My Two Cents

Jul 6 2009 10:18AM | Permalink | Email this | Comments (1) |
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By Susan Bady

The Wall Street Journal "Developments" blog reported last Thursday that luxury homebuilder Toll Brothers is planning to build McMansions at the Woodlands, a successful master-planned community in Houston. Toll starts preconstruction sales in August. Homes will start at 3,200 square feet and the high $400,000s.

While it might seem like an audacious move -- especially for a builder of large homes -- Houston is probably as good a bet as one can find nowadays. The area has suffered less from the recession than other markets (thanks to the oil industry). Unemployment is relatively low and the median price of a single-family home actually increased slightly in May, compared to a year earlier. According to a Metrostudy article released in June, at their peak, housing prices never rose by more than 7% or 8% because Houston has plenty of land and no zoning.

That said, I have to wonder why Toll believes it can sell McMansions when other builders have downshifted to smaller, more affordable homes. Will they offer to buy a prospect's existing home? Pay relocation costs? Or is the company confident that its brand name alone will translate into success?