| Sept 3
Sept 3 Toll Brothers Inc is finally
feeling the pinch as a steep rise in home prices discourages
even the most affluent Americans from buying its luxury homes.
The company, whose homes can cost more than $2 million, had
so far reported stellar results by selling more homes at higher
prices. But analysts said the largest U.S. luxury homebuilder
seems to have pushed its prices to the limit.
"Even though Toll targets the high-end luxury buyer, pricing
has been pushed so high already that at some point the buyer is
going to walk away," Morningstar Inc analyst James Krapfel told
Toll reported a 6 percent fall in quarterly orders, compared
with a 10 percent rise a year earlier.
Horsham, Pennsylvania-based Toll's shares fell 3.9 percent
to $34.23 on Wednesday.
With U.S. household income hardly growing and home prices
continuing to rise, housing experts warned that Toll may have to
check its price increases to lure back buyers.
Personal income in the United States rose 0.2 percent in
July, the weakest reading since December, Commerce Department
data showed. Personal spending fell 1 percent.
A slower-than-expected recovery in the U.S. housing market
this year has hurt other homebuilders too. No.1 builder D.R.
Horton Inc had to offer discounts to boost sales in some
markets in its quarter ended June 30.
While Toll said it did not offer incentives in its third
quarter ended July 31, analysts said discounts could be around
"The company will have to ultimately choose whether it wants
to target pace over price," Krapfel said.
Toll's average selling price rose 12 percent to $732,000 in
the third quarter. Prices had jumped 22 percent in the previous
Toll was not immediately available for further comment.
Analysts said Toll's results do not point to wider softness
in the U.S. housing market, which has recently shown signs of
Construction on new homes rebounded strongly in July after
two straight months of declines, data showed.
Toll's large land bank and exposure to the apartment rental
business make the company better positioned to take advantage of
At Tuesday's close of $35.63, Toll's stock traded at 16.2
times its forward 12-months earnings estimate, according to
StarMine data. The top five U.S. builders, which include Lennar
Corp, PulteGroup Inc, NVR Inc and KB
Home, traded at an average of 13.1 times.
"We like Toll's niche positioning as a luxury player in a
housing market that appears to be getting more competitive at
the lower end of the buyer spectrum," said MKM Partners analyst
Megan McGrath. She has a "buy" rating and $43 price target on
(Editing by Sriraj Kalluvila)