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Tale of Two Headlines, Toll Brothers Has Record New Home Sales But Misses Estimates

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19 comments on Tale of Two Headlines, Toll Brothers Has Record New Home Sales But Misses Estimates

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Record New Contracts

Fox News reports Toll Brothers Luxury Home Builders Hit Record in New Home Contracts.

Luxury home builder Toll Brothers Inc. reported in its fiscal year 2021 third quarter earnings results on Tuesday that the firm hit a new record for new contracts on the quarter, exceeding Q3 of last year by 35% when new contracts hit a previous all-time high.

The company also saw all-time records in both dollars and units for homes in backlog, with value surging 55% from a year earlier to $9.44 billion, and units spiking 47% to 10,661.

Not Good Enough

Bloomberg saw things this way: Toll Brothers Misses on Orders as Luxury-Home Sales Falter

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

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.

Drop in ‘Crazy High’ Lumber Prices Will Save $40,000 Per Home

In related news, Toll Brothers CEO says Drop in ‘Crazy High’ Lumber Prices Will Save $40,000 Per Home. 

Doug Yearley, CEO of luxury homebuilder Toll Brothers, told CNBC on Wednesday that lumber prices coming off record highs will serve as a tailwind in the face of other “cost pressures.”

“Lumber is down $40,000 a home. We’re going to see the benefit of that in the second half of ’22,” Yearley said on “Mad Money.” ”[Lumber] got crazy high. We knew it would come back,” he added. “We’ve been very happy with how quickly it’s come back. I think it’s going to stay down.”

Lofty Expectations

I am amused at the headline reporting difference but even more amused that contracts are up 35% from a previous all-time high and that is considered “faltering”.

It takes massive expectations and beats just to stand still. That’s how crazy things are.

What happens when sales really do falter?

Price Pressures Coming

On Tuesday I commented New Home Sales Rise But Supply Jumps to Most Since Nov 2008

New Homes For Sale By Stage of Construction

For Sale Details

  • The 230,000 under construction is the most since November of 2007.
  • The number of homes for sale not yet started is 104,000. That’s the most since June of 2006.

Balloons in Search of a Pin

Earnings estimates, expectations, and the entire stock market all seem like balloons in search of a pin. 

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19 Comments
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Cocoa
Cocoa
4 years ago
Mish very quiet about our genius moves in Afghanistan
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RonJ
RonJ
4 years ago
“Drop in ‘Crazy High’ Lumber Prices Will Save $40,000 Per Home”
How many people bought homes that were up to $40,000 over priced, or were there mitigations builders were able to employ to avoid much of the lumber cost price spikes?
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numike
numike
4 years ago
The Most Monstrously Overstimulated Economy & Markets Ever by Wolf Richter  https://wolfstreet.com/2021/08/25/the-most-monstrously-overstimulated-economy-markets-ever/#comments
The Fed will trim back its stimulus, but it’s already too late, and it’ll be too little and too slow.
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Casual_Observer2020
Casual_Observer2020
4 years ago
Reply to  numike
It has been overstimulated since 2001. The last time we got productivity growth that matched economic growth was the 1990s.Everything since the 2001 recession has been paper pushing. 
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Casual_Observer2020
Casual_Observer2020
4 years ago
OT. Somehow Biden managed to make the last 3 different presidents look like like they were the greatest presidents ever on Afghanistan.  In Obama’s words, don’t underestimate Joe’s ability to eff things up. 
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LM2022
LM2022
4 years ago
Reply to  Casual_Observer2020
Trump made deals with the Taliban, even released Taliban terrorists from prisons, but go ahead and blame Biden.
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1-shot
1-shot
4 years ago
Unfortunately for all the naysayers higher home prices do not necessarily mean the market is in a bubble that has to explode. If you adjust home prices for TRUE inflation rather than the government’s inaccurate core CPI index, would they still seem so high? 
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Eddie_T
Eddie_T
4 years ago
Reply to  1-shot
True that. Even the ACTUAL BLS reported housing inflation is much higher than reported CPI-U.
I don’t have it at my fingertips, but my friend Dan A’s book, to the best of my memory, reported housing inflation as 2.94% on average between 1975 and 2019. This site has it higher 1975-2021, at 3.77%.
This might not sound like huge inflation, but over time it matters a lot.
“Prices for Housing, 1975-2021 ($100,000)

According to the U.S. Bureau of Labor Statistics, prices for housing were 448.03% higher in 2021 versus 1975 (a $448,026.33 difference in value).

Between 1975 and 2021: Housing experienced an average inflation rate of 3.77% per year. This rate of change indicates significant inflation. In other words, housing costing $100,000 in the year 1975 would cost $548,026.33 in 2021 for an equivalent purchase. Compared to the overall inflation rate of 3.54% during this same period, inflation for housing was higher.

https://www.in2013dollars.com/Housing/price-inflation/1975-to-2021?amount=100000

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jhrodd
jhrodd
4 years ago
Reply to  Eddie_T
It’s a lot worse here in the PNW.  I bought my first house in Bellingham, WA for $25,000 in 1975.  Zillow estimates it’s value now as 644k.  A house across the street that was for sale at the same time in’ 75 for 15k sold last year for 542k.
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Eddie_T
Eddie_T
4 years ago
Reply to  jhrodd
Yep. You’re on the higher side out there, for multiple reasons, one of which is foreign buyers. The numbers I quoted are averages, and they include depressed areas too, like Danville Illinois and Pine Bluff Arkansas. I wonder what the housing inflation has been like in the Hamptons.
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Mish
Mish
4 years ago
Reply to  Eddie_T
My college roommate told me “Danville is the ideal place to raise a family”. He became a lawyer and did just that. I wonder what he thinks now.
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Eddie_T
Eddie_T
4 years ago
Reply to  Mish
I grew up in an economically depressed area…..rural East Texas….and the most frustrating  thing I remember is how hard it was to find work as a struggling student….I dropped out of college for two years…..and got a job with GE working in a foundry that was part of one of their plants. Union job, making $7 bucks….back in ’76 it was a living wage in those parts.
Mostly due to encouragement from my GF (who is now my wife of 40 years) I sucked it up and went back to school and made it through. Otherwise I might have stayed for the duration of my career.
But I will never forget how demoralizing it was……to just want to work and make your way in the world, and see no way to out of a crummy situation. It’s no wonder that people vote with their feet. You have to have hope, when you have nothing. Without hope of a better future, life really sucks.
Maybe your old roomie made a good life….it’s possible in most places with some kind of decent education and a credential…but it’s SO much easier where there’s vibrant commerce and a growing economy.
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Eddie_T
Eddie_T
4 years ago
I think the greatest threat to housing, ironically, is the stock market. Even though housing prices are up, in places like Texas, the demand is going to keep climbing. Unless……
A real deflationary event in stocks will take everything else down…I’m pretty sure that would happen, especially with so much leverage being used by people who are completely clueless about risk.
I just read this, which was of interest….five of the hottest housing markets in the country are in Texas…all in Austin or near DFW….Houston did not make the cut.
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Casual_Observer2020
Casual_Observer2020
4 years ago
Reply to  Eddie_T
It isn’t sustainable no matter how you slice it. I lived in Texas for 20+ years as a child into my adulthood.  The quality of life was crappy then, not because there were too many people, but because there nothing to do. Now with more stuff to do and a LOT more people, the traffic and everything else that comes with it can’t be that great.  As my colleagues around all corners of the country say about Texas, you just have to live there. 
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Eddie_T
Eddie_T
4 years ago
Reply to  Casual_Observer2020
I’m able to move anywhere I want (or will be soon when I hang up the day job) , and I still like life here. I look at alternatives constantly, and I have friends all over the US and abroad…there are definitely things I don’t like about Texas, such as the oppressive summer heat, and the lack of public land…..but there are many things I do like. So far, I’m not too inclined to move.
I think Austin has the best restaurant food in the US, and I’ve made a pretty good survey on that. I like Barton Springs and the limestone ledges of the hill country. I like the beach here, and the sailing isn’t bad. You can ride motorcycles forever and never cross a freeway if you know where to go.
When I was a kid I grew up here but very rural…..with miles of creeks and pastures to roam…..and not much surveillance. lol. It was lonely at times, but I read a lot. I can’t imagine a better childhood, other than growing up in a house that was very cold in the morning in the winter…until somebody built a fire in the wood stove.
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TexasTim65
TexasTim65
4 years ago
Reply to  Eddie_T
There’s beaches in Austin 😉 Or you mean South Padre area? Either way once you’ve been to Florida or some place else with blue water there are no beaches in Texas you want to visit.
That said, I enjoyed my decade or so living there (Dallas/Austin and visiting Wichita Falls). Coming from another country (Canada), I found the people very friendly and welcoming once they found out you were from Canada. I did not experience that in California (other than from mid-west transplants who lived there) or Florida (again from transplants that were also Canada).
I guess the food in Austin must have changed a lot since I left in 05. It didn’t seem like anything special back then and I would have never considered it on a list of cities with the best food.
Oh, and growing up where it’s cold (like Canada where I did) is highly over rated. One of the 2 big reasons I left was the cold (the other was lack of great jobs/socialism).
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Eddie_T
Eddie_T
4 years ago
Reply to  TexasTim65
I’ve been all over Florida, other than the northern Atlantic part of the Florida coast…and I’ve been to the Atlantic coast further north…..to the Outer Banks and Pamlico Sound, which I liked a lot.
I liked the water best around Bradenton…but I was talking about Mustang Island on the Texas coast which is a 4 hour drive from my house…I’ve spent lots of time on South Padre too. I was (once-upon-a-time) a kiteboarder who was known to drive 7 hours to find a place with a decent side-shore breeze. I even used to drive down to the Texas City dike, but the oyster beds there are hell on your feet.
The wind almost always blows on the Texas coast and I like that. It’s very soothing to me. The water is warm, and the sharks don’t bite. 
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Mish
Mish
4 years ago
Reply to  Eddie_T
In addition to demographics and death of boomers, in the shorter term, housing, cars, and travel all depend on stock market.
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Eddie_T
Eddie_T
4 years ago
Reply to  Mish
Agree…..with all those macro issues. I hate to see the stock market tank, even though I own zero stocks. I consider it my biggest risk.
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