By Kimberly Chin

Toll Brothers Inc.'s sales rose in the latest quarter, fueled by low borrowing costs and shifting living preferences driven by the pandemic.

The luxury home builder said it generated $2.55 billion in sales, a 7% increase from a year ago and ahead of analysts' projections of $2.08 billion, according to FactSet. Revenue from home sales, which represents a majority of the company's total revenue, rose about 9% to $2.5 billion.

"We are currently experiencing the strongest housing market I have seen in my 30 years at Toll Brothers, and we continue to increase prices in nearly all of our communities," Chief Executive Douglas Yearley said in prepared remarks.

The number of contracts for new homes increased 68% to 3,407 units from last year, while contract value rose 63% to $2.74 billion in the quarter ended Oct. 31.

The U.S. housing market has gotten a boost from pandemic trends as many have left large cities in search of bigger homes in less crowded areas where they can work remotely and enjoy more space.

Toll's home-building deliveries rose 10% to 2,940 from the year-earlier period. The company expects around 1,675 home deliveries in the first quarter with an average price between $780,000 and $800,000.

Toll said that in the first six weeks of the current quarter, demand has remained very strong compared with one year ago. The company said nonbinding reservation deposits, which are a precursor to contracts, have risen 48%.

Buyers have been aided by mortgage rates that reached another record low last Thursday, according to Freddie Mac. The low supply of homes for sale is boosting housing prices as well as demand for newly built housing.

In addition to low rates, Mr. Yearley said, companies allowing their employees to work from home has allowed more buyers to live where they want.

Shares of Toll, which are up nearly 25% in 2020, slid 3.8% to $47.32 in after-hours trading Monday.

The S&P CoreLogic Case-Shiller National Home Price Index, which measures average home prices in major metropolitan areas across the nation, rose 7% year-over-year in September, representing the highest annual growth rate since May 2014. The index has a two-month lag.

Sales of previously owned homes, which make up the bulk of the housing market, rose 4.3% in October from September to a 14-year high, extending a five-month streak of consecutive increases and marking one of the best stretches for the housing market in several years.

For the quarter, Toll recorded a profit of $199.3 million, or $1.55 a share, compared with $202.3 million, or $1.41 a share, in the comparable period a year earlier. Analysts surveyed by FactSet expected $1.24 in per-share earnings.

The home builder expects fiscal 2021 home deliveries of between 9,600 and 10,200 homes and an average price in the range of $790,00 and $810,000.

Write to Kimberly Chin at kimberly.chin@wsj.com

(END) Dow Jones Newswires

12-07-20 1807ET