In a housing market characterized by affordability challenges and uncertainty, Toll Brothers’ positioning as a luxury builder with affluent buyers has insulated the company from many of the challenges faced by its peers. With 25% of its third quarter buyers paying all cash and an average sales price of $996,400, the builder’s core customer is less payment sensitive and more comfortable moving forward with purchase decisions in an environment where other buyers are more cautious.
“[Our] strengths have helped us attract a customer base with greater financial resilience, one that is less affected by affordability challenges due to higher income levels, substantial existing home equity, and sizable stock portfolios,” Douglas Yearley, executive chairman, said during the builder’s third quarter earnings call. “Our third quarter results further demonstrate the strength of our business model. Our strategy is durable precisely because it is built on differentiated capabilities that enable us to create value, even when market conditions are less favorable.”
Home sales revenue ticked down in the third quarter for Toll Brothers to $2.65 billion from $2.88 billion in the same period a year ago, while deliveries fell to 2,662 homes from 2,959 in the third quarter of 2025. Net contracts increased to 2,508 homes from 2,388 and net contract value increased to $2.52 billion from $2.41 billion. The builder’s cancellation rate as a percentage of signed contracts fell to 5.4% in the third quarter from 7.5% in the same period a year ago.
Toll Brothers reported stronger demand and performance in Florida, Boston, the Carolinas, Boise, Idaho, Las Vegas, and Denver. Challenged markets included Atlanta, Seattle, Portland, San Francisco, and Texas.
“Demand from luxury buyers remains relatively resilient, and we continue to benefit from the expansion of our community count,” Yearley said. “Consistent with our longstanding approach, we continue to prioritize price discipline and margin performance over sales pace, a strategy that we believe is particularly important in the current environment.”
Yearley noted the builder is continuing to lean on its luxury move-up product segment and an approach skewed toward built-to-order homes in the current environment. Toll Brothers’ move-up business accounted for approximately 61% of third quarter sales, while its first-time and move-down businesses accounted for 23% and 16% of sales, respectively.
“Not only does our luxury move-up remain the largest contributor to revenues, but it also generates the highest margin among our buyer segments,” CEO Karl Mistry told investors. “Importantly, in this market, the higher the price of our homes, the lower the incentive as a percentage of sales price.”
Mistry said Toll Brothers continued to manage spec starts in the quarter to better align with demand, reducing its inventory of spec homes to 1.9 finished specs per community at quarter’s end. Toll Brothers sells its specs before framing is completed to minimize incentives and allow customers greater opportunities to personalize their homes.
“Personalization remains an important competitive advantage for Toll Brothers, as designed studio upgrades are highly accretive to margins,” Mistry said. “Overall, structural options and lot premiums averaged $207,000, or 24% of our average base sales price, in the quarter.”
The builder generated a profit of $280.1 million, or $2.97 per share, in the third quarter, down from $369.6 million, or $3.73 per share, in the same period of 2025.
The company remains on track to deliver 8% to 10% community count growth in its fiscal 2026, the third consecutive year of such growth. Toll Brothers ended the period with 75,500 owned or controlled lots. Nearly 60% of its lots were optioned and the company allocated $452 million on land acquisition in the quarter.
