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Homebuilder Toll Brothers keeps dancing downhill

Posted by: Peter Coy on February 6, 2008

Robert Toll.jpgIn December 2006, CEO Robert Toll of luxury homebuilder Toll Brothers issued a statement that is destined to live in housing bubble infamy:

“Fifteen months into the current slowdown, we may be seeing a floor in some markets where deposits and traffic, although erratic from week to week, seem to be dancing on the bottom or slightly above.”

It was the word “dancing” that made Bob Toll’s quote so memorable. One blog, Paper Economy, even superimposed his head on a photo of John Travolta dancing in Saturday Night Fever.

More than a year later, Toll’s imagery has changed from dancing to holes in the earth. To wit:

“Based on current traffic and deposits, we are not yet seeing much light at the end of the tunnel.”

Here’s a link to the Associated Press account of today’s earnings.

Toll, by the way, has raised hundreds of millions of dollars by selling shares of Toll Brothers stock over the past few years, while he was making optimistic statements and prices were nevertheless falling. One analyst, Ivy Zelman, said investors would have done much better mimicking Toll’s own trading patterns rather than paying attention to his public statements.

There’s no evidence that Toll attempted to mislead investors. It’s more likely that he was genuinely overoptimistic, and the sales may simply have been part of a prudent diversification strategy. (He still owns a big chunk of the company.) Still, you can see why some long-suffering shareholders would be less than happy with him.

Reader Comments


February 7, 2008 12:22 AM

I'm disinclined to feel sorry for Toll Bros, the original builder of all the gaudy McMansions. I'm sure they own a couple in which they can downsize their offices.

This country would be better off without national homebuilders - their supposed economies of scale haven't reduced the cost of construction or purchasing. Instead, let's see quality, local construction once more. I really dislike traveling and finding every area looking the same.

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BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.

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