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Luxury home builder Toll Brothers call real estate market bottom
It wasn't long ago where every where you looked you saw a headline about the end of the national real estate boom and the upcoming crash. Today prices are coming down and the real estate market is clearly softening.
Aren't we all waiting for headlines saying "The worst is over"?
I thought I would give you one today.
Today Toll Brothers, a luxury home builder from Pennsylvania announced 4th quarter and full year earnings results for 2006. Their earnings dropped 44 percent because of write downs of owned and optioned land and a high number of cancellations, 585 total.
Their forecast for the next year is not pretty. Earnings are expected to drop 62% in the next year.
The most interesting thing in their earnings release was a statement from the CEO and chairman Bob Toll. He is calling the bottom in some markets on the east coast:
"Fifteen months into the current slowdown, we may be seeing a floor in some markets where deposits and traffic, although erratic from week to week, seem to be dancing on the bottom or slightly above."
"The metro D.C. suburbs of northern Virginia, which was the first market in which we saw activity slow, seems to have stabilized, although at levels much lower than those we have enjoyed over the past few years. In metro DC's Maryland market, a more lot-constrained region where builders built fewer spec homes and there were fewer speculative buyers, the market also appears to be stabilizing", Toll continued.
Comments
Bob Toll is actually pretty accurate in his statements and acting quickly and appropriately, rare for large production builders these days.
Being in the Northern Virginia area, I agree with him that this area is showing signs of a bottom. Buyer activity was up last month for the first time in 21 months while inventory is down 45% from the peak back in June of this year (www.loudounstats.com).
The only thing we have to worry about is an influx of inventory during the "spring market" of 2007. Many people are waiting until then to list their homes and I'm not sure that the buyer acitvity will offset the increase in inventory.
Posted by: Danilo Bogdanovic | December 5, 2006 04:29 PM
I know a couple of people who work for Toll Brothers. They've mentioned a lot of lay-offs and more to come. Not pretty for them. However, I saw the CEO on CNN a few months ago and he was confident they would still be doing good today because they "build luxury homes and that market was not expected to drop, just average homes". Guess it was wishful thinking.
Posted by: Alex | December 5, 2006 04:32 PM