Toll Brothers Sees Boost

In a sign that the luxury homebuilding market, at least, is on its way back, Toll Brothers Inc. received a rush of new business in its latest quarter.

Horsham, Pennsylvania-based Toll Brothers said in a preliminary announcement of its fiscal 2009 fourth-quarter results that net signed contracts jumped 42 percent to approximately 765 units compared to fiscal 2008’s fourth quarter. Toll Brothers said the dollar value of contracts was 62 percent higher in the quarter ended October 31, than the prior year's quarter, and that the latest quarter’s totals exceeded fiscal year 2007's fourth-quarter results.

Of course, comparing results to last year is comparing them to the deepest portion of the financial crisis, when the entire economy seemed to seize. But the improvement over 2007 is a heartening sign.

“The surprise was more on the upside,” David Goldberg, an analyst with UBS Securities LLC in New York told Bloomberg. “They did better than we thought.”

Toll Brothers said that it produced the improved sales despite having fewer selling communities, 215 in the fourth quarter of 2009, compared with the same 2008 quarter when it had 290 selling communities, or the 2007 fourth quarter when it had 315 selling communities.

"We have definitely progressed from one year ago,” said Toll Brothers CEO Robert Toll. “The shock to the financial system in mid-September 2008 that shut down the capital markets appears to be mostly behind us. The improvement in consumer confidence over the past year, the increasing stabilization of home prices, the decline in unsold home inventories, and the reduction in buyer cancellation rates suggest that the new-home market should be improving; we sense that it is, though slowly and through choppy waters."

Toll Brothers said its revenue in the quarter declined 30 percent, to $486.6 million, and its backlog fell 34 percent, to $874.8 million. Toll Brothers expects to announce final fourth quarter results on December 3.

The positive sentiment amplifies that of Reston, Virginia-based Comstock Homebuilding Cos. Inc., which returned to profitability during the third quarter and said the homebuilding industry is on the mend.

Shares of Toll Brothers advanced $2.91, or 16 percent, to $21.30 Wednesday in the first regular trading session following the release of the preliminary results.

The mid-Atlantic region was the best performing of Toll Brothers’ four geographic operating areas in the latest quarter, generating the most contracts, 244, and the highest dollar amount, $134.7 million.

Toll Brothers mid-Atlantic region includes Delaware, Maryland, Pennsylvania, Virginia, and West Virginia.

Across the broader U.S. housing market, the picture remains grim, though somewhat less grim than in previous months, according to a Zillow.com report released earlier this month.

Home values declined for the 11th straight quarter, the Internet real estate company said. Values fell 6.9 percent to $190,400.

But the extension of the home tax credit recently could bolster sales in the next few months, said Zillow chief economist Stan Humphries.

"The next several months will be critical to the housing market. Previously, we'd been expecting to see increasing foreclosure rates during the real estate market's slow winter season, a confluence of events that would likely drive inventory up and prices down. But now, with the extension of the $8,000 first-time homebuyer tax credit and a new $6,500 credit for some repeat homebuyers, we could see a bump in demand that could partially offset the increased supply of foreclosed homes on the market," he said.