(Bloomberg) -- Luxury builder Toll Brothers Inc. reported weaker-than-expected quarterly orders as a surge in mortgage rates slowed demand.
- For the three months through October, purchase contracts jumped 72% from a year earlier to 2,038, the company said in a statement Tuesday. Analysts surveyed by Bloomberg expected 2,049 orders on average.
- The surge in mortgage rates toward 8% at the end of the period likely suppressed some demand as Toll’s relatively affluent buyers lost some purchasing power. But borrowing costs have eased in recent weeks. Toll Brothers Chief Executive Officer Douglas Yearley said in the statement Tuesday that demand has been “solid” in the first five weeks of the company’s fiscal first quarter.
- “With resale inventories at historic lows, buyers continue to be drawn to new homes, and we expect lower rates with lower inflation to add to this already solid demand,” Yearley said.
- The company set its guidance for fiscal year 2024, saying it expects home deliveries of 9,850 to 10,350 units. That’s higher than the 9,597 homes that Toll delivered in fiscal year 2023.
- Potential customers who would typically sell their existing home to upgrade to a Toll home may be sitting tight instead. Many owners are reluctant to sell and give up the cheaper mortgages they locked in before rates rose.
- Shares of Toll Brothers have gained 75% so far this year through Tuesday’s close, outpacing the increase in an S&P index of homebuilders.
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