Housing Bulletin—Assessing Mr. Toll’s F

While releasing some downward-sliding sales figures last week, Robert Toll—the CEO of Toll Brothers, a national home-building company—gave an informal letter grade to each of several regional markets where it operates. Chicago got an F.

That’s not to say that the housing market here has tanked more than in other parts of the country. In fact, as I read it, that low grade suggests that buyers here might be more cautious or judicious than elsewhere. The F is Toll’s assessment of how each market is doing vis-à-vis his company’s sales performance. He reported 38.9 percent of people with contracts to…

While releasing some downward-sliding sales figures last week, Robert Toll—the CEO of Toll Brothers, a national home-building company—gave an informal letter grade to each of several regional markets where it operates. Chicago got an F.

That’s not to say that the housing market here has tanked more than in other parts of the country. In fact, as I read it, that low grade suggests that buyers here might be more cautious or judicious than elsewhere. The F is Toll’s assessment of how each market is doing vis-à-vis his company’s sales performance. He reported 38.9 percent of people with contracts to buy new houses from his company cancelled their contracts—a record high for the company. If an F indicates that especially large numbers of potential buyers in the Chicago area have backed away from their contracts, that may suggest we are just more conservative about taking on new debt in this worrisome economy. Mr. Toll’s F may be the frugal Midwesterner’s A. 

An F is not the worst grade possible. As the New York Times reported, Toll gave grades of F-minus to four vacation areas and to Michigan. Chicago was just one of 11 areas that got a grade of F; others included the states of Massachusetts, Rhode Island, and Minnesota, and the cities of Reno, Nevada, and San Antonio, Texas. Some Toll projects in New Jersey got a B-plus; others there and in New York City, Connecticut, and Delaware got Bs.

Executives from Toll Brothers did not respond to requests to elaborate on their CEO’s comments, so we don’t know precisely how many cancellations Toll has had around here. All we know is that the number, whatever it is, merits an F from Mr. Toll.

Toll Brothers has ten subdivisions under construction in the Chicago suburbs, some with up to three different types of housing (townhouses, single-family homes, and even larger single-family homes). Listed prices started in the upper $200,000s (at a project in Elgin) and reached the mid-$700,000s (in South Barrington). The company’s Website reports that Toll Brothers has “quick delivery homes available” at almost every one of those projects, an indication that it has completed residences waiting around to be sold.

he company did release figures for its northern division, which includes Illinois and eight other states. They showed a 26 percent drop in the number of housing units completed as compared with the same time last year. Nationwide, the company completed 34 percent fewer units than at the same time last year. The northern division’s revenue dropped 22.2 percent; nationally, it was down 35.9 percent.

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