One CEO Thinks Market Forces Will Restore Real Estate

June 12, 2006 |

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Pent-Up Demand Will Reverse Market, Toll Says

(June 9, 2006) — Pent-up demand is going to turn around the housing market, insists CEO Robert Toll of Toll Bros. He said demand will be driven by buyers who are biding their time waiting for better incentives or lower prices.

"Once the natural balance is restored in the market, you’re going to see prices go up again. Prices are going to go up quite a bit," he said.

He added that mortgage rates aren’t a major factor in the housing slowdown because they still hover near four-decade lows. "We did business when mortgage rates were at 8.5 percent and it was fabulous. Now it’s 6.5."

Toll also expressed confidence in the second-home market, which he says will stay robust as baby boomers relocate to Sun Belt states and urban centers.

Toll told analysts viewing his company’s declining stock prices to hang in there. "Right now we’ve got a pretty great economy out there," he says. "Jobs are growing every day. Sooner or later, it will back itself into homes."

Source: Philadelphia Inquirer, 06/09/2006

Now I will concede that Robert Toll has a VERY BIG interest in talking the market up.  On the other hand, I think that there is some truth to his analysis.  One of the best things about the real estate market is that it is, in fact, a free market.  Prices are determined almost entirely by supply and demand.  As of right now, the supply in most places is good, and demand remains fairly high, but people either cannot or will not pay the prices of the homes for sale.  If prices do come down, people will most definitely buy the homes.  While slower appreciation or falling list prices may not be the best of news for sellers, it is good news for the health of the market in general

Posted by Daniel | Filed Under News 

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