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HORSHAM — Luxury homebuilder Toll Brothers Inc. gave investors another shot of optimism about the housing market recovery, saying it posted the first annual increase in signed contracts for new homes in four years.
Toll said Wednesday that new home contracts rose 3 percent from the third fiscal quarter last year, and the number was up a surprising 44 percent from the second fiscal quarter this year. Demand was so robust the company has been able to scale back the incentives it offered to get buyers in the door.
"The mood has changed," said Robert Toll, chairman and CEO, of the Horsham, Pa.-based company. "Our traffic still stinks ... but those people coming in are more serious."
Only 9 percent of buyers backed out — the lowest cancellation rate in three years.
The trend impressed investors, who drove the builder's stock up more than 14 percent. Shares added $2.94 to close at $23.42.
Toll sold 792 homes, generating $461.3 million in revenue for the three months ended July 31. Revenue was down 42 percent from the same period last year because home prices have declined and Toll has fewer communities around the country.
The executive highlighted several markets that were showing signs of recovery: the New York suburbs, Jersey City, Raleigh, N.C., Washington D.C., as well as some areas of Virginia, Connecticut, Florida, Delaware and northern California.
"The rest of the markets are either stuck in the mud or improved marginally," Toll said.
Asked whether the pickup in sales could merely be a blip before another market decline, Toll conceded he doesn't know but said the signs of improvement are "certainly more than anecdotal."
"You're talking about a whole lot of communities in 40 to 50 markets in 20 to 22 states," he said. "We're getting pretty deep information."
Toll's results are an added confirmation that a broad but slow recovery of the housing market is under way. Other major builders — including D.R. Horton Inc., Pulte Homes Inc. and Centex Corp. — all recently reported better earnings for the first half of the year.
Still, Toll expects to write down the value of its communities, land and joint ventures by $90 million to $160 million in the third quarter.
Toll Brothers will release final quarterly results on Aug. 27, and analysts surveyed by Thomson Reuters expect a loss of 32 cents a share on revenue of $377.1 million. And despite the upbeat report, the company said there remain too many uncertainties in the market to offer earnings guidance.
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Toll Brothers: http://www.tollbrothers.com/
