At 67, Toll is old enough to step aside and let others handle unpleasant times, but instead he approaches the wreckage with grim cheer. “It’s five times I’ve seen this movie,” he says. And the plot is always the same: Market drops, market recovers, home values rise again. Toll, having snapped up property at bargain-basement prices from wiped-out competitors, comes out stronger, richer, and better positioned. His plan is to do that again—and he thinks he has amassed the cash reserves to accomplish it. If all of Toll’s previous experience has offered a single lesson, it’s that the truly big money is made at the bottom, when other people are scared to buy. If he bets right again this time, he could lead his industry out of the doldrums. If he doesn’t, it augurs poorly for the entire sector—and perhaps indicates that the housing situation is even more dire than Toll imagined.

Homebuilding is an industry prone to spectacular cataclysms. Bob Toll became one of its patriarchs the same way Noah did—by staying afloat through the floods. “I think he loves being the grandfather of the business,” says Michael Greenberg, a former senior executive at Toll Brothers. In the early years, Bob was notoriously prickly and irascible—Bruce was the company diplomat—but age has smoothed his persona, turning sharp edges into charm and bluntness into wisdom. Toll’s conversational style resembles the layout of one of his developments, full of meandering byways and digressive culs-de-sac. He has a broad Philadelphia accent and cultivates an air of disarming schlumpiness. He’s been known to show up to industry conferences in sandals. Around the office, he wears a name tag, as do most Toll Brothers employees. Toll explained the policy to me by telling an intricate story, the gist of which was that he kept forgetting the secretaries’ names. Toll has been married for 33 years and has five children and trying to talk to him during the summer, when he vacations in Maine, is like conducting a conversation across a highway trafficked by grandkids and tennis partners.

The avuncular routine halts, however, at the first whiff of competition. When he was younger, Toll was an avid sailboat racer. Now he plays tennis with Stephen Solms, a retired Philadelphia developer whom he’s known since summer camp. “He doesn’t like to patshke the ball—he likes to really smash it,” says Solms.

Toll’s business demeanor isn’t that different. His father, also a real estate man, initially tried to prevent him from becoming a builder. Albert Toll had made a fortune as a young man and lost it during the Great Depression, and he never stopped regarding the business as perilous. In the mid-1960s, Albert happened upon a piece of ground in rural Chester County, Pennsylvania—its original owner had gone bust—and Bob, then just out of law school, begged his father to let him to develop the property. “You stick with the law,” Albert ordered, though he eventually gave in. Through all of  Toll Brothers’ success during the ensuing years, Albert, who died in 1995, never stopped warning his sons, “Don’t try to do too large of a deal, because it only takes one deal to bankrupt you.”

Bob continues to wrestle with the conflict between caution and daring, fighting the same battle he fought with his father on his very first project. He is attached to numbers and formulas, a latticework of rationality he’s erected around what is, at its foundation, a hunch-based business. Toll’s method for assessing risk is a complex equation he calls the model: in the old days, a formula crunched by calculators; these days, a sophisticated array of indicators parsed by computer software. Company executives speak of the model reverently, and Toll boasts that he devised it himself. “Speculating,” he told me, “is different than putting land in the model.” The model weighs the prices that homes on a prospective piece of land should fetch against projected costs, given certain assumptions about development expenses and interest rates. Toll builds a 10 percent cushion into all his estimated costs and presumes a conservative pace of sales. Unlike other builders, Toll says, he never forecasts that prices will increase during the interval it takes to get houses built.

The model protected Toll Brothers during previous downturns, telling it, for instance, to scale back at the end of the 1980s, ensuring the company’s survival during the savings-and-loan crisis. After that downturn, Toll went on a shopping spree, snapping up prime properties at cut rates. But this time, the model betrayed him. Toll says he now realizes it wasn’t designed to account for such a sustained frenzy and precipitous collapse. As the mortgage crunch set in and newspapers became filled with gloomy headlines, many buyers chose—irrationally, in Toll’s view—to walk away from substantial deposits. (Embarrassingly, one of them was Bruce Toll’s daughter.) Developments planned during the good times glutted the market just as demand evaporated. In 2004, Toll Brothers was selling units in about 220 developments; last year, the number was 315.

When I ask Toll if the worst is over for his company, he replies bluntly, “I don’t know.” Evaluating the true extent of Toll Brothers’ losses is difficult, because it all depends on the value of the land that the company acquired at the peak of the market. Homebuilding is a treacherous business because land, its essential raw material, can become a ruinous burden when the market takes a turn for the worse. Before selling a single house on their land, builders must secure zoning approvals, fight lawsuits, pave roads, and prepare for construction. Only at the end of that process, and at enormous expense, can their companies recoup a profit. The timetable places builders at the mercy of economic conditions five or 10 years in the future. Toll Brothers, like all of its competitors, tries to limit its risk by entering into option agreements when it acquires land, only closing the sale when the project is ready to go. In boom times, however, land prices rise and sellers have more power to demand an outright purchase. Builders then face a dilemma: They can keep buying land on unfavorable terms, or they can stop and amass cash, in which case they risk running out of ground to build on.

In 2006, when the market began to implode, Toll Brothers owned or had purchase options on more than 91,000 home lots—the most it had ever held and, by a low estimate, acreage equal to a city the size of Boston. The company has since tried to divest itself of as much of that land as possible, but it’s stuck with some of it. At the time of its last annual report, Toll Brothers stated that it controlled nearly 60,000 lots, including more than 31,000 that were not currently under development. Roughly half of the undeveloped parcels were concentrated in the hard-hit South and West, regions where Toll Brothers’ sales are off 29 and 66 percent this year, respectively. As of the quarter ended April 30, the company reported, the aggregate price of its outstanding land purchase agreements, some of which were only option deals, amounted to $1.8 billion. More than half of that figure was tied up in murky joint-venture agreements, about which Toll Brothers has issued vague warnings of potentially “significant” losses.

“Hi, I’m Bob Toll,” says the man on the 42-inch plasma-screen television. Inside a model home at Newtown Walk, a new Toll Brothers development in a Philadelphia suburb in Bucks County, a DVD presentation featuring the boss plays on a constant loop. The Tolls didn’t invent luxury housing, but they discovered how to mass-produce it. The basic approach was to take a few standard home styles—Georgian, Colonial, Tudor—and pump them up to steroidal proportions. Critics have labeled the products McMansions, a name that’s an insult to aesthetics and a compliment to marketing. “There’s a certain American spirit about bigger, better, more,” says Kira McCarron, Toll Brothers’ chief marketing officer, and the company came onto the scene at precisely the right historical moment to profit from that ethic.