Toll Bros. & the Twin Cities Housing Market

Cleaning Up After the Elephants; or,
"Love 'em and Leave 'em"

It was fun -- sort of -- while it lasted. But what a hangover!

In 2004, when local land went for $120k an acre, national home builder Toll Brothers swept into the Twin Cities paying . . . $200k an acre.

Why?

Because it could.

Just like the commercial REIT's ("Real Estate Investment Trusts"), large, publicly traded builders such as Toll and Pulte had access to cheap capital, allowing them to bid up local land prices 50% - 75% practically overnight.

While providing a windfall for the first wave of land sellers, the bubble created many more casualties than winners.

They include:

--Local builders, whose land acquisition costs got driven sky-high;
--New home buyers, who the builders passed their costs on to, and who were left holding the bag when prices collapsed;
--Municipalities also left holding the "foreclosure bag" when underwater homeowners defaulted, leaving decimated, half-built subdivisions in their wake.
--Banks whose balance sheets were left in tatters.

At least Toll hung around to help clean up their mess, right?

Wrong.

The 3 subdivisions Toll built in the last 5 years still have many unsold units (surprise!), but Toll appears to have exited the Twin Cities new construction market about two years ago (Note: if anyone's heard otherwise -- please let me know!).