"We Might Be At Bottom" Says Toll Brothers CEO


There might be some good news coming out of the homebuilding sector. In July construction fell to its lowest level in more than 17 years!

That’s good news? Yes. Some economists believe the drop will reduce the glut of unsold properties, an important step for a rebound.

"Slower starts means less adds to inventory," said Adam York, an economic analyst at Wachovia Corp. "We have too much supply on the market."

But a reduction in housing starts might only be a piece of the puzzle. “Foreclosure every day dumps tens of thousands of homes on the market and that’s very hard to compete with,” says Bob Toll on Fast Money. The Toll Brother CEO thinks where we are in this cycle has to do with “how much more foreclosure is yet to come.”

“The big question is whether the deal Congress made reduces foreclosures,” says Toll. “If we have additional foreclosures then the market will go lower, if we don’t we’re probably at the bottom now.”

It’s interesting to note that Toll Brothers has weathered the housing crisis better than many of its rivals.

Percentage Change YTD
Toll Brothers +8%
Homebuilders ETF -7%
Hovnanian -10%
D.R. Horton -18%
KB Homes -19%

“We try to stay alive by accumulating cash and selling as many homes without giving them away,” explains Toll “I think the difference between us and the other guys is that we’ve sacrificed volume to not sell below the value of the ground that the house is on.”


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