Toll Brothers Shares Soar After Rising Profits Show Housing Market Strong Despite Trade War Fears

The Associated Press
The Associated Press

Trade wars. Labor shortages. Lumber and steel tariffs. The cap on state and local tax deductions. A lower ceiling for mortgage interest deductions.

These were supposed to hammering homebuilders and, given the importance of homebuilding to the American economy, endangering the growth goals of the Trump administration.

Looks like someone forgot to tell Toll Brothers the sky is falling.

The luxury homebuilder said Tuesday that its quarterly profit rose 30 percent in the third quarter, to $193.3 million or $1.26 per share in the third quarter ended July 31, from $148.6 million or 87 cents per share a year earlier. The results easily beat Wall Street expectations and shares rose 12 percent in early trading.

The results show that strong demand for housing from Americans, fueled a stronger economy and very low unemployment, is more than enough to offset the impact from higher materials costs and alleged labor shortages.

Toll said that the average price of its homes in the most recent quarter was $851,900, a big increase from $791,400 a year ago. And that price hike is not fading. Toll forecast that prices for the current quarter will range between $840,000 and $870,000. The sales pipeline looks strong as well, with signed contracts per community at their highest level in a decade, according to the company.

The Toll results underscore how a simple-minded focus on one or even a handful of Trump economic policies can be misleading. Looking at the loss of deductions or tariff costs without factoring in the importance of tax cuts and very low unemployment, for example, paints a distorted picture. The combination of the Trump administration’s policies and current economic conditions is creating a powerful engine for growth in the U.S.

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