four to five year objective.
We secured about 9,800 net new lots this quarter compared to approximately 9,000 in the same quarter of 2020.
These new lots will translate to an estimated 45 net new communities, of which 87% are entry-level with an average community size of 196 lots.
In fact, our year-to-date finished lot cost for newly controlled lots is right around $75,000 a lot.
During the third quarter of 2021, we continued to make excellent progress in our land development despite municipal delays and supply chain constraints, and we opened 40 new communities.
We grew our community count by 10 net communities from 226 at the start of the quarter to 236 actively selling communities at the end of the quarter.
On a year-over-year basis, we were also up 16% or 32 net communities from 204 at September 30, 2020.
We spent $526 million on land acquisition and development this quarter, which was 76% higher than last year's Q3 spending of nearly $300 million.
We continue to expect our annual land acquisition and development to be about $2 billion in 2021 and thereafter.
About 64% of our total lot inventory at September 30, 2021, was owned and 36% was optioned compared to 58% owned and 42% option at September 30, 2020.
With more than 5,800 units in backlog and another almost 2,800 specs in the ground today, we are projecting 12,600 to 12,900 home closings for the full year of 2021, which we anticipate will generate $5.05 billion to $5.15 billion in home closing revenue.
We are lifting our full year 2021 guidance on home closing gross margin, which we now anticipate will be between 27.5% to 27.75%.
With an increase to the projected effective tax rate to 23%, we expect diluted earnings per share to be in the range of $18.75 to $19.40 for 2021, a year-over-year increase of over 70%.
For year-end 2021, we also anticipate around 250 active communities.
We are reiterating our commitment to 300 communities by June 2022, with around $2 billion of land acquisition and development spend projected for next year as well.
The continued significant investment in land acquisition and development as well as the meaningful growth in community count over the past two quarters to 236 communities as of September 30 demonstrates our ability to attain our strategic goal of 300 communities by mid-2022.

Summary:
We also set two additional quarterly company records: we generated the highest quarterly home closing gross margin of 29.7% in company history as a result of pricing power, more than offsetting the elevated lumber and other commodity costs; and our quarterly diluted earnings per share of $5.25 was the highest in our company's history.
The 10% year-over-year home closing revenue growth to $1.3 billion in the third quarter of 2021 was the result of the 4% increase in home closings and 7% higher closing ASP despite the mix shift to more entry-level products.
Higher closing volume, pricing power, expanded gross margin and the improved overhead leverage that we achieved this quarter all led to the 85% year-over-year increase in third quarter diluted earnings per share of $5.25.
With more than 5,800 units in backlog and another almost 2,800 specs in the ground today, we are projecting 12,600 to 12,900 home closings for the full year of 2021, which we anticipate will generate $5.05 billion to $5.15 billion in home closing revenue.
With an increase to the projected effective tax rate to 23%, we expect diluted earnings per share to be in the range of $18.75 to $19.40 for 2021, a year-over-year increase of over 70%.