Blog, Business & Finance

Toll Brothers Stock Up 14.3%…Good News for real estate

The most recent report from Toll Brothers, a massive New Jersey real estate developer, mentioned stronger than expected orders for the fiscal third quarter ending July 31.  Tax incentives, low mortgage rates, and discounted prices are likely to blame.  Toll’s stock price surged 14.3% to $23.40 Wednesday as investors saw the luxury home builder’s preliminary results as a sign of improving confidence among potential home buyers, many of whom until recently have been scared away by expectations of further price declines.

Although the fact that investors are not always right, it sure speaks volumes of current confidence levels, which were at historical lows just one year ago.  The mood of homebuyers has also changed.  A rebound in the stock market and the job prospects have began to take away that fear that we were seeing not long ago.  One thing that Toll recommended is to think conservatively on your home upgrades when going into contract.  Today’s ultra conservative appraisal approches have been recognized as one of the biggest deal breakers in transactions as appraisers are very apprehensive to give value on many justifiable upgrades.

Another confidence boosting statistic was that Toll’s cancellation rate dropped to 8.5%, down from 19% a year ago.  Although Toll’s pre-tax writedowns related to operating communities is going to be between $90 and $160 million, the New Jersey developer sees a lot of positive signs.

Hoboken real estate consists of hundreds Toll Brothers housing in numerous amenity buildings.  Will Hoboken see the same discounts from sellers that the developer offered in Brooklyn?… some units offered for up to 37% discounts?

My opinion is that we have seen the worse of the housing market decline.  Tax incentives and low interest rates are helping sales numbers.  I think as developers lower prices, home sales will continue to increase despite lower profits than usual from developer numbers.

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