Toll Brothers CEO Urges Buyers to Come Out of Woodwork

Toll Brothers anticipated revenue declines of 30% for the quarter ended April 30th. Robert Toll, the luxury home builder's CEO stated that "The just-completed spring selling season was quite weak in most markets as buyers remain on the sidelines." He further asserted "We believe there is significant pent-up demand which is growing." He characterized the current market as a "buyer's market, but buyers can only take advantage of it if they buy; sooner or later they will, but unfortunately we can't predict when." Mr. Toll then took out his trusty pent-up-demand-o-meter that he carries with him to open houses to show how he measured all of that "growing pent-up demand." But his COO hissed "Put that thing away! We don't want the competition to see that!"
Mr. Toll went on to give some dismal stats on the company's current and future money-making prospects. The number of signed contracts fell by 44% from a year earlier, leading to a 58% decline in terms of dollars. The math on that works out nicely because the average price per unit on contracts signed was $590,000, down from $711,000 a year earlier. These numbers strike me as particularly interesting because I had the pleasure of listening in on Toll's earnings conference call earlier in the year. At the time, Mr. Toll was adamant about the company not needing to cut its prices because it was a luxury home builder that operated in a different segment than the other home building clowns. Mr. Toll claimed that the company did less speculative building and would just wait for the market to turn around so margins shouldn't decline. Essentially he was saying that his company really sells houses on the Moon, where the laws of physics and hopefully economics do not apply. It's an entirely different competitive landscape. You see? There's practically no gravity on the Moon, so prices can't go down. People will continue to pay top dollar for our great houses even though every other new house on Earth is being discounted by at least 30%. Then he turned to his COO and whispered "When is that stupid Moon initiative getting off the ground so I can officially announce it, instead of beating around the bush?"