Toll Brothers See New Homes Sales Slow Down

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The largest builder of luxury homes, Toll Brothers, announced that the sale of high end homes have started to slow. After experiencing record profits over the past year, they are anticipating the next 12 to be slower.

High gas prices and the recent hurricanes seem to have rattled consumers, causing some to delay purchases of houses, company executives said. Also, some local governments appear to be holding back on construction permits, to slow new building.

One of the concerns I have is that people are treating the slow down as a depression, not a correction. After such a period of hyper growth in the market place, the real estate market has to catch it’s breathe. In the Metro Atlanta area, we have experienced solid (not hyper) appreciation of housing. Other areas of the country have come to expect that they will gain 30% on their home every year, they are surprised when it falls back to 5% per year.

Toll Brothers is an example of a company explaining that growth like this can not continue.

“The price increases pre-Katrina were at warp speed, and since Katrina, instead of going up $5,000 or $10,000 every week or two, we have been limited to no price increases or very limited price increases,” Robert I. Toll, the company’s chief executive, said in a conference call yesterday. The number of investors buying condominiums and houses in the hope of turning a quick profit also seems to have plunged, he said in an interview last week. “The true speculator is gone from the market,” Mr. Toll said. via The Tuscaloosa News

So lets all take a deep breath, enjoy the prosperity that our home ownership brings us, and not succumb to the hysteria that the media will try to create. Remember, the media does not sell homes, they sell hysteria which leads to papers being sold.

Update: The RealBlog also covers this story.