The recovery of the U.S. housing market since the recession has been steady, if generally unspectacular. But at least one builder seems to have convinced investors that it’s trending upward.
The luxury homebuilder Toll Brothers (TOL) reported quarterly revenue and earnings after market close Tuesday that beat analysts’ expectations. Shares of the company jumped more than 6% Wednesday, pushing the price close to $34. That’s its highest level since the end of 2015 and 43% higher than its level a little more than a year ago.
Toll Brothers reported $921 million in revenue and $70 million in profit for the quarter. The figures were down 0.8% and 3.8%, respectively, from last year, but still beat projections. The company also upped its guidance for the year, projecting year-end sales of 6,700 to 7,500 homes. Toll Brothers homes serve the higher end of the market (some go for several million dollars) and the company said it expected its average home to sell between $775,000 and $825,000 in 2017.
The company also said it will start issuing a dividend in April.
Prior to this week, there had been some concern that some of the company’s high-end markets were weakening. Last week, for example, Toll Brothers offered to pay for buyers’ transfer taxes for a couple of its New York City condominiums, in an effort to avoid having to bring down the asking prices. But the earnings report suggested there was enough strength elsewhere to offset the lagging demand. In fact, new contracts rose to $1.24 billion, up 14% from a year ago.
The company’s good news comes as new data points to a strengthening housing market. The rate of homebuilding in January was 10.5% higher than last year, according to data released by the Commerce Department last week. Permits for future construction jumped to the highest rate since November 2015, coming in at a pace of 1.29 million units a year. (More construction could help alleviate the housing supply crunch described in the video below.)
The jump in building highlights how the housing market as a whole is heating up. Existing home sales jumped to a seasonally adjusted annual rate of 5.69 million in January, its highest level in ten years, the National Association of Realtors said Wednesday. The inventory of existing homes was more than 7% lower than last year, with houses remaining on the market for 50 days on average before being sold, down from 52 days in December. The inventory has fallen year-over-year for 20 straight months, which underlines the need for more new building projects to fill the demand and keep prices from rising out of most buyers’ price range.
(For more, read “These 5 Trends Will Shape the Housing Market in 2017.”)
The median existing-home sale price rose to $228,900, which is more than 7% higher than a year ago and marks the 59th consecutive month of year-over-year gain.