Toll Brothers CEO Bob Toll hasn't given up on convincing Congress and the new administration to pass a short-term $15,000 tax credit for all buyers of homes.
"I hope to speak to people in the administration in the next week," Toll said during a March 4 investor call. "We hope that Congress and the president can help straighten this out. If not, we will do it the old-fashioned way--muddle through it."
Toll said he thinks the credit would signal to consumers that the government believes the market has bottomed out, giving them the confidence to start shopping for homes again.
"Right now the buyer is under the rock, in the foxhole, scared about their jobs," said Toll. "We must motivate the whole food chain of home buyers to stop the decline in home prices."
With only about a month left in the spring selling season, Toll said he does not hold much hope that it will be a good one. "So far the spring selling season has come out of the hole and seen its shadow and gone back into its hole," he said.
Yes, he said, traffic is up, but the buyers seem to go home and talk about the purchase and then decide against it.
Toll said he is not unduly worried that a reduction in the tax deduction for home interest rates for higher-end buyers proposed in President Obama's budget would further hurt sales if passed.
"As soon as this was announced we got the pencils out and cranked some numbers," he said. "Surprisingly enough, there's a slight difference. It's not as bad as it sounds. It seemed like it was going to mean quite a bit." But after consideration, "we don't think it has as much of an effect on sales."
Besides, he said, since it's linked in a reduction in deductions for charitable contributions as well, "it may not pass."
The luxury home builder, which is sitting on $1.53 billion in cash, $1.32 billion in bank credit, and little debt, is in the market for land. Toll has even bid on a couple of parcels only to lose out to private equity buyers. "The other [bidders] were not public builders, they were investors who thought it was worth more than we did, and I hope they were right," he said.
Toll is shopping in Florida, California, the Northeast, and Texas, but not in Phoenix or Las Vegas where lots are worth "maybe a nickel," he said. While the search for bargains is broad, the company is being extremely picky about the parcels.
"We want to make sure it's an absolute screaming bargain, that it's shovel ready, that we can get homes to the market quickly, and that it would be perceived to be a good buy," Toll said.
"We are super conservative out of fear that we have no idea how long this down market is going to last, and we have no understanding whether we are headed for inflation, in which case we would buy more land, or deflation," he said. "We are only jumping if it's super obvious."
The company is also tending to stay away from parcels that might be for sale around the corner from land it already owns; for fear that bidding on similar land at an extremely low price might trigger impairments on their own lots.
Responding to an analyst who questioned the company's ability to hang on to subdivisions that are seeing maybe one sale a quarter, Toll said they were holding the line on prices.
"All the Naples projects are working well, and we are making money," Toll said. "As a matter of fact, we have even raised prices." Yet last year, Naples was among the worst-performing home sales markets in the country. "We would have been kicking ourselves if we had reduced our prices last year. Now they are well performing."
Raymond James Financial analyst Buck Horne got a quick answer to his question about whether there were any "buckets of low hanging fruit that you can pull off to make a difference" in the company's expenses.
"Yes," answered Toll.
"Elaborate," said Horne.
"You could fire off senior management starting with me and work your way down," Toll answered.