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Luxury homebuilder hitting a wall

Steve Tripoli Feb 6, 2008
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Luxury homebuilder hitting a wall

Steve Tripoli Feb 6, 2008
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TEXT OF STORY

Scott Jagow: Today, the luxury homebuilder Toll Brothers reports how things are going — orders for the last three months. Might see a 25 percent drop compared to a year ago, and as far as homebuilders go, Toll Brothers is in good shape. Here’s Steve Tripoli.


Steve Tripoli: Toll Brothers is a bit of an exception to most other big home builders. That’s according to John McManus at the industry magazine Big Builder.

He says Toll isn’t choking on excess land like many others. And the company’s concentrated in relatively healthy housing markets. McManus says that’s not the case for many of the top 100.

John McManus: These companies hired too many people, and they paid too much for additional lots to build on, and got ahead of themselves in terms of what they could manage if things were to suddenly hit a wall.

The wall’s been hit, and McManus sees a terrible year ahead.

McManus: You’re going to see defaults and eventually bankruptcies occur in that group.

Tripoli: How many of the top 100 do you think are going down?

McManus: Well, I’d say probably one in three.

McManus says survivors will be those who aren’t wallowing in debt they can’t pay with homes that aren’t selling. He says those companies may even gain market share once a lengthy shakeout ends.

I’m Steve Tripoli for Marketplace.

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