In one of the first, if not the first, expansions by a home builder since the market crashed, Toll Brothers Inc. is planning to bring its McMansions to the Woodlands, a planned community north of downtown Houston.

After scouring the region for a more than a decade, the builder, known for its luxurious models, is opening for preconstruction sales next month, hoping its brand name — an industry rarity — will draw buyers.

The move shows Toll is looking beyond the worst residential downturn in decades, one that has shuttered a number of builders.

For its first new market since Atlanta in 2007, Toll made a relatively safe bet.

Houston did not experience wild housing price appreciation during the boom, so home values in the area have not plummeted.

The area even managed gains: In May its average and median prices climbed to the highest levels since August.

Still, Toll, of Horsham, Pa., is gambling that the nation's current obsession with smaller and cheaper homes — only intensified by elevated mortgage rates — does not signal a permanent shift in buying preferences.

"There's still going to be a move-up market," said Chris Myers, Toll's division president for Houston. "We want to get Toll Brothers established and branded in this market so that we can take advantage of the turnaround."

Toll is proceeding cautiously, optioning 49 lots, meaning it does not have to buy them outright, in an established development.

Deals on the first homes, starting at 3,200 square feet and in the high-$400,000 range — and offering the upgrades that transformed Toll homes into a known product — should start to close next spring.

The company is already hunting for more land across Houston.

"What this is, with Toll back into expanding their business, is that they've seen the housing market for what it is," said Vicki Fullerton, the chairman of the Houston Association of Realtors. "A good market with great growth potential."

So far, the area, long fueled by the oil industry, has not been battered by the global recession. Its May unemployment rate was 6.9%, according to the Labor Department. Though that is up 2.5% year over year, it is respectable compared with the 17.3% in bubble market Merced, Calif.

Though home prices continue falling nationwide, Houston's median price for single-family homes eked out a 1.6% gain in May compared with May of 2008.

And sales of foreclosed homes, which depress the market, continued to shrink — making up nearly 20% of sales, down from 34% in January, the Realtor group said.

The Woodlands, a 28,000-acre development, has been popular since its 1974 unveiling.

Demand is down from the peak but remains strong, with a dozen or more sales per week, Myers said. Chesmar Homes of Houston, which says it was the Woodlands' third-largest builder for the first half of 2009, expects starts to increase 25% this year.

Though there is plenty of competition among builders, "if the market's there, you'll sell homes in the Woodlands," said Don Klein, Chesmar's president.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.