A larger-than-expected fourth-quarter surge in signed contracts at Toll Brothers may signal a comeback for the beleaguered luxury building market.
Following the release of the company’s preliminary fiscal 2009 fourth-quarter results, Robert Toll, chairman and CEO at Toll Brothers, said in a conference call today that he believes the housing market recovery is in the same place now as it was in May or June of 1991.
The Horsham, Penn.-based luxury homebuilder saw a 42 percent rise in signed contracts year-over-year, to 765 units in the fourth quarter ending Oct. 31, Toll said. While 2008 was a particularly rough year for homebuilders, the fourth-quarter number also represents a 17 percent improvement over the same period in 2007, prior to the Lehman Brothers crash. The cancellation rate — 6.9 percent — returned to its pre-downturn average.
Shares of Toll Brothers rose 16 percent to $21.30 this morning as Wall Street reacted to the results, which were released late yesterday.
“People no longer ask me, ‘Have we hit the bottom or turned the corner?’” Toll said. “It’s pretty much assumed that we have.”
Recovery “will come in fits and starts” from here on out, he predicted. “There will be months when we feel lousy and there will be months when we feel we’re back on top.” Ultimately, he said, “it looks to me that we’re going to work our way out of it into times of success.” Some markets, including a number in the New York City area as well as Central Florida, are all doing well, he noted.
Still, Toll Brothers, which counts Williamsburg’s Northside Piers, the new 700 Grove condo in Jersey City, and the Frenchman’s Reserve in Palm Beach Gardens as projects, remains conservative on its decision to “de-mothball” communities currently on hold.
Thirty-two communities are projected to open throughout the year, but the same number will close, executives said during the call.
Traffic among people looking for new homes has been “shockingly low,” Toll said, but he believes the internet may be playing a role. Today, “people don’t cruise the communities as much,” because they can do that on the Toll Brothers Web site without ever leaving home. Those who do ultimately show up to see available inventory tend to be more serious buyers now than they used to be.
Nonetheless, “I think caution is the watchword of the day,” Toll said.
Toll also said he was “pleased” that the newly extended homebuyer tax credit will “bring some reticent homebuyers into the market.” The bill signed last week by President Barack Obama extends the $8,000 credit for first-time buyers to April 30 and also provides tax breaks for homebuilders. The largest building companies, which lobbied extensively in favor of the bill, reportedly stand to gain up to $450 million in refunds.
Toll Brothers’ final fourth-quarter results are expected to be released Dec. 3.