When luxury home builder Toll Brothers blew past quarterly sales and earnings views this week, it underscored how much distance lies between the higher end of the U.S. housing market and the lower end.
Although Toll's (NYSE:TOL) stock price fell after it reported fiscal third-quarter results — amid a drop in new contracts during that quarter — the firm's otherwise robust returns show that there's plenty of money to be made in selling homes to buyers with deep pockets.
Those buyers include wealthy Americans who have grown even wealthier thanks to this year's stock market gains, economists say. They also include foreign investors who continue to buy homes in high-dollar markets within New York, California and Florida.
Meanwhile, builders on the lower end of the spectrum have run up against numerous challenges: rising home prices, declining inventory, an uncertain economy and the ongoing problem that many would-be buyers have in getting a mortgage.
These problems have hurt builders of first-time-buyer and midpriced homes. But they haven't greatly worried luxury builders or their clients — at least not yet.
"The wealthiest Americans are doing very well — income is up, wealth is up a lot, the S&P has doubled what it was a few years ago. This has certainly helped the higher end of the housing market," said Richard Green, director of the USC Lusk Center for Real Estate.