If real estate investors are looking for blood in the streets, they had better be wearing galoshes.

Even the books of venerable luxury builder Toll Brothers, America’s largest luxury builder of tract homes, are in the red. For the first time in 21 years, the company is suffering its first quarterly loss (Oct. 31) in the amount of $81.8 million. Much of this loss can be attributed to $314.9 million in pretax write downs for homes it could no longer sell at a profit. Even Robert Toll, the company’s founder, concedes that 2007 has been the most challenging year in the company’s 40 year history.

But every loss also registers a gain–somewhere and somehow.

It has been evident that newer tract home subdivisions have been hit especially hard the past couple of years. Many homeowners needing to sell had bought during market highs and more than a few a have been forced to sell at a loss. Funds spent on landscaping, hardscaping, flooring/ surface upgrades, and window coverings (and perhaps even the down payment) have gone down the drain.

It is a tough time to be a home seller. And very tough for the luxury builder of homes.

This has forced a number of builders with standing inventory to offer costly upgrades as an incentive for potential home buyers. Those buyers, who once had to budget for many of these improvements, are now getting them for free–sometimes packaged with interest rate buydowns and other incentives. It is a spiral that has forced builders and their prior home buyers to compete.

Many shrewd real estate buyers have been renting and waiting for opportunities such as these–and are coming out of hiding. Real estate investors who sold at or near the top of the market a couple of years ago are also back into buying mode. And so are foreign investors, who benefit not only from depressed real estate prices in prime US markets, but also the strength of their Euros and Canadian dollars against the US dollar.

This may explain the recent phenomenon in the beaten-down San Diego real estate market, where multiple offers are being made on properties that are priced under market. It’s something we haven’t seen in a long time, and just may be the beginning of a market bottom.

If you have any questions (or need to borrow a pair of rubber boots), just give us a call at 760-942-9100 or 760-402-9101.

Roberta Murphy

The post Luxury Builder Says 2007 Worst in 40 Years appeared first on Luxury Home Digest.