The U.S. Census Bureau might have seen sales of new homes plunge in January to the lowest level since 1964, but Bob Toll didn’t.
“We definitely did not experience that type of a drop in our business,” said the Toll Brothers CEO during the company’s quarterly conference call with analysts Wednesday.
Rather, the Horsham, Pa.-based builder saw sales take off for its first quarter of 2010, which ended Jan. 31. Net signed contracts were up 129% to $292.1 million and 98% in volume to 526 units. Cancellations were down significantly too, to 6.7% from 37.1% in 2009, same quarter.
Still, the company lost reported a net loss of $40.8 million, or 25 cents per share, for its first quarter ended Jan. 31. The loss compares with an $88.9 million loss in the first quarter of 2009. Analysts were expecting a loss of $0.35 per share. Revenues, too, declined by 20%, to $326.7 million from $409 million the same quarter of last year. And the number of units delivered fell 10% on a year-over-year basis to 596 homes.
“I feel like Punxsutawney Phil,” said Toll, who often puts forth market prognostications during the company’s calls. “Everyone wants to know if I’ve seen my shadow. Are we in for six more weeks of winter, or has spring arrived?”
Toll didn’t say whether the spring selling season had indeed arrived, only that things seem to be getting better. “We believe the housing market is still in choppy waters, but the seas are getting calmer,” he said.
He remembered that when the housing market began to recover from its previous downturn, there was a January that was expected to be good but wasn’t. “We had choppy waters for a couple of years, but we slowly worked our way up the stairs and became happy and euphoric,” Toll said.
February sales were showing improvements with the advent of the company’s annual winter sale, which has been exceeding expectations by 50% to 60%. So are prices. “We do see prices going up because we are raising them whenever we get a chance to,” Toll said.
The problem of appraisals coming in lower than sales isn’t a problem for Toll any more.“We are no longer in declining markets,” said Donald Salmon, who runs the company’s mortgage division. “We have come out bouncing along the bottom, and I think we are seeing [price] support in those markets now.”
The market has stabilized enough to pull Toll back into the market for distressed land. The luxury public builder bought 3,000 lots in its last quarter, enough to help the company bring more communities online during the year.
The land was geographically dispersed between Northern and Southern California, Florida, New York City, North Carolina, Colorado, and Pennsylvania, according to executives, at prices low enough to produce returns in the mid- to high-20%-level when homes are priced for the current market.
Half the lots were raw with some entitlements, but no horizontal development yet. The rest were fairly finished.
Toll also offered some detail on a community that the company picked up in Boca Raton. “They were large lots, beautiful lots, beautiful landscaping, magnificent entrance. But it was a busted builder and a bank that very much wanted to get rid of it,” he said. “It was our perfect type of product. It wasn’t suited to the other major builders. We made what we think was a good buy.”
Toll also numbered its markets in the order they are performing, from best to worst: New York City, high-rise; New Jersey, high-rise; Connecticut; Houston; Florida’s Gulf Coast; New York City suburbs; Massachusetts; Austin, Texas; and Virginia and Southern California tying for tenth.
Teresa Burney is a senior editor at BUILDER and BIG BUILDER magazines.
Learn more about markets featured in this article: Austin, TX.