Toll Brothers (TOL) has come out and told investors that net contracts saw their first YoY up-tick in four years.
But this isn’t the first time the homebuilder has seen green shoots. A flashback to September 2008.
“It appears that per-community traffic and deposits at our sites over the past several months have been stabilizing, albeit at historic lows. We also note that our number of cancellations this quarter, although still greatly elevated from our historic norms, is the lowest in nine quarters. We observe that these indicators have occurred in the face of a particularly difficult year that has included explosive energy price increases, rising unemployment and severe mortgage and credit conditions. Even so, we believe that there is pent-up demand. When we have held promotions, many more buyers than usual have come out and put down deposits.
“We are now completing the third year of the worst housing market since we started in 1967. Weak consumer confidence has kept many potential buyers from taking advantage of the current buyers’ market. Tightened mortgage lending standards have sidelined others. Single-family housing starts have decreased by approximately 65% from their peak in January 2006: Starts now stand at their lowest level since January 1991. We believe that most big public builders have sold off most of their spec inventory, which eventually should help stabilise home prices.
In the period following September, Toll’s shares fell from $25 to $14 lows by March, a trend mirrored by housing stocks in general. Today many housing stocks, including Toll, are approaching their early September levels on renewed optimism. Let’s hope this time that optimism is warranted.
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