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Toll Brothers Misses on Orders as Luxury-Home Sales Falter

Bloomberg logoBloomberg 8/24/2021 Prashant Gopal
Toll Brothers Inc. Homes As Construction Spending Figures Slightly Up © Bloomberg Toll Brothers Inc. Homes As Construction Spending Figures Slightly Up

(Bloomberg) -- Toll Brothers Inc. reported weaker-than-expected order growth as soaring home prices started giving buyers sticker shock. 

Purchase contracts for the three months through July climbed 11% from a year earlier to 3,154, the Fort Washington, Pennsylvania-based builder said in a statement Tuesday. That missed the average estimate of analysts surveyed by Bloomberg of 3,217.

Key Insights

Analysts expected a bigger jump in orders for Toll, which, along with other U.S. builders, has been benefiting from the pandemic-driven rush to buy spacious homes in the suburbs. While the company missed the consensus estimate, orders reached a record for Toll’s fiscal third quarter, according to the statement.In value, orders jumped 35% from a year earlier, reflecting the company’s ability to push prices higher. The company’s adjusted gross margin on home sales in the quarter was 22.7%, up from 21% a year earlier.Toll’s wealthy customer base isn’t as constrained by the shortage of homes to buy in the U.S. Supplies are tightest at the entry level, where first-time buyers are competing with investors. And while sales of higher-end properties are soaring, more listings are available.With more demand than they could handle, Toll and other builders have limited orders so they could catch up. In a sign the crunch may be easing, new-home scaffolding in front of a wooden chair: As U.S.'s Lack of Homebuilding Nears Crisis, Fannie Offers Help © Photographer: Luke Sharrett/Bloomberg As U.S.'s Lack of Homebuilding Nears Crisis, Fannie Offers Help sales in July rose for the first time in four months, government data showed Tuesday.

Market Reaction

The shares fell as much as 5% in late trading before turning positive. They had climbed 40% this year through Tuesday’s close, compared with a 33% gain for an S&P index of homebuilder stocks.

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The company will hold a conference call Wednesday at 8:30 a.m. New York time.Toll is teaming up with Sam Zell’s Equity Residential to develop apartments.

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