March 28, 2024

Luxury Real Estate

Signs of an Upturn in Luxury Market?

Richard Westlund | 4/1/2008
Toll Brothers home
A Toll Brothers home at Jupiter Country Club. “What’s killing housing today is a lack of consumer confidence,” says Bob Toll.

With nearly 20 upscale communities under way from Naples and Boca Raton toJacksonville and Orlando, Bob Toll pays close attention to Florida.


Bob Toll

The chairman of Pennsylvania-based home builder Toll Brothers says the luxury home market is still looking for a floor in most regions of the state, with Naples the only bright spot. “I think the market has already bottomed in Naples but not on the southeastern Gold Coast, Orlando or Jacksonville,” Toll says. His take on markets around Florida:

  • “In the Naples-Fort Myers market, sales activity is definitely up for new homes on the market at reduced prices. That’s a definite contrast to late 2007, when you couldn’t give away a home regardless of price.”
  • In the Orlando market, it takes a real bargain to interest buyers, he says. Many buyers are walking away from deposits — a trend that’s prompted the company to require additional funds as its new homes move toward completion.
  • The luxury Jacksonville market “is in the doldrums in a serious way,” largely because it’s a primary home market where potential buyers are sitting back until the national economy perks up.
  • While the demographics are different in Palm Beach County and the Treasure Coast — far more snowbirds and preretirees — the sales pace is also slow. One reason, Toll says, is that buyers are having a hard time selling their current properties to move up to a luxury home in Florida.

Toll doesn’t expect a dramatic upturn until at least after the presidential election.

In discussing the company’s $96-million first-quarter loss, Toll told analysts that constant talk about recession is dampening consumer confidence, though he pointed to “glimmers of hope” in a few markets, including Naples.

Overall, Toll says his company, the nation’s 12th-largest home builder, is in “pretty good shape” to weather the downturn with a $2.15 billion cash cushion and lines of credit.

Dan Oppenheim, a financial analyst for Banc of America Securities, says Toll Brothers’ balance sheet appears “healthy.” He has a “neutral” rating on the stock. “We continue to think Toll needs to lower prices more aggressively near term.”

Meanwhile, Toll, 67, is following a path he’s taken through previous downturns. “You move from an expansion mode to protecting your balance sheet immediately,” he says. “Then you hunker down, build up your cash, wait for the blood in the streets and take advantage of the opportunities.”

Tags: Housing/Construction

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