A large tax hit wiped out Toll Brothers Inc. profits for the third fiscal quarter,
but the luxury builder saw housing markets improve in many parts of the country.
Toll saw its first annual increase in new home contracts since 2005. Its cancellation rate was the lowest in three years. The current quarter is off to a great start with 26 percent more buyers putting down deposits than a year ago.
It’s still tough out there, but “things sure feel better than they did six months ago,” Robert Toll, chairman and CEO, told analysts. “We believe declining cancellations and more solid demand indicate that the housing market is stabilizing.”
While home sales continue to be effected by job losses and tighter mortgage lending standards, recent housing data and reports from major homebuilders like Toll Brothers Inc. suggest the worst of the housing market slide may be over. Nationally, new home sales have risen for four months in a row, and prices have edged up for the past two months..
The company lost $472.3 million, or $2.93 a share, in the three months ended July 31. That compares with a loss of $29.3 million, or 18 cents a share, the same period last year.
“We believe customers are recognizing that now is the time to get into the market to take advantage of near-record affordability in what is still, for now, a buyers’ market,” Toll said.
Demand is strong enough that Toll is reducing incentives and raising its prices in select communities.
The Commerce Department recently reported sales of new U.S. homes surged almost 10 percent in July, another sign the housing market is climbing back from the historic bottom it reached early this year.
Similar to a Cash for Clunkers effect, homebuyers are rushing to take advantage of a federal tax credit that covers 10 percent of the home price, or up to $8,000, for first-time owners. Home sales must be completed by the end of November for buyers to qualify.
Builders and real estate agents are urging Congress for that credit to be extended. If it is not, there is a risk sales could reverse their upward trend.
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