‘Tailwinds’ Intact
Toll is off to a good start in August, Chief Executive Officer Doug Yearley said on a call with analysts. The company was able to increase prices in about half its markets, he said.
“With demographics improving, low interest rates, record-low unemployment, continued wage growth and limited new and resale inventory in many markets, we are optimistic about the opportunities ahead,” Yearley said.
The company said the weakness in California was primarily in the northern part of the state and that order growth will improve in subsequent quarters because the year-over-year comparisons will be with periods that were softer. The sales slowdown for new homes took hold late last summer.
“It’s no secret that lower prices is a better place to be right now,” Jack Micenko, an analyst with Susquehanna International Group, said after the call. “But I think the numbers this quarter were very much a function of how good things were well into the summer last year and then they fell off a cliff.”
The company has been looking to scale up its business in other parts of the country and build slightly less-expensive homes for wealthy millennials. That will lead to lower average prices and potentially an increase in sales because the pool of more-affordable homes is greater.
“They are diversifying the type of product they’re building, but it’s not a transformation that happens overnight,” said Alex Barron, an analyst with the Housing Research Center in El Paso, Texas. “Toll Brothers is luxury. They’re not going to go from being a Nordstrom to being Walmart.”
This article was provided by Bloomberg News.