Toll Brothers Grades for Various Housing Markets
By Dr. Duru written for One-Twenty
February 24, 2006


Toll Brothers came through on Thursday morning and maintained the momentum and case for a bottom in housing stocks. Just two weeks ago, Toll delivered its bad news and homebuilder stocks took a hard tumble. This time around, the bad news still allowed Toll Brothers stock to rise. (For those of you who are technically inclined, I strongly encourage you to review the charts. I do not post them here, but you will note that most of the homebuilder stocks have now risen right into areas of major resistance: 50 DMAs, 200 DMAs, and even upper Bollinger Bands.)

A lot has already been reported on Toll's earnings call given that we are so obssessed with the housing bubble. However, I would encourage you to read the report for yourself and, even better, listen to the conference call. I will say that the executives remain relatively positive overall. They acknowledge that this year will feature a slowdown in many of their housing markets but that by next year they expect things to stabilize and even begin improving once again. So, here we are again with no real alarm bells coming from the executives of the homebuilders. And if we are to believe them, all the bad news is now out. If the stocks follow suit, as I suspect they will, the jig could be up for shorts in this sector for now.

Anyway, I thought those of you who are just as obssessed with the housing bubble as I am might be interested in seeing Toll's ratings of its various housing markets. These grades represent Toll's ratings of their markets over the last four weeks or so of business. I copied this down from listening to the earnings call (and left it in the order in which they read it). An analyst during the call claimed that these ratings are very similar to the ratings from the last earnings call. When you think through the implications of these grades, remember that Toll specializes in the high-end of the housing market. Again, I highly recommend that you listen to the conference call for yourself.

Here is the approximate key:

  1. A: Toll is increasing prices
  2. B: Lower pricing power
  3. C: Sales down, prices flat
  4. D: Dog. Sales down and lack of any pricing power
  5. F: "Forget about it"

 

Region

Rating

Toll Brothers Comments

Phoenix, AZ

A

even with speculative selling

Palm Springs, CA

B

 

Northern California

C

 

Southern California

A

little info - only 3 communities

Colorado

A

 

Connecticut

B

have raised prices in past few weeks - CEO feels too much

Delaware

C+

 

Maryland/Delaware shore

D

 

Central Florida/Orlando

C

A+ in last 2 weeks

East Gold Coast, FL

B

 

Jacksonville, FL

D

this past week as good though

West Gold Coast, FL

C

has cooled down from B a few weeks ago and A over a month ago

Chicago, IL

B

raised some prices in past few weeks

Detroit, MI

C

surprised not an F

Minnesota

C/D+

only 2 communities

Las Vegas, NV

B

 

Reno, NV

C

 

Massachusetts

C

 

Rhode Island

C

1 community

New Jersey suburbs

C+

surprising

New Jersey - urban infill (Hoboken)

A+

 

New York City ex-urb (Peekskill)

C

 

Charlotte, NC

A-/B+

 

Raleigh, NC

B

solid

Philadelphia area

B+

 

Hilton Head (Blufton), South Carolina

B

considers this excellent for time of year

Austin, TX

D

thought they were coming back 5 weeks ago, wishing had fewer communities

San Antonio, TX

B

2 communities

Dallas, TX

B+

price sensitive, but can still make good profit on good volume

Washington DC (Maryland)

B

 

Washington DC (Northern Virginia)

D

 

Prince George County (Maryland)

A

 

 

Be careful out there!

DrDuru, 2006