New Home Sales Down, but Toll Brothers Surprises

Orders for new homes might be down, but luxury homebuilder Toll Brothers Inc. nevertheless reported a quarterly profit for the first time since the housing bubble burst in 2007.

August 26, 2010
By Dees Stribling, Contributing Editor

Courtesy Flickr Creative Commons user Kevin Shorter

On the heels of the doleful existing housing sales numbers on Tuesday came a report by the U.S. Department of Commerce on Wednesday that said that new homes are selling at an annualized rate of 276,000 in July, down 12.4 percent from June and 32.4 percent from June 2009. This kind of decline was also expected, now that the federal homebuying tax credit is gone. It likely had the effect of moving sales that would have normally been in the summer forward into the spring.

Median sales prices slid as well, though not quite as dramatically, according to Commerce. Among new homes that did sell in July, the median nationally was $204,000, down 6 percent from June and 4.8 percent from July 2009.

Orders for new homes might be down, but luxury homebuilder Toll Brothers Inc. nevertheless reported a quarterly profit for the first time since the housing bubble burst in 2007. Net income was the Horsham, Pa.-based company’s fiscal 3Q10, ended July 31, was $27.3 million, compared with a loss of $472.3 million during the same period last year.

Most of the profit was due to tax allowances, however; without that factored in, Toll’s profit would be about $800,000, eked out through cost reductions. A thin profit, but in today’s housing business that’s much better than a fat loss.

FHFA Offers Mixed Data on Home Prices

Two actual headlines from the same set of Federal Home Finance Agency data on Wednesday: “Home Prices in U.S. Decline 1.6% in Second Quarter” (BusinessWeek) and “U.S. House Prices Climb in Second Quarter” (MarketWatch). Clearly, the mood of the headline writer is important.

Decline 1.6 percent if compared to the second quarter of 2009. Climb (by 0.9 percent) if compared to the first quarter of 2010. In each case, the agency is measuring homes whose mortgages are insured by or belong to Fannie Mae or Freddie Mac. On the whole, that sounds roughly like price stagnation.

Foreclosures are the prime suspect in keeping the lid on prices, with unemployment keeping the supply of foreclosures at high levels. According to RealtyTrac Inc., U.S. foreclosures will top 1 million by the end of 2010.

Millionaires Nervous, Too

There’s an index for everything: The Spectrem Group’s Millionaire Investor Confidence Index, for instance, measures the investment outlook for people in possession of $1 million or more in investable assets. And from the look of things lately, even millionaires are spooked by the way things are going.

The latest such Spectrem index, for August, was down 11 points compared with July, deep into bearish territory. That is, the rich are now more pessimistic than before. About what? Possible tax policy changes that might require them to pony up a little more of their lucre, for one thing; but also the fact that the stock market doesn’t seem nearly as bullish as it did during most of 2009.

For now, at least, Wall Street shook off the housing-slump jitters and bounced back a little on Tuesday. The Dow Jones Industrial Average edged up 19.61 points, or 0.2 percent, while the S&P 500 was up 0.33 percent. The Nasdaq gained 0.84 percent.