Toll Brothers has earned a reputation for building some of the most luxurious homes across the United States. Their sprawling estates and mansions come with a premium price tag that leaves many homebuyers wondering – why exactly are Toll Brothers homes so expensive?
Several key factors contribute to the high prices associated with Toll Brothers’ luxury houses. From the custom architectural designs to premium building materials to prime locations, their homes include features and details that drive up costs.
Their focus on larger home sizes, high-end finishes, brand recognition, and target profit margins also play a role in pricing.
In this article, we will analyze the important reasons why Toll Brothers homes come at such a high cost compared to other production and custom home builders. By looking at their unique construction approaches, business model, and luxury offerings, we can understand why buyers pay a premium for the Toll Brothers experience.
From start to finish, these leading luxury home builders include elements that increase value but also price.
Reasons For Toll Brothers Homes Being So Expensive
- Unique Designs and Architecture
One of the biggest reasons Toll Brothers homes cost more is that they offer unique designs and architectural details you won’t find anywhere else.
Their homes feature custom touches like curved staircases, intricate moldings, and top-of-the-line fixtures.
Each home is completely customized with high-end finishes.
Toll Brothers doesn’t take a cookie-cutter approach.
Their homes are tailored to each individual lot and neighborhood. You won’t find the exact same home repeated over and over like you would with some builders.
All of this customization and attention to detail adds to the costs. But it gives their homes a distinct, luxurious style you can’t replicate for less.
- Prime Locations
In addition to custom designs, Toll Brothers focuses on prime real estate locations. They build homes in some of the most desirable communities in the country, from golf course properties to waterfront lots. This alone increases the value versus building in more rural or remote neighborhoods.
Their land acquisition team seeks out the best school districts, amenities, views, and access to major metropolitan areas.
Homesites in these exclusive areas cost more for the builder to purchase, driving up the end pricing. Building on a golf course or waterfront property adds desirability – and dollars to the final sale price.
- Larger Home Sizes
The average Toll Brothers home is around 4,000 square feet.
That’s nearly double the size of homes from most other national builders.
And in some luxury markets like California, their average home size tops 5,000 square feet.
Bigger homes mean higher costs for things like materials, labor, and finishing. The larger the home, the more it costs the builder to construct and finish out. All of those extra square feet, bonus rooms, and expanded features add up on the final price tag.
Even their smaller homes still offer ample space. A “smaller” Toll Brothers home is still around 3,000 square feet – much larger than what you’d get from other builders for the same price. All of that extra room and bigger footprints mean higher prices.
- Luxury Materials and Finishes
From the framing to the finishes, Toll Brothers uses higher-end materials to construct homes. Their homes feature architectural shingled roofs, James Hardie siding, and stone or brick accents on the exteriors. Inside, you’ll find custom cabinetry, granite countertops, and hardwood flooring throughout.
Kitchens are decked out with stainless steel appliances, gas cooking, and oversized islands. Bathrooms have soaking tubs, framed mirrors, and designer tile. Everything from the windows to the lighting is top-of-the-line. Not only does this boost the luxury aesthetic, but these materials also increase building costs.
- Higher Overhead Costs
As one of the nation’s largest builders, Toll Brothers operates differently than local custom home builders.
They invest heavily in things like architectural design, estimating, procurement, and support staff.
With over 5,000 employees, their overhead costs are higher.
While a local builder working on a few homes a year has minimal overhead, Toll Brothers has layers of management, design, and administration costs built in.
This gets passed onto the buyer through higher home prices, which help cover those operational expenses.
Their large scale also leads to higher marketing spend. In 2021 alone, Toll Brothers spent over $48 million on advertising to promote their luxury brand and listings. These types of expenses cause them to price homes higher than small custom builders.
- Longer Construction Timelines
It takes more time and coordination to build larger, customized homes. Where a typical builder might complete a home in 3-4 months, Toll Brothers generally takes 6-8 months. Their homes have more finishes, intricate details, and sizeable footprints.
This increased construction timeline raises costs in several ways. More labor hours are required over a longer timeframe. Holding costs like property taxes accrue over additional months. And material costs can increase the longer the build takes if there are price hikes.
The buyer has carrying costs too while waiting months longer to move in. So the builder prices homes higher to account for the greater expenses from extended timelines.
- Higher Profit Margins
As a publicly traded luxury homebuilder, Toll Brothers operates with different profit goals than a small custom builder.
They generate higher profit margins on each home they sell.
While other builders may target 10-15% margins, Toll Brothers aims for around 22% profit on average.
They can command these margins by emphasizing their brand cache, luxury features, and desirable locations. Homebuyers are willing to pay more for that premier Toll Brothers address and unique designs. This gives them pricing power to not just cover costs, but realize substantial profits.
Higher margins mean they can price homes higher than less profitable builders. For buyers, a percentage of each sale goes straight to Toll Brothers’ bottom line.
- More Included Features
When you buy a Toll Brothers home, more comes included. Most builders offer a base home with optional upgrades. Toll Brothers includes features like triple-pane windows, designer bath hardware, security systems, audio systems, and gourmet kitchens in their base pricing.
This avoids the dreaded upgrade sheet where you check boxes for every feature. Their included features would be upgrades with other builders. Opting for everything on an upgrade list adds tens of thousands in costs. Toll Brothers bakes more features in upfront.
While this means less choosing upgrades, it also leads to larger mortgages from those built-in luxury finishes. Their base prices appear higher because you’re getting more without paying extra.
- Costlier Financing Incentives
Toll Brothers offers in-house financing incentives that lower monthly payments. But these often come with higher home prices. One example is their mortgage with an interest rate buy down. This reduces the rate by paying points upfront.
While it makes the monthly payment more affordable, you pay for those points by accepting a higher home price. So while the financing helps sell homes, it also increases what Toll Brothers can charge.
They also offer incentives like covering closing costs. Again, this perk gets added to the bottom line price. Their incentives lure buyers in but drive up total costs that cover the incentives.
- Strong Brand Recognition
The Toll Brothers name carries cachet in the luxury market. They’ve spent decades building a reputation for quality, luxury homes. This brand recognition allows them to demand premium pricing that buyers will pay for the esteemed name.
Homebuyers are familiar with the features and designs they can expect from Toll Brothers. So even at higher prices, buyers are willing to pay more for that luxury brand stamp. This gives them more pricing power over lesser-known builders.
Much like buying a luxury vehicle, part of the extra cost comes from the reputation and trust in that luxury brand name. Toll Brothers has earned a top-tier reputation that bolsters their pricing leverage.
Frequently Asked Questions (FAQ)
Some of Toll Brothers biggest competitors in the luxury home market include: Lennar, PulteGroup, D.R. Horton, Hovnanian Enterprises, Taylor Morrison, Tri Pointe Homes, KB Home.
Lennar is the closest competitor in size and scale, known for building homes priced between $200k-$500k.
Toll Brothers stock trades on the NYSE under TOL. Recently the stock has been impacted by rising mortgage rates slowing luxury home demand. Wall Street analysts are mixed if TOL stock is a buy, sell or hold at current levels around $53 per share. Bulls believe the luxury market will fare better in a housing downturn. Bears see further declines from higher rates shrinking their addressable market.
Toll Brothers has a strong reputation as a developer of luxury homes and master-planned communities. They are known for quality construction, upscale designs, and premier locations. Given their focus on luxury, they are considered a good developer in that high-end niche. But they operate on a different model than developers focused on lower price points. Their large-scale approach may not appeal to buyers wanting a more customized build.
In fiscal year 2021, Toll Brothers reported record annual revenues of $8.8 billion. This marked a huge 55% increase from 2020 revenues of $5.7 billion. They delivered over 10,000 homes, which was 48% more than the prior year. Strong demand and higher home prices drove exceptional top line growth. 2022 results will face pressure from slowing demand, rising cancellations, and higher mortgage rates. Consensus estimates call for around $7.9 billion in 2022 revenues.
Final Thoughts
Toll Brothers homes command luxury prices due to their unique designs, prime locations, larger sizes, high-end finishes and features, strong brand recognition, and higher profits. Homebuyers pay for that top-tier quality, uniqueness, and exclusivity.
But the premium prices also come from Toll Brothers’ higher overhead costs and more robust business model required to build luxury homes on a national scale. While their homes come at upper-tier pricing, buyers see value in the Toll Brothers name, construction, and living experience.