Toll Brothers says homebuyer appetites are improving, and shortage of houses will keep benefiting industry

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Shares of Toll Brothers Inc. rose after hours on Tuesday after the homebuilder reported better-than-expected quarterly results and said homebuying appetites had improved in the current quarter, after higher rates led to a stall-out in the market.

“As mortgage rates have stabilized and buyer confidence has improved, the increase in demand that began in January has continued through our second fiscal quarter and into the start of our third quarter,” Chief Executive Douglas Yearley said in a statement.

The company also forecast more deliveries — or the handover of a home to its owner — than expected for the third quarter and full year. Toll Brothers said it expects deliveries of 2,350 units to 2,450 units for the third quarter, and 8,900 units to 9,500 units during the full year, with both projections above Wall Street’s forecasts.

For its fiscal second quarter, Toll Brothers

reported net income of $320.2 million, or $2.85 a share, compared with $220.6 million, or $1.85 a share, in the same quarter last year. Home sales came in at $2.49 billion, up 14% from $2.19 billion in the prior-year quarter. Deliveries came in at 2,492, up 4%.

Analysts polled by FactSet expected earnings of $1.91 a share, on revenue of $2.06 billion.

Shares were up 3.2% in after-hours trade on Tuesday.

Housing demand has been hit by higher mortgage rates over the past year. But prices, at times, have been propped up by a decline in the number of homeowners putting their homes up for sale, after securing a better mortgage rate during the pandemic.

Yearley, however, cast the short supply of available homes as a benefit to the industry.

“There continues to be a substantial shortage of homes for sale in the U.S., as housing starts have not kept up with population growth for at least the past 15 years,” he said. “Now, the supply of homes for sale is being further limited by a historically tight resale market as homeowners are reluctant to give up their low-rate mortgages.”

“We believe the resulting supply-demand imbalance will continue well into the future, adding to the long-term tailwinds that have supported the housing industry in recent years,” he continued. “These include favorable demographics, migration trends, and more flexible work arrangements.”


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