The Challenges Facing Luxury Home Builders

August 22, 2019
luxury home builder
Photo: Unsplash/Toa Heftiba

Toll Brothers Inc.’s purchasing agreements have fallen an unexpected 3% year-over-year, as the builder and others grapple with a lack of demand for luxury product, National Mortgage News reports.

Toll Brothers Inc., the nation's largest publicly traded luxury homebuilder, said late Tuesday that purchase agreements fell 3% from a year earlier, worse than a decline of less than 1% that was expected by a Bloomberg survey of six analysts. The company's orders in California, home to some of the priciest markets in the country, tumbled 36% from a year earlier.

The results underscore a shift taking place in the U.S. housing market. The return of low mortgage rates is heating up competition for starter homes and fueling steep price gains in cities that have long been more affordable. Meanwhile, expensive markets, like San Jose and Seattle, as well as the luxury homes that Toll builds, have seen a drop-off in demand.

"Their buyers are a little more sensitive to what's going on in the broader economy," said Drew Reading, an analyst at Bloomberg Intelligence. "They’re paying more attention to the stock market."

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