PART I

Special Note of Caution Regarding Forward-Looking Statements

Certain information included in this report or in other materials we have filed or will file with the Securities and Exchange Commission (the “SEC”) (as well as information included in oral statements or other written statements made or to be made by us) contains or may contain forward-looking statements, including, but not limited to, statements regarding our future financial performance and financial condition.  Words such as “expects,” “anticipates,” “envisions,” “targets,” “goals,” “projects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” variations of such words and similar expressions are intended to identify such forward-looking statements.  These statements involve a number of risks and uncertainties.  Any forward-looking statements that we make herein and in future reports and statements are not guarantees of future performance, and actual results may differ materially from those in such forward-looking statements as a result of various risk factors. Please seeSee “Item 1A. Risk Factors” in Part I of this Annual Report on Form 10-K for more information regarding those risk factors.

Any forward-looking statement speaks only as of the date made. Except as required by applicable law, we undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. However, any further disclosures made on related subjects in our subsequent reports on Forms 10-K, 10-Q and 8-K should be consulted.  This discussion is provided as permitted by the Private Securities Litigation Reform Act of 1995, and all of our forward-looking statements are expressly qualified in their entirety by the cautionary statements contained or referenced in this section.

Item 1. BUSINESS

General

M/I Homes, Inc. and subsidiaries (the “Company,” “we,” “us” or “our”) is one of the nation’s leading builders of single-family homes. The Company was incorporated, through predecessor entities, in 1973 and commenced homebuilding activities in 1976, with 2016 marking our 40th year of business.1976. Since that time, the Company has sold over 100,000118,200 homes.

Our homebuilding operations comprise the most substantialsignificant portion of our business, representing 98% of consolidated revenue in 2016both 2019 and 97% in 2015.2018. We design, market, construct and sell single-family homes and attached townhomes to first-time, move-up, empty-nester, and luxury buyers. In addition to home sales, our homebuilding operations generate revenue from the sale of land and lots. We use the term “home” to refer to a single-family residence, whether it is a single-family home or other type of residential property,attached home, and we use the term “community” to refer to a single development with a unique product type, or, at times, “communities” to refer to a single development with multiple product types, in which we construct homes. We primarily construct homes in planned development communities and mixed-use communities. We are currently offering homes for sale in 178225 communities within 15 markets located in nineten states. Our average sales price of homes delivered during 20162019 was $359,000,$384,000, and the average sales price of our homes in backlog at December 31, 20162019 was $380,000.$396,000. We offer homes ranging from a base sales price of approximately $170,000$180,000 to $1,200,000$1,000,000 and believe that this range of price points allows us to appeal to and attract a wide range of buyers. We further believe that we distinguish ourselves from competitors by offering homes in select areas with a high level of design and construction quality, within a given price range, providing superior customer service and offering mortgage and title services in order to fully serve our customers. In our experience, our product offerings and customer service make the homebuying process more efficient for our customers.

Our financial services operations generate revenue primarily from originating and selling mortgages and collecting fees for title insurance and closing services. We offer mortgage banking services to our homebuyers through our 100%-owned subsidiary, M/I Financial, LLC (“M/I Financial”). We offer title services through subsidiaries that are either 100% or majority owned by the Company. Our financial services operations accounted for 2% of our consolidated revenues in 2016both 2019 and 3% in 2015.2018. See the “Financial Services” section below for additional information regarding our financial services operations.

Our principal executive offices are located at 3 Easton Oval, Suite 500, Columbus, Ohio 43219. The telephone number of our corporate headquarters is (614) 418-8000 and our website address is www.mihomes.com. Information on our website is not a part of and shall not be deemed incorporated by reference in this Form 10-K.

Markets

OurFor reporting purposes, our 15 homebuilding divisions are aggregated into the following three segments for reporting purposes:two segments:

We believe we have experienced management teams in each of our divisions with local market expertise. Our business requires in-depth knowledge of local markets to acquire land in desirable locations and on favorable terms, engage subcontractors, plan communities that meet local demand, anticipate consumer tastes in specific markets, and assess local regulatory environments. Although we centralize certain functions (such as accounting, human resources, legal, land purchase approval, and risk management) to benefit from economies of scale, our local management, generally under the direction of an Area President and supervised by a Region President, exercises considerable autonomy in identifying land acquisition opportunities, developing and implementing product and sales strategies, and controlling costs.

Industry Overview and Current Market Conditions

Housing market conditions were generally favorable during 2019, as evidenced by our strong results. We believe that many of the fundamentals supporting continued growth in 2016 as demand for new homes improved, reflecting positive underlying demographic and economic trends,remain favorable, including historically low interestmortgage rates, and improvedhigh consumer confidence, highergrowth in employment, levels in mostwage increases, and a limited supply of new and existing homes. Company-wide, our markets and modest wage growth. Despite the increases in interest rates forecasted by the Federal Reserve, we expect continued modest improvement in the overall housing market in 2017 driven by these factors, accelerating household formation, improving own-versus-rent dynamics, and attractive home affordability relativeabsorption pace of sales per community for 2019 improved to income levels. According to the U.S. Census Bureau, new home sales increased in 2016 with 563,000 new homes sold in the United States2.6 per month compared to 501,000 sold2.4 per month in 20152018. However, as a result of the growth in our more affordable Smart Series, primarily designed for entry-level and 435,000 soldmove-down homebuyers, our average sales price in 2014, and we expect new home sales to continue to increasebacklog declined in 2017. The number of housing permits issued in the United States also increased to an estimated 1,187,000 in 2016 compared to 1,178,000 in 2015 and 1,033,000 in 2014.2019 by 3%.

Business Strategy

We believe that we are well-positioned to further improveremain focused on increasing our profitability and results in 2017 as a result ofby generating additional revenue, continuing to expand our market expansions into Texasshare, shifting our product mix to include more affordable designs, and most recently, Minneapolis/St. Paul, Minnesota and Sarasota, Florida, our competitive positionsinvesting in our other markets, and our plannedattractive land opportunities to increase in our number of average active communities in 2017.communities. Consistent with our focus on improving long-term financial results, we expect to continue to emphasize the following strategic business objectives in 2017:2020:

However, we can provide no assurance that the positive trends reflected in our financial and operating metrics in 20152018 and 20162019 will continue in 2017.2020.

Sales and Marketing

During 2016,2019, we continued to focus our marketing efforts on first-time and move-up homebuyers, including home designs targeted to first-time, millennial and empty-nester homebuyers. We market and sell our homes primarily under the M/I Homes and Showcase

We provide our homebuyers with the following products, programs and services which we believe differentiate our brand: (1) homes with high quality construction located in attractive areas and desirable communities that are supported by our industry leading15-yearleading transferable structural warranty, which is a 15-year warranty in all of our markets other than Texas and a 10-year transferable structural warranty in our Texas markets; (2) fully furnished model homes and highly-trained sales consultants to build the buyer’s confidence and enhance the quality of the homebuying experience; (3) our Whole Home Building Standards which are designed to deliver features and benefits that satisfy the buyer’s expectation for a better-built home, including a more eco-friendly and energy efficient home that we believe will generally save our customers up to 30% on their energy costs compared to a home that is built to minimum code requirements; (4)(3) our StyleSmart Design CentersStudios and StyleSmart Design Consultants that assist our homebuyers in selecting product and design options; (4) fully furnished model homes and highly-trained sales consultants to build the buyer’s confidence and enhance the quality of the homebuying experience; (5) our mortgage financing programs that we offer through M/I Financial, including competitive fixed-rate and adjustable-rate loans; (6) our Ready Now Homes program which offers homebuyers the opportunity to close on certain new homes in 60 days or less; and (7) our unwavering focus on customer care and customer satisfaction.

By offering Whole Home Energy-Efficient Homes to our customers, we enable our homebuyers to save on their energy costs (the second largest cost of home ownership) compared to a home that is built to minimum code requirements. We use independent RESNET-Certified Raters and the HERS (Home Energy Rating System) Index, the national standard for energy efficiency, to measure the performance of our homes, including insulation, ventilation, air tightness, and the heating and cooling system. Our divisions’ average scores are generally lower (and, therefore, better) than the Environmental Protection Agency’s Energy Star target standard of 72-75 or the average score for a resale home (130 or higher).

We also invest in designing and decorating fully-furnished and distinctive model homes intended to create an atmosphere reflecting how people live today and help our customers imagine the possibilities for a “home of their own, -- just the way they dreamed it.” We also carefully select the interior decorating and design of our model homes to reflect the lifestyles of our prospective buyers. We believe these models showcase our homes at their maximum livability and potential and provide ideas and inspiration for our customers to incorporate valuable design options into their new home.

Our company-employed sales consultants are trained and prepared to meet the buyer’s expectations and build the buyer’s confidence by fully explaining the features and benefits of our homes, helping each buyer determine which home best suits theirthe buyer’s needs, explaining the construction process, and assisting the buyer in choosing the best financing option. Significant attention is given to the ongoing training of all sales personnel to assure a high level of professionalism and product knowledge. As of December 31, 2016,2019, we employed 197248 home sales consultants.

We also offer specialized mortgage financing programs through M/I Financial to assist our homebuyers. We offer conventional financing options along with programs offered by the Federal Housing Authority (“FHA”), U.S. Veterans Administration (“VA”), United States Department of Agriculture (“USDA”) and state housing bond agencies. M/I Financial offers our homebuyers “one-stop” shopping by providing mortgage and title services for the purchase of their home, which we believe saves our customers both time and money. By working with many of the major mortgage providers in the country, we aimseek to offer our homebuyers unique programs with below-market financing options that are more competitive than what homebuyers could obtain on their own. With respect to title services, the Company’s title subsidiaries work closely with our homebuilding divisions so that we are able to provide an organized and efficient home delivery process.

We also build inventory homes in most of our communities to offer homebuyers the opportunity to close on certain new homes in 60 days or less. These homes enhance our marketing and sales efforts to prospective homebuyers who require a home delivery within a short time frame.frame and allow us to compete effectively with existing homes available in the market. We determine our inventory homes strategy in each market based on local market factors, such as job growth, the number of job relocations, housing

demand and supply, seasonality and our past experience in the market. We maintain a level of inventory homes in each community based on our current and planned sales pace, and we monitor and adjust inventory homes on an ongoing basis as conditions warrant.

Finally, we believe our ultimate differentiator comes from the principles our company was founded upon -- integrity and delivering superior customer service and a quality product. Our customer satisfaction scores are measured by an independent third-party company at both 30 days and 6 months after delivery to hold us accountable for building a home of the highest quality.

We market our homes using digital and traditional media such as newspapers, magazines, direct mail, billboards, radio and television.media. The particular media used differs from market to market based on area demographics and other competitive factors. In recent years, we have also significantly increased the reach ofWe market directly to consumers via newspaper, direct mail, billboards, radio, and television as well as internet marketing using our website, through enhanced search engine optimization, paid search, and search engine marketing.display advertising. We also have increased the number ofleverage our presence on referral sites, such as Zillow.com and Trulia.com, that we useNewHomeSource.com, to drive sales leads to our internet sales associates.  We also use email marketing to maintain communication with existing prospects and database marketing, which have become an increasingly important part of our marketing.customers. We use our social media presence to communicate to potential homebuyers the experiences of customers who have purchased our homes and to provide social content about our homes and design features. In the last five years, we have experienced a significant increase in sales demand from buyers who initially identified us online.

Our residential communities are generally located in suburban areas that are easily accessible through public and personal transportation. Our communities are designed as neighborhoods that fit existing land characteristics. We strive to achieve diversity among architectural styles within a community by offering a variety of house models and several exterior design options for each model andmodel. We also preserve existing trees and foliage whenever practicable. Normally, homes of the same type or color may not be built next to each other. We believe our communities have attractive entrances with distinctive signage and landscaping and that our added attention to community detail avoids a “development” appearance and gives each community a diversified neighborhood appearance.

We offer homes ranging from a base sales price of approximately $170,000$180,000 to $1,200,000$1,000,000 and from approximately 1,2001,100 to 5,2005,500 square feet. In addition to single-family detached homes, we also offer attached townhomes in someseveral of our markets. By offering a wide range of homes, we are able to attract first-time, millennial, move-up, empty-nester and luxury homebuyers. It is our goal to sell more than one home to our buyers, and we believe we have had success in this strategy.

We devote significant resources to the research, design and development of our homes to meet the demands of our buyers and evolving market requirements. Across all of our divisions, we currently offer over 700600 different floor plans designed to reflect current lifestyles and design trends. Our Showcase Collection is designed forWe continue to change and update our move-upplan portfolio based on trends and luxury homebuyers and offers more design options, larger floor plans, and a higher-end product line of homes in upscale communities.market conditions. In addition, we are developingcontinuing to develop new floor plans and communities specifically for the growing empty-nester market. These plans (primarily ranch and main floor master bedroom type plans) focus on move-down buyers, are smaller in size, and feature outdoor living potential, fewer bedrooms, and better community amenities. Our homebuilding divisions often share successful plans with other divisions, when appropriate.

We have also recently developed a series of efficient plans with smaller square footage to target a more affordable sales price in certain locations in somesuccessfully implemented our “Smart Series” across all of our markets, while maintaining high quality designdivisions and features.  We are beginningit represented approximately 30% of our total sales as of December 31, 2019. Our “Smart Series” is intended to introduce these more affordable plans in certain communities in 2017.offer buyers excellent value, great locations, and pre-selected packages of upgraded finishes and appliances. Our primary market remains move-up“Smart Series” targets entry-level and move-down buyers and as a result, we focusfocuses significant attention on current trends,affordability, livability and offering some design flexibility to our customers. This series has become an important and successful part of our overall product lineup.

We have value-engineereddesign all of our product lines to reduce production costs and construction cycle times while adhering to our quality standards and using materials and construction techniques that reflect our commitment to more environmentally conscious homebuilding methods. One of our core values is to offer homes that reflect current design and lifestyle trends. Our homebuilding divisions share successful plans with other divisions, when appropriate.

vendors. Our homes are constructed according to standardized prototypes which are designed and engineered to provide innovative product design while attempting to minimize costs of construction and control product consistency and availability. We generally employ subcontractors for the installation of site improvements and the construction of homes. The construction of each home is supervised by a Personal Construction Supervisor who reports to a Production Manager, both of whom are employees of the Company. Our Personal Construction Supervisors manage the scheduling and construction process. Subcontractor work is performed pursuant to written agreements that require our subcontractors to comply with all applicable laws and labor practices, follow local building

We begin construction on a majority of our homes after we have obtained a sales contract and preliminary oral confirmation from the buyer’s lender that financing should be approved. In certain markets, contracts may be accepted contingent upon the sale of an existing home, and construction may be authorized through a certain phase prior to satisfaction of that contingency. The construction of our homes typically takes approximately four to six months from the start of construction to completion of the home, depending on the size and complexity of the particular home being built, weather conditions, and the availability of labor, materials, and supplies. We also construct inventory homes (i.e., homes started in the absence of an executed contract) to facilitate delivery of homes on an immediate-need basis under our Ready Now Homes program and to provide presentation of new products. For some prospective buyers, selling their existing home has become a less predictable process and, as a result, when they sell their home, they often need to find, buy and move into a new home in 60 days or less. Other buyers simply prefer the certainty provided by being able to fully visualize a home before purchasing it. Of the total number of homes closed in 20162019 and 2015, 48%2018, 49% and 52%45%, respectively, were inventory homes which include both homes started as inventory homes and homes that started under a contract that were later cancelled and became inventory homes as a result.

Backlog

We sell our homes under standard purchase contracts, which generally require a homebuyer deposit at the time of signing the contract. The amount of the deposit varies among markets and communities. We also generally require homebuyers to pay additional deposits when they select options or upgrades for their homes. Most of our home purchase contracts stipulate that if a homebuyer cancels a contract with us, we have the right to retain the homebuyer’s deposits. However, we generally permit our homebuyers to cancel their obligations and obtain refunds of all or a portion of their deposits (unless home construction has started) in the event mortgage financing cannot be obtained within the period specified in their contract to maintain goodwill with the potential buyer.

Backlog consists of homes that are under contract but have not yet been delivered. Ending backlog represents the number of homes in backlog from the previous period plus the number of net new contracts (new contracts for homes less cancellations) generated during the current period minus the number of homes delivered during the current period. The backlog at any given time will be affected by cancellations. Due to the seasonality of the homebuilding industry, the number of homes delivered has historically increased from the first to the fourth quarter in any year.

As of December 31, 2016,2019, we had a total of 1,8042,671 homes in backlog with $685.5 millionan aggregate sales value in backlogof $1,058 million, in various stages of completion, including homes that are under contract but for which construction had not yet begun. As of December 31, 2015,2018, we had a total of 1,5312,194 homes in backlog, with $569.4 millionan aggregate sales value in backlog.of $896.7 million . Homes included in year-end backlog are typically included in homes delivered in the subsequent year.

Warranty

We provide certain warranties in connection with our homes and also perform inspections with the buyer of each home immediately prior to delivery and as needed after a home is delivered. The Company offers both a transferable limited warranty program (“Home Builder’s Limited Warranty”) and a transferable structural limited warranty. The Home Builder’s Limited Warranty covers construction defects for a statutory period based on geographic market and state law (currently ranging from five to ten years for the states in which the Company operates) and includes a mandatory arbitration clause. The structural warranty is for 10 or 15 years for homes sold after December 1, 2015 and 10 or 30 years for homes sold after April 25, 1998 and on or before December 1, 2015. We also pass along to our homebuyers all warranties provided by the manufacturers or suppliers of components installed in each home. Although our subcontractors are generally required to repair and replace any product or labor defects during their respective warranty periods, we are ultimately responsible to the homeowner for making such repairs during our applicable warranty period. Accordingly, we have estimated and established reserves for both our Home Builder’s Limited Warranty and potential future structural warranty costs based on the number of home deliveries and historical data trends for our communities. In the case of the structural warranty, we also employ an actuary to assist in the determination of our future costs on an annual basis. Our warranty expense (excluding stucco-related repair costs in certain of our Florida communities in 2018 and 2017 (as more fully

Land Acquisition and Development

We continuously evaluate land acquisition opportunities in the normal course of our homebuilding business, and we focus on both the replenishment ofreplenishing our lot positions and adding to our lot positions in key submarkets to expand our market share. Our goal is to maintain an approximate three to five-year supply of lots, including lots controlled under option contracts and purchase agreements, which we believe provides an appropriate horizon for addressing regulatory matters and land development and the subsequent build-out of the homes in each community, and allows us to manage our business plan for future home deliveries.

We seek to meet our need for lots by obtaining advantageous land positions in desirable locations in a cost effective manner that is responsive to market conditions and maintains our financial strength and liquidity. Before acquiring land, we complete extensive comparative studies and analyses, which assist us in evaluating the economic feasibility of theeach land acquisition. We consider a number of factors, including projected rates of return, estimated gross margins, and projected pace of absorption and sales prices of the homes to be built, all of which are impacted by our evaluation of population and employment growth patterns, demographic trends and competing new home subdivisions and resales in the relevant sub-market.

During the development of lots, we are required by some municipalities and other governmental authorities to provide completion bonds or letters of credit for sewer, streets and other improvements. The development agreements under which we are required to provide completion bonds or letters of credit are generally not subject to a required completion date and only require that the improvements are in place in phases as homes are built and sold. In locations where development has progressed, the amount of development work remaining to be completed is typically less than the remaining amount of bonds or letters of credit due to timing delays in obtaining release of the bonds or letters of credit.

Our ability to continue development activities over the long-term will depend upon, among other things, a suitable economic environment and our continued ability to locate suitable parcels of land, enter into options or agreements to purchase such land, obtain governmental approvals for such land, and consummate the acquisition and development of such land.

PART II

Market for Common Shares and Dividends

The Company’s common shares are traded on the New York Stock Exchange under the symbol “MHO.” As of February 15, 2017,19, 2020, there were approximately 348445 record holders of the Company’s common shares. At that date, there were 27,092,07330,137,141 common shares issued and 24,762,44128,578,537 common shares outstanding.

The following table sets forth our selected consolidated financial data as of the dates and for the periods indicated.  This table should be read together with “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our Consolidated Financial Statements, including the Notes thereto, contained in this Annual Report on Form 10-K. These historical results may not be indicative of future results.

M/I Homes, Inc. and subsidiaries (the “Company” or “we”) is one of the nation’s leading builders of single-family homes, having sold over 100,000118,200 homes since we commencedcommencing homebuilding activities in 1976. 2016 marked our 40th year in business. The Company’s homes are marketed and sold primarily under the M/I Homes brand (M/I Homes and Showcase Collection (exclusively by M/I)) and, following our acquisition of a privately-held homebuilder in the Minneapolis/St. Paul market in December 2015, we use. In addition, the Hans Hagen brand is used in thatolder communities in our Minneapolis/St. Paul, Minnesota market. The Company has homebuilding operations in Columbus and Cincinnati, Ohio; Indianapolis, Indiana; Chicago, Illinois; Minneapolis/St. Paul, Minnesota; Detroit, Michigan; Tampa, OrlandoSarasota and Sarasota,Orlando, Florida; Austin, Dallas/Fort Worth, Houston and San Antonio, Texas; and Charlotte and Raleigh, North Carolina;Carolina. In the first quarter of 2019, we decided to wind down our Washington, D.C. operations, which we substantially completed by the end of 2019. See Note 15 to our Consolidated Financial Statements for more information regarding our decision to wind down our operations in Washington, D.C. and the Virginia and Maryland suburbsour re-evaluation of Washington, D.C.our reporting segments as a result of this wind-down.

Included in this Management’s Discussion and Analysis of Financial Condition and Results of Operations are the following topics relevant to the Company’s performance and financial condition:

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period.  Management bases its estimates and assumptions on historical experience and on various other factors that it believes are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.  On an ongoing basis, management evaluates such estimates and assumptions and makes adjustments as deemed necessary.  Actual results could differ from these estimates using different estimates and assumptions, or if conditions are significantly different in the future. See “Forward - Looking Statements” above in Part I.

Listed below are those estimates and policies that we believe are critical and require the use of complex judgment in their application. Our critical accounting estimates should be read in conjunction with the Notes to our Consolidated Financial Statements.

Contract liabilities include customer deposits related to sold but undelivered homes. Substantially all otherof our home deliveries initially funded by our 100%-owned subsidiary, M/I Financial, LLC (“M/I Financial”), issales are scheduled to close and be recorded onto revenue within one year from the date of receiving a customer deposit. Contract liabilities

expected to be recognized as revenue, excluding revenue pertaining to contracts that M/I Financial sellshave an original expected duration of one year or less, is not material.

A performance obligation is a promise in a contract to transfer a distinct good or service to the loancustomer. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. All of our home purchase contracts have a third-party investor, becausesingle performance obligation as the receivablepromise to transfer the home is not separately identifiable from other promises in the contract and, therefore, not distinct. Our performance obligation, to deliver the agreed-upon home, is generally satisfied in less than one year from the third-party investororiginal contract date. Deferred revenue resulting from uncompleted performance obligations existing at the time we deliver new homes to our homebuyers is not subjectmaterial.

Although our third party land sale contracts may include multiple performance obligations, the revenue we expect to recognize in any future subordination, andyear related to remaining performance obligations, excluding revenue pertaining to contracts that have an original expected duration of one year or less, is not material. We do not disclose the Company has transferred to this investor the usual risks and rewardsvalue of ownership that is in substance aunsatisfied performance obligations for land sale and does not have a substantial continuing involvementcontracts with the home.an original expected duration of one year or less.

We recognize the majority of the revenue associated with our mortgage loan operations when the mortgage loans are sold and/or related servicing rights are sold to third party investors or retained and managed under a third party subservicesub-service arrangement. The revenue recognized is reduced by the fair value of the related guarantee provided to the investor. The fair value of the guarantee is recognized in revenue when the Company is released from its obligation under the guarantee. We recognize financial services revenue associated with our title operations as homes are delivered, closing services are rendered, and title policies are issued, all of which generally occur simultaneously as each home is delivered. All of the underwriting risk associated with title insurance policies is transferred to third-party insurers.

As of December 31, 2016,2019, our projections generally assume a gradual improvement in market conditions. If communities are not recoverable based on estimated future undiscounted cash flows, the impairment to be recognized is measured as the amount by which the carrying amount of the assets exceeds the estimated fair value of the assets. The fair value of a community is estimated by discounting management’s cash flow projections using an appropriate risk-adjusted interest rate. As of December 31, 2016,2019, we utilized discount rates ranging from 13% to 16% in our valuations. The discount rate used in determining each asset’s estimated fair value reflects the inherent risks associated with the related estimated cash flow stream, as well as current risk-free rates available in the market and estimated market risk premiums.

Our quarterly assessments reflect management’s best estimates. Due to the inherent uncertainties in management’s estimates and uncertainties related to our operations and our industry as a whole as further discussed in “Item 1A. Risk Factors” in Part I of this Annual Report on Form 10-K, we are unable to determine at this time if and to what extent continuing future impairments will occur. Additionally, due to the volume of possible outcomes that can be generated from changes in the various model inputs for each community, we do not believe it is possible to create a sensitivity analysis that can provide meaningful information for the users of our financial statements.

Our warranty reserves for our 30-year (offered on all homes sold after April 25, 1998 and on or before December 1, 2015 in all of our markets except our Texas markets), 15-year (offered on all homes sold after December 1, 2015 in all of our markets except our Texas markets) orand 10-year (offered on all homes sold in our Texas markets) transferable structural warranty programs are established on a per-unit basis. While the structural warranty reserve is recorded as each house is delivered, the sufficiency of the structural warranty per unit charge and total reserve is reevaluated on an annual basis, with the assistance of an actuary, using our own historical data and trends, as well as industry-wide historical data and trends, and other project specific factors. The reserves are also evaluated quarterly and adjusted if we encounter activity that is not consistent with the historical experience used in the annual analysis. These reserves are subject to variability due to uncertainties regarding structural defect claims for products we build, the markets in which we build, claim settlement history, insurance and legal interpretations, among other factors.

For the year ended December 31, 2016, our 40th year in business,2019, we achieved record levels of new contracts, homes delivered, revenue and revenue. Ourpre-tax income. The improved profitability is attributable primarily to the increase in homes delivered and improved overhead leverage. We also incurred lower acquisition-related expenses in 2019. Additionally, our complementary financial services business also achieved record resultsrevenue and a record number of loans originated in 2016. Throughout the year, we experienced generally2019. Fundamental housing market factors were favorable demand in most of our markets as a result of2019, including steady increases in employment, historicallycontinued low interestmortgage rates, improvedrelatively high consumer confidence, and improved mortgage availability, along with a limited supply of new homes. While industry-wide new home saleshomes available for sale. Although we believe housing market conditions will remain relatively favorable during 2020, we also believe rising land and construction costs may continue at a pace below historical averages, the generally favorable demand for new homes andto impose pressure on housing affordability in many of our markets.

Favorable market conditions along with the continued execution of our strategic business initiatives enabled us to achieve the following improvedrecord results in 2019 in comparison to the year ended December 31, 2015:2018:

In 2016,2019, we achieved net income to common shareholders of $51.7$127.6 million, or $1.84$4.48 per diluted share. This comparesshare compared to net income to common shareholders of $46.9$107.7 million, or $1.68$3.70 per diluted share in 2015. Net2018, both of which include the after-tax impact of the acquisition-related charges and asset impairment charges noted above. Excluding these charges, adjusted net income in each period included $4.9increased 12% from $117.3 million in dividend payments made2018 to holders of our Series A Preferred Shares.$131.9 million in 2019.

In 2016,2019, we recorded record total revenue of $1.69$2.50 billion, of which $1.61including $2.42 billion was from homes delivered, $38.8$24.6 million was from land sales, and $42.0$55.3 million was from our financial services operations. Revenue from homes delivered increased 20%9% from 20152018 driven primarily by an 4% increase in the average sales price of homes delivered in 2016 ($13,000 per home delivered) compared to 2015, and 599518 additional homes delivered in 20162019 (a 15%9% increase). Revenue from land sales decreased $1.5increased $7.7 million from 20152018 due primarily to increased revenue onmore land sales in both our Mid-Atlantic and Southern regions that occurredNorthern region in the priorcurrent year compared to the currentprior year. Revenue from our financial services segment increased 17%6% to $42.0$55.3 million in 20162019 as a result of increasesan increase in the number of loan originations increasesand an increase in the average loan amount, and more favorable market conditions resulting in higherpartially offset by lower margins on our loans sold in both periodsduring the period than we experienced in 2018, primarily in the prior year.first quarter of 2019.

We believe the increased sales volume and higher sales prices on homes delivered in 2016 were2019 compared to 2018 was driven primarily by the opening of new communities which increased our average number of locations selling homes, along with the continued favorable economic conditions described above, limited supply of homes available for sale, better pricing leverage in select locations and submarkets, and shifts in both product and community mix. We opened 80 new communities during 2019. We sell a variety of home types in various communities and markets, each of which yields a different gross margin. The timing of the openings of new replacement communities as well as underlying lot costs and type of home offered varies from year to year. As a result, our new contracts, average closing price and housing gross margin may fluctuate up or down from year to year depending on the mix of communities delivering homes. The pricing improvements described above were partially offset by higher average lot and construction costs related to homebuilding industry conditions and normal supply and demand dynamics which led to the decline in our housing gross margin percentage for 2016 as described above. In 2016, we were able to pass a portion of the higher construction and lot costs to our homebuyers in the form of higher sales prices. However, we cannot provide any assurance that we will be able to continue to raise prices.dynamics.

During 2019, housing market conditions were favorable, as interest rates moderated, with particularly strong sales in the second half of the year. We believe that U.S. housing markets in 2017 will experiencethe general economic backdrop, with low unemployment, higher wages and high consumer confidence along with relatively low mortgage rates and low home inventory levels, provided a similar improvement incatalyst for increased demand for new homes. We believe these conditions and the associated level of housing demand will continue into 2020. The housing industry also continued to experience a modest shift to more affordable homes as occurred in 2016, with modest increases expected2019, which we responded to through additional investment in total permits and new home sales in many of our markets, even with the expected increase in mortgage rates as forecasted by the Federal Reserve. We further believe that growth in employment, modest wage growth, historically low interest rates and consumer confidence will lead to improved levels of household formation, and drive the modest improvement in demand in 2017.more affordable Smart Series product. We remain focusedsensitive to changes in market conditions, and continue to focus on increasing our profitability by generating additional revenue, and improving overhead operating leverage, continuing to expandexpanding our market share, shifting our product mix to include more affordable designs, and investing in attractive land and/or new market opportunities.opportunities to increase our number of active communities.

Consistent with these objectives, we took a number of stepsseveral actions in 2016 focused on continuing2019 intended to improvecontinue the improvement in our financial and operating results in 20172020 and beyond, including investing $227.6$332.1 million in land acquisitions and $180.2$268.3 million in land development in 2016 to help grow our presence in our existing markets. We currently estimate that we will spend approximately $500$650 million to $550$700 million on land purchases and land development in 2017.2020. However, land transactions are subject to a number of factors, including our financial condition and market conditions, as well as the satisfaction of various conditions related to specific properties. We will continue to monitor market conditions and our ongoing pace of home sales and deliveries, and we will adjust our land spending accordingly.

We ended 20162019 with more than 23,000approximately 33,300 lots under control, which represents a 5.15.3 year supply of lots based on 20162019 homes delivered, including certain lots that we anticipate selling to third parties. This represents a 3%16% increase from our approximately 22,40028,700 lots under control at the end of 2015.2018. We also opened 5280 communities and closed 4964 communities in 2016,2019, ending the year with a total of 178225 communities. In 2017, weOf our total communities, 61 offered our more affordable Smart Series designs, which are primarily designed for first-time homebuyers. We estimate that our average community count in 2020 will increase by 5 - 10%about 5% from our average community count of 176218 communities for 2016.

The following table shows, by segment: revenue; gross margin; selling, general and administrative expense; operating income (loss); interest expense; and depreciation and amortization for the years ended December 31, 2016, 20152019, 2018 and 2014:2017: