'Pent-up demand' returns for housing: Toll Brothers CEO
Luxury home builder Toll Brothers saw its second-quarter profit more than double from a year ago, thanks to the niche market it serves, the company's CEO told CNBC's "Closing Bell."
"Our buyers don't have mortgage problems; 20 percent are all cash. Those that get a mortgage put 30 percent down," Douglas Yearley said. "Their decision to buy is more of a discretionary decision, it is more emotional, [and] it is based on confidence ... we love our niche."
The home builder also predicted its home prices would stay resilient for the rest of the year, averaging $690,000 to $720,000 for all homes delivered in 2014.
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"Current demographics seem to suggest that new home sales should pick up. If the tight supply bumps into increasing demand, prices could rapidly rise," Toll Brothers Chairman Robert Toll said in a statement Wednesday.
Home prices in the nation's largest cities are already moving higher. Single-family home prices rose 0.9 percent in March on a seasonably adjust basis, according to the 20-city Case-Shiller home price index.
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"We're in the early stages of a recovery," Yearly said."We're very confident that pent-up demand is coming back."
California and Texas,which are among the strongest housing markets in the U.S., helped fuel Toll's profits for the quarter.
"What's going on in New York, Texas and coastal California ... those markets are hot," Yearley said. "We have pricing power in those markets and inventories are low."
The home builder earned $65.2 million, or 35 cents per share compared with $24.7 million or 14 cents per share in the year ago quarter. Analysts expected earnings of 27 cents, according to FactSet. Revenue also came in at $860.4 million compared with $516 million from a year ago.
Toll Brothers shares closed 2 percent higher Wednesday, finishing the day at $36.36.
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—By CNBC's Donna Burton