Resilient demand that has carried into May helped drive record second quarter home sales revenue for Toll Brothers. The home builder’s strong performance in the quarter, ended April 30, also included an outperformance relative to guidance in deliveries, revenue, gross margin, and earnings per share.

In the quarter, Toll Brothers delivered 2,641 homes at an average price of $1.0 million, generating home sales revenues of $2.65 billion, a 6% increase compared the second quarter of 2023. Home deliveries also represented a 6% increase on a year-over-year basis, while average selling price increased marginally by less than 1%. The home builder reported a quarterly cancellation rate of 2.8% of beginning quarter backlog.

The strong home building results in the quarter helped drive profit of $481.6 million, or $4.55 per share, compared to $320.2 million, or $2.85 per share, in the second quarter of 2023. In addition, Toll Brothers signed 3,041 net contracts for $2.9 billion in the quarter, up 30% in units and 29% in dollars on a year-over-year basis.

“Based on these outstanding results, and with continued solid demand as we start our third quarter, we are increasing our full year revenue and earnings guidance,” Douglas Yearley, chairman and CEO of Toll Brothers, said.

Yearley said demand for new homes continues to be supported by a resilient economy, favorable demographics, and a lack of supply. In the quarter, Toll Brothers continued its efforts to expand its price point by offering more affordable luxury homes and increasing its supply of spec homes. Affordable luxury homes represented 44% of unit sales in the second quarter of 31% of sales dollars, according to Yearly.

“Specs represented about 54% of orders and 46% of deliveries in the second quarter, meeting strong demand from buyers who choose a quicker move in,” Yearley said during the home builder’s earnings call. “We sell our specs at various stages of construction from foundation to finished home. This allows some of our spec buyers the opportunity to visit our design studios and personalize their homes with finishes that match their taste. Choice, a very important pillar of Toll Brothers, is still part of our spec strategy.”

Chief financial officer Martin Connor said Toll Brothers expects more than half of its deliveries in the second half of the year to be spec homes. He said having more spec homes available for delivery in the late summer and early fall months would allow Toll Brothers to meet demand for buyers who want to move in around the beginning of the school year.

In the second quarter, Yearley said sales were evenly spread, with about 1,000 net contracts signed per month. Demand was particularly strong for Toll Brothers in its New Jersey; Texas; California; Boise, Idaho; and Colorado markets. Sales of luxury homes represented 37% of all units in the second quarter and 53% of sales dollars. Yearley said the strength of demand allowed Toll Brothers to raise net prices after incentives in about 60% of its communities.

“While mortgage rate buydowns are heavily marketed and offered nationwide, very few of our buyers use incentive dollars to buy down their rates,” Yearley said. “The vast majority of our buyers can qualify for a mortgage without a buydown, and they prefer to use the incentives offered on design studio upgrades or to reduce their closing costs.”

According to Yearley, approximately 27% of second quarter buyers paid in all cash, up from 25% in the first quarter and the Toll Brothers long-run average of 20%. Approximately 20% of affordable luxury buyers paid all cash for home purchases. Additionally, Yearley said 30% of second quarter buyers were first-time buyers.

At the end of the second quarter, Toll Brothers had 7,093 homes in backlog with a value of $7.38 billion, declines of 6% and 12% year-over-year, respectively. The company ended the quarter with 71,800 lots owned and optioned, with approximately 52% of those lots owned. Toll Brothers spent approximately $472.0 million on land in the quarter and ended the quarter with 386 selling communities.

Keep the conversation going—sign up to our newsletter for exclusive content and updates. Sign up for free.