Toll Brothers Inc. (TOL), the largest U.S. luxury-home builder, reported increases in sales, prices and orders during its second quarter as more owners decided to move up to bigger properties.
Contracts signed for Toll Brothers homes climbed to 879 in the fiscal quarter ended April 30, from 866 a year earlier, the Horsham, Pennsylvania-based company said in a statement today. The average price for the orders rose to $570,000 from $565,000 a year earlier. Revenue increased 8 percent to $319.7 million.
Buyers are “not trying to time the perfect opportunity to get into the real estate market,” Chief Executive Officer Douglas Yearley Jr. said during a conference call with investors. “It’s time for them to move on and they have the ability to do it. That’s the difference with the luxury end and we’re seeing the benefit to that.”
The rising sales helped the builder narrow losses in the period, which includes the spring selling months that are typically among the busiest for home orders. Toll Brothers had a loss of $20.8 million, or 12 cents a share, for the quarter, including about $32.5 million in writedowns. A year earlier, the loss was $40.4 million, or 24 cents a share.
“The positive order and pricing commentary more than offset the larger-than-expected impairment charges,” Michael Rehaut, an analyst with JPMorgan Chase & Co., wrote in a note to investors. He has an “overweight” rating on the shares.
Toll Brothers rose 36 cents, or 1.8 percent, to $20.63 at 4:15 p.m. in New York Stock Exchange composite trading. The shares increased 8.6 percent this year, the largest gain in the 12-member Standard & Poor’s Supercomposite Homebuilding Index.
U.S. homebuilders have struggled as foreclosures, which sell at a discount, flood the market and make previously owned homes more affordable than new properties. New homes sold at an annual pace of 323,000 in April, up from 278,000 in February, a low in records dating to 1963, the Commerce Department reported yesterday. The average pace for the past 10 years was 823,000.
“As consumers better understand that prices are firming, we believe they will gain confidence, which will help release some of the pent-up demand that must be building in the market,” Executive Chairman Robert Toll said in the statement.
Toll forecast sales of 2,300 to 2,800 homes in fiscal 2012 at an average price of $540,000 to $560,000. Three months ago the company predicted a price range of $540,000 to $565,000.
About 23 percent of buyers paid cash for Toll’s homes during the quarter, while the average down payment on homes with a mortgage was 30 percent, Yearley said.
The company wrote down $32.5 million for investments in communities, land and joint ventures, compared with $42.3 million a year earlier.
The builder reported a profit for the three previous quarters as it cut costs and reduced losses from impairments on land acquired before real estate prices plunged. Toll, which sells in 20 states, has diversified from suburban, single-family homes by building urban high-rises and investing in distressed real estate deals through its Gibraltar Capital and Asset Management division.
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