Homebuilders saw the industry fall 80 percent in 2008, according to Toll Brothers CEO Doug Yearley, Jr. whose business survived the unrest. Fast forward six years and the hope was that 2014 would build on the strong sales of 2013.
“We’re making money, growing, expanding, but it’s perplexing because interest rates are incredibly low,” he said Friday at the Society of American Business Editors and Writers Fall 2014 Conference at CUNY Graduate School of Journalism. “Pent up demand you expect to come back out, but it hasn’t to the extent we thought.”
The publicly-traded, Pennsylvania-based luxury homebuilder (TOL) reported that its fiscal third quarter orders declined nearly six percent and posted revenue figures 53 percent higher than 2013, according to its quarterly financials released in September. Nationwide, new home sales remain flat as mortgage applications rose 0.2 percent in September, according to the Mortgage Bankers Association.
As baby boomers downsize and move into smaller homes and social communities in such states as Florida or Arizona, Yearley said that millennials have a different buying habit because family formation is beginning later. “The traditional starter home will become a bigger home, bought five to 10 years later in life when you have more money,” he said.
Toll Brothers has aggressively played the New York residential market including Hoboken, New Jersey, erecting 23 towers. Yearley said the company recognizes the urban infill risk is much greater than traditional home building in a suburban community where exposure is limited and construction can cease more quickly. “If it’s bad, you turn the lights off at the model home and cut the grass,” he said.
Millennials increasingly want to toss aside their car keys in favor of public transportation, according to a report by the Pew Institute and Urban Land Institute that found 55 percent wanted to live adjacent to transit. Schools, however, remain a strong selling point for the suburbs, according to Yearley, whose business conducts 50 percent of its work in the suburbs. “We obsess with school districts that we buy land in,” he said.
On the technological front, often called the “internet of things,” Yearley doesn’t think the smart house idea has caught on, but he said the company offers a package that includes a wall-mounted iPad to control such items as a thermostat or alarm. “It’s not sold as much as you think,” he said.
Yearley personified the housing bubble collapse as a Las Vegas black jack dealer who owned three homes, followed by the government overreacting in its correction. He said the government needs to “carefully loosen the underwriting and not go back to anything like 2006,” when homeowners received credit who should not have qualified.
“It’s moving that way, it just needs to accelerate a little bit,” he said. “We need to get the first time buyer in the house and help the food chain.”