* Third-quarter revenue rises 24 pct to $689.2 mln
* Average selling price climbs 13 pct to $651,000
* Shares up in morning trading
* Toll’s ready-to-build land base up 20 pct
* CEO: “We believe the recovery is real”
By Rohit T. K.
Aug 21 (Reuters) - Toll Brothers Inc reported a 24 percent jump in quarterly revenue due to higher home prices and said it expects to raise rates again in the current quarter, as customers buy its luxury houses undeterred by rising mortgage rates.
Toll, the largest U.S. luxury homebuilder, typically targets affluent customers with spotless credit records and, so, has not been hit as much as some of its peers have been by higher interest rates.
Mortgage rates rose to a two-year high in July, denting the prospects of the two largest U.S. homebuilders, D.R. Horton Inc and PulteGroup Inc. However, the rates are still at historically low levels.
“Today is still a better time to buy a house than tomorrow,” said Williams Financial Group analyst David Williams. “You’re not going to get a more affordable purchase price in the future than you are today.”
Not only did Horsham, Pennsylvania-based Toll raise its selling price, it said the number of homes it booked per community in the third quarter ended July 31 was at levels last seen in 1997-1998.
“We believe the recovery is real and we are in the early stages of the rebound,” Toll Chief Executive Douglas Yearley said in a statement on Wednesday.
Toll’s shares were up 2 percent at $32.27 in morning trade. Shares of D.R. Horton, PulteGroup, KB Home and Lennar Corp were also up, in a market that was slightly down.
Toll’s revenue rose 24 percent to $689.2 million in the third quarter as prices rose 13 percent to $651,000. It expects to increase prices to $675,000-$695,000 in the current quarter.
Profit fell by 24 percent to $46.6 million, or 26 cents per share, in the latest quarter.
Toll said it ended the quarter with 47,200 lots developed for construction, up from 39,200 a year earlier.
The company, with a major presence in downtown Manhattan, is one of the few builders that does not need to ramp up buying land given its strong land bank in urban areas, which allows it to consistently raise prices thanks to a short supply of houses.
Lennar is the other U.S. builder whose large land assets have allowed it to maintain a strong sales pace.
Until July, Toll enjoyed being the only listed luxury U.S. homebuilder, which gave it access to easy financing to recover from the financial crisis.
However, its order growth has been slowing on a sequential basis for three straight quarters and was 26 percent in the latest quarter.
That rate was still higher than that reported by D.R. Horton and PulteGroup in the spring quarter, which bore the brunt of the rising interest rates.
Toll’s smaller peer WCI Communities Inc went public late last month, joining a string of builders tapping the stock market as they aim to meet the growing demand.
WCI’s revenue rose 72 percent and orders jumped 15 percent in the second quarter ended June 30.