(Bloomberg) -- Toll Brothers Inc. reported better-than-expected quarterly orders as wealthy buyers plowed stock-market gains into luxury-home purchases.

Purchase contracts for the three months through October were down 13% from a year earlier to 2,957, the builder said in a statement Tuesday. The average estimate of analysts surveyed by Bloomberg was 2,926. 

Key Insights

  • Toll’s high-income customers are less likely to face affordability challenges. And thanks to the surge in home values across the U.S., many owners are able to sell existing properties at a profit, and pump extra cash into new ones. Some buyers also are sitting on bulging stock portfolios.
  • The pandemic has fueled a rush to the suburbs where Toll has plenty of options for buyers seeking more space.
  • The gross margin on home sales for the quarter was 23.5%, up from 20.1% a year earlier. The average price of homes in backlog was $922,100, up from $818,200 a year earlier.
  • Builders, including Toll, would have sold more homes if they could. Instead, they’ve been limiting orders so they can catch up on homes that have been delayed by shortages of labor and materials.
  • Even with those issues, “which we expect to continue for the foreseeable future, we project 20% revenue growth” in fiscal year 2022, Chief Executive Officer Douglas Yearley said in the statement.

Market Reaction

  • Toll’s shares rose slightly in late trading. They had jumped 64% this year through Tuesday’s close, one of the best performances in an S&P index of homebuilders, which gained 46%.

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  • The company will hold a conference call on Wednesday at 8:30 a.m. New York time.

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