Homebuilder Toll Brothers lost more money again this last quarter, missing on both the top and bottom lines. Revenue basically fell by half, year-over-year. Still, they’re obviously selling some new homes, which is pretty amazing in its way.
Not surprisingly, the company won’t give out a forecast, but it is calling for a roundabout bailout of itself. More specifically, it wants that $15,000-per-home tax credit passed, and it hopes that’s applies to all homebuyers, not just first-timers. In other words, it wants the government to subsidise its product. In other words, it wants a bailout.
Our view is that this is a bad idea. The homebuilders, the companies that add more glut every quarter, are really the last companies that deserve a break. They had their run and now it’s over. Beyond that, housing prices are still too expensive. They still have a long way to fall just to hit historical norms, and probably they’ll have to fall below that before they bounce, since markets overshoot. To stem it now would just be delaying the inevitable, dragging it out longer than it ought to go.