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Toll Brothers Inc - Stock Quote TOL

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Morningstar's Toll Brothers Inc Stock Analysis

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Higher Rates Likely to Cool Housing Market but Our Residential Construction Outlook Is Constructive

Analyst Note

| Brian Bernard, CFA, CPA |

Inflation-adjusted home prices eclipsed mid-2000's levels in 2021 as housing demand surged amid a tight supply of homes for sale. Still, homeownership affordability (measured by the median mortgage/income ratio) remained favorable, in our view, due to record low mortgage rates (the 30-year fixed rate mortgage averaged about 3% in 2021). However, affordability has since eroded due to the 30-year rate increasing 200 basis points since end-2021 (to over 5% in late April) and a continued uptick in home prices. We had been expecting a more gradual increase in mortgage rates. There's a recent precedent of slowing housing demand amid sharply increasing mortgage rates. In late 2018, home sales slowed considerably as the average 30-year fixed rate rose about 100 basis points to 5% in less than a year. However, the slowdown was short-lived as mortgage rates quickly moderated. We don't expect mortgage rates to quickly reverse course this time though.

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Toll Brothers Inc's Company Profile

Business Description

Toll Brothers is the leading luxury homebuilder in the United States with an average sale price well above public competitors'. The company operates in 60 markets across 24 states and caters to move-up, active-adult, and second-home buyers. Traditional homebuilding operations represent most of company’s revenue. Toll Brothers also builds luxury for-sale and for-rent properties in urban centers across the U.S. It has its headquarters in Horsham, Pennsylvania.

1140 Virginia Drive
Fort Washington, PA, 19034
T +1 215 938-8000
Sector Consumer Cyclical
Industry Residential Construction
Most Recent Earnings Jan 31, 2022
Fiscal Year End Oct 31, 2022
Stock Type Cyclical
Employees 5,100

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