Toll Brothers FY 2Q15 Earnings Call Notes

posted in: Notes | 0

Average price of signed contracts is up a lot y/y

“The average price of homes delivered was $713,000 compared to $706,000 in 2014 second quarter. Net signed contracts of $1.6 billion and 1,931 units rose 25% in dollars and 10% in units compared to fiscal year 2014 second quarter. The average price of net signed contracts was $826,000, compared to $729,000 in 2014 second quarter. This significant increase reflects our greater concentration in California and some high priced City Living products.”

California is strong

“We’re pleased with the way fiscal year 2015 is unfolding. California demand remains very strong. Our communities there accounted for roughly 30% of the value of signed contracts this past quarter as we enjoyed pricing power across both Northern and Southern California.’

Texas doing well

“Texas which for Toll is primarily Dallas and Houston, continues to perform well. Over the past few weeks more than 1500 visitors have showed up a grand opening events at our Sienna Plantation master plan community on the South side of Houston, where we and other builders will be selling homes.”

Pent up demand is releasing

“We have seen a number of strong community openings in the past few months elsewhere in the country. Pent-up demand is releasing in many markets.”

Housing market is on firm footing

“The economy and housing continue on parallel pace of recovery. It appears that the housing market is on firm footing and heading in the right direction. As pent-up demand is released, we envision a solid recovery for housing.’

Now weakness in Houston

“we keep a close eye on it as we’ve talked about, we’re constantly asking sales and our management team down there what they’re seeing and the market is holding on, we’re keeping our fingers crossed. Right now it’s okay, and we love our positioning.”

Mortgage rates are not going to have a huge impact on the market at this point

I don’t think the increase in mortgage rates is truly meaningful at this point. It is low as 3.5, 3.75 now you’re at 3.70. I don’t think that is going to determine the market going one way or the other.”

Buyers don’t talk about rates. They’ve been here for so long

“We’ve always said that if the rates pick up slowly because of great economic news, which is why they should pick up, we’ll take it all day long, and right now buyers don’t talk about rates, it’s not an issue, they have been sitting at this number for so long, so we don’t see it as an issue right now for our business.’

Less concern about reselling an existing home

“We don’t hear as much about the concern of selling the existing home as we heard few years ago. To Bob stats, the stronger the resale market becomes the higher price of the houses become, the more comfortable people are in moving up and that is evolving.’

Encouraged by demand all over the country

“We are encouraged by the demand we’re seeing released around different pockets of the country. And hopefully that continues and we will also contribute to margin expansion around the rest of the country in 2016, but we’ll probably have more on that more to say on that later this year.’

Have been able to be more selective with land acquisitions

“I wouldn’t read too much into the land levels coming down it’s just lately. We’ve bought a little bit less land and we’re in such great position with the land holdings we have, that we can afford to be very selective and we are.’

“With the recovery being a bit more gradual than other recoveries have been, the need to get land is not been a significant.”