Life in luxury

Jennifer Collins Aug 24, 2011

Life in luxury

Jennifer Collins Aug 24, 2011

Jeremy Hobson: We’ll get earnings this morning from the
luxury homebuilder Toll Brothers. And in what would be a rare bright spot for the housing market, analysts expect the company to report a profit.

Marketplace’s Jennifer Collins tells us why.

Jennifer Collins: Analyst Jack Micenko of Susquehanna Financial says Toll Brothers has been successful selling homes that people actually want to buy.

Jack Micenko: You have older folks, baby boomers, retiring and they want to age in place. They don’t want to be climbing up stairs.

So in Florida, for example, Toll’s built homes with master suits on the first floor.

Citigroup analyst Josh Levin says for the urbanite:

Josh Levin: Toll’s actually really started to expand in New York City and the New York environments by going to apartment buildings, building skyscrapers. That’s been their hottest market in the country for the past year.

Levin says Toll Brothers has a leg up because luxury properties don’t compete with homes in the low end of the market, which has been hobbled by foreclosures. Still the company’s only selling about a quarter of the homes it sold during the bubble.

Megan McGrath is an analyst with investment consultants MKM Partners.

Megan McGrath: They have to hustle to sell their homes. This is a very, very, very tough market.

She says luxury buyers tend to have more of their wealth in the stock market. So when the market is volatile — like right now — the wealthy may be more hesitant to buy. The average price of a Toll Brothers home has dropped around 20 percent since 2006.

Morris Davis, a real estate professor at the University of Wisconsin, doesn’t expect these prices to stay low forever. Historically low interest rates are bound to lure in more buyers.

Morris Davis: The housing market will recover because it has to. There’s population growth and people will need homes.

And he says the first sign of life seems to be in luxury.

I’m Jennifer Collins for Marketplace.

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