During the downturn, desperate home builders cut prices dramatically and threw in everything from free vacations to below-market mortgage rates to entice buyers to the closing table, but these days may be numbered.
As improving economic conditions soothe the nerves of jittery consumers, the luxury home builder Toll Brothers Inc. said it is reducing incentives and raising prices "in selected communities."
It was unclear where exactly this was being done, but any builder that is raising prices — instead of shaving them — and cutting back on profit-eroding incentives signals a return to a more normal sales environment in a sector recovering from the worst downturn in decades.
"We believe that customers are recognizing that now is the time to get into the market to take advantage of near-record affordability and what is still, for now, a buyer's market," said chairman and chief executive Robert I. Toll as the firm reported a wider fiscal third-quarter loss on Thursday.
Of course, headwinds remain, and there is potential for Toll Brothers, which builds some of the sector's priciest units, to find itself again ponying up freebies and cutting prices should the market turn down again.
"This is good news for Toll, probably good news for the industry," said Joe Snider, a vice president and senior credit officer at Moody's Investors Service Inc.
But "many companies in many industries try raising prices after coming out of a downturn, only to have to roll them back because the price increases don't stick," he said.
