Millennials may be frequently blamed for destroying industries like brick-and-mortar retail, but their habits aren’t exactly bad for homebuilders like Toll Brothers, the luxury construction company’s CEO told CNBC on Tuesday.
CNBC reported in July that today, just 57 percent of first-time homebuyers are married, compared with 75 percent in 1985.
That trend could lead to more millennials being able to afford Toll Brothers’ higher end homes, a boon for the company, Yearley told Cramer.
“If not, they’re going to buy the homes from our buyers, because … while we’re not selling the starter home, that’s in our food chain. We need that to be healthy,” the CEO added.
Investors have been worried about the state of the housing market for much of 2018. Rising mortgage rates and a slowdown in luxury real estate sales in key areas of the country have made some question the fate of Toll Brothers, which does business in 20 states including California and New York.
But Toll Brothers’ trajectory tells a different story. Its latest earnings report handily beat Wall Street’s quarterly profit estimates, buffered by rising home sales and prices.
“This is the largest premium for a new home to a used home that I’ve seen in my 28 years, and it’s because the architecture’s better, the options you can put into the home are better,” Yearley told Cramer. “More and more people want new than ever before and we’re really benefiting from that.”
And while Toll’s California results were slightly weaker compared with this quarter in 2017, Yearley cast last year’s numbers as “an aberration,” adding that California was “still one of our top markets.”
“Last summer was very odd in that we sold more homes in the summer in California than in the spring, and everybody that follows the industry knows that the spring season is when most homes are sold,” he explained. “So … if you look back two years ago, our numbers are up significantly.”
All in all, the reported slump in areas of the luxury housing market doesn’t seem to be touching Toll Brothers.
“We love our niche,” Yearley said Tuesday. “The luxury end of the market is very strong. There’s more and more households that make $100,000 or more, which is our business.”
Shares of Toll Brothers closed up 0.77 percent on Tuesday at $36.57, far off their 52-week high of $52.73.