Toll Brothers Inc Report Offers Ray Of Hope

Author: Rob K. Blake | Date: August 13, 2008 | Filed In: Real Estate

Toll Brothers Inc., the high-end home builder, reported revenue of $796.5 million that exceeded analysts expectations of $735 million. Toll Brothers also reports the lowest quarterly cancellation rate in two years.

New Home Demand

Bloomberg reports CEO, Robert Toll stated,

“We believe there is growing pent-up demand from those who have postponed buying during the past three years. For example, when we run promotions and work the phones for a market, our rate of deposits improves significantly.”

This new demand is about the only ray of hope for Toll Brothers Inc. and even that comes with a caveat. That being, if home buyers demanding new homes can’t sell their old homes…this new demand is wasted. The existing home market is a awash with properties and until that market soaks up the excess inventory, new home sales are stalled.

The Bad News

Even though Toll Brothers Inc posted the “better the expected number” of $796.5 million that is still lower than last years same quarter number of $1.21 billion…a 34% drop.

Most of the luxury markets are still in turmoil and the Toll Brothers CEO knows it. Rueters reported Robert Toll’s statement,

“Our third-quarter results for revenues, contracts and backlog reflect the continued weakness in most of our markets.”

I cannot recommend buying a new home in today’s market under any circumstances. The financial status of any developer can change on a dime leaving unlucky buyers with half-finished houses that get foreclosed on by the construction lender. The lucky buyers get to live in a development with no neighbors, unfinished sidewalks, and an inability to sell.

Here’s a Bloomberg video for the details…

Good Luck!