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Toll: People Will Want Big Houses Again

By Marc Davis   |   Thursday, 21 May 2009 03:17 PM

A climbing stock market and an easing of cash and credit for mortgages are attracting luxury home buyers again, according to Robert Toll, CEO of Toll Brothers, Inc., of Horsham, Pa., the nation's leading builder of luxury homes, and a Fortune 1000 company.

"We have a few reasons for cautious optimism," Toll told The Wall Street Journal.

Toll is hopeful despite the firm's reported a 51 percent decline in revenues to $398.3 million for their second quarter ending April 30.

The CEO believes that people will want big, luxurious houses again and he thinks the trend in that direction seems to be beginning.

"The assumption that people will want smaller, more affordable, more Spartan-type housing ... we don't believe that that's where the market will end up," Toll told analysts.

But Toll Brothers’ sales for the quarter were less than robust, with the value of the firm's backlog of orders down about 9 percent from the first quarter.

Orders declined by 37 percent from the previous year to 582 homes, although that's twice the number of units ordered in the first quarter of 2009.

Also significant, said Toll, was an increase in home buyer deposits on orders, which he says has gone up in seven of the past nine weeks over the same period last year.

Zacks Research analyst Dirk van Dijk is not as impressed by predictions of a rebound. In fact, he thinks the next round of foreclosures will hit the high-end homeowners who until now have been largely exempt in the subprime crisis.

Millions of adjustable rate mortgage popular with jumbo loan borrowers will soon reset, some with 50 percent increases. That will fuel a new wave of foreclosures, particularly in gated communities, van Dijk says.

"If the equity in your house is gone and your monthly mortgage payment suddenly jumps from $2000 per month to over $3000 per month, what do you think is going to happen?" van Dijk asks.

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A climbing stock market and an easing of cash and credit for mortgages are attracting luxury home buyers again, according to Robert Toll, CEO of Toll Brothers, Inc., of Horsham, Pa., the nation's leading builder of luxury homes, and a Fortune 1000 company."We have a few...
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2009-17-21
 

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