Home Builder: Housing Prices will Rebound
Robert Toll is the co-founder and CEO of Toll Brothers. He recently spoke with Maggie Lake of CNN about the national and Florida housing market…
Maggie Lake: Should we have seen this slump coming? A lot of home builders, including Toll Brothers are left with a lot of excess inventory. Should we have been better at spotting it?
Robert Toll: I don’t see how we could have done better. The news talked about the bubble while we were still roaring as a market. So there were plenty of warnings that we were entering trepidatious times. What would you do differently?
That extra demand comes to you in the face of your limited supply he wants to buy, she wants to buy, the 40th home for the year in that community and you are geared up to build 35 so how do you separate who gets that very limited supply?
Maggie: You only know after it happens.
Toll: It’s hard. You should feel it, but what would you do? You say I’m raising my prices 5, 10 thousand dollars every other week — I better quit? Shareholders might have a problem with that.
Maggie: How do you describe your leadership style?
Toll: Cross examining from law school and expected to be cross examined back. Giving and taking. Not losing control of the information and questioning when that information shows me things that are less than it should be or questioning when the information shows me that they are more than they should be.
Maggie: What do you worry about most as CEO of Toll Brothers?
Toll: The macro economic scene has bothered me, this time around more than anything else. God forbid we have a recession, a bad economy on top of a bad [Florida housing market], then we are in for trouble. Fortunately there is nothing I can do about the macro economics, so I just keep going along.
Maggie: What do you see happening? What is your outlook? What is the future of the U.S. housing market?
Toll: I’m sorry to say the future is that you will see a rebound that will come back with a vengeance and the prices will chase up even faster than they have in the past [once Florida mortgage demand returns].
So what you have is tremendous extra demand built into the system, and a lack of supply compared to that growth and demand because not only have you not had that growth in the industry because of zoning, planning regulation, but you’ve also had less built because 400 of it is for second homes.
I think what you will see when the market straightens itself out, as it always does, you will see a resurgence so that we begin to pay for our homes proportionately to what they are paying in Britain or Western Europe, which is 45 even 50 percent of their incomes for their housing.
