Toll Brothers CEO Sees ‘Improvement Everywhere’
Home prices fell in 18 of 20 cities for the fourth consecutive month in December, according to the latest Case-Schiller report. The S&P Case/Shiller Home Price Index slid 3.8 percent, ending 2011 at the lowest levels since mid-2006.
Last week, Toll Brothers posted a first-quarter loss on a slight decline in home deliveries and a higher cancellation rate.
But Yearly said that orders were up 43 percent in the first three weeks of February.
“I think right now what’s going on is people are sick and tired of waiting. They’ve been waiting five years to get on with their lives. They’re taking advantage of interest rates that are down below 4 percent,” he said. “Affordability’s never been higher, and I just think they’re feeling better about the economy in general and they’re out in the market.”
The average selling price for a Toll Brothers home is $682,000, a number that was weighted by its new development, The Touraine, on Manhattan’s Upper East Side. Without that development, its average selling price was $595,000.
“We sure love New York. We love Hoboken. We love Brooklyn. It’s been our best performing market for the last few years,” he said. “We’re aggressively trying to find new opportunities in those markets. It’s a tight land market, as you can imagine.”
Yearly also said the builder was seeing continued strength in the corridor from Washington, D.C., to Boston.
Among the “Fast Money” traders, however, it was tough to find a buyer.
“The Case-Schiller numbers reflect a very weak pricing environment no matter what these guys are talking about from a supply-demand perspective,” said Keith McCullough of Hedgeye Risk Management.
McCullough said relative strength was not enough, especially in light of weak mortgage activity.
“To me, it’s like comparing it to tulips,” he said. “To the prior peak in tulips, it’s attractive.”
Drakon Capital’s Guy Adami saw Toll Brothers stock in a “pretty defined range.”
Instead, he likes Home Depot as a way to play the residential space.
“The stock continues to go higher, and I think it’s tape-impervious right now,” he said. “So I think HD, even given the levels we’re seeing, to me is still the best way to play it.”
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Trader disclosure: On Feb. 28, 2012, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders: Gartman is long gold futures; Gartman is short oil futures; McCullough is long (XLU); McCullough is long (GLD); McCullough is short (XLY); Finerman is long (AAPL); Finerman is long (BAC); Finerman is long (JPM); Finerman is long (HPQ); Finerman is long (CMI); Finerman is short (SPY); Finerman is short (MDY); Finerman is short (IWM); Adami is long ( C); Adami is long (GS); Adami is long (INTC); Adami is long (AGU); Adami is long (NUE); Adami is long (MSFT); Adami is long (BTU);
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