Luxury home builder Toll Brothers (TOL) reported a fourth quarter loss of $111.4 million ($0.68 per share) today.
This net loss was worse than the -$0.46 analysts expected and the -$0.49 reported a year ago. Excluding inventory write-downs and a costs for the early retirement of debt they almost broke even, losing just $9.6 million in the quarter.
Yet despite the worse than expected loss, Toll made it clear that they felt the housing bottom was past, and highlighted that housing affordability was now better than it has been in a very long time. The problem is just that people have far less to spend these days, especially when it comes to buying a luxury property from Toll.
Toll CEO Robert Toll: Recent news reports indicate that one in four Americans have mortgages that exceed the value of their homes, which restricts their ability to sell and move to another home. On the other hand, affordability hovers near an all-time high, mortgage rates are near historic lows, and home prices, although down to 2003 levels, have improved sequentially over the past two quarters according to the most recent S&P/Case-Shiller Home Price Index. And although the volume of home sales continues to be near record lows, inventories of unsold homes are declining nationally.
Toll is getting more aggressive, and confident, against its competition as well.
“In the past few months, we have been seeing and competing for a greater number of attractive land acquisition opportunities from financial institutions and other sellers. With our strong cash position, our record low net-debt-to-capital ratio and our demonstrated access to liquidity, we believe we can take advantage of opportunities that arise from the current state of distress in our industry.
“As has happened in previous downturns, we believe there will be further consolidation in our industry. Many of the small- and mid-sized private builders, who historically have been our primary competitors in the luxury niche, are facing serious capital constraints, among other problems, and are either hobbled or no longer in business.
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